10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2016

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: 000-26481

(Exact name of registrant as specified in its charter)

NEW YORK	16-0816610
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
220 LIBERTY STREET, WARSAW, NEW YORK	14569
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (585) 786-1100

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),

and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every

Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller company)	Smaller reporting company	¨

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

The registrant had 14,498,014 shares of Common Stock, $0.01 par value, outstanding as of April 29, 2016.

FINANCIAL INSTITUTIONS, INC.

Form 10-Q

For the Quarterly Period Ended March 31, 2016

TABLE OF CONTENTS

		PAGE
PART I.	FINANCIAL INFORMATION		3
ITEM 1.	Financial Statements		3
	Consolidated Statements of Financial Condition - at March 31, 2016 (Unaudited) and December 31, 2015		3
	Consolidated Statements of Income (Unaudited) - Three months ended March 31, 2016 and 2015		4
	Consolidated Statements of Comprehensive Income (Unaudited) - Three months ended March 31, 2016 and 2015		5
	Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) - Three months ended March 31, 2016 and 2015		6
	Consolidated Statements of Cash Flows (Unaudited) - Three months ended March 31, 2016 and 2015		7
	Notes to Consolidated Financial Statements (Unaudited)		8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		31
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		48
ITEM 4.	Controls and Procedures		49
PART II.	OTHER INFORMATION		50
ITEM 1.	Legal Proceedings		50
ITEM 1A.	Risk Factors		50
ITEM 6.	Exhibits		51
	Signatures		52

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition (Unaudited)

(Dollars in thousands, except share and per share data)	March 31,			December 31,
	2016			2015
ASSETS
Cash and due from banks	$	110,944		$	60,121
Securities available for sale, at fair value		610,013			544,395
Securities held to maturity, at amortized cost (fair value of $485,863 and $490,064, respectively)		476,283			485,717
Loans held for sale		609			1,430
Loans (net of allowance for loan losses of $27,568 and $27,085, respectively)		2,087,466			2,056,677
Company owned life insurance		61,962			63,045
Premises and equipment, net		40,771			39,445
Goodwill and other intangible assets, net		76,567			66,946
Other assets		51,957			63,248
Total assets	$	3,516,572		$	3,381,024
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand	$	617,394		$	641,972
Interest-bearing demand		622,443			523,366
Savings and money market		1,042,910			928,175
Time deposits		677,430			637,018
Total deposits		2,960,177			2,730,531
Short-term borrowings		179,200			293,100
Long-term borrowings, net of issuance costs of $992 and $1,010, respectively		39,008			38,990
Other liabilities		24,234			24,559
Total liabilities		3,202,619			3,087,180
Shareholders’ equity:
Series A 3% preferred stock, $100 par value; 1,533 shares authorized; 1,492 shares issued		149			149
Series B-1 8.48% preferred stock, $100 par value; 200,000 shares authorized; 171,906 shares issued		17,191			17,191
Total preferred equity		17,340			17,340
Common stock, $0.01 par value; 50,000,000 shares authorized; 14,692,214 and 14,397,509 shares issued, respectively		147			144
Additional paid-in capital		81,010			72,690
Retained earnings		223,290			218,920
Accumulated other comprehensive loss		(4,105	)		(11,327	)
Treasury stock, at cost – 197,131 and 207,317 shares, respectively		(3,729	)		(3,923	)
Total shareholders’ equity		313,953			293,844
Total liabilities and shareholders’ equity	$	3,516,572		$	3,381,024

See accompanying notes to the consolidated financial statements.

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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)

(In thousands, except per share amounts)	Three months ended March 31,
	2016		2015
Interest income:
Interest and fees on loans	$	22,057	$	20,137
Interest and dividends on investment securities		5,578		4,860
Total interest income		27,635		24,997
Interest expense:
Deposits		1,959		1,620
Short-term borrowings		339		230
Long-term borrowings		618		—
Total interest expense		2,916		1,850
Net interest income		24,719		23,147
Provision for loan losses		2,368		2,741
Net interest income after provision for loan losses		22,351		20,406
Noninterest income:
Service charges on deposits		1,724		1,879
Insurance income		1,672		1,608
ATM and debit card		1,325		1,193
Investment advisory		1,243		487
Company owned life insurance		1,368		467
Investments in limited partnerships		56		474
Loan servicing		116		167
Net gain on sale of loans held for sale		78		69
Net gain on disposal of investment securities		613		1,062
Net gain on disposal of other assets		4		4
Other		1,018		887
Total noninterest income		9,217		8,297
Noninterest expense:
Salaries and employee benefits		11,614		10,223
Occupancy and equipment		3,625		3,699
Professional services		1,447		968
Computer and data processing		804		702
Supplies and postage		594		563
FDIC assessments		436		418
Advertising and promotions		377		239
Other		2,321		2,199
Total noninterest expense		21,218		19,011
Income before income taxes		10,350		9,692
Income tax expense		2,732		2,891
Net income	$	7,618	$	6,801
Preferred stock dividends		365		365
Net income available to common shareholders	$	7,253	$	6,436
Earnings per common share (Note 3):
Basic	$	0.50	$	0.46
Diluted	$	0.50	$	0.46
Cash dividends declared per common share	$	0.20	$	0.20
Weighted average common shares outstanding:
Basic		14,395		14,063
Diluted		14,465		14,113

See accompanying notes to the consolidated financial statements.

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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in thousands)	Three months ended March 31,
	2016		2015
Net income	$	7,618	$	6,801
Other comprehensive income, net of tax:
Net unrealized gains on securities available for sale		7,083		3,261
Pension and post-retirement obligations		139		135
Total other comprehensive income, net of tax		7,222		3,396
Comprehensive income	$	14,840	$	10,197

See accompanying notes to the consolidated financial statements.

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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

Three months ended March 31, 2016 and 2015

(Dollars in thousands, except per share data)	Preferred Equity		Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total Shareholders’ Equity
Balance at January 1, 2015	$	17,340	$	144	$	72,955		$	203,312		$	(9,011	)	$	(5,208	)	$	279,532
Comprehensive income:
Net income		—		—		—			6,801			—			—			6,801
Other comprehensive income, net of tax		—		—		—			—			3,396			—			3,396
Purchases of common stock for treasury		—		—		—			—			—			(41	)		(41	)
Share-based compensation plans:
Share-based compensation		—		—		103			—			—			—			103
Stock options exercised		—		—		3			—			—			69			72
Restricted stock awards issued, net		—		—		(874	)		—			—			874			—
Excess tax benefit on share-based compensation		—		—		4			—			—			—			4
Cash dividends declared:
Series A 3% Preferred-$0.75 per share		—		—		—			(1	)		—			—			(1	)
Series B-1 8.48% Preferred-$2.12 per share		—		—		—			(364	)		—			—			(364	)
Common-$0.20 per share		—		—		—			(2,813	)		—			—			(2,813	)
Balance at March 31, 2015	$	17,340	$	144	$	72,191		$	206,935		$	(5,615	)	$	(4,306	)	$	286,689
Balance at January 1, 2016	$	17,340	$	144	$	72,690		$	218,920		$	(11,327	)	$	(3,923	)	$	293,844
Comprehensive income:
Net income		—		—		—			7,618			—			—			7,618
Other comprehensive income, net of tax		—		—		—			—			7,222			—			7,222
Common stock issued		—		3		8,097			—			—			—			8,100
Share-based compensation plans:
Share-based compensation		—		—		129			—			—			—			129
Stock options exercised		—		—		2			—			—			286			288
Restricted stock awards forfeited		—		—		92			—			—			(92	)		—
Cash dividends declared:
Series A 3% Preferred-$0.75 per share		—		—		—			(1	)		—			—			(1	)
Series B-1 8.48% Preferred-$2.12 per share		—		—		—			(364	)		—			—			(364	)
Common-$0.20 per share		—		—		—			(2,883	)		—			—			(2,883	)
Balance at March 31, 2016	$	17,340	$	147	$	81,010		$	223,290		$	(4,105	)	$	(3,729	)	$	313,953

See accompanying notes to the consolidated financial statements.

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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)	Three months ended March 31,
	2016			2015
Cash flows from operating activities:
Net income	$	7,618		$	6,801
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,487			1,326
Net amortization of premiums on securities		714			743
Provision for loan losses		2,368			2,741
Share-based compensation		129			103
Deferred income tax expense		131			582
Proceeds from sale of loans held for sale		4,144			3,366
Originations of loans held for sale		(3,245	)		(3,198	)
Income on company owned life insurance		(1,368	)		(467	)
Net gain on sale of loans held for sale		(78	)		(69	)
Net gain on disposal of investment securities		(613	)		(1,062	)
Net gain on sale and disposal of other assets		(4	)		(4	)
Decrease in other assets		5,804			7,702
Decrease in other liabilities		(127	)		(627	)
Net cash provided by operating activities		16,960			17,937
Cash flows from investing activities:
Purchases of available for sale securities		(119,597	)		(78,405	)
Purchases of held to maturity securities		(3,612	)		(11,024	)
Proceeds from principal payments, maturities and calls on available for sale securities		48,280			38,073
Proceeds from principal payments, maturities and calls on held to maturity securities		12,381			5,048
Proceeds from sales of securities available for sale		17,627			29,508
Net loan originations		(33,297	)		(14,190	)
Proceeds from company owned life insurance, net of purchases		2,451			(7	)
Proceeds from sales of other assets		109			109
Purchases of premises and equipment		(2,460	)		(1,024	)
Cash consideration paid for acquisition, net of cash acquired		(868	)		—
Net cash used in investing activities		(78,986	)		(31,912	)
Cash flows from financing activities:
Net increase in deposits		229,646			254,168
Net decrease in short-term borrowings		(113,900	)		(159,231	)
Purchase of common stock for treasury		—			(41	)
Proceeds from stock options exercised		288			72
Excess tax benefit on share-based compensation, net		—			4
Cash dividends paid to common and preferred shareholders		(3,185	)		(3,176	)
Net cash provided by financing activities		112,849			91,796
Net increase in cash and cash equivalents		50,823			77,821
Cash and cash equivalents, beginning of period		60,121			58,151
Cash and cash equivalents, end of period	$	110,944		$	135,972
Supplemental information:
Cash paid for interest	$	2,096		$	1,473
Cash paid for income taxes		500			—
Noncash investing and financing activities:
Real estate and other assets acquired in settlement of loans		140			51
Accrued and declared unpaid dividends		3,248			3,178
(Decrease) increase in net unsettled security purchases		(170	)		6,222
Common stock issued for acquisition		8,100			—
Assets acquired and liabilities assumed in business combinations:
Fair value of assets acquired		4,848			—
Fair value of liabilities assumed		1,845			—

See accompanying notes to the consolidated financial statements.

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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(1.) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Financial Institutions, Inc., (the “Company”) is a financial holding company organized in 1931 under the laws of New York State. The Company provides diversified financial services through its subsidiaries, Five Star Bank, Scott Danahy Naylon, LLC (“Scott Danahy Naylon”) and Courier Capital, LLC (“Courier Capital”). The Company offers a broad array of deposit, lending and other financial services to individuals, municipalities and businesses in Western and Central New York through its wholly-owned New York chartered banking subsidiary, Five Star Bank (the “Bank”). The Bank has also expanded its indirect lending network to include relationships with franchised automobile dealers in the Capital District of New York and Northern Pennsylvania. Scott Danahy Naylon provides a broad range of insurance services to personal and business clients across 44 states. Acquired on January 5, 2016, Courier Capital provides customized investment management, investment consulting and retirement plan services to individuals, businesses, institutions, foundations and retirement plans across nine states.

Basis of Presentation

The consolidated financial statements include the accounts of Financial Institutions, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The accounting and reporting policies conform to U.S. generally accepted accounting principles (“GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in conformity with GAAP have been condensed or omitted pursuant to such rules and regulations. However, in the opinion of management, the accompanying consolidated financial statements reflect all adjustments of a normal and recurring nature necessary for a fair presentation of the consolidated statements of financial condition, income, comprehensive income, changes in shareholders’ equity and cash flows for the periods indicated, and contain adequate disclosure to make the information presented not misleading. Prior years’ consolidated financial statements are re-classified whenever necessary to conform to the current year’s presentation. These consolidated financial statements should be read in conjunction with the Company’s 2015 Annual Report on Form 10-K for the year ended December 31, 2015. The results of operations for any interim periods are not necessarily indicative of the results which may be expected for the entire year.

Reclassifications

Certain reclassifications of previously reported amounts have been made to conform to the current year presentation. Such reclassifications did not impact net income or shareholders’ equity as previously reported.

Subsequent Events

The Company has evaluated events and transactions for potential recognition or disclosure through the day the financial statements were issued and determined there were no material recognizable subsequent events.

Use of Estimates

The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates relate to the determination of the allowance for loan losses, the carrying value of goodwill and deferred tax assets, and assumptions used in the defined benefit pension plan accounting.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The effective date was recently deferred for one year to the interim and annual periods beginning on or after December 15, 2017. Early adoption is permitted as of the original effective date – interim and annual periods beginning on or after December 15, 2016. The Company continues to assess the potential impact of ASU 2014-09 on its accounting and disclosures.

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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(1.) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 is intended to improve the recognition and measurement of financial instruments by requiring equity investments to be measured at fair value with changes in fair value recognized in net income; requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured and amortized at cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. ASU 2016-01 is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2017. The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption. The Company is assessing the impact of ASU 2016-01 on its accounting and disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 establishes a right of use model that requires a lessee to record a right of use asset and a lease liability for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. A lease will be treated as sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as a financing. If the lessor doesn’t convey risks and rewards or control, an operating lease results. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, with certain practical expedients available. Early adoption is permitted. The Company is assessing the impact of ASU 2016-02 on its accounting and disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718) – Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It also allows an employer to repurchase more of an employee’s shares than it can today for tax withholding purposes without triggering liability accounting and to make a policy election for forfeitures as they occur. The guidance is effective for public business entities for fiscal years beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted. The Company is assessing the impact of ASU 2016-09 on its accounting and disclosures.

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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(2.) BUSINESS COMBINATIONS

Courier Capital Acquisition

On January 5, 2016, the Company completed the acquisition of Courier Capital Corporation, a registered investment advisory and wealth management firm with approximately $1.2 billion in assets under management. Consideration for the acquisition totaled $9.0 million and included stock of $8.1 million and $918 thousand of cash. The acquisition also included $2.8 million of potential future payments of stock and $2.2 million of potential future cash bonuses contingent upon Courier Capital meeting certain EBITDA performance targets through 2018. In addition, the Company purchased two pieces of real property in Buffalo and Jamestown, New York used by Courier Capital for total cash considerations of $1.3 million. As a result of the acquisition, the Company recorded goodwill of $6.0 million and other intangible assets of $3.9 million. The goodwill is not expected to be deductible for income tax purposes. Pro forma results of operations for this acquisition have not been presented because the effect of this acquisition was not material to the Company’s consolidated financial statements.

This acquisition was accounted for under the acquisition method in accordance with FASB ASC Topic 805. Accordingly, the assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the acquisition date. Due to the timing of the closing of the acquisition, the fair values of other intangibles recorded are subject to adjustment as additional information becomes available to indicate a more accurate or appropriate fair value for the intangibles during the measurement period, which is not to exceed one year from the acquisition date. The following table presents the allocation of acquisition cost to the assets acquired and liabilities assumed, based on their estimated fair values.

Cash	$	50
Identified intangible assets		3,928
Premises and equipment, accounts receivable and other assets		870
Deferred tax liability		(1,797	)
Other liabilities		(48	)
Net assets acquired	$	3,003

The amounts assigned to goodwill and other intangible assets for the Courier Capital acquisition are as follows:

	Amount allocated		Useful life (in years)
Goodwill	$	6,015	n/a
Other intangible assets – customer relationships		3,900	20
Other intangible assets – other		28	5
	$	9,943

(3.) EARNINGS PER COMMON SHARE (“EPS”)

The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted EPS (in thousands, except per share amounts).

	Three months ended March 31,
	2016			2015
Net income available to common shareholders	$	7,253		$	6,436
Weighted average common shares outstanding:
Total shares issued		14,679			14,397
Unvested restricted stock awards		(79	)		(74	)
Treasury shares		(205	)		(260	)
Total basic weighted average common shares outstanding		14,395			14,063
Incremental shares from assumed:
Exercise of stock options		27			22
Vesting of restricted stock awards		43			28
Total diluted weighted average common shares outstanding		14,465			14,113
Basic earnings per common share	$	0.50		$	0.46
Diluted earnings per common share	$	0.50		$	0.46

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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(4.) INVESTMENT SECURITIES

The amortized cost and fair value of investment securities are summarized below (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
March 31, 2016
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	235,964	$	5,506	$	7	$	241,463
Mortgage-backed securities:
Federal National Mortgage Association		293,220		4,312		53		297,479
Federal Home Loan Mortgage Corporation		28,019		535		28		28,526
Government National Mortgage Association		18,302		664		12		18,954
Collateralized mortgage obligations:
Federal National Mortgage Association		16,986		394		—		17,380
Federal Home Loan Mortgage Corporation		5,165		90		—		5,255
Privately issued		—		777		—		777
Total mortgage-backed securities		361,692		6,772		93		368,371
Asset-backed securities		—		179		—		179
Total available for sale securities	$	597,656	$	12,457	$	100	$	610,013
Securities held to maturity:
State and political subdivisions		291,934		8,544		1		300,477
Mortgage-backed securities:
Federal National Mortgage Association		9,190		152		2		9,340
Government National Mortgage Association		26,365		204		41		26,528
Collateralized mortgage obligations:
Federal National Mortgage Association		54,281		227		15		54,493
Federal Home Loan Mortgage Corporation		77,407		467		5		77,869
Government National Mortgage Association		17,106		57		7		17,156
Total mortgage-backed securities		184,349		1,107		70		185,386
Total held to maturity securities	$	476,283	$	9,651	$	71	$	485,863
December 31, 2015
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	260,748	$	1,164	$	1,049	$	260,863
Mortgage-backed securities:
Federal National Mortgage Association		209,671		1,092		2,333		208,430
Federal Home Loan Mortgage Corporation		24,564		282		194		24,652
Government National Mortgage Association		26,465		943		4		27,404
Collateralized mortgage obligations:
Federal National Mortgage Association		16,998		90		154		16,934
Federal Home Loan Mortgage Corporation		5,175		1		91		5,085
Privately issued		—		809		—		809
Total mortgage-backed securities		282,873		3,217		2,776		283,314
Asset-backed securities		—		218		—		218
Total available for sale securities	$	543,621	$	4,599	$	3,825	$	544,395
Securities held to maturity:
State and political subdivisions		294,423		6,562		4		300,981
Mortgage-backed securities:
Federal National Mortgage Association		9,242		14		79		9,177
Government National Mortgage Association		25,607		33		159		25,481
Collateralized mortgage obligations:
Federal National Mortgage Association		56,791		—		818		55,973
Federal Home Loan Mortgage Corporation		80,570		—		1,120		79,450
Government National Mortgage Association		19,084		19		101		19,002
Total mortgage-backed securities		191,294		66		2,277		189,083
Total held to maturity securities	$	485,717	$	6,628	$	2,281	$	490,064

- 11 -

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(4.) INVESTMENT SECURITIES (Continued)

Investment securities with a total fair value of $908.8 million at March 31, 2016 were pledged as collateral to secure public deposits and for other purposes required or permitted by law.

Sales and calls of securities available for sale were as follows (in thousands):

	Three months ended March 31,
	2016		2015
Proceeds from sales	$	17,627	$	29,508
Gross realized gains		613		1,073
Gross realized losses		—		11

The scheduled maturities of securities available for sale and securities held to maturity at March 31, 2016 are shown below (in thousands). Actual expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.

	Amortized Cost		Fair Value
Debt securities available for sale:
Due in one year or less	$	5,101	$	5,137
Due from one to five years		179,535		182,050
Due after five years through ten years		300,883		308,638
Due after ten years		112,137		114,188
	$	597,656	$	610,013
Debt securities held to maturity:
Due in one year or less	$	20,934	$	20,987
Due from one to five years		174,277		178,726
Due after five years through ten years		111,349		115,419
Due after ten years		169,723		170,731
	$	476,283	$	485,863

- 12 -

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(4.) INVESTMENT SECURITIES (Continued)

Unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows (in thousands):

	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2016
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	391	$	1	$	7,482	$	6	$	7,873	$	7
Mortgage-backed securities:
Federal National Mortgage Association		12,098		3		15,781		50		27,879		53
Federal Home Loan Mortgage Corporation		—		—		4,258		28		4,258		28
Government National Mortgage Association		1,332		12		—		—		1,332		12
Total mortgage-backed securities		13,430		15		20,039		78		33,469		93
Total available for sale securities		13,821		16		27,521		84		41,342		100
Securities held to maturity:
State and political subdivisions		2,477		1		—		—		2,477		1
Mortgage-backed securities:
Federal National Mortgage Association		1,362		2		—		—		1,362		2
Government National Mortgage Association		4,225		12		3,773		29		7,998		41
Collateralized mortgage obligations:
Federal National Mortgage Association		6,895		15		—		—		6,895		15
Federal Home Loan Mortgage Corporation		5,100		5		—		—		5,100		5
Government National Mortgage Association		3,366		7		—		—		3,366		7
Total mortgage-backed securities		20,948		41		3,773		29		24,721		70
Total held to maturity securities		23,425		42		3,773		29		27,198		71
Total temporarily impaired securities	$	37,246	$	58	$	31,294	$	113	$	68,540	$	171
December 31, 2015
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	82,298	$	735	$	26,302	$	314	$	108,600	$	1,049
Mortgage-backed securities:
Federal National Mortgage Association		123,774		2,134		9,562		199		133,336		2,333
Federal Home Loan Mortgage Corporation		12,660		194		—		—		12,660		194
Government National Mortgage Association		1,405		4		—		—		1,405		4
Collateralized mortgage obligations:
Federal National Mortgage Association		7,778		154		—		—		7,778		154
Federal Home Loan Mortgage Corporation		4,998		91		—		—		4,998		91
Total mortgage-backed securities		150,615		2,577		9,562		199		160,177		2,776
Total available for sale securities		232,913		3,312		35,864		513		268,777		3,825
Securities held to maturity:
State and political subdivisions		3,075		4		—		—		3,075		4
Mortgage-backed securities:
Federal National Mortgage Association		5,666		79		—		—		5,666		79
Government National Mortgage Association		8,790		159		—		—		8,790		159
Collateralized mortgage obligations:
Federal National Mortgage Association		55,973		818		—		—		55,973		818
Federal Home Loan Mortgage Corporation		79,323		1,120		—		—		79,323		1,120
Government National Mortgage Association		14,559		101		—		—		14,559		101
Total mortgage-backed securities		164,311		2,277		—		—		164,311		2,277
Total held to maturity securities		167,386		2,281		—		—		167,386		2,281
Total temporarily impaired securities	$	400,299	$	5,593	$	35,864	$	513	$	436,163	$	6,106

- 13 -

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(4.) INVESTMENT SECURITIES (Continued)

The total number of security positions in the investment portfolio in an unrealized loss position at March 31, 2016 was 45 compared to 152 at December 31, 2015. At March 31, 2016, the Company had positions in 13 investment securities with a fair value of $31.3 million and a total unrealized loss of $113 thousand that have been in a continuous unrealized loss position for more than 12 months. At March 31, 2016, there were a total of 32 securities positions in the Company’s investment portfolio with a fair value of $37.2 million and a total unrealized loss of $58 thousand that had been in a continuous unrealized loss position for less than 12 months. At December 31, 2015, the Company had positions in 10 investment securities with a fair value of $35.9 million and a total unrealized loss of $513 thousand that had been in a continuous unrealized loss position for more than 12 months. At December 31, 2015, there were a total of 142 securities positions in the Company’s investment portfolio with a fair value of $400.3 million and a total unrealized loss of $5.6 million that had been in a continuous unrealized loss position for less than 12 months. The unrealized loss on investment securities was predominantly caused by changes in market interest rates subsequent to purchase. The fair value of most of the investment securities in the Company’s portfolio fluctuates as market interest rates change.

The Company reviews investment securities on an ongoing basis for the presence of other than temporary impairment (“OTTI”) with formal reviews performed quarterly. When evaluating debt securities for OTTI, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intention to sell the debt security or whether it is more likely than not that it will be required to sell the debt security before its anticipated recovery. The assessment of whether OTTI exists involves a high degree of subjectivity and judgment and is based on the information then available to management. There was no impairment recorded during the three months ended March 31, 2016 and 2015.

Based on management’s review and evaluation of the Company’s debt securities as of March 31, 2016, the debt securities with unrealized losses were not considered to be other-than-temporarily impaired. As of March 31, 2016, the Company did not intend to sell any of the securities in a loss position and believes that it is not likely that it will be required to sell any such securities before the anticipated recovery of amortized cost. Accordingly, as of March 31, 2016, management has concluded that unrealized losses on its investment securities are temporary and no further impairment loss has been realized in the Company’s consolidated statements of income.

- 14 -

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(5.) LOANS

The Company’s loan portfolio consisted of the following as of the dates indicated (in thousands):

	Principal Amount Outstanding		Net Deferred Loan (Fees) Costs			Loans, Net
March 31, 2016
Commercial business	$	317,420	$	356		$	317,776
Commercial mortgage		591,800		(1,484	)		590,316
Residential real estate loans		377,406		5,098			382,504
Residential real estate lines		123,894		2,632			126,526
Consumer indirect		655,348		24,498			679,846
Other consumer		17,889		177			18,066
Total	$	2,083,757	$	31,277			2,115,034
Allowance for loan losses							(27,568	)
Total loans, net						$	2,087,466
December 31, 2015
Commercial business	$	313,475	$	283		$	313,758
Commercial mortgage		567,481		(1,380	)		566,101
Residential real estate loans		376,023		5,051			381,074
Residential real estate lines		124,766		2,581			127,347
Consumer indirect		652,494		24,446			676,940
Other consumer		18,361		181			18,542
Total	$	2,052,600	$	31,162			2,083,762
Allowance for loan losses							(27,085	)
Total loans, net						$	2,056,677

Loans held for sale (not included above) were comprised entirely of residential real estate mortgages and totaled $609 thousand and $1.4 million as of March 31, 2016 and December 31, 2015, respectively.

- 15 -

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(5.) LOANS (Continued)

Past Due Loans Aging

The Company’s recorded investment, by loan class, in current and nonaccrual loans, as well as an analysis of accruing delinquent loans is set forth as of the dates indicated (in thousands):

	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Nonaccrual		Current		Total Loans
March 31, 2016
Commercial business	$	94	$	2	$	—	$	96	$	4,056	$	313,268	$	317,420
Commercial mortgage		53		—		—		53		1,781		589,966		591,800
Residential real estate loans		515		22		—		537		1,601		375,268		377,406
Residential real estate lines		151		43		—		194		165		123,535		123,894
Consumer indirect		1,296		267		—		1,563		943		652,842		655,348
Other consumer		52		17		9		78		12		17,799		17,889
Total loans, gross	$	2,161	$	351	$	9	$	2,521	$	8,558	$	2,072,678	$	2,083,757
December 31, 2015
Commercial business	$	321	$	612	$	—	$	933	$	3,922	$	308,620	$	313,475
Commercial mortgage		68		146		—		214		947		566,320		567,481
Residential real estate loans		723		395		—		1,118		1,848		373,057		376,023
Residential real estate lines		199		34		—		233		235		124,298		124,766
Consumer indirect		1,975		286		—		2,261		1,467		648,766		652,494
Other consumer		98		13		8		119		13		18,229		18,361
Total loans, gross	$	3,384	$	1,486	$	8	$	4,878	$	8,432	$	2,039,290	$	2,052,600

There were no loans past due greater than 90 days and still accruing interest as of March 31, 2016 and December 31, 2015. There were $9 thousand and $8 thousand in consumer overdrafts which were past due greater than 90 days as of March 31, 2016 and December 31, 2015, respectively. Consumer overdrafts are overdrawn deposit accounts which have been reclassified as loans but by their terms do not accrue interest.

Troubled Debt Restructurings

A modification of a loan constitutes a troubled debt restructuring (“TDR”) when a borrower is experiencing financial difficulty and the modification constitutes a concession. Commercial loans modified in a TDR may involve temporary interest-only payments, term extensions, reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, collateral concessions, forgiveness of principal, forebearance agreements, or substituting or adding a new borrower or guarantor.

The following table presents information related to loans modified in a TDR during the quarterly periods indicated (dollars in thousands).

	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
March 31, 2016
Commercial business		2	$	312	$	312
Commercial mortgage		1		550		550
Total		3	$	862	$	862
March 31, 2015
Commercial business		—	$	—	$	—
Commercial mortgage		1		682		330
Total		1	$	682	$	330

- 16 -

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(5.) LOANS (Continued)

The loans identified as a TDR by the Company during the three month periods ended March 31, 2016 and 2015 were previously reported as an impaired loan prior to restructuring. Each of the loans restructured during the three months ended March 31, 2016 and 2015 were on nonaccrual status at the end of the respective period. The modifications related to collateral concessions. Nonaccrual loans that are restructured remain on nonaccrual status, but may move to accrual status after they have performed according to the restructured terms for a period of time. The TDR classifications did not have a material impact on the Company’s determination of the allowance for loan losses because the modified loans were impaired and evaluated for a specific reserve both before and after restructuring.

There were no loans modified as a TDR within the previous 12 months that defaulted during the three months ended March 31, 2016 or 2015. For purposes of this disclosure, a loan modified as a TDR is considered to have defaulted when the borrower becomes 90 days past due.

Impaired Loans

Management has determined that specific commercial loans on nonaccrual status and all loans that have had their terms restructured in a troubled debt restructuring are impaired loans. The following table presents the recorded investment, unpaid principal balance and related allowance of impaired loans as of the dates indicated and average recorded investment and interest income recognized on impaired loans for the three month periods ended as of the dates indicated (in thousands):

	Recorded Investment(1)		Unpaid Principal Balance(1)		Related Allowance		Average Recorded Investment		Interest Income Recognized
March 31, 2016
With no related allowance recorded:
Commercial business	$	2,130	$	2,710	$	—	$	1,516	$	—
Commercial mortgage		1,349		1,697		—		1,018		—
		3,479		4,407		—		2,534		—
With an allowance recorded:
Commercial business		1,926		1,926		825		2,339		—
Commercial mortgage		432		432		127		114		—
		2,358		2,358		952		2,453		—
	$	5,837	$	6,765	$	952	$	4,987	$	—
December 31, 2015
With no related allowance recorded:
Commercial business	$	1,441	$	1,810	$	—	$	1,352	$	—
Commercial mortgage		937		1,285		—		1,013		—
		2,378		3,095		—		2,365		—
With an allowance recorded:
Commercial business		2,481		2,481		996		1,946		—
Commercial mortgage		10		10		10		449		—
		2,491		2,491		1,006		2,395		—
	$	4,869	$	5,586	$	1,006	$	4,760	$	—

⁽¹⁾ Difference between recorded investment and unpaid principal balance represents partial charge-offs.

- 17 -

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(5.) LOANS (Continued)

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors such as the fair value of collateral. The Company analyzes commercial business and commercial mortgage loans individually by classifying the loans as to credit risk. Risk ratings are updated any time the situation warrants. The Company uses the following definitions for risk ratings:

Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans that do not meet the criteria above that are analyzed individually as part of the process described above are considered “Uncriticized” or pass-rated loans and are included in groups of homogeneous loans with similar risk and loss characteristics.

The following table sets forth the Company’s commercial loan portfolio, categorized by internally assigned asset classification, as of the dates indicated (in thousands):

	Commercial Business		Commercial Mortgage
March 31, 2016
Uncriticized	$	303,114	$	576,742
Special mention		5,643		8,580
Substandard		8,663		6,478
Doubtful		—		—
Total	$	317,420	$	591,800
December 31, 2015
Uncriticized	$	298,413	$	551,603
Special mention		4,916		9,015
Substandard		10,146		6,863
Doubtful		—		—
Total	$	313,475	$	567,481

The Company utilizes payment status as a means of identifying and reporting problem and potential problem retail loans. The Company considers nonaccrual loans and loans past due greater than 90 days and still accruing interest to be non-performing. The following table sets forth the Company’s retail loan portfolio, categorized by payment status, as of the dates indicated (in thousands):

	Residential Real Estate Loans		Residential Real Estate Lines		Consumer Indirect		Other Consumer
March 31, 2016
Performing	$	375,805	$	123,729	$	654,405	$	17,868
Non-performing		1,601		165		943		21
Total	$	377,406	$	123,894	$	655,348	$	17,889
December 31, 2015
Performing	$	374,175	$	124,531	$	651,027	$	18,340
Non-performing		1,848		235		1,467		21
Total	$	376,023	$	124,766	$	652,494	$	18,361

- 18 -

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(5.) LOANS (Continued)

Allowance for Loan Losses

The following tables set forth the changes in the allowance for loan losses for the three month periods ended as of the dates indicated (in thousands):

	Commercial Business		Commercial Mortgage		Residential Real Estate Loans		Residential Real Estate Lines			Consumer Indirect		Other Consumer		Total
March 31, 2016
Allowance for loan losses:
Beginning balance	$	5,540	$	9,027	$	1,347	$	345		$	10,458	$	368	$	27,085
Charge-offs		602		4		46		4			2,498		157		3,311
Recoveries		100		5		25		4			1,170		122		1,426
Provision		398		687		58		—			1,167		58		2,368
Ending balance	$	5,436	$	9,715	$	1,384	$	345		$	10,297	$	391	$	27,568
Evaluated for impairment:
Individually	$	791	$	120	$	—	$	—		$	—	$	—	$	911
Collectively	$	4,645	$	9,595	$	1,384	$	345		$	10,297	$	391	$	26,657
Loans:
Ending balance	$	317,420	$	591,800	$	377,406	$	123,894		$	655,348	$	17,889	$	2,083,757
Evaluated for impairment:
Individually	$	3,924	$	1,730	$	—	$	—		$	—	$	—	$	5,654
Collectively	$	313,496	$	590,070	$	377,406	$	123,894		$	655,348	$	17,889	$	2,078,103
March 31, 2015
Allowance for loan losses:
Beginning balance	$	5,621	$	8,122	$	1,620	$	435		$	11,383	$	456	$	27,637
Charge-offs		1,141		609		139		—			2,422		259		4,570
Recoveries		48		89		41		2			1,105		98		1,383
Provision (credit)		867		554		64		(35	)		1,139		152		2,741
Ending balance	$	5,395	$	8,156	$	1,586	$	402		$	11,205	$	447	$	27,191
Evaluated for impairment:
Individually	$	1,120	$	817	$	—	$	—		$	—	$	—	$	1,937
Collectively	$	4,275	$	7,339	$	1,586	$	402		$	11,205	$	447	$	25,254
Loans:
Ending balance	$	277,427	$	480,479	$	351,088	$	126,832		$	637,380	$	19,184	$	1,892,390
Evaluated for impairment:
Individually	$	4,587	$	3,411	$	—	$	—		$	—	$	—	$	7,998
Collectively	$	272,840	$	477,068	$	351,088	$	126,832		$	637,380	$	19,184	$	1,884,392

Risk Characteristics

Commercial business loans primarily consist of loans to small to midsize businesses in our market area in a diverse range of industries. These loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value. The credit risk related to commercial loans is largely influenced by general economic conditions and the resulting impact on a borrower’s operations or on the value of underlying collateral, if any.

Commercial mortgage loans generally have larger balances and involve a greater degree of risk than residential mortgage loans, potentially resulting in higher losses on an individual customer basis. Loan repayment is often dependent on the successful operation and management of the properties, as well as on the collateral securing the loan. Economic events or conditions in the real estate market could have an adverse impact on the cash flows generated by properties securing the Company’s commercial real estate loans and on the value of such properties.

- 19 -

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(5.) LOANS (Continued)

Residential real estate loans (comprised of conventional mortgages and home equity loans) and Residential real estate lines (comprised of home equity lines) are generally made on the basis of the borrower’s ability to make repayment from his or her employment and other income, but are secured by real property whose value tends to be more easily ascertainable. Credit risk for these types of loans is generally influenced by general economic conditions, the characteristics of individual borrowers, and the nature of the loan collateral.

Consumer indirect and other consumer loans may entail greater credit risk than residential mortgage loans and home equities, particularly in the case of other consumer loans which are unsecured or, in the case of indirect consumer loans, secured by depreciable assets, such as automobiles or boats. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances such as job loss, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

(6.) GOODWILL AND OTHER INTANGIBLE ASSETS

The carrying amount of goodwill totaled $66.4 and $60.4 million as of March 31, 2016 and December 31, 2015, respectively. The Company performs a goodwill impairment test on an annual basis or more frequently if events and circumstances warrant.

	Banking		Non-Banking		Total
Balance, December 31, 2015	$	48,536	$	11,866	$	60,402
Acquisition		—		6,015		6,015
Balance, March 31, 2016	$	48,536	$	17,881	$	66,417

Goodwill and other intangible assets added during the period relates to the Courier Capital acquisition, which was completed on January 5, 2016. See Note 2 – Business Combinations for additional information.

The Company has other intangible assets that are amortized, consisting of core deposit intangibles and other intangibles (primarily related to customer relationships). Changes in the gross carrying amount, accumulated amortization and net book value, were as follows (in thousands):

	March 31,			December 31,
	2016			2015
Other intangibles assets:
Gross carrying amount	$	12,610		$	8,682
Accumulated amortization		(2,460	)		(2,138	)
Net book value	$	10,150		$	6,544

Amortization expense for total other intangible assets was $322 thousand and $243 thousand for the three months ended March 31, 2016 and 2015, respectively. As of March 31, 2016, the estimated amortization expense of other intangible assets for the remainder of 2016 and each of the next five years is as follows (in thousands):

2016 (remainder of year)	$	927
2017		1,144
2018		1,035
2019		937
2020		840
2021		738

- 20 -

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(7.) SHAREHOLDERS’ EQUITY

Common Stock

The changes in shares of common stock were as follows for the three month periods ended March 31, 2016 and 2015:

	Outstanding			Treasury			Issued
March 31, 2016
Shares outstanding at December 31, 2015		14,190,192			207,317			14,397,509
Common stock issued for acquisition		294,705			—			294,705
Restricted stock awards forfeited		(4,914	)		4,914			—
Stock options exercised		15,100			(15,100	)		—
Shares outstanding at March 31, 2016		14,495,083			197,131			14,692,214
March 31, 2015
Shares outstanding at December 31, 2014		14,118,048			279,461			14,397,509
Restricted stock awards issued		49,084			(49,084	)		—
Restricted stock awards forfeited		(2,271	)		2,271			—
Stock options exercised		3,722			(3,722	)		—
Treasury stock purchases		(1,791	)		1,791			—
Shares outstanding at March 31, 2015		14,166,792			230,717			14,397,509

(8.) ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the components of other comprehensive income for the three month periods ended March 31, 2016 and 2015 (in thousands):

	Pre-tax Amount			Tax Effect			Net-of-tax Amount
March 31, 2016
Securities available for sale and transferred securities:
Change in unrealized gain/loss during the period	$	12,196		$	4,706		$	7,490
Reclassification adjustment for net gains included in net income (1)		(662	)		(255	)		(407	)
Total securities available for sale and transferred securities		11,534			4,451			7,083
Amortization of pension and post-retirement items:
Prior service credit		(12	)		(5	)		(7	)
Net actuarial losses		239			93			146
Total pension and post-retirement obligations		227			88			139
Other comprehensive income	$	11,761		$	4,539		$	7,222
March 31, 2015
Securities available for sale and transferred securities:
Change in unrealized gain/loss during the period	$	6,396		$	2,436		$	3,960
Reclassification adjustment for net gains included in net income (1)		(1,139	)		(440	)		(699	)
Total securities available for sale and transferred securities		5,257			1,996			3,261
Amortization of pension and post-retirement items:
Prior service credit		(12	)		(5	)		(7	)
Net actuarial losses		236			94			142
Total pension and post-retirement obligations		224			89			135
Other comprehensive income	$	5,481		$	2,085		$	3,396

⁽¹⁾ Includes amounts related to the amortization/accretion of unrealized net gains and losses related to the Company’s reclassification of available for sale investment securities to the held to maturity category. The unrealized net gains/losses will be amortized/accreted over the remaining life of the investment securities as an adjustment of yield.

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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(8.) ACCUMULATED OTHER COMPREHENSIVE LOSS (Continued)

Activity in accumulated other comprehensive loss, net of tax, for the three month periods ended March 31, 2016 and 2015 was as follows (in thousands):

	Securities Available for Sale and Transferred Securities			Pension and Post- retirement Obligations			Accumulated Other Comprehensive Loss
March 31, 2016
Balance at beginning of year	$	(696	)	$	(10,631	)	$	(11,327	)
Other comprehensive income before reclassifications		7,490			—			7,490
Amounts reclassified from accumulated other comprehensive loss		(407	)		139			(268	)
Net current period other comprehensive income		7,083			139			7,222
Balance at end of period	$	6,387		$	(10,492	)	$	(4,105	)
March 31, 2015
Balance at beginning of year	$	1,625		$	(10,636	)	$	(9,011	)
Other comprehensive income before reclassifications		3,960			—			3,960
Amounts reclassified from accumulated other comprehensive loss		(699	)		135			(564	)
Net current period other comprehensive income		3,261			135			3,396
Balance at end of period	$	4,886		$	(10,501	)	$	(5,615	)

The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss for the three month periods ended March 31, 2016 and 2015 (in thousands):

Details About Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss						Affected Line Item in the Consolidated Statement of Income
	Three months ended March 31,
	2016			2015
Realized gain on sale of investment securities	$	613		$	1,062		Net gain on disposal of investment securities
Amortization of unrealized holding gains (losses) on investment securities transferred from available for sale to held to maturity		49			77		Interest income
		662			1,139		Total before tax
		(255	)		(440	)	Income tax expense
		407			699		Net of tax
Amortization of pension and post-retirement items:
Prior service credit (1)		12			12		Salaries and employee benefits
Net actuarial losses (1)		(239	)		(236	)	Salaries and employee benefits
		(227	)		(224	)	Total before tax
		88			89		Income tax benefit
		(139	)		(135	)	Net of tax
Total reclassified for the period	$	268		$	564

⁽¹⁾ These items are included in the computation of net periodic pension expense. See Note 10 – Employee Benefit Plans for additional information.

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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(9.) SHARE-BASED COMPENSATION PLANS

The Company maintains certain stock-based compensation plans that were approved by the Company’s shareholders and are administered by the Company’s Board of Directors, or the Management Development and Compensation Committee (the “MD&C Committee”) of the Board. The share-based compensation plans were established to allow for the grant of compensation awards to attract, motivate and retain employees, executive officers and non-employee directors who contribute to the success and profitability of the Company and to give such persons a proprietary interest in the Company, thereby enhancing their personal interest in the Company’s success.

The MD&C Committee approved the grant of restricted stock units (“RSUs”) and performance share units (“PSUs”) shown in the table below to certain members of management during the first quarter of 2016.

			Weighted
			Average
	Number of		Per Share
	Underlying		Grant Date
	Shares		Fair Value
RSUs		14,500	$	24.21
PSUs		24,084		22.94

The grant-date fair value for the RSUs granted during the three month period ended March 31, 2016 is equal to the closing market price of our common stock on the date of grant reduced by the present value of the dividends expected to be paid on the underlying shares.

The number of PSUs that ultimately vest is contingent on achieving specified EPS targets and specified total shareholder return (“TSR”) targets relative to the SNL Small Cap Bank & Thrifts Index. Thirty percent of the shares subject to each grant will be earned based upon achievement of an EPS performance requirement for the Company’s fiscal year ended December 31, 2016. The remaining seventy percent of the shares will be earned based on the Company’s achievement of a relative TSR performance requirement, on a percentile basis, compared to the SNL Small Cap Bank & Thrifts Index over a three-year performance period ended December 31, 2018. The shares earned based on the achievement of the EPS and TSR performance requirements, if any, will vest on February 24, 2019 assuming the recipient’s continuous service to the Company.

The grant-date fair value for the EPS portion of the PSUs granted during the three month period ended March 31, 2016 is equal to the closing market price of our common stock on the date of grant reduced by the present value of the dividends expected to be paid on the underlying shares. The grant-date fair value of the TSR portion of the PSUs granted during the three month period ended March 31, 2016 was determined using the Monte Carlo simulation model on the date of grant, assuming the following (i) expected term of 2.85 years, (ii) risk free interest rate of 0.88%, (iii) expected dividend yield of 2.99% and (iv) expected stock price volatility over the expected term of the TSR award of 24.3%.

The Company previously granted restricted stock awards to certain members of management. There were no restricted stock awards granted during the quarter ended March 31, 2016. The following is a summary of restricted stock award activity for the three month period ended March 31, 2016:

				Weighted
				Average
				Market
	Number of			Price at
	Shares			Grant Date
Outstanding at beginning of year		82,908		$	17.23
Forfeited		(4,914	)		22.69
Outstanding at end of period		77,994		$	16.89

At March 31, 2016, the total unrecognized compensation cost related to the nonvested awards granted and expected to vest was $1.5 million. This cost is expected to be recognized over a weighted-average period of 2.4 years.

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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(9.) SHARE-BASED COMPENSATION PLANS (Continued)

The Company uses the Black-Scholes valuation method to estimate the fair value of its stock option awards. There were no stock options awarded during 2016 or 2015. The following is a summary of stock option activity for the three months ended March 31, 2016 (dollars in thousands, except per share amounts):

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Options			Price		Term		Value
Outstanding at beginning of year		102,249		$	19.21
Exercised		(15,100	)		19.03
Expired		—
Outstanding and exercisable at end of period		87,149		$	19.24		1.2	$	856

The aggregate intrinsic value (the amount by which the market price of the stock on the date of exercise exceeded the market price of the stock on the date of grant) of option exercises for the three months ended March 31, 2016 and 2015 was $126 thousand and $13 thousand, respectively. The total cash received as a result of option exercises under stock compensation plans for the three months ended March 31, 2016 and 2015 was $288 thousand and $72 thousand, respectively.

The Company amortizes the expense related to stock-based compensation awards over the vesting period. Share-based compensation expense is recorded as a component of salaries and employee benefits in the consolidated statements of income for awards granted to management and as a component of other noninterest expense for awards granted to directors. The share-based compensation expense included in the consolidated statements of income is as follows (in thousands):

	Three months ended
	March 31,
	2016		2015
Salaries and employee benefits	$	98	$	78
Other noninterest expense		31		25
Total share-based compensation expense	$	129	$	103

(10.) EMPLOYEE BENEFIT PLANS

The components of the Company’s net periodic benefit expense for its pension and post-retirement obligations were as follows (in thousands):

	Three months ended
	March 31,
	2016			2015
Service cost	$	721		$	581
Interest cost on projected benefit obligation		601			583
Expected return on plan assets		(1,150	)		(1,205	)
Amortization of prior service credit		(12	)		(12	)
Amortization of net actuarial losses		239			236
Net periodic benefit expense	$	399		$	183

The net periodic benefit expense is recorded as a component of salaries and employee benefits in the consolidated statements of income. The Company’s funding policy is to contribute, at a minimum, an actuarially determined amount that will satisfy the minimum funding requirements determined under the appropriate sections of the Internal Revenue Code. The Company has no minimum required contribution for the 2016 fiscal year.

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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(11.) COMMITMENTS AND CONTINGENCIES

The Company has financial instruments with off-balance sheet risk established in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk extending beyond amounts recognized in the Company’s financial statements.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is essentially the same as that involved with extending loans to customers. The Company uses the same credit underwriting policies in making commitments and conditional obligations as for on-balance sheet instruments.

Off-balance sheet commitments consist of the following (in thousands):

	March 31, 2016		December 31, 2015
Commitments to extend credit	$	521,912	$	514,818
Standby letters of credit		10,892		11,746

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses which may require payment by the customer of a termination fee. Commitments may expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if any, is based on management’s credit evaluation of the borrower. Standby letters of credit are conditional lending commitments issued by the Company to guarantee the performance of a customer to a third party. These standby letters of credit are primarily issued to support private borrowing arrangements. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers.

The Company also extends rate lock agreements to borrowers related to the origination of residential mortgage loans. To mitigate the interest rate risk inherent in these rate lock agreements, the Company may enter into forward commitments to sell individual residential mortgages. Rate lock agreements and forward commitments are considered derivatives and are recorded at fair value. Forward sales commitments totaled $826 thousand and $1.3 million at March 31, 2016 and December 31, 2015, respectively. In addition, the net change in the fair values of these derivatives was recognized as other noninterest income or other noninterest expense in the consolidated statements of income.

(12.) FAIR VALUE MEASUREMENTS

Determination of Fair Value – Assets Measured at Fair Value on a Recurring and Nonrecurring Basis

Valuation Hierarchy

The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. ASC Topic 820, “Fair Value Measurements and Disclosures,” establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. There have been no changes in the valuation techniques used during the current period. The fair value hierarchy is as follows:

• Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

• Level 2 – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

• Level 3 – Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Transfers between levels of the fair value hierarchy are recorded as of the end of the reporting period.

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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(12.) FAIR VALUE MEASUREMENTS (Continued)

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein. A more detailed description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Securities available for sale: Securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent 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.

Loans held for sale: The fair value of loans held for sale is determined using quoted secondary market prices and investor commitments. Loans held for sale are classified as Level 2 in the fair value hierarchy.

Collateral dependent impaired loans: Fair value of impaired loans with specific allocations of the allowance for loan losses is measured based on the value of the collateral securing these loans and is classified as Level 3 in the fair value hierarchy. Collateral may be real estate and/or business assets including equipment, inventory and/or accounts receivable and collateral value is determined based on appraisals performed by qualified licensed appraisers hired by the Company. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and the client’s business. Such discounts are typically significant and result in a Level 3 classification of the inputs for determining fair value. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors identified above.

Loan servicing rights: Loan servicing rights do not trade in an active market with readily observable market data. As a result, the Company estimates the fair value of loan servicing rights by using a discounted cash flow model to calculate the present value of estimated future net servicing income. The assumptions used in the discounted cash flow model are those that we believe market participants would use in estimating future net servicing income, including estimates of loan prepayment rates, servicing costs, ancillary income, impound account balances, and discount rates. The significant unobservable inputs used in the fair value measurement of the Company’s loan servicing rights are the constant prepayment rates and weighted average discount rate. Significant increases (decreases) in any of those inputs in isolation could result in a significantly lower (higher) fair value measurement. Although the constant prepayment rate and the discount rate are not directly interrelated, they will generally move in opposite directions. Loan servicing rights are classified as Level 3 measurements due to the use of significant unobservable inputs, as well as significant management judgment and estimation.

Other real estate owned (Foreclosed assets): Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned are measured at the lower of carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisals of the property, resulting in a Level 3 classification. The appraisals are sometimes further discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and client’s business. Such discounts are typically significant and result in a Level 3 classification of the inputs for determining fair value. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized.

Commitments to extend credit and letters of credit: Commitments to extend credit and fund letters of credit are principally at current interest rates, and, therefore, the carrying amount approximates fair value. The fair value of commitments is not material.

- 26 -

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(12.) FAIR VALUE MEASUREMENTS (Continued)

Assets Measured at Fair Value

The following tables present for each of the fair-value hierarchy levels the Company’s assets that are measured at fair value on a recurring and non-recurring basis as of the dates indicated (in thousands).

	Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
March 31, 2016
Measured on a recurring basis:
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	—	$	241,463	$	—	$	241,463
Mortgage-backed securities		—		368,371		—		368,371
Asset-backed securities		—		179		—		179
	$	—	$	610,013	$	—	$	610,013
Measured on a nonrecurring basis:
Loans:
Loans held for sale	$	—	$	609	$	—	$	609
Collateral dependent impaired loans		—		—		1,263		1,263
Other assets:
Loan servicing rights		—		—		1,222		1,222
Other real estate owned		—		—		187		187
	$	—	$	609	$	2,672	$	3,281
December 31, 2015
Measured on a recurring basis:
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	—	$	260,863	$	—	$	260,863
Mortgage-backed securities		—		283,314		—		283,314
Asset-backed securities		—		218		—		218
	$	—	$	544,395	$	—	$	544,395
Measured on a nonrecurring basis:
Loans:
Loans held for sale	$	—	$	1,430	$	—	$	1,430
Collateral dependent impaired loans		—		—		1,485		1,485
Other assets:
Loan servicing rights		—		—		1,241		1,241
Other real estate owned		—		—		163		163
	$	—	$	1,430	$	2,889	$	4,319

There were no transfers between Levels 1 and 2 during the three months ended March 31, 2016 and 2015. There were no liabilities measured at fair value on a recurring or nonrecurring basis during the three month periods ended March 31, 2016 and 2015.

- 27 -

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(12.) FAIR VALUE MEASUREMENTS (Continued)

The following table presents additional quantitative information about assets measured at fair value on a recurring and nonrecurring basis for which the Company has utilized Level 3 inputs to determine fair value (dollars in thousands).

Asset	Fair Value		Valuation Technique	Unobservable Input	Unobservable Input Value or Range
Collateral dependent impaired loans	$	1,263	Appraisal of collateral (1)	Appraisal adjustments (2)	0% - 50% discount
Loan servicing rights		1,222	Discounted cash flow	Discount rate	4.7% (3)
				Constant prepayment rate	14.9% (3)
Other real estate owned		187	Appraisal of collateral (1)	Appraisal adjustments (2)	39% - 48% discount

⁽¹⁾ Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.

⁽²⁾ Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

⁽³⁾ Weighted averages.

Changes in Level 3 Fair Value Measurements

There were no assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of or during the three months ended March 31, 2016.

Disclosures about Fair Value of Financial Instruments

The assumptions used below are expected to approximate those that market participants would use in valuing these financial instruments.

Fair value estimates are made at a specific point in time, based on available market information and judgments about the financial instrument, including estimates of timing, amount of expected future cash flows and the credit standing of the issuer. Such estimates do not consider the tax impact of the realization of unrealized gains or losses. In some cases, the fair value estimates cannot be substantiated by comparison to independent markets. In addition, the disclosed fair value may not be realized in the immediate settlement of the financial instrument. Care should be exercised in deriving conclusions about our business, its value or financial position based on the fair value information of financial instruments presented below.

The estimated fair value approximates carrying value for cash and cash equivalents, Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, accrued interest receivable, non-maturity deposits, short-term borrowings and accrued interest payable. Fair value estimates for other financial instruments not included elsewhere in this disclosure are discussed below.

Securities held to maturity: The fair value of the Company’s investment securities held to maturity is primarily measured using information from a third-party pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

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

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

Long-term borrowings: Long-term borrowings consist of $40 million of subordinated notes issued during the second quarter of 2015. The subordinated notes are publicly traded and are valued based on market prices, which are characterized as Level 2 liabilities in the fair value hierarchy.

- 28 -

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(12.) FAIR VALUE MEASUREMENTS (Continued)

The following presents (in thousands) the carrying amount, estimated fair value, and placement in the fair value measurement hierarchy of the Company’s financial instruments as of the dates indicated.

	Level in	March 31, 2016				December 31, 2015
	Fair Value			Estimated				Estimated
	Measurement	Carrying		Fair		Carrying		Fair
	Hierarchy	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	110,944	$	110,944	$	60,121	$	60,121
Securities available for sale	Level 2		610,013		610,013		544,395		544,395
Securities held to maturity	Level 2		476,283		485,863		485,717		490,064
Loans held for sale	Level 2		609		609		1,430		1,430
Loans	Level 2		2,086,203		2,092,237		2,055,192		2,046,235
Loans (1)	Level 3		1,263		1,263		1,485		1,485
Accrued interest receivable	Level 1		10,181		10,181		8,609		8,609
FHLB and FRB stock	Level 2		14,865		14,865		19,991		19,991
Financial liabilities:
Non-maturity deposits	Level 1		2,282,747		2,282,747		2,093,513		2,093,513
Time deposits	Level 2		677,430		674,410		637,018		636,159
Short-term borrowings	Level 1		179,200		179,200		293,100		293,100
Long-term borrowings	Level 2		39,008		37,566		38,990		40,313
Accrued interest payable	Level 1		5,495		5,495		4,676		4,676

⁽¹⁾ Comprised of collateral dependent impaired loans.

(13.) SEGMENT REPORTING

The Company has two reportable segments: Banking and Non-Banking. These reportable segments have been identified and organized based on the nature of the underlying products and services applicable to each segment, the type of customers to whom those products and services are offered and the distribution channel through which those products and services are made available.

The banking segment includes all of the Company’s retail and commercial banking operations. The non-banking segment includes the activities of Scott Danahy Naylon, a full service insurance agency that provides a broad range of insurance services to both personal and business clients, and Courier Capital, an investment advisor and wealth management firm that provides customized investment management, investment consulting and retirement plan services to individuals, businesses, institutions, foundations and retirement plans. The Company operated as two business segments (banking and insurance) until the acquisition of Courier Capital on January 5, 2016, at which time the insurance segment was re-named non-banking to consider the inclusion of Courier Capital which has similar products, services and reporting, as noted above. Holding company amounts are the primary differences between segment amounts and consolidated totals, and are reflected in the Holding Company and Other column below, along with amounts to eliminate balances and transactions between segments.

- 29 -

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(13.) SEGMENT REPORTING (Continued)

The following tables present information regarding our business segments as of and for the periods indicated (in thousands).

	Banking			Non-Banking			Holding Company and Other			Consolidated Totals
March 31, 2016
Goodwill	$	48,536		$	17,881		$	—		$	66,417
Other intangible assets, net		762			9,388			—			10,150
Total assets		3,484,886			31,545			141			3,516,572
December 31, 2015
Goodwill	$	48,536		$	11,866		$	—		$	60,402
Other intangible assets, net		829			5,715			—			6,544
Total assets		3,356,987			20,315			3,722			3,381,024
	Banking			Non-Banking(1)			Holding Company and Other			Consolidated Totals
Three months ended March 31, 2016
Net interest income (expense)	$	25,337		$	—		$	(618	)	$	24,719
Provision for loan losses		(2,368	)		—			—			(2,368	)
Noninterest income		6,863			2,484			(130	)		9,217
Noninterest expense		(18,345	)		(1,806	)		(1,067	)		(21,218	)
Income (loss) before income taxes		11,487			678			(1,815	)		10,350
Income tax (expense) benefit		(3,101	)		(264	)		633			(2,732	)
Net income (loss)	$	8,386		$	414		$	(1,182	)	$	7,618
Three months ended March 31, 2015
Net interest income	$	23,147		$	—		$	—		$	23,147
Provision for loan losses		(2,741	)		—			—			(2,741	)
Noninterest income		6,831			1,593			(127	)		8,297
Noninterest expense		(17,279	)		(1,187	)		(545	)		(19,011	)
Income (loss) before income taxes		9,958			406			(672	)		9,692
Income tax (expense) benefit		(2,949	)		(159	)		217			(2,891	)
Net income (loss)	$	7,009		$	247		$	(455	)	$	6,801

⁽¹⁾ Includes activity from Courier Capital since January 5, 2016, the date of acquisition.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q should be read in conjunction with the more detailed and comprehensive disclosures included in our Annual Report on Form 10-K for the year ended December 31, 2015. In addition, please read this section in conjunction with our Consolidated Financial Statements and Notes to Consolidated Financial Statements contained herein.

FORWARD LOOKING INFORMATION

Statements and financial analysis contained in this document that are based on other than historical data are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations or forecasts of future events and include, among others:

• statements with respect to the beliefs, plans, objectives, goals, guidelines, expectations, anticipations, and future financial condition, results of operations and performance of Financial Institutions, Inc. (the “Parent”) and our subsidiaries (together, the “Company,” “we,” “our” or “us”); and

• statements preceded by, followed by or that include the words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “projects,” or similar expressions.

These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties and actual results may differ materially from those presented, either expressed or implied, in this document and our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which we refer to as the Form 10-K, including, but not limited to, those presented in the Management’s Discussion and Analysis of Financial Condition and Results of Operations. Factors that might cause such differences include, but are not limited to:

• If we experience greater credit losses than anticipated, earnings may be adversely impacted;

• Our tax strategies and the value of our deferred tax assets could adversely affect our operating results and regulatory capital ratios;

• Geographic concentration may unfavorably impact our operations;

• We depend on the accuracy and completeness of information about or from customers and counterparties;

• Our insurance brokerage subsidiary is subject to risk related to the insurance industry;

• Our investment advisory and wealth management operations are subject to risk related to the financial services industry;

• Our inability to successfully implement our growth strategies;

• We are subject to environmental liability risk associated with our lending activities;

• Commercial real estate and business loans increase our exposure to credit risks;

• Our indirect lending involves risk elements in addition to normal credit risk;

• We accept deposits that do not have a fixed term and which may be withdrawn by the customer at any time for any reason;

• Any future FDIC insurance premium increases may adversely affect our earnings;

• We are highly regulated and may be adversely affected by changes in banking laws, regulations and regulatory practices;

• New or changing tax and accounting rules and interpretations could significantly impact our strategic initiatives, results of operations, cash flows, and financial condition;

• Legal and regulatory proceedings and related matters could adversely affect us and banking industry in general;

• A breach in security of our or third party information systems, including the occurrence of a cyber incident or a deficiency in cyber security, may subject us to liability, result in a loss of customer business or damage our brand image;

• We face competition in staying current with technological changes to compete and meet customer demands;

• We rely on other companies to provide key components of our business infrastructure;

• We use financial models for business planning purposes that may not adequately predict future results;

• We may not be able to attract and retain skilled people;

• Acquisitions may disrupt our business and dilute shareholder value;

• We are subject to interest rate risk;

• Our business may be adversely affected by conditions in the financial markets and economic conditions generally;

• The fiscal and monetary policies of the federal government and its agencies have a significant impact on our earnings;

• The soundness of other financial institutions could adversely affect us;

• The value of our goodwill and other intangible assets may decline in the future;

• The current proxy contest for the election of directors at our annual meeting could cause us to incur costs in excess of our current estimates and negatively affect our business;

• We operate in a highly competitive industry and market area;

• Severe weather, natural disasters, acts of war or terrorism, and other external events could significantly impact our business;

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MANAGEMENT’S DISCUSSION AND ANALYSIS

• Liquidity is essential to our businesses;

• We may need to raise additional capital in the future and such capital may not be available on acceptable terms or at all;

• We rely on dividends from our subsidiaries for most of our revenue;

• We may not pay or may reduce the dividends on our common stock;

• We may issue debt and equity securities or securities convertible into equity securities, any of which may be senior to our common stock as to distributions and in liquidation, which could dilute our current shareholders or negatively affect the value of our common stock;

• Our certificate of incorporation, our bylaws, and certain banking laws may have an anti-takeover effect; and

• The market price of our common stock may fluctuate significantly in response to a number of factors.

We caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made, and advise readers that various factors, including those described above, could affect our financial performance and could cause our actual results or circumstances for future periods to differ materially from those anticipated or projected. See also Item 1A, Risk Factors in the Form 10-K for further information. Except as required by law, we do not undertake, and specifically disclaim any obligation to publicly release any revisions to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

GENERAL

Financial Institutions, Inc. (the “Parent”) is a financial holding company headquartered in New York State, providing banking and nonbanking financial services to individuals, municipalities and businesses primarily in our Western and Central New York footprint. The Company provides diversified financial services through its subsidiaries, Five Star Bank, Scott Danahy Naylon, LLC (“Scott Danahy Naylon”) and Courier Capital, LLC (“Courier Capital”). The Company offers a broad array of deposit, lending and other financial services to individuals, municipalities and businesses in Western and Central New York through its wholly-owned New York chartered banking subsidiary, Five Star Bank (the “Bank”). The Bank has also expanded its indirect lending network to include relationships with franchised automobile dealers in the Capital District of New York and Northern Pennsylvania. Scott Danahy Naylon provides a broad range of insurance services to personal and business clients across 44 states. Courier Capital, which we acquired on January 5, 2016, provides customized investment management, investment consulting and retirement plan services to individuals, businesses, institutions, foundations and retirement plans across nine states.

Our primary sources of revenue are net interest income (interest earned on our loans and securities, net of interest paid on deposits and other funding sources) and noninterest income, particularly fees and other revenue from insurance and financial services provided to customers or ancillary services tied to loans and deposits. Business volumes and pricing drive revenue potential, and tend to be influenced by overall economic factors, including market interest rates, business spending, consumer confidence, economic growth, and competitive conditions within the marketplace. We are not able to predict market interest rate fluctuations with certainty and our asset/liability management strategy may not prevent interest rate changes from having a material adverse effect on our results of operations and financial condition.

Our business strategy has been to maintain a community bank philosophy, which consists of focusing on and understanding the individualized banking needs of individuals, municipalities and businesses of the local communities surrounding our primary service areas. We believe this focus allows us to be more responsive to our customers’ needs and provide a high level of personal service that differentiates us from larger competitors, resulting in long-standing and broad based banking relationships. Our core customers are primarily small to medium-sized businesses, individuals and community organizations, which prefer to build banking, insurance and wealth management relationships with a community bank that combines high quality, competitively-priced products and services with personalized service. Because of our identity and origin as a locally operated bank, we believe that our level of personal service provides a competitive advantage over larger banks, which tend to consolidate decision-making authority outside local communities.

A key aspect of our current business strategy is to foster a community-oriented culture where our customers and employees establish long-standing and mutually beneficial relationships. We believe that we are well-positioned to be a strong competitor within our market area because of our focus on community banking needs and customer service, our comprehensive suite of deposit, loan, insurance and wealth management products typically found at larger banks, our highly experienced management team and our strategically located banking centers. We believe that the foregoing factors all help to grow our core deposits, which supports a central element of our business strategy – the growth of a diversified and high-quality loan portfolio.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

EXECUTIVE OVERVIEW

Summary of 2016 First Quarter Results

Net income increased $817 thousand or 12% to $7.6 million for the first quarter of 2016 compared to $6.8 million for the first quarter of 2015. Net income available to common shareholders for the first quarter of 2016 was $7.3 million, or $0.50 per diluted share, compared with $6.4 million, or $0.46 per diluted share, for the first quarter of last year. Return on average equity was 9.91% and return on average assets was 0.90% for the first quarter of 2016 compared to 9.68% and 0.89%, respectively, for the first quarter of 2015.

Net interest income totaled $24.7 million in the first quarter 2016, up from $23.1 million in the first quarter 2015. Average earning assets were up $313.1 million, led by a $193.4 million increase in average loans in the first quarter of 2016 compared to the same quarter in 2015. The growth in earning assets was offset by a lower net interest margin. First quarter 2016 net interest margin was 3.27%, a decrease of 16 basis points from 3.43% reported in the first quarter of 2015.

The provision for loans losses was $2.4 million in the first quarter of 2016 compared to $2.7 million in the first quarter of 2015. Net charge-offs during the recent quarter were $1.9 million, down from $3.2 million in the first quarter of 2015. Net charge-offs expressed as an annualized percentage of average loans outstanding were 0.36% during the first three months of 2016 compared with 0.68% in the first quarter of 2015. See the “Allowance for Loan Losses” and “Non-Performing Assets and Potential Problem Loans” sections of this Management’s Discussion and Analysis for further discussion regarding the decreases in the provision for loan losses and net-charge-offs.

Noninterest income totaled $9.2 million in the first quarter of 2016, compared to $8.3 million in the first quarter of 2015. Included in these totals are net gains realized from the sale of investment securities totaling $613 thousand for the first quarter of 2016 and $1.1 million for the first quarter of 2015. Also, included in company owned life insurance for the first quarter of 2016 is $911 thousand of death benefit proceeds. Exclusive of those items, noninterest income was $7.7 million in the first quarter of 2016 and $7.2 million in the first quarter of 2015. The higher noninterest income in the first quarter 2016 compared to the first quarter 2015 is primarily a result of the investment advisory income from Courier Capital.

Noninterest expense in the first quarter of 2016 totaled $21.2 million compared with $19.0 million in the first quarter of 2015. The increase in noninterest expense was largely due to higher salaries and employee benefits reflecting the addition of Courier Capital and an increase in professional services associated with responding to the demands of an activist shareholder.

The regulatory Common equity Tier 1 ratio and Total risk-based capital ratio were 9.83%, and 13.39%, respectively, for the first quarter of 2016. See the “Liquidity and Capital Management” section of this Management’s Discussion and Analysis for further discussion regarding regulatory capital and the Basel III capital rules.

Courier Capital Acquisition

On January 5, 2016, we completed the acquisition of Courier Capital Corporation, a registered investment advisory and wealth management firm with approximately $1.2 billion in assets under management. Consideration for the acquisition totaled $9.0 million and included stock of $8.1 million and $918 thousand of cash. The acquisition also included $2.8 million of potential future payments of stock and $2.2 million of potential future cash bonuses contingent upon Courier Capital meeting certain EBITDA performance targets through 2018. In addition, the Company purchased two pieces of real property in Buffalo and Jamestown, New York used by Courier Capital for total cash considerations of $1.3 million. As a result of the acquisition, we recorded goodwill of $6.0 million and other intangible assets of $3.9 million. The goodwill is not expected to be deductible for income tax purposes. Courier Capital now operates as a subsidiary of Financial Institutions, Inc. and an affiliate of Five Star Bank and Scott Danahy Naylon.

We expect to realize the following benefits from this acquisition:

• Grow and diversify our noninterest income by offering investment advisory services

• Further increase revenue by cross-selling between our banking, insurance and wealth management lines of business

• Retain capable management with extensive experience in the investment advisory and wealth management industry

• Improve our presence and brand recognition in the Buffalo marketplace

• Provide access to a new customer base in our target expansion markets of Rochester and Buffalo

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MANAGEMENT’S DISCUSSION AND ANALYSIS

2016 Outlook

We began 2016 in a strong financial condition and with positive momentum. We expect net interest income to increase in 2016. We anticipate an increase in earning assets as we remain focused on loan growth, which will be primarily funded through deposit gathering. However, the benefit to net interest income from increased earning assets is expected to be partially offset by slight downward pressure on net interest margin. We plan to maintain a disciplined approach to loan pricing, but asset yields remain under pressure due to the low interest rate environment and flattening of the yield curve, while the opportunity for deposit repricing remains limited.

We expect our commercial loan portfolio to grow in a manner consistent with our strategic initiatives and continued support of middle market small business lending. Automobile loan originations remained strong through the first quarter of 2016, reflecting the positive impact from our investment in automotive dealer relationships. The residential real estate portfolio, which includes both first and junior lien residential real estate related products, is expected to increase as we remain focused on the customer experience and our convenient application process.

We anticipate the increase in total loans will modestly outpace growth in total deposits. This anticipated outcome reflects our continued focus on targeting loyal relationship-based deposit customers rather than those that are more price sensitive. We expect to continue managing our overall cost of funds using short-term borrowings, as well as our continued shift in mix of deposits towards low- and no-cost demand deposits and money market deposit accounts.

Noninterest income during 2016 is expected to be higher than 2015, reflecting our continued efforts to increase both account and transaction-based fee income, coupled with the benefit of revenue from our fee-based subsidiaries, Scott Danahy Naylon and Courier Capital. We anticipate that the results of these efforts will further reduce our reliance on traditional spread-based net interest income, as fee-based activities are a relatively stable revenue source during periods of changing interest rates.

Noninterest expense is expected to increase with the addition of Courier Capital, coupled with higher salaries and benefits costs associated with our expansion initiatives, including the opening of our second financial solution center in Rochester, New York. We also expect to incur approximately $1.8 million of additional out-of-pocket expenses associated with the current proxy contest, of which approximately $360 thousand was incurred in the first quarter of 2016. Otherwise, we remain committed to diligent expense control and have implemented several initiatives designed to reduce operating expenses late in the first quarter of 2016. We expect those savings to be reflected beginning in the second quarter.

We do not expect significant changes in overall asset quality and allowance measurements.

The effective tax rate for 2016 is expected to be slightly higher than it was in 2015, as the lower effective tax rate in 2015 was partly driven by historic tax credits claimed in 2015. However, our 2016 effective tax rate will continue to reflect the positive impacts of tax-exempt income (including the $911 thousand of non-taxable company owned life death benefit proceeds received in the first quarter of 2016), tax advantaged investments, the formation of our real estate investment trust in early 2014 and benefits from New York State tax law changes that began going into effect during 2015.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

Net Interest Income and Net Interest Margin

Net interest income is our primary source of revenue. Net interest income is the difference between interest income on interest-earning assets, such as loans and investment securities, and the interest expense on interest-bearing deposits and other borrowings used to fund interest-earning and other assets or activities. Net interest income is affected by changes in interest rates and by the amount and composition of earning assets and interest-bearing liabilities, as well as the sensitivity of the balance sheet to changes in interest rates, including characteristics such as the fixed or variable nature of the financial instruments, contractual maturities and repricing frequencies.

Interest rate spread and net interest margin are utilized to measure and explain changes in net interest income. Interest rate spread is the difference between the yield on earning assets and the rate paid for interest-bearing liabilities that fund those assets. The net interest margin is expressed as the percentage of net interest income to average earning assets. The net interest margin exceeds the interest rate spread because noninterest-bearing sources of funds (“net free funds”), principally noninterest-bearing demand deposits and stockholders’ equity, also support earning assets. To compare tax-exempt asset yields to taxable yields, the yield on tax-exempt investment securities is computed on a taxable equivalent basis. Net interest income, interest rate spread, and net interest margin are discussed on a taxable equivalent basis.

The following table reconciles interest income per the consolidated statements of income to interest income adjusted to a fully taxable equivalent basis (dollars in thousands):

	Three months ended March 31,
	2016		2015
Interest income per consolidated statements of income	$	27,635	$	24,997
Adjustment to fully taxable equivalent basis		793		752
Interest income adjusted to a fully taxable equivalent basis		28,428		25,749
Interest expense per consolidated statements of income		2,916		1,850
Net interest income on a taxable equivalent basis	$	25,512	$	23,899

Analysis of Net Interest Income for the Three Month Periods ended March 31, 2016 and 2015

Net interest income on a taxable equivalent basis for the three months ended March 31, 2016, was $25.5 million, an increase of $1.6 million versus the comparable quarter last year. The increase in net interest income was due to an increase in average earning assets of $313.1 million or 11% compared to the first quarter of 2015.

The net interest margin for the first quarter of 2016 was 3.27%, 16 basis points lower than 3.43% for the same period in 2015. This comparable period decrease was a function of a 20 basis point decrease in interest rate spread, partially offset by a higher contribution from net free funds of 4 basis points (due principally to increases in average noninterest-bearing deposits and other net free funds). The lower interest rate spread was a result of a 5 basis point decrease in the yield on earning assets and a 15 increase in the cost of average interest-bearing liabilities.

For the first quarter of 2016, the yield on average earning assets of 3.64% was 5 basis points lower than the first quarter of 2015. Loan yields decreased 6 basis points during the first quarter of 2016 to 4.21%. The yield on investment securities increased 1 basis point during the first quarter of 2016 to 2.48%. Overall, the earning asset rate changes reduced interest income by $98 thousand during the first quarter of 2016, but that was more than offset by a favorable volume variance that increased interest income by $2.8 million, which collectively drove a $2.7 million increase in interest income.

Average interest-earning assets were $3.13 billion for the first quarter 2016, an increase of $313.1 million or 11% from the comparable quarter last year, with average loans up $193.4 million and average securities up $119.7 million. The growth in average loans reflected increases in most loan categories. Commercial loans, in particular, were up $154.8 million or 21% from the first quarter of 2015. Loans represented 67.2% of average interest-earning assets during first quarter of 2016 compared to 67.8% during the first quarter of 2015. The increase in the volume of average loans resulted in a $2.1 million increase in interest income, partially offset by a $154 thousand decrease due to the unfavorable rate variance. Securities represented 32.8% of average interest-earning assets during first quarter of 2016 compared to 32.2% during the first quarter of 2015. The increase in the volume of average securities resulted in a $703 thousand increase in interest income, coupled with a $56 thousand increase due to the favorable rate variance.

The cost of average interest-bearing liabilities of 0.48% in the first quarter of 2016 was 15 basis points higher than the first quarter of 2015. The cost of average interest-bearing deposits increased 3 basis points to 0.36% and the cost of short-term borrowings increased 25 basis points to 0.62% in the first quarter of 2016 compared to the same quarter of 2015. The cost of long-term borrowings for the first quarter of 2016 was 6.34% due to the issuance of $40 million of subordinated notes during the second quarter of 2015. Overall, interest-bearing liability rate and volume increases resulted in $1.1 million of higher interest expense.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Average interest-bearing liabilities of $2.46 billion in the first quarter of 2016 were $212.3 million or 10% higher than the first quarter of 2015. On average, interest-bearing deposits grew $203.8 million, while noninterest-bearing demand deposits (a principal component of net free funds) were up $53.1 million. The increase in average deposits was due in part to seasonal inflows of municipal deposits, successful business development efforts in retail banking, and an increase in deposits from our Certificate of Deposit Account Registry Service (“CDARS”) and Insured Cash Sweep (“ICS”) programs. For further discussion of the CDARS and ICS programs, refer to the “Funding Activities – Deposits” section of this Management’s Discussion and Analysis. Overall, interest-bearing deposit rate and volume changes resulted in $339 thousand of higher interest expense during the first quarter of 2016. Average borrowings increased $8.6 million compared to the first quarter of 2016. Overall, short and long-term borrowing rate and volume changes resulted in $727 thousand of higher interest expense during the first quarter of 2016, with the majority of the increase related to the issuance of the subordinate notes in the second quarter of 2015.

The following table sets forth certain information relating to the consolidated balance sheets and reflects the average yields earned on interest-earning assets, as well as the average rates paid on interest-bearing liabilities for the periods indicated (in thousands).

	Three months ended March 31,
	2016								2015
	Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate
Interest-earning assets:
Federal funds sold and interest-earning deposits	$	70			—		—	%	$	124		$	—		0.19	%
Investment securities (1):
Taxable		734,084			4,105		2.24			630,633			3,463		2.20
Tax-exempt (2)		293,518			2,266		3.09			277,238			2,149		3.10
Total investment securities		1,027,602			6,371		2.48			907,871			5,612		2.47
Loans:
Commercial business		316,143			3,248		4.13			264,814			2,724		4.17
Commercial mortgage		582,142			6,713		4.64			478,705			5,551		4.70
Residential real estate loans		382,077			3,832		4.01			355,866			3,720		4.18
Residential real estate lines		127,317			1,208		3.82			129,444			1,166		3.65
Consumer indirect		678,133			6,531		3.87			661,727			6,426		3.94
Other consumer		17,926			525		11.78			19,736			550		11.30
Total loans		2,103,738			22,057		4.21			1,910,292			20,137		4.27
Total interest-earning assets		3,131,410			28,428		3.64			2,818,287			25,749		3.69
Allowance for loan losses		(27,638	)							(27,884	)
Other noninterest-earning assets		301,679								325,113
Total assets	$	3,405,451							$	3,115,516
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	572,424			202		0.14	%	$	551,503		$	156		0.11	%
Savings and money market		965,629			324		0.13			839,218			217		0.10
Certificates of deposit		658,537			1,433		0.88			602,115			1,247		0.84
Total interest-bearing deposits		2,196,590			1,959		0.36			1,992,836			1,620		0.33
Short-term borrowings		221,326			339		0.62			251,768			230		0.37
Long-term borrowings		38,997			618		6.34			—			—		—
Total borrowings		260,323			957		1.47			251,768			230		0.37
Total interest-bearing liabilities		2,456,913			2,916		0.48			2,244,604			1,850		0.33
Noninterest-bearing demand deposits		617,590								564,500
Other noninterest-bearing liabilities		21,760								21,453
Shareholders’ equity		309,188								284,959
Total liabilities and shareholders’ equity	$	3,405,451							$	3,115,516
Net interest income (tax-equivalent)					25,512							$	23,899
Interest rate spread							3.16	%							3.36	%
Net earning assets	$	674,497							$	573,683
Net interest margin (tax-equivalent)							3.27	%							3.43	%
Ratio of average interest-earning assets to average interest-bearing liabilities							127.45	%							125.56	%

⁽¹⁾ Investment securities are shown at amortized cost.

⁽²⁾ The interest on tax-exempt securities is calculated on a tax equivalent basis assuming a Federal tax rate of 35%.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

The following table presents, on a tax equivalent basis, the relative contribution of changes in volumes and changes in rates to changes in net interest income for the periods indicated. The change in interest income not solely due to changes in volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each (in thousands):

	Three months ended March 31, 2016 vs. 2015
	Volume			Rate			Total
Increase (decrease) in:
Interest income:
Federal funds sold and interest-earning deposits	$	—		$	—		$	—
Investment securities:
Taxable		577			65			642
Tax-exempt		126			(9	)		117
Total investment securities		703			56			759
Loans:
Commercial business		527			(3	)		524
Commercial mortgage		1,193			(31	)		1,162
Residential real estate loans		267			(155	)		112
Residential real estate lines		(19	)		61			42
Consumer indirect		158			(53	)		105
Other consumer		(52	)		27			(25	)
Total loans		2,074			(154	)		1,920
Total interest income		2,777			(98	)		2,679
Interest expense:
Deposits:
Interest-bearing demand		6			40			46
Savings and money market		36			71			107
Certificates of deposit		121			65			186
Total interest-bearing deposits		163			176			339
Short-term borrowings		(31	)		140			109
Long-term borrowings		309			309			618
Total borrowings		278			449			727
Total interest expense		441			625			1,066
Net interest income	$	2,336		$	(723	)	$	1,613

Provision for Loan Losses

The provision for loan losses is based upon credit loss experience, growth or contraction of specific segments of the loan portfolio, and the estimate of losses inherent in the current loan portfolio. The provision for loan losses for the first quarter of 2016 was $2.4 million, compared to $2.7 million for the same period in 2015.

See the “Allowance for Loan Losses” and “Non-Performing Assets and Potential Problem Loans” sections of this Management’s Discussion and Analysis for further discussion.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Noninterest Income

The following table details the major categories of noninterest income for the periods presented (in thousands):

	Three months ended March 31,
	2016		2015
Service charges on deposits	$	1,724	$	1,879
Insurance income		1,672		1,608
ATM and debit card		1,325		1,193
Investment advisory		1,243		487
Company owned life insurance		1,368		467
Investments in limited partnerships		56		474
Loan servicing		116		167
Net gain on sale of loans held for sale		78		69
Net gain on disposal of investment securities		613		1,062
Net gain on disposal of other assets		4		4
Other		1,018		887
Total noninterest income	$	9,217	$	8,297

Service charges on deposit accounts for the three months ended March 31, 2016 decreased $155 thousand compared to the same period in 2015. The decrease was primarily due to a decrease in the amount of checking account overdraft activity.

Investment advisory income increased to $1.2 million in the first quarter of 2016 compared to $487 thousand in the first quarter of 2015, reflecting the contribution from Courier Capital which was acquired during the first quarter 2016 as part of our strategy to diversify our business lines and increase noninterest income through additional fee-based services.

Company owned life insurance increased to $1.4 million in the first quarter of 2016 compared to $467 thousand in the same period in 2015, as the current quarter includes $911 thousand of death benefit proceeds.

We have investments in limited partnerships, primarily small business investment companies, and account for these investments under the equity method. Income from investments in limited partnerships was $56 thousand and $474 thousand for the three months ended March 31, 2016 and 2015, respectively. The income from these equity method investments fluctuates based on the performance of the underlying investments.

During the first quarter of 2016, we recognized net gains on investment securities totaling $613 thousand from the sale of one agency security and six mortgage backed securities. The $1.1 million in gains realized during the first quarter of 2015 resulted from the sale of six agency securities and nine mortgage backed securities. The amount and timing of our sale of investments securities is dependent on a number of factors, including our prudent efforts to realize gains while managing duration, premium and credit risk.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Noninterest Expense

The following table details the major categories of noninterest expense for the periods presented (in thousands):

	Three months ended March 31,
	2016		2015
Salaries and employee benefits	$	11,614	$	10,223
Occupancy and equipment		3,625		3,699
Professional services		1,447		968
Computer and data processing		804		702
Supplies and postage		594		563
FDIC assessments		436		418
Advertising and promotions		377		239
Other		2,321		2,199
Total noninterest expense	$	21,218	$	19,011

Salaries and employee benefits expense increased by $1.4 million or 14% in the first quarter of 2016 compared to the same period in 2015, reflecting the addition of Courier Capital and a combination of additional personnel to support organic growth as part of the Company’s expansion initiatives and higher medical expense as the level of medical claims in the first quarter of 2015 were unusually low.

Occupancy and equipment expense was relatively flat at $3.6 million, as the incremental expenses associated with Courier Capital’s operations were offset by the favorable impact of a mild winter compared to a year ago.

Professional services increased $479 thousand when comparing the first quarter of 2016 to the same period in 2015. The first quarter of 2016 includes approximately $360 thousand of professional services associated with the current proxy contest.

Other noninterest expense was $2.3 million in the first quarter of 2016 compared to $2.2 million in the first quarter of 2015. Other noninterest expense for the first quarter 2016 included an increase of $79 thousand in intangible asset amortization attributable to the Courier Capital acquisition.

Our efficiency ratio for the first quarter of 2016 was 62.90% compared with 60.27% for the first quarter of 2015. The higher efficiency ratio is a result of the higher noninterest expenses associated with our expansion initiatives and current proxy contest. The efficiency ratio is calculated by dividing total noninterest expense, excluding other real estate expense and amortization of intangible assets, by net revenue, defined as the sum of tax-equivalent net interest income and noninterest income before net gains on investment securities and proceeds from company owned life insurance. An increase in the efficiency ratio indicates that more resources are being utilized to generate the same volume of income, while a decrease indicates a more efficient allocation of resources.

Income Taxes

For the three months ended March 31, 2016, we recorded income tax expense of $2.7 million, versus $2.9 million a year ago. The effective tax rates for the first quarters of 2016 and 2015 were 26.4% and 29.8%, respectively. The decrease in income tax expense and effective tax rate was primarily due to the non-taxable death benefits proceeds on company owned life insurance received in the first quarter of 2016. Effective tax rates are impacted by items of income and expense that are not subject to federal or state taxation. Our effective tax rates reflect the impact of these items, which include, but are not limited to, interest income from tax-exempt securities and earnings on company owned life insurance. In addition, our effective tax rate for 2016 and 2015 reflects the New York State tax savings generated by our real estate investment trust.

In March 2014, the New York legislature approved changes in the state tax law that will be phased-in over two years, beginning in 2015. The primary changes that impact us include the repeal of the Article 32 franchise tax on banking corporations (“Article 32”) for 2015, expanded nexus standards for 2015 and a reduction in the corporate tax rate for 2016. The repeal of Article 32 and the expanded nexus standards lowered our taxable income apportioned to New York to approximately 85% in both 2016 and 2015. In addition, our New York state income tax rate was reduced from 7.1% to 6.5% in 2016.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

ANALYSIS OF FINANCIAL CONDITION

INVESTING ACTIVITIES

Investment Securities

The following table sets forth selected information regarding the composition of our investment securities portfolio as of the dates indicated (in thousands):

	Investment Securities Portfolio Composition
	March 31, 2016				December 31, 2015
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Securities available for sale:
U.S. Government agencies and government-sponsored enterprise securities	$	235,964	$	241,463	$	260,748	$	260,863
Mortgage-backed securities:
Agency mortgage-backed securities		361,692		367,594		282,873		282,505
Non-Agency mortgage-backed securities		—		777		—		809
Asset-backed securities		—		179		—		218
Total available for sale securities		597,656		610,013		543,621		544,395
Securities held to maturity:
State and political subdivisions		291,934		300,477		294,423		300,981
Mortgage-backed securities		184,349		185,386		191,294		189,083
Total held to maturity securities		476,283		485,863		485,717		490,064
Total investment securities	$	1,073,939	$	1,095,876	$	1,029,338	$	1,034,459

The available for sale (“AFS”) investment securities portfolio increased $65.6 million or 12%, from $544.4 million at December 31, 2015 to $610.0 million at March 31, 2016. The AFS portfolio had net unrealized gains totaling $12.4 million and $774 thousand at March 31, 2016 and December 31, 2015, respectively. The unrealized gains in the AFS portfolio were predominantly caused by changes in market interest rates. The fair value of most of the investment securities in the AFS portfolio fluctuates as market interest rates change.

Impairment Assessment

We review investment securities on an ongoing basis for the presence of other than temporary impairment (“OTTI”) with formal reviews performed quarterly. Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses or the security is intended to be sold or will be required to be sold. The amount of the impairment related to non-credit related factors is recognized in other comprehensive income. Evaluating whether the impairment of a debt security is other than temporary involves assessing the intent to sell the debt security or the likelihood of being required to sell the security before the recovery of its amortized cost basis. In determining whether the OTTI includes a credit loss, we use our best estimate of the present value of cash flows expected to be collected from the debt security considering factors such as: the length of time and the extent to which the fair value has been less than the amortized cost basis, adverse conditions specifically related to the security, an industry, or a geographic area, the historical and implied volatility of the fair value of the security, the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future, failure of the issuer of the security to make scheduled interest or principal payments, any changes to the rating of the security by a rating agency, and recoveries or additional declines in fair value subsequent to the balance sheet date. The assessment of whether OTTI exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time. There were no securities deemed to be other-than-temporarily impaired during the three month periods ended March 31, 2016 and 2015.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

LENDING ACTIVITIES

The following table sets forth selected information regarding the composition of our loan portfolio as of the dates indicated (in thousands).

	Loan Portfolio Composition
	March 31, 2016					December 31, 2015
	Amount		% of Total			Amount		% of Total
Commercial business	$	317,776		15.0	%	$	313,758		15.0	%
Commercial mortgage		590,316		27.9			566,101		27.2
Total commercial		908,092		42.9			879,859		42.2
Residential real estate loans		382,504		18.1			381,074		18.3
Residential real estate lines		126,526		6.0			127,347		6.1
Consumer indirect		679,846		32.1			676,940		32.5
Other consumer		18,066		0.9			18,542		0.9
Total consumer		1,206,942		57.1			1,105,594		57.8
Total loans		2,115,034		100.0	%		2,083,762		100.0	%
Less: Allowance for loan losses		27,568					27,085
Total loans, net	$	2,087,466				$	2,056,677

Total loans increased $31.3 million to $2.12 billion at March 31, 2016 from $2.08 billion at December 31, 2015. The increase in loans was attributable to organic growth, primarily in the commercial loan portfolios.

Commercial loans increased $28.2 million and represented 42.9% of total loans as of March 31, 2016, a result of our continued commercial business development efforts.

The consumer indirect portfolio totaled $679.8 million and represented 32.1% of total loans as of March 31, 2016. During the first quarter of 2016, we originated $75.9 million in indirect auto loans with a mix of approximately 41% new auto and 59% used auto. During the first quarter of 2015, we originated $69.3 million in indirect auto loans with a mix of approximately 39% new auto and 61% used auto. Our origination volumes and mix of new and used vehicles financed fluctuate depending on general market conditions.

Loans Held for Sale and Loan Servicing Rights

Loans held for sale (not included in the loan portfolio composition table) were entirely comprised of residential real estate mortgages and totaled $609 thousand and $1.4 million as of March 31, 2016 and December 31, 2015, respectively.

We sell certain qualifying newly originated or refinanced residential real estate mortgages on the secondary market. Residential real estate mortgages serviced for others, which are not included in the consolidated statements of financial condition, amounted to $192.6 million and $196.0 million as of March 31, 2016 and December 31, 2015, respectively.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Allowance for Loan Losses

The following table sets forth an analysis of the activity in the allowance for loan losses for the periods indicated (in thousands).

	Loan Loss Analysis
	Three months ended March 31,
	2016			2015
Balance as of beginning of period	$	27,085		$	27,637
Charge-offs:
Commercial business		602			1,141
Commercial mortgage		4			609
Residential real estate loans		46			139
Residential real estate lines		4			—
Consumer indirect		2,498			2,422
Other consumer		157			259
Total charge-offs		3,311			4,570
Recoveries:
Commercial business		100			48
Commercial mortgage		5			89
Residential real estate loans		25			41
Residential real estate lines		4			2
Consumer indirect		1,170			1,105
Other consumer		122			98
Total recoveries		1,426			1,383
Net charge-offs		1,885			3,187
Provision for loan losses		2,368			2,741
Balance at end of period	$	27,568		$	27,191
Net loan charge-offs to average loans (annualized)		0.36	%		0.68	%
Allowance for loan losses to total loans		1.30	%		1.41	%
Allowance for loan losses to non-performing loans		322	%		246	%

The allowance for loan losses represents the estimated amount of probable credit losses inherent in our loan portfolio. We perform periodic, systematic reviews of the loan portfolio to estimate probable losses in the respective loan portfolios. In addition, we regularly evaluate prevailing economic and business conditions, industry concentrations, changes in the size and characteristics of the portfolio and other pertinent factors. The process we use to determine the overall allowance for loan losses is based on this analysis. Based on this analysis, we believe the allowance for loan losses is adequate as of March 31, 2016.

Assessing the adequacy of the allowance for loan losses involves substantial uncertainties and is based upon management’s evaluation of the amounts required to meet estimated charge-offs in the loan portfolio after weighing a variety of factors, including the risk-profile of our loan products and customers.

The adequacy of the allowance for loan losses is subject to ongoing management review. While management evaluates currently available information in establishing the allowance for loan losses, future adjustments to the allowance may be necessary if conditions differ substantially from the assumptions used in making the evaluations. In addition, various regulatory agencies, as an integral part of their examination process, periodically review a financial institution’s allowance for loan losses. Such agencies may require the financial institution to increase the allowance based on their judgments about information available to them at the time of their examination.

Net charge-offs of $1.9 million in the first quarter of 2016 represented 0.36% of average loans on an annualized basis compared to $3.2 million or 0.68% in the first quarter of 2015. The first quarter of 2015 included charge-offs for two commercial loan relationships totaling $1.7 million. The allowance for loan losses was $27.6 million at March 31, 2016, compared with $27.1 million at December 31, 2015. The ratio of the allowance for loan losses to total loans was 1.30% at March 31, 2016 and December 31, 2015. The ratio of allowance for loan losses to non-performing loans was 322% at March 31, 2016, compared with 321% at December 31, 2015.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Non-Performing Assets and Potential Problem Loans

The table below sets forth the amounts and categories of our non-performing assets at the dates indicated (in thousands).

	Non-Performing Assets
	March 31,			December 31,
	2016			2015
Nonaccrual loans:
Commercial business	$	4,056		$	3,922
Commercial mortgage		1,781			947
Residential real estate loans		1,601			1,848
Residential real estate lines		165			235
Consumer indirect		943			1,467
Other consumer		12			13
Total nonaccrual loans		8,558			8,432
Accruing loans 90 days or more delinquent		9			8
Total non-performing loans		8,567			8,440
Foreclosed assets		187			163
Total non-performing assets	$	8,754		$	8,603
Non-performing loans to total loans		0.41	%		0.41	%
Non-performing assets to total assets		0.25	%		0.25	%

Changes in the level of nonaccrual loans typically represent increases for loans that reach a specified past due status, offset by reductions for loans that are charged-off, paid down, sold, transferred to foreclosed real estate, or are no longer classified as nonaccrual because they have returned to accrual status. Activity in nonaccrual loans for the three months ended March 31, 2016 was as follows (in thousands):

Nonaccrual loans at December 31, 2015	$	8,432
Additions		6,005
Payments		(1,962	)
Charge-offs		(3,234	)
Returned to accruing status		(543	)
Transferred to other real estate or repossessed assets		(140	)
Nonaccrual loans at March 31, 2016	$	8,558

Non-performing assets include non-performing loans and foreclosed assets. Non-performing assets at March 31, 2016 were $8.8 million, an increase of $151 thousand from the $8.6 million balance at December 31, 2015. The primary component of non-performing assets is non-performing loans, which were $8.6 million or 0.41% of total loans at March 31, 2016, compared with $8.4 million or 0.41% of total loans at December 31, 2015.

Approximately $1.8 million, or 21%, of the $8.6 million in non-performing loans as of March 31, 2016 were current with respect to payment of principal and interest, but were classified as non-accruing because repayment in full of principal and/or interest was uncertain. Included in nonaccrual loans are troubled debt restructurings (“TDRs”) of $2.8 million and $2.4 million at March 31, 2016 and December 31, 2015, respectively. We had no TDRs that were accruing interest as of March 31, 2016 or December 31, 2015.

Foreclosed assets consist of real property formerly pledged as collateral for loans, which we have acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure. Foreclosed asset holdings represented two properties totaling $187 thousand at March 31, 2016 and four properties totaling $163 thousand at December 31, 2015.

Potential problem loans are loans that are currently performing, but information known about possible credit problems of the borrowers causes us to have concern as to the ability of such borrowers to comply with the present loan payment terms and may result in disclosure of such loans as nonperforming at some time in the future. These loans remain in a performing status due to a variety of factors, including payment history, the value of collateral supporting the credits, and/or personal or government guarantees. We consider loans classified as substandard, which continue to accrue interest, to be potential problem loans. We identified $9.3 million and $12.1 million in loans that continued to accrue interest which were classified as substandard as of March 31, 2016 and December 31, 2015, respectively.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

FUNDING ACTIVITIES

Deposits

The following table summarizes the composition of our deposits at the dates indicated (dollars in thousands):

	Deposit Composition
	March 31, 2016					December 31, 2015
	Amount		% of Total			Amount		% of Total
Noninterest-bearing demand	$	617,394		20.9	%	$	641,972		23.5	%
Interest-bearing demand		622,443		21.0			523,366		19.2
Savings and money market		1,042,910		35.2			928,175		34.0
Certificates of deposit < $250,000		575,621		19.5			545,044		19.9
Certificates of deposit of $250,000 or more		101,809		3.4			91,974		3.4
Total deposits	$	2,960,177		100.0	%	$	2,730,531		100.0	%

We offer a variety of deposit products designed to attract and retain customers, with the primary focus on building and expanding long-term relationships. At March 31, 2016, total deposits were $2.96 billion, representing an increase of $229.6 million for the year. Time deposits were approximately 23% of total deposits at March 31, 2016 and December 31, 2015. Depositors remain hesitant to invest in time deposits, such as certificates of deposit, for long periods due to the low interest rate environment. This has resulted in lower amounts being placed in time deposits for generally shorter terms.

Nonpublic deposits, the largest component of our funding sources, totaled $2.07 billion and $2.05 billion at March 31, 2016 and December 31, 2015, respectively, and represented 70% and 75% of total deposits as of the end of each period, respectively. We have managed this segment of funding through a strategy of competitive pricing that minimizes the number of customer relationships that have only a single service high cost deposit account.

As an additional source of funding, we offer a variety of public (municipal) deposit products to the towns, villages, counties and school districts within our market. Public deposits generally range from 20% to 30% of our total deposits. There is a high degree of seasonality in this component of funding, because the level of deposits varies with the seasonal cash flows for these public customers. We maintain the necessary levels of short-term liquid assets to accommodate the seasonality associated with public deposits. Total public deposits were $888.0 million and $675.7 million at March 31, 2016 and December 31, 2015, respectively, and represented 30% and 25% of total deposits as of the end of each period, respectively. The increase in public deposits during 2016 was due largely to successful business development efforts.

We had no traditional brokered deposits at March 31, 2016 or December 31, 2015; however, we do participate in the CDARS and ICS programs, which enable depositors to receive FDIC insurance coverage for deposits otherwise exceeding the maximum insurable amount. CDARS and ICS deposits are considered brokered deposits for regulatory reporting purposes. Through these programs, deposits in excess of the maximum insurable amount are placed with multiple participating financial institutions. Reciprocal CDARS deposits and ICS deposits totaled $120.9 million and $153.7 million, respectively, at March 31, 2016, compared to $92.9 million and $146.6, respectively, at December 31, 2015.

Borrowings

The Company classifies borrowings as short-term or long-term in accordance with the original terms of the applicable agreement. Outstanding borrowings consisted of the following as of the dates indicated (in thousands):

	March 31,		December 31,
	2016		2015
Short-term borrowings - Short-term FHLB borrowings	$	179,200	$	293,100
Long-term borrowings - Subordinated notes		39,008		38,990
Total borrowings	$	218,208	$	332,090

Short-term Borrowings

We have credit capacity with the FHLB and can borrow through facilities that include amortizing and term advances or repurchase agreements. We had approximately $193 million of immediate credit capacity with the FHLB as of March 31, 2016. We had approximately $500 million in secured borrowing capacity at the Federal Reserve Bank (“FRB”) discount window, none of which was outstanding at March 31, 2016. The FHLB and FRB credit capacity are collateralized by securities from our investment portfolio and certain qualifying loans. We had approximately $120 million of credit available under unsecured federal funds purchased lines with various banks as of March 31, 2016. Additionally, we had approximately $180 million of unencumbered liquid securities available for pledging.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Federal funds purchased are short-term borrowings that typically mature within one to ninety days. Short-term repurchase agreements are secured overnight borrowings with customers. Short-term FHLB borrowings have original maturities of up to one year and include overnight borrowings which we typically utilize to address short term funding needs as they arise. Short-term FHLB borrowings at March 31, 2016 consisted of $8.5 million in overnight borrowings and $170.7 million in short-term advances. Short-term FHLB borrowings at December 31, 2015 consisted of $116.8 million in overnight borrowings and $176.3 million in short-term advances.

The Parent has a revolving line of credit with a commercial bank allowing borrowings up to $20.0 million in total as an additional source of working capital. At March 31, 2016, no amounts have been drawn on the line of credit.

Long-term Borrowings

On April 15, 2015, we issued $40.0 million of Subordinated Notes in a registered public offering. The Subordinated Notes bear interest at a fixed rate of 6.0% per year, payable semi-annually, for the first 10 years. From April 15, 2025 to the April 15, 2030 maturity date, the interest rate will reset quarterly to an annual interest rate equal to the then current three-month London Interbank Offered Rate (LIBOR) plus 3.944%, payable quarterly. The Subordinated Notes are redeemable by us at any quarterly interest payment date beginning on April 15, 2025 to maturity at par, plus accrued and unpaid interest. Proceeds, net of debt issuance costs of $1.1 million, were $38.9 million. The Subordinated Notes qualify as Tier 2 capital for regulatory purposes.

LIQUIDITY AND CAPITAL MANAGEMENT

Liquidity

The objective of maintaining adequate liquidity is to assure that we meet our financial obligations. These obligations include the withdrawal of deposits on demand or at their contractual maturity, the repayment of matured borrowings, the ability to fund new and existing loan commitments and the ability to take advantage of new business opportunities. We achieve liquidity by maintaining a strong base of core customer funds, maturing short-term assets, our ability to sell or pledge securities, lines-of-credit, and access to the financial and capital markets.

Liquidity for the Bank is managed through the monitoring of anticipated changes in loans, the investment portfolio, core deposits and wholesale funds. The strength of the Bank’s liquidity position is a result of its base of core customer deposits. These core deposits are supplemented by wholesale funding sources that include credit lines with the other banking institutions, the FHLB and the FRB. The primary source of our non-deposit borrowings is FHLB advances, of which we had $179.2 million outstanding at March 31, 2016. In addition to this amount, we have additional collateralized wholesale borrowing capacity of approximately $800 million from various funding sources which include the FHLB, Federal Reserve Bank, and commercial banks that we can use to fund lending activities, liquidity needs, and/or to adjust and manage our asset and liability position.

The Parent’s funding requirements consist primarily of dividends to shareholders, debt service, income taxes, operating expenses, funding of nonbank subsidiaries, repurchases of our stock, and acquisitions. The Parent obtains funding to meet obligations from dividends received from the Bank, net taxes collected from subsidiaries included in the federal consolidated tax return, and the issuance of debt and equity securities. In addition, the Parent maintains a revolving line of credit with a commercial bank for an aggregate amount of up to $20.0 million, all of which was available at March 31, 2016. The line of credit has a one year term and matures in May 2016. Funds drawn would be used for general corporate purposes and backup liquidity.

Cash and cash equivalents were $110.9 million as of March 31, 2016, up $50.8 million from $60.1 million as of December 31, 2015. Net cash provided by operating activities totaled $17.0 million and the principal source of operating activity cash flow was net income adjusted for noncash income and expense items. Net cash used in investing activities totaled $79.0 million, which included outflows of $33.3 million for net loan originations and $44.9 million from net investment securities transactions. Net cash provided by financing activities of $112.8 million was attributed to a $229.6 million increase in deposits, partly offset by a $113.9 million decrease in short-term borrowings and $3.2 million in dividend payments. The higher cash and cash equivalents balance resulted from strong public deposit inflows at the end of the first quarter of 2016.

Capital Management

We actively manage capital, commensurate with our risk profile, to enhance shareholder value. We also seek to maintain capital levels for the Company and the Bank at amounts in excess of the regulatory “well-capitalized” thresholds. Periodically, we may respond to market conditions by implementing changes to our overall balance sheet positioning to manage our capital position.

Banks and financial holding companies are subject to various regulatory capital requirements administered by state and federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material impact on our consolidated financial statements. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weighting and other factors.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Shareholders’ equity was $314.0 million at March 31, 2016, an increase of $20.1 million from $293.8 million at December 31, 2015. Net income for the year and stock issued for the acquisition of Courier Capital increased shareholders’ equity by $7.6 million and $8.1 million, respectively, which were partially offset by common and preferred stock dividends declared of $3.2 million. Accumulated other comprehensive income included in shareholders’ equity increased $7.2 million during the first three months of 2016 due primarily to higher net unrealized gains on securities available for sale.

The FRB and FDIC have adopted a system using risk-based capital guidelines to evaluate the capital adequacy of banks and bank holding companies. The final rules implementing the Basel Committee on Banking Supervision’s (“BCBS”) capital guidelines for U.S. banks became effective for the Company on January 1, 2015, with full compliance with all of the final requirements phased in over a multi-year schedule, to be fully phased-in by January 1, 2019. As of March 31, 2016, the Company’s capital levels remained characterized as “well-capitalized” under the new rules.

The following table reflects the ratios and their components (dollars in thousands):

	March 31,			December 31,
	2016			2015
Common shareholders’ equity	$	296,613		$	276,504
Less: Goodwill and other intangible assets, net of deferred tax liabilities		69,349			61,217
Net unrealized (loss) gain on investment securities (1)		6,387			(696	)
Net periodic pension & postretirement benefits plan adjustments		(10,492	)		(10,631	)
Other		246			201
Common equity Tier 1 (“CET1”) capital		231,123			226,413
Plus: Preferred stock		17,340			17,340
Less: Other		164			301
Tier 1 Capital		248,299			243,452
Plus: Qualifying allowance for loan losses		27,568			27,085
Subordinated Notes		39,008			38,990
Total regulatory capital	$	314,875		$	309,527
Adjusted average total assets (for leverage capital purposes)	$	3,330,552		$	3,287,646
Total risk-weighted assets	$	2,351,522		$	2,318,536
Regulatory Capital Ratios
Tier 1 leverage (Tier 1 capital to adjusted average assets)		7.46	%		7.41	%
CET1 capital (CET1 capital to total risk-weighted assets)		9.83			9.77
Tier 1 capital (Tier 1 capital to total risk-weighted assets)		10.56			10.50
Total risk-based capital (Total regulatory capital to total risk-weighted assets)		13.39			13.35

⁽¹⁾ Includes unrealized gains and losses related to the Company’s reclassification of available for sale investment securities to the held to maturity category.

Basel III Capital Rules

The BCBS rules include a new common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5%, increase the minimum Tier 1 capital to risk-weighted assets ratio from 4.0% to 6.0%, require a minimum total capital to risk-weighted assets ratio of 8.0%, and require a minimum Tier 1 leverage ratio of 4.0%. A new capital conservation buffer is also established above the regulatory minimum capital requirements, effectively increasing the minimum required risk-weighted asset ratios. This capital conservation buffer will be phased-in beginning January 1, 2016 at 0.625% of risk-weighted assets and will increase each subsequent year by an additional 0.625% until reaching its final level of 2.5% on January 1, 2019. Banking institutions with a capital conservation buffer below the minimum level will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall. The Basel III Capital Rules also provide for a “countercyclical capital buffer” that is applicable to only certain covered institutions and does not have any current applicability to the Company or the Bank. Strict eligibility criteria for regulatory capital instruments were also implemented under the final rules. The final rules also revised the definition and calculation of Tier 1 capital, total capital, and risk-weighted assets.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

The following table presents actual and required capital ratios as of March 31, 2016 and December 31, 2015 for the Company and the Bank under the Basel III Capital Rules. The minimum required capital amounts presented include the minimum required capital levels as of those dates based on the phase-in provisions of the Basel III Capital Rules and the minimum required capital levels as of January 1, 2019 when the Basel III Capital Rules have been fully phased-in. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules (in thousands):

						Minimum Capital					Minimum Capital					Required to be
						Required – Basel III					Required – Basel III					Considered Well
	Actual					Phase-in Schedule					Fully Phased-in					Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
March 31, 2016
Tier 1 leverage:
Company	$	248,299		7.46	%	$	133,222		4.00	%	$	133,222		4.00	%	$	166,528		5.00	%
Bank		269,909		8.13			132,840		4.00			132,840		4.00			166,050		5.00
CET1 capital:
Company		231,123		9.83			120,518		5.13			164,607		7.00			152,849		6.50
Bank		269,909		11.53			119,991		5.13			163,890		7.00			152,183		6.50
Tier 1 capital:
Company		248,299		10.56			155,788		6.63			199,879		8.50			188,122		8.00
Bank		269,909		11.53			155,110		6.63			199,009		8.50			187,303		8.00
Total capital:
Company		314,875		13.39			202,819		8.63			246,910		10.50			235,152		10.00
Bank		297,477		12.71			201,936		8.63			245,835		10.50			234,128		10.00
December 31, 2015
Tier 1 leverage:
Company	$	243,452		7.41	%	$	131,506		4.00	%	$	131,506		4.00	%	$	164,382		5.00	%
Bank		265,487		8.09			131,188		4.00			131,188		4.00			163,985		5.00
CET1 capital:
Company		226,413		9.77			104,334		4.50			162,297		7.00			150,705		6.50
Bank		265,487		11.49			103,971		4.50			161,733		7.00			150,180		6.50
Tier 1 capital:
Company		243,452		10.50			139,112		6.00			197,076		8.50			185,483		8.00
Bank		265,487		11.49			138,628		6.00			196,389		8.50			184,837		8.00
Total capital:
Company		309,527		13.35			185,483		8.00			243,446		10.50			231,854		10.00
Bank		292,572		12.66			184,837		8.00			242,599		10.50			231,046		10.00

Dividend Restrictions

In the ordinary course of business we are dependent upon dividends from the Bank to provide funds for the payment of dividends to shareholders and to provide for other cash requirements. Banking regulations may limit the amount of dividends that may be paid. Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels. Approval is also required if dividends declared exceed the net profits for that year combined with the retained net profits for the preceding two years.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Quantitative and qualitative disclosures about market risk were presented at December 31, 2015 in Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the Securities and Exchange Commission on March 8, 2016. The following is an update of the discussion provided therein.

Portfolio Composition

There was no material change in the composition of assets, deposit liabilities or borrowings from December 31, 2015 to March 31, 2016. See the section titled “Analysis of Financial Condition” in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of asset, deposit and borrowing activity during the period.

Net Interest Income at Risk

A primary tool used to manage interest rate risk is “rate shock” simulation to measure the rate sensitivity. Rate shock simulation is a modeling technique used to estimate the impact of changes in rates on net interest income as well as economic value of equity. At March 31, 2016, the Company was slightly asset sensitive, meaning that net interest income increases in rising rate conditions.

Net interest income at risk is measured by estimating the changes in net interest income resulting from instantaneous and sustained parallel shifts in interest rates of different magnitudes over a period of 12 months. The following table sets forth the estimated changes to net interest income over the 12-month period ending March 31, 2017 assuming instantaneous changes in interest rates for the given rate shock scenarios (dollars in thousands):

	Changes in Interest Rate
	-100 bp			+100 bp			+200 bp			+300 bp
Change in net interest income	$	(1,436	)	$	1,889		$	4,366		$	3,847
% Change		(1.40	)%		1.85	%		4.27	%		3.76	%

In addition to the changes in interest rate scenarios listed above, other scenarios are typically modeled to measure interest rate risk. These scenarios vary depending on the economic and interest rate environment.

The simulations referenced above are based on management’s assumption as to the effect of interest rate changes on assets and liabilities and assumes a parallel shift of the yield curve. It also includes certain assumptions about the future pricing of loans and deposits in response to changes in interest rates. Further, it assumes that delinquency rates would not change as a result of changes in interest rates, although there can be no assurance that this will be the case. While this simulation is a useful measure as to net interest income at risk due to a change in interest rates, it is not a forecast of future results, does not measure the effect of changing interest rates on noninterest income and is based on many assumptions that, if changed, could cause a different outcome.

Economic Value of Equity At Risk

The economic (or “fair”) value of financial instruments on our balance sheet will also vary under the interest rate scenarios previously discussed. This is measured by simulating changes in our economic value of equity (“EVE”), which is calculated by subtracting the estimated fair value of liabilities from the estimated fair value of assets. Fair values for financial instruments are estimated by discounting projected cash flows (principal and interest) at current replacement rates for each account type, while fair values of non-financial assets and liabilities are assumed to equal book value and do not vary with interest rate fluctuations. An economic value simulation is a static measure for balance sheet accounts at a given point in time, but this measurement can change substantially over time as the characteristics of our balance sheet evolve and as interest rate and yield curve assumptions are updated.

The amount of change in economic value under different interest rate scenarios depends on the characteristics of each class of financial instrument, including the stated interest rate or spread relative to current market rates or spreads, the likelihood of prepayment, whether the rate is fixed or floating, and the maturity date of the instrument. As a general rule, fixed-rate financial assets become more valuable in declining rate scenarios and less valuable in rising rate scenarios, while fixed-rate financial liabilities gain in value as interest rates rise and lose value as interest rates decline. The longer the duration of the financial instrument, the greater the impact a rate change will have on its value. In our economic value simulations, estimated prepayments are factored in for financial instruments with stated maturity dates, and decay rates for non-maturity deposits are projected based on historical data (back-testing).

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The analysis that follows presents the estimated EVE resulting from market interest rates prevailing at a given quarter-end (“Pre-Shock Scenario”), and under other interest rate scenarios (each a “Rate Shock Scenario”) represented by immediate, permanent, parallel shifts in interest rates from those observed at March 31, 2016 and December 31, 2015. The analysis additionally presents a measurement of the interest rate sensitivity at March 31, 2016 and December 31, 2015. EVE amounts are computed under each respective Pre- Shock Scenario and Rate Shock Scenario. An increase in the EVE amount is considered favorable, while a decline is considered unfavorable.

	March 31, 2016								December 31, 2015
	EVE		Change			Percentage Change			EVE		Change			Percentage Change
Rate Shock Scenario:
Pre-Shock Scenario	$	505,174							$	497,349
- 100 Basis Points		537,090	$	31,916			6.32	%		508,973	$	11,624			2.34	%
+ 100 Basis Points		487,993		(17,181	)		(3.40	)		480,888		(16,461	)		(3.31	)
+ 200 Basis Points		468,578		(36,596	)		(7.24	)		460,567		(36,782	)		(7.40	)
+ 300 Basis Points		435,502		(69,672	)		(13.79	)		429,381		(67,968	)		(13.67	)

The Pre-Shock Scenario EVE was $505.2 million at March 31, 2016, compared to $497.3 million at December 31, 2015. The increase in the Pre-Shock Scenario EVE at March 31, 2016, compared to December 31, resulted primarily from a more favorable valuation of non-maturity deposits that reflected alternative funding rate changes used for discounting future cash flows.

The +200 basis point Rate Shock Scenario EVE increased from $$460.6 million at December 31, 2015 to $468.6 million at March 31, 2016, reflecting the more favorable valuation of non-maturity deposits. The percentage change in the EVE amount from the Pre-Shock Scenario to the +200 basis point Rate Shock Scenario decreased from to (7.40)% at December 31, 2015 to (7.24)% at March 31, 2016. The decrease in sensitivity resulted from an increased benefit in the valuation of non-maturity deposits in the +200 basis point Rate Shock Scenario EVE as of March 31, 2016, compared to December 31, 2015.

ITEM 4. Controls and Procedures

Evaluation of disclosure controls and procedures

As of March 31, 2016, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(b), as adopted by the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934 (“Exchange Act”). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Disclosure controls and procedures are the controls and other procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting

The acquisition of Courier Capital Corporation was consummated on January 5, 2016, at which time Courier Capital, LLC (“Courier Capital”) became a consolidated subsidiary of the Company. The Company is in the process of reviewing the internal control structure of Courier Capital and, if necessary, will make appropriate changes as it integrates Courier Capital into the Company’s overall internal control over financial reporting process. In connection with the foregoing evaluation by the Company’s Chief Executive Officer and its Chief Financial Officer, other than as noted above, no changes in the Company’s internal control over financial reporting have occurred during the quarter ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

The Company has experienced no material developments in its legal proceedings from the disclosure included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, dated March 8, 2016, as filed with the Securities and Exchange Commission (“SEC”).

ITEM 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed under Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, dated March 8, 2016, as filed with the SEC, as updated by the factor below. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report.

Our investment advisory and wealth management operations are subject to risk related to the financial services industry.

The financial services industry is subject to extensive regulation at the federal and state levels. It is very difficult to predict the future impact of the legislative and regulatory requirements affecting our business. The securities laws and other laws that govern the activities of our registered investment advisor are complex and subject to rapid change. The activities of our investment advisory and wealth management operations are subject primarily to provisions of the Investment Advisers Act of 1940, as amended and the Employee Retirement Income Act of 1940, as amended (“ERISA”). We are a fiduciary under ERISA. Our investment advisory services are also subject to state laws including anti-fraud laws and regulations. Any claim of noncompliance, regardless of merit or ultimate outcome, could subject us to investigation by the SEC or other regulatory authorities. Our compliance processes may not be sufficient to prevent assertions that we failed to comply with any applicable law, rule or regulation. If our investment advisory and wealth management operations are subject to investigation by the SEC or other regulatory authorities or if litigation is brought by clients based on our failure to comply with applicable regulations, our results of operations could be materially adversely effected.

In addition, the majority of our investment advisory revenue is from fees based on the percentage of assets under management. The value of the assets under management is determined, in part by market conditions that can be volatile. As a result, investment advisory revenues and profitability can fluctuate with market conditions.

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ITEM 6. Exhibits

(a) The following is a list of all exhibits filed or incorporated by reference as part of this Report:

Exhibit Number	Description	Location
10.1	Form of Restricted Stock Unit Award Agreement Pursuant to the Financial Institutions, Inc. 2015 Long-Term Incentive Plan	Filed Herewith
10.2	Form of Performance Stock Unit Award Agreement Pursuant to the Financial Institutions, Inc. 2015 Long-Term Incentive Plan	Filed Herewith
10.3	Consulting Agreement, dated April 1, 2016, by and between the Company and Richard J. Harrison.	Incorporated by reference to Exhibit 10.1 of the Form 8-K, dated March 31, 2016
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Principal Executive Officer	Filed Herewith
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Principal Financial Officer	Filed Herewith
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed Herewith
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

- 51 -

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.

FINANCIAL INSTITUTIONS, INC.
/s/ Martin K. Birmingham	, May 6, 2016
Martin K. Birmingham
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Kevin B. Klotzbach	, May 6, 2016
Kevin B. Klotzbach
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
/s/ Michael D. Grover	, May 6, 2016
Michael D. Grover
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)

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EX-10.1

Exhibit 10.1

RESTRICTED STOCK UNIT AWARD AGREEMENT

Pursuant to the

FINANCIAL INSTITUTIONS, INC.

2015 LONG-TERM INCENTIVE PLAN

Name of Participant:
Date of Grant:
Number of Restricted Stock Units:
Vested Restricted Stock Units and Vesting Schedule:	The Number of Restricted Stock Units set forth above shall become vested Restricted Stock Units in accordance with the terms of this Agreement as of the following Vesting Date(s):
	Vesting Date	Vested Restricted Stock Units

This RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Agreement”), dated as of [DATE], is made between Financial Institutions, Inc. (the “Company”) and the above-named individual (the “Participant”) to record the grant to the Participant of a Restricted Stock Unit Award (the “Award”) on the Date of Grant set forth above pursuant to Section 6.5 of the Financial Institutions, Inc. 2015 Long-Term Incentive Plan (the “Plan”). Capitalized terms not defined in this Agreement shall have the meaning given to such terms under the Plan.

The Company and the Participant hereby agree as follows:

Section 1. Grant of Restricted Stock Units. The Company hereby grants to the Participant, as of the Date of Grant, subject to and in accordance with the terms and conditions of the Plan and this Agreement, a Restricted Stock Unit Award for the Number of Restricted Stock Units set forth above (the “Restricted Stock Units”).

Section 2. Vesting of Restricted Stock Units. Subject to Section 4 below, provided that the Participant provides substantial services and remains in continuous employment with the Company or a Subsidiary through the Vesting Date(s) set forth above, the Restricted Stock Units shall vest pursuant to the Vesting Schedule set forth above. Except as otherwise provided by Section 4 below, if the Participant ceases to provide substantial services or remain in continuous employment with the Company or a Subsidiary for any reason prior to the Vesting Date (or the latest of the Vesting Dates) set forth above, then all of the Participant’s unvested Restricted Stock Units as of the date that the Participant ceases to provide substantial services or remain in continuous employment with the Company or a Subsidiary shall be immediately forfeited.

Section 3. Timing and Form of Payout. Except as otherwise provided by Section 4 below and subject to Section 8 below, within 90 days following a Vesting Date (a “Payment Date”), the vested Restricted Stock Units shall be paid to the Participant by the Company delivering to the Participant a number of shares of Common Stock equal to the number of vested Restricted Stock Units as of the Payment Date. The Company may issue the shares of Common Stock either (a) in certificate form or (b) in book entry form, registered in the name of the Participant. Notwithstanding anything herein to the contrary, the Company shall have no obligation to issue shares of Common Stock in payment of the vested Restricted Stock Units unless such issuance and such payment shall comply with all relevant provisions of law and the requirements of any Stock Exchange on which the shares of Common Stock are traded.

Section 4. Effects of Certain Events.

(a) Change in Control. Subject to the terms of the Plan, if prior to the Vesting Date (or the latest of the Vesting Dates) set forth above there is a Change in Control:

(i) if Replacement Awards are not provided to the Participant to replace unvested Restricted Stock Units, then all of the Participant’s unvested Restricted Stock Units that have not been forfeited

shall fully vest as of the date of the Change in Control. If the Change in Control qualifies as a “change in control” for purposes of Code Section 409A, then subject to Section 8 below, such vested Restricted Stock Units shall be paid to the Participant within 90 days following the Change in Control. Otherwise, such vested Restricted Stock Units shall be paid at the time specified under Section 3 above.

(ii) if Replacement Awards are provided to the Participant to replace unvested Restricted Stock Units, then in the event of the Participant’s Involuntary Termination during the period of two (2) years immediately following the Change in Control, all of such Replacement Awards shall fully vest as of the date of the Involuntary Termination, and subject to Section 8 below, shall be paid to the Participant within 90 days following the Involuntary Termination.

(b) Death or Disability. If prior to the Vesting Date (or the latest of the Vesting Dates) set forth above, the Participant’s employment with the Company or a Subsidiary terminates due to death or Disability, then all of the Participant’s unvested Restricted Stock Units shall fully vest as of the date of the Participant’s death or Disability, and subject to Section 8 below, shall be paid to the Participant or the Participant’s legal representative in the event of the Disability of the Participant, or in the event of the death of the Participant, to the legal representative of the Participant’s estate, or if no legal representative has been appointed, to the successor in interest determined under the Participant’s will, within 90 days following the Participant’s termination of employment due to death or Disability.

Section 5. Dividend Equivalents. No dividend equivalents shall accrue or be paid to the Participant with respect to any Restricted Stock Units.

Section 6. Rights as Shareholder. In addition to the transfer and other restrictions set forth elsewhere in this Agreement and in the Plan, the Participant, as holder of the Restricted Stock Units, shall not possess any rights of a holder of Common Stock (including voting and dividend rights) with respect to the shares of Common Stock underlying such Restricted Stock Unit Award until such time as the Restricted Stock Unit Award vests, is paid and the shares of Common Stock are issued to the holder of the Restricted Stock Unit Award.

Section 7. No Transferability. The Restricted Stock Units may not be sold, transferred, pledged, assigned, encumbered, or otherwise alienated or hypothecated other than by will or the laws of descent and distribution. Vested Restricted Stock Units shall be payable only to the Participant during the Participant’s lifetime, or in the event of the Disability of the Participant, to the Participant or the legal representative of the Participant, or in the event of the death of the Participant, to the legal representative of the Participant’s estate, or if no legal representative has been appointed to the successor in interest determined under the Participant’s will.

Section 8. Withholding Taxes. As a condition of and prior to the payout of any Restricted Stock Units, the Company shall be entitled to require the Participant to remit to the Company an amount sufficient to satisfy the amount of any federal, state, or local taxes required to be withheld with respect to the vesting and payout of the vested Restricted Stock Units, or any other taxable event related thereto. The Committee may permit the Participant to make such payment in any form or manner authorized by the Committee in its sole discretion, including, but not limited to one or more of the forms specified below:

(a) U.S. dollars by personal check, bank draft, or money order payable to the Company, by money transfer or direct account debits;

(b) Delivery to the Company of a number of shares of Common Stock having an aggregate fair market value of not less than the minimum tax withholding required for the Award;

(c) Involvement of a stockbroker in accordance with the federal margin rules set forth in Regulation T;

(d) A cashless exercise if and to the extent permissible by applicable law; or

(e) Any combination of the above forms and methods.

2

In the event the Participant fails to provide timely payment of all sums required by the Company pursuant to this Section 8, the Company shall have the right and option, but not obligation, to treat such failure as an election by the Participant to provide all or any portion of such required payment by means of tendering vested shares of Common Stock.

Section 9. Adjustment. As provided by the Plan, in the event of any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, stock dividend, combination or exchange of shares, exchange for other securities, reclassification, reorganization, recapitalization, or any other increase or decrease in the number of outstanding shares of Common Stock effected without consideration to the Company, the specified number of Restricted Stock Units shall be proportionately adjusted to prevent dilution or enlargement of the rights granted to, or available for, the Participant hereunder.

Section 10. No Employment Rights. Nothing in the Plan or this Agreement confers upon the Participant any right with respect to continuance of employment by the Company or any of its Subsidiaries, or affects the right of the Company or any of its Subsidiaries may have to terminate the Participant’s employment at any time.

Section 11. Coordination with Plan. The Participant hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all of the terms and provisions thereof including any that may conflict with those contained in this Agreement.

Section 12. Notices. All notices to the Company shall be in writing and sent to the Company’s Director of Human Resources at the Company’s offices. Notices to the Participant shall be addressed to the Participant at the Participant’s address as it appears on the Company’s records.

Section 13. Amendment. The Company may alter, amend or terminate this Agreement only with the Participant’s consent, except as otherwise expressly provided by the Plan or this Agreement.

Section 14. Governing Law. This Agreement shall be governed by the laws of the State of New York to the extent not preempted by federal law, without reference to principles of conflict of laws, and construed accordingly.

Section 15. Compensation Recovery Policy. Notwithstanding any other provision of this Agreement to the contrary, any Restricted Stock Units granted and/or shares of Common Stock issued hereunder, and/or any amount received with respect to any sale of any such shares of Common Stock, shall be subject to potential cancellation, recoupment, rescission, payback or other action in accordance with the terms of the Company’s compensation recovery policy, if any, or any similar policy that the Company may adopt from time to time (the “Policy”). The Participant agrees and consents to the Company’s application, implementation and enforcement of (i) the Policy that may apply to the Participant and (ii) any provision of applicable law relating to cancellation, rescission, payback or recoupment of compensation, including, but not limited to Section 10D of the Exchange Act, and expressly agrees that the Company may take such actions as are necessary to effectuate the Policy or applicable law without further consent or action being required by the Participant. To the extent that the terms of this Agreement and the Policy or any similar policy conflict, then the terms of such policy shall prevail.

Section 16. Excise Tax Cap. In the event that a Participant becomes entitled to any payment or benefit under this Agreement (such benefits together with any other payments or benefits payable to the Participant under any other agreement with the Participant, or plan or policy of the Company, are referred to in the aggregate as the “Total Payments”), if all or any part of the Total Payments will be subject to the tax imposed by Code Section 4999, or any similar tax that may hereafter be imposed (the “Excise Tax”), then:

(a) Within 30 days following the Participant’s termination of employment, the Company will notify the Participant in writing: (1) whether the payments and benefits under this Agreement, when added to any other payments and benefits making up the Total Payments, exceed an amount equal to 299% of the Participant’s “base amount” as defined in Code Section 280G(b)(3) (the “299% Amount”); and (2) the amount that is equal to the 299% Amount.

(b) The payments and benefits under this Agreement shall be reduced such that the Total Payments do not exceed the 299% Amount, so that no portion of the payments and benefits under this Agreement will be subject to the Excise Tax. Any payment or benefit so reduced will be permanently forfeited and will not be paid to the Participant.

3

(c) The calculation of the 299% Amount and the determination of how much the Participant’s payments and benefits must be reduced in order to avoid application of the Excise Tax will be made by the Company’s public accounting firm prior to the Participant’s termination of employment, which firm must be reasonably acceptable to the Participant (the “Accounting Firm”). The Company will cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Company and the Participant. Notice must be given to the Accounting Firm within 15 business days after an event entitling the Participant to a payment under this Agreement. All fees and expenses of the Accounting Firm will be borne solely by the Company.

(d) For purposes of making the reduction of amounts payable under this Agreement, such amounts will be eliminated in compliance with the requirements of Code Section 409A, to the extent applicable.

Section 17. Section 409A. This Agreement and the Restricted Stock Units hereunder are intended to comply with Code Section 409A, and this Agreement shall be administered and interpreted consistent with such intention. Notwithstanding the foregoing, the Company makes no representations to the Participant regarding the taxation of the Restricted Stock Units under this Agreement, including, but not limited to, the tax effects of Code Section 409A, and the Participant shall be solely responsible for the taxes imposed upon him or her with respect to the Restricted Stock Units. References to “termination of employment” and similar terms used in this Agreement mean, to the extent necessary to comply with Code Section 409A, the date that the Participant first incurs a “separation from service” within the meaning of Code Section 409A. Notwithstanding anything in this Agreement to the contrary, if at the time of the Participant’s separation from service, the Participant is a “specified employee” for purposes of Code Section 409A, and payment under this Agreement as a result of such separation from service is required by Code Section 409A to be delayed by six months, then the Company shall make such payment on the day following the six-month anniversary of the Participant’s separation from service to the extent required to comply with Code Section 409A.

IN WITNESS WHEREOF, the Company and the Participant have caused this Agreement to be executed on the date set forth opposite their respective signatures, but effective as of the Date of Grant.

Dated:	For the Company:
	By:
	Name:
	Title:
Dated:	PARTICIPANT:
	By:
	Name:

4

EX-10.2

Exhibit 10.2

PERFORMANCE STOCK UNIT AWARD AGREEMENT

Pursuant to the

FINANCIAL INSTITUTIONS, INC.

2015 LONG-TERM INCENTIVE PLAN

Name of Participant:
Date of Grant:
Number of Restricted Stock Units:
Service Period:	The three-year period beginning on [DATE] and ending on [DATE]
Earned RSUs and Vesting Schedule:	The Number of Restricted Stock Units set forth above shall become Earned RSUs in accordance with the terms of this Agreement and based on the achievement of the applicable Performance Goal(s) during the applicable Performance Period(s) in accordance with Exhibit A.

This PERFORMANCE STOCK UNIT AWARD AGREEMENT (this “Agreement”), dated as of [DATE], is made between Financial Institutions, Inc. (the “Company”) and the above-named individual (the “Participant”) to record the grant to the Participant of a Performance Stock Unit Award (the “Award”) on the Date of Grant set forth above pursuant to Section 6.5 and Section 6.6 of the Financial Institutions, Inc. 2015 Long-Term Incentive Plan (the “Plan”). The Award is intended to qualify as “performance-based compensation” under Code Section 162(m), and will be interpreted and administered accordingly. Capitalized terms not defined in this Agreement shall have the meaning given to such terms under the Plan.

The Company and the Participant hereby agree as follows:

Section 1. Grant of Restricted Stock Units. The Company hereby grants to the Participant, as of the Date of Grant, subject to and in accordance with the terms and conditions of the Plan and this Agreement, a Performance Stock Unit Award for the Number of Restricted Stock Units set forth above (the “Restricted Stock Units”).

Section 2. Achievement and Vesting of Restricted Stock Units. Subject to Section 4 below, and the achievement of the applicable Performance Goal(s) during the applicable Performance Period (both as set forth on Exhibit A), provided that the Participant provides substantial services and remains in continuous employment with the Company or a Subsidiary through the end of the Service Period set forth above, the Earned RSUs shall vest on the last day of the Service Period. Except as otherwise provided by Section 4 below, if the Participant ceases to provide substantial services or remain in continuous employment with the Company or a Subsidiary for any reason before the completion of the Service Period, the unvested Restricted Stock Units shall be immediately forfeited. Notwithstanding the foregoing, before the Award will be earned and paid, the Committee must determine and certify in accordance with the requirements of Code Section 162(m) that the Performance Goal(s) and other material terms of the Award have been satisfied, and if applicable, the level of performance achieved.

Section 3. Timing and Form of Payout. Except as otherwise provided by Section 4 below and subject to Section 8 below, within 90 days following the last day of the Service Period (the “Payment Date”), the vested Earned RSUs shall be paid to the Participant by the Company delivering to the Participant a number of shares of Common Stock equal to the number of vested Earned RSUs as of the Payment Date. The Company may issue the shares of Common Stock either (a) in certificate form or (b) in book entry form, registered in the name of the Participant. Notwithstanding anything herein to the contrary, the Company shall have no obligation to issue shares of Common Stock in payment of the Earned RSUs unless such issuance and such payment shall comply with all relevant provisions of law and the requirements of any Stock Exchange on which the shares of Common Stock are traded.

Section 4. Effects of Certain Events.

(a) Change in Control. Subject to the terms of the Plan, if prior to the completion of the Service Period set forth above there is a Change in Control:

(i) if Replacement Awards are not provided to the Participant to replace unvested Restricted Stock Units, then the number of the Participant’s Earned RSUs shall be determined at the target level of performance, and such Earned RSUs shall vest as of such date. If the Change in Control qualifies as a “change in control” for purposes of Code Section 409A, then subject to Section 8 below, such vested Earned RSUs shall be paid to the Participant within 90 days following the Change in Control. Otherwise such vested Earned RSUs shall be paid at the time specified under Section 3 above.

(ii) if Replacement Awards are provided to the Participant to replace unvested Restricted Stock Units, then in the event of the Participant’s Involuntary Termination during the period of two (2) years immediately following the Change in Control, the number of Earned Shares under such Replacement Awards shall be determined at the target level of performance, and such Earned RSUs shall vest as of the date of the Involuntary Termination, and subject to Section 8 below, shall be paid to the Participant within 90 days following the Involuntary Termination.

(b) Death or Disability. If during the Service Period, the Participant’s employment with the Company or a Subsidiary terminates due to death or Disability, then the number of the Participant’s Earned RSUs shall be determined at the target level of performance, and such Earned RSUs shall vest as of such date, and subject to Section 8 below, shall be paid to the Participant or the Participant’s legal representative in the event of the Disability of the Participant, or in the event of the death of the Participant, to the legal representative of the Participant’s estate, or if no legal representative has been appointed, to the successor in interest determined under the Participant’s will, on a pro-rata basis within 90 days following the Participant’s termination of employment due to death or Disability. Unless Exhibit A provides otherwise, the pro-rata portion of the Earned RSUs shall be determined in accordance with Section 4(d) below.

(c) Retirement. If a Participant terminates employment during the Service Period due to Retirement, then the Award shall continue and a pro-rata number of Earned RSUs shall vest and be paid at the time and form of payment specified by Section 2 and Section 3 above, respectively, based on actual performance through the end of the applicable Performance Period. Unless Exhibit A provides otherwise, the pro-rata portion of the Earned RSUs shall be determined in accordance with Section 4(d) below. “Retirement” shall mean the resignation or voluntary termination of employment after attainment of age 65 and ten or more years of service with the Company or a Subsidiary.

(d) Determination of Pro-Rata Portion. Unless Exhibit A provides otherwise, in the event of the death, Disability or a Retirement of a Participant, the pro-rata portion of the Earned RSUs under Section 4(b) or Section 4(c), as applicable, shall be determined separately for each portion of the Award that is subject to a separate Performance Goal based on the Performance Period for the portion of the Award that is subject to that separate Performance Goal. In the event of a Participant’s death, Disability or Retirement prior to the completion of the applicable Performance Period for a portion of the Award that is subject to a given Performance Goal, the pro-rata portion of the Earned RSUs for such portion of the Award shall be determined by multiplying the Earned RSUs for such portion of the Award by a fraction, the numerator of which is the number of completed months in the Performance Period during which the Participant was employed by the Company or a Subsidiary, and the denominator of which is the total number of months in the Performance Period for that portion of the Award. In the event of a Participant’s Retirement after the completion of the applicable Performance Period for a portion of the Award that is subject to a given Performance Goal, the pro-rata portion of the Earned RSUs for such portion of the Award shall be the full number of Earned RSUs for that portion of the Award.

Section 5. Dividend Equivalents. No dividend equivalents shall accrue or be paid to the Participant with respect to any Restricted Stock Units.

Section 6. Rights as Shareholder. In addition to the transfer and other restrictions set forth elsewhere in this Agreement and in the Plan, the Participant, as holder of the Restricted Stock Units, shall not possess any rights of a holder

2

of Common Stock (including voting and dividend rights) with respect to the shares of Common Stock underlying such Restricted Stock Unit Award until such time as the Restricted Stock Unit Award vests, is paid and the shares of Common Stock are issued to the holder of the Restricted Stock Unit Award.

Section 7. No Transferability. The Restricted Stock Units may not be sold, transferred, pledged, assigned, encumbered, or otherwise alienated or hypothecated other than by will or the laws of descent and distribution. Earned RSUs shall be payable only to the Participant during the Participant’s lifetime, or in the event of the Disability of the Participant, to the Participant or the legal representative of the Participant, or in the event of the death of the Participant, to the legal representative of the Participant’s estate, or if no legal representative has been appointed to the successor in interest determined under the Participant’s will.

Section 8. Withholding Taxes. As a condition of and prior to the payout of any Restricted Stock Units, the Company shall be entitled to require the Participant to remit to the Company an amount sufficient to satisfy the amount of any federal, state, or local taxes required to be withheld with respect to the vesting and payout of the Earned RSUs, or any other taxable event related thereto. The Committee may permit the Participant to make such payment in any form or manner authorized by the Committee in its sole discretion, including, but not limited to one or more of the forms specified below:

(a) U.S. dollars by personal check, bank draft, or money order payable to the Company, by money transfer or direct account debits;

(b) Delivery to the Company of a number of shares of Common Stock having an aggregate fair market value of not less than the minimum tax withholding required for the Award;

(c) Involvement of a stockbroker in accordance with the federal margin rules set forth in Regulation T;

(d) A cashless exercise if and to the extent permissible by applicable law; or

(e) Any combination of the above forms and methods.

In the event the Participant fails to provide timely payment of all sums required by the Company pursuant to this Section 8, the Company shall have the right and option, but not obligation, to treat such failure as an election by the Participant to provide all or any portion of such required payment by means of tendering vested shares of Common Stock.

In the event that the Participant becomes subject to federal, state or local taxes (e.g., social security or Medicare tax) on the Restricted Stock Units before the date that the Restricted Stock Units are paid, the Company shall accelerate the vesting and payment of, and shall withhold the number of shares of Common Stock underlying the Restricted Stock Units (based on the Fair Market Value on the date that the Restricted Stock Units become subject to such taxes) necessary to satisfy the minimum amount of the taxes required to be withheld, including the payment of any federal, state or local taxes (e.g., federal and state income taxes) on the withheld shares pursuant to this paragraph.

Section 9. Adjustments. As provided by the Plan, in the event of any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, stock dividend, combination or exchange of shares, exchange for other securities, reclassification, reorganization, recapitalization, or any other increase or decrease in the number of outstanding shares of Common Stock effected without consideration to the Company, the specified number of Restricted Stock Units shall be proportionately adjusted to prevent dilution or enlargement of the rights granted to, or available for, the Participant hereunder. Furthermore, if and to the extent permissible for purposes of the “performance-based compensation” exception under Code Section 162(m), the Committee shall adjust the Performance Goal(s) to the extent (if any) it determines that the adjustment is necessary or advisable to preserve the intended incentives and benefits to reflect any material change in corporate capitalization, any material corporate transaction (such as a reorganization, combination, separation, merger, acquisition, or any combination of the foregoing), or any complete or partial liquidation of the Company, or any other similar special circumstances, including the issuance of a significant number of shares of Common Stock.

Section 10. No Employment Rights. Nothing in the Plan or this Agreement confers upon the Participant any right with respect to continuance of employment by the Company or any of its Subsidiaries, or affects the right of the Company or any of its Subsidiaries may have to terminate the Participant’s employment at any time.

3

Section 11. Coordination with Plan. The Participant hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all of the terms and provisions thereof including any that may conflict with those contained in this Agreement.

Section 12. Notices. All notices to the Company shall be in writing and sent to the Company’s Director of Human Resources at the Company’s offices. Notices to the Participant shall be addressed to the Participant at the Participant’s address as it appears on the Company’s records.

Section 13. Amendment. The Company may alter, amend or terminate this Agreement only with the Participant’s consent, except as otherwise expressly provided by the Plan or this Agreement.

Section 14. Governing Law. This Agreement shall be governed by the laws of the State of New York to the extent not preempted by federal law, without reference to principles of conflict of laws, and construed accordingly.

Section 15. Compensation Recovery Policy. Notwithstanding any other provision of this Agreement to the contrary, any Restricted Stock Units granted and/or shares of Common Stock issued hereunder, and/or any amount received with respect to any sale of any such shares of Common Stock, shall be subject to potential cancellation, recoupment, rescission, payback or other action in accordance with the terms of the Company’s compensation recovery policy, if any, or any similar policy that the Company may adopt from time to time (the “Policy”). The Participant agrees and consents to the Company’s application, implementation and enforcement of (i) the Policy that may apply to the Participant and (ii) any provision of applicable law relating to cancellation, rescission, payback or recoupment of compensation, including, but not limited to Section 10D of the Exchange Act, and expressly agrees that the Company may take such actions as are necessary to effectuate the Policy or applicable law without further consent or action being required by the Participant. To the extent that the terms of this Agreement and the Policy or any similar policy conflict, then the terms of such policy shall prevail.

Section 16. Excise Tax Cap. In the event that a Participant becomes entitled to any payment or benefit under this Agreement (such benefits together with any other payments or benefits payable to the Participant under any other agreement with the Participant, or plan or policy of the Company, are referred to in the aggregate as the “Total Payments”), if all or any part of the Total Payments will be subject to the tax imposed by Code Section 4999, or any similar tax that may hereafter be imposed (the “Excise Tax”), then:

(a) Within 30 days following the Participant’s termination of employment, the Company will notify the Participant in writing: (1) whether the payments and benefits under this Agreement, when added to any other payments and benefits making up the Total Payments, exceed an amount equal to 299% of the Participant’s “base amount” as defined in Code Section 280G(b)(3) (the “299% Amount”); and (2) the amount that is equal to the 299% Amount.

(b) The payments and benefits under this Agreement shall be reduced such that the Total Payments do not exceed the 299% Amount, so that no portion of the payments and benefits under this Agreement will be subject to the Excise Tax. Any payment or benefit so reduced will be permanently forfeited and will not be paid to the Participant.

(c) The calculation of the 299% Amount and the determination of how much the Participant’s payments and benefits must be reduced in order to avoid application of the Excise Tax will be made by the Company’s public accounting firm prior to the Participant’s termination of employment, which firm must be reasonably acceptable to the Participant (the “Accounting Firm”). The Company will cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Company and the Participant. Notice must be given to the Accounting Firm within 15 business days after an event entitling the Participant to a payment under this Agreement. All fees and expenses of the Accounting Firm will be borne solely by the Company.

(d) For purposes of making the reduction of amounts payable under this Agreement, such amounts will be eliminated in compliance with the requirements of Code Section 409A, to the extent applicable.

Section 17. Section 409A. This Agreement and the Restricted Stock Units hereunder are intended to comply with Code Section 409A, and this Agreement shall be administered and interpreted consistent with such intention. Notwithstanding the foregoing, the Company makes no representations to the Participant regarding the taxation of the

4

Restricted Stock Units under this Agreement, including, but not limited to, the tax effects of Code Section 409A, and the Participant shall be solely responsible for the taxes imposed upon him or her with respect to the Restricted Stock Units. References to “termination of employment” and similar terms used in this Agreement mean, to the extent necessary to comply with Code Section 409A, the date that the Participant first incurs a “separation from service” within the meaning of Code Section 409A. Notwithstanding anything in this Agreement to the contrary, if at the time of the Participant’s separation from service, the Participant is a “specified employee” for purposes of Code Section 409A, and payment under this Agreement as a result of such separation from service is required by Code Section 409A to be delayed by six months, then the Company shall make such payment on the day following the six-month anniversary of the Participant’s separation from service to the extent required to comply with Code Section 409A.

IN WITNESS WHEREOF, the Company and the Participant have caused this Agreement to be executed on the date set forth opposite their respective signatures, but effective as of the Date of Grant.

Dated:	For the Company:
	By:
	Name:
	Title:
Dated:	PARTICIPANT:
	By:
	Name:

5

EXHIBIT A

PERFORMANCE PERIOD AND PERFORMANCE GOALS

Performance Period

The three-year period beginning on January 1, [YEAR] and ending on December 31, [YEAR].

Performance Goals

XXX

Definitions.

XXX

Pro-Ration of Earned RSUs

XXX

6

EX-31.1

Exhibit 31.1

Certification of Principal Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Martin K. Birmingham, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Financial Institutions, 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: May 6, 2016	/s/ Martin K. Birmingham
	Martin K. Birmingham
	President and 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, Kevin B. Klotzbach, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Financial Institutions, 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: May 6, 2016	/s/ Kevin B. Klotzbach
	Kevin B. Klotzbach
	Chief Financial Officer

EX-32

Exhibit 32

Certification pursuant to

18 U.S.C. Section 1350,

as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Martin K. Birmingham, President and Chief Executive Officer, and Kevin B. Klotzbach, Chief Financial Officer of Financial Institutions, Inc. (the “Company”), each certify in his capacity as an officer of the Company that he has reviewed the Quarterly Report of the Company on Form 10-Q for the period ended March 31, 2016 and that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 6, 2016	/s/ Martin K. Birmingham
	Martin K. Birmingham
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: May 6, 2016	/s/ Kevin B. Klotzbach
	Kevin B. Klotzbach
	Chief Financial Officer
	(Principal Financial Officer)

The purpose of this statement is solely to comply with Title 18, Chapter 63, Section 1350 of the United States Code, as amended by Section 906 of the Sarbanes-Oxley Act of 2002. A signed original of this written statement required by Section 906 has been provided to Financial Institutions, Inc. and will be retained by Financial Institutions, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 29, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2016
Entity Registrant Name	FINANCIAL INSTITUTIONS INC
Entity Central Index Key	0000862831
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		14,498,014

XML

Consolidated Statements Of Financial Condition - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
ASSETS
Cash and due from banks	$ 110,944	$ 60,121
Securities available for sale, at fair value	610,013	544,395
Securities held to maturity, at amortized cost (fair value of $485,863 and $490,064, respectively)	476,283	485,717
Loans held for sale	609	1,430
Loans (net of allowance for loan losses of $27,568 and $27,085, respectively)	2,087,466	2,056,677
Company owned life insurance	61,962	63,045
Premises and equipment, net	40,771	39,445
Goodwill and other intangible assets, net	76,567	66,946
Other assets	51,957	63,248
Total assets	3,516,572	3,381,024
Deposits:
Noninterest-bearing demand	617,394	641,972
Interest-bearing demand	622,443	523,366
Savings and money market	1,042,910	928,175
Time deposits	677,430	637,018
Total deposits	2,960,177	2,730,531
Short-term borrowings	179,200	293,100
Long-term borrowings, net of issuance costs of $992 and $1,010, respectively	39,008	38,990
Other liabilities	24,234	24,559
Total liabilities	3,202,619	3,087,180
Shareholders' equity:
Total preferred equity	17,340	17,340
Common stock, $0.01 par value; 50,000,000 shares authorized; 14,692,214 and 14,397,509 shares issued, respectively	147	144
Additional paid-in capital	81,010	72,690
Retained earnings	223,290	218,920
Accumulated other comprehensive loss	(4,105)	(11,327)
Treasury stock, at cost - 197,131 and 207,317 shares, respectively	(3,729)	(3,923)
Total shareholders' equity	313,953	293,844
Total liabilities and shareholders' equity	3,516,572	3,381,024
Series A 3% Preferred Stock [Member]
Shareholders' equity:
Total preferred equity	149	149
Series B-1 8.48% Preferred Stock [Member]
Shareholders' equity:
Total preferred equity	$ 17,191	$ 17,191

XML

Consolidated Statements Of Financial Condition (Parenthetical) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Securities held to maturity, fair value	$ 485,863	$ 490,064
Loans, allowance for loan losses	27,568	27,085
Debt issuance costs	$ 992	$ 1,010
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	14,692,214	14,397,509
Treasury stock, shares	197,131	207,317
Series A 3% Preferred Stock [Member]
Preferred stock, par value	$ 100	$ 100
Preferred stock, shares authorized	1,533	1,533
Preferred stock, shares issued	1,492	1,492
Preferred stock, dividend percentage	3.00%	3.00%
Series B-1 8.48% Preferred Stock [Member]
Preferred stock, par value	$ 100	$ 100
Preferred stock, shares authorized	200,000	200,000
Preferred stock, shares issued	171,906	171,906
Preferred stock, dividend percentage	8.48%	8.48%

XML

Consolidated Statements Of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Interest income:
Interest and fees on loans	$ 22,057	$ 20,137
Interest and dividends on investment securities	5,578	4,860
Total interest income	27,635	24,997
Interest expense:
Deposits	1,959	1,620
Short-term borrowings	339	230
Long-term borrowings	618
Total interest expense	2,916	1,850
Net interest income	24,719	23,147
Provision for loan losses	2,368	2,741
Net interest income after provision for loan losses	22,351	20,406
Noninterest income:
Service charges on deposits	1,724	1,879
Insurance income	1,672	1,608
ATM and debit card	1,325	1,193
Investment advisory	1,243	487
Company owned life insurance	1,368	467
Investments in limited partnerships	56	474
Loan servicing	116	167
Net gain on sale of loans held for sale	78	69
Net gain on disposal of investment securities	613	1,062
Net gain on disposal of other assets	4	4
Other	1,018	887
Total noninterest income	9,217	8,297
Noninterest expense:
Salaries and employee benefits	11,614	10,223
Occupancy and equipment	3,625	3,699
Professional services	1,447	968
Computer and data processing	804	702
Supplies and postage	594	563
FDIC assessments	436	418
Advertising and promotions	377	239
Other	2,321	2,199
Total noninterest expense	21,218	19,011
Income before income taxes	10,350	9,692
Income tax expense	2,732	2,891
Net income	7,618	6,801
Net income available to common shareholders	$ 7,253	$ 6,436
Earnings per common share (Note 3):
Basic	$ 0.50	$ 0.46
Diluted	0.50	0.46
Cash dividends declared per common share	$ 0.20	$ 0.20
Weighted average common shares outstanding:
Basic	14,395	14,063
Diluted	14,465	14,113

XML

Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Consolidated Statements Of Comprehensive Income [Abstract]
Net income	$ 7,618	$ 6,801
Other comprehensive (loss) income, net of tax:
Net unrealized gains on securities available for sale	7,083	3,261
Pension and post-retirement obligations	139	135
Total other comprehensive income, net of tax	7,222	3,396
Comprehensive income	$ 14,840	$ 10,197

XML

Consolidated Statements Of Changes In Shareholders' Equity - USD ($) $ in Thousands	Series A 3% Preferred Stock [Member] Retained Earnings [Member]	Series A 3% Preferred Stock [Member]	Series B-1 8.48% Preferred Stock [Member] Retained Earnings [Member]	Series B-1 8.48% Preferred Stock [Member]	Preferred Equity [Member]	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Treasury Stock [Member]	Total
Balance at Dec. 31, 2014					$ 17,340	$ 144	$ 72,955	$ 203,312	$ (9,011)	$ (5,208)	$ 279,532
Comprehensive income:
Net income								6,801			6,801
Other comprehensive income, net of tax									3,396		3,396
Purchases of common stock for treasury										(41)	(41)
Share-based compensation plans:
Share-based compensation							103				103
Stock options exercised							3			69	72
Restricted stock awards issued, net							(874)			874
Excess tax benefit on share-based compensation							4				4
Cash dividends declared:
Preferred stock dividends per share	$ (1)	$ (1)	$ (364)	$ (364)							(365)
Common stock dividends per share								(2,813)			(2,813)
Balance at Mar. 31, 2015					17,340	144	72,191	206,935	(5,615)	(4,306)	286,689
Balance at Dec. 31, 2015					17,340	144	72,690	218,920	(11,327)	(3,923)	293,844
Comprehensive income:
Net income								7,618			7,618
Other comprehensive income, net of tax									7,222		7,222
Common stock issued						3	8,097				8,100
Share-based compensation plans:
Share-based compensation							129				129
Stock options exercised							2			286	288
Restricted stock awards forfeited							92			(92)
Cash dividends declared:
Preferred stock dividends per share	$ (1)	$ (1)	$ (364)	$ (364)							(365)
Common stock dividends per share								(2,883)			(2,883)
Balance at Mar. 31, 2016					$ 17,340	$ 147	$ 81,010	$ 223,290	$ (4,105)	$ (3,729)	$ 313,953

XML

Consolidated Statements Of Changes In Shareholders' Equity (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Common stock dividends per share, declared	$ 0.20	$ 0.20
Series A 3% Preferred Stock [Member]
Preferred stock dividends per share, declared	$ 0.75	0.75
Preferred stock, dividend percentage	3.00%
Series B-1 8.48% Preferred Stock [Member]
Preferred stock dividends per share, declared	$ 2.12	$ 2.12
Preferred stock, dividend percentage	8.48%

XML

Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash flows from operating activities:
Net income	$ 7,618	$ 6,801
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,487	1,326
Net amortization of premiums on securities	714	743
Provision for loan losses	2,368	2,741
Share-based compensation	129	103
Deferred income tax expense	131	582
Proceeds from sale of loans held for sale	4,144	3,366
Originations of loans held for sale	(3,245)	(3,198)
Income on company owned life insurance	(1,368)	(467)
Net gain on sale of loans held for sale	(78)	(69)
Net gain on disposal of investment securities	(613)	(1,062)
Net gain on sale and disposal of other assets	(4)	(4)
Decrease in other assets	5,804	7,702
Decrease in other liabilities	(127)	(627)
Net cash provided by operating activities	16,960	17,937
Cash flows from investing activities:
Purchases of available for sale securities	(119,597)	(78,405)
Purchases of held to maturity securities	(3,612)	(11,024)
Proceeds from principal payments, maturities and calls on available for sale securities	48,280	38,073
Proceeds from principal payments, maturities and calls on held to maturity securities	12,381	5,048
Proceeds from sales of securities available for sale	17,627	29,508
Net loan originations	(33,297)	(14,190)
Proceeds from company owned life insurance, net of purchases	2,451	(7)
Proceeds from sales of other assets	109	109
Purchases of premises and equipment	(2,460)	(1,024)
Cash consideration paid for acquisition, net of cash acquired	(868)
Net cash used in investing activities	(78,986)	(31,912)
Cash flows from financing activities:
Net increase in deposits	229,646	254,168
Net decrease in short-term borrowings	(113,900)	(159,231)
Purchase of common stock for treasury		(41)
Proceeds from stock options exercised	288	72
Excess tax benefit on share-based compensation, net		4
Cash dividends paid to common and preferred shareholders	(3,185)	(3,176)
Net cash provided by financing activities	112,849	91,796
Net increase in cash and cash equivalents	50,823	77,821
Cash and cash equivalents, beginning of period	60,121	58,151
Cash and cash equivalents, end of period	110,944	135,972
Supplemental information:
Cash paid for interest	2,096	1,473
Cash paid for income taxes	500
Noncash investing and financing activities:
Real estate and other assets acquired in settlement of loans	140	51
Accrued and declared unpaid dividends	3,248	3,178
(Decrease) increase in net unsettled security purchases	(170)	$ 6,222
Common stock issued for acquisition	8,100
Assets acquired and liabilities assumed in business combinations:
Fair value of assets acquired	4,848
Fair value of liabilities assumed	$ 1,845

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Basis of Presentation And Summary Of Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

Basis of Presentation And Summary Of Significant Accounting Policies [Abstract]

Basis of Presentation And Summary Of Significant Accounting Policies

(1.) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Financial Institutions, Inc., (the "Company") is a financial holding company organized in 1931 under the laws of New York State. The Company provides diversified financial services through its subsidiaries, Five Star Bank, Scott Danahy Naylon, LLC ("Scott Danahy Naylon") and Courier Capital, LLC ("Courier Capital"). The Company offers a broad array of deposit, lending and other financial services to individuals, municipalities and businesses in Western and Central New York through its wholly-owned New York chartered banking subsidiary, Five Star Bank (the "Bank"). The Bank has also expanded its indirect lending network to include relationships with franchised automobile dealers in the Capital District of New York and Northern Pennsylvania. Scott Danahy Naylon provides a broad range of insurance services to personal and business clients across 44 states. Acquired on January 5, 2016, Courier Capital provides customized investment management, investment consulting and retirement plan services to individuals, businesses, institutions, foundations and retirement plans across nine states.

Basis of Presentation

The consolidated financial statements include the accounts of Financial Institutions, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The accounting and reporting policies conform to U.S. generally accepted accounting principles ("GAAP"). Certain information and footnote disclosures normally included in financial statements prepared in conformity with GAAP have been condensed or omitted pursuant to such rules and regulations. However, in the opinion of management, the accompanying consolidated financial statements reflect all adjustments of a normal and recurring nature necessary for a fair presentation of the consolidated statements of financial condition, income, comprehensive income, changes in shareholders' equity and cash flows for the periods indicated, and contain adequate disclosure to make the information presented not misleading. Prior years' consolidated financial statements are re-classified whenever necessary to conform to the current year's presentation. These consolidated financial statements should be read in conjunction with the Company's 2015 Annual Report on Form 10-K for the year ended December 31, 2015. The results of operations for any interim periods are not necessarily indicative of the results which may be expected for the entire year.

Reclassifications

Certain reclassifications of previously reported amounts have been made to conform to the current year presentation. Such reclassifications did not impact net income or shareholders' equity as previously reported.

Subsequent Events

The Company has evaluated events and transactions for potential recognition or disclosure through the day the financial statements were issued and determined there were no material recognizable subsequent events.

Use of Estimates

The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates relate to the determination of the allowance for loan losses, the carrying value of goodwill and deferred tax assets, and assumptions used in the defined benefit pension plan accounting.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The effective date was recently deferred for one year to the interim and annual periods beginning on or after December 15, 2017. Early adoption is permitted as of the original effective date – interim and annual periods beginning on or after December 15, 2016. The Company continues to assess the potential impact of ASU 2014-09 on its accounting and disclosures.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 is intended to improve the recognition and measurement of financial instruments by requiring equity investments to be measured at fair value with changes in fair value recognized in net income; requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured and amortized at cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. ASU 2016-01 is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2017. The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption. The Company is assessing the impact of ASU 2016-01 on its accounting and disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 establishes a right of use model that requires a lessee to record a right of use asset and a lease liability for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. A lease will be treated as sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as a financing. If the lessor doesn't convey risks and rewards or control, an operating lease results. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, with certain practical expedients available. Early adoption is permitted. The Company is assessing the impact of ASU 2016-02 on its accounting and disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It also allows an employer to repurchase more of an employee's shares than it can today for tax withholding purposes without triggering liability accounting and to make a policy election for forfeitures as they occur. The guidance is effective for public business entities for fiscal years beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted. The Company is assessing the impact of ASU 2016-09 on its accounting and disclosures.

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Business Combinations

3 Months Ended

Mar. 31, 2016

Business Combinations [Abstract]

Business Combinations

(2.) BUSINESS COMBINATIONS

Courier Capital Acquisition

On January 5, 2016, the Company completed the acquisition of Courier Capital Corporation, a registered investment advisory and wealth management firm with approximately $1.2 billion in assets under management. Consideration for the acquisition totaled $9.0 million and included stock of $8.1 million and $918 thousand of cash. The acquisition also included $2.8 million of potential future payments of stock and $2.2 million of potential future cash bonuses contingent upon Courier Capital meeting certain EBITDA performance targets through 2018. In addition, the Company purchased two pieces of real property in Buffalo and Jamestown, New York used by Courier Capital for total cash considerations of $1.3 million. As a result of the acquisition, the Company recorded goodwill of $6.0 million and other intangible assets of $3.9 million. The goodwill is not expected to be deductible for income tax purposes. Pro forma results of operations for this acquisition have not been presented because the effect of this acquisition was not material to the Company's consolidated financial statements.

This acquisition was accounted for under the acquisition method in accordance with FASB ASC Topic 805. Accordingly, the assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the acquisition date. Due to the timing of the closing of the acquisition, the fair values of other intangibles recorded are subject to adjustment as additional information becomes available to indicate a more accurate or appropriate fair value for the intangibles during the measurement period, which is not to exceed one year from the acquisition date.The following table presents the allocation of acquisition cost to the assets acquired and liabilities assumed, based on their estimated fair values.

Cash	$	50
Identified intangible assets		3,928
Premises and equipment, accounts receivable and other assets		870
Deferred tax liability		(1,797	)
Other liabilities		(48	)
Net assets acquired	$	3,003

The amounts assigned to goodwill and other intangible assets for the Courier Capital acquisition are as follows:

		Amount	Useful life
		allocated	(in years)
Goodwill	$	6,015	n/a
Other intangible assets – customer relationships		3,900	20
Other intangible assets – other		28	5
	$	9,943

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Earnings Per Common Share ("EPS")

3 Months Ended

Mar. 31, 2016

Earnings Per Common Share ("EPS") [Abstract]

Earnings Per Common Share ("EPS")

(3.) EARNINGS PER COMMON SHARE ("EPS")

The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted EPS (in thousands, except per share amounts).

		Three months ended
		March 31,
		2016			2015
Net income available to common shareholders	$	7,253		$	6,436
Weighted average common shares outstanding:
Total shares issued		14,679			14,397
Unvested restricted stock awards		(79	)		(74	)
Treasury shares		(205	)		(260	)
Total basic weighted average common shares outstanding		14,395			14,063
Incremental shares from assumed:
Exercise of stock options		27			22
Vesting of restricted stock awards		43			28
Total diluted weighted average common shares outstanding		14,465			14,113
Basic earnings per common share	$	0.50		$	0.46
Diluted earnings per common share	$	0.50		$	0.46

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Investment Securities

3 Months Ended

Mar. 31, 2016

Investment Securities [Abstract]

Investment Securities

(4.) INVESTMENT SECURITIES

The amortized cost and fair value of investment securities are summarized below (in thousands):

		Amortized		Unrealized		Unrealized		Fair
		Cost		Gains		Losses		Value
March 31, 2016
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	235,964	$	5,506	$	7	$	241,463
Mortgage-backed securities:
Federal National Mortgage Association		293,220		4,312		53		297,479
Federal Home Loan Mortgage Corporation		28,019		535		28		28,526
Government National Mortgage Association		18,302		664		12		18,954
Collateralized mortgage obligations:
Federal National Mortgage Association		16,986		394		-		17,380
Federal Home Loan Mortgage Corporation		5,165		90		-		5,255
Privately issued		-		777		-		777
Total mortgage-backed securities		361,692		6,772		93		368,371
Asset-backed securities		-		179		-		179
Total available for sale securities	$	597,656	$	12,457	$	100	$	610,013
Securities held to maturity:
State and political subdivisions		291,934		8,544		1		300,477
Mortgage-backed securities:
Federal National Mortgage Association		9,190		152		2		9,340
Government National Mortgage Association		26,365		204		41		26,528
Collateralized mortgage obligations:
Federal National Mortgage Association		54,281		227		15		54,493
Federal Home Loan Mortgage Corporation		77,407		467		5		77,869
Government National Mortgage Association		17,106		57		7		17,156
Total mortgage-backed securities		184,349		1,107		70		185,386
Total held to maturity securities	$	476,283	$	9,651	$	71	$	485,863

December 31, 2015
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	260,748	$	1,164	$	1,049	$	260,863
Mortgage-backed securities:
Federal National Mortgage Association		209,671		1,092		2,333		208,430
Federal Home Loan Mortgage Corporation		24,564		282		194		24,652
Government National Mortgage Association		26,465		943		4		27,404
Collateralized mortgage obligations:
Federal National Mortgage Association		16,998		90		154		16,934
Federal Home Loan Mortgage Corporation		5,175		1		91		5,085
Privately issued		-		809		-		809
Total mortgage-backed securities		282,873		3,217		2,776		283,314
Asset-backed securities		-		218		-		218
Total available for sale securities	$	543,621	$	4,599	$	3,825	$	544,395
Securities held to maturity:
State and political subdivisions		294,423		6,562		4		300,981
Mortgage-backed securities:
Federal National Mortgage Association		9,242		14		79		9,177
Government National Mortgage Association		25,607		33		159		25,481
Collateralized mortgage obligations:
Federal National Mortgage Association		56,791		-		818		55,973
Federal Home Loan Mortgage Corporation		80,570		-		1,120		79,450
Government National Mortgage Association		19,084		19		101		19,002
Total mortgage-backed securities		191,294		66		2,277		189,083
Total held to maturity securities	$	485,717	$	6,628	$	2,281	$	490,064

Investment securities with a total fair value of $908.8 million at March 31, 2016 were pledged as collateral to secure public deposits and for other purposes required or permitted by law.

Sales and calls of securities available for sale were as follows (in thousands):

		Three months ended
		March 31,
		2016		2015
Proceeds from sales	$	17,627	$	29,508
Gross realized gains		613		1,073
Gross realized losses		-		11

The scheduled maturities of securities available for sale and securities held to maturity at March 31, 2016 are shown below (in thousands). Actual expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.

		Amortized		Fair
		Cost		Value
Debt securities available for sale:
Due in one year or less	$	5,101	$	5,137
Due from one to five years		179,535		182,050
Due after five years through ten years		300,883		308,638
Due after ten years		112,137		114,188
	$	597,656	$	610,013
Debt securities held to maturity:
Due in one year or less	$	20,934	$	20,987
Due from one to five years		174,277		178,726
Due after five years through ten years		111,349		115,419
Due after ten years		169,723		170,731
	$	476,283	$	485,863

Unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows (in thousands):

		Less than 12 months				12 months or longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
March 31, 2016
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	391	$	1	$	7,482	$	6	$	7,873	$	7
Mortgage-backed securities:
Federal National Mortgage Association		12,098		3		15,781		50		27,879		53
Federal Home Loan Mortgage Corporation		-		-		4,258		28		4,258		28
Government National Mortgage Association		1,332		12		-		-		1,332		12
Total mortgage-backed securities		13,430		15		20,039		78		33,469		93
Total available for sale securities		13,821		16		27,521		84		41,342		100
Securities held to maturity:
State and political subdivisions		2,477		1		-		-		2,477		1
Mortgage-backed securities:
Federal National Mortgage Association		1,362		2		-		-		1,362		2
Government National Mortgage Association		4,225		12		3,773		29		7,998		41
Collateralized mortgage obligations:
Federal National Mortgage Association		6,895		15		-		-		6,895		15
Federal Home Loan Mortgage Corporation		5,100		5		-		-		5,100		5
Government National Mortgage Association		3,366		7		-		-		3,366		7
Total mortgage-backed securities		20,948		41		3,773		29		24,721		70
Total held to maturity securities		23,425		42		3,773		29		27,198		71
Total temporarily impaired securities	$	37,246	$	58	$	31,294	$	113	$	68,540	$	171
December 31, 2015
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	82,298	$	735	$	26,302	$	314	$	108,600	$	1,049
Mortgage-backed securities:
Federal National Mortgage Association		123,774		2,134		9,562		199		133,336		2,333
Federal Home Loan Mortgage Corporation		12,660		194		-		-		12,660		194
Government National Mortgage Association		1,405		4		-		-		1,405		4
Collateralized mortgage obligations:
Federal National Mortgage Association		7,778		154		-		-		7,778		154
Federal Home Loan Mortgage Corporation		4,998		91		-		-		4,998		91
Total mortgage-backed securities		150,615		2,577		9,562		199		160,177		2,776
Total available for sale securities		232,913		3,312		35,864		513		268,777		3,825
Securities held to maturity:
State and political subdivisions		3,075		4		-		-		3,075		4
Mortgage-backed securities:
Federal National Mortgage Association		5,666		79		-		-		5,666		79
Government National Mortgage Association		8,790		159		-		-		8,790		159
Collateralized mortgage obligations:
Federal National Mortgage Association		55,973		818		-		-		55,973		818
Federal Home Loan Mortgage Corporation		79,323		1,120		-		-		79,323		1,120
Government National Mortgage Association		14,559		101		-		-		14,559		101
Total mortgage-backed securities		164,311		2,277		-		-		164,311		2,277
Total held to maturity securities		167,386		2,281		-		-		167,386		2,281
Total temporarily impaired securities	$	400,299	$	5,593	$	35,864	$	513	$	436,163	$	6,106

The total number of security positions in the investment portfolio in an unrealized loss position at March 31, 2016 was 45 compared to 152 at December 31, 2015. At March 31, 2016, the Company had positions in 13 investment securities with a fair value of $31.3 million and a total unrealized loss of $113 thousand that have been in a continuous unrealized loss position for more than 12 months. At March 31, 2016, there were a total of 32 securities positions in the Company's investment portfolio with a fair value of $37.2 million and a total unrealized loss of $58 thousand that had been in a continuous unrealized loss position for less than 12 months. At December 31, 2015, the Company had positions in 10 investment securities with a fair value of $35.9 million and a total unrealized loss of $513 thousand that had been in a continuous unrealized loss position for more than 12 months. At December 31, 2015, there were a total of 142 securities positions in the Company's investment portfolio with a fair value of $400.3 million and a total unrealized loss of $5.6 million that had been in a continuous unrealized loss position for less than 12 months. The unrealized loss on investment securities was predominantly caused by changes in market interest rates subsequent to purchase. The fair value of most of the investment securities in the Company's portfolio fluctuates as market interest rates change.

The Company reviews investment securities on an ongoing basis for the presence of other than temporary impairment ("OTTI") with formal reviews performed quarterly. When evaluating debt securities for OTTI, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intention to sell the debt security or whether it is more likely than not that it will be required to sell the debt security before its anticipated recovery. The assessment of whether OTTI exists involves a high degree of subjectivity and judgment and is based on the information then available to management. There was no impairment recorded during the three months ended March 31, 2016 and 2015.

Based on management's review and evaluation of the Company's debt securities as of March 31, 2016, the debt securities with unrealized losses were not considered to be other-than-temporarily impaired. As of March 31, 2016, the Company did not intend to sell any of the securities in a loss position and believes that it is not likely that it will be required to sell any such securities before the anticipated recovery of amortized cost. Accordingly, as of March 31, 2016, management has concluded that unrealized losses on its investment securities are temporary and no further impairment loss has been realized in the Company's consolidated statements of income.

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Loans

3 Months Ended

Mar. 31, 2016

Loans [Abstract]

Loans

(5.) LOANS

The Company's loan portfolio consisted of the following as of the dates indicated (in thousands):

		Principal		Net Deferred
		Amount		Loan (Fees)
		Outstanding		Costs			Loans, Net
March 31, 2016
Commercial business	$	317,420	$	356		$	317,776
Commercial mortgage		591,800		(1,484	)		590,316
Residential real estate loans		377,406		5,098			382,504
Residential real estate lines		123,894		2,632			126,526
Consumer indirect		655,348		24,498			679,846
Other consumer		17,889		177			18,066
Total	$	2,083,757	$	31,277			2,115,034
Allowance for loan losses							(27,568	)
Total loans, net						$	2,087,466
December 31, 2015
Commercial business	$	313,475	$	283		$	313,758
Commercial mortgage		567,481		(1,380	)		566,101
Residential real estate loans		376,023		5,051			381,074
Residential real estate lines		124,766		2,581			127,347
Consumer indirect		652,494		24,446			676,940
Other consumer		18,361		181			18,542
Total	$	2,052,600	$	31,162			2,083,762
Allowance for loan losses							(27,085	)
Total loans, net						$	2,056,677

Loans held for sale (not included above) were comprised entirely of residential real estate mortgages and totaled $609 thousand and $1.4 million as of March 31, 2016 and December 31, 2015, respectively.

The Company's recorded investment, by loan class, in current and nonaccrual loans, as well as an analysis of accruing delinquent loans is set forth as of the dates indicated (in thousands):

						Greater
		30-59 Days		60-89 Days		Than 90		Total Past
		Past Due		Past Due		Days		Due		Nonaccrual		Current		Total Loans
March 31, 2016
Commercial business	$	94	$	2	$	-	$	96	$	4,056	$	313,268	$	317,420
Commercial mortgage		53		-		-		53		1,781		589,966		591,800
Residential real estate loans		515		22		-		537		1,601		375,268		377,406
Residential real estate lines		151		43		-		194		165		123,535		123,894
Consumer indirect		1,296		267		-		1,563		943		652,842		655,348
Other consumer		52		17		9		78		12		17,799		17,889
Total loans, gross	$	2,161	$	351	$	9	$	2,521	$	8,558	$	2,072,678	$	2,083,757
December 31, 2015
Commercial business	$	321	$	612	$	-	$	933	$	3,922	$	308,620	$	313,475
Commercial mortgage		68		146		-		214		947		566,320		567,481
Residential real estate loans		723		395		-		1,118		1,848		373,057		376,023
Residential real estate lines		199		34		-		233		235		124,298		124,766
Consumer indirect		1,975		286		-		2,261		1,467		648,766		652,494
Other consumer		98		13		8		119		13		18,229		18,361
Total loans, gross	$	3,384	$	1,486	$	8	$	4,878	$	8,432	$	2,039,290	$	2,052,600

There were no loans past due greater than 90 days and still accruing interest as of March 31, 2016 and December 31, 2015. There were $9 thousand and $8 thousand in consumer overdrafts which were past due greater than 90 days as of March 31, 2016 and December 31, 2015, respectively. Consumer overdrafts are overdrawn deposit accounts which have been reclassified as loans but by their terms do not accrue interest.

Troubled Debt Restructurings

A modification of a loan constitutes a troubled debt restructuring ("TDR") when a borrower is experiencing financial difficulty and the modification constitutes a concession. Commercial loans modified in a TDR may involve temporary interest-only payments, term extensions, reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, collateral concessions, forgiveness of principal, forebearance agreements, or substituting or adding a new borrower or guarantor.

The following table presents information related to loans modified in a TDR during the quarterly periods indicated (dollars in thousands).

			Pre-		Post-
			Modification		Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment
March 31, 2016
Commercial business	2	$	312	$	312
Commercial mortgage	1		550		550
Total	3	$	862	$	862
March 31, 2015
Commercial business	-	$	-	$	-
Commercial mortgage	1		682		330
Total	1	$	682	$	330

The loans identified as a TDR by the Company during the three month periods ended March 31, 2016 and 2015 were previously reported as an impaired loan prior to restructuring. Each of the loans restructured during the three months ended March 31, 2016 and 2015 were on nonaccrual status at the end of the respective period. The modifications related to collateral concessions. Nonaccrual loans that are restructured remain on nonaccrual status, but may move to accrual status after they have performed according to the restructured terms for a period of time. The TDR classifications did not have a material impact on the Company's determination of the allowance for loan losses because the modified loans were impaired and evaluated for a specific reserve both before and after restructuring.

There were no loans modified as a TDR within the previous 12 months that defaulted during the three months ended March 31, 2016 or 2015. For purposes of this disclosure, a loan modified as a TDR is considered to have defaulted when the borrower becomes 90 days past due.

Impaired Loans

Management has determined that specific commercial loans on nonaccrual status and all loans that have had their terms restructured in a troubled debt restructuring are impaired loans. The following table presents the recorded investment, unpaid principal balance and related allowance of impaired loans as of the dates indicated and average recorded investment and interest income recognized on impaired loans for the three month periods ended as of the dates indicated (in thousands):

				Unpaid				Average		Interest
		Recorded		Principal		Related		Recorded		Income
		Investment(1)		Balance(1)		Allowance		Investment		Recognized
March 31, 2016
With no related allowance recorded:
Commercial business	$	2,130	$	2,710	$	-	$	1,516	$	-
Commercial mortgage		1,349		1,697		-		1,018		-
		3,479		4,407		-		2,534		-
With an allowance recorded:
Commercial business		1,926		1,926		825		2,339		-
Commercial mortgage		432		432		127		114		-
		2,358		2,358		952		2,453		-
	$	5,837	$	6,765	$	952	$	4,987	$	-
December 31, 2015
With no related allowance recorded:
Commercial business	$	1,441	$	1,810	$	-	$	1,352	$	-
Commercial mortgage		937		1,285		-		1,013		-
		2,378		3,095		-		2,365		-
With an allowance recorded:
Commercial business		2,481		2,481		996		1,946		-
Commercial mortgage		10		10		10		449		-
		2,491		2,491		1,006		2,395		-
	$	4,869	$	5,586	$	1,006	$	4,760	$	-

(1) Difference between recorded investment and unpaid principal balance represents partial charge-offs.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors such as the fair value of collateral. The Company analyzes commercial business and commercial mortgage loans individually by classifying the loans as to credit risk. Risk ratings are updated any time the situation warrants. The Company uses the following definitions for risk ratings: Special Mention: Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company's credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans that do not meet the criteria above that are analyzed individually as part of the process described above are considered "Uncriticized" or pass-rated loans and are included in groups of homogeneous loans with similar risk and loss characteristics.

The following table sets forth the Company's commercial loan portfolio, categorized by internally assigned asset classification, as of the dates indicated (in thousands):

		Commercial		Commercial
		Business		Mortgage
March 31, 2016
Uncriticized	$	303,114	$	576,742
Special mention		5,643		8,580
Substandard		8,663		6,478
Doubtful		-		-
Total	$	317,420	$	591,800
December 31, 2015
Uncriticized	$	298,413	$	551,603
Special mention		4,916		9,015
Substandard		10,146		6,863
Doubtful		-		-
Total	$	313,475	$	567,481

The Company utilizes payment status as a means of identifying and reporting problem and potential problem retail loans. The Company considers nonaccrual loans and loans past due greater than 90 days and still accruing interest to be non-performing. The following table sets forth the Company's retail loan portfolio, categorized by payment status, as of the dates indicated (in thousands):

		Residential		Residential
		Real Estate		Real Estate		Consumer		Other
		Loans		Lines		Indirect		Consumer
March 31, 2016
Performing	$	375,805	$	123,729	$	654,405	$	17,868
Non-performing		1,601		165		943		21
Total	$	377,406	$	123,894	$	655,348	$	17,889
December 31, 2015
Performing	$	374,175	$	124,531	$	651,027	$	18,340
Non-performing		1,848		235		1,467		21
Total	$	376,023	$	124,766	$	652,494	$	18,361

The following tables set forth the changes in the allowance for loan losses for the three month periods ended as of the dates indicated (in thousands):

						Residential		Residential
		Commercial		Commercial		Real Estate		Real Estate			Consumer		Other
		Business		Mortgage		Loans		Lines			Indirect		Consumer		Total
March 31, 2016
Allowance for loan losses:
Beginning balance	$	5,540	$	9,027	$	1,347	$	345		$	10,458	$	368	$	27,085
Charge-offs		602		4		46		4			2,498		157		3,311
Recoveries		100		5		25		4			1,170		122		1,426
Provision		398		687		58		-			1,167		58		2,368
Ending balance	$	5,436	$	9,715	$	1,384	$	345		$	10,297	$	391	$	27,568
Evaluated for impairment:
Individually	$	791	$	120	$	-	$	-		$	-	$	-	$	911
Collectively	$	4,645	$	9,595	$	1,384	$	345		$	10,297	$	391	$	26,657
Loans:
Ending balance	$	317,420	$	591,800	$	377,406	$	123,894		$	655,348	$	17,889	$	2,083,757
Evaluated for impairment:
Individually	$	3,924	$	1,730	$	-	$	-		$	-	$	-	$	5,654
Collectively	$	313,496	$	590,070	$	377,406	$	123,894		$	655,348	$	17,889	$	2,078,103
March 31, 2015
Allowance for loan losses:
Beginning balance	$	5,621	$	8,122	$	1,620	$	435		$	11,383	$	456	$	27,637
Charge-offs		1,141		609		139		-			2,422		259		4,570
Recoveries		48		89		41		2			1,105		98		1,383
Provision (credit)		867		554		64		(35	)		1,139		152		2,741
Ending balance	$	5,395	$	8,156	$	1,586	$	402		$	11,205	$	447	$	27,191
Evaluated for impairment:
Individually	$	1,120	$	817	$	-	$	-		$	-	$	-	$	1,937
Collectively	$	4,275	$	7,339	$	1,586	$	402		$	11,205	$	447	$	25,254
Loans:
Ending balance	$	277,427	$	480,479	$	351,088	$	126,832		$	637,380	$	19,184	$	1,892,390
Evaluated for impairment:
Individually	$	4,587	$	3,411	$	-	$	-		$	-	$	-	$	7,998
Collectively	$	272,840	$	477,068	$	351,088	$	126,832		$	637,380	$	19,184	$	1,884,392

Risk Characteristics

Commercial business loans primarily consist of loans to small to midsize businesses in our market area in a diverse range of industries. These loans are of higher risk and typically are made on the basis of the borrower's ability to make repayment from the cash flow of the borrower's business. Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value. The credit risk related to commercial loans is largely influenced by general economic conditions and the resulting impact on a borrower's operations or on the value of underlying collateral, if any.

Commercial mortgage loans generally have larger balances and involve a greater degree of risk than residential mortgage loans, potentially resulting in higher losses on an individual customer basis. Loan repayment is often dependent on the successful operation and management of the properties, as well as on the collateral securing the loan. Economic events or conditions in the real estate market could have an adverse impact on the cash flows generated by properties securing the Company's commercial real estate loans and on the value of such properties.

Residential real estate loans (comprised of conventional mortgages and home equity loans) and Residential real estate lines (comprised of home equity lines) are generally made on the basis of the borrower's ability to make repayment from his or her employment and other income, but are secured by real property whose value tends to be more easily ascertainable. Credit risk for these types of loans is generally influenced by general economic conditions, the characteristics of individual borrowers, and the nature of the loan collateral.

Consumer indirect and other consumer loans may entail greater credit risk than residential mortgage loans and home equities, particularly in the case of other consumer loans which are unsecured or, in the case of indirect consumer loans, secured by depreciable assets, such as automobiles or boats. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance. In addition, consumer loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be affected by adverse personal circumstances such as job loss, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

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Goodwill And Other Intangible Assets

3 Months Ended

Mar. 31, 2016

Goodwill And Other Intangible Assets [Abstract]

Goodwill And Other Intangible Assets

(6.) GOODWILL AND OTHER INTANGIBLE ASSETS

The carrying amount of goodwill totaled $66.4 and $60.4 million as of March 31, 2016 and December 31, 2015, respectively. The Company performs a goodwill impairment test on an annual basis or more frequently if events and circumstances warrant.

		Banking		Non-Banking		Total
Balance, December 31, 2015	$	48,536	$	11,866	$	60,402
Acquisition		-		6,015		6,015
Balance, March 31, 2016	$	48,536	$	17,881	$	66,417

Goodwill and other intangible assets added during the period relates to the Courier Capital acquisition, which was completed on January 5, 2016. See Note 2 – Business Combinations for additional information.

The Company has other intangible assets that are amortized, consisting of core deposit intangibles and other intangibles (primarily related to customer relationships). Changes in the gross carrying amount, accumulated amortization and net book value, were as follows (in thousands):

		March 31,			December 31,
		2016			2015
Other intangibles assets:
Gross carrying amount	$	12,610		$	8,682
Accumulated amortization		(2,460	)		(2,138	)
Net book value	$	10,150		$	6,544

Amortization expense for total other intangible assets was $322 thousand and $243 thousand for the three months ended March 31, 2016 and 2015, respectively. As of March 31, 2016, the estimated amortization expense of other intangible assets for the remainder of 2016 and each of the next five years is as follows (in thousands):

2016 (remainder of year)	$	927
2017		1,144
2018		1,035
2019		937
2020		840
2021		738

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Shareholders' Equity

3 Months Ended

Mar. 31, 2016

Shareholders' Equity [Abstract]

Shareholders' Equity

(7.) SHAREHOLDERS' EQUITY

Common Stock

The changes in shares of common stock were as follows for the three month periods ended March 31, 2016 and 2015:

	Outstanding		Treasury		Issued
March 31, 2016
Shares outstanding at December 31, 2015	14,190,192		207,317		14,397,509
Common stock issued for acquisition	294,705		-		294,705
Restricted stock awards forfeited	(4,914	)	4,914		-
Stock options exercised	15,100		(15,100	)	-
Shares outstanding at March 31, 2016	14,495,083		197,131		14,692,214
March 31, 2015
Shares outstanding at December 31, 2014	14,118,048		279,461		14,397,509
Restricted stock awards issued	49,084		(49,084	)	-
Restricted stock awards forfeited	(2,271	)	2,271		-
Stock options exercised	3,722		(3,722	)	-
Treasury stock purchases	(1,791	)	1,791		-
Shares outstanding at March 31, 2015	14,166,792		230,717		14,397,509

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Accumulated Other Comprehensive Loss

3 Months Ended

Mar. 31, 2016

Accumulated Other Comprehensive Loss [Abstract]

Accumulated Other Comprehensive Loss

(8.) ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the components of other comprehensive income for the three month periods ended March 31, 2016 and 2015 (in thousands):

		Pre-tax						Net-of-tax
		Amount			Tax Effect			Amount
March 31, 2016
Securities available for sale and transferred securities:
Change in unrealized gain/loss during the period	$	12,196		$	4,706		$	7,490
Reclassification adjustment for net gains included in net income (1)		(662	)		(255	)		(407	)
Total securities available for sale and transferred securities		11,534			4,451			7,083
Amortization of pension and post-retirement items:
Prior service credit		(12	)		(5	)		(7	)
Net actuarial losses		239			93			146
Total pension and post-retirement obligations		227			88			139
Other comprehensive income	$	11,761		$	4,539		$	7,222
March 31, 2015
Securities available for sale and transferred securities:
Change in unrealized gain/loss during the period	$	6,396		$	2,436		$	3,960
Reclassification adjustment for net gains included in net income (1)		(1,139	)		(440	)		(699	)
Total securities available for sale and transferred securities		5,257			1,996			3,261
Amortization of pension and post-retirement items:
Prior service credit		(12	)		(5	)		(7	)
Net actuarial losses		236			94			142
Total pension and post-retirement obligations		224			89			135
Other comprehensive income	$	5,481		$	2,085		$	3,396

(1) Includes amounts related to the amortization/accretion of unrealized net gains and losses related to the Company's reclassification of available for sale investment securities to the held to maturity category. The unrealized net gains/losses will be amortized/accreted over the remaining life of the investment securities as an adjustment of yield.

Activity in accumulated other comprehensive loss, net of tax, for the three month periods ended March 31, 2016 and 2015 was as follows (in thousands):

		Securities
		Available for			Pension and			Accumulated
		Sale and			Post-			Other
		Transferred			retirement			Comprehensive
		Securities			Obligations			Loss
March 31, 2016
Balance at beginning of year	$	(696	)	$	(10,631	)	$	(11,327	)
Other comprehensive income before reclassifications		7,490			-			7,490
Amounts reclassified from accumulated other comprehensive loss		(407	)		139			(268	)
Net current period other comprehensive income		7,083			139			7,222
Balance at end of period	$	6,387		$	(10,492	)	$	(4,105	)
March 31, 2015
Balance at beginning of year	$	1,625		$	(10,636	)	$	(9,011	)
Other comprehensive income before reclassifications		3,960			-			3,960
Amounts reclassified from accumulated other comprehensive loss		(699	)		135			(564	)
Net current period other comprehensive income		3,261			135			3,396
Balance at end of period	$	4,886		$	(10,501	)	$	(5,615	)

The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss for the three month periods ended March 31, 2016 and 2015 (in thousands):

		Amount Reclassified from
Details About Accumulated Other		Accumulated Other					Affected Line Item in the
Comprehensive Loss Components		Comprehensive Loss					Consolidated Statement of Income
		Three months ended
		March 31,
		2016			2015
Realized gain on sale of investment securities	$	613		$	1,062		Net gain on disposal of investment securities
Amortization of unrealized holding gains (losses)
on investment securities transferred from
available for sale to held to maturity		49			77		Interest income
		662			1,139		Total before tax
		(255	)		(440	)	Income tax expense
		407			699		Net of tax
Amortization of pension and post-retirement items:
Prior service credit (1)		12			12		Salaries and employee benefits
Net actuarial losses (1)		(239	)		(236	)	Salaries and employee benefits
		(227	)		(224	)	Total before tax
		88			89		Income tax benefit
		(139	)		(135	)	Net of tax
Total reclassified for the period	$	268		$	564

(1) These items are included in the computation of net periodic pension expense. See Note 10 – Employee Benefit Plans for additional information.

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Share-Based Compensation Plans

3 Months Ended

Mar. 31, 2016

Share-Based Compensation Plans [Abstract]

Share-Based Compensation Plans

(9.) SHARE-BASED COMPENSATION PLANS

The Company maintains certain stock-based compensation plans that were approved by the Company's shareholders and are administered by the Company's Board of Directors, or the Management Development and Compensation Committee (the "MD&C Committee") of the Board. The share-based compensation plans were established to allow for the grant of compensation awards to attract, motivate and retain employees, executive officers and non-employee directors who contribute to the success and profitability of the Company and to give such persons a proprietary interest in the Company, thereby enhancing their personal interest in the Company's success.

The MD&C Committee approved the grant of restricted stock units ("RSUs") and performance share units ("PSUs") shown in the table below to certain members of management during the first quarter of 2016.

			Weighted
			Average
	Number of		Per Share
	Underlying		Grant Date
	Shares		Fair Value
RSUs	14,500	$	24.21
PSUs	24,084		22.94

The grant-date fair value for the RSUs granted during the three month period ended March 31, 2016 is equal to the closing market price of our common stock on the date of grant reduced by the present value of the dividends expected to be paid on the underlying shares.

The number of PSUs that ultimately vest is contingent on achieving specified EPS targets and specified total shareholder return ("TSR") targets relative to the SNL Small Cap Bank & Thrifts Index. Thirty percent of the shares subject to each grant will be earned based upon achievement of an EPS performance requirement for the Company's fiscal year ended December 31, 2016. The remaining seventy percent of the shares will be earned based on the Company's achievement of a relative TSR performance requirement, on a percentile basis, compared to the SNL Small Cap Bank & Thrifts Index over a three-year performance period ended December 31, 2018. The shares earned based on the achievement of the EPS and TSR performance requirements, if any, will vest on February 24, 2019 assuming the recipient's continuous service to the Company.

The grant-date fair value for the EPS portion of the PSUs granted during the three month period ended March 31, 2016 is equal to the closing market price of our common stock on the date of grant reduced by the present value of the dividends expected to be paid on the underlying shares. The grant-date fair value of the TSR portion of the PSUs granted during the three month period ended March 31, 2016 was determined using the Monte Carlo simulation model on the date of grant, assuming the following (i) expected term of 2.85 years, (ii) risk free interest rate of 0.88%, (iii) expected dividend yield of 2.99% and (iv) expected stock price volatility over the expected term of the TSR award of 24.3%.

The Company previously granted restricted stock awards to certain members of management. There were no restricted stock awards granted during the quarter ended March 31, 2016. The following is a summary of restricted stock award activity for the three month period ended March 31, 2016:

				Weighted
				Average
				Market
	Number of			Price at
	Shares			Grant Date
Outstanding at beginning of year	82,908		$	17.23
Forfeited	(4,914	)		22.69
Outstanding at end of period	77,994		$	16.89

At March 31, 2016, the total unrecognized compensation cost related to the nonvested awards granted and expected to vest was $1.5 million. This cost is expected to be recognized over a weighted-average period of 2.4 years.

The Company uses the Black-Scholes valuation method to estimate the fair value of its stock option awards. There were no stock options awarded during 2016 or 2015. The following is a summary of stock option activity for the three months ended March 31, 2016 (dollars in thousands, except per share amounts):

					Weighted
				Weighted	Average
				Average	Remaining		Aggregate
	Number of			Exercise	Contractual		Intrinsic
	Options			Price	Term		Value
Outstanding at beginning of year	102,249		$	19.21
Exercised	(15,100	)		19.03
Expired	-
Outstanding and exercisable at end of period	87,149		$	19.24	1.2	$	856

The aggregate intrinsic value (the amount by which the market price of the stock on the date of exercise exceeded the market price of the stock on the date of grant) of option exercises for the three months ended March 31, 2016 and 2015 was $126 thousand and $13 thousand, respectively. The total cash received as a result of option exercises under stock compensation plans for the three months ended March 31, 2016 and 2015 was $288 thousand and $72 thousand, respectively.

The Company amortizes the expense related to stock-based compensation awards over the vesting period. Share-based compensation expense is recorded as a component of salaries and employee benefits in the consolidated statements of income for awards granted to management and as a component of other noninterest expense for awards granted to directors. The share-based compensation expense included in the consolidated statements of income is as follows (in thousands):

	Three months ended
	March 31,
		2016		2015
Salaries and employee benefits	$	98	$	78
Other noninterest expense		31		25
Total share-based compensation expense	$	129	$	103

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Employee Benefit Plans

3 Months Ended

Mar. 31, 2016

Employee Benefit Plans [Abstract]

Employee Benefit Plans

(10.) EMPLOYEE BENEFIT PLANS

The components of the Company's net periodic benefit expense for its pension and post-retirement obligations were as follows (in thousands):

	Three months ended
	March 31,
		2016			2015
Service cost	$	721		$	581
Interest cost on projected benefit obligation		601			583
Expected return on plan assets		(1,150	)		(1,205	)
Amortization of prior service credit		(12	)		(12	)
Amortization of net actuarial losses		239			236
Net periodic benefit expense	$	399		$	183

The net periodic benefit expense is recorded as a component of salaries and employee benefits in the consolidated statements of income. The Company's funding policy is to contribute, at a minimum, an actuarially determined amount that will satisfy the minimum funding requirements determined under the appropriate sections of the Internal Revenue Code. The Company has no minimum required contribution for the 2016 fiscal year.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Commitments And Contingencies [Abstract]

Commitments And Contingencies

(11.) COMMITMENTS AND CONTINGENCIES

The Company has financial instruments with off-balance sheet risk established in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk extending beyond amounts recognized in the Company's financial statements.

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is essentially the same as that involved with extending loans to customers. The Company uses the same credit underwriting policies in making commitments and conditional obligations as for on-balance sheet instruments.

Off-balance sheet commitments consist of the following (in thousands):

		March 31,		December 31,
		2016		2015
Commitments to extend credit	$	521,912	$	514,818
Standby letters of credit		10,892		11,746

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses which may require payment by the customer of a termination fee. Commitments may expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements. Each customer's creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if any, is based on management's credit evaluation of the borrower. Standby letters of credit are conditional lending commitments issued by the Company to guarantee the performance of a customer to a third party. These standby letters of credit are primarily issued to support private borrowing arrangements. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers.

The Company also extends rate lock agreements to borrowers related to the origination of residential mortgage loans. To mitigate the interest rate risk inherent in these rate lock agreements, the Company may enter into forward commitments to sell individual residential mortgages. Rate lock agreements and forward commitments are considered derivatives and are recorded at fair value. Forward sales commitments totaled $826 thousand and $1.3 million at March 31, 2016 and December 31, 2015, respectively. In addition, the net change in the fair values of these derivatives was recognized as other noninterest income or other noninterest expense in the consolidated statements of income.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2016

Fair Value Measurements [Abstract]

Fair Value Measurements

(12.) FAIR VALUE MEASUREMENTS

Determination of Fair Value – Assets Measured at Fair Value on a Recurring and Nonrecurring Basis Valuation Hierarchy

The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. ASC Topic 820, "Fair Value Measurements and Disclosures," establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. There have been no changes in the valuation techniques used during the current period. The fair value hierarchy is as follows:

• Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
• Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.
• Level 3 - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity's own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Transfers between levels of the fair value hierarchy are recorded as of the end of the reporting period.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the company's creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company's valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company's valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein. A more detailed description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Securities available for sale: Securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent 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.

Loans held for sale: The fair value of loans held for sale is determined using quoted secondary market prices and investor commitments. Loans held for sale are classified as Level 2 in the fair value hierarchy.

Collateral dependent impaired loans: Fair value of impaired loans with specific allocations of the allowance for loan losses is measured based on the value of the collateral securing these loans and is classified as Level 3 in the fair value hierarchy. Collateral may be real estate and/or business assets including equipment, inventory and/or accounts receivable and collateral value is determined based on appraisals performed by qualified licensed appraisers hired by the Company. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Appraised and reported values may be discounted based on management's historical knowledge, changes in market conditions from the time of valuation, and/or management's expertise and knowledge of the client and the client's business. Such discounts are typically significant and result in a Level 3 classification of the inputs for determining fair value. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors identified above.

Loan servicing rights: Loan servicing rights do not trade in an active market with readily observable market data. As a result, the Company estimates the fair value of loan servicing rights by using a discounted cash flow model to calculate the present value of estimated future net servicing income. The assumptions used in the discounted cash flow model are those that we believe market participants would use in estimating future net servicing income, including estimates of loan prepayment rates, servicing costs, ancillary income, impound account balances, and discount rates. The significant unobservable inputs used in the fair value measurement of the Company's loan servicing rights are the constant prepayment rates and weighted average discount rate. Significant increases (decreases) in any of those inputs in isolation could result in a significantly lower (higher) fair value measurement. Although the constant prepayment rate and the discount rate are not directly interrelated, they will generally move in opposite directions. Loan servicing rights are classified as Level 3 measurements due to the use of significant unobservable inputs, as well as significant management judgment and estimation.

Other real estate owned (Foreclosed assets): Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned are measured at the lower of carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisals of the property, resulting in a Level 3 classification. The appraisals are sometimes further discounted based on management's historical knowledge, changes in market conditions from the time of valuation, and/or management's expertise and knowledge of the client and client's business. Such discounts are typically significant and result in a Level 3 classification of the inputs for determining fair value. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized.

Commitments to extend credit and letters of credit: Commitments to extend credit and fund letters of credit are principally at current interest rates, and, therefore, the carrying amount approximates fair value. The fair value of commitments is not material.

Assets Measured at Fair Value

The following tables present for each of the fair-value hierarchy levels the Company's assets that are measured at fair value on a recurring and non-recurring basis as of the dates indicated (in thousands).

		Quoted Prices
		in Active
		Markets for		Significant
		Identical		Other		Significant
		Assets or		Observable		Unobservable
		Liabilities		Inputs		Inputs
		(Level 1)		(Level 2)		(Level 3)		Total
March 31, 2016
Measured on a recurring basis:
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	-	$	241,463	$	-	$	241,463
Mortgage-backed securities		-		368,371		-		368,371
Asset-backed securities		-		179		-		179
	$	-	$	610,013	$	-	$	610,013
Measured on a nonrecurring basis:
Loans:
Loans held for sale	$	-	$	609	$	-	$	609
Collateral dependent impaired loans		-		-		1,263		1,263
Other assets:
Loan servicing rights		-		-		1,222		1,222
Other real estate owned		-		-		187		187
	$	-	$	609	$	2,672	$	3,281
December 31, 2015
Measured on a recurring basis:
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	-	$	260,863	$	-	$	260,863
Mortgage-backed securities		-		283,314		-		283,314
Asset-backed securities		-		218		-		218
	$	-	$	544,395	$	-	$	544,395
Measured on a nonrecurring basis:
Loans:
Loans held for sale	$	-	$	1,430	$	-	$	1,430
Collateral dependent impaired loans		-		-		1,485		1,485
Other assets:
Loan servicing rights		-		-		1,241		1,241
Other real estate owned		-		-		163		163
	$	-	$	1,430	$	2,889	$	4,319

There were no transfers between Levels 1 and 2 during the three months ended March 31, 2016 and 2015. There were no liabilities measured at fair value on a recurring or nonrecurring basis during the three month periods ended March 31, 2016 and 2015.

The following table presents additional quantitative information about assets measured at fair value on a recurring and nonrecurring basis for which the Company has utilized Level 3 inputs to determine fair value (dollars in thousands).

		Fair			Unobservable Input
Asset		Value	Valuation Technique	Unobservable Input	Value or Range
Collateral dependent impaired loans	$	1,263	Appraisal of collateral (1)	Appraisal adjustments (2)	0% - 50% discount
Loan servicing rights		1,222	Discounted cash flow	Discount rate	4.7% (3)
				Constant prepayment rate	14.9% (3)
Other real estate owned		187	Appraisal of collateral (1)	Appraisal adjustments (2)	39% - 48% discount

⁽¹⁾ Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.

⁽²⁾ Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

⁽³⁾ Weighted averages.

Changes in Level 3 Fair Value Measurements

There were no assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of or during the three months ended March 31, 2016.

Disclosures about Fair Value of Financial Instruments

The assumptions used below are expected to approximate those that market participants would use in valuing these financial instruments.

Fair value estimates are made at a specific point in time, based on available market information and judgments about the financial instrument, including estimates of timing, amount of expected future cash flows and the credit standing of the issuer. Such estimates do not consider the tax impact of the realization of unrealized gains or losses. In some cases, the fair value estimates cannot be substantiated by comparison to independent markets. In addition, the disclosed fair value may not be realized in the immediate settlement of the financial instrument. Care should be exercised in deriving conclusions about our business, its value or financial position based on the fair value information of financial instruments presented below.

The estimated fair value approximates carrying value for cash and cash equivalents, Federal Home Loan Bank ("FHLB") and Federal Reserve Bank ("FRB") stock, accrued interest receivable, non-maturity deposits, short-term borrowings and accrued interest payable. Fair value estimates for other financial instruments not included elsewhere in this disclosure are discussed below.

Securities held to maturity: The fair value of the Company's investment securities held to maturity is primarily measured using information from a third-party pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond's terms and conditions, among other things.

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

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

Long-term borrowings: Long-term borrowings consist of $40 million of subordinated notes issued during the second quarter of 2015. The subordinated notes are publicly traded and are valued based on market prices, which are characterized as Level 2 liabilities in the fair value hierarchy.

The following presents (in thousands) the carrying amount, estimated fair value, and placement in the fair value measurement hierarchy of the Company's financial instruments as of the dates indicated.

	Level in		March 31, 2016				December 31, 2015
	Fair Value				Estimated				Estimated
	Measurement		Carrying		Fair		Carrying		Fair
	Hierarchy		Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	110,944	$	110,944	$	60,121	$	60,121
Securities available for sale	Level 2		610,013		610,013		544,395		544,395
Securities held to maturity	Level 2		476,283		485,863		485,717		490,064
Loans held for sale	Level 2		609		609		1,430		1,430
Loans	Level 2		2,086,203		2,092,237		2,055,192		2,046,235
Loans (1)	Level 3		1,263		1,263		1,485		1,485
Accrued interest receivable	Level 1		10,181		10,181		8,609		8,609
FHLB and FRB stock	Level 2		14,865		14,865		19,991		19,991
Financial liabilities:
Non-maturity deposits	Level 1		2,282,747		2,282,747		2,093,513		2,093,513
Time deposits	Level 2		677,430		674,410		637,018		636,159
Short-term borrowings	Level 1		179,200		179,200		293,100		293,100
Long-term borrowings	Level 2		39,008		37,566		38,990		40,313
Accrued interest payable	Level 1		5,495		5,495		4,676		4,676

⁽¹⁾ Comprised of collateral dependent impaired loans.

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Segment Reporting

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Segment Reporting

(13.) SEGMENT REPORTING

The Company has two reportable segments: Banking and Non-Banking. These reportable segments have been identified and organized based on the nature of the underlying products and services applicable to each segment, the type of customers to whom those products and services are offered and the distribution channel through which those products and services are made available.

The banking segment includes all of the Company's retail and commercial banking operations. The non-banking segment includes the activities of Scott Danahy Naylon, a full service insurance agency that provides a broad range of insurance services to both personal and business clients, and Courier Capital, an investment advisor and wealth management firm that provides customized investment management, investment consulting and retirement plan services to individuals, businesses, institutions, foundations and retirement plans. The Company operated as two business segments (banking and insurance) until the acquisition of Courier Capital on January 5, 2016, at which time the insurance segment was re-named non-banking to consider the inclusion of Courier Capital which has similar products, services and reporting, as noted above. Holding company amounts are the primary differences between segment amounts and consolidated totals, and are reflected in the Holding Company and Other column below, along with amounts to eliminate balances and transactions between segments.

The following tables present information regarding our business segments as of and for the periods indicated (in thousands).

						Holding
						Company and		Consolidated
		Banking		Non-Banking		Other		Totals
March 31, 2016
Goodwill	$	48,536	$	17,881	$	-	$	66,417
Other intangible assets, net		762		9,388		-		10,150
Total assets		3,484,886		31,545		141		3,516,572
December 31, 2015
Goodwill	$	48,536	$	11,866	$	-	$	60,402
Other intangible assets, net		829		5,715		-		6,544
Total assets		3,356,987		20,315		3,722		3,381,024

								Holding
								Company and			Consolidated
		Banking			Non-Banking (1)			Other			Totals
Three months ended March 31, 2016
Net interest income (expense)	$	25,337		$	-		$	(618	)	$	24,719
Provision for loan losses		(2,368	)		-			-			(2,368	)
Noninterest income		6,863			2,484			(130	)		9,217
Noninterest expense		(18,345	)		(1,806	)		(1,067	)		(21,218	)
Income (loss) before income taxes		11,487			678			(1,815	)		10,350
Income tax (expense) benefit		(3,101	)		(264	)		633			(2,732	)
Net income (loss)	$	8,386		$	414		$	(1,182	)	$	7,618
Three months ended March 31, 2015
Net interest income	$	23,147		$	-		$	-		$	23,147
Provision for loan losses		(2,741	)		-			-			(2,741	)
Noninterest income		6,831			1,593			(127	)		8,297
Noninterest expense		(17,279	)		(1,187	)		(545	)		(19,011	)
Income (loss) before income taxes		9,958			406			(672	)		9,692
Income tax (expense) benefit		(2,949	)		(159	)		217			(2,891	)
Net income (loss)	$	7,009		$	247		$	(455	)	$	6,801

⁽¹⁾ Includes activity from Courier Capital since January 5, 2016, the date of acquisition.

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Basis Of Presentation And Summary Of Significant Accounting Policies (Policy)

3 Months Ended

Mar. 31, 2016

Basis of Presentation And Summary Of Significant Accounting Policies [Abstract]

Nature Of Operations

Nature of Operations

Financial Institutions, Inc., (the "Company") is a financial holding company organized in 1931 under the laws of New York State. The Company provides diversified financial services through its subsidiaries, Five Star Bank, Scott Danahy Naylon, LLC ("Scott Danahy Naylon") and Courier Capital, LLC ("Courier Capital"). The Company offers a broad array of deposit, lending and other financial services to individuals, municipalities and businesses in Western and Central New York through its wholly-owned New York chartered banking subsidiary, Five Star Bank (the "Bank"). The Bank has also expanded its indirect lending network to include relationships with franchised automobile dealers in the Capital District of New York and Northern Pennsylvania. Scott Danahy Naylon provides a broad range of insurance services to personal and business clients across 44 states. Acquired on January 5, 2016, Courier Capital provides customized investment management, investment consulting and retirement plan services to individuals, businesses, institutions, foundations and retirement plans across nine states.

Basis Of Presentation

Basis of Presentation

The consolidated financial statements include the accounts of Financial Institutions, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The accounting and reporting policies conform to U.S. generally accepted accounting principles ("GAAP"). Certain information and footnote disclosures normally included in financial statements prepared in conformity with GAAP have been condensed or omitted pursuant to such rules and regulations. However, in the opinion of management, the accompanying consolidated financial statements reflect all adjustments of a normal and recurring nature necessary for a fair presentation of the consolidated statements of financial condition, income, comprehensive income, changes in shareholders' equity and cash flows for the periods indicated, and contain adequate disclosure to make the information presented not misleading. Prior years' consolidated financial statements are re-classified whenever necessary to conform to the current year's presentation. These consolidated financial statements should be read in conjunction with the Company's 2015 Annual Report on Form 10-K for the year ended December 31, 2015. The results of operations for any interim periods are not necessarily indicative of the results which may be expected for the entire year.

Reclassifications

Reclassifications

Certain reclassifications of previously reported amounts have been made to conform to the current year presentation. Such reclassifications did not impact net income or shareholders' equity as previously reported.

Subsequent Events

Subsequent Events

The Company has evaluated events and transactions for potential recognition or disclosure through the day the financial statements were issued and determined there were no material recognizable subsequent events.

Use Of Estimates

Use of Estimates

The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates relate to the determination of the allowance for loan losses, the carrying value of goodwill and deferred tax assets, and assumptions used in the defined benefit pension plan accounting.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The effective date was recently deferred for one year to the interim and annual periods beginning on or after December 15, 2017. Early adoption is permitted as of the original effective date – interim and annual periods beginning on or after December 15, 2016. The Company continues to assess the potential impact of ASU 2014-09 on its accounting and disclosures.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 is intended to improve the recognition and measurement of financial instruments by requiring equity investments to be measured at fair value with changes in fair value recognized in net income; requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured and amortized at cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. ASU 2016-01 is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2017. The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption. The Company is assessing the impact of ASU 2016-01 on its accounting and disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 establishes a right of use model that requires a lessee to record a right of use asset and a lease liability for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. A lease will be treated as sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as a financing. If the lessor doesn't convey risks and rewards or control, an operating lease results. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, with certain practical expedients available. Early adoption is permitted. The Company is assessing the impact of ASU 2016-02 on its accounting and disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It also allows an employer to repurchase more of an employee's shares than it can today for tax withholding purposes without triggering liability accounting and to make a policy election for forfeitures as they occur. The guidance is effective for public business entities for fiscal years beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted. The Company is assessing the impact of ASU 2016-09 on its accounting and disclosures.

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Business Combinations (Tables)

3 Months Ended

Mar. 31, 2016

Business Combinations [Abstract]

Schedule Of Assets Purchased And Liabilities Assumed

Cash	$	50
Identified intangible assets		3,928
Premises and equipment, accounts receivable and other assets		870
Deferred tax liability		(1,797	)
Other liabilities		(48	)
Net assets acquired	$	3,003

Goodwill And Other Intangible Assets Acquired

		Amount	Useful life
		allocated	(in years)
Goodwill	$	6,015	n/a
Other intangible assets – customer relationships		3,900	20
Other intangible assets – other		28	5
	$	9,943

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Earnings Per Common Share ("EPS") (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Common Share ("EPS") [Abstract]

Reconciliation Of Earnings And Shares Used In Calculating Basic And Diluted EPS

		Three months ended
		March 31,
		2016			2015
Net income available to common shareholders	$	7,253		$	6,436
Weighted average common shares outstanding:
Total shares issued		14,679			14,397
Unvested restricted stock awards		(79	)		(74	)
Treasury shares		(205	)		(260	)
Total basic weighted average common shares outstanding		14,395			14,063
Incremental shares from assumed:
Exercise of stock options		27			22
Vesting of restricted stock awards		43			28
Total diluted weighted average common shares outstanding		14,465			14,113
Basic earnings per common share	$	0.50		$	0.46
Diluted earnings per common share	$	0.50		$	0.46

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Investment Securities (Tables)

3 Months Ended

Mar. 31, 2016

Investment Securities [Abstract]

Amortized Cost And Fair Value Of Investment Securities

		Amortized		Unrealized		Unrealized		Fair
		Cost		Gains		Losses		Value
March 31, 2016
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	235,964	$	5,506	$	7	$	241,463
Mortgage-backed securities:
Federal National Mortgage Association		293,220		4,312		53		297,479
Federal Home Loan Mortgage Corporation		28,019		535		28		28,526
Government National Mortgage Association		18,302		664		12		18,954
Collateralized mortgage obligations:
Federal National Mortgage Association		16,986		394		-		17,380
Federal Home Loan Mortgage Corporation		5,165		90		-		5,255
Privately issued		-		777		-		777
Total mortgage-backed securities		361,692		6,772		93		368,371
Asset-backed securities		-		179		-		179
Total available for sale securities	$	597,656	$	12,457	$	100	$	610,013
Securities held to maturity:
State and political subdivisions		291,934		8,544		1		300,477
Mortgage-backed securities:
Federal National Mortgage Association		9,190		152		2		9,340
Government National Mortgage Association		26,365		204		41		26,528
Collateralized mortgage obligations:
Federal National Mortgage Association		54,281		227		15		54,493
Federal Home Loan Mortgage Corporation		77,407		467		5		77,869
Government National Mortgage Association		17,106		57		7		17,156
Total mortgage-backed securities		184,349		1,107		70		185,386
Total held to maturity securities	$	476,283	$	9,651	$	71	$	485,863

December 31, 2015
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	260,748	$	1,164	$	1,049	$	260,863
Mortgage-backed securities:
Federal National Mortgage Association		209,671		1,092		2,333		208,430
Federal Home Loan Mortgage Corporation		24,564		282		194		24,652
Government National Mortgage Association		26,465		943		4		27,404
Collateralized mortgage obligations:
Federal National Mortgage Association		16,998		90		154		16,934
Federal Home Loan Mortgage Corporation		5,175		1		91		5,085
Privately issued		-		809		-		809
Total mortgage-backed securities		282,873		3,217		2,776		283,314
Asset-backed securities		-		218		-		218
Total available for sale securities	$	543,621	$	4,599	$	3,825	$	544,395
Securities held to maturity:
State and political subdivisions		294,423		6,562		4		300,981
Mortgage-backed securities:
Federal National Mortgage Association		9,242		14		79		9,177
Government National Mortgage Association		25,607		33		159		25,481
Collateralized mortgage obligations:
Federal National Mortgage Association		56,791		-		818		55,973
Federal Home Loan Mortgage Corporation		80,570		-		1,120		79,450
Government National Mortgage Association		19,084		19		101		19,002
Total mortgage-backed securities		191,294		66		2,277		189,083
Total held to maturity securities	$	485,717	$	6,628	$	2,281	$	490,064

Scheduled Maturities Of Securities Available For Sale And Securities Held To Maturity

		Amortized		Fair
		Cost		Value
Debt securities available for sale:
Due in one year or less	$	5,101	$	5,137
Due from one to five years		179,535		182,050
Due after five years through ten years		300,883		308,638
Due after ten years		112,137		114,188
	$	597,656	$	610,013
Debt securities held to maturity:
Due in one year or less	$	20,934	$	20,987
Due from one to five years		174,277		178,726
Due after five years through ten years		111,349		115,419
Due after ten years		169,723		170,731
	$	476,283	$	485,863

Sales And Calls Of Securities Available For Sale

		Three months ended
		March 31,
		2016		2015
Proceeds from sales	$	17,627	$	29,508
Gross realized gains		613		1,073
Gross realized losses		-		11

Investments' Gross Unrealized Losses And Fair Value

		Less than 12 months				12 months or longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
March 31, 2016
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	391	$	1	$	7,482	$	6	$	7,873	$	7
Mortgage-backed securities:
Federal National Mortgage Association		12,098		3		15,781		50		27,879		53
Federal Home Loan Mortgage Corporation		-		-		4,258		28		4,258		28
Government National Mortgage Association		1,332		12		-		-		1,332		12
Total mortgage-backed securities		13,430		15		20,039		78		33,469		93
Total available for sale securities		13,821		16		27,521		84		41,342		100
Securities held to maturity:
State and political subdivisions		2,477		1		-		-		2,477		1
Mortgage-backed securities:
Federal National Mortgage Association		1,362		2		-		-		1,362		2
Government National Mortgage Association		4,225		12		3,773		29		7,998		41
Collateralized mortgage obligations:
Federal National Mortgage Association		6,895		15		-		-		6,895		15
Federal Home Loan Mortgage Corporation		5,100		5		-		-		5,100		5
Government National Mortgage Association		3,366		7		-		-		3,366		7
Total mortgage-backed securities		20,948		41		3,773		29		24,721		70
Total held to maturity securities		23,425		42		3,773		29		27,198		71
Total temporarily impaired securities	$	37,246	$	58	$	31,294	$	113	$	68,540	$	171
December 31, 2015
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	82,298	$	735	$	26,302	$	314	$	108,600	$	1,049
Mortgage-backed securities:
Federal National Mortgage Association		123,774		2,134		9,562		199		133,336		2,333
Federal Home Loan Mortgage Corporation		12,660		194		-		-		12,660		194
Government National Mortgage Association		1,405		4		-		-		1,405		4
Collateralized mortgage obligations:
Federal National Mortgage Association		7,778		154		-		-		7,778		154
Federal Home Loan Mortgage Corporation		4,998		91		-		-		4,998		91
Total mortgage-backed securities		150,615		2,577		9,562		199		160,177		2,776
Total available for sale securities		232,913		3,312		35,864		513		268,777		3,825
Securities held to maturity:
State and political subdivisions		3,075		4		-		-		3,075		4
Mortgage-backed securities:
Federal National Mortgage Association		5,666		79		-		-		5,666		79
Government National Mortgage Association		8,790		159		-		-		8,790		159
Collateralized mortgage obligations:
Federal National Mortgage Association		55,973		818		-		-		55,973		818
Federal Home Loan Mortgage Corporation		79,323		1,120		-		-		79,323		1,120
Government National Mortgage Association		14,559		101		-		-		14,559		101
Total mortgage-backed securities		164,311		2,277		-		-		164,311		2,277
Total held to maturity securities		167,386		2,281		-		-		167,386		2,281
Total temporarily impaired securities	$	400,299	$	5,593	$	35,864	$	513	$	436,163	$	6,106

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Loans (Tables)

3 Months Ended

Mar. 31, 2016

Loans [Abstract]

Loan Portfolio

		Principal		Net Deferred
		Amount		Loan (Fees)
		Outstanding		Costs			Loans, Net
March 31, 2016
Commercial business	$	317,420	$	356		$	317,776
Commercial mortgage		591,800		(1,484	)		590,316
Residential real estate loans		377,406		5,098			382,504
Residential real estate lines		123,894		2,632			126,526
Consumer indirect		655,348		24,498			679,846
Other consumer		17,889		177			18,066
Total	$	2,083,757	$	31,277			2,115,034
Allowance for loan losses							(27,568	)
Total loans, net						$	2,087,466
December 31, 2015
Commercial business	$	313,475	$	283		$	313,758
Commercial mortgage		567,481		(1,380	)		566,101
Residential real estate loans		376,023		5,051			381,074
Residential real estate lines		124,766		2,581			127,347
Consumer indirect		652,494		24,446			676,940
Other consumer		18,361		181			18,542
Total	$	2,052,600	$	31,162			2,083,762
Allowance for loan losses							(27,085	)
Total loans, net						$	2,056,677

Recorded Investment By Loan Class In Current And Nonaccrual Loans

						Greater
		30-59 Days		60-89 Days		Than 90		Total Past
		Past Due		Past Due		Days		Due		Nonaccrual		Current		Total Loans
March 31, 2016
Commercial business	$	94	$	2	$	-	$	96	$	4,056	$	313,268	$	317,420
Commercial mortgage		53		-		-		53		1,781		589,966		591,800
Residential real estate loans		515		22		-		537		1,601		375,268		377,406
Residential real estate lines		151		43		-		194		165		123,535		123,894
Consumer indirect		1,296		267		-		1,563		943		652,842		655,348
Other consumer		52		17		9		78		12		17,799		17,889
Total loans, gross	$	2,161	$	351	$	9	$	2,521	$	8,558	$	2,072,678	$	2,083,757
December 31, 2015
Commercial business	$	321	$	612	$	-	$	933	$	3,922	$	308,620	$	313,475
Commercial mortgage		68		146		-		214		947		566,320		567,481
Residential real estate loans		723		395		-		1,118		1,848		373,057		376,023
Residential real estate lines		199		34		-		233		235		124,298		124,766
Consumer indirect		1,975		286		-		2,261		1,467		648,766		652,494
Other consumer		98		13		8		119		13		18,229		18,361
Total loans, gross	$	3,384	$	1,486	$	8	$	4,878	$	8,432	$	2,039,290	$	2,052,600

Information Related To Loans Modified In A TDR

			Pre-		Post-
			Modification		Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment
March 31, 2016
Commercial business	2	$	312	$	312
Commercial mortgage	1		550		550
Total	3	$	862	$	862
March 31, 2015
Commercial business	-	$	-	$	-
Commercial mortgage	1		682		330
Total	1	$	682	$	330

Summary Of Impaired Loans

				Unpaid				Average		Interest
		Recorded		Principal		Related		Recorded		Income
		Investment(1)		Balance(1)		Allowance		Investment		Recognized
March 31, 2016
With no related allowance recorded:
Commercial business	$	2,130	$	2,710	$	-	$	1,516	$	-
Commercial mortgage		1,349		1,697		-		1,018		-
		3,479		4,407		-		2,534		-
With an allowance recorded:
Commercial business		1,926		1,926		825		2,339		-
Commercial mortgage		432		432		127		114		-
		2,358		2,358		952		2,453		-
	$	5,837	$	6,765	$	952	$	4,987	$	-
December 31, 2015
With no related allowance recorded:
Commercial business	$	1,441	$	1,810	$	-	$	1,352	$	-
Commercial mortgage		937		1,285		-		1,013		-
		2,378		3,095		-		2,365		-
With an allowance recorded:
Commercial business		2,481		2,481		996		1,946		-
Commercial mortgage		10		10		10		449		-
		2,491		2,491		1,006		2,395		-
	$	4,869	$	5,586	$	1,006	$	4,760	$	-

(1) Difference between recorded investment and unpaid principal balance represents partial charge-offs.

Commercial Loan Portfolio Categorized By Internally Assigned Asset Classification

		Commercial		Commercial
		Business		Mortgage
March 31, 2016
Uncriticized	$	303,114	$	576,742
Special mention		5,643		8,580
Substandard		8,663		6,478
Doubtful		-		-
Total	$	317,420	$	591,800
December 31, 2015
Uncriticized	$	298,413	$	551,603
Special mention		4,916		9,015
Substandard		10,146		6,863
Doubtful		-		-
Total	$	313,475	$	567,481

Retail Loan Portfolio Categorized By Payment Status

		Residential		Residential
		Real Estate		Real Estate		Consumer		Other
		Loans		Lines		Indirect		Consumer
March 31, 2016
Performing	$	375,805	$	123,729	$	654,405	$	17,868
Non-performing		1,601		165		943		21
Total	$	377,406	$	123,894	$	655,348	$	17,889
December 31, 2015
Performing	$	374,175	$	124,531	$	651,027	$	18,340
Non-performing		1,848		235		1,467		21
Total	$	376,023	$	124,766	$	652,494	$	18,361

Changes In The Allowance For Loan Losses

						Residential		Residential
		Commercial		Commercial		Real Estate		Real Estate			Consumer		Other
		Business		Mortgage		Loans		Lines			Indirect		Consumer		Total
March 31, 2016
Allowance for loan losses:
Beginning balance	$	5,540	$	9,027	$	1,347	$	345		$	10,458	$	368	$	27,085
Charge-offs		602		4		46		4			2,498		157		3,311
Recoveries		100		5		25		4			1,170		122		1,426
Provision		398		687		58		-			1,167		58		2,368
Ending balance	$	5,436	$	9,715	$	1,384	$	345		$	10,297	$	391	$	27,568
Evaluated for impairment:
Individually	$	791	$	120	$	-	$	-		$	-	$	-	$	911
Collectively	$	4,645	$	9,595	$	1,384	$	345		$	10,297	$	391	$	26,657
Loans:
Ending balance	$	317,420	$	591,800	$	377,406	$	123,894		$	655,348	$	17,889	$	2,083,757
Evaluated for impairment:
Individually	$	3,924	$	1,730	$	-	$	-		$	-	$	-	$	5,654
Collectively	$	313,496	$	590,070	$	377,406	$	123,894		$	655,348	$	17,889	$	2,078,103
March 31, 2015
Allowance for loan losses:
Beginning balance	$	5,621	$	8,122	$	1,620	$	435		$	11,383	$	456	$	27,637
Charge-offs		1,141		609		139		-			2,422		259		4,570
Recoveries		48		89		41		2			1,105		98		1,383
Provision (credit)		867		554		64		(35	)		1,139		152		2,741
Ending balance	$	5,395	$	8,156	$	1,586	$	402		$	11,205	$	447	$	27,191
Evaluated for impairment:
Individually	$	1,120	$	817	$	-	$	-		$	-	$	-	$	1,937
Collectively	$	4,275	$	7,339	$	1,586	$	402		$	11,205	$	447	$	25,254
Loans:
Ending balance	$	277,427	$	480,479	$	351,088	$	126,832		$	637,380	$	19,184	$	1,892,390
Evaluated for impairment:
Individually	$	4,587	$	3,411	$	-	$	-		$	-	$	-	$	7,998
Collectively	$	272,840	$	477,068	$	351,088	$	126,832		$	637,380	$	19,184	$	1,884,392

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Goodwill And Other Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2016

Goodwill And Other Intangible Assets [Abstract]

Changes In Carrying Amount Of Goodwill

		Banking		Non-Banking		Total
Balance, December 31, 2015	$	48,536	$	11,866	$	60,402
Acquisition		-		6,015		6,015
Balance, March 31, 2016	$	48,536	$	17,881	$	66,417

Other Intangible Assets

		March 31,			December 31,
		2016			2015
Other intangibles assets:
Gross carrying amount	$	12,610		$	8,682
Accumulated amortization		(2,460	)		(2,138	)
Net book value	$	10,150		$	6,544

Estimated Core Deposit Intangible Amortization Expense

2016 (remainder of year)	$	927
2017		1,144
2018		1,035
2019		937
2020		840
2021		738

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Shareholders' Equity (Tables)

3 Months Ended

Mar. 31, 2016

Shareholders' Equity [Abstract]

Changes In Shares Of Common Stock

	Outstanding		Treasury		Issued
March 31, 2016
Shares outstanding at December 31, 2015	14,190,192		207,317		14,397,509
Common stock issued for acquisition	294,705		-		294,705
Restricted stock awards forfeited	(4,914	)	4,914		-
Stock options exercised	15,100		(15,100	)	-
Shares outstanding at March 31, 2016	14,495,083		197,131		14,692,214
March 31, 2015
Shares outstanding at December 31, 2014	14,118,048		279,461		14,397,509
Restricted stock awards issued	49,084		(49,084	)	-
Restricted stock awards forfeited	(2,271	)	2,271		-
Stock options exercised	3,722		(3,722	)	-
Treasury stock purchases	(1,791	)	1,791		-
Shares outstanding at March 31, 2015	14,166,792		230,717		14,397,509

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Accumulated Other Comprehensive Loss (Tables)

3 Months Ended

Mar. 31, 2016

Accumulated Other Comprehensive Loss [Abstract]

Components Of Other Comprehensive Income (Loss)

		Pre-tax						Net-of-tax
		Amount			Tax Effect			Amount
March 31, 2016
Securities available for sale and transferred securities:
Change in unrealized gain/loss during the period	$	12,196		$	4,706		$	7,490
Reclassification adjustment for net gains included in net income (1)		(662	)		(255	)		(407	)
Total securities available for sale and transferred securities		11,534			4,451			7,083
Amortization of pension and post-retirement items:
Prior service credit		(12	)		(5	)		(7	)
Net actuarial losses		239			93			146
Total pension and post-retirement obligations		227			88			139
Other comprehensive income	$	11,761		$	4,539		$	7,222
March 31, 2015
Securities available for sale and transferred securities:
Change in unrealized gain/loss during the period	$	6,396		$	2,436		$	3,960
Reclassification adjustment for net gains included in net income (1)		(1,139	)		(440	)		(699	)
Total securities available for sale and transferred securities		5,257			1,996			3,261
Amortization of pension and post-retirement items:
Prior service credit		(12	)		(5	)		(7	)
Net actuarial losses		236			94			142
Total pension and post-retirement obligations		224			89			135
Other comprehensive income	$	5,481		$	2,085		$	3,396

(1) Includes amounts related to the amortization/accretion of unrealized net gains and losses related to the Company's reclassification of available for sale investment securities to the held to maturity category. The unrealized net gains/losses will be amortized/accreted over the remaining life of the investment securities as an adjustment of yield.

Components Of Accumulated Other Comprehensive Income (Loss)

		Securities
		Available for			Pension and			Accumulated
		Sale and			Post-			Other
		Transferred			retirement			Comprehensive
		Securities			Obligations			Loss
March 31, 2016
Balance at beginning of year	$	(696	)	$	(10,631	)	$	(11,327	)
Other comprehensive income before reclassifications		7,490			-			7,490
Amounts reclassified from accumulated other comprehensive loss		(407	)		139			(268	)
Net current period other comprehensive income		7,083			139			7,222
Balance at end of period	$	6,387		$	(10,492	)	$	(4,105	)
March 31, 2015
Balance at beginning of year	$	1,625		$	(10,636	)	$	(9,011	)
Other comprehensive income before reclassifications		3,960			-			3,960
Amounts reclassified from accumulated other comprehensive loss		(699	)		135			(564	)
Net current period other comprehensive income		3,261			135			3,396
Balance at end of period	$	4,886		$	(10,501	)	$	(5,615	)

Amounts Reclassified Out Of Each Component Of Accumulated Other Comprehensive Income (Loss)

		Amount Reclassified from
Details About Accumulated Other		Accumulated Other					Affected Line Item in the
Comprehensive Loss Components		Comprehensive Loss					Consolidated Statement of Income
		Three months ended
		March 31,
		2016			2015
Realized gain on sale of investment securities	$	613		$	1,062		Net gain on disposal of investment securities
Amortization of unrealized holding gains (losses)
on investment securities transferred from
available for sale to held to maturity		49			77		Interest income
		662			1,139		Total before tax
		(255	)		(440	)	Income tax expense
		407			699		Net of tax
Amortization of pension and post-retirement items:
Prior service credit (1)		12			12		Salaries and employee benefits
Net actuarial losses (1)		(239	)		(236	)	Salaries and employee benefits
		(227	)		(224	)	Total before tax
		88			89		Income tax benefit
		(139	)		(135	)	Net of tax
Total reclassified for the period	$	268		$	564

(1) These items are included in the computation of net periodic pension expense. See Note 10 – Employee Benefit Plans for additional information.

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Share-Based Compensation Plans (Tables)

3 Months Ended

Mar. 31, 2016

Share-Based Compensation Plans [Abstract]

Summary Of Restricted Stock Units And Performance Share Units Activity

			Weighted
			Average
	Number of		Per Share
	Underlying		Grant Date
	Shares		Fair Value
RSUs	14,500	$	24.21
PSUs	24,084		22.94

Summary Of Restricted Stock Award Activity

				Weighted
				Average
				Market
	Number of			Price at
	Shares			Grant Date
Outstanding at beginning of year	82,908		$	17.23
Forfeited	(4,914	)		22.69
Outstanding at end of period	77,994		$	16.89

Summary Of Stock Option Activity

					Weighted
				Weighted	Average
				Average	Remaining		Aggregate
	Number of			Exercise	Contractual		Intrinsic
	Options			Price	Term		Value
Outstanding at beginning of year	102,249		$	19.21
Exercised	(15,100	)		19.03
Expired	-
Outstanding and exercisable at end of period	87,149		$	19.24	1.2	$	856

Share-Based Compensation Expense Included In Consolidated Statements Of Income

	Three months ended
	March 31,
		2016		2015
Salaries and employee benefits	$	98	$	78
Other noninterest expense		31		25
Total share-based compensation expense	$	129	$	103

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Employee Benefit Plans (Tables)

3 Months Ended

Mar. 31, 2016

Employee Benefit Plans [Abstract]

Components Of Net Periodic Benefit Expense

	Three months ended
	March 31,
		2016			2015
Service cost	$	721		$	581
Interest cost on projected benefit obligation		601			583
Expected return on plan assets		(1,150	)		(1,205	)
Amortization of prior service credit		(12	)		(12	)
Amortization of net actuarial losses		239			236
Net periodic benefit expense	$	399		$	183

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2016

Commitments And Contingencies [Abstract]

Off-Balance Sheet Commitments

		March 31,		December 31,
		2016		2015
Commitments to extend credit	$	521,912	$	514,818
Standby letters of credit		10,892		11,746

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Measurements [Abstract]

Assets Measured At Fair Value On A Recurring And Non-Recurring Basis

		Quoted Prices
		in Active
		Markets for		Significant
		Identical		Other		Significant
		Assets or		Observable		Unobservable
		Liabilities		Inputs		Inputs
		(Level 1)		(Level 2)		(Level 3)		Total
March 31, 2016
Measured on a recurring basis:
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	-	$	241,463	$	-	$	241,463
Mortgage-backed securities		-		368,371		-		368,371
Asset-backed securities		-		179		-		179
	$	-	$	610,013	$	-	$	610,013
Measured on a nonrecurring basis:
Loans:
Loans held for sale	$	-	$	609	$	-	$	609
Collateral dependent impaired loans		-		-		1,263		1,263
Other assets:
Loan servicing rights		-		-		1,222		1,222
Other real estate owned		-		-		187		187
	$	-	$	609	$	2,672	$	3,281
December 31, 2015
Measured on a recurring basis:
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	-	$	260,863	$	-	$	260,863
Mortgage-backed securities		-		283,314		-		283,314
Asset-backed securities		-		218		-		218
	$	-	$	544,395	$	-	$	544,395
Measured on a nonrecurring basis:
Loans:
Loans held for sale	$	-	$	1,430	$	-	$	1,430
Collateral dependent impaired loans		-		-		1,485		1,485
Other assets:
Loan servicing rights		-		-		1,241		1,241
Other real estate owned		-		-		163		163
	$	-	$	1,430	$	2,889	$	4,319

Additional Quantitative Information About Assets Measured At Fair Value On A Recurring And Non-Recurring Basis

		Fair			Unobservable Input
Asset		Value	Valuation Technique	Unobservable Input	Value or Range
Collateral dependent impaired loans	$	1,263	Appraisal of collateral (1)	Appraisal adjustments (2)	0% - 50% discount
Loan servicing rights		1,222	Discounted cash flow	Discount rate	4.7% (3)
				Constant prepayment rate	14.9% (3)
Other real estate owned		187	Appraisal of collateral (1)	Appraisal adjustments (2)	39% - 48% discount

⁽¹⁾ Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.

⁽²⁾ Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

⁽³⁾ Weighted averages.

Carrying Amount, Estimated Fair Value, And Placement In Fair Value Hierarchy Of Financial Instruments

	Level in		March 31, 2016				December 31, 2015
	Fair Value				Estimated				Estimated
	Measurement		Carrying		Fair		Carrying		Fair
	Hierarchy		Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	110,944	$	110,944	$	60,121	$	60,121
Securities available for sale	Level 2		610,013		610,013		544,395		544,395
Securities held to maturity	Level 2		476,283		485,863		485,717		490,064
Loans held for sale	Level 2		609		609		1,430		1,430
Loans	Level 2		2,086,203		2,092,237		2,055,192		2,046,235
Loans (1)	Level 3		1,263		1,263		1,485		1,485
Accrued interest receivable	Level 1		10,181		10,181		8,609		8,609
FHLB and FRB stock	Level 2		14,865		14,865		19,991		19,991
Financial liabilities:
Non-maturity deposits	Level 1		2,282,747		2,282,747		2,093,513		2,093,513
Time deposits	Level 2		677,430		674,410		637,018		636,159
Short-term borrowings	Level 1		179,200		179,200		293,100		293,100
Long-term borrowings	Level 2		39,008		37,566		38,990		40,313
Accrued interest payable	Level 1		5,495		5,495		4,676		4,676

⁽¹⁾ Comprised of collateral dependent impaired loans.

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Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Business Segment Assets

						Holding
						Company and		Consolidated
		Banking		Non-Banking		Other		Totals
March 31, 2016
Goodwill	$	48,536	$	17,881	$	-	$	66,417
Other intangible assets, net		762		9,388		-		10,150
Total assets		3,484,886		31,545		141		3,516,572
December 31, 2015
Goodwill	$	48,536	$	11,866	$	-	$	60,402
Other intangible assets, net		829		5,715		-		6,544
Total assets		3,356,987		20,315		3,722		3,381,024

Business Segment Profit (Loss)

								Holding
								Company and			Consolidated
		Banking			Non-Banking (1)			Other			Totals
Three months ended March 31, 2016
Net interest income (expense)	$	25,337		$	-		$	(618	)	$	24,719
Provision for loan losses		(2,368	)		-			-			(2,368	)
Noninterest income		6,863			2,484			(130	)		9,217
Noninterest expense		(18,345	)		(1,806	)		(1,067	)		(21,218	)
Income (loss) before income taxes		11,487			678			(1,815	)		10,350
Income tax (expense) benefit		(3,101	)		(264	)		633			(2,732	)
Net income (loss)	$	8,386		$	414		$	(1,182	)	$	7,618
Three months ended March 31, 2015
Net interest income	$	23,147		$	-		$	-		$	23,147
Provision for loan losses		(2,741	)		-			-			(2,741	)
Noninterest income		6,831			1,593			(127	)		8,297
Noninterest expense		(17,279	)		(1,187	)		(545	)		(19,011	)
Income (loss) before income taxes		9,958			406			(672	)		9,692
Income tax (expense) benefit		(2,949	)		(159	)		217			(2,891	)
Net income (loss)	$	7,009		$	247		$	(455	)	$	6,801

⁽¹⁾ Includes activity from Courier Capital since January 5, 2016, the date of acquisition.

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Basis of Presentation And Summary Of Significant Accounting Policies (Details)	3 Months Ended
	Mar. 31, 2016 state
Number of states in which services are provided	44
Courier Capital [Member]
Number of states in which services are provided	9

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Business Combinations (Narrative) (Details) - Courier Capital [Member] $ in Thousands	Jan. 05, 2016 USD ($) property
Significant Acquisitions and Disposals [Line Items]
Assets under management	$ 1,200,000
Consideration including both cash and stock	9,000
Cash	8,100
Common stock issued for acquisition	918
Potential future stock payments	2,800
Potential future cash payments	$ 2,200
Number of properties | property	2
Payments to properties	$ 1,300
Identified intangible assets	3,928
Goodwill	$ 6,015

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Business Combinations (Schedule Of Assets Purchased And Liabilities Assumed) (Details) - Courier Capital [Member] $ in Thousands	Jan. 05, 2016 USD ($)
Significant Acquisitions and Disposals [Line Items]
Cash	$ 50
Identified intangible assets	3,928
Premises and equipment, accounts receivable and other assets	870
Deferred tax liability	(1,797)
Other liabilities	(48)
Net assets acquired	$ 3,003

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Business Combinations (Goodwill And Other Intangible Assets Acquired) (Details) $ in Thousands	Jan. 05, 2016 USD ($)
Customer Relationships [Member]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	20 years
Other Intangible Assets [Member]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	5 years
Courier Capital [Member]
Goodwill	$ 6,015
Goodwill and other intangible assets acquired	9,943
Courier Capital [Member] | Customer Relationships [Member]
Other intangible assets	3,900
Courier Capital [Member] | Other Intangible Assets [Member]
Other intangible assets	$ 28

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Earnings Per Common Share ("EPS") (Reconciliation Of Earnings And Shares Used In Calculating Basic And Diluted EPS) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Earnings Per Common Share ("EPS") [Abstract]
Net income available to common shareholders for EPS	$ 7,253	$ 6,436
Total shares issued	14,679	14,397
Unvested restricted stock awards	(79)	(74)
Treasury shares	(205)	(260)
Total basic weighted average common shares outstanding	14,395	14,063
Exercise of stock options	27	22
Vesting of restricted stock awards	43	28
Total diluted weighted average common shares outstanding	14,465	14,113
Basic earnings per common share	$ 0.50	$ 0.46
Diluted earnings per common share	$ 0.50	$ 0.46

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Investment Securities (Narrative) (Details) $ in Thousands	Mar. 31, 2016 USD ($) security	Dec. 31, 2015 USD ($) security
Investment Securities [Abstract]
Securities pledged as collateral	$ 908,800
Number of security positions, unrealized loss position | security	45	152
Number of security positions, unrealized loss position for more than 12 months | security	13	10
Securities, 12 months or longer, Fair Value	$ 31,294	$ 35,864
Securities, 12 months or longer, Unrealized Losses	$ 113	$ 513
Number of security positions, unrealized loss position for less than 12 months | security	32	142
Securities, less than 12 months, Fair Value	$ 37,246	$ 400,299
Securities, less than 12 months, Unrealized Losses	$ 58	$ 5,593

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Investment Securities (Summary Of Amortized Cost And Fair Value Of Investment Securities) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Investment [Line Items]
Securities available for sale, Amortized Cost	$ 597,656	$ 543,621
Securities available for sale, Unrealized Gains	12,457	4,599
Securities available for sale, Unrealized Losses	100	3,825
Securities available for sale	610,013	544,395
Securities held to maturity, Amortized Cost	476,283	485,717
Securities held to maturity, Unrealized Gains	9,651	6,628
Securities held to maturity, Unrealized Losses	71	2,281
Securities held to maturity, fair value	485,863	490,064
U.S. Government Agencies And Government Sponsored Enterprises [Member]
Investment [Line Items]
Securities available for sale, Amortized Cost	235,964	260,748
Securities available for sale, Unrealized Gains	5,506	1,164
Securities available for sale, Unrealized Losses	7	1,049
Securities available for sale	241,463	260,863
State And Political Subdivisions [Member]
Investment [Line Items]
Securities held to maturity, Amortized Cost	291,934	294,423
Securities held to maturity, Unrealized Gains	8,544	6,562
Securities held to maturity, Unrealized Losses	1	4
Securities held to maturity, fair value	300,477	300,981
Collateralized Mortgage Obligations [Member] | Federal National Mortgage Association [Member]
Investment [Line Items]
Securities available for sale, Amortized Cost	16,986	16,998
Securities available for sale, Unrealized Gains	394	90
Securities available for sale, Unrealized Losses		154
Securities available for sale	17,380	16,934
Securities held to maturity, Amortized Cost	54,281	56,791
Securities held to maturity, Unrealized Gains	227
Securities held to maturity, Unrealized Losses	15	818
Securities held to maturity, fair value	54,493	55,973
Collateralized Mortgage Obligations [Member] | Federal Home Loan Mortgage Corporation [Member]
Investment [Line Items]
Securities available for sale, Amortized Cost	5,165	5,175
Securities available for sale, Unrealized Gains	90	1
Securities available for sale, Unrealized Losses		91
Securities available for sale	5,255	5,085
Securities held to maturity, Amortized Cost	77,407	80,570
Securities held to maturity, Unrealized Gains	467
Securities held to maturity, Unrealized Losses	5	1,120
Securities held to maturity, fair value	77,869	79,450
Collateralized Mortgage Obligations [Member] | Government National Mortgage Association [Member]
Investment [Line Items]
Securities held to maturity, Amortized Cost	17,106	19,084
Securities held to maturity, Unrealized Gains	57	19
Securities held to maturity, Unrealized Losses	7	101
Securities held to maturity, fair value	17,156	19,002
Collateralized Mortgage Obligations [Member] | Privately Issued [Member]
Investment [Line Items]
Securities available for sale, Unrealized Gains	777	809
Securities available for sale	777	809
Mortgage-Backed Securities [Member]
Investment [Line Items]
Securities available for sale, Amortized Cost	361,692	282,873
Securities available for sale, Unrealized Gains	6,772	3,217
Securities available for sale, Unrealized Losses	93	2,776
Securities available for sale	368,371	283,314
Securities held to maturity, Amortized Cost	184,349	191,294
Securities held to maturity, Unrealized Gains	1,107	66
Securities held to maturity, Unrealized Losses	70	2,277
Securities held to maturity, fair value	185,386	189,083
Mortgage-Backed Securities [Member] | Federal National Mortgage Association [Member]
Investment [Line Items]
Securities available for sale, Amortized Cost	293,220	209,671
Securities available for sale, Unrealized Gains	4,312	1,092
Securities available for sale, Unrealized Losses	53	2,333
Securities available for sale	297,479	208,430
Securities held to maturity, Amortized Cost	9,190	9,242
Securities held to maturity, Unrealized Gains	152	14
Securities held to maturity, Unrealized Losses	2	79
Securities held to maturity, fair value	9,340	9,177
Mortgage-Backed Securities [Member] | Federal Home Loan Mortgage Corporation [Member]
Investment [Line Items]
Securities available for sale, Amortized Cost	28,019	24,564
Securities available for sale, Unrealized Gains	535	282
Securities available for sale, Unrealized Losses	28	194
Securities available for sale	28,526	24,652
Mortgage-Backed Securities [Member] | Government National Mortgage Association [Member]
Investment [Line Items]
Securities available for sale, Amortized Cost	18,302	26,465
Securities available for sale, Unrealized Gains	664	943
Securities available for sale, Unrealized Losses	12	4
Securities available for sale	18,954	27,404
Securities held to maturity, Amortized Cost	26,365	25,607
Securities held to maturity, Unrealized Gains	204	33
Securities held to maturity, Unrealized Losses	41	159
Securities held to maturity, fair value	26,528	25,481
Asset-Backed Securities [Member]
Investment [Line Items]
Securities available for sale, Unrealized Gains	179	218
Securities available for sale	$ 179	$ 218

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Investment Securities (Sales And Calls Of Securities Available For Sale) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Investment Securities [Abstract]
Proceeds from sales	$ 17,627	$ 29,508
Gross realized gains	$ 613	1,073
Gross realized losses		$ 11

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Investment Securities (Scheduled Maturities Of Securities Available For Sale And Securities Held To Maturity) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Investment Securities [Abstract]
Debt securities available for sale, Due in one year or less, Amortized Cost	$ 5,101
Debt securities available for sale, Due from one to five years, Amortized Cost	179,535
Debt securities available for sale, Due after five years through ten years, Amortized Cost	300,883
Debt securities available for sale, Due after ten years, Amortized Cost	112,137
Debt securities available for sale, Amortized Cost	597,656
Debt securities available for sale, Due in one year or less, Fair Value	5,137
Debt securities available for sale, Due from one to five years, Fair Value	182,050
Debt securities available for sale, Due after five years through ten years, Fair Value	308,638
Debt securities available for sale, Due after ten years, Fair Value	114,188
Debt securities available for sale, Fair Value	610,013
Debt securities held to maturity, Due in one year or less, Amortized Cost	20,934
Debt securities held to maturity, Due from one to five years, Amortized Cost	174,277
Debt securities held to maturity, Due after five years through ten years, Amortized Cost	111,349
Debt securities held to maturity, Due after ten years, Amortized Cost	169,723
Securities held to maturity, Amortized Cost	476,283	$ 485,717
Debt securities held to maturity, Due in one year or less, Fair Value	20,987
Debt securities held to maturity, Due from one to five years, Fair Value	178,726
Debt securities held to maturity, Due after five years through ten years, Fair Value	115,419
Debt securities held to maturity, Due after ten years, Fair Value	170,731
Securities held to maturity, Fair Value	$ 485,863	$ 490,064

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Investment Securities (Investments' Gross Unrealized Losses And Fair Value) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Investment [Line Items]
Securities available for sale, Less than 12 months, Fair Value	$ 13,821	$ 232,913
Securities available for sale, Less than 12 months, Unrealized Losses	16	3,312
Securities available for sale, 12 months or longer, Fair Value	27,521	35,864
Securities available for sale, 12 months or longer, Unrealized Losses	84	513
Securities available for sale, Fair Value, Total	41,342	268,777
Securities available for sale, Unrealized Losses, Total	100	3,825
Securities held to maturity, Less than 12 months, Fair Value	23,425	167,386
Securities held to maturity, Less than 12 months, Unrealized Losses	42	2,281
Securities held to maturity, 12 months or longer, Fair Value	3,773
Securities held to maturity, 12 months or longer, Unrealized Losses	29
Securities held to maturity, Fair Value, Total	27,198	167,386
Securities held to maturity, Unrealized Losses, Total	71	2,281
Total Securities, Less than 12 months, Fair Value	37,246	400,299
Total Securities, Less than 12 months, Unrealized Losses	58	5,593
Total Securities, 12 months or longer, Fair Value	31,294	35,864
Total Securities, 12 months or longer, Unrealized Losses	113	513
Total Securities, Fair Value	68,540	436,163
Total Securities, Unrealized Losses	171	6,106
U.S. Government Agencies And Government Sponsored Enterprises [Member]
Investment [Line Items]
Securities available for sale, Less than 12 months, Fair Value	391	82,298
Securities available for sale, Less than 12 months, Unrealized Losses	1	735
Securities available for sale, 12 months or longer, Fair Value	7,482	26,302
Securities available for sale, 12 months or longer, Unrealized Losses	6	314
Securities available for sale, Fair Value, Total	7,873	108,600
Securities available for sale, Unrealized Losses, Total	7	1,049
State And Political Subdivisions [Member]
Investment [Line Items]
Securities held to maturity, Less than 12 months, Fair Value	2,477	3,075
Securities held to maturity, Less than 12 months, Unrealized Losses	1	4
Securities held to maturity, Fair Value, Total	2,477	3,075
Securities held to maturity, Unrealized Losses, Total	1	4
Collateralized Mortgage Obligations [Member] | Federal National Mortgage Association [Member]
Investment [Line Items]
Securities available for sale, Less than 12 months, Fair Value		7,778
Securities available for sale, Less than 12 months, Unrealized Losses		154
Securities available for sale, Fair Value, Total		7,778
Securities available for sale, Unrealized Losses, Total		154
Securities held to maturity, Less than 12 months, Fair Value	6,895	55,973
Securities held to maturity, Less than 12 months, Unrealized Losses	15	818
Securities held to maturity, Fair Value, Total	6,895	55,973
Securities held to maturity, Unrealized Losses, Total	15	818
Collateralized Mortgage Obligations [Member] | Federal Home Loan Mortgage Corporation [Member]
Investment [Line Items]
Securities available for sale, Less than 12 months, Fair Value		4,998
Securities available for sale, Less than 12 months, Unrealized Losses		91
Securities available for sale, Fair Value, Total		4,998
Securities available for sale, Unrealized Losses, Total		91
Securities held to maturity, Less than 12 months, Fair Value	5,100	79,323
Securities held to maturity, Less than 12 months, Unrealized Losses	5	1,120
Securities held to maturity, Fair Value, Total	5,100	79,323
Securities held to maturity, Unrealized Losses, Total	5	1,120
Collateralized Mortgage Obligations [Member] | Government National Mortgage Association [Member]
Investment [Line Items]
Securities held to maturity, Less than 12 months, Fair Value	3,366	14,559
Securities held to maturity, Less than 12 months, Unrealized Losses	7	101
Securities held to maturity, Fair Value, Total	3,366	14,559
Securities held to maturity, Unrealized Losses, Total	7	101
Mortgage-Backed Securities [Member]
Investment [Line Items]
Securities available for sale, Less than 12 months, Fair Value	13,430	150,615
Securities available for sale, Less than 12 months, Unrealized Losses	15	2,577
Securities available for sale, 12 months or longer, Fair Value	20,039	9,562
Securities available for sale, 12 months or longer, Unrealized Losses	78	199
Securities available for sale, Fair Value, Total	33,469	160,177
Securities available for sale, Unrealized Losses, Total	93	2,776
Securities held to maturity, Less than 12 months, Fair Value	20,948	164,311
Securities held to maturity, Less than 12 months, Unrealized Losses	41	2,277
Securities held to maturity, 12 months or longer, Fair Value	3,773
Securities held to maturity, 12 months or longer, Unrealized Losses	29
Securities held to maturity, Fair Value, Total	24,721	164,311
Securities held to maturity, Unrealized Losses, Total	70	2,277
Mortgage-Backed Securities [Member] | Federal National Mortgage Association [Member]
Investment [Line Items]
Securities available for sale, Less than 12 months, Fair Value	12,098	123,774
Securities available for sale, Less than 12 months, Unrealized Losses	3	2,134
Securities available for sale, 12 months or longer, Fair Value	15,781	9,562
Securities available for sale, 12 months or longer, Unrealized Losses	50	199
Securities available for sale, Fair Value, Total	27,879	133,336
Securities available for sale, Unrealized Losses, Total	53	2,333
Securities held to maturity, Less than 12 months, Fair Value	1,362	5,666
Securities held to maturity, Less than 12 months, Unrealized Losses	2	79
Securities held to maturity, Fair Value, Total	1,362	5,666
Securities held to maturity, Unrealized Losses, Total	2	79
Mortgage-Backed Securities [Member] | Federal Home Loan Mortgage Corporation [Member]
Investment [Line Items]
Securities available for sale, Less than 12 months, Fair Value		12,660
Securities available for sale, Less than 12 months, Unrealized Losses		194
Securities available for sale, 12 months or longer, Fair Value	4,258
Securities available for sale, 12 months or longer, Unrealized Losses	28
Securities available for sale, Fair Value, Total	4,258	12,660
Securities available for sale, Unrealized Losses, Total	28	194
Mortgage-Backed Securities [Member] | Government National Mortgage Association [Member]
Investment [Line Items]
Securities available for sale, Less than 12 months, Fair Value	1,332	1,405
Securities available for sale, Less than 12 months, Unrealized Losses	12	4
Securities available for sale, Fair Value, Total	1,332	1,405
Securities available for sale, Unrealized Losses, Total	12	4
Securities held to maturity, Less than 12 months, Fair Value	4,225	8,790
Securities held to maturity, Less than 12 months, Unrealized Losses	12	159
Securities held to maturity, 12 months or longer, Fair Value	3,773
Securities held to maturity, 12 months or longer, Unrealized Losses	29
Securities held to maturity, Fair Value, Total	7,998	8,790
Securities held to maturity, Unrealized Losses, Total	$ 41	$ 159

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Loans (Narrative) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) contract	Mar. 31, 2015 USD ($) contract	Dec. 31, 2015 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans held for sale	$ 609		$ 1,430
Past due greater than 90 days	$ 9		$ 8
Number of Contracts | contract	3	1
Pre-Modification Outstanding Recorded Investment	$ 862	$ 682
Commercial Business [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of Contracts | contract	2
Pre-Modification Outstanding Recorded Investment	$ 312

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Loans (Loan Portfolio) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross	$ 2,083,757	$ 2,052,600
Net Deferred Loan Costs (Fees)	31,277	31,162
Loans, Net	2,115,034	2,083,762
Allowance for loan losses	(27,568)	(27,085)
Total loans, net	2,087,466	2,056,677
Commercial Business [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross	317,420	313,475
Net Deferred Loan Costs (Fees)	356	283
Loans, Net	317,776	313,758
Commercial Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross	591,800	567,481
Net Deferred Loan Costs (Fees)	(1,484)	(1,380)
Loans, Net	590,316	566,101
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross	377,406	376,023
Net Deferred Loan Costs (Fees)	5,098	5,051
Loans, Net	382,504	381,074
Residential Real Estate Lines [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross	123,894	124,766
Net Deferred Loan Costs (Fees)	2,632	2,581
Loans, Net	126,526	127,347
Consumer Indirect [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross	655,348	652,494
Net Deferred Loan Costs (Fees)	24,498	24,446
Loans, Net	679,846	676,940
Other Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross	17,889	18,361
Net Deferred Loan Costs (Fees)	177	181
Loans, Net	$ 18,066	$ 18,542

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Loans (Recorded Investment By Loan Class In Current And Nonaccrual Loans) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	$ 2,161	$ 3,384
60-89 Days Past Due	351	1,486
Greater Than 90 Days	9	8
Total Past Due	2,521	4,878
Nonaccrual	8,558	8,432
Current	2,072,678	2,039,290
Total loans	2,083,757	2,052,600	$ 1,892,390
Commercial Business [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	94	321
60-89 Days Past Due	2	612
Total Past Due	96	933
Nonaccrual	4,056	3,922
Current	313,268	308,620
Total loans	317,420	313,475	277,427
Commercial Mortgage [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	53	68
60-89 Days Past Due		146
Total Past Due	53	214
Nonaccrual	1,781	947
Current	589,966	566,320
Total loans	591,800	567,481	480,479
Residential Real Estate Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	515	723
60-89 Days Past Due	22	395
Total Past Due	537	1,118
Nonaccrual	1,601	1,848
Current	375,268	373,057
Total loans	377,406	376,023	351,088
Residential Real Estate Lines [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	151	199
60-89 Days Past Due	43	34
Total Past Due	194	233
Nonaccrual	165	235
Current	123,535	124,298
Total loans	123,894	124,766	126,832
Consumer Indirect [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	1,296	1,975
60-89 Days Past Due	267	286
Total Past Due	1,563	2,261
Nonaccrual	943	1,467
Current	652,842	648,766
Total loans	655,348	652,494	637,380
Other Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	52	98
60-89 Days Past Due	17	13
Greater Than 90 Days	9	8
Total Past Due	78	119
Nonaccrual	12	13
Current	17,799	18,229
Total loans	$ 17,889	$ 18,361	$ 19,184

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Loans (Information Related To Loans Modified In A TDR) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) contract	Mar. 31, 2015 USD ($) contract
Financing Receivable, Modifications [Line Items]
Number of Contracts | contract	3	1
Pre-Modification Outstanding Recorded Investment	$ 862	$ 682
Post-Modification Outstanding Recorded Investment	$ 862	$ 330
Commercial Business [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | contract	2
Pre-Modification Outstanding Recorded Investment	$ 312
Post-Modification Outstanding Recorded Investment	$ 312
Commercial Mortgage [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | contract	1	1
Pre-Modification Outstanding Recorded Investment	$ 550	$ 682
Post-Modification Outstanding Recorded Investment	$ 550	$ 330

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Loans (Summary Of Impaired Loans) (Details) - USD ($) $ in Thousands		3 Months Ended	12 Months Ended
		Mar. 31, 2016	Dec. 31, 2015
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance recorded	[1]	$ 3,479	$ 2,378
Recorded Investment, With an allowance recorded	[1]	2,358	2,491
Recorded Investment	[1]	5,837	4,869
Unpaid Principal Balance, With no related allowance recorded	[1]	4,407	3,095
Unpaid Principal Balance, With an allowance recorded	[1]	2,358	2,491
Unpaid Principal Balance	[1]	6,765	5,586
Related Allowance		952	1,006
Average Recorded Investment, With no related allowance recorded		2,534	2,365
Average Recorded Investment, With an allowance recorded		2,453	2,395
Average Recorded Investment		$ 4,987	$ 4,760
Interest Income Recognized, With no related allowance recorded
Interest Income Recognized, With an allowance recorded
Interest Income Recognized
Commercial Business [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance recorded	[1]	$ 2,130	$ 1,441
Recorded Investment, With an allowance recorded	[1]	1,926	2,481
Unpaid Principal Balance, With no related allowance recorded	[1]	2,710	1,810
Unpaid Principal Balance, With an allowance recorded	[1]	1,926	2,481
Related Allowance		825	996
Average Recorded Investment, With no related allowance recorded		1,516	1,352
Average Recorded Investment, With an allowance recorded		$ 2,339	$ 1,946
Interest Income Recognized, With no related allowance recorded
Interest Income Recognized, With an allowance recorded
Commercial Mortgage [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance recorded	[1]	$ 1,349	$ 937
Recorded Investment, With an allowance recorded	[1]	432	10
Unpaid Principal Balance, With no related allowance recorded	[1]	1,697	1,285
Unpaid Principal Balance, With an allowance recorded	[1]	432	10
Related Allowance		127	10
Average Recorded Investment, With no related allowance recorded		1,018	1,013
Average Recorded Investment, With an allowance recorded		$ 114	$ 449
Interest Income Recognized, With no related allowance recorded
Interest Income Recognized, With an allowance recorded

[1] Difference between recorded investment and unpaid principal balance represents partial charge-offs.

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Loans (Commercial Loan Portfolio Categorized By Internally Assigned Asset Classification) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment [Line Items]
Total Loans	$ 2,083,757	$ 2,052,600
Commercial Business [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	317,420	313,475
Commercial Business [Member] | Uncriticized [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	303,114	298,413
Commercial Business [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	5,643	4,916
Commercial Business [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	$ 8,663	$ 10,146
Commercial Business [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans
Commercial Mortgage [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	$ 591,800	$ 567,481
Commercial Mortgage [Member] | Uncriticized [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	576,742	551,603
Commercial Mortgage [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	8,580	9,015
Commercial Mortgage [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	$ 6,478	$ 6,863
Commercial Mortgage [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans

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Loans (Retail Loan Portfolio Categorized By Payment Status) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment [Line Items]
Total Loans	$ 2,083,757	$ 2,052,600
Residential Real Estate Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	377,406	376,023
Residential Real Estate Loans [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	375,805	374,175
Residential Real Estate Loans [Member] | Non-Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	1,601	1,848
Residential Real Estate Lines [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	123,894	124,766
Residential Real Estate Lines [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	123,729	124,531
Residential Real Estate Lines [Member] | Non-Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	165	235
Consumer Indirect [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	655,348	652,494
Consumer Indirect [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	654,405	651,027
Consumer Indirect [Member] | Non-Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	943	1,467
Other Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	17,889	18,361
Other Consumer [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	17,868	18,340
Other Consumer [Member] | Non-Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	$ 21	$ 21

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Loans (Changes In The Allowance For Loan Losses) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	$ 27,085	$ 27,637
Charge-offs	3,311	4,570
Recoveries	1,426	1,383
Provision (credit)	2,368	2,741
Ending balance	27,568	27,191
Allowance for loan losses, Individually Evaluated for impairment	911	1,937
Allowance for loan losses, Collectively Evaluated for impairment	26,657	25,254
Loans, Ending balance	2,083,757	1,892,390	$ 2,052,600
Loans, Individually Evaluated for impairment	5,654	7,998
Loans, Collectively Evaluated for impairment	2,078,103	1,884,392
Commercial Business [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	5,540	5,621
Charge-offs	602	1,141
Recoveries	100	48
Provision (credit)	398	867
Ending balance	5,436	5,395
Allowance for loan losses, Individually Evaluated for impairment	791	1,120
Allowance for loan losses, Collectively Evaluated for impairment	4,645	4,275
Loans, Ending balance	317,420	277,427	313,475
Loans, Individually Evaluated for impairment	3,924	4,587
Loans, Collectively Evaluated for impairment	313,496	272,840
Commercial Mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	9,027	8,122
Charge-offs	4	609
Recoveries	5	89
Provision (credit)	687	554
Ending balance	9,715	8,156
Allowance for loan losses, Individually Evaluated for impairment	120	817
Allowance for loan losses, Collectively Evaluated for impairment	9,595	7,339
Loans, Ending balance	591,800	480,479	567,481
Loans, Individually Evaluated for impairment	1,730	3,411
Loans, Collectively Evaluated for impairment	590,070	477,068
Residential Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	1,347	1,620
Charge-offs	46	139
Recoveries	25	41
Provision (credit)	58	64
Ending balance	1,384	1,586
Allowance for loan losses, Collectively Evaluated for impairment	1,384	1,586
Loans, Ending balance	377,406	351,088	376,023
Loans, Collectively Evaluated for impairment	377,406	351,088
Residential Real Estate Lines [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	345	435
Charge-offs	4
Recoveries	4	2
Provision (credit)		(35)
Ending balance	345	402
Allowance for loan losses, Collectively Evaluated for impairment	345	402
Loans, Ending balance	123,894	126,832	124,766
Loans, Collectively Evaluated for impairment	123,894	126,832
Consumer Indirect [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	10,458	11,383
Charge-offs	2,498	2,422
Recoveries	1,170	1,105
Provision (credit)	1,167	1,139
Ending balance	10,297	11,205
Allowance for loan losses, Collectively Evaluated for impairment	10,297	11,205
Loans, Ending balance	655,348	637,380	652,494
Loans, Collectively Evaluated for impairment	655,348	637,380
Other Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	368	456
Charge-offs	157	259
Recoveries	122	98
Provision (credit)	58	152
Ending balance	391	447
Allowance for loan losses, Collectively Evaluated for impairment	391	447
Loans, Ending balance	17,889	19,184	$ 18,361
Loans, Collectively Evaluated for impairment	$ 17,889	$ 19,184

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Goodwill And Other Intangible Assets (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Goodwill And Other Intangible Assets [Abstract]
Goodwill	$ 66,417		$ 60,402
Amortization during the year	$ 322	$ 243

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Goodwill And Other Intangible Assets (Changes In Carrying Amount Of Goodwill) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)
Goodwill [Line Items]
Goodwill, beginning balance	$ 60,402
Acquisition	6,015
Goodwill, ending balance	66,417
Banking [Member]
Goodwill [Line Items]
Goodwill, beginning balance	48,536
Goodwill, ending balance	48,536
Non-Banking [Member]
Goodwill [Line Items]
Goodwill, beginning balance	11,866
Acquisition	6,015
Goodwill, ending balance	$ 17,881

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Goodwill And Other Intangible Assets (Changes In The Accumulated Amortization And Net Book Value) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Goodwill And Other Intangible Assets [Abstract]
Gross carrying amount	$ 12,610		$ 8,682
Accumulated amortization	(2,460)		(2,138)
Net carrying value at end of period	10,150		$ 6,544
Amortization during the year	$ 322	$ 243

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Goodwill And Other Intangible Assets (Estimated Core Deposit Intangible Amortization Expense) (Details) $ in Thousands	Mar. 31, 2016 USD ($)
Goodwill And Other Intangible Assets [Abstract]
2016 (remainder of year)	$ 927
2017	1,144
2018	1,035
2019	937
2020	840
2021	$ 738

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Shareholders' Equity (Changes In Shares Of Common Stock) (Details) - shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Shareholders Equity [Line Items]
Treasury stock, beginning balance	207,317
Shares issued, beginning balance	14,397,509	14,397,509
Common stock issued for aquisition	294,705
Restricted stock awards issued
Restricted stock awards forfeited
Stock options exercised
Treasury stock purchases
Treasury stock, ending balance	197,131
Shares issued, ending balance	14,692,214	14,397,509
Common Stock [Member]
Shareholders Equity [Line Items]
Shares outstanding, beginning balance	14,190,192	14,118,048
Common stock issued for aquisition	294,705
Restricted stock awards issued		49,084
Restricted stock awards forfeited	(4,914)	(2,271)
Stock options exercised	15,100	3,722
Treasury stock purchases		(1,791)
Shares outstanding, ending balance	14,495,083	14,166,792
Treasury Stock [Member]
Shareholders Equity [Line Items]
Treasury stock, beginning balance	207,317	279,461
Restricted stock awards issued		(49,084)
Restricted stock awards forfeited	4,914	2,271
Stock options exercised	(15,100)	(3,722)
Treasury stock purchases		1,791
Treasury stock, ending balance	197,131	230,717

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Accumulated Other Comprehensive Loss (Components Of Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Accumulated Other Comprehensive Loss [Abstract]
Change in unrealized gain/loss during the period, Pre-tax Amount	$ 12,196	$ 6,396
Reclassification adjustment for net gains included in net income, Pre-tax Amount	(662)	(1,139)
Total securities available for sale and transferred securities, Pre-tax Amount	11,534	5,257
Prior service credit, Pre-tax Amount	(12)	(12)
Net actuarial losses, Pre-tax Amount	239	236
Total pension and post-retirement obligations, Pre-tax Amount	227	224
Other comprehensive income (loss), Pre-tax Amount	11,761	5,481
Change in unrealized gain/loss during the period, Tax Effect	4,706	2,436
Reclassification adjustment for net gains included in net income, Tax Effect	(255)	(440)
Total securities available for sale and transferred securities, Tax Effect	4,451	1,996
Prior service credit, Tax Effect	(5)	(5)
Net actuarial losses, Tax Effect	93	94
Total pension and post-retirement obligations, Tax Effect	88	89
Other comprehensive income (loss), Tax Effect	4,539	2,085
Change in unrealized gain/loss during the period, Net-of-tax Amount	7,490	3,960
Reclassification adjustment for net gains included in net income, Net-of-tax Amount	(407)	(699)
Total securities available for sale and transferred securities, Net-of-tax Amount	7,083	3,261
Prior service credit, Net-of-tax Amount	(7)	(7)
Net actuarial losses, Net-of-tax Amount	146	142
Total pension and post-retirement obligations, Net-of-tax Amount	139	135
Other comprehensive income (loss), Net-of-tax Amount	$ 7,222	$ 3,396

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Accumulated Other Comprehensive Loss (Components Of Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of year	$ (11,327)	$ (9,011)
Other comprehensive income (loss) before reclassifications	7,490	3,960
Amounts reclassified from accumulated other comprehensive loss	(268)	(564)
Net current period other comprehensive income (loss)	7,222	3,396
Balance at end of period	(11,327)	(9,011)	$ (4,105)	$ (5,615)
Securities Available For Sale and Transferred Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of year	(696)	1,625
Other comprehensive income (loss) before reclassifications	7,490	3,960
Amounts reclassified from accumulated other comprehensive loss	(407)	(699)
Net current period other comprehensive income (loss)	7,083	3,261
Balance at end of period	(696)	1,625	6,387	4,886
Pension And Post-Retirement Obligations [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of year	$ (10,631)	$ (10,636)
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive loss	$ 139	$ 135
Net current period other comprehensive income (loss)	139	135
Balance at end of period	$ (10,631)	$ (10,636)	$ (10,492)	$ (10,501)

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Accumulated Other Comprehensive Loss (Amounts Reclassified Out Of Each Component Of Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net gain on disposal of investment securities	$ 613	$ 1,062
Interest income	24,719	23,147
Prior service credit	(12)	(12)
Net actuarial losses	239	236
Income before income taxes	10,350	9,692
Income tax (expense) benefit	(2,732)	(2,891)
Net income	7,618	6,801
Total reclassified for the period	268	564
Securities Available For Sale and Transferred Securities [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total reclassified for the period	407	699
Pension And Post-Retirement Obligations [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total reclassified for the period	(139)	(135)
Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total reclassified for the period	268	564
Reclassification out of Accumulated Other Comprehensive Income [Member] | Realized Gain on Sale of Investment Securities [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net gain on disposal of investment securities	613	1,062
Interest income	49	77
Income before income taxes	662	1,139
Income tax (expense) benefit	(255)	(440)
Net income	407	699
Reclassification out of Accumulated Other Comprehensive Income [Member] | Pension And Post-Retirement Obligations [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Prior service credit	12	12
Net actuarial losses	(239)	(236)
Income before income taxes	(227)	(224)
Income tax (expense) benefit	88	89
Net income	$ (139)	$ (135)

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Share-Based Compensation Plans (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options awarded	0	0
Unrecognized compensation expense	$ 1,500
Aggregate intrinsic value	126	$ 13
Total cash received as a result of option exercises	$ 288	$ 72
EPS Performance Requirement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
EPS percentage of award, one year performance period	30.00%
TSR Performance Requirement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
TSR percentage of award, three year performance period	70.00%
Expected term	2 years 10 months 6 days
Risk free interest rate	0.88%
Expected dividend yield	2.99%
Expected stock price volatility	24.30%
Management Stock Incentive Plan [Member] | Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period	3 years
Minimum [Member] | Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected recognition expense period, weighted average period in years	2 years 4 months 24 days

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Share-Based Compensation Plans (Summary Of Restricted Stock Units And Performance Share Units Activity) (Details)	3 Months Ended
	Mar. 31, 2016 $ / shares shares
RSUs [Member]
Granted, Number of Shares | shares	14,500
Granted, Weighted Average Market Price at Grant Date | $ / shares	$ 24.21
PSUs [Member]
Granted, Number of Shares | shares	24,084
Granted, Weighted Average Market Price at Grant Date | $ / shares	$ 22.94

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Share-Based Compensation Plans (Summary Of Restricted Stock Award Activity) (Details) - Restricted Stock Awards [Member]	3 Months Ended
	Mar. 31, 2016 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding at beginning of year, Number of Shares | shares	82,908
Forfeited, number of shares | shares	(4,914)
Outstanding at end of period, Number of Shares | shares	77,994
Outstanding at beginning of year, Weighted Average Market Price at Grant Date | $ / shares	$ 17.23
Forfeited, Weighted Average Market Price at Grant Date | $ / shares	22.69
Outstanding at end of period, Weighted Average Market Price at Grant Date | $ / shares	$ 16.89

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Share-Based Compensation Plans (Summary Of Stock Option Activity) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercised, Number of Options
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding at beginning of year, Number of Options	102,249
Exercised, Number of Options	(15,100)
Outstanding and exercisable at end of period, Number of Options	87,149
Outstanding at beginning of year, Weighted Average Exercise Price	$ 19.21
Exercised, Weighted Average Exercise Price	19.03
Outstanding and exercisable at end of period, Weighted Average Exercise Price	$ 19.24
Outstanding and exercisable at end of period, Weighted Average Remaining Contractual Term	1 year 2 months 12 days
Outstanding and exercisable at end of period, Aggregate Intrinsic Value	$ 856

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Share-Based Compensation Plans (Share-Based Compensation Expense Included In Consolidated Statements Of Income) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total share-based compensation expense	$ 129	$ 103
Salaries and Employee Benefits [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total share-based compensation expense	98	78
Other Noninterest Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total share-based compensation expense	$ 31	$ 25

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Employee Benefit Plans (Components Of Net Periodic Benefit Expense) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Employee Benefit Plans [Abstract]
Service cost	$ 721	$ 581
Interest cost on projected benefit obligation	601	583
Expected return on plan assets	(1,150)	(1,205)
Amortization of prior service credit	(12)	(12)
Amortization of net actuarial losses	239	236
Net periodic pension expense	$ 399	$ 183

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Commitments and Contingencies (Narrative) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Commitments And Contingencies [Abstract]
Forward sales commitments	$ 826	$ 1,300

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Commitments and Contingencies (Off-Balance Sheet Commitments) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Commitments To Extend Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet commitments	$ 521,912	$ 514,818
Standby Letters Of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet commitments	$ 10,892	$ 11,746

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Fair Value Measurements (Narrative) (Details) - USD ($)	Mar. 31, 2016	Jun. 30, 2015	Mar. 31, 2015
Level 1 to Level 2 transfers, assets amount	$ 0		$ 0
Level 2 to Level 1 transfers, assets amount	0		0
Level 1 to Level 2 transfers, liabilities amount	0		0
Level 2 to Level 1 transfers, liabilities amount	0		0
Liabilities measured at fair value on recurring basis	0		0
Liabilities measured at fair value on nonrecurring basis	0		0
Assets measured at fair value on recurring basis using significant unobservable inputs	$ 0		$ 0
Subordinated Notes Due April 15, 2030 [Member]
Long-term borrowings		$ 40,000,000

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Fair Value Measurements (Assets Measured At Fair Value On A Recurring And Non-Recurring Basis) (Details) - USD ($) $ in Thousands		Mar. 31, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale		$ 610,013	$ 544,395
Collateral Dependent Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	[1]	1,263
Loan Servicing Rights [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value		1,222
Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	[1]	187
Measured On A Recurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale		610,013	544,395
Measured On A Recurring Basis [Member] | U.S. Government Agencies And Government Sponsored Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale		241,463	260,863
Measured On A Recurring Basis [Member] | Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale		368,371	283,314
Measured On A Recurring Basis [Member] | Asset-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale		$ 179	$ 218
Measured On A Recurring Basis [Member] | Level 1 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Measured On A Recurring Basis [Member] | Level 1 Inputs [Member] | U.S. Government Agencies And Government Sponsored Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Measured On A Recurring Basis [Member] | Level 1 Inputs [Member] | Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Measured On A Recurring Basis [Member] | Level 1 Inputs [Member] | Asset-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Measured On A Recurring Basis [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale		$ 610,013	$ 544,395
Measured On A Recurring Basis [Member] | Level 2 Inputs [Member] | U.S. Government Agencies And Government Sponsored Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale		241,463	260,863
Measured On A Recurring Basis [Member] | Level 2 Inputs [Member] | Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale		368,371	283,314
Measured On A Recurring Basis [Member] | Level 2 Inputs [Member] | Asset-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale		179	218
Measured On A Nonrecurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value		3,281	4,319
Measured On A Nonrecurring Basis [Member] | Loans Held For Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value		609	1,430
Measured On A Nonrecurring Basis [Member] | Collateral Dependent Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value		1,263	1,485
Measured On A Nonrecurring Basis [Member] | Loan Servicing Rights [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value		1,222	1,241
Measured On A Nonrecurring Basis [Member] | Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value		$ 187	$ 163
Measured On A Nonrecurring Basis [Member] | Level 1 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value
Measured On A Nonrecurring Basis [Member] | Level 1 Inputs [Member] | Loans Held For Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value
Measured On A Nonrecurring Basis [Member] | Level 1 Inputs [Member] | Collateral Dependent Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value
Measured On A Nonrecurring Basis [Member] | Level 1 Inputs [Member] | Loan Servicing Rights [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value
Measured On A Nonrecurring Basis [Member] | Level 1 Inputs [Member] | Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value
Measured On A Nonrecurring Basis [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value		$ 609	$ 1,430
Measured On A Nonrecurring Basis [Member] | Level 2 Inputs [Member] | Loans Held For Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value		609	1,430
Measured On A Nonrecurring Basis [Member] | Level 3 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value		2,672	2,889
Measured On A Nonrecurring Basis [Member] | Level 3 Inputs [Member] | Collateral Dependent Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value		1,263	1,485
Measured On A Nonrecurring Basis [Member] | Level 3 Inputs [Member] | Loan Servicing Rights [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value		1,222	1,241
Measured On A Nonrecurring Basis [Member] | Level 3 Inputs [Member] | Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value		$ 187	$ 163

[1] Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.

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Fair Value Measurements (Additional Quantitative Information About Assets Measured At Fair Value On A Recurring And Non-Recurring Basis) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)
Collateral Dependent Impaired Loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets at fair value	$ 1,263	[1]
Loan Servicing Rights [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets at fair value	$ 1,222
Discount rate	4.70%	[2]
Constant prepayment rate	14.90%	[2]
Other Real Estate Owned [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets at fair value	$ 187	[1]
Minimum [Member] | Collateral Dependent Impaired Loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Appraisal adjustments	0.00%
Minimum [Member] | Other Real Estate Owned [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Appraisal adjustments	39.00%
Maximum [Member] | Collateral Dependent Impaired Loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Appraisal adjustments	50.00%
Maximum [Member] | Other Real Estate Owned [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Appraisal adjustments	48.00%

[1] Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.

[2] Weighted averages.

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Fair Value Measurements (Carrying Amount, Estimated Fair Value, And Placement In Fair Value Hierarchy Of Financial Instruments) (Details) - USD ($) $ in Thousands		Mar. 31, 2016	Dec. 31, 2015
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale		$ 610,013	$ 544,395
Securities held to maturity, fair value		485,863	490,064
Carrying Amount [Member] | Level 1 Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents		110,944	60,121
Accrued interest receivable		10,181	8,609
Non-maturity deposits		2,282,747	2,093,513
Short-term borrowings		179,200	293,100
Accrued interest payable		5,495	4,676
Carrying Amount [Member] | Level 2 Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale		610,013	544,395
Securities held to maturity, fair value		476,283	485,717
Loans held for sale		609	1,430
Loans		2,086,203	2,055,192
FHLB and FRB stock		14,865	19,991
Time deposits		677,430	637,018
Long-term borrowings		39,008	38,990
Carrying Amount [Member] | Level 3 Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans	[1]	1,263	1,485
Estimated Fair Value [Member] | Level 1 Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents		110,944	60,121
Accrued interest receivable		10,181	8,609
Non-maturity deposits		2,282,747	2,093,513
Short-term borrowings		179,200	293,100
Accrued interest payable		5,495	4,676
Estimated Fair Value [Member] | Level 2 Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale		610,013	544,395
Securities held to maturity, fair value		485,863	490,064
Loans held for sale		609	1,430
Loans		2,092,237	2,046,235
FHLB and FRB stock		14,865	19,991
Time deposits		674,410	636,159
Long-term borrowings		37,566	40,313
Estimated Fair Value [Member] | Level 3 Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans	[1]	$ 1,263	$ 1,485

[1] Comprised of collateral dependent impaired loans.

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Segment Reporting (Narrative) (Details)	3 Months Ended
	Mar. 31, 2016 segment
Segment Reporting [Abstract]
Number of reportable segments	2

XML

Segment Reporting (Business Segment Assets) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Segment Reporting Information [Line Items]
Goodwill	$ 66,417	$ 60,402
Other intangible assets, net	10,150	6,544
Assets	3,516,572	3,381,024
Banking [Member]
Segment Reporting Information [Line Items]
Goodwill	48,536	48,536
Other intangible assets, net	762	829
Assets	3,484,886	3,356,987
Non-Banking [Member]
Segment Reporting Information [Line Items]
Goodwill	17,881	11,866
Other intangible assets, net	9,388	5,715
Assets	31,545	20,315
Holding Company and Other [Member]
Segment Reporting Information [Line Items]
Assets	$ 141	$ 3,722

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Segment Reporting (Business Segment Profit (Loss)) (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015
Segment Reporting Information [Line Items]
Net interest income (expense)		$ 24,719	$ 23,147
Provision for loan losses		(2,368)	(2,741)
Noninterest income		9,217	8,297
Noninterest expense		(21,218)	(19,011)
Income before income taxes		10,350	9,692
Income tax (expense) benefit		(2,732)	(2,891)
Net income		7,618	6,801
Banking [Member]
Segment Reporting Information [Line Items]
Net interest income (expense)		25,337	23,147
Provision for loan losses		(2,368)	(2,741)
Noninterest income		6,863	6,831
Noninterest expense		(18,345)	(17,279)
Income before income taxes		11,487	9,958
Income tax (expense) benefit		(3,101)	(2,949)
Net income		8,386	7,009
Non-Banking [Member]
Segment Reporting Information [Line Items]
Noninterest income	[1]	2,484	1,593
Noninterest expense	[1]	(1,806)	(1,187)
Income before income taxes	[1]	678	406
Income tax (expense) benefit	[1]	(264)	(159)
Net income	[1]	414	247
Holding Company and Other [Member]
Segment Reporting Information [Line Items]
Net interest income (expense)		(618)
Noninterest income		(130)	(127)
Noninterest expense		(1,067)	(545)
Income before income taxes		(1,815)	(672)
Income tax (expense) benefit		633	217
Net income		$ (1,182)	$ (455)

[1] Includes activity from Courier Capital since January 5, 2016, the date of acquisition.