10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2017

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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark 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	☒
Non-accelerated filer	☐  (Do not check if a smaller company)	Smaller reporting company	☐
Emerging Growth Company	☐

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

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

The registrant had 14,540,815 shares of Common Stock, $0.01 par value, outstanding as of April 28, 2017.

FINANCIAL INSTITUTIONS, INC.

Form 10-Q

For the Quarterly Period Ended March 31, 2017

TABLE OF CONTENTS

		PAGE
PART I.	FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Consolidated Statements of Financial Condition - at March  31, 2017 (Unaudited) and December 31, 2016		3
	Consolidated Statements of Income (Unaudited) - Three months ended March 31, 2017 and 2016		4
	Consolidated Statements of Comprehensive Income (Unaudited) - Three months ended March 31, 2017 and 2016		5
	Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) - Three months ended March 31, 2017 and 2016		6
	Consolidated Statements of Cash Flows (Unaudited) - Three months ended March 31, 2017 and 2016		7
	Notes to Consolidated Financial Statements (Unaudited)		8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		49
ITEM 4.	Controls and Procedures		50
PART II.	OTHER INFORMATION
ITEM 1.	Legal Proceedings		51
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, 2017			December 31, 2016
ASSETS
Cash and due from banks	$	149,699		$	71,277
Securities available for sale, at fair value		540,406			539,926
Securities held to maturity, at amortized cost (fair value of $544,438 and $539,991, respectively)		545,381			543,338
Loans held for sale		2,097			1,050
Loans (net of allowance for loan losses of $31,081 and $30,934, respectively)		2,371,546			2,309,227
Company owned life insurance		63,907			63,455
Premises and equipment, net		46,525			42,398
Goodwill and other intangible assets, net		75,343			75,640
Other assets		64,961			64,029
Total assets	$	3,859,865		$	3,710,340
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand	$	666,332		$	677,076
Interest-bearing demand		698,962			581,436
Savings and money market		1,069,901			1,034,194
Time deposits		734,464			702,516
Total deposits		3,169,659			2,995,222
Short-term borrowings		303,300			331,500
Long-term borrowings, net of issuance costs of $922 and $939, respectively		39,078			39,061
Other liabilities		22,140			24,503
Total liabilities		3,534,177			3,390,286
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 shares issued		147			147
Additional paid-in capital		81,901			81,755
Retained earnings		242,501			237,687
Accumulated other comprehensive loss		(13,186	)		(13,951	)
Treasury stock, at cost – 156,199 and 154,617 shares, respectively		(3,015	)		(2,924	)
Total shareholders’ equity		325,688			320,054
Total liabilities and shareholders’ equity	$	3,859,865		$	3,710,340

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,
	2017			2016
Interest income:
Interest and fees on loans	$	24,616		$	22,057
Interest and dividends on investment securities		5,897			5,578
Other interest income		25			—
Total interest income		30,538			27,635
Interest expense:
Deposits		2,231			1,959
Short-term borrowings		694			339
Long-term borrowings		618			618
Total interest expense		3,543			2,916
Net interest income		26,995			24,719
Provision for loan losses		2,781			2,368
Net interest income after provision for loan losses		24,214			22,351
Noninterest income:
Service charges on deposits		1,745			1,724
Insurance income		1,431			1,672
ATM and debit card		1,329			1,325
Investment advisory		1,431			1,243
Company owned life insurance		445			1,368
Investments in limited partnerships		(30	)		56
Loan servicing		120			116
Net gain on sale of loans held for sale		48			78
Net gain on investment securities		206			613
Net (loss) gain on other assets		(2	)		4
Other		1,113			1,018
Total noninterest income		7,836			9,217
Noninterest expense:
Salaries and employee benefits		11,369			11,614
Occupancy and equipment		3,964			3,625
Professional services		1,199			1,447
Computer and data processing		1,171			1,087
Supplies and postage		537			594
FDIC assessments		457			436
Advertising and promotions		278			427
Amortization of intangibles		297			322
Other		1,670			1,666
Total noninterest expense		20,942			21,218
Income before income taxes		11,108			10,350
Income tax expense		3,165			2,732
Net income	$	7,943		$	7,618
Preferred stock dividends		365			365
Net income available to common shareholders	$	7,578		$	7,253
Earnings per common share (Note 3):
Basic	$	0.52		$	0.50
Diluted	$	0.52		$	0.50
Cash dividends declared per common share	$	0.21		$	0.20
Weighted average common shares outstanding:
Basic		14,479			14,395
Diluted		14,528			14,465

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,
	2017		2016
Net income	$	7,943	$	7,618
Other comprehensive income, net of tax:
Net unrealized gains on securities available for sale		594		7,083
Pension and post-retirement obligations		171		139
Total other comprehensive income, net of tax		765		7,222
Comprehensive income	$	8,708	$	14,840

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, 2017 and 2016

(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, 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
Balance at December 31, 2016	$	17,340	$	147	$	81,755		$	237,687		$	(13,951	)	$	(2,924	)	$	320,054
Cumulative-effect adjustment		—		—		(279	)		279			—			—			—
Balance at January 1, 2017	$	17,340	$	147	$	81,476		$	237,966		$	(13,951	)	$	(2,924	)	$	320,054
Comprehensive income:
Net income		—		—		—			7,943			—			—			7,943
Other comprehensive income, net of tax		—		—		—			—			765			—			765
Purchases of common stock for treasury		—		—		—			—			—			(148	)		(148	)
Share-based compensation plans:
Share-based compensation		—		—		239			—			—			—			239
Stock options exercised		—		—		4			—			—			239			243
Restricted stock awards forfeited		—		—		182			—			—			(182	)		—
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-$0.21 per share		—		—		—			(3,043	)		—			—			(3,043	)
Balance at March 31, 2017	$	17,340	$	147	$	81,901		$	242,501		$	(13,186	)	$	(3,015	)	$	325,688

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,
	2017			2016
Cash flows from operating activities:
Net income	$	7,943		$	7,618
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,477			1,487
Net amortization of premiums on securities		824			714
Provision for loan losses		2,781			2,368
Share-based compensation		239			129
Deferred income tax expense		679			131
Proceeds from sale of loans held for sale		1,663			4,144
Originations of loans held for sale		(2,662	)		(3,245	)
Income on company owned life insurance		(445	)		(1,368	)
Net gain on sale of loans held for sale		(48	)		(78	)
Net gain on investment securities		(206	)		(613	)
Net loss (gain) on other assets		2			(4	)
(Increase) decrease in other assets		(2,013	)		5,804
Decrease in other liabilities		(2,937	)		(127	)
Net cash provided by operating activities		7,297			16,960
Cash flows from investing activities:
Purchases of available for sale securities		(22,544	)		(119,597	)
Purchases of held to maturity securities		(16,276	)		(3,612	)
Proceeds from principal payments, maturities and calls on available for sale securities		10,566			48,280
Proceeds from principal payments, maturities and calls on held to maturity securities		14,470			12,381
Proceeds from sales of securities available for sale		12,350			17,627
Net loan originations		(65,100	)		(33,297	)
Proceeds from company owned life insurance, net of purchases		(7	)		2,451
Proceeds from sales of other assets		27			109
Purchases of premises and equipment		(5,290	)		(2,460	)
Cash consideration paid for acquisition, net of cash acquired		—			(868	)
Net cash used in investing activities		(71,804	)		(78,986	)
Cash flows from financing activities:
Net increase in deposits		174,437			229,646
Net decrease in short-term borrowings		(28,200	)		(113,900	)
Purchases of common stock for treasury		(148	)		—
Proceeds from stock options exercised		243			288
Cash dividends paid to common and preferred shareholders		(3,403	)		(3,185	)
Net cash provided by financing activities		142,929			112,849
Net increase in cash and cash equivalents		78,422			50,823
Cash and cash equivalents, beginning of period		71,277			60,121
Cash and cash equivalents, end of period	$	149,699		$	110,944
Supplemental information:
Cash paid for interest	$	2,597		$	2,096
Cash paid for income taxes		4,500			500
Noncash investing and financing activities:
Real estate and other assets acquired in settlement of loans		—			140
Accrued and declared unpaid dividends		3,408			3,248
Increase (decrease) in net unsettled security purchases		740			(170	)
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 (“New York”). The Company provides diversified financial services through its subsidiaries, Five Star Bank, Scott Danahy Naylon, LLC (“SDN”) 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 also has indirect lending network relationships with franchised automobile dealers in the Capital District of New York and Northern and Central Pennsylvania. SDN provides a broad range of insurance services to personal and business clients across 45 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 the Company 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. These consolidated financial statements should be read in conjunction with the Company’s 2016 Annual Report on Form 10-K for the year ended December 31, 2016. 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 is assessing the impact of ASU 2014-09 on its 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 (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 financial statements.

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 financial statements.

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 could previously 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 adoption of ASU 2016-09 did not have a significant impact on the Company’s financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends guidance on reporting credit losses for financial assets held at amortized cost basis and available for sale debt securities. Topic 326 eliminates the probable initial recognition threshold in current GAAP and instead, requires an entity to reflect its current estimate of all expected credit losses based on historical experience, current conditions and reasonable and supportable forecasts. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those years. Early adoption is permitted beginning after December 15, 2018. The Company is assessing the impact of ASU 2016-13 on its financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides guidance on the following eight specific cash flow issues: 1) debt prepayment or debt extinguishment costs; 2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; 3) contingent consideration payments made after a business combination; 4) proceeds from the settlement of insurance claims; 5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; 6) distributions received from equity method investees; 7) beneficial interests in securitization transactions; and 8) separately identifiable cash flows and application of the predominance principle. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. As this guidance only affects the classification within the statement of cash flows, this ASU is not expected to have a significant impact on the Company’s 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 (Continued)

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under the new guidance, an entity will recognize an impairment charge for the amount by which the carrying value exceeds the fair value. This standard is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is assessing the impact of ASU 2017-04 on its financial statements.

In March 2017, the FASB issued ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715) – Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which provides additional guidance on the presentation of net periodic pension and postretirement benefit costs in the income statement and on the components eligible for capitalization. The amendments in this ASU require that an employer report the service cost component of the net periodic benefit costs in the same income statement line item as other compensation costs arising from services rendered by employees during the period. The non-service-cost components of net periodic benefit costs are to be presented in the income statement separately from the service cost components and outside a subtotal of income from operations. The ASU also allows for the capitalization of the service cost components, when applicable (i.e., as a cost of internally manufactured inventory or a self-constructed asset). The amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods; early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The amendments in this ASU are to be applied retrospectively. The company is assessing the impact of ASU 2017-07 on its financial statements.

In March 2017, the FASB issued ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20) – Premium Amortization on Purchased Callable Debt Securities. These amendments shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company is assessing the impact of ASU 2017-08 on its financial statements.

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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. 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

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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(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,
	2017			2016
Net income available to common shareholders	$	7,578		$	7,253
Weighted average common shares outstanding:
Total shares issued		14,692			14,679
Unvested restricted stock awards		(56	)		(79	)
Treasury shares		(157	)		(205	)
Total basic weighted average common shares outstanding		14,479			14,395
Incremental shares from assumed:
Exercise of stock options		15			27
Vesting of restricted stock awards		34			43
Total diluted weighted average common shares outstanding		14,528			14,465
Basic earnings per common share	$	0.52		$	0.50
Diluted earnings per common share	$	0.52		$	0.50

For each of the periods presented, average shares subject to the following instruments were excluded from the computation of diluted EPS because the effect would be antidilutive:

Stock options	—	—
Restricted stock awards	5	—
Total	5	—

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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		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
March 31, 2017
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	190,793	$	595	$	1,173	$	190,215
Mortgage-backed securities:
Federal National Mortgage Association		303,388		842		4,008		300,222
Federal Home Loan Mortgage Corporation		34,362		106		808		33,660
Government National Mortgage Association		14,598		313		18		14,893
Collateralized mortgage obligations:
Federal National Mortgage Association		308		—		2		306
Federal Home Loan Mortgage Corporation		59		—		1		58
Privately issued		—		819		—		819
Total mortgage-backed securities		352,715		2,080		4,837		349,958
Asset-backed securities		—		233		—		233
Total available for sale securities	$	543,508	$	2,908	$	6,010	$	540,406
Securities held to maturity:
State and political subdivisions		307,894		3,723		892		310,725
Mortgage-backed securities:
Federal National Mortgage Association		10,290		—		121		10,169
Federal Home Loan Mortgage Corporation		3,270		—		154		3,116
Government National Mortgage Association		27,151		—		256		26,895
Collateralized mortgage obligations:
Federal National Mortgage Association		85,474		21		1,433		84,062
Federal Home Loan Mortgage Corporation		98,029		75		1,791		96,313
Government National Mortgage Association		13,273		34		149		13,158
Total mortgage-backed securities		237,487		130		3,904		233,713
Total held to maturity securities	$	545,381	$	3,853	$	4,796	$	544,438
December 31, 2016
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	187,325	$	512	$	1,569	$	186,268
Mortgage-backed securities:
Federal National Mortgage Association		288,949		897		4,413		285,433
Federal Home Loan Mortgage Corporation		30,182		114		807		29,489
Government National Mortgage Association		15,473		316		15		15,774
Collateralized mortgage obligations:
Federal National Mortgage Association		16,921		74		125		16,870
Federal Home Loan Mortgage Corporation		5,142		—		65		5,077
Privately issued		—		824		—		824
Total mortgage-backed securities		356,667		2,225		5,425		353,467
Asset-backed securities		—		191		—		191
Total available for sale securities	$	543,992	$	2,928	$	6,994	$	539,926

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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(4.) INVESTMENT SECURITIES (Continued)

	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
December 31, 2016 (continued)
Securities held to maturity:
State and political subdivisions		305,248		2,127		1,616		305,759
Mortgage-backed securities:
Federal National Mortgage Association		10,362		1		124		10,239
Federal Home Loan Mortgage Corporation		3,290		—		150		3,140
Government National Mortgage Association		24,575		18		182		24,411
Collateralized mortgage obligations:
Federal National Mortgage Association		83,929		21		1,573		82,377
Federal Home Loan Mortgage Corporation		101,025		80		1,827		99,278
Government National Mortgage Association		14,909		40		162		14,787
Total mortgage-backed securities		238,090		160		4,018		234,232
Total held to maturity securities	$	543,338	$	2,287	$	5,634	$	539,991

Investment securities with a total fair value of $937.3 million at March 31, 2017 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,
	2017		2016
Proceeds from sales	$	12,350	$	17,627
Gross realized gains		206		613
Gross realized losses		—		—

The scheduled maturities of securities available for sale and securities held to maturity at March 31, 2017 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	$	27	$	27
Due from one to five years		145,749		145,749
Due after five years through ten years		302,203		300,102
Due after ten years		95,529		94,528
	$	543,508	$	540,406
Debt securities held to maturity:
Due in one year or less	$	51,256	$	51,326
Due from one to five years		176,638		179,806
Due after five years through ten years		91,549		91,059
Due after ten years		225,938		222,247
	$	545,381	$	544,438

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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		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
March 31, 2017
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	96,026	$	1,171	$	1,412	$	2	$	97,438	$	1,173
Mortgage-backed securities:
Federal National Mortgage Association		220,754		4,008		—		—		220,754		4,008
Federal Home Loan Mortgage Corporation		28,799		808		—		—		28,799		808
Government National Mortgage Association		—		—		1,053		18		1,053		18
Collateralized mortgage obligations:
Federal National Mortgage Association		252		1		55		1		307		2
Federal Home Loan Mortgage Corporation		59		1		—		—		59		1
Total mortgage-backed securities		249,864		4,818		1,108		19		250,972		4,837
Total available for sale securities		345,890		5,989		2,520		21		348,410		6,010
Securities held to maturity:
State and political subdivisions		47,118		892		—		—		47,118		892
Mortgage-backed securities:
Federal National Mortgage Association		10,169		121		—		—		10,169		121
Federal Home Loan Mortgage Corporation		3,116		154		—		—		3,116		154
Government National Mortgage Association		24,982		256		—		—		24,982		256
Collateralized mortgage obligations:
Federal National Mortgage Association		67,013		1,420		2,700		13		69,713		1,433
Federal Home Loan Mortgage Corporation		87,601		1,789		672		2		88,273		1,791
Government National Mortgage Association		8,042		148		305		1		8,347		149
Total mortgage-backed securities		200,923		3,888		3,677		16		204,600		3,904
Total held to maturity securities		248,041		4,780		3,677		16		251,718		4,796
Total temporarily impaired securities	$	593,931	$	10,769	$	6,197	$	37	$	600,128	$	10,806
December 31, 2016
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	113,261	$	1,566	$	1,458	$	3	$	114,719	$	1,569
Mortgage-backed securities:
Federal National Mortgage Association		211,491		4,413		—		—		211,491		4,413
Federal Home Loan Mortgage Corporation		24,360		807		—		—		24,360		807
Government National Mortgage Association		1,111		15		—		—		1,111		15
Collateralized mortgage obligations:
Federal National Mortgage Association		8,119		125		—		—		8,119		125
Federal Home Loan Mortgage Corporation		5,077		65		—		—		5,077		65
Total mortgage-backed securities		250,158		5,425		—		—		250,158		5,425
Total available for sale securities		363,419		6,991		1,458		3		364,877		6,994

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FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(4.) INVESTMENT SECURITIES (Continued)

	Less than 12 months				12 months or longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
December 31, 2016 (continued)
Securities held to maturity:
State and political subdivisions		82,644		1,616		—		—		82,644		1,616
Mortgage-backed securities:
Federal National Mortgage Association		9,253		124		—		—		9,253		124
Federal Home Loan Mortgage Corporation		3,141		150		—		—		3,141		150
Government National Mortgage Association		10,736		182		—		—		10,736		182
Collateralized mortgage obligations:
Federal National Mortgage Association		72,734		1,560		3,107		13		75,841		1,573
Federal Home Loan Mortgage Corporation		92,256		1,825		430		2		92,686		1,827
Government National Mortgage Association		8,675		161		531		1		9,206		162
Total mortgage-backed securities		196,795		4,002		4,068		16		200,863		4,018
Total held to maturity securities		279,439		5,618		4,068		16		283,507		5,634
Total temporarily impaired securities	$	642,858	$	12,609	$	5,526	$	19	$	648,384	$	12,628

The total number of security positions in the investment portfolio in an unrealized loss position at March 31, 2017 was 360 compared to 463 at December 31, 2016. At March 31, 2017, the Company had positions in 15 investment securities with a fair value of $6.2 million and a total unrealized loss of $37 thousand that have been in a continuous unrealized loss position for more than 12 months. At March 31, 2017, there were a total of 345 securities positions in the Company’s investment portfolio with a fair value of $593.9 million and a total unrealized loss of $10.8 million that had been in a continuous unrealized loss position for less than 12 months. At December 31, 2016, the Company had positions in 9 investment securities with a fair value of $5.5 million and a total unrealized loss of $19 thousand that had been in a continuous unrealized loss position for more than 12 months. At December 31, 2016, there were a total of 454 securities positions in the Company’s investment portfolio with a fair value of $642.9 million and a total unrealized loss of $12.6 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, 2017 and 2016.

Based on management’s review and evaluation of the Company’s debt securities as of March 31, 2017, the debt securities with unrealized losses were not considered to be OTTI. As of March 31, 2017, 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, 2017, 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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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, 2017
Commercial business	$	374,992	$	526		$	375,518
Commercial mortgage		676,455		(1,448	)		675,007
Residential real estate loans		421,614		6,557			428,171
Residential real estate lines		118,056		2,818			120,874
Consumer indirect		758,761		27,359			786,120
Other consumer		16,762		175			16,937
Total	$	2,366,640	$	35,987			2,402,627
Allowance for loan losses							(31,081	)
Total loans, net						$	2,371,546
December 31, 2016
Commercial business	$	349,079	$	468		$	349,547
Commercial mortgage		671,552		(1,494	)		670,058
Residential real estate loans		421,476		6,461			427,937
Residential real estate lines		119,745		2,810			122,555
Consumer indirect		725,754		26,667			752,421
Other consumer		17,465		178			17,643
Total	$	2,305,071	$	35,090			2,340,161
Allowance for loan losses							(30,934	)
Total loans, net						$	2,309,227

Loans held for sale (not included above) were comprised entirely of residential real estate mortgages and totaled $2.1 million and $1.1 million as of March 31, 2017 and December 31, 2016, respectively.

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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, 2017
Commercial business	$	976	$	97	$	—	$	1,073	$	3,753	$	370,166	$	374,992
Commercial mortgage		99		—		—		99		1,267		675,089		676,455
Residential real estate loans		1,052		198		—		1,250		1,601		418,763		421,614
Residential real estate lines		202		63		—		265		336		117,455		118,056
Consumer indirect		1,239		303		—		1,542		1,040		756,179		758,761
Other consumer		71		12		10		93		13		16,656		16,762
Total loans, gross	$	3,639	$	673	$	10	$	4,322	$	8,010	$	2,354,308	$	2,366,640
December 31, 2016
Commercial business	$	1,337	$	—	$	—	$	1,337	$	2,151	$	345,591	$	349,079
Commercial mortgage		48		—		—		48		1,025		670,479		671,552
Residential real estate loans		1,073		253		—		1,326		1,236		418,914		421,476
Residential real estate lines		216		—		—		216		372		119,157		119,745
Consumer indirect		2,320		488		—		2,808		1,526		721,420		725,754
Other consumer		134		15		9		158		7		17,300		17,465
Total loans, gross	$	5,128	$	756	$	9	$	5,893	$	6,317	$	2,292,861	$	2,305,071

There were no loans past due greater than 90 days and still accruing interest as of March 31, 2017 and December 31, 2016. There were $10 thousand and $9 thousand in consumer overdrafts which were past due greater than 90 days as of March 31, 2017 and December 31, 2016, 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, 2017
Commercial business		—	$	—	$	—
Commercial mortgage		—		—		—
Total		—	$	—	$	—
March 31, 2016
Commercial business		2	$	312	$	312
Commercial mortgage		1		550		550
Total		3	$	862	$	862

- 18 -

FINANCIAL INSTITUTIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(5.) LOANS (Continued)

The loans identified as TDRs by the Company during the three month period ended March 31, 2016 were previously reported as impaired loans prior to restructuring. All loans restructured during the three months ended March 31, 2016 were on nonaccrual status at the end of those respective periods. 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 classification did not have a material impact on the Company’s determination of the allowance for loan losses because the modified loans were either classified as substandard, with an increased risk allowance allocation, or 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, 2017 or 2016. 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, 2017
With no related allowance recorded:
Commercial business	$	424	$	625	$	—	$	686	$	—
Commercial mortgage		589		589		—		620		—
		1,013		1,214		—		1,306		—
With an allowance recorded:
Commercial business		3,329		3,329		1,897		2,296		—
Commercial mortgage		678		678		126		432		—
		4,007		4,007		2,023		2,728		—
	$	5,020	$	5,221	$	2,023	$	4,034	$	—
December 31, 2016
With no related allowance recorded:
Commercial business	$	645	$	1,044	$	—	$	1,032	$	—
Commercial mortgage		673		882		—		725		—
		1,318		1,926		—		1,757		—
With an allowance recorded:
Commercial business		1,506		1,506		694		1,141		—
Commercial mortgage		352		352		124		486		—
		1,858		1,858		818		1,627		—
	$	3,176	$	3,784	$	818	$	3,384	$	—

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

- 19 -

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, 2017
Uncriticized	$	351,108	$	658,453
Special mention		10,636		11,660
Substandard		13,248		6,342
Doubtful		—		—
Total	$	374,992	$	676,455
December 31, 2016
Uncriticized	$	326,254	$	652,550
Special mention		10,377		12,690
Substandard		12,448		6,312
Doubtful		—		—
Total	$	349,079	$	671,552

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, 2017
Performing	$	420,013	$	117,720	$	757,721	$	16,739
Non-performing		1,601		336		1,040		23
Total	$	421,614	$	118,056	$	758,761	$	16,762
December 31, 2016
Performing	$	420,240	$	119,373	$	724,228	$	17,449
Non-performing		1,236		372		1,526		16
Total	$	421,476	$	119,745	$	725,754	$	17,465

- 20 -

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, 2017
Allowance for loan losses:
Beginning balance	$	7,225		$	10,315		$	1,478		$	303		$	11,311		$	302		$	30,934
Charge-offs		(1,122	)		(10	)		(14	)		(43	)		(2,809	)		(203	)		(4,201	)
Recoveries		158			214			40			10			1,051			94			1,567
Provision		7,742			(6,852	)		(64	)		(56	)		1,909			102			2,781
Ending balance	$	14,003		$	3,667		$	1,440		$	214		$	11,462		$	295		$	31,081
Evaluated for impairment:
Individually	$	1,842		$	120		$	—		$	—		$	—		$	—		$	1,962
Collectively	$	12,161		$	3,547		$	1,440		$	214		$	11,462		$	295		$	29,119
Loans:
Ending balance	$	374,992		$	676,455		$	421,614		$	118,056		$	758,761		$	16,762		$	2,366,640
Evaluated for impairment:
Individually	$	3,549		$	1,195		$	—		$	—		$	—		$	—		$	4,744
Collectively	$	371,443		$	675,260		$	421,614		$	118,056		$	758,761		$	16,762		$	2,361,896
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 (credit)		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

Risk Characteristics

Commercial business loans primarily consist of loans to small to mid-sized 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 potential 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.

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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

Goodwill

The carrying amount of goodwill totaled $66.4 million as of March 31, 2017 and December 31, 2016. The Company performs a goodwill impairment test on an annual basis as of September 30^th or more frequently if events and circumstances warrant.

	Banking		Non-Banking		Total
Balance, December 31, 2016	$	48,536	$	17,881	$	66,417
No activity during the period		—		—		—
Balance, March 31, 2017	$	48,536	$	17,881	$	66,417

Other Intangible Assets

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,
	2017			2016
Other intangibles assets:
Gross carrying amount	$	12,610		$	12,610
Accumulated amortization		(3,684	)		(3,387	)
Net book value	$	8,926		$	9,223

Amortization expense for total other intangible assets was $297 thousand and $322 thousand for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017, the estimated amortization expense of other intangible assets for the remainder of 2017 and each of the next five years is as follows (in thousands):

2017 (remainder of year)	$	847
2018		1,035
2019		937
2020		840
2021		738
2022		663

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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, 2017 and 2016:

	Outstanding			Treasury			Issued
March 31, 2017
Shares outstanding at December 31, 2016		14,537,597			154,617			14,692,214
Restricted stock awards forfeited		(9,759	)		9,759			—
Stock options exercised		12,500			(12,500	)		—
Treasury stock purchases		(4,323	)		4,323			—
Shares outstanding at March 31, 2017		14,536,015			156,199			14,692,214
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

(8.) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the components of other comprehensive income (loss) for the three month periods ended March 31, 2017 and 2016 (in thousands):

	Pre-tax Amount			Tax Effect			Net-of-tax Amount
March 31, 2017
Securities available for sale and transferred securities:
Change in unrealized gain/loss during the period	$	1,170		$	451		$	719
Reclassification adjustment for net gains included in net income (1)		(203	)		(78	)		(125	)
Total securities available for sale and transferred securities		967			373			594
Pension and post-retirement obligations:
Amortization of prior service credit included in income		(13	)		(4	)		(9	)
Amortization of net actuarial loss included in income		292			112			180
Total pension and post-retirement obligations		279			108			171
Other comprehensive income	$	1,246		$	481		$	765
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
Pension and post-retirement obligations:
Amortization of prior service credit included in income		(12	)		(5	)		(7	)
Amortization of net actuarial loss included in income		239			93			146
Total pension and post-retirement obligations		227			88			139
Other comprehensive income	$	11,761		$	4,539		$	7,222

⁽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 INCOME (LOSS) (Continued)

Activity in accumulated other comprehensive income (loss), net of tax, for the three month periods ended March 31, 2017 and 2016 was as follows (in thousands):

	Securities Available for Sale and Transferred Securities			Pension and Post- retirement Obligations			Accumulated Other Comprehensive Income (Loss)
March 31, 2017
Balance at beginning of year	$	(3,729	)	$	(10,222	)	$	(13,951	)
Other comprehensive income (loss) before reclassifications		719			—			719
Amounts reclassified from accumulated other comprehensive income (loss)		(125	)		171			46
Net current period other comprehensive income (loss)		594			171			765
Balance at end of period	$	(3,135	)	$	(10,051	)	$	(13,186	)
March 31, 2016
Balance at beginning of year	$	(696	)	$	(10,631	)	$	(11,327	)
Other comprehensive income (loss) before reclassifications		7,490			—			7,490
Amounts reclassified from accumulated other comprehensive income (loss)		(407	)		139			(268	)
Net current period other comprehensive income (loss)		7,083			139			7,222
Balance at end of period	$	6,387		$	(10,492	)	$	(4,105	)

The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three month periods ended March 31, 2017 and 2016 (in thousands):

Details About Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)						Affected Line Item in the Consolidated Statement of Income
	Three months ended
	March 31,
	2017			2016
Realized gain on sale of investment securities	$	206		$	613		Net gain on investment securities
Amortization of unrealized holding gains (losses) on investment securities transferred from available for sale to held to maturity		(3	)		49		Interest income
		203			662		Total before tax
		(78	)		(255	)	Income tax expense
		125			407		Net of tax
Amortization of pension and post-retirement items:
Prior service credit (1)		13			12		Salaries and employee benefits
Net actuarial losses (1)		(292	)		(239	)	Salaries and employee benefits
		(279	)		(227	)	Total before tax
		108			88		Income tax benefit
		(171	)		(139	)	Net of tax
Total reclassified for the period	$	(46	)	$	268

⁽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, approved by the Company’s shareholders that are administered by 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 long-term growth 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 2017.

	Number of Underlying Shares		Weighted Average Per Share Grant Date Fair Value
RSUs		25,331	$	32.22
PSUs		12,531		33.07

The grant-date fair value for the RSUs granted during the three month period ended March 31, 2017 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 total shareholder return (“TSR”) targets relative to the SNL Small Cap Bank & Thrift Index, a market index the MD&C Committee has selected as a peer group for this purpose. 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 & Thrift Index over a three-year performance period ended December 31, 2019. The shares earned based on the achievement of the TSR performance requirement, if any, will vest on February 22, 2020 assuming the recipient’s continuous service to the Company.

The grant-date fair value of the PSUs granted during the three month period ended March 31, 2017 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 1.45%, (iii) expected dividend yield of 2.41% and (iv) expected stock price volatility over the expected term of the TSR award of 21.9%. The Monte Carlo simulation model is a risk analysis method that selects a random value from a range of estimates.

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, 2017. The following is a summary of restricted stock award and restricted stock units activity for the three month period ended March 31, 2017:

	Number of Shares			Weighted Average Market Price at Grant Date
Outstanding at beginning of year		114,565		$	19.90
Granted		41,229			31.82
Vested		(16,393	)		21.19
Forfeited		(10,159	)		11.56
Outstanding at end of period		129,242		$	24.20

At March 31, 2017, there was $2.2 million of unrecognized compensation expense related to unvested restricted stock awards and restricted stock units that 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 the first three months of 2017 or 2016. There was no unrecognized compensation expense related to unvested stock options as of March 31, 2017. The following is a summary of stock option activity for the three months ended March 31, 2017 (dollars in thousands, except per share amounts):

				Weighted Average		Weighted Average Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Options			Price		Term		Value
Outstanding at beginning of year		49,099		$	19.00
Exercised		(12,500	)		19.44
Expired		—			—
Outstanding and exercisable at end of period		36,599		$	18.85		0.8	$	516

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, 2017 and 2016 was $180 thousand and $126 thousand, respectively. The total cash received as a result of option exercises under stock compensation plans for the three months ended March 31, 2017 and 2016 was $243 thousand and $288 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,
	2017		2016
Salaries and employee benefits	$	207	$	98
Other noninterest expense		32		31
Total share-based compensation expense	$	239	$	129

(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,
	2017			2016
Service cost	$	785		$	721
Interest cost on projected benefit obligation		613			601
Expected return on plan assets		(1,194	)		(1,150	)
Amortization of unrecognized prior service credit		(13	)		(12	)
Amortization of unrecognized net actuarial loss		292			239
Net periodic benefit expense	$	483		$	399

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 2017 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 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, 2017		December 31, 2016
Commitments to extend credit	$	536,312	$	555,713
Standby letters of credit		13,232		12,689

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the agreement. Commitments generally have fixed expiration dates or other termination clauses which may require payment of a 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 when the Company intends to sell the related loan, once originated, as well as closed residential mortgage loans held for sale, the Company enters 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 $413 thousand at March 31, 2017. The Company had no forward sales commitments at December 31, 2016. 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.

- 28 -

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, 2017
Measured on a recurring basis:
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	—	$	190,215	$	—	$	190,215
Mortgage-backed securities		—		349,958		—		349,958
Asset-backed securities		—		233		—		233
	$	—	$	540,406	$	—	$	540,406
Measured on a nonrecurring basis:
Loans:
Loans held for sale	$	—	$	2,097	$	—	$	2,097
Collateral dependent impaired loans		—		—		1,769		1,769
Other assets:
Loan servicing rights		—		—		1,046		1,046
Other real estate owned		—		—		58		58
	$	—	$	2,097	$	2,873	$	4,970
December 31, 2016
Measured on a recurring basis:
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	—	$	186,268	$	—	$	186,268
Mortgage-backed securities		—		353,467		—		353,467
Asset-backed securities		—		191		—		191
	$	—	$	539,926	$	—	$	539,926
Measured on a nonrecurring basis:
Loans:
Loans held for sale	$	—	$	1,050	$	—	$	1,050
Collateral dependent impaired loans		—		—		901		901
Other assets:
Loan servicing rights		—		—		1,075		1,075
Other real estate owned		—		—		107		107
	$	—	$	1,050	$	2,083	$	3,133

There were no transfers between Levels 1 and 2 during the three months ended March 31, 2017 and 2016. There were no liabilities measured at fair value on a recurring or nonrecurring basis during the three month periods ended March 31, 2017 and 2016.

- 29 -

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	$	1,769	Appraisal of collateral(1)	Appraisal adjustments(2)	0% - 75% discount
Loan servicing rights		1,046	Discounted cash flow	Discount rate	5.4%(3)
				Constant prepayment rate	6.9%(3)
Other real estate owned		58	Appraisal of collateral(1)	Appraisal adjustments(2)	14% - 72% 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, 2017.

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.

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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, 2017				December 31, 2016
	Fair Value Measurement Hierarchy		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Cash and cash equivalents		Level 1	$	149,699	$	149,699	$	71,277	$	71,277
Securities available for sale		Level 2		540,406		540,406		539,926		539,926
Securities held to maturity		Level 2		545,381		544,438		543,338		539,991
Loans held for sale		Level 2		2,097		2,097		1,050		1,050
Loans		Level 2		2,369,777		2,343,479		2,308,326		2,285,146
Loans (1)		Level 3		1,769		1,769		901		901
Accrued interest receivable		Level 1		10,329		10,329		9,192		9,192
FHLB and FRB stock		Level 2		20,511		20,511		21,780		21,780
Financial liabilities:
Non-maturity deposits		Level 1		2,435,195		2,435,195		2,292,706		2,292,706
Time deposits		Level 2		734,464		732,294		702,516		701,097
Short-term borrowings		Level 1		303,300		303,300		331,500		331,500
Long-term borrowings		Level 2		39,078		41,518		39,061		40,701
Accrued interest payable		Level 1		6,340		6,340		5,394		5,394

⁽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 SDN, 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. 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.

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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, 2017
Goodwill	$	48,536	$	17,881	$	—	$	66,417
Other intangible assets, net		523		8,403		—		8,926
Total assets		3,826,805		30,942		2,118		3,859,865
December 31, 2016
Goodwill	$	48,536	$	17,881	$	—	$	66,417
Other intangible assets, net		579		8,644		—		9,223
Total assets		3,678,230		31,166		944		3,710,340

	Banking			Non-Banking (1)			Holding Company and Other			Consolidated Totals
Three months ended March 31, 2017
Net interest income (expense)	$	27,613		$	—		$	(618	)	$	26,995
Provision for loan losses		(2,781	)		—			—			(2,781	)
Noninterest income		5,578			2,405			(147	)		7,836
Noninterest expense		(18,484	)		(1,834	)		(624	)		(20,942	)
Income (loss) before income taxes		11,926			571			(1,389	)		11,108
Income tax (expense) benefit		(3,573	)		(222	)		630			(3,165	)
Net income (loss)	$	8,353		$	349		$	(759	)	$	7,943
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

⁽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, 2016. 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 Quarterly Report on Form 10-Q 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 its subsidiaries (collectively, 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 Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, 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 material 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;

• We may be unable to successfully implement our growth strategies;

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

• Our commercial business and mortgage 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 policies of the Federal Reserve 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;

• A proxy contest for the election of directors at our annual meeting or proposals arising out of shareholder initiatives could cause us to incur substantial costs and could 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

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 (the “Bank”), Scott Danahy Naylon, LLC (“SDN”) 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, the Bank. Our indirect lending network includes relationships with franchised automobile dealers in Western and Central New York, the Capital District of New York and Northern and Central Pennsylvania. SDN provides a broad range of insurance services to personal and business clients across 45 states. Courier Capital 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, investment advisory 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 and other financial needs of individuals, municipalities and businesses of the local communities surrounding our primary service area. 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 who 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 2017 First Quarter Results

Net income increased $325 thousand or 4% to $7.9 million for the first quarter of 2017 compared to $7.6 million for the first quarter of 2016. Net income available to common shareholders for the first quarter of 2017 was $7.6 million, or $0.52 per diluted share, compared with $7.3 million, or $0.50 per diluted share, for the first quarter of last year. Return on average common equity was 10.02% and return on average assets was 0.86% for the first quarter of 2017 compared to 10.00% and 0.90%, respectively, for the first quarter of 2016.

Net interest income totaled $27.0 million in the first quarter of 2017, up from $24.7 million in the first quarter of 2016. Average earning assets were up $346.9 million, led by a $274.4 million increase in average loans in the first quarter of 2017 compared to the same quarter in 2016. The growth in earning assets was partially offset by a lower net interest margin. First quarter of 2017 net interest margin was 3.23%, a decrease of four basis points from 3.27% reported in the first quarter of 2016.

The provision for loans losses was $2.8 million in the first quarter of 2017 compared to $2.4 million in the first quarter of 2016. Net charge-offs during the recent quarter were $2.6 million, up from $1.9 million in the first quarter of 2016. Net charge-offs expressed as an annualized percentage of average loans outstanding were 0.45% during the first three months of 2017 compared with 0.36% in the first quarter of 2016. 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 increases in the provision for loan losses and net-charge-offs.

Noninterest income totaled $7.8 million in the first quarter of 2017, compared to $9.2 million in the first quarter of 2016. Included in these totals are net gains realized from the sale of investment securities totaling $206 thousand for the first quarter of 2017 and $613 thousand for the first quarter of 2016. 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 $7.6 million in the first quarter of 2017 and $7.7 million in the first quarter of 2016.

Noninterest expense in the first quarter of 2017 totaled $20.9 million compared with $21.2 million in the first quarter of 2016. The decrease in noninterest expense was primarily due to a decrease in professional services. Professional services in the first quarter of 2016 included approximately $360 thousand of expense associated with responding to the demands of an activist shareholder.

The regulatory Common equity Tier 1 ratio and Total risk-based capital ratio were 9.46%, and 12.75%, respectively, for the first quarter of 2017. 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.

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.

We use interest rate spread and net interest margin 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.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

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,
	2017		2016
Interest income per consolidated statements of income	$	30,538	$	27,635
Adjustment to fully taxable equivalent basis		814		793
Interest income adjusted to a fully taxable equivalent basis		31,352		28,428
Interest expense per consolidated statements of income		3,543		2,916
Net interest income on a taxable equivalent basis	$	27,809	$	25,512

Analysis of Net Interest Income for the Three Month Periods ended March 31, 2017 and 2016

Net interest income on a taxable equivalent basis for the three months ended March 31, 2017, was $27.8 million, an increase of $2.3 million versus the comparable quarter last year. The increase in net interest income was due to an increase in average earning assets of $346.9 million or 11% compared to the first quarter of 2016.

The net interest margin for the first quarter of 2017 was 3.23%, four basis points lower than 3.27% for the same period in 2016. This comparable period decrease was a function of a four basis point decrease in interest rate spread. The lower interest rate spread was a result of a four basis point increase in the cost of average interest-bearing liabilities.

For the first quarter of 2017, the yield on average earning assets of 3.64% was unchanged from the first quarter of 2016. Loan yields decreased two basis points during the first quarter of 2017 to 4.19%. The yield on investment securities decreased two basis points during the first quarter of 2017 to 2.46%. Overall, the earning asset rate changes reduced interest income by $307 thousand during the first quarter of 2017, but that was more than offset by a favorable volume variance that increased interest income by $3.2 million, which collectively drove a $2.9 million increase in interest income.

Average interest-earning assets were $3.48 billion for the first quarter 2017, an increase of $346.9 million or 11% from the comparable quarter last year, with average loans up $274.4 million and average securities up $62.5 million. The growth in average loans reflected increases in most loan categories. Commercial loans, in particular, were up $143.7 million or 16% from the first quarter of 2016. Loans represented 68.4% of average interest-earning assets during first quarter of 2017 compared to 67.2% during the first quarter of 2016. The increase in the volume of average loans resulted in a $2.8 million increase in interest income, partially offset by a $272 thousand decrease due to the unfavorable rate variance. Securities represented 31.3% of average interest-earning assets during first quarter of 2017 compared to 32.8% during the first quarter of 2016. The increase in the volume of average securities resulted in a $375 thousand increase in interest income, partially offset by a $35 thousand decrease due to the unfavorable rate variance.

The cost of average interest-bearing liabilities of 0.52% in the first quarter of 2017 was four basis points higher than the first quarter of 2016. The cost of average interest-bearing deposits increased two basis points to 0.38% and the cost of short-term borrowings increased 24 basis points to 0.86% in the first quarter of 2017 compared to the same quarter of 2016. The cost of long-term borrowings for the first quarter of 2017 decreased two basis points to 6.32% in the first quarter of 2017 compared to the same quarter of 2016. Overall, interest-bearing liability rate and volume increases resulted in $627 thousand of higher interest expense.

Average interest-bearing liabilities of $2.75 billion in the first quarter of 2017 were $295.3 million or 12% higher than the first quarter of 2016. On average, interest-bearing deposits grew $189.3 million, while noninterest-bearing demand deposits (a principal component of net free funds) were up $39.6 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 $272 thousand of higher interest expense during the first quarter of 2017. Average borrowings increased $105.9 million compared to the first quarter of 2016. Overall, short and long-term borrowing rate and volume changes resulted in $355 thousand of higher interest expense during the first quarter of 2017.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

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,
	2017								2016
	Average					Average			Average					Average
	Balance			Interest		Rate			Balance			Interest		Rate
Interest-earning assets:
Federal funds sold and interest-earning deposits	$	10,078			25		1.00	%	$	70			—		—	%
Investment securities (1):
Taxable		784,018			4,384		2.24			734,084			4,105		2.24
Tax-exempt (2)		306,045			2,327		3.04			293,518			2,266		3.09
Total investment securities		1,090,063			6,711		2.46			1,027,602			6,371		2.48
Loans:
Commercial business		363,367			3,786		4.23			316,143			3,248		4.13
Commercial mortgage		678,613			7,843		4.69			582,142			6,713		4.64
Residential real estate loans		429,746			4,054		3.77			382,077			3,832		4.01
Residential real estate lines		121,594			1,192		3.98			127,317			1,208		3.82
Consumer indirect		767,887			7,243		3.83			678,133			6,531		3.87
Other consumer		16,956			498		11.91			17,926			525		11.78
Total loans		2,378,163			24,616		4.19			2,103,738			22,057		4.21
Total interest-earning assets		3,478,304			31,352		3.64			3,131,410			28,428		3.64
Less: Allowance for loan losses		(31,284	)							(27,638	)
Other noninterest-earning assets		307,450								301,679
Total assets	$	3,754,470							$	3,405,451
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	634,141			218		0.14	%	$	572,424			202		0.14	%
Savings and money market		1,030,363			325		0.13			965,629			324		0.13
Time deposits		721,404			1,688		0.95			658,537			1,433		0.88
Total interest-bearing deposits		2,385,908			2,231		0.38			2,196,590			1,959		0.36
Short-term borrowings		327,195			694		0.86			221,326			339		0.62
Long-term borrowings		39,067			618		6.32			38,997			618		6.34
Total borrowings		366,262			1,312		1.44			260,323			957		1.47
Total interest-bearing liabilities		2,752,170			3,543		0.52			2,456,913			2,916		0.48
Noninterest-bearing demand deposits		657,190								617,590
Other noninterest-bearing liabilities		21,144								21,760
Shareholders’ equity		323,966								309,188
Total liabilities and shareholders’ equity	$	3,754,470							$	3,405,451
Net interest income (tax-equivalent)					27,809								25,512
Interest rate spread							3.12	%							3.16	%
Net earning assets	$	726,134							$	674,497
Net interest margin (tax-equivalent)							3.23	%							3.27	%
Ratio of average interest-earning assets to average interest-bearing liabilities							126.38	%							127.45	%

⁽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, 2017 vs. 2016
Increase (decrease) in:	Volume			Rate			Total
Interest income:
Federal funds sold and interest-earning deposits	$	25		$	—		$	25
Investment securities:
Taxable		279			—			279
Tax-exempt		96			(35	)		61
Total investment securities		375			(35	)		340
Loans:
Commercial business		491			47			538
Commercial mortgage		1,115			15			1,130
Residential real estate loans		459			(237	)		222
Residential real estate lines		(55	)		39			(16	)
Consumer indirect		849			(137	)		712
Other consumer		(28	)		1			(27	)
Total loans		2,831			(272	)		2,559
Total interest income		3,231			(307	)		2,924
Interest expense:
Deposits:
Interest-bearing demand		21			(5	)		16
Savings and money market		21			(20	)		1
Time deposits		143			112			255
Total interest-bearing deposits		185			87			272
Short-term borrowings		197			158			355
Long-term borrowings		1			(1	)		—
Total borrowings		198			157			355
Total interest expense		383			244			627
Net interest income	$	2,848		$	(551	)	$	2,297

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 2017 was $2.8 million, compared to $2.4 million for the same period in 2016.

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,
	2017			2016
Service charges on deposits	$	1,745		$	1,724
Insurance income		1,431			1,672
ATM and debit card		1,329			1,325
Investment advisory		1,431			1,243
Company owned life insurance		445			1,368
Investments in limited partnerships		(30	)		56
Loan servicing		120			116
Net gain on sale of loans held for sale		48			78
Net gain on investment securities		206			613
Net (loss) gain on other assets		(2	)		4
Other		1,113			1,018
Total noninterest income	$	7,836		$	9,217

Insurance income for the three months ended March 31, 2017 decreased $241 thousand compared to the same period in 2016. The decrease was primarily due to the loss of legacy SDN accounts.

Investment advisory income for the three months ended March 31, 2017 increased $188 thousand compared to the same period in 2016, reflecting higher assets under managements driven by favorable market conditions and successful business development efforts.

Company owned life insurance decreased to $445 thousand in the first quarter of 2017 compared to $1.4 million in the same period in 2016, as the first quarter of 2016 included $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. The income (loss) from these equity method investments fluctuates based on the performance of the underlying investments.

During the first quarter of 2017, we recognized net gains on investment securities totaling $206 thousand from the sale of two agency securities and two mortgage backed securities. The $613 thousand in gains realized during the first quarter of 2016 resulted from the sale of one agency security and six mortgage backed securities. The amount and timing of our sale of investment 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,
	2017		2016
Salaries and employee benefits	$	11,369	$	11,614
Occupancy and equipment		3,964		3,625
Professional services		1,199		1,447
Computer and data processing		1,171		1,087
Supplies and postage		537		594
FDIC assessments		457		436
Advertising and promotions		278		427
Amortization of intangibles		297		322
Other		1,670		1,666
Total noninterest expense	$	20,942	$	21,218

Salaries and employee benefits expense decreased by $245 thousand in the first quarter of 2017 compared to the same period in 2016, primarily due to a reduction in medical expenses driven by fewer health insurance policy claims.

Occupancy and equipment expense increased $339 thousand in the first quarter of 2017 compared to the same period in 2016, primarily due to organic growth initiatives.

Professional services decreased $248 thousand when comparing the first quarter of 2017 to the same period in 2016. The first quarter of 2016 included approximately $360 thousand of professional services associated with responding to the demands of an activist shareholder.

Our efficiency ratio for the first quarter of 2017 was 59.09% compared with 62.19% for the first quarter of 2016. The lower efficiency ratio is a result of the higher net interest income and noninterest income associated with our organic growth initiatives. The efficiency ratio is calculated by dividing total noninterest expense by net revenue, defined as the sum of tax-equivalent net interest income and noninterest income before net gains on investment securities. 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. The efficiency ratio, a banking industry financial measure, is not required by GAAP. However, the efficiency ratio is used by management in its assessment of financial performance specifically as it relates to noninterest expense control. Management also believes such information is useful to investors in evaluating Company performance.

Income Taxes

For the three months ended March 31, 2017, we recorded income tax expense of $3.2 million, versus $2.7 million a year ago. The effective tax rates for the first quarters of 2017 and 2016 were 28.5% and 26.4%, respectively. The increase 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 2017 and 2016 reflects the New York State tax savings generated by our real estate investment trust.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

ANALYSIS OF FINANCIAL CONDITION

INVESTING ACTIVITIES

Investment Securities

The following table summarizes the composition of our investment securities portfolio as of the dates indicated (in thousands):

	Investment Securities Portfolio Composition
	March 31, 2017				December 31, 2016
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Securities available for sale:
U.S. Government agency and government-sponsored enterprise securities	$	190,793	$	190,215	$	187,325	$	186,268
Mortgage-backed securities:
Agency mortgage-backed securities		352,715		349,139		356,667		352,643
Non-Agency mortgage-backed securities		—		819		—		824
Asset-backed securities		—		233		—		191
Total available for sale securities		543,508		540,406		543,992		539,926
Securities held to maturity:
State and political subdivisions		307,894		310,725		305,248		305,759
Mortgage-backed securities		237,487		233,713		238,090		234,232
Total held to maturity securities		545,381		544,438		543,338		539,991
Total investment securities	$	1,088,889	$	1,084,844	$	1,087,330	$	1,079,917

The available for sale (“AFS”) investment securities portfolio increased $480 thousand from $539.9 million at December 31, 2016 to $540.4 million at March 31, 2017. The AFS portfolio had net unrealized losses totaling $3.1 million and $4.1 million at March 31, 2017 and December 31, 2016, respectively. The unrealized losses 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.

Security Yields and Maturities Schedule

The following table sets forth certain information regarding the amortized cost (“Cost”), weighted average yields (“Yield”) and contractual maturities of our debt securities portfolio as of March 31, 2017. Mortgage-backed securities are included in maturity categories based on their stated maturity date. Actual maturities may differ from the contractual maturities presented because borrowers may have the right to call or prepay certain investments. No tax-equivalent adjustments were made to the weighted average yields (dollars in thousands).

	Due in one year or less					Due from one to five years					Due after five years through ten years					Due after ten years					Total
	Cost		Yield			Cost		Yield			Cost		Yield			Cost		Yield			Cost		Yield
Available for sale debt securities:
U.S. Government agencies and government-sponsored enterprises	$	27		0.87	%	$	32,726		1.67	%	$	153,751		2.33	%	$	4,289		1.59	%	$	190,793		2.20	%
Mortgage-backed securities		—		—			113,023		1.88			148,452		2.52			91,240		2.28			352,715		2.25
		27		0.87			145,749		1.84			302,203		2.42			95,529		2.25			543,508		2.23
Held to maturity debt securities:
State and political subdivisions		51,256		1.57			176,638		2.13			80,000		1.89			—		—			307,894		1.98
Mortgage-backed securities		—		—			—		—			11,549		1.52			225,938		2.15			237,487		2.12
		51,256		1.57			176,638		2.13			91,549		1.84			225,938		2.15			545,381		2.04
Total investment securities	$	51,283		1.57	%	$	322,387		2.00	%	$	393,752		2.29	%	$	321,467		2.18	%	$	1,088,889		2.13	%

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MANAGEMENT’S DISCUSSION AND ANALYSIS

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 i.) the intent to sell the debt security or ii.) 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: a.) the length of time and the extent to which the fair value has been less than the amortized cost basis, b.) adverse conditions specifically related to the security, an industry, or a geographic area, c.) the historical and implied volatility of the fair value of the security, d.) the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future, e.) failure of the issuer of the security to make scheduled interest or principal payments, f.) any changes to the rating of the security by a rating agency, and g.) 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, 2017 and 2016.

LENDING ACTIVITIES

The following table summarizes the composition of our loan portfolio, excluding loans held for sale and including net unearned income and net deferred fees and costs, as of the dates indicated (in thousands).

	Loan Portfolio Composition
	March 31, 2017					December 31, 2016
	Amount		% of Total			Amount		% of Total
Commercial business	$	375,518		15.6	%	$	349,547		14.9	%
Commercial mortgage		675,007		28.1			670,058		28.6
Total commercial		1,050,525		43.7			1,019,605		43.5
Residential real estate loans		428,171		17.8			427,937		18.3
Residential real estate lines		120,874		5.1			122,555		5.2
Consumer indirect		786,120		32.7			752,421		32.2
Other consumer		16,937		0.7			17,643		0.8
Total consumer		1,352,102		56.3			1,320,556		56.5
Total loans		2,402,627		100.0	%		2,340,161		100.0	%
Less: Allowance for loan losses		31,081					30,934
Total loans, net	$	2,371,546				$	2,309,227

Total loans increased $62.5 million to $2.40 billion at March 31, 2017 from $2.34 billion at December 31, 2016. The increase in loans was attributable to our organic growth initiatives.

Commercial loans increased $30.9 million and represented 43.7% of total loans as of March 31, 2017, a result of our continued commercial business development efforts.

The consumer indirect portfolio totaled $786.1 million and represented 32.7% of total loans as of March 31, 2017. During the first quarter of 2017, we originated $97.9 million in indirect auto loans with a mix of approximately 42% new auto and 58% used auto. 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. 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 loans and totaled $2.1 million and $1.1 million as of March 31, 2017 and December 31, 2016, respectively.

We sell certain qualifying newly originated or refinanced residential real estate loans on the secondary market. Residential real estate loans serviced for others, which are not included in the consolidated statements of financial condition, amounted to $170.1 million and $173.7 million as of March 31, 2017 and December 31, 2016, respectively.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Allowance for Loan Losses

The following table summarizes the activity in the allowance for loan losses for the periods indicated (in thousands).

	Loan Loss Analysis
	Three months ended March 31,
	2017			2016
Allowance for loan losses, beginning of period	$	30,934		$	27,085
Charge-offs:
Commercial business		1,122			602
Commercial mortgage		10			4
Residential real estate loans		14			46
Residential real estate lines		43			4
Consumer indirect		2,809			2,498
Other consumer		203			157
Total charge-offs		4,201			3,311
Recoveries:
Commercial business		158			100
Commercial mortgage		214			5
Residential real estate loans		40			25
Residential real estate lines		10			4
Consumer indirect		1,051			1,170
Other consumer		94			122
Total recoveries		1,567			1,426
Net charge-offs		2,634			1,885
Provision for loan losses		2,781			2,368
Allowance for loan losses, end of period	$	31,081		$	27,568
Net loan charge-offs to average loans (annualized)		0.45	%		0.36	%
Allowance for loan losses to total loans		1.29	%		1.30	%
Allowance for loan losses to non-performing loans		388	%		322	%

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, 2017.

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 $2.6 million in the first quarter of 2017 represented 0.45% of average loans on an annualized basis compared to $1.9 million or 0.36% in the first quarter of 2016. The allowance for loan losses was $31.1 million at March 31, 2017, compared with $30.9 million at December 31, 2016. The ratio of the allowance for loan losses to total loans was 1.29% and 1.32% at March 31, 2017 and December 31, 2016, respectively. The ratio of allowance for loan losses to non-performing loans was 388% at March 31, 2017, compared with 489% at December 31, 2016.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Non-Performing Assets and Potential Problem Loans

The table below summarizes our non-performing assets at the dates indicated (in thousands).

	Non-Performing Assets
	March 31,			December 31,
	2017			2016
Nonaccrual loans:
Commercial business	$	3,753		$	2,151
Commercial mortgage		1,267			1,025
Residential real estate loans		1,601			1,236
Residential real estate lines		336			372
Consumer indirect		1,040			1,526
Other consumer		13			7
Total nonaccrual loans		8,010			6,317
Accruing loans 90 days or more delinquent		10			9
Total non-performing loans		8,020			6,326
Foreclosed assets		58			107
Total non-performing assets	$	8,078		$	6,433
Non-performing loans to total loans		0.33	%		0.27	%
Non-performing assets to total assets		0.21	%		0.17	%

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, 2017 was as follows (in thousands):

Nonaccrual loans at December 31, 2016	$	6,317
Additions		7,080
Payments		(1,098	)
Charge-offs		(4,094	)
Returned to accruing status		(195	)
Transferred to other real estate or repossessed assets		—
Nonaccrual loans at March 31, 2017	$	8,010

Non-performing assets include non-performing loans and foreclosed assets. Non-performing assets at March 31, 2017 were $8.1 million, an increase of $1.7 million from the $6.4 million balance at December 31, 2016. The primary component of non-performing assets is non-performing loans, which were $8.0 million or 0.33% of total loans at March 31, 2017, compared with $6.3 million or 0.27% of total loans at December 31, 2016.

Approximately $2.6 million, or 33%, of the $8.0 million in non-performing loans as of March 31, 2017 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 $830 thousand and $1.4 million at March 31, 2017 and December 31, 2016, respectively. We had no TDRs that were accruing interest as of March 31, 2017 or December 31, 2016.

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 three properties totaling $58 thousand at March 31, 2017 and four properties totaling $107 thousand at December 31, 2016.

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 $14.6 million and $15.6 million in loans that continued to accrue interest which were classified as substandard as of March 31, 2017 and December 31, 2016, 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, 2017					December 31, 2016
	Amount		% of Total			Amount		% of Total
Noninterest-bearing demand	$	666,332		21.0	%	$	677,076		22.6	%
Interest-bearing demand		698,962		22.0			581,436		19.4
Savings and money market		1,069,901		33.8			1,034,194		34.5
Time deposits < $250,000		616,283		19.5			602,715		20.2
Time deposits of $250,000 or more		118,181		3.7			99,801		3.3
Total deposits	$	3,169,659		100.0	%	$	2,995,222		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, 2017, total deposits were $3.17 billion, representing an increase of $174.4 million for the year. Time deposits were approximately 23% of total deposits at March 31, 2017 and 24% at December 31, 2016.

Nonpublic deposits, the largest component of our funding sources, totaled $2.19 billion at March 31, 2017 and December 31, 2016, respectively, and represented 69% and 73% 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 $978.3 million and $803.6 million at March 31, 2017 and December 31, 2016, respectively, and represented 31% and 27% of total deposits as of the end of each period, respectively. The increase in public deposits during 2017 was due largely to seasonality.

We had no traditional brokered deposits at March 31, 2017 or December 31, 2016; 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 $157.6 million and $150.0 million, respectively, at March 31, 2017, compared to $143.2 million and $152.9 million, respectively, at December 31, 2016.

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,
	2017		2016
Short-term borrowings - Short-term FHLB borrowings	$	303,300	$	331,500
Long-term borrowings - Subordinated notes, net		39,078		39,061
Total borrowings	$	342,378	$	370,561

Short-term Borrowings

Short-term FHLB borrowings have original maturities of less then 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, 2017 consisted of $143.4 million in overnight borrowings and $159.9 million in short-term advances. The maximum amount of Short-term FHLB borrowings outstanding at any month-end during the three months ended March 31, 2017 was $336.0 million. Short-term FHLB borrowings at December 31, 2016 consisted of $171.5 million in overnight borrowings and $160.0 million in short-term advances.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

We have credit capacity with the FHLB and can borrow through facilities that include amortizing and term advances or repurchase agreements. We had approximately $101.7 million of immediate credit capacity with the FHLB as of March 31, 2017. We had approximately $554.1 million in secured borrowing capacity at the Federal Reserve Bank (“FRB”) discount window, none of which was outstanding at March 31, 2017. The FHLB and FRB credit capacity are collateralized by securities from our investment portfolio and certain qualifying loans. We had approximately $140.0 million of credit available under unsecured federal funds purchased lines with various banks as of March 31, 2017. Additionally, we had approximately $128.1 million of unencumbered liquid securities available for pledging.

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, 2017, 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 both core customer funds and maturing short-term assets; we also rely on our ability to sell or pledge securities and lines-of-credit and our overall ability to 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 $303.3 million outstanding at March 31, 2017. In addition to this amount, we have additional collateralized wholesale borrowing capacity of approximately $795.8 million from various funding sources which include the FHLB, the FRB, 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, 2017. The line of credit has a one year term and matures in May 2017. Funds drawn would be used for general corporate purposes and backup liquidity.

Cash and cash equivalents were $149.7 million as of March 31, 2017, up $78.4 million from $71.3 million as of December 31, 2016. Net cash provided by operating activities totaled $7.3 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 $71.8 million, which included outflows of $65.1 million for net loan originations and $1.4 million from net investment securities transactions. Net cash provided by financing activities of $142.9 million was attributed to a $174.4 million increase in deposits, partly offset by a $28.2 million decrease in short-term borrowings and $3.4 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 2017.

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.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

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.

Shareholders’ equity was $325.7 million at March 31, 2017, an increase of $5.6 million from $320.1 million at December 31, 2016. Net income for the year increased shareholders’ equity by $7.9 million, which was partially offset by common and preferred stock dividends declared of $3.4 million. Accumulated other comprehensive loss included in shareholders’ equity decreased $765 thousand during the first three months of 2017 due primarily to lower net unrealized losses 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, 2017, 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,
	2017			2016
Common shareholders’ equity	$	308,348		$	302,714
Less: Goodwill and other intangible assets		69,712			68,759
Net unrealized (loss) gain on investment securities (1)		(3,135	)		(3,729	)
Net periodic pension & postretirement benefits plan adjustments		(10,051	)		(10,222	)
Other		—			—
Common equity Tier 1 (“CET1”) capital		251,822			247,906
Plus: Preferred stock		17,340			17,340
Less: Other		—			—
Tier 1 Capital		269,162			265,246
Plus: Qualifying allowance for loan losses		31,081			30,934
Subordinated Notes		39,078			39,061
Total regulatory capital	$	339,321		$	335,241
Adjusted average total assets (for leverage capital purposes)	$	3,686,258		$	3,602,377
Total risk-weighted assets	$	2,661,042		$	2,584,161
Regulatory Capital Ratios
Tier 1 leverage (Tier 1 capital to adjusted average assets)		7.30	%		7.36	%
CET1 capital (CET1 capital to total risk-weighted assets)		9.46			9.59
Tier 1 capital (Tier 1 capital to total risk-weighted assets)		10.11			10.26
Total risk-based capital (Total regulatory capital to total risk-weighted assets)		12.75			12.97

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

BCBS Capital Rules

The BCBS Capital 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 is being phased-in as of January 1, 2016 at 0.625% of risk-weighted assets and increases 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 BCBS 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, 2017 and December 31, 2016 for the Company and the Bank under the BCBS 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 BCBS Capital Rules and the minimum required capital levels as of January 1, 2019 when the BCBS 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 BCBS 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, 2017
Tier 1 leverage:
Company	$	269,162		7.30	%	$	147,450		4.00	%	$	147,450		4.00	%	$	184,313		5.00	%
Bank		290,116		7.88			147,178		4.00			147,178		4.00			183,972		5.00
CET1 capital:
Company		251,822		9.46			153,010		5.75			186,273		7.00			172,968		6.50
Bank		290,116		10.94			152,534		5.75			185,693		7.00			172,429		6.50
Tier 1 capital:
Company		269,162		10.11			192,926		7.25			226,189		8.50			212,883		8.00
Bank		290,116		10.94			192,325		7.25			225,485		8.50			212,221		8.00
Total capital:
Company		339,321		12.75			246,146		9.25			279,409		10.50			266,104		10.00
Bank		321,197		12.11			245,380		9.25			278,540		10.50			265,276		10.00
December 31, 2016
Tier 1 leverage:
Company	$	265,246		7.36	%	$	144,095		4.00	%	$	144,095		4.00	%	$	180,119		5.00	%
Bank		284,765		7.92			143,862		4.00			143,862		4.00			179,828		5.00
CET1 capital:
Company		247,906		9.59			132,438		5.13			180,891		7.00			167,970		6.50
Bank		284,765		11.06			132,014		5.13			180,312		7.00			167,432		6.50
Tier 1 capital:
Company		265,246		10.26			171,201		6.63			219,654		8.50			206,733		8.00
Bank		284,765		11.06			170,652		6.63			218,950		8.50			206,070		8.00
Total capital:
Company		335,241		12.97			222,884		8.63			271,337		10.50			258,416		10.00
Bank		315,699		12.26			222,170		8.63			270,467		10.50			257,588		10.00

Dividend Restrictions

In the ordinary course of business, the Company is 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.

- 48 -

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Quantitative and qualitative disclosures about market risk were presented at December 31, 2016 in Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the Securities and Exchange Commission on March 7, 2017. 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, 2016 to March 31, 2017. 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, 2017, 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, 2018 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
Estimated change in net interest income	$	(2,483	)	$	1,634		$	3,368		$	2,322
% Change		(2.14	)%		1.41	%		2.90	%		2.00	%

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 simulation referenced above is based on our 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 variance 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, 2017 and December 31, 2016. The analysis additionally presents a measurement of the interest rate sensitivity at March 31, 2017 and December 31, 2016. 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, 2017								December 31, 2016
Rate Shock Scenario:	EVE		Change			Percentage Change			EVE		Change			Percentage Change
Pre-Shock Scenario	$	549,514							$	532,744
- 100 Basis Points		557,857	$	8,343			1.52	%		543,506	$	10,762			2.02	%
+ 100 Basis Points		528,982		(20,532	)		(3.74	)		507,924		(24,820	)		(4.66	)
+ 200 Basis Points		505,649		(43,865	)		(7.98	)		481,692		(51,052	)		(9.58	)
+ 300 Basis Points		470,875		(78,639	)		(14.31	)		445,207		(87,537	)		(16.43	)

The Pre-Shock Scenario EVE was $549.5 million at March 31, 2017, compared to $532.7 million at December 31, 2016. The increase in the Pre-Shock Scenario EVE at March 31, 2017 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 $481.7 million at December 31, 2016 to $505.6 million at March 31, 2017, 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 (9.58)% at December 31, 2016 to (7.98)% at March 31, 2017. 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, 2017, compared to December 31, 2016.

ITEM 4. Controls and Procedures

Evaluation of disclosure controls and procedures

As of March 31, 2017, 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, as amended (“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

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2017 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, 2016, dated March 7, 2017, as filed with the SEC.

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	Amended and Restated Executive Agreement, dated May 3, 2017, by and between the Company and Martin K. Birmingham	Incorporated by reference to Exhibit 10.1 of the Form 8-K, dated May 4, 2017
10.2	Amended and Restated Executive Agreement, dated May 3, 2017, by and between the Company and Kevin B. Klotzbach	Incorporated by reference to Exhibit 10.2 of the Form 8-K, dated May 4, 2017
10.3	Executive Agreement, dated May 3, 2017, by and between the Company and Michael D. Burneal	Incorporated by reference to Exhibit 10.3 of the Form 8-K, dated May 4, 2017
10.4	Executive Agreement, dated May 3, 2017, by and between the Company and Jeffrey P. Kenefick	Incorporated by reference to Exhibit 10.4 of the Form 8-K, dated May 4, 2017
10.5	Executive Agreement, dated May 3, 2017, by and between the Company and William L. Kreienberg	Incorporated by reference to Exhibit 10.5 of the Form 8-K, dated May 4, 2017
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 to18 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 5, 2017
Martin K. Birmingham
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Kevin B. Klotzbach	, May 5, 2017
Kevin B. Klotzbach
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
/s/ Michael D. Grover	, May 5, 2017
Michael D. Grover
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)

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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 5, 2017	/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 5, 2017	/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, 2017 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 5, 2017	/s/ Martin K. Birmingham
	Martin K. Birmingham
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: May 5, 2017	/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, 2017	Apr. 28, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2017
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2017
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		14,540,815

XML

Consolidated Statements Of Financial Condition - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
ASSETS
Cash and due from banks	$ 149,699	$ 71,277
Securities available for sale, at fair value	540,406	539,926
Securities held to maturity, at amortized cost (fair value of $544,438 and $539,991, respectively)	545,381	543,338
Loans held for sale	2,097	1,050
Loans (net of allowance for loan losses of $31,081 and $30,934, respectively)	2,371,546	2,309,227
Company owned life insurance	63,907	63,455
Premises and equipment, net	46,525	42,398
Goodwill and other intangible assets, net	75,343	75,640
Other assets	64,961	64,029
Total assets	3,859,865	3,710,340
Deposits:
Noninterest-bearing demand	666,332	677,076
Interest-bearing demand	698,962	581,436
Savings and money market	1,069,901	1,034,194
Time deposits	734,464	702,516
Total deposits	3,169,659	2,995,222
Short-term borrowings	303,300	331,500
Long-term borrowings, net of issuance costs of $922 and $939, respectively	39,078	39,061
Other liabilities	22,140	24,503
Total liabilities	3,534,177	3,390,286
Shareholders' equity:
Total preferred equity	17,340	17,340
Common stock, $0.01 par value; 50,000,000 shares authorized; 14,692,214 shares issued	147	147
Additional paid-in capital	81,901	81,755
Retained earnings	242,501	237,687
Accumulated other comprehensive loss	(13,186)	(13,951)
Treasury stock, at cost - 156,199 and 154,617 shares, respectively	(3,015)	(2,924)
Total shareholders' equity	325,688	320,054
Total liabilities and shareholders' equity	3,859,865	3,710,340
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, 2017	Dec. 31, 2016
Securities held to maturity, fair value	$ 544,438	$ 539,991
Loans, allowance for loan losses	31,081	30,934
Debt issuance costs	$ 922	$ 939
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	14,692,214
Treasury stock, shares	156,199	154,617
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, 2017	Mar. 31, 2016
Interest income:
Interest and fees on loans	$ 24,616	$ 22,057
Interest and dividends on investment securities	5,897	5,578
Other interest income	25
Total interest income	30,538	27,635
Interest expense:
Deposits	2,231	1,959
Short-term borrowings	694	339
Long-term borrowings	618	618
Total interest expense	3,543	2,916
Net interest income	26,995	24,719
Provision for loan losses	2,781	2,368
Net interest income after provision for loan losses	24,214	22,351
Noninterest income:
Service charges on deposits	1,745	1,724
Insurance income	1,431	1,672
ATM and debit card	1,329	1,325
Investment advisory	1,431	1,243
Company owned life insurance	445	1,368
Investments in limited partnerships	(30)	56
Loan servicing	120	116
Net gain on sale of loans held for sale	48	78
Net gain on investment securities	206	613
Net (loss) gain on other assets	(2)	4
Other	1,113	1,018
Total noninterest income	7,836	9,217
Noninterest expense:
Salaries and employee benefits	11,369	11,614
Occupancy and equipment	3,964	3,625
Professional services	1,199	1,447
Computer and data processing	1,171	1,087
Supplies and postage	537	594
FDIC assessments	457	436
Advertising and promotions	278	427
Amortization of intangibles	297	322
Other	1,670	1,666
Total noninterest expense	20,942	21,218
Income before income taxes	11,108	10,350
Income tax expense	3,165	2,732
Net income	7,943	7,618
Preferred stock dividends	365	365
Net income available to common shareholders	$ 7,578	$ 7,253
Earnings per common share (Note 3):
Basic	$ 0.52	$ 0.50
Diluted	0.52	0.50
Cash dividends declared per common share	$ 0.21	$ 0.20
Weighted average common shares outstanding:
Basic	14,479	14,395
Diluted	14,528	14,465

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Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Consolidated Statements Of Comprehensive Income [Abstract]
Net income	$ 7,943	$ 7,618
Other comprehensive income, net of tax:
Net unrealized gains on securities available for sale	594	7,083
Pension and post-retirement obligations	171	139
Total other comprehensive income, net of tax	765	7,222
Comprehensive income	$ 8,708	$ 14,840

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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, 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)
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
Cumulative-effect adjustment							(279)	279
Balance at Dec. 31, 2016					17,340	147	81,755	237,687	(13,951)	(2,924)	320,054
Adjusted Balance at Dec. 31, 2016					17,340	147	81,476	237,966	(13,951)	(2,924)	320,054
Comprehensive income:
Net income								7,943			7,943
Other comprehensive income, net of tax									765		765
Purchases of common stock for treasury										(148)	(148)
Share-based compensation plans:
Share-based compensation							239				239
Stock options exercised							4			239	243
Restricted stock awards forfeited							182			(182)
Cash dividends declared:
Preferred stock dividends per share	$ (1)	$ (1)	$ (364)	$ (364)
Common stock dividends per share								(3,043)			(3,043)
Balance at Mar. 31, 2017					$ 17,340	$ 147	$ 81,901	$ 242,501	$ (13,186)	$ (3,015)	$ 325,688

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Consolidated Statements Of Changes In Shareholders' Equity (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Common stock dividends per share, declared	$ 0.21	$ 0.20
Series A 3% Preferred Stock [Member]
Preferred stock dividends per share, declared	$ 0.75	$ 0.75
Preferred stock, dividend percentage	3.00%	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%	8.48%

XML

Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities:
Net income	$ 7,943	$ 7,618
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,477	1,487
Net amortization of premiums on securities	824	714
Provision for loan losses	2,781	2,368
Share-based compensation	239	129
Deferred income tax expense	679	131
Proceeds from sale of loans held for sale	1,663	4,144
Originations of loans held for sale	(2,662)	(3,245)
Income on company owned life insurance	(445)	(1,368)
Net gain on sale of loans held for sale	(48)	(78)
Net gain on investment securities	(206)	(613)
Net loss (gain) on other assets	2	(4)
(Increase) decrease in other assets	(2,013)	5,804
Decrease in other liabilities	(2,937)	(127)
Net cash provided by operating activities	7,297	16,960
Cash flows from investing activities:
Purchases of available for sale securities	(22,544)	(119,597)
Purchases of held to maturity securities	(16,276)	(3,612)
Proceeds from principal payments, maturities and calls on available for sale securities	10,566	48,280
Proceeds from principal payments, maturities and calls on held to maturity securities	14,470	12,381
Proceeds from sales of securities available for sale	12,350	17,627
Net loan originations	(65,100)	(33,297)
Proceeds from company owned life insurance, net of purchases	(7)	2,451
Proceeds from sales of other assets	27	109
Purchases of premises and equipment	(5,290)	(2,460)
Cash consideration paid for acquisition, net of cash acquired		(868)
Net cash used in investing activities	(71,804)	(78,986)
Cash flows from financing activities:
Net increase in deposits	174,437	229,646
Net decrease in short-term borrowings	(28,200)	(113,900)
Purchases of common stock for treasury	(148)
Proceeds from stock options exercised	243	288
Cash dividends paid to common and preferred shareholders	(3,403)	(3,185)
Net cash provided by financing activities	142,929	112,849
Net increase in cash and cash equivalents	78,422	50,823
Cash and cash equivalents, beginning of period	71,277	60,121
Cash and cash equivalents, end of period	149,699	110,944
Supplemental information:
Cash paid for interest	2,597	2,096
Cash paid for income taxes	4,500	500
Noncash investing and financing activities:
Real estate and other assets acquired in settlement of loans		140
Accrued and declared unpaid dividends	3,408	3,248
Increase (decrease) in net unsettled security purchases	$ 740	(170)
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, 2017

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 ("New York"). The Company provides diversified financial services through its subsidiaries, Five Star Bank, Scott Danahy Naylon, LLC ("SDN") 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 also has indirect lending network relationships with franchised automobile dealers in the Capital District of New York and Northern and Central Pennsylvania. SDN provides a broad range of insurance services to personal and business clients across 45 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 the Company 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. These consolidated financial statements should be read in conjunction with the Company's 2016 Annual Report on Form 10-K for the year ended December 31, 2016. 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 is assessing the impact of ASU 2014-09 on its financial statements.

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 financial statements.

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 financial statements.

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 could previously 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 adoption of ASU 2016-09 did not have a significant impact on the Company's financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends guidance on reporting credit losses for financial assets held at amortized cost basis and available for sale debt securities. Topic 326 eliminates the probable initial recognition threshold in current GAAP and instead, requires an entity to reflect its current estimate of all expected credit losses based on historical experience, current conditions and reasonable and supportable forecasts. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those years. Early adoption is permitted beginning after December 15, 2018. The Company is assessing the impact of ASU 2016-13 on its financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides guidance on the following eight specific cash flow issues: 1) debt prepayment or debt extinguishment costs; 2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; 3) contingent consideration payments made after a business combination; 4) proceeds from the settlement of insurance claims; 5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; 6) distributions received from equity method investees; 7) beneficial interests in securitization transactions; and 8) separately identifiable cash flows and application of the predominance principle. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. As this guidance only affects the classification within the statement of cash flows, this ASU is not expected to have a significant impact on the Company's financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under the new guidance, an entity will recognize an impairment charge for the amount by which the carrying value exceeds the fair value. This standard is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is assessing the impact of ASU 2017-04 on its financial statements.

In March 2017, the FASB issued ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715) – Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which provides additional guidance on the presentation of net periodic pension and postretirement benefit costs in the income statement and on the components eligible for capitalization. The amendments in this ASU require that an employer report the service cost component of the net periodic benefit costs in the same income statement line item as other compensation costs arising from services rendered by employees during the period. The non-service-cost components of net periodic benefit costs are to be presented in the income statement separately from the service cost components and outside a subtotal of income from operations. The ASU also allows for the capitalization of the service cost components, when applicable (i.e., as a cost of internally manufactured inventory or a self-constructed asset). The amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods; early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The amendments in this ASU are to be applied retrospectively. The company is assessing the impact of ASU 2017-07 on its financial statements.

In March 2017, the FASB issued ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20) – Premium Amortization on Purchased Callable Debt Securities. These amendments shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company is assessing the impact of ASU 2017-08 on its financial statements.

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Business Combinations

3 Months Ended

Mar. 31, 2017

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. 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, 2017

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,
		2017			2016
Net income available to common shareholders	$	7,578		$	7,253
Weighted average common shares outstanding:
Total shares issued		14,692			14,679
Unvested restricted stock awards		(56	)		(79	)
Treasury shares		(157	)		(205	)
Total basic weighted average common shares outstanding		14,479			14,395
Incremental shares from assumed:
Exercise of stock options		15			27
Vesting of restricted stock awards		34			43
Total diluted weighted average common shares outstanding		14,528			14,465
Basic earnings per common share	$	0.52		$	0.50
Diluted earnings per common share	$	0.52		$	0.50

For each of the periods presented, average shares subject to the following instruments were excluded from the computation of diluted EPS because the effect would be antidilutive:

Stock options	-	-
Restricted stock awards	5	-
Total	5	-

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Investment Securities

3 Months Ended

Mar. 31, 2017

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, 2017
Securities available for sale:
U.S. Government agency and government
sponsored enterprises	$	190,793	$	595	$	1,173	$	190,215
Mortgage-backed securities:
Federal National Mortgage Association		303,388		842		4,008		300,222
Federal Home Loan Mortgage Corporation		34,362		106		808		33,660
Government National Mortgage Association		14,598		313		18		14,893
Collateralized mortgage obligations:
Federal National Mortgage Association		308		-		2		306
Federal Home Loan Mortgage Corporation		59		-		1		58
Privately issued		-		819		-		819
Total mortgage-backed securities		352,715		2,080		4,837		349,958
Asset-backed securities		-		233		-		233
Total available for sale securities	$	543,508	$	2,908	$	6,010	$	540,406
Securities held to maturity:
State and political subdivisions		307,894		3,723		892		310,725
Mortgage-backed securities:
Federal National Mortgage Association		10,290		-		121		10,169
Federal Home Loan Mortgage Corporation		3,270		-		154		3,116
Government National Mortgage Association		27,151		-		256		26,895
Collateralized mortgage obligations:
Federal National Mortgage Association		85,474		21		1,433		84,062
Federal Home Loan Mortgage Corporation		98,029		75		1,791		96,313
Government National Mortgage Association		13,273		34		149		13,158
Total mortgage-backed securities		237,487		130		3,904		233,713
Total held to maturity securities	$	545,381	$	3,853	$	4,796	$	544,438

December 31, 2016
Securities available for sale:
U.S. Government agency and government
sponsored enterprises	$	187,325	$	512	$	1,569	$	186,268
Mortgage-backed securities:
Federal National Mortgage Association		288,949		897		4,413		285,433
Federal Home Loan Mortgage Corporation		30,182		114		807		29,489
Government National Mortgage Association		15,473		316		15		15,774
Collateralized mortgage obligations:
Federal National Mortgage Association		16,921		74		125		16,870
Federal Home Loan Mortgage Corporation		5,142		-		65		5,077
Privately issued		-		824		-		824
Total mortgage-backed securities		356,667		2,225		5,425		353,467
Asset-backed securities		-		191		-		191
Total available for sale securities	$	543,992	$	2,928	$	6,994	$	539,926
Securities held to maturity:
State and political subdivisions		305,248		2,127		1,616		305,759
Mortgage-backed securities:
Federal National Mortgage Association		10,362		1		124		10,239
Federal Home Loan Mortgage Corporation		3,290		-		150		3,140
Government National Mortgage Association		24,575		18		182		24,411
Collateralized mortgage obligations:
Federal National Mortgage Association		83,929		21		1,573		82,377
Federal Home Loan Mortgage Corporation		101,025		80		1,827		99,278
Government National Mortgage Association		14,909		40		162		14,787
Total mortgage-backed securities		238,090		160		4,018		234,232
Total held to maturity securities	$	543,338	$	2,287	$	5,634	$	539,991

Investment securities with a total fair value of $937.3 million at March 31, 2017 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,
		2017		2016
Proceeds from sales	$	12,350	$	17,627
Gross realized gains		206		613
Gross realized losses		-		-

The scheduled maturities of securities available for sale and securities held to maturity at March 31, 2017 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	$	27	$	27
Due from one to five years		145,749		145,749
Due after five years through ten years		302,203		300,102
Due after ten years		95,529		94,528
	$	543,508	$	540,406
Debt securities held to maturity:
Due in one year or less	$	51,256	$	51,326
Due from one to five years		176,638		179,806
Due after five years through ten years		91,549		91,059
Due after ten years		225,938		222,247
	$	545,381	$	544,438

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, 2017
Securities available for sale:
U.S. Government agency and government
sponsored enterprises	$	96,026	$	1,171	$	1,412	$	2	$	97,438	$	1,173
Mortgage-backed securities:
Federal National Mortgage Association		220,754		4,008		-		-		220,754		4,008
Federal Home Loan Mortgage Corporation		28,799		808		-		-		28,799		808
Government National Mortgage Association		-		-		1,053		18		1,053		18
Collateralized mortgage obligations:
Federal National Mortgage Association		252		1		55		1		307		2
Federal Home Loan Mortgage Corporation		59		1		-		-		59		1
Total mortgage-backed securities		249,864		4,818		1,108		19		250,972		4,837
Total available for sale securities		345,890		5,989		2,520		21		348,410		6,010
Securities held to maturity:
State and political subdivisions		47,118		892		-		-		47,118		892
Mortgage-backed securities:
Federal National Mortgage Association		10,169		121		-		-		10,169		121
Federal Home Loan Mortgage Corporation		3,116		154		-		-		3,116		154
Government National Mortgage Association		24,982		256		-		-		24,982		256
Collateralized mortgage obligations:
Federal National Mortgage Association		67,013		1,420		2,700		13		69,713		1,433
Federal Home Loan Mortgage Corporation		87,601		1,789		672		2		88,273		1,791
Government National Mortgage Association		8,042		148		305		1		8,347		149
Total mortgage-backed securities		200,923		3,888		3,677		16		204,600		3,904
Total held to maturity securities		248,041		4,780		3,677		16		251,718		4,796
Total temporarily impaired securities	$	593,931	$	10,769	$	6,197	$	37	$	600,128	$	10,806
December 31, 2016
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	113,261	$	1,566	$	1,458	$	3	$	114,719	$	1,569
Mortgage-backed securities:
Federal National Mortgage Association		211,491		4,413		-		-		211,491		4,413
Federal Home Loan Mortgage Corporation		24,360		807		-		-		24,360		807
Government National Mortgage Association		1,111		15		-		-		1,111		15
Collateralized mortgage obligations:
Federal National Mortgage Association		8,119		125		-		-		8,119		125
Federal Home Loan Mortgage Corporation		5,077		65		-		-		5,077		65
Total mortgage-backed securities		250,158		5,425		-		-		250,158		5,425
Total available for sale securities		363,419		6,991		1,458		3		364,877		6,994
Securities held to maturity:
State and political subdivisions		82,644		1,616		-		-		82,644		1,616
Mortgage-backed securities:
Federal National Mortgage Association		9,253		124		-		-		9,253		124
Federal Home Loan Mortgage Corporation		3,141		150		-		-		3,141		150
Government National Mortgage Association		10,736		182		-		-		10,736		182
Collateralized mortgage obligations:
Federal National Mortgage Association		72,734		1,560		3,107		13		75,841		1,573
Federal Home Loan Mortgage Corporation		92,256		1,825		430		2		92,686		1,827
Government National Mortgage Association		8,675		161		531		1		9,206		162
Total mortgage-backed securities		196,795		4,002		4,068		16		200,863		4,018
Total held to maturity securities		279,439		5,618		4,068		16		283,507		5,634
Total temporarily impaired securities	$	642,858	$	12,609	$	5,526	$	19	$	648,384	$	12,628

The total number of security positions in the investment portfolio in an unrealized loss position at March 31, 2017 was 360 compared to 463 at December 31, 2016. At March 31, 2017, the Company had positions in 15 investment securities with a fair value of $6.2 million and a total unrealized loss of $37 thousand that have been in a continuous unrealized loss position for more than 12 months. At March 31, 2017, there were a total of 345 securities positions in the Company's investment portfolio with a fair value of $593.9 million and a total unrealized loss of $10.8 million that had been in a continuous unrealized loss position for less than 12 months. At December 31, 2016, the Company had positions in 9 investment securities with a fair value of $5.5 million and a total unrealized loss of $19 thousand that had been in a continuous unrealized loss position for more than 12 months. At December 31, 2016, there were a total of 454 securities positions in the Company's investment portfolio with a fair value of $642.9 million and a total unrealized loss of $12.6 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, 2017 and 2016.

Based on management's review and evaluation of the Company's debt securities as of March 31, 2017, the debt securities with unrealized losses were not considered to be OTTI. As of March 31, 2017, 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, 2017, 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, 2017

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, 2017
Commercial business	$	374,992	$	526		$	375,518
Commercial mortgage		676,455		(1,448	)		675,007
Residential real estate loans		421,614		6,557			428,171
Residential real estate lines		118,056		2,818			120,874
Consumer indirect		758,761		27,359			786,120
Other consumer		16,762		175			16,937
Total	$	2,366,640	$	35,987			2,402,627
Allowance for loan losses							(31,081	)
Total loans, net						$	2,371,546
December 31, 2016
Commercial business	$	349,079	$	468		$	349,547
Commercial mortgage		671,552		(1,494	)		670,058
Residential real estate loans		421,476		6,461			427,937
Residential real estate lines		119,745		2,810			122,555
Consumer indirect		725,754		26,667			752,421
Other consumer		17,465		178			17,643
Total	$	2,305,071	$	35,090			2,340,161
Allowance for loan losses							(30,934	)
Total loans, net						$	2,309,227

Loans held for sale (not included above) were comprised entirely of residential real estate mortgages and totaled $2.1 million and $1.1 million as of March 31, 2017 and December 31, 2016, respectively.

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):

						Greater
		30-59 Days		60-89 Days		Than 90		Total Past
		Past Due		Past Due		Days		Due		Nonaccrual		Current		Total Loans
March 31, 2017
Commercial business	$	976	$	97	$	-	$	1,073	$	3,753	$	370,166	$	374,992
Commercial mortgage		99		-		-		99		1,267		675,089		676,455
Residential real estate loans		1,052		198		-		1,250		1,601		418,763		421,614
Residential real estate lines		202		63		-		265		336		117,455		118,056
Consumer indirect		1,239		303		-		1,542		1,040		756,179		758,761
Other consumer		71		12		10		93		13		16,656		16,762
Total loans, gross	$	3,639	$	673	$	10	$	4,322	$	8,010	$	2,354,308	$	2,366,640
December 31, 2016
Commercial business	$	1,337	$	-	$	-	$	1,337	$	2,151	$	345,591	$	349,079
Commercial mortgage		48		-		-		48		1,025		670,479		671,552
Residential real estate loans		1,073		253		-		1,326		1,236		418,914		421,476
Residential real estate lines		216		-		-		216		372		119,157		119,745
Consumer indirect		2,320		488		-		2,808		1,526		721,420		725,754
Other consumer		134		15		9		158		7		17,300		17,465
Total loans, gross	$	5,128	$	756	$	9	$	5,893	$	6,317	$	2,292,861	$	2,305,071

There were no loans past due greater than 90 days and still accruing interest as of March 31, 2017 and December 31, 2016. There were $10 thousand and $9 thousand in consumer overdrafts which were past due greater than 90 days as of March 31, 2017 and December 31, 2016, 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, 2017
Commercial business	-	$	-	$	-
Commercial mortgage	-		-		-
Total	-	$	-	$	-
March 31, 2016
Commercial business	2	$	312	$	312
Commercial mortgage	1		550		550
Total	3	$	862	$	862

The loans identified as TDRs by the Company during the three month period ended March 31, 2016 were previously reported as impaired loans prior to restructuring. All loans restructured during the three months ended March 31, 2016 were on nonaccrual status at the end of those respective periods. 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 classification did not have a material impact on the Company's determination of the allowance for loan losses because the modified loans were either classified as substandard, with an increased risk allowance allocation, or 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, 2017 or 2016. 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, 2017
With no related allowance recorded:
Commercial business	$	424	$	625	$	-	$	686	$	-
Commercial mortgage		589		589		-		620		-
		1,013		1,214		-		1,306		-
With an allowance recorded:
Commercial business		3,329		3,329		1,897		2,296		-
Commercial mortgage		678		678		126		432		-
		4,007		4,007		2,023		2,728		-
	$	5,020	$	5,221	$	2,023	$	4,034	$	-
December 31, 2016
With no related allowance recorded:
Commercial business	$	645	$	1,044	$	-	$	1,032	$	-
Commercial mortgage		673		882		-		725		-
		1,318		1,926		-		1,757		-
With an allowance recorded:
Commercial business		1,506		1,506		694		1,141		-
Commercial mortgage		352		352		124		486		-
		1,858		1,858		818		1,627		-
	$	3,176	$	3,784	$	818	$	3,384	$	-

(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, 2017
Uncriticized	$	351,108	$	658,453
Special mention		10,636		11,660
Substandard		13,248		6,342
Doubtful		-		-
Total	$	374,992	$	676,455
December 31, 2016
Uncriticized	$	326,254	$	652,550
Special mention		10,377		12,690
Substandard		12,448		6,312
Doubtful		-		-
Total	$	349,079	$	671,552

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, 2017
Performing	$	420,013	$	117,720	$	757,721	$	16,739
Non-performing		1,601		336		1,040		23
Total	$	421,614	$	118,056	$	758,761	$	16,762
December 31, 2016
Performing	$	420,240	$	119,373	$	724,228	$	17,449
Non-performing		1,236		372		1,526		16
Total	$	421,476	$	119,745	$	725,754	$	17,465

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):

								Residential			Residential
		Commercial			Commercial			Real Estate			Real Estate			Consumer			Other
		Business			Mortgage			Loans			Lines			Indirect			Consumer			Total
March 31, 2017
Allowance for loan losses:
Beginning balance	$	7,225		$	10,315		$	1,478		$	303		$	11,311		$	302		$	30,934
Charge-offs		(1,122	)		(10	)		(14	)		(43	)		(2,809	)		(203	)		(4,201	)
Recoveries		158			214			40			10			1,051			94			1,567
Provision		7,742			(6,852	)		(64	)		(56	)		1,909			102			2,781
Ending balance	$	14,003		$	3,667		$	1,440		$	214		$	11,462		$	295		$	31,081
Evaluated for impairment:
Individually	$	1,842		$	120		$	-		$	-		$	-		$	-		$	1,962
Collectively	$	12,161		$	3,547		$	1,440		$	214		$	11,462		$	295		$	29,119
Loans:
Ending balance	$	374,992		$	676,455		$	421,614		$	118,056		$	758,761		$	16,762		$	2,366,640
Evaluated for impairment:
Individually	$	3,549		$	1,195		$	-		$	-		$	-		$	-		$	4,744
Collectively	$	371,443		$	675,260		$	421,614		$	118,056		$	758,761		$	16,762		$	2,361,896
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 (credit)		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

Risk Characteristics

Commercial business loans primarily consist of loans to small to mid-sized 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 potential 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, 2017

Goodwill And Other Intangible Assets [Abstract]

Goodwill And Other Intangible Assets

(6.) GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The carrying amount of goodwill totaled $66.4 million as of March 31, 2017 and December 31, 2016. The Company performs a goodwill impairment test on an annual basis as of September 30^th or more frequently if events and circumstances warrant.

		Banking		Non-Banking		Total
Balance, December 31, 2016	$	48,536	$	17,881	$	66,417
No activity during the period		-		-		-
Balance, March 31, 2017	$	48,536	$	17,881	$	66,417

Other Intangible Assets

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,
		2017			2016
Other intangibles assets:
Gross carrying amount	$	12,610		$	12,610
Accumulated amortization		(3,684	)		(3,387	)
Net book value	$	8,926		$	9,223

Amortization expense for total other intangible assets was $297 thousand and $322 thousand for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017, the estimated amortization expense of other intangible assets for the remainder of 2017 and each of the next five years is as follows (in thousands):

2017 (remainder of year)	$	847
2018		1,035
2019		937
2020		840
2021		738
2022		663

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Shareholders' Equity

3 Months Ended

Mar. 31, 2017

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, 2017 and 2016:

	Outstanding		Treasury		Issued
March 31, 2017
Shares outstanding at December 31, 2016	14,537,597		154,617		14,692,214
Restricted stock awards forfeited	(9,759	)	9,759		-
Stock options exercised	12,500		(12,500	)	-
Treasury stock purchases	(4,323	)	4,323		-
Shares outstanding at March 31, 2017	14,536,015		156,199		14,692,214
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

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Accumulated Other Comprehensive Income (Loss)

3 Months Ended

Mar. 31, 2017

Accumulated Other Comprehensive Income (Loss) [Abstract]

Accumulated Other Comprehensive Income (Loss)

(8.) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the components of other comprehensive income (loss) for the three month periods ended March 31, 2017 and 2016 (in thousands):

		Pre-tax						Net-of-tax
		Amount			Tax Effect			Amount
March 31, 2017
Securities available for sale and transferred securities:
Change in unrealized gain/loss during the period	$	1,170		$	451		$	719
Reclassification adjustment for net gains included in net income (1)		(203	)		(78	)		(125	)
Total securities available for sale and transferred securities		967			373			594
Pension and post-retirement obligations:
Amortization of prior service credit included in income		(13	)		(4	)		(9	)
Amortization of net actuarial loss included in income		292			112			180
Total pension and post-retirement obligations		279			108			171
Other comprehensive income	$	1,246		$	481		$	765
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
Pension and post-retirement obligations:
Amortization of prior service credit included in income		(12	)		(5	)		(7	)
Amortization of net actuarial loss included in income		239			93			146
Total pension and post-retirement obligations		227			88			139
Other comprehensive income	$	11,761		$	4,539		$	7,222

(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 income (loss), net of tax, for the three month periods ended March 31, 2017 and 2016 was as follows (in thousands):

		Securities
		Available for			Pension and			Accumulated
		Sale and			Post-			Other
		Transferred			retirement			Comprehensive
		Securities			Obligations			Income (Loss)
March 31, 2017
Balance at beginning of year	$	(3,729	)	$	(10,222	)	$	(13,951	)
Other comprehensive income (loss) before reclassifications		719			-			719
Amounts reclassified from accumulated other comprehensive income (loss)		(125	)		171			46
Net current period other comprehensive income (loss)		594			171			765
Balance at end of period	$	(3,135	)	$	(10,051	)	$	(13,186	)
March 31, 2016
Balance at beginning of year	$	(696	)	$	(10,631	)	$	(11,327	)
Other comprehensive income (loss) before reclassifications		7,490			-			7,490
Amounts reclassified from accumulated other comprehensive income (loss)		(407	)		139			(268	)
Net current period other comprehensive income (loss)		7,083			139			7,222
Balance at end of period	$	6,387		$	(10,492	)	$	(4,105	)

The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three month periods ended March 31, 2017 and 2016 (in thousands):

		Amount Reclassified from
		Accumulated Other
Details About Accumulated Other		Comprehensive					Affected Line Item in the
Comprehensive Income (Loss) Components		Income (Loss)					Consolidated Statement of Income
		Three months ended
		March 31,
		2017			2016
Realized gain on sale of investment securities	$	206		$	613		Net gain on investment securities
Amortization of unrealized holding gains (losses)
on investment securities transferred from
available for sale to held to maturity		(3	)		49		Interest income
		203			662		Total before tax
		(78	)		(255	)	Income tax expense
		125			407		Net of tax
Amortization of pension and post-retirement items:
Prior service credit (1)		13			12		Salaries and employee benefits
Net actuarial losses (1)		(292	)		(239	)	Salaries and employee benefits
		(279	)		(227	)	Total before tax
		108			88		Income tax benefit
		(171	)		(139	)	Net of tax
Total reclassified for the period	$	(46	)	$	268

(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, 2017

Share-Based Compensation Plans [Abstract]

Share-Based Compensation Plans

(9.) SHARE-BASED COMPENSATION PLANS

The Company maintains certain stock-based compensation plans, approved by the Company's shareholders that are administered by 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 long-term growth 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 2017.

			Weighted
			Average
	Number of		Per Share
	Underlying		Grant Date
	Shares		Fair Value
RSUs	25,331	$	32.22
PSUs	12,531		33.07

The grant-date fair value for the RSUs granted during the three month period ended March 31, 2017 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 total shareholder return ("TSR") targets relative to the SNL Small Cap Bank & Thrift Index, a market index the MD&C Committee has selected as a peer group for this purpose. 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 & Thrift Index over a three-year performance period ended December 31, 2019. The shares earned based on the achievement of the TSR performance requirement, if any, will vest on February 22, 2020 assuming the recipient's continuous service to the Company.

The grant-date fair value of the PSUs granted during the three month period ended March 31, 2017 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 1.45%, (iii) expected dividend yield of 2.41% and (iv) expected stock price volatility over the expected term of the TSR award of 21.9%. The Monte Carlo simulation model is a risk analysis method that selects a random value from a range of estimates.

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, 2017. The following is a summary of restricted stock award and restricted stock units activity for the three month period ended March 31, 2017:

				Weighted
				Average
				Market
	Number of			Price at
	Shares			Grant Date
Outstanding at beginning of year	114,565		$	19.90
Granted	41,229			31.82
Vested	(16,393	)		21.19
Forfeited	(10,159	)		11.56
Outstanding at end of period	129,242		$	24.20

At March 31, 2017, there was $2.2 million of unrecognized compensation expense related to unvested restricted stock awards and restricted stock units that 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 the first three months of 2017 or 2016. There was no unrecognized compensation expense related to unvested stock options as of March 31, 2017. The following is a summary of stock option activity for the three months ended March 31, 2017 (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	49,099		$	19.00
Exercised	(12,500	)		19.44
Expired	-			-
Outstanding and exercisable at end of period	36,599		$	18.85	0.8	$	516

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, 2017 and 2016 was $180 thousand and $126 thousand, respectively. The total cash received as a result of option exercises under stock compensation plans for the three months ended March 31, 2017 and 2016 was $243 thousand and $288 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,
		2017		2016
Salaries and employee benefits	$	207	$	98
Other noninterest expense		32		31
Total share-based compensation expense	$	239	$	129

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Employee Benefit Plans

3 Months Ended

Mar. 31, 2017

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,
		2017			2016
Service cost	$	785		$	721
Interest cost on projected benefit obligation		613			601
Expected return on plan assets		(1,194	)		(1,150	)
Amortization of unrecognized prior service credit		(13	)		(12	)
Amortization of unrecognized net actuarial loss		292			239
Net periodic benefit expense	$	483		$	399

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 2017 fiscal year.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2017

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 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,
		2017		2016
Commitments to extend credit	$	536,312	$	555,713
Standby letters of credit		13,232		12,689

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the agreement. Commitments generally have fixed expiration dates or other termination clauses which may require payment of a 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 when the Company intends to sell the related loan, once originated, as well as closed residential mortgage loans held for sale, the Company enters 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 $413 thousand at March 31, 2017. The Company had no forward sales commitments at December 31, 2016. 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, 2017

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, 2017
Measured on a recurring basis:
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	-	$	190,215	$	-	$	190,215
Mortgage-backed securities		-		349,958		-		349,958
Asset-backed securities		-		233		-		233
	$	-	$	540,406	$	-	$	540,406
Measured on a nonrecurring basis:
Loans:
Loans held for sale	$	-	$	2,097	$	-	$	2,097
Collateral dependent impaired loans		-		-		1,769		1,769
Other assets:
Loan servicing rights		-		-		1,046		1,046
Other real estate owned		-		-		58		58
	$	-	$	2,097	$	2,873	$	4,970
December 31, 2016
Measured on a recurring basis:
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	-	$	186,268	$	-	$	186,268
Mortgage-backed securities		-		353,467		-		353,467
Asset-backed securities		-		191		-		191
	$	-	$	539,926	$	-	$	539,926
Measured on a nonrecurring basis:
Loans:
Loans held for sale	$	-	$	1,050	$	-	$	1,050
Collateral dependent impaired loans		-		-		901		901
Other assets:
Loan servicing rights		-		-		1,075		1,075
Other real estate owned		-		-		107		107
	$	-	$	1,050	$	2,083	$	3,133

There were no transfers between Levels 1 and 2 during the three months ended March 31, 2017 and 2016. There were no liabilities measured at fair value on a recurring or nonrecurring basis during the three month periods ended March 31, 2017 and 2016.

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	$	1,769	Appraisal of collateral (1)	Appraisal adjustments (2)	0% - 75% discount
Loan servicing rights		1,046	Discounted cash flow	Discount rate	5.4% (3)
				Constant prepayment rate	6.9% (3)
Other real estate owned		58	Appraisal of collateral (1)	Appraisal adjustments (2)	14% - 72% 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, 2017.

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, 2017				December 31, 2016
	Fair Value				Estimated				Estimated
	Measurement		Carrying		Fair		Carrying		Fair
	Hierarchy		Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	149,699	$	149,699	$	71,277	$	71,277
Securities available for sale	Level 2		540,406		540,406		539,926		539,926
Securities held to maturity	Level 2		545,381		544,438		543,338		539,991
Loans held for sale	Level 2		2,097		2,097		1,050		1,050
Loans	Level 2		2,369,777		2,343,479		2,308,326		2,285,146
Loans (1)	Level 3		1,769		1,769		901		901
Accrued interest receivable	Level 1		10,329		10,329		9,192		9,192
FHLB and FRB stock	Level 2		20,511		20,511		21,780		21,780
Financial liabilities:
Non-maturity deposits	Level 1		2,435,195		2,435,195		2,292,706		2,292,706
Time deposits	Level 2		734,464		732,294		702,516		701,097
Short-term borrowings	Level 1		303,300		303,300		331,500		331,500
Long-term borrowings	Level 2		39,078		41,518		39,061		40,701
Accrued interest payable	Level 1		6,340		6,340		5,394		5,394

⁽¹⁾ Comprised of collateral dependent impaired loans.

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Segment Reporting

3 Months Ended

Mar. 31, 2017

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 SDN, 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. 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, 2017
Goodwill	$	48,536	$	17,881	$	-	$	66,417
Other intangible assets, net		523		8,403		-		8,926
Total assets		3,826,805		30,942		2,118		3,859,865
December 31, 2016
Goodwill	$	48,536	$	17,881	$	-	$	66,417
Other intangible assets, net		579		8,644		-		9,223
Total assets		3,678,230		31,166		944		3,710,340

								Holding
								Company and			Consolidated
		Banking			Non-Banking (1)			Other			Totals
Three months ended March 31, 2017
Net interest income (expense)	$	27,613		$	-		$	(618	)	$	26,995
Provision for loan losses		(2,781	)		-			-			(2,781	)
Noninterest income		5,578			2,405			(147	)		7,836
Noninterest expense		(18,484	)		(1,834	)		(624	)		(20,942	)
Income (loss) before income taxes		11,926			571			(1,389	)		11,108
Income tax (expense) benefit		(3,573	)		(222	)		630			(3,165	)
Net income (loss)	$	8,353		$	349		$	(759	)	$	7,943
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

⁽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, 2017

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 ("New York"). The Company provides diversified financial services through its subsidiaries, Five Star Bank, Scott Danahy Naylon, LLC ("SDN") 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 also has indirect lending network relationships with franchised automobile dealers in the Capital District of New York and Northern and Central Pennsylvania. SDN provides a broad range of insurance services to personal and business clients across 45 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 the Company 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. These consolidated financial statements should be read in conjunction with the Company's 2016 Annual Report on Form 10-K for the year ended December 31, 2016. 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 is assessing the impact of ASU 2014-09 on its financial statements.

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 financial statements.

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 financial statements.

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 could previously 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 adoption of ASU 2016-09 did not have a significant impact on the Company's financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends guidance on reporting credit losses for financial assets held at amortized cost basis and available for sale debt securities. Topic 326 eliminates the probable initial recognition threshold in current GAAP and instead, requires an entity to reflect its current estimate of all expected credit losses based on historical experience, current conditions and reasonable and supportable forecasts. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those years. Early adoption is permitted beginning after December 15, 2018. The Company is assessing the impact of ASU 2016-13 on its financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides guidance on the following eight specific cash flow issues: 1) debt prepayment or debt extinguishment costs; 2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; 3) contingent consideration payments made after a business combination; 4) proceeds from the settlement of insurance claims; 5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; 6) distributions received from equity method investees; 7) beneficial interests in securitization transactions; and 8) separately identifiable cash flows and application of the predominance principle. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. As this guidance only affects the classification within the statement of cash flows, this ASU is not expected to have a significant impact on the Company's financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under the new guidance, an entity will recognize an impairment charge for the amount by which the carrying value exceeds the fair value. This standard is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is assessing the impact of ASU 2017-04 on its financial statements.

In March 2017, the FASB issued ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715) – Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which provides additional guidance on the presentation of net periodic pension and postretirement benefit costs in the income statement and on the components eligible for capitalization. The amendments in this ASU require that an employer report the service cost component of the net periodic benefit costs in the same income statement line item as other compensation costs arising from services rendered by employees during the period. The non-service-cost components of net periodic benefit costs are to be presented in the income statement separately from the service cost components and outside a subtotal of income from operations. The ASU also allows for the capitalization of the service cost components, when applicable (i.e., as a cost of internally manufactured inventory or a self-constructed asset). The amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods; early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The amendments in this ASU are to be applied retrospectively. The company is assessing the impact of ASU 2017-07 on its financial statements.

In March 2017, the FASB issued ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20) – Premium Amortization on Purchased Callable Debt Securities. These amendments shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company is assessing the impact of ASU 2017-08 on its financial statements.

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Business Combinations (Tables)

3 Months Ended

Mar. 31, 2017

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, 2017

Earnings Per Common Share ("EPS) [Abstract]

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

	Three months ended
	March 31,
		2017			2016
Net income available to common shareholders	$	7,578		$	7,253
Weighted average common shares outstanding:
Total shares issued		14,692			14,679
Unvested restricted stock awards		(56	)		(79	)
Treasury shares		(157	)		(205	)
Total basic weighted average common shares outstanding		14,479			14,395
Incremental shares from assumed:
Exercise of stock options		15			27
Vesting of restricted stock awards		34			43
Total diluted weighted average common shares outstanding		14,528			14,465
Basic earnings per common share	$	0.52		$	0.50
Diluted earnings per common share	$	0.52		$	0.50

Shares Excluded From Computation Of Diluted EPS

Stock options	-	-
Restricted stock awards	5	-
Total	5	-

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Investment Securities (Tables)

3 Months Ended

Mar. 31, 2017

Investment Securities [Abstract]

Amortized Cost And Fair Value Of Investment Securities

		Amortized		Unrealized		Unrealized		Fair
		Cost		Gains		Losses		Value
March 31, 2017
Securities available for sale:
U.S. Government agency and government
sponsored enterprises	$	190,793	$	595	$	1,173	$	190,215
Mortgage-backed securities:
Federal National Mortgage Association		303,388		842		4,008		300,222
Federal Home Loan Mortgage Corporation		34,362		106		808		33,660
Government National Mortgage Association		14,598		313		18		14,893
Collateralized mortgage obligations:
Federal National Mortgage Association		308		-		2		306
Federal Home Loan Mortgage Corporation		59		-		1		58
Privately issued		-		819		-		819
Total mortgage-backed securities		352,715		2,080		4,837		349,958
Asset-backed securities		-		233		-		233
Total available for sale securities	$	543,508	$	2,908	$	6,010	$	540,406
Securities held to maturity:
State and political subdivisions		307,894		3,723		892		310,725
Mortgage-backed securities:
Federal National Mortgage Association		10,290		-		121		10,169
Federal Home Loan Mortgage Corporation		3,270		-		154		3,116
Government National Mortgage Association		27,151		-		256		26,895
Collateralized mortgage obligations:
Federal National Mortgage Association		85,474		21		1,433		84,062
Federal Home Loan Mortgage Corporation		98,029		75		1,791		96,313
Government National Mortgage Association		13,273		34		149		13,158
Total mortgage-backed securities		237,487		130		3,904		233,713
Total held to maturity securities	$	545,381	$	3,853	$	4,796	$	544,438

December 31, 2016
Securities available for sale:
U.S. Government agency and government
sponsored enterprises	$	187,325	$	512	$	1,569	$	186,268
Mortgage-backed securities:
Federal National Mortgage Association		288,949		897		4,413		285,433
Federal Home Loan Mortgage Corporation		30,182		114		807		29,489
Government National Mortgage Association		15,473		316		15		15,774
Collateralized mortgage obligations:
Federal National Mortgage Association		16,921		74		125		16,870
Federal Home Loan Mortgage Corporation		5,142		-		65		5,077
Privately issued		-		824		-		824
Total mortgage-backed securities		356,667		2,225		5,425		353,467
Asset-backed securities		-		191		-		191
Total available for sale securities	$	543,992	$	2,928	$	6,994	$	539,926
Securities held to maturity:
State and political subdivisions		305,248		2,127		1,616		305,759
Mortgage-backed securities:
Federal National Mortgage Association		10,362		1		124		10,239
Federal Home Loan Mortgage Corporation		3,290		-		150		3,140
Government National Mortgage Association		24,575		18		182		24,411
Collateralized mortgage obligations:
Federal National Mortgage Association		83,929		21		1,573		82,377
Federal Home Loan Mortgage Corporation		101,025		80		1,827		99,278
Government National Mortgage Association		14,909		40		162		14,787
Total mortgage-backed securities		238,090		160		4,018		234,232
Total held to maturity securities	$	543,338	$	2,287	$	5,634	$	539,991

Sales And Calls Of Securities Available For Sale

		Three months ended
		March 31,
		2017		2016
Proceeds from sales	$	12,350	$	17,627
Gross realized gains		206		613
Gross realized losses		-		-

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	$	27	$	27
Due from one to five years		145,749		145,749
Due after five years through ten years		302,203		300,102
Due after ten years		95,529		94,528
	$	543,508	$	540,406
Debt securities held to maturity:
Due in one year or less	$	51,256	$	51,326
Due from one to five years		176,638		179,806
Due after five years through ten years		91,549		91,059
Due after ten years		225,938		222,247
	$	545,381	$	544,438

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, 2017
Securities available for sale:
U.S. Government agency and government
sponsored enterprises	$	96,026	$	1,171	$	1,412	$	2	$	97,438	$	1,173
Mortgage-backed securities:
Federal National Mortgage Association		220,754		4,008		-		-		220,754		4,008
Federal Home Loan Mortgage Corporation		28,799		808		-		-		28,799		808
Government National Mortgage Association		-		-		1,053		18		1,053		18
Collateralized mortgage obligations:
Federal National Mortgage Association		252		1		55		1		307		2
Federal Home Loan Mortgage Corporation		59		1		-		-		59		1
Total mortgage-backed securities		249,864		4,818		1,108		19		250,972		4,837
Total available for sale securities		345,890		5,989		2,520		21		348,410		6,010
Securities held to maturity:
State and political subdivisions		47,118		892		-		-		47,118		892
Mortgage-backed securities:
Federal National Mortgage Association		10,169		121		-		-		10,169		121
Federal Home Loan Mortgage Corporation		3,116		154		-		-		3,116		154
Government National Mortgage Association		24,982		256		-		-		24,982		256
Collateralized mortgage obligations:
Federal National Mortgage Association		67,013		1,420		2,700		13		69,713		1,433
Federal Home Loan Mortgage Corporation		87,601		1,789		672		2		88,273		1,791
Government National Mortgage Association		8,042		148		305		1		8,347		149
Total mortgage-backed securities		200,923		3,888		3,677		16		204,600		3,904
Total held to maturity securities		248,041		4,780		3,677		16		251,718		4,796
Total temporarily impaired securities	$	593,931	$	10,769	$	6,197	$	37	$	600,128	$	10,806
December 31, 2016
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	113,261	$	1,566	$	1,458	$	3	$	114,719	$	1,569
Mortgage-backed securities:
Federal National Mortgage Association		211,491		4,413		-		-		211,491		4,413
Federal Home Loan Mortgage Corporation		24,360		807		-		-		24,360		807
Government National Mortgage Association		1,111		15		-		-		1,111		15
Collateralized mortgage obligations:
Federal National Mortgage Association		8,119		125		-		-		8,119		125
Federal Home Loan Mortgage Corporation		5,077		65		-		-		5,077		65
Total mortgage-backed securities		250,158		5,425		-		-		250,158		5,425
Total available for sale securities		363,419		6,991		1,458		3		364,877		6,994
Securities held to maturity:
State and political subdivisions		82,644		1,616		-		-		82,644		1,616
Mortgage-backed securities:
Federal National Mortgage Association		9,253		124		-		-		9,253		124
Federal Home Loan Mortgage Corporation		3,141		150		-		-		3,141		150
Government National Mortgage Association		10,736		182		-		-		10,736		182
Collateralized mortgage obligations:
Federal National Mortgage Association		72,734		1,560		3,107		13		75,841		1,573
Federal Home Loan Mortgage Corporation		92,256		1,825		430		2		92,686		1,827
Government National Mortgage Association		8,675		161		531		1		9,206		162
Total mortgage-backed securities		196,795		4,002		4,068		16		200,863		4,018
Total held to maturity securities		279,439		5,618		4,068		16		283,507		5,634
Total temporarily impaired securities	$	642,858	$	12,609	$	5,526	$	19	$	648,384	$	12,628

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Loans (Tables)

3 Months Ended

Mar. 31, 2017

Loans [Abstract]

Loan Portfolio

		Principal		Net Deferred
		Amount		Loan (Fees)
		Outstanding		Costs			Loans, Net
March 31, 2017
Commercial business	$	374,992	$	526		$	375,518
Commercial mortgage		676,455		(1,448	)		675,007
Residential real estate loans		421,614		6,557			428,171
Residential real estate lines		118,056		2,818			120,874
Consumer indirect		758,761		27,359			786,120
Other consumer		16,762		175			16,937
Total	$	2,366,640	$	35,987			2,402,627
Allowance for loan losses							(31,081	)
Total loans, net						$	2,371,546
December 31, 2016
Commercial business	$	349,079	$	468		$	349,547
Commercial mortgage		671,552		(1,494	)		670,058
Residential real estate loans		421,476		6,461			427,937
Residential real estate lines		119,745		2,810			122,555
Consumer indirect		725,754		26,667			752,421
Other consumer		17,465		178			17,643
Total	$	2,305,071	$	35,090			2,340,161
Allowance for loan losses							(30,934	)
Total loans, net						$	2,309,227

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, 2017
Commercial business	$	976	$	97	$	-	$	1,073	$	3,753	$	370,166	$	374,992
Commercial mortgage		99		-		-		99		1,267		675,089		676,455
Residential real estate loans		1,052		198		-		1,250		1,601		418,763		421,614
Residential real estate lines		202		63		-		265		336		117,455		118,056
Consumer indirect		1,239		303		-		1,542		1,040		756,179		758,761
Other consumer		71		12		10		93		13		16,656		16,762
Total loans, gross	$	3,639	$	673	$	10	$	4,322	$	8,010	$	2,354,308	$	2,366,640
December 31, 2016
Commercial business	$	1,337	$	-	$	-	$	1,337	$	2,151	$	345,591	$	349,079
Commercial mortgage		48		-		-		48		1,025		670,479		671,552
Residential real estate loans		1,073		253		-		1,326		1,236		418,914		421,476
Residential real estate lines		216		-		-		216		372		119,157		119,745
Consumer indirect		2,320		488		-		2,808		1,526		721,420		725,754
Other consumer		134		15		9		158		7		17,300		17,465
Total loans, gross	$	5,128	$	756	$	9	$	5,893	$	6,317	$	2,292,861	$	2,305,071

Information Related To Loans Modified In A TDR

			Pre-		Post-
			Modification		Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment
March 31, 2017
Commercial business	-	$	-	$	-
Commercial mortgage	-		-		-
Total	-	$	-	$	-
March 31, 2016
Commercial business	2	$	312	$	312
Commercial mortgage	1		550		550
Total	3	$	862	$	862

Summary Of Impaired Loans

				Unpaid				Average		Interest
		Recorded		Principal		Related		Recorded		Income
		Investment(1)		Balance(1)		Allowance		Investment		Recognized
March 31, 2017
With no related allowance recorded:
Commercial business	$	424	$	625	$	-	$	686	$	-
Commercial mortgage		589		589		-		620		-
		1,013		1,214		-		1,306		-
With an allowance recorded:
Commercial business		3,329		3,329		1,897		2,296		-
Commercial mortgage		678		678		126		432		-
		4,007		4,007		2,023		2,728		-
	$	5,020	$	5,221	$	2,023	$	4,034	$	-
December 31, 2016
With no related allowance recorded:
Commercial business	$	645	$	1,044	$	-	$	1,032	$	-
Commercial mortgage		673		882		-		725		-
		1,318		1,926		-		1,757		-
With an allowance recorded:
Commercial business		1,506		1,506		694		1,141		-
Commercial mortgage		352		352		124		486		-
		1,858		1,858		818		1,627		-
	$	3,176	$	3,784	$	818	$	3,384	$	-

(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, 2017
Uncriticized	$	351,108	$	658,453
Special mention		10,636		11,660
Substandard		13,248		6,342
Doubtful		-		-
Total	$	374,992	$	676,455
December 31, 2016
Uncriticized	$	326,254	$	652,550
Special mention		10,377		12,690
Substandard		12,448		6,312
Doubtful		-		-
Total	$	349,079	$	671,552

Retail Loan Portfolio Categorized By Payment Status

		Residential		Residential
		Real Estate		Real Estate		Consumer		Other
		Loans		Lines		Indirect		Consumer
March 31, 2017
Performing	$	420,013	$	117,720	$	757,721	$	16,739
Non-performing		1,601		336		1,040		23
Total	$	421,614	$	118,056	$	758,761	$	16,762
December 31, 2016
Performing	$	420,240	$	119,373	$	724,228	$	17,449
Non-performing		1,236		372		1,526		16
Total	$	421,476	$	119,745	$	725,754	$	17,465

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, 2017
Allowance for loan losses:
Beginning balance	$	7,225		$	10,315		$	1,478		$	303		$	11,311		$	302		$	30,934
Charge-offs		(1,122	)		(10	)		(14	)		(43	)		(2,809	)		(203	)		(4,201	)
Recoveries		158			214			40			10			1,051			94			1,567
Provision		7,742			(6,852	)		(64	)		(56	)		1,909			102			2,781
Ending balance	$	14,003		$	3,667		$	1,440		$	214		$	11,462		$	295		$	31,081
Evaluated for impairment:
Individually	$	1,842		$	120		$	-		$	-		$	-		$	-		$	1,962
Collectively	$	12,161		$	3,547		$	1,440		$	214		$	11,462		$	295		$	29,119
Loans:
Ending balance	$	374,992		$	676,455		$	421,614		$	118,056		$	758,761		$	16,762		$	2,366,640
Evaluated for impairment:
Individually	$	3,549		$	1,195		$	-		$	-		$	-		$	-		$	4,744
Collectively	$	371,443		$	675,260		$	421,614		$	118,056		$	758,761		$	16,762		$	2,361,896
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 (credit)		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

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Goodwill And Other Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2017

Goodwill And Other Intangible Assets [Abstract]

Changes In Carrying Amount Of Goodwill

		Banking		Non-Banking		Total
Balance, December 31, 2016	$	48,536	$	17,881	$	66,417
No activity during the period		-		-		-
Balance, March 31, 2017	$	48,536	$	17,881	$	66,417

Changes In The Accumulated Amortization And Net Book Value

		March 31,			December 31,
		2017			2016
Other intangibles assets:
Gross carrying amount	$	12,610		$	12,610
Accumulated amortization		(3,684	)		(3,387	)
Net book value	$	8,926		$	9,223

Estimated Core Deposit Intangible Amortization Expense

2017 (remainder of year)	$	847
2018		1,035
2019		937
2020		840
2021		738
2022		663

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Shareholders' Equity (Tables)

3 Months Ended

Mar. 31, 2017

Shareholders' Equity [Abstract]

Changes In Shares Of Common Stock

	Outstanding		Treasury		Issued
March 31, 2017
Shares outstanding at December 31, 2016	14,537,597		154,617		14,692,214
Restricted stock awards forfeited	(9,759	)	9,759		-
Stock options exercised	12,500		(12,500	)	-
Treasury stock purchases	(4,323	)	4,323		-
Shares outstanding at March 31, 2017	14,536,015		156,199		14,692,214
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

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Accumulated Other Comprehensive Income (Loss) (Tables)

3 Months Ended

Mar. 31, 2017

Accumulated Other Comprehensive Income (Loss) [Abstract]

Components Of Other Comprehensive Income (Loss)

		Pre-tax						Net-of-tax
		Amount			Tax Effect			Amount
March 31, 2017
Securities available for sale and transferred securities:
Change in unrealized gain/loss during the period	$	1,170		$	451		$	719
Reclassification adjustment for net gains included in net income (1)		(203	)		(78	)		(125	)
Total securities available for sale and transferred securities		967			373			594
Pension and post-retirement obligations:
Amortization of prior service credit included in income		(13	)		(4	)		(9	)
Amortization of net actuarial loss included in income		292			112			180
Total pension and post-retirement obligations		279			108			171
Other comprehensive income	$	1,246		$	481		$	765
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
Pension and post-retirement obligations:
Amortization of prior service credit included in income		(12	)		(5	)		(7	)
Amortization of net actuarial loss included in income		239			93			146
Total pension and post-retirement obligations		227			88			139
Other comprehensive income	$	11,761		$	4,539		$	7,222

(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			Income (Loss)
March 31, 2017
Balance at beginning of year	$	(3,729	)	$	(10,222	)	$	(13,951	)
Other comprehensive income (loss) before reclassifications		719			-			719
Amounts reclassified from accumulated other comprehensive income (loss)		(125	)		171			46
Net current period other comprehensive income (loss)		594			171			765
Balance at end of period	$	(3,135	)	$	(10,051	)	$	(13,186	)
March 31, 2016
Balance at beginning of year	$	(696	)	$	(10,631	)	$	(11,327	)
Other comprehensive income (loss) before reclassifications		7,490			-			7,490
Amounts reclassified from accumulated other comprehensive income (loss)		(407	)		139			(268	)
Net current period other comprehensive income (loss)		7,083			139			7,222
Balance at end of period	$	6,387		$	(10,492	)	$	(4,105	)

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

		Amount Reclassified from
		Accumulated Other
Details About Accumulated Other		Comprehensive					Affected Line Item in the
Comprehensive Income (Loss) Components		Income (Loss)					Consolidated Statement of Income
		Three months ended
		March 31,
		2017			2016
Realized gain on sale of investment securities	$	206		$	613		Net gain on investment securities
Amortization of unrealized holding gains (losses)
on investment securities transferred from
available for sale to held to maturity		(3	)		49		Interest income
		203			662		Total before tax
		(78	)		(255	)	Income tax expense
		125			407		Net of tax
Amortization of pension and post-retirement items:
Prior service credit (1)		13			12		Salaries and employee benefits
Net actuarial losses (1)		(292	)		(239	)	Salaries and employee benefits
		(279	)		(227	)	Total before tax
		108			88		Income tax benefit
		(171	)		(139	)	Net of tax
Total reclassified for the period	$	(46	)	$	268

(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, 2017

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	25,331	$	32.22
PSUs	12,531		33.07

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	49,099		$	19.00
Exercised	(12,500	)		19.44
Expired	-			-
Outstanding and exercisable at end of period	36,599		$	18.85	0.8	$	516

Summary Of Restricted Stock Award Activity

				Weighted
				Average
				Market
	Number of			Price at
	Shares			Grant Date
Outstanding at beginning of year	114,565		$	19.90
Granted	41,229			31.82
Vested	(16,393	)		21.19
Forfeited	(10,159	)		11.56
Outstanding at end of period	129,242		$	24.20

Share-Based Compensation Expense Included In Consolidated Statements Of Income

	Three months ended
	March 31,
		2017		2016
Salaries and employee benefits	$	207	$	98
Other noninterest expense		32		31
Total share-based compensation expense	$	239	$	129

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Employee Benefit Plans (Tables)

3 Months Ended

Mar. 31, 2017

Employee Benefit Plans [Abstract]

Components Of Net Periodic Benefit Expense

	Three months ended
	March 31,
		2017			2016
Service cost	$	785		$	721
Interest cost on projected benefit obligation		613			601
Expected return on plan assets		(1,194	)		(1,150	)
Amortization of unrecognized prior service credit		(13	)		(12	)
Amortization of unrecognized net actuarial loss		292			239
Net periodic benefit expense	$	483		$	399

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2017

Commitments And Contingencies [Abstract]

Off-Balance Sheet Commitments

		March 31,		December 31,
		2017		2016
Commitments to extend credit	$	536,312	$	555,713
Standby letters of credit		13,232		12,689

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2017

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, 2017
Measured on a recurring basis:
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	-	$	190,215	$	-	$	190,215
Mortgage-backed securities		-		349,958		-		349,958
Asset-backed securities		-		233		-		233
	$	-	$	540,406	$	-	$	540,406
Measured on a nonrecurring basis:
Loans:
Loans held for sale	$	-	$	2,097	$	-	$	2,097
Collateral dependent impaired loans		-		-		1,769		1,769
Other assets:
Loan servicing rights		-		-		1,046		1,046
Other real estate owned		-		-		58		58
	$	-	$	2,097	$	2,873	$	4,970
December 31, 2016
Measured on a recurring basis:
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	-	$	186,268	$	-	$	186,268
Mortgage-backed securities		-		353,467		-		353,467
Asset-backed securities		-		191		-		191
	$	-	$	539,926	$	-	$	539,926
Measured on a nonrecurring basis:
Loans:
Loans held for sale	$	-	$	1,050	$	-	$	1,050
Collateral dependent impaired loans		-		-		901		901
Other assets:
Loan servicing rights		-		-		1,075		1,075
Other real estate owned		-		-		107		107
	$	-	$	1,050	$	2,083	$	3,133

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	$	1,769	Appraisal of collateral (1)	Appraisal adjustments (2)	0% - 75% discount
Loan servicing rights		1,046	Discounted cash flow	Discount rate	5.4% (3)
				Constant prepayment rate	6.9% (3)
Other real estate owned		58	Appraisal of collateral (1)	Appraisal adjustments (2)	14% - 72% 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, 2017				December 31, 2016
	Fair Value				Estimated				Estimated
	Measurement		Carrying		Fair		Carrying		Fair
	Hierarchy		Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	149,699	$	149,699	$	71,277	$	71,277
Securities available for sale	Level 2		540,406		540,406		539,926		539,926
Securities held to maturity	Level 2		545,381		544,438		543,338		539,991
Loans held for sale	Level 2		2,097		2,097		1,050		1,050
Loans	Level 2		2,369,777		2,343,479		2,308,326		2,285,146
Loans (1)	Level 3		1,769		1,769		901		901
Accrued interest receivable	Level 1		10,329		10,329		9,192		9,192
FHLB and FRB stock	Level 2		20,511		20,511		21,780		21,780
Financial liabilities:
Non-maturity deposits	Level 1		2,435,195		2,435,195		2,292,706		2,292,706
Time deposits	Level 2		734,464		732,294		702,516		701,097
Short-term borrowings	Level 1		303,300		303,300		331,500		331,500
Long-term borrowings	Level 2		39,078		41,518		39,061		40,701
Accrued interest payable	Level 1		6,340		6,340		5,394		5,394

⁽¹⁾ Comprised of collateral dependent impaired loans.

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Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Business Segment Assets

						Holding
						Company and		Consolidated
		Banking		Non-Banking		Other		Totals
March 31, 2017
Goodwill	$	48,536	$	17,881	$	-	$	66,417
Other intangible assets, net		523		8,403		-		8,926
Total assets		3,826,805		30,942		2,118		3,859,865
December 31, 2016
Goodwill	$	48,536	$	17,881	$	-	$	66,417
Other intangible assets, net		579		8,644		-		9,223
Total assets		3,678,230		31,166		944		3,710,340

Business Segment Profit (Loss)

								Holding
								Company and			Consolidated
		Banking			Non-Banking (1)			Other			Totals
Three months ended March 31, 2017
Net interest income (expense)	$	27,613		$	-		$	(618	)	$	26,995
Provision for loan losses		(2,781	)		-			-			(2,781	)
Noninterest income		5,578			2,405			(147	)		7,836
Noninterest expense		(18,484	)		(1,834	)		(624	)		(20,942	)
Income (loss) before income taxes		11,926			571			(1,389	)		11,108
Income tax (expense) benefit		(3,573	)		(222	)		630			(3,165	)
Net income (loss)	$	8,353		$	349		$	(759	)	$	7,943
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

⁽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, 2017 state
Number of states in which services are provided	45
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
Common stock issued for acquisition	8,100
Cash	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, 2017	Mar. 31, 2016
Earnings Per Common Share ("EPS) [Abstract]
Net income available to common shareholders	$ 7,578	$ 7,253
Total shares issued	14,692	14,679
Unvested restricted stock awards	(56)	(79)
Treasury shares	(157)	(205)
Total basic weighted average common shares outstanding	14,479	14,395
Exercise of stock options	15	27
Vesting of restricted stock awards	34	43
Total diluted weighted average common shares outstanding	14,528	14,465
Basic earnings per common share	$ 0.52	$ 0.50
Diluted earnings per common share	$ 0.52	$ 0.50

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Earnings Per Common Share ("EPS) (Shares Excluded from Computation of Diluted EPS) (Details) shares in Thousands	3 Months Ended
	Mar. 31, 2017 shares
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive shares excluded from computation of diluted EPS	5
Restricted Stock Awards [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive shares excluded from computation of diluted EPS	5

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Investment Securities (Narrative) (Details) $ in Thousands	Mar. 31, 2017 USD ($) security	Dec. 31, 2016 USD ($) security
Investment Securities [Abstract]
Securities pledged as collateral	$ 937,300
Number of security positions, unrealized loss position | security	360	463
Number of security positions, unrealized loss position for more than 12 months | security	15	9
Securities, 12 months or longer, Fair Value	$ 6,197	$ 5,526
Securities, 12 months or longer, Unrealized Losses	$ 37	$ 19
Number of security positions, unrealized loss position for less than 12 months | security	345	454
Securities, less than 12 months, Fair Value	$ 593,931	$ 642,858
Securities, less than 12 months, Unrealized Losses	$ 10,769	$ 12,609

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Investment Securities (Amortized Cost And Fair Value Of Investment Securities) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Investment [Line Items]
Securities available for sale, Amortized Cost	$ 543,508	$ 543,992
Securities available for sale, Unrealized Gains	2,908	2,928
Securities available for sale, Unrealized Losses	6,010	6,994
Securities available for sale	540,406	539,926
Securities held to maturity, Amortized Cost	545,381	543,338
Securities held to maturity, Unrealized Gains	3,853	2,287
Securities held to maturity, Unrealized Losses	4,796	5,634
Securities held to maturity, fair value	544,438	539,991
U.S. Government Agencies And Government Sponsored Enterprises [Member]
Investment [Line Items]
Securities available for sale, Amortized Cost	190,793	187,325
Securities available for sale, Unrealized Gains	595	512
Securities available for sale, Unrealized Losses	1,173	1,569
Securities available for sale	190,215	186,268
State And Political Subdivisions [Member]
Investment [Line Items]
Securities held to maturity, Amortized Cost	307,894	305,248
Securities held to maturity, Unrealized Gains	3,723	2,127
Securities held to maturity, Unrealized Losses	892	1,616
Securities held to maturity, fair value	310,725	305,759
Collateralized Mortgage Obligations [Member] | Federal National Mortgage Association [Member]
Investment [Line Items]
Securities available for sale, Amortized Cost	308	16,921
Securities available for sale, Unrealized Gains		74
Securities available for sale, Unrealized Losses	2	125
Securities available for sale	306	16,870
Securities held to maturity, Amortized Cost	85,474	83,929
Securities held to maturity, Unrealized Gains	21	21
Securities held to maturity, Unrealized Losses	1,433	1,573
Securities held to maturity, fair value	84,062	82,377
Collateralized Mortgage Obligations [Member] | Federal Home Loan Mortgage Corporation [Member]
Investment [Line Items]
Securities available for sale, Amortized Cost	59	5,142
Securities available for sale, Unrealized Losses	1	65
Securities available for sale	58	5,077
Securities held to maturity, Amortized Cost	98,029	101,025
Securities held to maturity, Unrealized Gains	75	80
Securities held to maturity, Unrealized Losses	1,791	1,827
Securities held to maturity, fair value	96,313	99,278
Collateralized Mortgage Obligations [Member] | Government National Mortgage Association [Member]
Investment [Line Items]
Securities held to maturity, Amortized Cost	13,273	14,909
Securities held to maturity, Unrealized Gains	34	40
Securities held to maturity, Unrealized Losses	149	162
Securities held to maturity, fair value	13,158	14,787
Collateralized Mortgage Obligations [Member] | Privately Issued [Member]
Investment [Line Items]
Securities available for sale, Unrealized Gains	819	824
Securities available for sale	819	824
Mortgage-Backed Securities [Member]
Investment [Line Items]
Securities available for sale, Amortized Cost	352,715	356,667
Securities available for sale, Unrealized Gains	2,080	2,225
Securities available for sale, Unrealized Losses	4,837	5,425
Securities available for sale	349,958	353,467
Securities held to maturity, Amortized Cost	237,487	238,090
Securities held to maturity, Unrealized Gains	130	160
Securities held to maturity, Unrealized Losses	3,904	4,018
Securities held to maturity, fair value	233,713	234,232
Mortgage-Backed Securities [Member] | Federal National Mortgage Association [Member]
Investment [Line Items]
Securities available for sale, Amortized Cost	303,388	288,949
Securities available for sale, Unrealized Gains	842	897
Securities available for sale, Unrealized Losses	4,008	4,413
Securities available for sale	300,222	285,433
Securities held to maturity, Amortized Cost	10,290	10,362
Securities held to maturity, Unrealized Gains		1
Securities held to maturity, Unrealized Losses	121	124
Securities held to maturity, fair value	10,169	10,239
Mortgage-Backed Securities [Member] | Federal Home Loan Mortgage Corporation [Member]
Investment [Line Items]
Securities available for sale, Amortized Cost	34,362	30,182
Securities available for sale, Unrealized Gains	106	114
Securities available for sale, Unrealized Losses	808	807
Securities available for sale	33,660	29,489
Securities held to maturity, Amortized Cost	3,270	3,290
Securities held to maturity, Unrealized Losses	154	150
Securities held to maturity, fair value	3,116	3,140
Mortgage-Backed Securities [Member] | Government National Mortgage Association [Member]
Investment [Line Items]
Securities available for sale, Amortized Cost	14,598	15,473
Securities available for sale, Unrealized Gains	313	316
Securities available for sale, Unrealized Losses	18	15
Securities available for sale	14,893	15,774
Securities held to maturity, Amortized Cost	27,151	24,575
Securities held to maturity, Unrealized Gains		18
Securities held to maturity, Unrealized Losses	256	182
Securities held to maturity, fair value	26,895	24,411
Asset-Backed Securities [Member]
Investment [Line Items]
Securities available for sale, Unrealized Gains	233	191
Securities available for sale	$ 233	$ 191

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Investment Securities (Sales And Calls Of Securities Available For Sale) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Investment Securities [Abstract]
Proceeds from sales	$ 12,350	$ 17,627
Gross realized gains	$ 206	$ 613

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Investment Securities (Scheduled Maturities Of Securities Available For Sale And Securities Held To Maturity) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Investment Securities [Abstract]
Debt securities available for sale, Due in one year or less, Amortized Cost	$ 27
Debt securities available for sale, Due from one to five years, Amortized Cost	145,749
Debt securities available for sale, Due after five years through ten years, Amortized Cost	302,203
Debt securities available for sale, Due after ten years, Amortized Cost	95,529
Debt securities available for sale, Amortized Cost	543,508
Debt securities available for sale, Due in one year or less, Fair Value	27
Debt securities available for sale, Due from one to five years, Fair Value	145,749
Debt securities available for sale, Due after five years through ten years, Fair Value	300,102
Debt securities available for sale, Due after ten years, Fair Value	94,528
Debt securities available for sale, Fair Value	540,406
Debt securities held to maturity, Due in one year or less, Amortized Cost	51,256
Debt securities held to maturity, Due from one to five years, Amortized Cost	176,638
Debt securities held to maturity, Due after five years through ten years, Amortized Cost	91,549
Debt securities held to maturity, Due after ten years, Amortized Cost	225,938
Securities held to maturity, Amortized Cost	545,381	$ 543,338
Debt securities held to maturity, Due in one year or less, Fair Value	51,326
Debt securities held to maturity, Due from one to five years, Fair Value	179,806
Debt securities held to maturity, Due after five years through ten years, Fair Value	91,059
Debt securities held to maturity, Due after ten years, Fair Value	222,247
Securities held to maturity, Fair Value	$ 544,438	$ 539,991

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Investment Securities (Investments Gross Unrealized Losses And Fair Value) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Investment [Line Items]
Securities available for sale, Less than 12 months, Fair Value	$ 345,890	$ 363,419
Securities available for sale, Less than 12 months, Unrealized Losses	5,989	6,991
Securities available for sale, 12 months or longer, Fair Value	2,520	1,458
Securities available for sale, 12 months or longer, Unrealized Losses	21	3
Securities available for sale, Fair Value, Total	348,410	364,877
Securities available for sale, Unrealized Losses, Total	6,010	6,994
Securities held to maturity, Less than 12 months, Fair Value	248,041	279,439
Securities held to maturity, Less than 12 months, Unrealized Losses	4,780	5,618
Securities held to maturity, 12 months or longer, Fair Value	3,677	4,068
Securities held to maturity, 12 months or longer, Unrealized Losses	16	16
Securities held to maturity, Fair Value, Total	251,718	283,507
Securities held to maturity, Unrealized Losses, Total	4,796	5,634
Total Securities, Less than 12 months, Fair Value	593,931	642,858
Total Securities, Less than 12 months, Unrealized Losses	10,769	12,609
Total Securities, 12 months or longer, Fair Value	6,197	5,526
Total Securities, 12 months or longer, Unrealized Losses	37	19
Total Securities, Fair Value	600,128	648,384
Total Securities, Unrealized Losses	10,806	12,628
U.S. Government Agencies And Government Sponsored Enterprises [Member]
Investment [Line Items]
Securities available for sale, Less than 12 months, Fair Value	96,026	113,261
Securities available for sale, Less than 12 months, Unrealized Losses	1,171	1,566
Securities available for sale, 12 months or longer, Fair Value	1,412	1,458
Securities available for sale, 12 months or longer, Unrealized Losses	2	3
Securities available for sale, Fair Value, Total	97,438	114,719
Securities available for sale, Unrealized Losses, Total	1,173	1,569
State And Political Subdivisions [Member]
Investment [Line Items]
Securities held to maturity, Less than 12 months, Fair Value	47,118	82,644
Securities held to maturity, Less than 12 months, Unrealized Losses	892	1,616
Securities held to maturity, Fair Value, Total	47,118	82,644
Securities held to maturity, Unrealized Losses, Total	892	1,616
Collateralized Mortgage Obligations [Member] | Federal National Mortgage Association [Member]
Investment [Line Items]
Securities available for sale, Less than 12 months, Fair Value	252	8,119
Securities available for sale, Less than 12 months, Unrealized Losses	1	125
Securities available for sale, 12 months or longer, Fair Value	55
Securities available for sale, 12 months or longer, Unrealized Losses	1
Securities available for sale, Fair Value, Total	307	8,119
Securities available for sale, Unrealized Losses, Total	2	125
Securities held to maturity, Less than 12 months, Fair Value	67,013	72,734
Securities held to maturity, Less than 12 months, Unrealized Losses	1,420	1,560
Securities held to maturity, 12 months or longer, Fair Value	2,700	3,107
Securities held to maturity, 12 months or longer, Unrealized Losses	13	13
Securities held to maturity, Fair Value, Total	69,713	75,841
Securities held to maturity, Unrealized Losses, Total	1,433	1,573
Collateralized Mortgage Obligations [Member] | Federal Home Loan Mortgage Corporation [Member]
Investment [Line Items]
Securities available for sale, Less than 12 months, Fair Value	59	5,077
Securities available for sale, Less than 12 months, Unrealized Losses	1	65
Securities available for sale, Fair Value, Total	59	5,077
Securities available for sale, Unrealized Losses, Total	1	65
Securities held to maturity, Less than 12 months, Fair Value	87,601	92,256
Securities held to maturity, Less than 12 months, Unrealized Losses	1,789	1,825
Securities held to maturity, 12 months or longer, Fair Value	672	430
Securities held to maturity, 12 months or longer, Unrealized Losses	2	2
Securities held to maturity, Fair Value, Total	88,273	92,686
Securities held to maturity, Unrealized Losses, Total	1,791	1,827
Collateralized Mortgage Obligations [Member] | Government National Mortgage Association [Member]
Investment [Line Items]
Securities held to maturity, Less than 12 months, Fair Value	8,042	8,675
Securities held to maturity, Less than 12 months, Unrealized Losses	148	161
Securities held to maturity, 12 months or longer, Fair Value	305	531
Securities held to maturity, 12 months or longer, Unrealized Losses	1	1
Securities held to maturity, Fair Value, Total	8,347	9,206
Securities held to maturity, Unrealized Losses, Total	149	162
Mortgage-Backed Securities [Member]
Investment [Line Items]
Securities available for sale, Less than 12 months, Fair Value	249,864	250,158
Securities available for sale, Less than 12 months, Unrealized Losses	4,818	5,425
Securities available for sale, 12 months or longer, Fair Value	1,108
Securities available for sale, 12 months or longer, Unrealized Losses	19
Securities available for sale, Fair Value, Total	250,972	250,158
Securities available for sale, Unrealized Losses, Total	4,837	5,425
Securities held to maturity, Less than 12 months, Fair Value	200,923	196,795
Securities held to maturity, Less than 12 months, Unrealized Losses	3,888	4,002
Securities held to maturity, 12 months or longer, Fair Value	3,677	4,068
Securities held to maturity, 12 months or longer, Unrealized Losses	16	16
Securities held to maturity, Fair Value, Total	204,600	200,863
Securities held to maturity, Unrealized Losses, Total	3,904	4,018
Mortgage-Backed Securities [Member] | Federal National Mortgage Association [Member]
Investment [Line Items]
Securities available for sale, Less than 12 months, Fair Value	220,754	211,491
Securities available for sale, Less than 12 months, Unrealized Losses	4,008	4,413
Securities available for sale, Fair Value, Total	220,754	211,491
Securities available for sale, Unrealized Losses, Total	4,008	4,413
Securities held to maturity, Less than 12 months, Fair Value	10,169	9,253
Securities held to maturity, Less than 12 months, Unrealized Losses	121	124
Securities held to maturity, Fair Value, Total	10,169	9,253
Securities held to maturity, Unrealized Losses, Total	121	124
Mortgage-Backed Securities [Member] | Federal Home Loan Mortgage Corporation [Member]
Investment [Line Items]
Securities available for sale, Less than 12 months, Fair Value	28,799	24,360
Securities available for sale, Less than 12 months, Unrealized Losses	808	807
Securities available for sale, Fair Value, Total	28,799	24,360
Securities available for sale, Unrealized Losses, Total	808	807
Securities held to maturity, Less than 12 months, Fair Value	3,116	3,141
Securities held to maturity, Less than 12 months, Unrealized Losses	154	150
Securities held to maturity, Fair Value, Total	3,116	3,141
Securities held to maturity, Unrealized Losses, Total	154	150
Mortgage-Backed Securities [Member] | Government National Mortgage Association [Member]
Investment [Line Items]
Securities available for sale, Less than 12 months, Fair Value		1,111
Securities available for sale, Less than 12 months, Unrealized Losses		15
Securities available for sale, 12 months or longer, Fair Value	1,053
Securities available for sale, 12 months or longer, Unrealized Losses	18
Securities available for sale, Fair Value, Total	1,053	1,111
Securities available for sale, Unrealized Losses, Total	18	15
Securities held to maturity, Less than 12 months, Fair Value	24,982	10,736
Securities held to maturity, Less than 12 months, Unrealized Losses	256	182
Securities held to maturity, Fair Value, Total	24,982	10,736
Securities held to maturity, Unrealized Losses, Total	$ 256	$ 182

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Loans (Narrative) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) contract	Mar. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans held for sale		$ 2,097	$ 1,050
Past due greater than 90 days and still accruing interest		0	0
Past Due Loans		4,322	5,893
Number of Contracts | contract	3
Pre-Modification Outstanding Recorded Investment	$ 862
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due Loans		1,250	1,326
Commercial Business [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due Loans		1,073	1,337
Number of Contracts | contract	2
Pre-Modification Outstanding Recorded Investment	$ 312
Greater than 90 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past Due Loans		$ 10	$ 9

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Loans (Loan Portfolio) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross	$ 2,366,640	$ 2,305,071
Net Deferred Loan Costs (Fees)	35,987	35,090
Loans, Net	2,402,627	2,340,161
Allowance for loan losses	(31,081)	(30,934)
Total loans, net	2,371,546	2,309,227
Commercial Business [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross	374,992	349,079
Net Deferred Loan Costs (Fees)	526	468
Loans, Net	375,518	349,547
Commercial Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross	676,455	671,552
Net Deferred Loan Costs (Fees)	(1,448)	(1,494)
Loans, Net	675,007	670,058
Residential Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross	421,614	421,476
Net Deferred Loan Costs (Fees)	6,557	6,461
Loans, Net	428,171	427,937
Residential Real Estate Lines [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross	118,056	119,745
Net Deferred Loan Costs (Fees)	2,818	2,810
Loans, Net	120,874	122,555
Consumer Indirect [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross	758,761	725,754
Net Deferred Loan Costs (Fees)	27,359	26,667
Loans, Net	786,120	752,421
Other Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Gross	16,762	17,465
Net Deferred Loan Costs (Fees)	175	178
Loans, Net	$ 16,937	$ 17,643

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Loans (Recorded Investment By Loan Class In Current And Nonaccrual Loans) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	$ 4,322	$ 5,893
Nonaccrual	8,010	6,317
Current	2,354,308	2,292,861
Total loans	2,366,640	2,305,071	$ 2,083,757
30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	3,639	5,128
60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	673	756
Greater than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	10	9
Commercial Business [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	1,073	1,337
Nonaccrual	3,753	2,151
Current	370,166	345,591
Total loans	374,992	349,079	317,420
Commercial Business [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	976	1,337
Commercial Business [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	97
Commercial Mortgage [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	99	48
Nonaccrual	1,267	1,025
Current	675,089	670,479
Total loans	676,455	671,552	591,800
Commercial Mortgage [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	99	48
Residential Real Estate Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	1,250	1,326
Nonaccrual	1,601	1,236
Current	418,763	418,914
Total loans	421,614	421,476	377,406
Residential Real Estate Loans [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	1,052	1,073
Residential Real Estate Loans [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	198	253
Residential Real Estate Lines [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	265	216
Nonaccrual	336	372
Current	117,455	119,157
Total loans	118,056	119,745	123,894
Residential Real Estate Lines [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	202	216
Residential Real Estate Lines [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	63
Consumer Indirect [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	1,542	2,808
Nonaccrual	1,040	1,526
Current	756,179	721,420
Total loans	758,761	725,754	655,348
Consumer Indirect [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	1,239	2,320
Consumer Indirect [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	303	488
Other Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	93	158
Nonaccrual	13	7
Current	16,656	17,300
Total loans	16,762	17,465	$ 17,889
Other Consumer [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	71	134
Other Consumer [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	12	15
Other Consumer [Member] | Greater than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Loans	$ 10	$ 9

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

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Loans (Summary Of Impaired Loans) (Details) - USD ($) $ in Thousands		3 Months Ended	12 Months Ended
		Mar. 31, 2017	Dec. 31, 2016
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance recorded	[1]	$ 1,013	$ 1,318
Recorded Investment, With an allowance recorded	[1]	4,007	1,858
Recorded Investment	[1]	5,020	3,176
Unpaid Principal Balance, With no related allowance recorded	[1]	1,214	1,926
Unpaid Principal Balance, With an allowance recorded	[1]	4,007	1,858
Unpaid Principal Balance	[1]	5,221	3,784
Related Allowance		2,023	818
Average Recorded Investment, With no related allowance recorded		1,306	1,757
Average Recorded Investment, With an allowance recorded		2,728	1,627
Average Recorded Investment		4,034	3,384
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]	424	645
Recorded Investment, With an allowance recorded	[1]	3,329	1,506
Unpaid Principal Balance, With no related allowance recorded	[1]	625	1,044
Unpaid Principal Balance, With an allowance recorded	[1]	3,329	1,506
Related Allowance		1,897	694
Average Recorded Investment, With no related allowance recorded		686	1,032
Average Recorded Investment, With an allowance recorded		2,296	1,141
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]	589	673
Recorded Investment, With an allowance recorded	[1]	678	352
Unpaid Principal Balance, With no related allowance recorded	[1]	589	882
Unpaid Principal Balance, With an allowance recorded	[1]	678	352
Related Allowance		126	124
Average Recorded Investment, With no related allowance recorded		620	725
Average Recorded Investment, With an allowance recorded		432	486
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, 2017	Dec. 31, 2016
Financing Receivable, Recorded Investment [Line Items]
Total Loans	$ 2,366,640	$ 2,305,071
Commercial Business [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	374,992	349,079
Commercial Business [Member] | Uncriticized [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	351,108	326,254
Commercial Business [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	10,636	10,377
Commercial Business [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	13,248	12,448
Commercial Business [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans
Commercial Mortgage [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	676,455	671,552
Commercial Mortgage [Member] | Uncriticized [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	658,453	652,550
Commercial Mortgage [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	11,660	12,690
Commercial Mortgage [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	6,342	6,312
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, 2017	Dec. 31, 2016
Financing Receivable, Recorded Investment [Line Items]
Total Loans	$ 2,366,640	$ 2,305,071
Residential Real Estate Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	421,614	421,476
Residential Real Estate Loans [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	420,013	420,240
Residential Real Estate Loans [Member] | Non-Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	1,601	1,236
Residential Real Estate Lines [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	118,056	119,745
Residential Real Estate Lines [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	117,720	119,373
Residential Real Estate Lines [Member] | Non-Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	336	372
Consumer Indirect [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	758,761	725,754
Consumer Indirect [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	757,721	724,228
Consumer Indirect [Member] | Non-Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	1,040	1,526
Other Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	16,762	17,465
Other Consumer [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	16,739	17,449
Other Consumer [Member] | Non-Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	$ 23	$ 16

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Loans (Changes In The Allowance For Loan Losses) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	$ 30,934	$ 27,085
Charge-offs	(4,201)	(3,311)
Recoveries	1,567	1,426
Provision	2,781	2,368
Ending balance	31,081	27,568
Allowance for loan losses, Individually Evaluated for impairment	1,962	911
Allowance for loan losses, Collectively Evaluated for impairment	29,119	26,657
Loans, Ending balance	2,366,640	2,083,757	$ 2,305,071
Loans, Individually Evaluated for impairment	4,744	5,654
Loans, Collectively Evaluated for impairment	2,361,896	2,078,103
Commercial Business [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	7,225	5,540
Charge-offs	(1,122)	(602)
Recoveries	158	100
Provision	7,742	398
Ending balance	14,003	5,436
Allowance for loan losses, Individually Evaluated for impairment	1,842	791
Allowance for loan losses, Collectively Evaluated for impairment	12,161	4,645
Loans, Ending balance	374,992	317,420	349,079
Loans, Individually Evaluated for impairment	3,549	3,924
Loans, Collectively Evaluated for impairment	371,443	313,496
Commercial Mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	10,315	9,027
Charge-offs	(10)	(4)
Recoveries	214	5
Provision	(6,852)	687
Ending balance	3,667	9,715
Allowance for loan losses, Individually Evaluated for impairment	120	120
Allowance for loan losses, Collectively Evaluated for impairment	3,547	9,595
Loans, Ending balance	676,455	591,800	671,552
Loans, Individually Evaluated for impairment	1,195	1,730
Loans, Collectively Evaluated for impairment	675,260	590,070
Residential Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	1,478	1,347
Charge-offs	(14)	(46)
Recoveries	40	25
Provision	(64)	58
Ending balance	1,440	1,384
Allowance for loan losses, Collectively Evaluated for impairment	1,440	1,384
Loans, Ending balance	421,614	377,406	421,476
Loans, Collectively Evaluated for impairment	421,614	377,406
Residential Real Estate Lines [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	303	345
Charge-offs	(43)	(4)
Recoveries	10	4
Provision	(56)
Ending balance	214	345
Allowance for loan losses, Collectively Evaluated for impairment	214	345
Loans, Ending balance	118,056	123,894	119,745
Loans, Collectively Evaluated for impairment	118,056	123,894
Consumer Indirect [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	11,311	10,458
Charge-offs	(2,809)	(2,498)
Recoveries	1,051	1,170
Provision	1,909	1,167
Ending balance	11,462	10,297
Allowance for loan losses, Collectively Evaluated for impairment	11,462	10,297
Loans, Ending balance	758,761	655,348	725,754
Loans, Collectively Evaluated for impairment	758,761	655,348
Other Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	302	368
Charge-offs	(203)	(157)
Recoveries	94	122
Provision	102	58
Ending balance	295	391
Allowance for loan losses, Collectively Evaluated for impairment	295	391
Loans, Ending balance	16,762	17,889	$ 17,465
Loans, Collectively Evaluated for impairment	$ 16,762	$ 17,889

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Goodwill And Other Intangible Assets (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Goodwill And Other Intangible Assets [Abstract]
Goodwill	$ 66,417		$ 66,417
Amortization during the year	$ 297	$ 322

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Goodwill And Other Intangible Assets (Changes In Carrying Amount Of Goodwill) (Details) $ in Thousands	Mar. 31, 2017 USD ($)
Goodwill [Line Items]
Goodwill, beginning balance	$ 66,417
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	17,881
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, 2017	Mar. 31, 2016	Dec. 31, 2016
Goodwill And Other Intangible Assets [Abstract]
Gross carrying amount	$ 12,610		$ 12,610
Accumulated amortization	(3,684)		(3,387)
Net book value	8,926		$ 9,223
Amortization during the year	$ 297	$ 322

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Goodwill And Other Intangible Assets (Estimated Core Deposit Intangible Amortization Expense) (Details) $ in Thousands	Mar. 31, 2017 USD ($)
Goodwill And Other Intangible Assets [Abstract]
2017 (remainder of year)	$ 847
2018	1,035
2019	937
2020	840
2021	738
2022	$ 663

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Shareholders' Equity (Changes In Shares Of Common Stock) (Details) - shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Shareholders Equity [Line Items]
Treasury stock, beginning balance	154,617
Shares issued, beginning balance	14,692,214	14,397,509
Common stock issued for acquisition		294,705
Restricted stock awards forfeited
Stock options exercised
Treasury stock purchases
Treasury stock, ending balance	156,199
Shares issued, ending balance	14,692,214	14,692,214
Common Stock [Member]
Shareholders Equity [Line Items]
Shares outstanding, beginning balance	14,537,597	14,190,192
Common stock issued for acquisition		294,705
Restricted stock awards forfeited	(9,759)	(4,914)
Stock options exercised	12,500	15,100
Treasury stock purchases	(4,323)
Shares outstanding, ending balance	14,536,015	14,495,083
Treasury Stock [Member]
Shareholders Equity [Line Items]
Treasury stock, beginning balance	154,617	207,317
Restricted stock awards forfeited	9,759	4,914
Stock options exercised	(12,500)	(15,100)
Treasury stock purchases	4,323
Treasury stock, ending balance	156,199	197,131

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Accumulated Other Comprehensive Income (Loss) (Components Of Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Other comprehensive income (loss), Pre-tax Amount		$ 1,246	$ 11,761
Other comprehensive income (loss), Tax Effect		481	4,539
Other comprehensive income (loss), before Reclassifications, Net-of-tax Amount		719	7,490
Amounts reclassified from accumulated other comprehensive income		46	(268)
Total other comprehensive income, net of tax		765	7,222
Securities Available for Sale and Transferred Securities [Member]
Other comprehensive income (loss), before Reclassifications, Pre-tax Amount		1,170	12,196
Reclassification, Pre-tax Amount	[1]	(203)	(662)
Other comprehensive income (loss), Pre-tax Amount		967	11,534
Other comprehensive income (loss), before Reclassifications, Tax Effect		451	4,706
Reclassification, Tax Effect	[1]	(78)	(255)
Other comprehensive income (loss), Tax Effect		373	4,451
Other comprehensive income (loss), before Reclassifications, Net-of-tax Amount		719	7,490
Amounts reclassified from accumulated other comprehensive income	[1]	(125)	(407)
Total other comprehensive income, net of tax		594	7,083
Pension And Post-Retirement Obligations [Member]
Reclassification, Pre-tax Amount		279	227
Reclassification, Tax Effect		108	88
Amounts reclassified from accumulated other comprehensive income		171	139
Total other comprehensive income, net of tax		171	139
Accumulated Defined Benefit Plans Adjustment, Net Gain (Loss) Including Portion Attributable to Noncontrolling Interest [Member]
Other comprehensive income (loss), Pre-tax Amount		(13)	(12)
Other comprehensive income (loss), Tax Effect		4	5
Total other comprehensive income, net of tax		(9)	(7)
Accumulated Defined Benefit Plans Adjustment, Net Prior Service Including Portion Attributable to Noncontrolling Interest [Member]
Other comprehensive income (loss), Pre-tax Amount		292	239
Other comprehensive income (loss), Tax Effect		(112)	(93)
Total other comprehensive income, net of tax		180	146
Accumulated Defined Benefit Plans Adjustment Including Portion Attributable to Noncontrolling Interest [Member]
Other comprehensive income (loss), Pre-tax Amount		279	227
Other comprehensive income (loss), Tax Effect		(108)	(88)
Total other comprehensive income, net of tax		$ 171	$ 139

[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.

XML

Accumulated Other Comprehensive Income (Loss) (Components Of Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance	$ 320,054	$ 293,844
Other comprehensive income (loss) before reclassifications	719	7,490
Amounts reclassified from accumulated other comprehensive income	46	(268)
Net current period other comprehensive (loss) income	765	7,222
Balance	325,688	313,953
Accumulated Other Comprehensive Loss [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance	(13,951)	(11,327)
Net current period other comprehensive (loss) income	765	7,222
Balance	(13,186)	(4,105)
Securities Available-For-Sale and Transferred Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance	(3,729)	(696)
Other comprehensive income (loss) before reclassifications	719	7,490
Amounts reclassified from accumulated other comprehensive income	(125)	(407)
Net current period other comprehensive (loss) income	594	7,083
Balance	(3,135)	6,387
Pension And Post-Retirement Obligations [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance	(10,222)	(10,631)
Amounts reclassified from accumulated other comprehensive income	171	139
Net current period other comprehensive (loss) income	171	139
Balance	$ (10,051)	$ (10,492)

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Accumulated Other Comprehensive Income (Loss) (Amounts Reclassified Out Of Each Component Of Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net gain on investment securities		$ 206	$ 613
Interest income		26,995	24,719
Income before income taxes		11,108	10,350
Income tax (expense) benefit		(3,165)	(2,732)
Net income		7,943	7,618
Total reclassified for the period		(46)	268
Securities Available for Sale and Transferred Securities [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Reclassification before tax	[1]	203	662
Reclassification tax	[1]	78	255
Total reclassified for the period	[1]	125	407
Prior Service Credit [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Reclassification before tax	[1]	13	12
Net Actuarial Losses [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Reclassification before tax	[1]	(292)	(239)
Pension And Post-Retirement Obligations [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Reclassification before tax		(279)	(227)
Reclassification tax		(108)	(88)
Total reclassified for the period		(171)	(139)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Securities Available for Sale and Transferred Securities [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net gain on investment securities		206	613
Interest income		(3)	49
Income before income taxes		203	662
Income tax (expense) benefit		(78)	(255)
Net income		$ 125	$ 407

[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.

XML

Share-Based Compensation Plans (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options awarded	0	0
Unrecognized compensation expense	$ 2,200
Expected recognition expense period, weighted average period in years	2 years 4 months 24 days
Aggregate intrinsic value	$ 180	$ 126
Total cash received as a result of option exercises	$ 243	$ 288
TSR Performance Requirement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term	2 years 10 months 6 days
Risk free interest rate	1.45%
Expected dividend yield	2.41%
Expected stock price volatility	21.90%
Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted shares of common stock awarded	41,229
Grant date fair value	$ 31.82
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

XML

Share-Based Compensation Plans (Summary Of Restricted Stock Units And Performance Share Units Activity) (Details)	3 Months Ended
	Mar. 31, 2017 $ / shares shares
RSUs [Member]
Granted, Number of Shares | shares	25,331
Granted, Weighted Average Market Price at Grant Date | $ / shares	$ 32.22
PSUs [Member]
Granted, Number of Shares | shares	12,531
Granted, Weighted Average Market Price at Grant Date | $ / shares	$ 33.07

XML

Share-Based Compensation Plans (Summary Of Stock Option Activity) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted, Number of Options	0	0
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	49,099
Exercised, Number of Options	(12,500)
Outstanding and exercisable at end of period, Number of Options	36,599
Outstanding at beginning of year, Weighted Average Exercise Price	$ 19.00
Exercised, Weighted Average Exercise Price	19.44
Outstanding and exercisable at end of period, Weighted Average Exercise Price	$ 18.85
Outstanding and exercisable at end of period, Weighted Average Remaining Contractual Term	9 months 18 days
Outstanding and exercisable at end of period, Aggregate Intrinsic Value	$ 516

XML

Share-Based Compensation Plans (Summary Of Restricted Stock Award Activity) (Details) - Restricted Stock Awards [Member]	3 Months Ended
	Mar. 31, 2017 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding at beginning of year, Number of Shares | shares	114,565
Granted, Number of Shares | shares	41,229
Vested, Number of Shares | shares	(16,393)
Forfeited, number of shares | shares	(10,159)
Outstanding at end of period, Number of Shares | shares	129,242
Outstanding at beginning of year, Weighted Average Market Price at Grant Date | $ / shares	$ 19.90
Granted, Weighted Average Market Price at Grant Date | $ / shares	31.82
Vested, Weighted Average Market Price at Grant Date | $ / shares	21.19
Forfeited, Weighted Average Market Price at Grant Date | $ / shares	11.56
Outstanding at end of period, Weighted Average Market Price at Grant Date | $ / shares	$ 24.20

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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, 2017	Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total share-based compensation expense	$ 239	$ 129
Salaries and Employee Benefits [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total share-based compensation expense	207	98
Other Noninterest Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total share-based compensation expense	$ 32	$ 31

XML

Employee Benefit Plans (Components Of Net Periodic Benefit Expense) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Employee Benefit Plans [Abstract]
Service cost	$ 785	$ 721
Interest cost on projected benefit obligation	613	601
Expected return on plan assets	(1,194)	(1,150)
Amortization of unrecognized prior service credit	(13)	(12)
Amortization of unrecognized net actuarial loss	292	239
Net periodic benefit expense	$ 483	$ 399

XML

Commitments And Contingencies (Narrative) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Commitments And Contingencies [Abstract]
Forward sales commitments	$ 413	$ 0

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Commitments And Contingencies (Off-Balance Sheet Commitments) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Commitments To Extend Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet commitments	$ 536,312	$ 555,713
Standby Letters Of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet commitments	$ 13,232	$ 12,689

XML

Fair Value Measurements (Narrative) (Details) - USD ($)	Mar. 31, 2017	Mar. 31, 2016	Jun. 30, 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

XML

Fair Value Measurements (Assets Measured At Fair Value On A Recurring And Non-Recurring Basis) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 540,406	$ 539,926
Collateral Dependent Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	1,769
Loan Servicing Rights [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	1,046
Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	58
Measured On A Recurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	540,406	539,926
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	190,215	186,268
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	349,958	353,467
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	233	191
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	540,406	539,926
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	190,215	186,268
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	349,958	353,467
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	233	191
Measured On A Recurring Basis [Member] | Level 3 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 3 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 3 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 3 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 Nonrecurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	4,970	3,133
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	2,097	1,050
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	1,769	901
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	1,046	1,075
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	58	107
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	2,097	1,050
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	2,097	1,050
Measured On A Nonrecurring Basis [Member] | Level 2 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 2 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 2 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 3 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets at fair value	2,873	2,083
Measured On A Nonrecurring Basis [Member] | Level 3 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 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	1,769	901
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	1,046	1,075
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	$ 58	$ 107

XML

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, 2017 USD ($)
Collateral Dependent Impaired Loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets at fair value	$ 1,769
Loan Servicing Rights [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets at fair value	$ 1,046
Discount rate	5.40%
Constant prepayment rate	6.90%
Other Real Estate Owned [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets at fair value	$ 58
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	14.00%
Maximum [Member] | Collateral Dependent Impaired Loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Appraisal adjustments	75.00%
Maximum [Member] | Other Real Estate Owned [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Appraisal adjustments	72.00%

XML

Fair Value Measurements (Carrying Amount, Estimated Fair Value, And Placement In Fair Value Hierarchy Of Financial Instruments) (Details) - USD ($) $ in Thousands		Mar. 31, 2017	Dec. 31, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale		$ 540,406	$ 539,926
Securities held to maturity, fair value		544,438	539,991
Carrying Amount [Member] | Level 1 Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents		149,699	71,277
Accrued interest receivable		10,329	9,192
Non-maturity deposits		2,435,195	2,292,706
Short-term borrowings		303,300	331,500
Accrued interest payable		6,340	5,394
Carrying Amount [Member] | Level 2 Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale		540,406	539,926
Securities held to maturity, fair value		545,381	543,338
Loans held for sale		2,097	1,050
Loans		2,369,777	2,308,326
FHLB and FRB stock		20,511	21,780
Time deposits		734,464	702,516
Long-term borrowings		39,078	39,061
Carrying Amount [Member] | Level 3 Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans	[1]	1,769	901
Estimated Fair Value [Member] | Level 1 Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents		149,699	71,277
Accrued interest receivable		10,329	9,192
Non-maturity deposits		2,435,195	2,292,706
Short-term borrowings		303,300	331,500
Accrued interest payable		6,340	5,394
Estimated Fair Value [Member] | Level 2 Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale		540,406	539,926
Securities held to maturity, fair value		544,438	539,991
Loans held for sale		2,097	1,050
Loans		2,343,479	2,285,146
FHLB and FRB stock		20,511	21,780
Time deposits		732,294	701,097
Long-term borrowings		41,518	40,701
Estimated Fair Value [Member] | Level 3 Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans	[1]	$ 1,769	$ 901

[1] Comprised of collateral dependent impaired loans.

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Segment Reporting (Narrative) (Details)	3 Months Ended
	Mar. 31, 2017 segment
Segment Reporting [Abstract]
Number of reportable segments	2

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Segment Reporting (Business Segment Assets) (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Segment Reporting Information [Line Items]
Goodwill	$ 66,417	$ 66,417
Other intangible assets, net	8,926	9,223
Assets	3,859,865	3,710,340
Banking [Member]
Segment Reporting Information [Line Items]
Goodwill	48,536	48,536
Other intangible assets, net	523	579
Assets	3,826,805	3,678,230
Non-Banking [Member]
Segment Reporting Information [Line Items]
Goodwill	17,881	17,881
Other intangible assets, net	8,403	8,644
Assets	30,942	31,166
Holding Company and Other [Member]
Segment Reporting Information [Line Items]
Assets	$ 2,118	$ 944

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Segment Reporting (Business Segment Profit (Loss)) (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Segment Reporting Information [Line Items]
Net interest income (expense)		$ 26,995	$ 24,719
Provision for loan losses		(2,781)	(2,368)
Noninterest income		7,836	9,217
Noninterest expense		(20,942)	(21,218)
Income before income taxes		11,108	10,350
Income tax (expense) benefit		(3,165)	(2,732)
Net income		7,943	7,618
Banking [Member]
Segment Reporting Information [Line Items]
Net interest income (expense)		27,613	25,337
Provision for loan losses		(2,781)	(2,368)
Noninterest income		5,578	6,863
Noninterest expense		(18,484)	(18,345)
Income before income taxes		11,926	11,487
Income tax (expense) benefit		(3,573)	(3,101)
Net income		8,353	8,386
Non-Banking [Member]
Segment Reporting Information [Line Items]
Noninterest income	[1]	2,405	2,484
Noninterest expense	[1]	(1,834)	(1,806)
Income before income taxes	[1]	571	678
Income tax (expense) benefit	[1]	(222)	(264)
Net income	[1]	349	414
Holding Company and Other [Member]
Segment Reporting Information [Line Items]
Net interest income (expense)		(618)	(618)
Noninterest income		(147)	(130)
Noninterest expense		(624)	(1,067)
Income before income taxes		(1,389)	(1,815)
Income tax (expense) benefit		630	633
Net income		$ (759)	$ (1,182)

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