NBT BANCORP INC (Form: 10-K, Received: 02/29/2012 06:14:27)

The following tables illustrates the Company’s credit quality by loan class for the years ended December 31, 2011 and 2010:

Credit Quality Indicators

As of December 31, 2011

Commercial Credit Exposure			Commercial				Agricultural
By Internally Assigned Grade:	Commercial		Real Estate		Agricultural		Real Estate		Total
Pass	$	470,332	$	758,673	$	58,481	$	28,927	$	1,316,413
Special Mention		10,346		24,478		42		10		34,876
Substandard		29,940		51,748		7,945		4,989		94,622
Doubtful		456		-		69		-		525
Total		511,074		834,899		66,537		33,926		1,446,436

Business Banking Credit Exposure	Business
By Internally Assigned Grade:	Banking								Total
Non-classified		237,887								237,887
Classified		18,254								18,254
Total		256,141								256,141

Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct				Total
Performing	$	870,270	$	560,760	$	72,849			$	1,503,879
Nonperforming		2,833		8,885		518				12,236
Total	$	873,103	$	569,645	$	73,367			$	1,516,115

Residential Mortgage Credit Exposure	Residential
By Payment Activity:	Mortgage								Total
Performing	$	571,704							$	571,704
Nonperforming		9,807								9,807
Total	$	581,511							$	581,511

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Credit Quality Indicators

As of December 31, 2010

(in thousands)

Commercial Credit Exposure			Commercial				Agricultural
By Internally Assigned Grade:	Commercial		Real Estate		Agricultural		Real Estate		Total
1 - Pass	$	441,834	$	654,974	$	61,195	$	30,483	$	1,188,486
2 - Special Mention		4,830		35,461		660		936		41,887
3 - Substandard		21,091		46,800		5,606		4,518		78,015
4 - Doubtful		-		-		95		-		95
Total	$	467,755	$	737,235	$	67,556	$	35,937	$	1,308,483

Business Banking Credit Exposure	Business
By Internally Assigned Grade:	Banking								Total
Non-classified	$	253,120							$	253,120
Classified		18,768								18,768
Total	$	271,888							$	271,888

Consumer Credit Exposure
By Payment Activity:	Indirect		Home Equity		Direct				Total
Performing	$	826,956	$	569,283	$	76,237			$	1,472,476
Nonperforming		1,971		6,395		399				8,765
Total	$	828,927	$	575,678	$	76,636			$	1,481,241

Residential Mortgage Credit Exposure	Residential
By Payment Activity:	Mortgage								Total
Performing	$	539,743							$	539,743
Nonperforming		8,651								8,651
Total	$	548,394							$	548,394

Modifications

The Company’s loan portfolio includes certain loans that have been modified in a TDR, where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.

When the Company modifies a loan, management evaluates any possible impairment based on the present value of the expected future cash flows, discounted at the contractual interest rate of the original loan agreement, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral. In these cases, management uses the current fair value of the collateral, less selling costs, instead of discounted cash flows. If management determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized by segment or class of loan as applicable, through an allowance estimate or a charge-off to the allowance. Segment and class status is determined by the loan’s classification at origination.

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Modifications made during the year ended December 31, 2011 consisted of three commercial loans totaling $0.7 million, twenty-five home equity loans totaling $2.4 million and four residential real estate mortgages totaling $0.8 million. For all such modifications, the pre and post outstanding recorded investment amount remained unchanged. During the year ended December 31, 2011, there were two commercial loans classified as TDRs totaling $0.7 million, seven home equity loans classified as TDRs totaling $0.6 million and two residential real estate loans classified as TDRs totaling $0.4 million that subsequently defaulted on their renegotiated terms.

Modifications made during the year ended December 31, 2010 consisted of one commercial loan totaling $0.3 million. The pre and post outstanding recorded investment amount remained unchanged for this loan. During the year ended December 31, 2010, there were no loans classified as TDRs that subsequently defaulted on their renegotiated terms.

As a result of adopting the amendments in Accounting Standards Update (“ASU”) No. 2011-02, “A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring (Topic 310)”, the Company reassessed all restructurings that occurred on or after the beginning of the current fiscal year (January 1, 2011) for identification as TDRs. The Company identified as TDRs certain receivables for which the allowance for credit losses had previously been measured under a general allowance for credit losses methodology. Upon identifying those receivables as TDRs, the Company identified them as impaired under the guidance in Section 310-10-35 and evaluated TDRs for impairment in accordance with the Company’s methodology used to establish the allowance for loan and lease losses on impaired loans. The amendments in ASU No. 2011-02 require prospective application of the impairment measurement guidance in Section 310-10-35 for those receivables newly identified as impaired. Adoption of this amendment had no material impact on the Company’s measured of impairment on these loans.

(8)	Related Party Transactions

In the ordinary course of business, the Company has made loans at prevailing rates and terms to directors, officers, and other related parties. Such loans, in management’s opinion, do not present more than the normal risk of collectibility or incorporate other unfavorable features. The aggregate amount of loans outstanding to qualifying related parties and changes during the years are summarized as follows:

(In thousands)	2011			2010
Balance at January 1	$	2,914		$	1,843
New loans		25			1,174
Adjustment due to change in composition of related parties		328			216
Repayments		(730	)		(319	)
Balance at December 31	$	2,537		$	2,914

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(9)	Premises and Equipment, Net

A summary of premises and equipment follows:

	December 31,
(In thousands)	2011		2010
Land, buildings, and improvements	$	103,399	$	95,970
Equipment		47,646		72,326
Construction in progress		75		342
Premises and equipment before accumulated depreciation		151,120		168,638
Accumulated depreciation		76,579		101,234
Total premises and equipment	$	74,541	$	67,404

Land, buildings, and improvements with a carrying value of approximately $2.9 million and $3.0 million at December 31, 2011 and 2010, respectively, are pledged to secure long-term borrowings. Buildings and improvements are depreciated based on useful lives of 15 to 40 years. Equipment is depreciated based on useful lives of three to ten years. During 2011, a physical inventory was conducted resulting in an entry to remove certain fully depreciated assets determined to be no longer in use, with a gross amount totaling approximately $27.1 million. The entry had no impact on the Company’s net book value of fixed assets.

Rental expense included in occupancy expense amounted to $5.9 million in 2011, $5.5 million in 2010, and $5.3 million in 2009. The future minimum rental payments related to noncancelable operating leases with original terms of one year or more are as follows at December 31, 2011 (in thousands):

Future Minimum Rental Payments

2012	$	5,337
2013		5,200
2014		4,786
2015		4,365
2016		4,121
Thereafter		25,081
Total	$	48,890

(10)	Goodwill and other Intangible Assets

A summary of goodwill is as follows:

(In thousands)
January 1, 2011		114,841
Goodwill resulting from acquisitions		17,188
December 31, 2011	$	132,029

January 1, 2010		114,938
Goodwill resulting from acquisitions		-
Goodwill reclassification		(97	)
December 31, 2010	$	114,841

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The Company has intangible assets with definite useful lives capitalized on its consolidated balance sheet in the form of core deposit and other identified intangible assets. These intangible assets are amortized over their estimated useful lives, which range primarily from one to twelve years.

A summary of core deposit and other intangible assets follows:

	December 31,
(In thousands)	2011		2010
Core deposit intangibles
Gross carrying amount	$	11,966	$	10,762
Less: accumulated amortization		6,401		5,517
Net carrying amount		5,565		5,245

Identified intangible assets
Gross carrying amount		20,919		18,556
Less: accumulated amortization		8,290		6,259
Net carrying amount		12,629		12,297

Total intangibles
Gross carrying amount		32,885		29,318
Less: accumulated amortization		14,691		11,776
Net carrying amount	$	18,194	$	17,542

Amortization expense on intangible assets with definite useful lives totaled $3.0 million for 2011, $3.1 million for 2010 and $3.2 million for 2009. Amortization expense on intangible assets with definite useful lives is expected to total $3.2 million for 2012, $3.0 million for 2013, $2.8 million for 2014, $2.6 million for 2015, $1.6 million for 2016 and $3.0 million thereafter. Identified intangible assets include customer lists, non-competes, and trademark intangibles. The Company also has $2.0 million in intangible assets that will not amortize.

(11)

Deposits

The following table sets forth the maturity distribution of time deposits at December 31, 2011 (in thousands):

Time deposits
Within one year	$	444,870
After one but within two years		162,049
After two but within three years		240,228
After three but within four years		50,954
After four but within five years		28,528
After five years		6,498
Total	$	933,127

Time deposits of $100,000 or more aggregated $305.7 million and $264.4 million December 31, 2011 and 2010, respectively.

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(12)	Short-Term Borrowings

Short-term borrowings totaled $181.6 million and $159.4 million at December 31, 2011 and 2010, respectively, and consist of Federal funds purchased and securities sold under repurchase agreements, which generally represent overnight borrowing transactions, and other short-term borrowings, primarily Federal Home Loan Bank (FHLB) advances, with original maturities of one year or less.

The Company had unused lines of credit with the FHLB available for short-term financing of approximately $323 million and $284 million at December 31, 2011 and 2010, respectively. Borrowings on these lines are secured by FHLB stock, certain securities and one-to-four family first lien mortgage loans. Securities collateralizing repurchase agreements are held in safekeeping by nonaffiliated financial institutions and are under the Company’s control.

Information related to short-term borrowings is summarized as follows:

(In thousands)	2011			2010			2009
Federal funds purchased
Balance at year-end	$	27,000		$	-		$	-
Average during the year		3,017			-			5,957
Maximum month end balance		28,000			-			50,000
Weighted average rate during the year		0.11	%		-			0.30	%
Weighted average rate at December 31		0.13	%		-			-

Securities sold under repurchase agreements
Balance at year-end	$	154,592		$	159,184		$	155,727
Average during the year		150,663			157,964			133,859
Maximum month end balance		178,414			169,278			166,208
Weighted average rate during the year		0.13	%		0.25	%		0.40	%
Weighted average rate at December 31		0.10	%		0.15	%		0.32	%

Other short-term borrowings
Balance at year-end	$	-		$	250		$	250
Average during the year		249			250			250
Maximum month end balance		250			250			250
Weighted average rate during the year		-			-			0.03	%
Weighted average rate at December 31		-			-			-

See Note 5 for additional information regarding securities pledged as collateral for securities sold under the repurchase agreements.

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(13)	Long-Term Debt

Long-term debt consists of obligations having an original maturity at issuance of more than one year. A majority of the Company’s long-term debt is comprised of FHLB advances collateralized by the FHLB stock owned by the Company, certain of its mortgage-backed securities and a blanket lien on its residential real estate mortgage loans. A summary as of December 31, 2011 and 2010 is as follows:

	As of December 31, 2011										As of December 31, 2010
Maturity	Amount		Weighted Average Rate			Callable Amount		Weighted Average Rate			Amount		Weighted Average Rate			Callable Amount		Weighted Average Rate
2011		-		-			-		-			1,994		4.73	%		1,994		4.73	%
2013		119,400		3.87	%		100,000		3.71	%		119,400		3.87	%		100,000		3.71	%
2014		2,604		2.00	%		-		-			-		-			-		-
2016		70,000		4.21	%		70,000		4.21	%		70,000		4.21	%		70,000		4.21	%
2017		100,000		3.89	%		100,000		3.89	%		100,000		3.89	%		100,000		3.89	%
2018		75,000		3.61	%		75,000		3.61	%		75,000		3.61	%		75,000		3.61	%
2025		3,340		2.75	%		-		-			3,480		2.75	%		-		-
	$	370,344				$	345,000				$	369,874				$	346,994

(14)	Trust Preferred Debentures

The Company has issued a total of $75.4 million of junior subordinated deferrable interest debentures to three wholly owned Delaware statutory business trusts, CNBF Capital Trust I (“CNBF Trust I”), NBT Statutory Trust I (“NBT Trust I”) and NBT Statutory Trust II (“NBT Trust II”, and, together with CNBF Trust I and NBT Trust I, the “Trusts”). The Trusts are considered variable interest entities for which the Company is not the primary beneficiary. Accordingly, the accounts of the Trusts are not included in the Company’s consolidated financial statements. See Note 1 — Summary of Significant Accounting Policies for additional information about the Company’s consolidation policy. Details of the Company’s transactions with these trusts are presented below.

CNBF Trust I

In June 1999, CNBF Trust I issued $18.0 million of floating rate (three-month LIBOR plus 275 basis points) trust preferred securities, which represent beneficial interests in the assets of CNBF Trust I. The trust preferred securities will mature on August 31, 2029 and are redeemable with the approval of the Federal Reserve Board in whole or in part at the option of the Company at any time after September 1, 2009 and in whole at any time upon the occurrence of certain events affecting their tax or regulatory capital treatment. Distributions on the trust preferred securities are payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year. CNBF Trust I also issued $0.7 million of common equity securities to the Company. The proceeds of the offering of the trust preferred securities and common equity securities were used to purchase $18.7 million of floating rate (three-month LIBOR plus 275 basis points) junior subordinated deferrable interest debentures issued by the Company, which have terms substantially similar to the trust preferred securities.

NBT Trust I

In November 2005, NBT Trust I issued $5.0 million of fixed rate (at 6.30%) trust preferred securities, which represent beneficial interests in the assets of the trust. The rate converted to a floating rate (three-month LIBOR plus 140 basis points) in November 2010. The trust preferred securities will mature on December 1, 2035 and are redeemable with the approval of the Federal Reserve Board in whole or in part at the option of the Corporation at any time after December 1, 2010 and in whole at any time upon the occurrence of certain events affecting their tax or regulatory capital treatment. Distributions on the trust preferred securities are payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year. NBT Trust I also issued $0.2 million of common equity securities to the Company. The proceeds of the offering of the trust preferred securities and common equity securities were used to purchase $5.2 million of fixed rate (at 6.30%) junior subordinated deferrable interest debentures issued by the Corporation, which have terms substantially similar to the trust preferred securities.

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NBT Trust II

In connection with acquisition of CNB, the Company formed NBT Trust II in February 2006 to fund the cash portion of the acquisition as well as to provide regulatory capital. NBT Trust II issued $50.0 million of fixed rate (at 6.195%) trust preferred securities, which represent beneficial interests in the assets of NBT Trust II. In February 2011, the rate converted to a floating rate (three-month LIBOR plus 140 basis points). The trust preferred securities will mature on March 15, 2036 and are redeemable with the approval of the Federal Reserve Board in whole or in part at the option of the Company at any time after March 15, 2011 and in whole at any time upon the occurrence of certain events affecting their tax or regulatory capital treatment. Distributions on the trust preferred securities are payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year. NBT Trust II also issued $1.5 million of common equity securities to the Company. The proceeds of the offering of the trust preferred securities and common equity securities were used to purchase $51.5 million of fixed rate (at 6.195%) junior subordinated deferrable interest debentures issued by the Corporation, which have terms substantially similar to the trust preferred securities.

With respect to the Trusts, the Company has the right to defer payments of interest on the debentures issued to the Trusts at any time or from time to time for a period of up to ten consecutive semi-annual periods with respect to each deferral period. Under the terms of the debentures, if in certain circumstances there is an event of default under the debentures or the Company elects to defer interest on the debentures, the Company may not, with certain exceptions, declare or pay any dividends or distributions on its capital stock or purchase or acquire any of its capital stock.

Payments of distributions on the trust preferred securities and payments on redemption of the trust preferred securities are guaranteed by the Company on a limited basis. The Company also entered into an agreement as to expenses and liabilities with the Trusts pursuant to which it agreed, on a subordinated basis, to pay any costs, expenses or liabilities of each Trust other than those arising under the trust preferred securities. The obligations of the Company under the junior subordinated debentures, the related indentures, the trust agreements establishing the Trusts, the guarantees and the agreements as to expenses and liabilities, in the aggregate, constitute a full and unconditional guarantee by the Company of each Trust’s obligations under the trust preferred securities.

Despite the fact that the accounts of CNBF Trust I, NBT Trust I, and NBT Trust II are not included in the Company’s consolidated financial statements, $74 million of the $75 million in trust preferred securities issued by these subsidiary trusts is included in the Tier 1 capital of the Company for regulatory capital purposes as allowed by the Federal Reserve Board (NBT Bank, NA owns $1.0 million of CNBF Trust I securities). The recently enacted Dodd-Frank Act requires bank holding companies with assets greater than $500 million to be subject to the same capital requirements as insured depository institutions, meaning, for instance, that such bank holding companies will not be able to count trust preferred securities issued after May 19, 2010 as Tier 1 capital. The aforementioned Trusts are grandfathered with respect to this enactment based on their date of issuance.

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(15)	Income Taxes

The significant components of income tax expense attributable to operations are:

	Years ended December 31,
	2011			2010			2009
Current
Federal	$	29,274		$	34,124		$	21,046
State		1,477			1,743			1,086
		30,751			35,867			22,132

Deferred
Federal		(8,129	)		(12,121	)		(1,669	)
State		(1,349	)		(2,834	)		168
		(9,478	)		(14,955	)		(1,501	)
Total income tax expense	$	21,273		$	20,912		$	20,631

Not included in the above table are items that were recorded to stockholders’ equity of approximately ($0.5 million), ($4.3 million), and $6.1 million for 2011, 2010, and 2009, respectively, relating to deferred taxes on the unrealized (gain) loss on available for sale securities, tax benefits recognized with respect to stock options exercised, and deferred taxes related to pension plans.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

	December 31,
(In thousands)	2011			2010
Deferred tax assets
Allowance for loan and lease losses	$	27,487		$	27,463
Deferred compensation		4,911			4,653
Postretirement benefit obligation		1,036			1,024
Fair value adjustments from acquisitions		2,227			-
Accrued liabilities		1,482			1,649
Stock-based compensation expense		4,440			3,943
Other		1,214			1,012
Total deferred tax assets		42,797			39,744
Deferred tax liabilities
Pension and executive retirement		6,916			11,922
Unrealized gains on securities available for sale		12,156			7,162
Premises and equipment, primarily due to accelerated depreciation		2,340			1,384
Equipment leasing		3,090			11,456
Deferred loan costs		767			1,395
Intangible amortization		11,081			10,270
Other		494			178
Total deferred tax liabilities		36,844			43,767
Net deferred tax asset (liability) at year-end		5,953			(4,023	)
Net deferred tax liability at beginning of year		(4,023	)		(23,245	)
Decrease in net deferred tax liability	$	(9,976	)	$	(19,222	)

Realization of deferred tax assets is dependent upon the generation of future taxable income or the existence of sufficient taxable income within the available carryback period. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. Based on available evidence, gross deferred tax assets will ultimately be realized and a valuation allowance was not deemed necessary at December 31, 2011 and 2010.

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A reconciliation of the beginning and ending balance of gross unrecognized tax benefits is as follows:

(In thousands)	2011			2010			2009
Balance at January 1	$	3,081		$	2,287		$	2,212
Additions for tax positions of prior years		-			1,714			132
Reduction for tax positions of prior years		(2,193	)		(920	)		(57	)
Balance at December 31	$	888		$	3,081		$	2,287

The $0.9 million, $3.1 million, and $2.3 million of unrecognized tax benefits at December 31, 2011, 2010, and 2009 respectively, would impact the annual effective tax rate, if recognized. During 2011, the Company reached settlement with New York State on franchise tax examinations for the years 2003 through 2007. Also during 2011, there was a reduction of reserves for Federal tax benefits for years in which the statute of limitations has expired. As a result, unrecognized tax benefits were reduced by $1.4 million and $0.8 million related to the examination and the expiration of the statute of limitations, respectively, which resulted in a reduction of tax expense for 2011 of $1.5 million.

The Company is no longer subject to U.S. Federal and New York State examination by tax authorities for years prior to 2008.

The Company recognizes interest accrued and penalties related to unrecognized tax benefits in income tax expense. The total amount of accrued interest at December 31, 2011 and 2010 was approximately $0.1 million and $0.7 million, respectively. Net interest impacting the Company’s 2011, 2010 and 2009 tax expense was $0.3 million, $0.1 million and $0.2 million, respectively.

The following is a reconciliation of the provision for income taxes to the amount computed by applying the applicable Federal statutory rate of 35% to income before taxes:

	Years ended December 31
(In thousands)	2011			2010			2009
Federal income tax at statutory rate	$	27,711		$	27,410		$	25,424
Tax exempt income		(2,925	)		(3,448	)		(3,811	)
Net increase in CSV of life insurance		(919	)		(939	)		(871	)
Low income housing tax credits		(782	)		(296	)		(132	)
State taxes, net of federal tax benefit		764			756			816
State audit settlements		(681	)		(1,465	)		-
Other, net		(1,895	)		(1,106	)		(795	)
Income tax expense	$	21,273		$	20,912		$	20,631

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(16) Stockholders’ Equity

In accordance with accounting standards, unrealized gains on available for sale securities and unrecognized actuarial gains or losses and prior service costs associated with the Company’s pension and postretirement benefit plans are included in accumulated other comprehensive loss. For the years ended December 31, components of accumulated other comprehensive loss are:

(In thousands)	2011			2010
Unrecognized prior service cost and net actuarial loss on pension plans	$	(24,633	)	$	(16,251	)
Unrealized net holding gains on available for sale securities		18,529			10,916
Accumulated other comprehensive income (loss)	$	(6,104	)	$	(5,335	)

Certain restrictions exist regarding the ability of the subsidiary bank to transfer funds to the Company in the form of cash dividends. The approval of the Office of Comptroller of the Currency (OCC) is required to pay dividends when a bank fails to meet certain minimum regulatory capital standards or when such dividends are in excess of a subsidiary bank’s earnings retained in the current year plus retained net profits for the preceding two years as specified in applicable OCC regulations. At December 31, 2011, approximately $95.9 million of the total stockholders’ equity of the Bank was available for payment of dividends to the Company without approval by the OCC. The Bank’s ability to pay dividends also is subject to the Bank being in compliance with regulatory capital requirements. The Bank is currently in compliance with these requirements. Under the State of Delaware Business Corporation Law, the Company may declare and pay dividends either out of accumulated net retained earnings or capital surplus.

In October 2004, the Company adopted a Stockholder Rights Plan (the “Plan”) designed to ensure that any potential acquirer of the Company negotiate with the board of directors and that all Company stockholders are treated equitably in the event of a takeover attempt. At that time, the Company paid a dividend of one Preferred Share Purchase Right (a “Right”) for each outstanding share of common stock of the Company. Similar rights are attached to each share of the Company’s common stock issued after November 16, 2004. Under the Plan, the Rights will not be exercisable until a person or group acquires beneficial ownership of 15% or more of the Company’s outstanding common stock or begins a tender or exchange offer for 15% or more of the Company’s outstanding common stock. Additionally, until the occurrence of such an event, the Rights are not severable from the Company’s common stock and, therefore, the Rights will be transferred upon the transfer of shares of the Company’s common stock. Upon the occurrence of such events, each Right entitles the holder to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock of the Company, no par value and $0.01 stated value per share, at a price of $70.

The Plan also provides that upon the occurrence of certain specified events, the holders of Rights will be entitled to acquire additional equity interests in the Company or in the acquiring entity and such interests will have a market value of two times the Right’s exercise price of $70. The Rights, which expire October 24, 2014, are redeemable in whole, but not in part, at the Company’s option prior to the time they are exercisable, for a price of $0.001 per Right.

( 17) Regulatory Capital Requirements

The Company and NBT Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, NBT Bank must meet specific capital guidelines that involve quantitative measures of NBT Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

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Quantitative measures established by regulation to ensure capital adequacy require the Company and NBT Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 Capital to risk-weighted assets and of Tier 1 capital to average assets. As of December 31, 2011 and 2010, the Company and NBT Bank meet all capital adequacy requirements to which they were subject.

Under their prompt corrective action regulations, regulatory authorities are required to take certain supervisory actions (and may take additional discretionary actions) with respect to an undercapitalized institution. Such actions could have a direct material effect on an institution’s financial statements. The regulations establish a framework for the classification of banks into five categories: well capitalized, adequately capitalized, under capitalized, significantly under capitalized, and critically under capitalized. As of December 31, 2011, the most recent notification from NBT Bank’s regulators categorized NBT Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized NBT Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 capital to average asset ratios as set forth in the table below. There are no conditions or events since that notification that management believes have changed NBT Bank’s category.

The Company and NBT Bank’s actual capital amounts and ratios are presented as follows:

	Actual					Regulatory ratio requirements

(Dollars in thousands)	Amount		Ratio			Minimum capital adequacy			For classification as well capitalized
As of December 31, 2011
Total Capital (to risk weighted assets):
Company	$	528,674		12.81	%		8.00	%		10.00	%
NBT Bank		506,246		12.28	%		8.00	%		10.00	%
Tier I Capital (to risk weighted assets)
Company		476,837		11.56	%		4.00	%		6.00	%
NBT Bank		454,476		11.03	%		4.00	%		6.00	%
Tier I Capital (to average assets)
Company		476,837		8.74	%		4.00	%		5.00	%
NBT Bank		454,476		8.35	%		4.00	%		5.00	%

As of December 31, 2010
Total Capital (to risk weighted assets):
Company	$	537,305		13.70	%		8.00	%		10.00	%
NBT Bank		510,196		13.03	%		8.00	%		10.00	%
Tier I Capital (to risk weighted assets)
Company		487,994		12.44	%		4.00	%		6.00	%
NBT Bank		460,969		11.77	%		4.00	%		6.00	%
Tier I Capital (to average assets)
Company		487,994		9.16	%		4.00	%		5.00	%
NBT Bank		460,969		8.67	%		4.00	%		5.00	%

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(18) Employee Benefit Plans

Defined Benefit Postretirement Plans

The Company has a qualified, noncontributory, defined benefit pension plan covering substantially all of its employees at December 31, 2011. Benefits paid from the plan are based on age, years of service, compensation, social security benefits, and are determined in accordance with defined formulas. The Company’s policy is to fund the pension plan in accordance with ERISA standards. Assets of the plan are invested in publicly traded stocks and bonds. Prior to January 1, 2000, the Company’s plan was a traditional defined benefit plan based on final average compensation. On January 1, 2000, the plan was converted to a cash balance plan with grandfathering provisions for existing participants.

In addition to the pension plan, the Company also provides supplemental employee retirement plans to certain current and former executives. These supplemental employee retirement plans and the defined benefit pension plan are collectively referred to herein as “Pension Benefits.”

Also, the Company provides certain health care benefits for retired employees. Benefits are accrued over the employees’ active service period. Only employees that were employed by NBT Bank on or before January 1, 2000 are eligible to receive postretirement health care benefits. The plan is contributory for participating retirees, requiring participants to absorb certain deductibles and coinsurance amounts with contributions adjusted annually to reflect cost sharing provisions and benefit limitations called for in the plan. Employees become eligible for these benefits if they reach normal retirement age while working for the Company. For eligible employees described above, the Company funds the cost of postretirement health care as benefits are paid. The Company elected to recognize the transition obligation on a delayed basis over twenty years. These postretirement benefits are referred to herein as “Other Benefits.”

Accounting standards require an employer to: (1) recognize the overfunded or underfunded status of defined benefit postretirement plans, which is measured as the difference between plan assets at fair value and the benefit obligation, as an asset or liability in its balance sheet; (2) recognize changes in that funded status in the year in which the changes occur through comprehensive income; and (3) measure the defined benefit plan assets and obligations as of the date of its year-end balance sheet.

The components of accumulated other comprehensive loss, which have not yet been recognized as components of net periodic benefit cost, related to pensions and other postretirement benefits at December 31, 2011 are summarized below. The Company expects that $3.3 million in net actuarial loss and $0.1 million in prior service cost will be recognized as components of net periodic benefit cost in 2012.

	Pension Benefits				Other Benefits
(In thousands)	2011		2010		2011			2010
Net actuarial loss	$	37,914	$	23,161	$	2,323		$	3,089
Prior service cost		1,430		1,739		(874	)		(1,076	)
Total amounts recognized in accumulated other comprehensive loss (pre-tax)	$	39,344	$	24,900	$	1,449		$	2,013

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A December 31 measurement date is used for the pension, supplemental pension and postretirement benefit plans. The following table sets forth changes in benefit obligations, changes in plan assets, and the funded status of the pension plans and other postretirement benefits:

	Pension Benefits						Other Benefits
(In thousands)	2011			2010			2011			2010
Change in benefit obligation
Benefit obligation at beginning of year	$	70,229		$	63,408		$	4,554		$	3,838
Service cost		2,589			2,254			17			17
Interest cost		3,544			3,613			202			228
Plan participants' contributions		-			-			263			277
Actuarial loss (gain)		5,935			4,940			(562	)		955
Amendments		-			21			-			-
Benefits paid		(4,273	)		(4,007	)		(489	)		(761	)
Projected benefit obligation at end of year		78,024			70,229			3,985			4,554
Change in plan assets
Fair value of plan assets at beginning of year		97,821			90,891			-			-
Actual return (loss) on plan assets		(2,452	)		10,487			-			-
Employer contributions		479			450			226			484
Plan participants' contributions		-			-			263			277
Benefits paid		(4,273	)		(4,007	)		(489	)		(761	)
Fair value of plan assets at end of year		91,575			97,821			-			-

Funded status at year end	$	13,551		$	27,592		$	(3,985	)	$	(4,554	)

The funded status of the pension and other postretirement benefit plans has been recognized as follows in the consolidated balance sheets at December 31, 2011 and 2010. An asset is recognized for an overfunded plan and a liability is recognized for an underfunded plan. The accumulated benefit obligation for pension benefits was $76.5 million and $68.6 million at December 31, 2011 and 2010, respectively. The accumulated benefit obligation for other postretirement benefits was $4.0 million and $4.6 million at December 31, 2011 and 2010, respectively.

	Pension Benefits						Other Benefits
(In thousands)	2011			2010			2011			2010
Other assets	$	23,973		$	35,895		$	-		$	-
Other liabilities		(10,422	)		(8,303	)		(3,985	)		(4,554	)
Funded status	$	13,551		$	27,592		$	(3,985	)	$	(4,554	)

The following assumptions were used to determine the benefit obligation and the net periodic pension cost for the years indicated:

	Years ended December 31,

(In thousands)	2011			2010			2009
Weighted average assumptions:
The following assumptions were used to determine benefit obligations:
Discount rate		4.10	%		5.15	%		5.70	%
Expected long-term return on plan assets		7.50	%		8.00	%		8.00	%
Rate of compensation increase		3.00	%		3.00	%		3.00	%

The following assumptions were used to determine net periodic pension cost:
Discount rate		5.15	%		5.70	%		6.30	%
Expected long-term return on plan assets		8.00	%		8.00	%		8.00	%
Rate of compensation increase		3.00	%		3.00	%		3.00	%

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Net periodic benefit cost and other amounts recognized in other comprehensive income (loss) for the years ended December 31 included the following components:

	Pension Benefits									Other Benefits
(In thousands)	2011			2010			2009			2011			2010			2009
Components of net periodic benefit cost
Service cost	$	2,589		$	2,254		$	2,222		$	17		$	17		$	17
Interest cost		3,544			3,613			3,413			202			228			205
Expected return on plan assets		(7,720	)		(7,166	)		(5,591	)		-			-			-
Amortization of initial unrecognized asset		-			-			(23	)		-			-			-
Amortization of prior service cost		309			322			296			(202	)		(202	)		(202	)
Amortization of unrecognized net loss		1,353			1,447			2,374			205			201			136
Net periodic pension cost	$	75		$	470		$	2,691		$	222		$	244		$	156

Other changes in plan assets and benefit obligations recognized in other comprehensive income (pre-tax)

Net loss (gain)	$	16,108		$	1,620		$	(6,053	)	$	(562	)	$	955		$	289
Prior service cost		-			21			127			-			-			-
Amortization of initial unrecognized asset		-			-			23			-			-			-
Amortization of prior service cost		(309	)		(322	)		(296	)		202			202			202
Amortization of unrecognized net gain		(1,353	)		(1,447	)		(2,374	)		(205	)		(201	)		(136	)
Total recognized in other comprehensive loss (income)		14,446			(128	)		(8,573	)		(565	)		956			355

Total recognized in net periodic benefit cost and other comprehensive income (loss) - pre-tax	$	14,521		$	342		$	(5,882	)	$	(343	)	$	1,200		$	511

The following table sets forth estimated future benefit payments for the pension plans and other postretirement benefit plans:

	Pension		Other
	Benefits		Benefits

2012		5,010		204
2013		5,236		218
2014		5,361		232
2015		7,034		244
2016		5,590		254
Thereafter		29,745		1,358

The Company is not required to make contributions to the defined benefit plan in 2012.

For measurement purposes, the annual rates of increase in the per capita cost of covered medical and prescription drug benefits for fiscal year 2011 were assumed to be 8.0 to 9.75 percent. The rates were assumed to decrease gradually to 5.0 percent for fiscal year 2018 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on amounts reported for health care plans. A one-percentage point change in the health care trend rates would have the following effects as of and for the year ended December 31, 2011:

(In thousands)	One Percentage point increase		One Percentage point decrease
Increase (decrease) on total service and interest cost components	$	29	$	(24	)
Increase (decrease) on postretirement accumulated benefit obligation		482		(410	)

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Plan Investment Policy

The Company’s key investment objectives in managing its defined benefit plan assets are to ensure that present and future benefit obligations to all participants and beneficiaries are met as they become due; to provide a total return that, over the long-term, maximizes the ratio of the plan assets to liabilities, while minimizing the present value of required Company contributions, at the appropriate levels of risk; to meet statutory requirements and regulatory agencies’ requirements; and to satisfy applicable accounting standards. The Company periodically evaluates the asset allocations, funded status, rate of return assumption and contribution strategy for satisfaction of our investment objectives. The target and actual allocations expressed as a percentage of the defined benefit pension plan’s assets are as follows:

	Target 2012			2011			2010
Cash and cash equivalents		0 - 20	%		2	%		2%
Fixed income securities		20 - 40	%		34	%		26%
Equities		40 - 80	%		64	%		72%
Total					100	%		100%

Only high-quality bonds are to be included in the portfolio. All issues that are rated lower than A by Standard and Poor’s are to be excluded. Equity securities at December 31, 2011 and 2010 do not include any Company common stock. The following table presents the financial instruments recorded at fair value on a recurring basis by the Plan as of December 31, 2011 and 2010:

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2011
Cash and Cash Equivalents	$	1,503	$	-	$	-	$	1,503
Foreign Equity Mutual Funds		6,577		-		-		6,577
Equity Mutual Funds		9,902		-		-		9,902
US Government Bonds		-		15,683		-		15,683
Corporate Bonds		-		12,954		-		12,954
Common Stock		33,850		-		-		33,850
Municipal bonds and Notes		-		1,799		-		1,799
Foreign Bonds and Notes		-		1,096		-		1,096
Foreign Equity		8,211		-		-		8,211
Totals	$	60,043	$	31,532	$	-	$	91,575

(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2010
Cash and Cash Equivalents	$	1,604	$	-	$	-	$	1,604
Foreign Equity Mutual Funds		6,577		-		-		6,577
Equity Mutual Funds		22,515		-		-		22,515
US Government Bonds		-		16,219		-		16,219
Corporate Bonds		-		5,003		-		5,003
Common Stock		31,213		-		-		31,213
Municipal bonds and Notes		-		2,294		-		2,294
Foreign Bonds and Notes		-		1,666		-		1,666
Foreign Equity		10,730		-		-		10,730
Totals	$	72,639	$	25,182	$	-	$	97,821

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The Plan had no financial instruments recorded at fair value on a nonrecurring basis as of December 31, 2011.

Determination of Assumed Rate of Return

The expected long-term rate-of-return on assets is 7.5% at December 31, 2011. This assumption represents the rate of return on plan assets reflecting the average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the projected benefit obligation. The assumption has been determined by reflecting expectations regarding future rates of return for the portfolio considering the asset distribution and related historical rates of return. The appropriateness of the assumption is reviewed annually.

Employee 401(k) and Employee Stock Ownership Plans

The Company maintains a 401(k) and employee stock ownership plan (the “401(k) Plan”). The Company contributes to the 401(k) Plan based on employees’ contributions out of their annual salaries. In addition, the Company may also make discretionary contributions to the 401(k) Plan based on profitability. Participation in the 401(k) Plan is contingent upon certain age and service requirements. The employer contributions associated with the 401(k) Plan were $3.7 million in 2011, $3.5 million in 2010, and $3.4 million in 2009.

Omnibus Incentive Plan

In April 2008, the Company adopted the NBT Bancorp Inc. 2008 Omnibus Incentive Plan (the “Plan”). Under the terms of the Plan, options and other equity-based awards are granted to directors and employees to increase their direct proprietary interest in the operations and success of the Company. The Plan assumes all prior equity-based incentive plans and any new equity-based awards are granted under the terms of the Plan. Under terms of the Plan, stock options are granted to purchase shares of the Company’s common stock at a price equal to the fair market value of the common stock on the date of the grant. Options granted have a vesting period of four years and terminate ten years from the date of the grant. Shares issued as a result of stock option exercises and vesting of restricted shares and stock unit awards are funded from the Company’s treasury stock. Restricted shares granted under the Plan vest after five years for employees and three years for non-employee directors. Restricted stock units granted under the Plan may have different terms and conditions. Performance shares and units granted under the Plan for executives may have different terms and conditions.

The per share weighted average fair value of stock options granted during 2011, 2010, and 2009 was $5.45, $5.03, and $5.71, respectively. The fair value of each award is estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the years ended December 31. Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options. The risk-free interest rate was selected based upon yields of the U.S. Treasury issues with a term equal to the expected life of the option being valued:

	Years ended December 31,
	2011	2010	2009
Dividend yield	3.31%–3.82%	3.27%–3.96%	2.86%–3.65%
Expected volatility	33.75%–34.36%	33.00%–33.86%	30.20%–32.91%
Risk-free interest rates	1.48%–2.81%	1.90%–3.17%	1.71%–3.20%
Expected life	7 years	7 years	7 years

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The following table summarizes information concerning stock options outstanding at December 31, 2011:

	Number of Shares			Weighted average exercise price		Weighted Average Remaining Contractual Term (in yrs)		Aggregate Intrinsic Value
Outstanding at December 31, 2010		2,031,578		$	22.05
Granted		50,700			22.21
Exercised		(142,178	)		16.11
Forfeited		(26,085	)		24.42
Expired		(50,425	)		24.64
Outstanding at December 31, 2011		1,863,590		$	22.41		5.37	$	3,869,134

Exercisable at December 31, 2011		1,457,710		$	22.50		4.71	$	2,872,729

Expected to Vest		399,034		$	22.08		7.73	$	979,661

Total stock-based compensation expense for stock option awards totaled $0.9 million for the year ended December 31, 2011, $1.8 million for the year ended December 31, 2010, and $1.6 million for the year ended December 31, 2009. There were no new stock option awards issued in 2011 which caused the aforementioned decrease. Cash proceeds, tax benefits and intrinsic value related to total stock options exercised is as follows:

	Years ended
(dollars in thousands)	2011		2010		2009
Proceeds from stock options exercised	$	1,793	$	1,778	$	2,728
Tax benefits related to stock options exercised		341		140		(243	)
Intrinsic value of stock options exercised		897		574		406
Fair value of shares vested during the year		1,597		1,800		1,700

The Company has outstanding restricted and deferred stock awards granted from various plans at December 31, 2011. The Company recognized $2.3 million in stock-based compensation expense related to these stock awards for the year ended December 31, 2011, $2.0 million for the year ended December 31, 2010, and $1.5 million for the year ended December 31, 2009. Tax benefits recognized with respect to restricted and deferred stock-based compensation expense were $1.2 million, $0.7 million and $0.6 million for the years ended December 31, 2011, 2010 and 2009, respectively. Unrecognized compensation cost related to restricted stock awards and stock units totaled $4.4 million at December 31, 2011 and will be recognized over 2.8 years on a weighted average basis. Shares issued are funded from the Company’s treasury stock. The following table summarizes information for unvested restricted stock awards outstanding as of December 31, 2011:

	Number of Shares			Weighted- Average Grant Date Fair Value
Unvested Restricted Stock Awards
Unvested at January 1, 2011		202,039		$	24.09
Forfeited		(14,000	)		24.44
Vested		(58,110	)		24.48
Granted		25,447			24.09
Unvested at December 31, 2011		155,376		$	23.92

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The following table summarizes information for unvested restricted stock units outstanding as of December 31, 2011:

	Number of Shares			Weighted- Average Grant Date Fair Value
Unvested Restricted Stock Units
Unvested at January 1, 2011		57,400		$	22.59
Forfeited		(3,520	)		-
Vested		(625	)		-
Granted		188,652			23.84
Unvested at December 31, 2011		241,907		$	23.95

The Company has 4.6 million securities remaining available to be granted as part of the Plan at December 31, 2011.

(19) Commitments and Contingent Liabilities

The Company’s concentrations of credit risk are reflected in the consolidated balance sheets. The concentrations of credit risk with standby letters of credit, unused lines of credit, commitments to originate new loans and loans sold with recourse generally follow the loan classifications.

At December 31, 2011, approximately 58% of the Company’s loans were secured by real estate located in central and northern New York, northeastern Pennsylvania, western Massachusetts and the greater Burlington, Vermont area. Accordingly, the ultimate collectibility of a substantial portion of the Company’s portfolio is susceptible to changes in market conditions of those areas. Management is not aware of any material concentrations of credit to any industry or individual borrowers.

The Company is a party to certain financial instruments with off balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, unused lines of credit, standby letters of credit, and certain mortgage loans sold to investors with recourse. The Company’s exposure to credit loss in the event of nonperformance by the other party to the commitments to extend credit, unused lines of credit, standby letters of credit, and loans sold with recourse is represented by the contractual amount of those instruments. The credit risk associated with commitments to extend credit and standby and commercial letters of credit is essentially the same as that involved with extending loans to customers and is subject to normal credit policies. Collateral may be obtained based on management’s assessment of the customer’s creditworthiness.

	At December 31,
(In thousands)	2011		2010
Unused lines of credit	$	161,551	$	141,579
Commitments to extend credits, primarily variable rate		603,322		501,987
Standby letters of credit		26,783		26,193
Commercial letters of credit		15,218		16,255
Loans sold with recourse		16,175		13,970

Since many loan commitments, standby letters of credit, and guarantees and indemnification contracts expire without being funded in whole or in part, the contract amounts are not necessarily indicative of future cash flows. The Company does not issue any guarantees that would require liability-recognition or disclosure, other than its standby letters of credit.

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The Company guarantees the obligations or performance of customers by issuing stand-by letters of credit to third parties. These stand-by letters of credit are frequently issued in support of third party debt, such as corporate debt issuances, industrial revenue bonds, and municipal securities. The risk involved in issuing stand-by letters of credit is essentially the same as the credit risk involved in extending loan facilities to customers, and letters of credit are subject to the same credit origination, portfolio maintenance and management procedures in effect to monitor other credit and off-balance sheet products. Typically, these instruments have terms of five years or less and expire unused; therefore, the total amounts do not necessarily represent future cash requirements. The fair value of the Company’s stand-by letters of credit at December 31, 2011 and 2010 was not significant.

The total amount of loans serviced by the Company for unrelated third parties was approximately $301.9 million and $323.2 million at December 31, 2011 and 2010, respectively.

In the normal course of business there are various outstanding legal proceedings. If legal costs are deemed material by management, the Company accrues for the estimated loss from a loss contingency if the information available indicates that it is probable that a liability had been incurred at the date of the financial statements, and the amount of loss can be reasonably estimated. In the opinion of management, the aggregate amount involved in such proceedings at December 31, 2011 is not material to the consolidated balance sheets or results of operations of the Company.

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(20) Parent Company Financial Information

Condensed Balance Sheets

	December 31,
(In thousands)	2011		2010
Assets
Cash and cash equivalents	$	2,454	$	3,493
Securities available for sale, at estimated fair value		9,825		9,190
Trading securities		2,550		2,273
Investment in subsidiaries, on equity basis		622,885		609,260
Other assets		48,153		41,942
Total assets	$	685,867	$	666,158
Liabilities and Stockholders’ Equity
Total liabilities	$	147,757	$	132,586
Stockholders’ equity		538,110		533,572
Total liabilities and stockholders’ equity	$	685,867	$	666,158

Condensed Income Statements

	Years ended December 31,
(In thousands)	2011			2010		2009
Dividends from subsidiaries	$	54,400		$	12,000	$	9,000
Management fee from subsidiaries		69,430			68,228		65,596
Securities (losses) gains		(31	)		1,814		141
Interest, dividend and other income		628			1,136		869
Total revenue		124,427			83,178		75,606
Operating expense		75,254			72,436		73,687
Income before income tax benefit and equity in undistributed income of subsidiaries		49,173			10,742		1,919
Income tax benefit		1,340			282		1,994
Equity in undistributed income of subsidiaries		7,388			46,380		48,098
Net income	$	57,901		$	57,404	$	52,011

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Statements of Cash Flow

	Years ended December 31,
(In thousands)	2011			2010			2009
Operating activities
Net income	$	57,901		$	57,404		$	52,011
Adjustments to reconcile net income to net cash provided by operating activities
Stock-based compensation		3,244			3,782			3,133
Loss (Gain) on sales of available-for-sale securities		31			(1,814	)		(141	)
Equity in undistributed income of subsidiaries		(7,388	)		(46,380	)		(48,098	)
Net change in other liabilities		15,311			2,155			(3,662	)
Net change in other assets		(11,607	)		(2,605	)		3,632
Net cash provided by operating activities		57,492			12,542			6,875
Investing activities
Purchases of available-for-sale securities		(968	)		(1,745	)		(2,173	)
Sales and maturities of available-for-sale securities		71			7,807			494
Purchases of premises and equipment		(1,656	)		(321	)		(600	)
Net cash provided by (used in) investing activities		(2,553	)		5,741			(2,279	)
Financing activities
Proceeds from the issuance of shares to employee benefit plans and other stock plans		1,386			1,675			2,728
Payments on long-term debt		(140	)		(135	)		(12,625	)
Proceeds from the issuance of common stock		-			-			33,401
Purchases of treasury shares		(30,502	)		(477	)		-
Cash dividends and payments for fractional shares		(27,063	)		(27,577	)		(27,119	)
Excess tax benefit from exercise of stock options		341			140			(243	)
Net cash used in financing activities		(55,978	)		(26,374	)		(3,858	)
Net (decrease) increase in cash and cash equivalents		(1,039	)		(8,091	)		738
Cash and cash equivalents at beginning of year		3,493			11,584			10,846
Cash and cash equivalents at end of year	$	2,454		$	3,493		$	11,584

A statement of changes in stockholders’ equity has not been presented since it is the same as the consolidated statement of changes in stockholders’ equity previously presented.

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(21) Fair Values of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments.

Short-Term Instruments

For short-term instruments, such as cash and cash equivalents, accrued interest receivable, accrued interest payable, and short term borrowings, carrying value approximates fair value.

Securities

Fair values for securities are based on quoted market prices or dealer quotes, where available. Where quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. When necessary, the Company utilizes matrix pricing from third party pricing vendors to determine fair value pricing. Matrix prices are based on quoted prices for securities with similar coupons, ratings, and maturities, rather than on specific bids and offers for the designated security.

Loans

For variable rate loans that reprice frequently and have no significant credit risk, fair values are based on carrying values. The fair values for fixed rate loans are estimated through discounted cash flow analysis using interest rates currently being offered for loans with similar terms and credit quality. Nonperforming loans are valued based upon recent loss history for similar loans.

Deposits

The fair values disclosed for savings, money market, and noninterest bearing accounts are, by definition, equal to their carrying values at the reporting date. The fair value of fixed maturity time deposits is estimated using a discounted cash flow analysis that applies interest rates currently offered to a schedule of aggregated expected monthly maturities on time deposits.

Long-Term Debt

The fair value of long-term debt has been estimated using discounted cash flow analysis that applies interest rates currently offered for notes with similar terms.

Commitments to Extend Credit and Standby Letters of Credit

The fair value of commitments to extend credit and standby letters of credit are estimated using fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present credit worthiness of the counterparties. Carrying amounts, which are comprised of the unamortized fee income, are not significant.

Trust Preferred Debentures

The fair value of trust preferred debentures has been estimated using a discounted cash flow analysis.

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Estimated fair values of financial instruments at December 31 are as follows:

	2011				2010
(In thousands)	Carrying amount		Estimated fair value		Carrying amount		Estimated fair value
Financial assets
Cash and cash equivalents	$	129,381	$	129,381	$	168,792	$	168,792
Securities available for sale		1,244,619		1,244,619		1,129,368		1,129,368
Securities held to maturity		70,811		72,198		97,310		98,759
Trading securities		3,062		3,062		2,808		2,808
Net loans		3,728,869		3,821,640		3,538,772		3,626,603
Accrued interest receivable		17,800		17,800		19,130		19,130
Financial liabilities
Savings, NOW, and money market	$	2,381,116	$	2,381,116	$	2,291,833	$	2,291,833
Time deposits		933,127		942,436		930,778		943,988
Noninterest bearing		1,052,906		1,052,906		911,741		911,741
Short-term borrowings		181,592		181,592		159,434		159,434
Long-term debt		370,344		427,107		369,874		423,350
Accrued interest payable		3,942		3,942		4,356		4,356
Trust preferred debentures		75,422		75,422		75,422		71,148

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, the Company has a substantial trust and investment management operation that contributes net fee income annually. The trust and investment management operation is not considered a financial instrument, and its value has not been incorporated into the fair value estimates. Other significant assets and liabilities include the benefits resulting from the low-cost funding of deposit liabilities as compared to the cost of borrowing funds in the market, and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimate of fair value.

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The following table sets forth the Company’s financial assets and liabilities measured on a recurring basis that were accounted for at fair value as of December 31, 2011 and December 31, 2010. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2011
Assets:
Securities Available for Sale:
U.S. Treasury		82,233		-		-		82,233
Federal Agency		-		255,846		-		255,846
State & municipal		-		104,789		-		104,789
Mortgage-backed		-		325,397		-		325,397
Collateralized mortgage obligations		-		465,475		-		465,475
Other securities		8,825		2,054		-		10,879
Total Securities Available for Sale	$	91,058	$	1,153,561	$	-	$	1,244,619

Trading Securities		3,062		-		-		3,062
Total	$	94,120	$	1,153,561	$	-	$	1,247,681

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2010
Assets:
Securities Available for Sale :
U.S. Treasury		91,280		-		-		91,280
Federal Agency		-		349,750		-		349,750
State & municipal		-		114,937		-		114,937
Mortgage-backed		-		244,808		-		244,808
Collateralized mortgage obligations		-		297,888		-		297,888
Corporate		-		20,489		-		20,489
Other securities		8,190		2,026		-		10,216
Total Securities Available for Sale	$	99,470	$	1,029,898	$	-	$	1,129,368

Trading Securities		2,808		-		-		2,808
Total	$	102,278	$	1,029,898	$	-	$	1,132,176

Fair values for securities are based on quoted market prices or dealer quotes, where available. Where quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. When necessary, the Company utilizes matrix pricing from a third party pricing vendor to determine fair value pricing. Matrix prices are based on quoted prices for securities with similar coupons, ratings, and maturities, rather than on specific bids and offers for the designated security.

FASB ASC Topic 820 requires disclosure of assets and liabilities measured and recorded at fair value on a nonrecurring basis. In accordance with the provisions of FASB ASC Topic 310, the Company had collateral dependent impaired loans with a carrying value of approximately $0.5 million which had specific reserves included in the allowance for loan and lease losses of $0.2 million at December 31, 2011. The Company uses the fair value of underlying collateral to estimate the specific reserves for collateral dependent impaired loans. Based on the valuation techniques used, the fair value measurements for collateral dependent impaired loans are classified as Level 3.

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FASB ASC Topic 825 gives entities the option to measure eligible financial assets, financial liabilities and Company commitments at fair value (i.e., the fair value option), on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability or upon entering into a Company commitment. Subsequent changes in fair value must be recorded in earnings. As of December 31, 2011, the Company has not elected the fair value option

for any eligible items.

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ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 9A. Controls and Procedures

As of the end of the period covered by this Annual Report on Form 10-K, an evaluation was carried out by the Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report. No changes were made to the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management Report on Internal Controls Over Financial Reporting

The management of NBT Bancorp, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external purposes in accordance with generally accepted accounting principles.

As of December 31, 2011, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “Internal Control — Integrated Framework,” issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on the assessment, management determined that the Company’s internal control over financial reporting as of December 31, 2011 was effective at the reasonable assurance level based on those criteria.

KPMG LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Company included in this Annual Report on Form 10-K, has issued a report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011. The report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011, is included in this Item under the heading “Report of Independent Registered Public Accounting Firm” on the following page.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

NBT Bancorp Inc.:

We have audited NBT Bancorp, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s report on Internal Control Over Financial Reporting . Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control — Integrated Framework issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of NBT Bancorp Inc. and subsidiaries as of December 31, 2011 and 2010 and the related consolidated statements of income, changes in stockholders’ equity, cash flows, and comprehensive income for each of the years in the three-year period ended December 31, 2011, and our report dated February 28, 2012 expressed an unqualified opinion on those financial statements.

/s/ KPMG LLP

Albany, New York

February 28, 2012

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ITEM 9B. Other Information

None.

PART III

ITEM 10. Directors , Executive Officers and Corporate Governance

The following table sets forth certain information for the executive officers other than directors who are officers of NBT Bancorp Inc.

Name	Age at December 31, 2011	Positions Held with the Company and NBT Bank
Michael J. Chewens	50	Senior Executive Vice President and Chief Financial Officer
David E. Raven	49	President of Retail Banking of NBT Bank, President and Chief Executive Officer of the Pennstar Bank Division
Jeffrey M. Levy	50	President of Commercial Banking and Capital Region President of NBT Bank
F. Sheldon Prentice	61	Corporate Senior Vice President, General Counsel and Corporate Secretary

Information concerning the principal occupation of these executive officers of NBT Bancorp Inc. and NBT Bank N.A. during at least the last five years is set forth below.

Michael J. Chewens has been Senior Executive Vice President and Chief Financial Officer of NBT and NBT Bank since January 2002. He was EVP and CFO of same from 1999 to 2001.

David E. Raven has been President of Retail Banking of NBT Bank since July 2006 and President and Chief Executive Officer of Pennstar Bank Division since August 2005. Prior to that, he was President and Chief Operating Officer of Pennstar Bank Division from August 2000 to 2005 and Sales and Administration from September 1999 through August 2000.

Jeffrey M. Levy has been Executive Vice President of NBT and Executive Vice President, Commercial Banking for NBT Bank since December 2006. He joined NBT in August 2005 as Capital Region President. Prior to joining NBT, Mr. Levy was Manager of New York State Government Banking at M&T Bank from January 2004 to August 2005 and President of the Capital District, Commercial Banking at M&T Bank from January 2001 to December 2003.

F. Sheldon Prentice has been Corporate Senior Vice President, General Counsel and Corporate Secretary of NBT and NBT Bank since April 2010. Prior to joining the Company, Mr. Prentice served as Senior Vice President and General Counsel for Merchants Bancshares, Inc. in South Burlington, Vermont from March 2008 until April 2010. Prior to joining Merchants Bancshares, Inc., Mr. Prentice served as Senior Vice President, General Counsel and Secretary of Chittenden Corporation in Burlington, Vermont from December 1985 until they were purchased in December 2007 by Peoples United Bank of Bridgeport, Connecticut. Mr. Prentice remained with Peoples United Bank until March 2008 when he joined Merchants Bancshares, Inc.

Additional information required by this item is incorporated herein by reference to the Company’s definitive Proxy Statement for its Annual Meeting of shareholders to be held on May 3, 2011 (the “Proxy Statement”), which will be filed with the SEC within 120 days after the Company’s 2011 fiscal year end.

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ITEM 11. Executive Compensation

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed with the SEC within 120 days of the Company’s 2011 fiscal year end.

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ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table provides information with respect to shares of common stock that may be issued under the Company’s existing equity compensation plans:

Plan Category

A. Number of securities to

be issued upon exercise of

outstanding options,

warrants and rights

B. Weighted-average

exercise price of

outstanding options,

warrants and rights

Number of securities

remaining available for future

issuance under equity

compensation plans

(excluding securities reflected

in column A.)

Equity compensation plans approved by stockholders

1,863,590

22.41

4,595,199

Equity compensation plans not approved by stockholders

None

Under previously disclosed stock repurchase plans, the Company purchased 1,458,609 shares of its common stock during the year ended December 31, 2011, for a total of $30.5 million at an average price of $20.91 per share. On July 25, 2011, the NBT Board of Directors authorized a new repurchase program for NBT to repurchase up to 1,000,000 shares (approximately 3%) of its outstanding common stock, effective July 25, 2011, as market conditions warrant in open market and privately negotiated transactions. At December 31, 2011, there were 517,581 shares available for repurchase under this plan, which expires on December 31, 2013.

On October 24, 2011, the NBT Board of Directors authorized a new repurchase program for NBT to repurchase up to an additional 1,000,000 shares (approximately 3%) of its outstanding common stock, effective October 24, 2011, as market conditions warrant in open market and privately negotiated transactions. At December 31, 2011, there were 1,000,000 shares available for repurchase under this plan, which expires on December 31, 2013.

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans		Maximum Number of Shares That May Yet be Purchased Under The Plans
1/1/11 - 1/31/11		-	$	-		-		976,190
2/1/11 - 2/28/11		-		-		-		976,190
3/1/11 - 3/31/11		107,871		21.96		107,871		868,319
4/1/11 - 4/30/11		21,050		22.29		21,050		847,269
5/1/11 - 5/31/11		306,756		21.90		306,756		540,513
6/1/11 - 6/30/11		540,513		21.48		540,513		-
7/1/11 - 7/31/11		86,288		21.74		86,288		913,712
8/1/11 - 8/31/11		36,046		21.97		36,046		877,666
9/1/11 - 9/30/11		360,085		18.53		360,085		517,581
10/1/11 - 10/31/11		-		-		-		1,517,581
11/1/11 - 11/30/11		-		-		-		1,517,581
12/1/11 - 12/31/11		-		-		-		1,517,581
Total		1,458,609	$	20.91		1,458,609		1,517,581

The other information required by this item is incorporated herein by reference to the Proxy Statement which will be filed with the SEC within 120 days of the Company’s 2011 fiscal year end.

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ITEM 13. Certain Relationships, Related Transactions and Director Independence

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed with the SEC within 120 days of the Company’s 2011 fiscal year end.

ITEM 14. Principal Accountant Fees and Services

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed with the SEC within 120 days of the Company’s 2011 fiscal year end.

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PART IV

ITEM 15. Exhibits and Financial Statement Schedules

(a)(1) The following Consolidated Financial Statements are included in Part II, Item 8 hereof:

Report of Independent Registered Public Accounting Firm.

Consolidated Balance Sheets as of December 31, 2011 and 2010.

Consolidated Statements of Income for each of the three years ended December 31, 2011, 2010 and 2009.

Consolidated Statements of Changes in Stockholders’ Equity for each of the three years ended December 31, 2011, 2010 and 2009.

Consolidated Statements of Cash Flows for each of the three years ended December 31, 2011, 2010 and 2009.

Consolidated Statements of Comprehensive Income for each of the three years ended December 31, 2011, 2010 and 2009.

Notes to the Consolidated Financial Statements.

(a)(2) There are no financial statement schedules that are required to be filed as part of this form since they are not applicable or the information is included in the consolidated financial statements.

(a)(3) See below for all exhibits filed herewith and the Exhibit Index.

3.1	Certificate of Incorporation of NBT Bancorp Inc. as amended through July 23, 2001 (filed as Exhibit 3.1 to Registrant’s Form 10-K for the year ended December 31, 2008, filed on March 2, 2009 and incorporated herein by reference).
3.2	Bylaws of NBT Bancorp Inc. as amended and restated through July 23, 2001 (filed as Exhibit 3.2 to Registrant’s Form 10-K for the year ended December 31, 2008, filed on March 2, 2009 and incorporated herein by reference).
3.3	Certificate of Designation of the Series A Junior Participating Preferred Stock (filed as Exhibit A to Exhibit 4.1 of the Registration’s Form 8-K, file number 0-14703, filed on November 18, 2004, and incorporated herein by reference).
4.1	Specimen common stock certificate for NBT’s common stock (filed as Exhibit 4.1 to the Registrant’s Amendment No. 1 to Registration Statement on Form S-4 filed on December 27, 2005 and incorporated herein by reference).
4.2	Rights Agreement, dated as of November 15, 2004, between NBT Bancorp Inc. and Registrar and Transfer Company, as Rights Agent (filed as Exhibit 4.1 to Registrant's Form 8-K, file number 0-14703, filed on November 18, 2004, and incorporated by reference herein).
10.1	NBT Bancorp Inc. 1993 Stock Option Plan (filed as Exhibit 99.1 to Registrant's Form S-8 Registration Statement, file number 333-71830 filed on October 18, 2001 and incorporated by reference herein).*
10.2	NBT Bancorp Inc. Non-Employee Director, Divisional Director and Subsidiary Director Stock Option Plan (filed as Exhibit 99.1 to Registrant's Form S-8 Registration Statement, file number 333-73038 filed on November 9, 2001 and incorporated by reference herein).*
10.3	NBT Bancorp Inc. Employee Stock Purchase Plan (filed as Exhibit 10.4 to Registrant’s Form 10-K for the year ended December 31, 2008, filed on March 2, 2009 and incorporated herein by reference).*
10.4	NBT Bancorp Inc. Non-employee Directors Restricted and Deferred Stock Plan (filed as Exhibit 10.5 to Registrant’s Form 10-K for the year ended December 31, 2008, filed on March 2, 2009 and incorporated herein by reference).*
10.5	NBT Bancorp Inc. Performance Share Plan (filed as Exhibit 10.6 to Registrant’s Form 10-K for the year ended December 31, 2008, filed on March 2, 2009 and incorporated herein by reference).*
10.6	NBT Bancorp Inc. 2012 Executive Incentive Compensation Plan.*

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10.7	2006 Non-Executive Restricted Stock Plan (filed as Exhibit 99.1 to Registrant’s Form S-8 Registration Statement, file number 333-139956, filed on January 12, 2007, and incorporated herein by reference).*
10.8	Supplemental Retirement Agreement between NBT Bancorp Inc., NBT Bank, National Association and Daryl R. Forsythe as amended and restated Effective January 1, 2005 (filed as Exhibit 10.11 to Registrant’s Form 10-K for the year ended December 31, 2005, filed on March 15, 2006 and incorporated herein by reference).*
10.9	Death Benefits Agreement between NBT Bancorp Inc., NBT Bank, National Association and Daryl R. Forsythe made August 22, 1995 (filed as Exhibit 10.12 to Registrant’s Form 10-K for the year ended December 31, 2005, filed on March 15, 2006 and incorporated herein by reference).*
10.10	Amendment dated January 28, 2002 to Death Benefits Agreement between NBT Bancorp Inc., NBT Bank, National Association and Daryl R. Forsythe made August 22, 1995 (filed as Exhibit 10.12 to Registrant’s Form 10-K for the year ended December 31, 2008, filed on March 2, 2009 and incorporated herein by reference).*
10.11	Employment Agreement between NBT Bancorp Inc. and Martin A. Dietrich as amended and restated November 5, 2009 (filed as Exhibit 10.1 to Registrant’s Form 10-Q for the quarterly period ended September 30, 2009, filed on November 9, 2009 and incorporated herein by reference).*
10.12	Supplemental Executive Retirement Agreement between NBT Bancorp Inc. and Martin A. Dietrich as amended and restated January 20, 2010. (filed as Exhibit 10.14 to Registrant’s Form 10-K for the year ended December 31, 2009, filed on March 1, 2010 and incorporated herein by reference).*
10.13	Form of Change in Control Agreement, dated November 5, 2009, by and between NBT Bancorp Inc. and certain executive officers (filed as Exhibit 10.5 to Registrant’s Form 10-Q for the quarterly period ended September 30, 2009, filed on November 9, 2009 and incorporated herein by reference).*
10.14	Employment Agreement between NBT Bancorp Inc. and Michael J. Chewens as amended and restated November 5, 2009 (filed as Exhibit 10.2 to Registrant’s Form 10-Q for the quarterly period ended September 30, 2009, filed on November 9, 2009 and incorporated herein by reference).*
10.15	Form of Amended and Restated NBT Bancorp Inc. Supplemental Retirement Agreement, dated as of November 5, 2009, between NBT Bancorp Inc. and certain executive officers (filed as Exhibit 10.7 to Registrant’s Form 10-Q for the quarterly period ended September 30, 2009, filed on November 9, 2009 and incorporated herein by reference).*
10.16	Employment Agreement between NBT Bancorp Inc. and David E. Raven as amended and restated November 5, 2009 (filed as Exhibit 10.3 to Registrant’s Form 10-Q for the quarterly period ended September 30, 2009, filed on November 9, 2009 and incorporated herein by reference).*
10.17	Employment Agreement between NBT Bancorp Inc. and Jeffrey M. Levy made as amended and restated November 5, 2009 (filed as Exhibit 10.3 to Registrant’s Form 10-Q for the quarterly period ended September 30, 2009, filed on November 9, 2009 and incorporated herein by reference).*
10.18	Split-Dollar Agreement between NBT Bancorp Inc., NBT Bank, National Association and Martin A. Dietrich made November 10, 2008 (filed as Exhibit 10.1 to Registrant’s Form 10-Q for the quarterly period ended September 30, 2008, filed on November 10, 2008 and incorporated herein by reference).*
10.19	First amendment dated November 5, 2009 to Split-Dollar Agreement between NBT Bancorp Inc., NBT Bank, National Association and Martin A. Dietrich made November 10, 2008 (filed as Exhibit 10.6 to Registrant’s Form 10-Q for the quarterly period ended September 30, 2009, filed on November 9, 2009 and incorporated herein by reference).*
10.20	NBT Bancorp Inc. 2008 Omnibus Incentive Plan (filed as Appendix A of Registrant's Definitive Proxy Statement on Form 14A filed on March 31, 2008, and incorporated herein by reference).*
10.21	Description of Arrangement for Directors Fees.*
10.22	Employment Agreement, dated May 7, 2010, by and between F. Sheldon Prentice and NBT Bancorp Inc. (filed as Exhibit 10.1 to Registrant’s Form 10-Q for the quarterly period ended March 31, 2010, filed on May 10, 2010 and incorporated herein by reference).*
10.23	Change in Control Agreement, dated May 7, 2010, by and between F. Sheldon Prentice and NBT Bancorp Inc. (filed as Exhibit 10.2 to Registrant’s Form 10-Q for the quarterly period ended March 31, 2010, filed on May 10, 2010 and incorporated herein by reference).*
10.24	Long Term Incentive Compensation Plan for Named Executive officers.*
21	A list of the subsidiaries of the Registrant.
23	Consent of KPMG LLP.
31.1	Certification by the Chief Executive Officer pursuant to Rules 13(a)-14(a)/15(d)-14(e) of the Securities and Exchange Act of 1934.

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31.2	Certification by the Chief Financial Officer pursuant to Rules 13(a)-14(a)/15(d)-14(e) of the Securities and Exchange Act of 1934.
32.1	Certification by the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management contract or compensatory plan or arrangement

(b) Exhibits to this Form 10-K are attached or incorporated herein by reference as noted above.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, NBT Bancorp Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NBT BANCORP INC. (Registrant)

February 28, 2012

/s/ Martin A. Dietrich

Martin A. Dietrich

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ Daryl R. Forsythe

Daryl R. Forsythe

Chairman and Director

Date: February 28, 2012

/s/ Martin A. Dietrich

Martin A. Dietrich

NBT Bancorp Inc. President, CEO, and Director (Principal Executive Officer)

Date: February 28, 2012

/s/ Michael J. Chewens

Michael J. Chewens

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

Date: February 28, 2012

/s/ Richard Chojnowski

Richard Chojnowski, Director

Date: February 28, 2012

/s/ Patricia T. Civil

Patricia T. Civil, Director

Date: February 28, 2012

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/s/ Timothy E. Delaney

Timothy E. Delaney, Director

Date: February 28, 2012

/s/ James H. Douglas

James H. Douglas, Director

Date: February 28, 2012

/s/ John C. Mitchell

John C. Mitchell, Director

Date: February 28, 2012

/s/ Michael M. Murphy

Michael M. Murphy, Director

Date: February 28, 2012

/s/ Joseph G. Nasser

Joseph G. Nasser, Director

Date: February 28, 2012

/s/ Joseph A. Santengelo

Joseph A. Santangelo, Director

Date: February 28, 2012

/s/ Robert A. Wadsworth

Robert A. Wadsworth, Director

Date: February 28, 2012

127

Delaware		16-1268674
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

Title of each class:		Name of each exchange on which registered:
Common Stock, par value $0.01 per share		The NASDAQ Stock Market LLC

PART I

ITEM 1	BUSINESS		5

ITEM 1A	RISK FACTORS		17

ITEM 1B	UNRESOLVED STAFF COMMENTS		25

ITEM 2	PROPERTIES		26

ITEM 3	LEGAL PROCEEDINGS		26

ITEM 4	MINE SAFETY DISCLOSURES		27

PART II

ITEM 5	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES		27

ITEM 6	SELECTED FINANCIAL DATA		29

ITEM 7	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		31

ITEM 7A	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK		57

ITEM 8	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		59
		Report of Independent Registered Public Accounting Firm	59
		Consolidated Balance Sheets at December 31, 2011 and 2010	60
		Consolidated Statements of Income for each of the years in the three-year period ended December 31, 2011	61
		Consolidated Statements of Changes in Stockholders’ Equity for each of the years in the three-year period ended December 31, 2011	63
		Consolidated Statements of Cash Flows for each of the years in the three- year period ended December 31, 2011	64
		Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended December 31, 2011	65
		Notes to Consolidated Financial Statements	66

ITEM 9	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		117

County	State	Deposits (in thousands)		Market Share			Market Rank		Number of Branches*		Number of ATMs*
Chenango	NY	$	466,890		80.19	%		1		11		15
Fulton	NY		360,613		56.68	%		1		7		11
Hamilton	NY		32,338		47.50	%		2		1		1
Schoharie	NY		173,906		45.01	%		1		4		3
Delaware	NY		307,417		35.29	%		1		5		5
Montgomery	NY		205,961		30.46	%		2		6		5
Otsego	NY		287,487		28.26	%		2		9		12
Essex	NY		126,299		24.39	%		2		3		6
Susquehanna	PA		135,500		19.98	%		3		6		7
Wayne	PA		152,793		12.52	%		4		3		4
Broome	NY		244,529		11.12	%		3		9		11
Saint Lawrence	NY		120,852		10.62	%		3		5		6
Pike	PA		57,733		9.91	%		5		2		3
Oneida	NY		260,872		8.63	%		4		6		14
Lackawanna	PA		361,709		7.63	%		7		15		20
Tioga	NY		30,615		7.43	%		5		1		1
Herkimer	NY		37,797		6.71	%		6		2		1
Clinton	NY		81,652		6.40	%		6		3		2
Franklin	NY		25,545		5.61	%		5		1		1
Berkshire	MA		163,918		5.53	%		6		4		5
Schenectady	NY		89,333		3.81	%		8		2		2
Warren	NY		51,936		3.78	%		7		2		3
Saratoga	NY		124,362		3.69	%		11		4		4
Monroe	PA		84,645		3.62	%		8		5		7
Luzerne	PA		111,859		1.97	%		15		4		6
Rensselaer	NY		23,496		1.27	%		13		1		1
Albany	NY		150,830		1.14	%		11		4		6
Chittenden	VT		24,496		0.72	%		7		3		3
		$	4,295,383							128		165

County	Branches		ATMs		County	Branches		ATMs
NBT Bank Division					Pennstar Bank Division

New York					Pennsylvania
Albany County		4		6	Lackawanna County		15		20
Broome County		9		11	Luzerne County		4		6
Chenango County		11		15	Monroe County		5		7
Clinton County		3		2	Pike County		2		3
Delaware County		5		5	Susquehanna County		6		7
Essex County		3		6	Wayne County		3		4
Franklin County		1		1
Fulton County		7		11
Hamilton County		1		1
Herkimer County		2		1
Montgomery County		6		5
Oneida County		6		14
Otsego County		9		12
Rensselaer County		1		1
Saratoga County		4		4
Schenectady County		2		2
Schoharie County		4		3
St. Lawrence County		5		6
Tioga County		1		1
Warren County		2		3

Vermont
Chittenden County		3		3

Massachusetts
Berkshire County		4		5

ITEM 9A	CONTROLS AND PROCEDURES	117

ITEM 9B	OTHER INFORMATION	119

PART III

ITEM 10	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	119

ITEM 11	EXECUTIVE COMPENSATION	120

ITEM 12	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	121

ITEM 13	CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	122

ITEM 14	PRINCIPAL ACCOUNTANT FEES AND SERVICES	122

PART IV

ITEM 15	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	123

SIGNATURES		126

	Interest and			Noninterest			Total
	Fee Income			Income			Revenue
New York		59	%		26	%		85	%
Pennsylvania		8	%		5	%		13	%
Vermont		2	%		0	%		2	%
		69	%		31	%		100	%

							Residential			Total Loan
	Commercial			Consumer			Real Estate			Portfolio
New York		37	%		32	%		11	%		80	%
Pennsylvania		6	%		6	%		4	%		16	%
Vermont		2	%		1	%		0	%		3	%
Massachusetts		0	%		1	%		0	%		1	%
		45	%		40	%		15	%		100	%

	High		Low		Dividend
2011
1st quarter	$	24.98	$	21.55	$	0.20
2nd quarter		23.32		20.62		0.20
3rd quarter		23.25		17.05		0.20
4th quarter		22.63		17.47		0.20
2010
1st quarter	$	23.99	$	19.15	$	0.20
2nd quarter		25.96		20.21		0.20
3rd quarter		23.06		19.27		0.20
4th quarter		24.96		21.41		0.20

	Period Ending
Index	12/31/06		12/31/07		12/31/08		12/31/09		12/31/10		12/31/11
NBT Bancorp	$	100.00	$	92.62	$	117.22	$	88.62	$	108.88	$	103.58
NASDAQ Financial Stocks	$	100.00	$	92.78	$	65.77	$	68.02	$	77.65	$	69.41
NASDAQ Composite Index	$	100.00	$	110.65	$	66.44	$	96.52	$	114.02	$	113.14

Source: Bloomberg, L.P.

	Year ended December 31,
(Dollars in thousands, except share and per share data)	2011			2010			2009			2008			2007
Interest, fee and dividend income	$	239,997		$	255,738		$	273,393		$	294,414		$	306,117
Interest expense		39,721			53,210			76,924			108,368			141,090
Net interest income		200,276			202,528			196,469			186,046			165,027
Provision for loan and lease losses		20,737			29,809			33,392			27,181			30,094
Noninterest income excluding securities gains		80,161			80,614			79,987			70,171			57,586
Securities gains, net		150			3,274			144			1,535			2,113
Noninterest expense		180,676			178,291			170,566			146,813			122,517
Income before income taxes		79,174			78,316			72,642			83,758			72,115
Net income		57,901			57,404			52,011			58,353			50,328

Per common share
Basic earnings	$	1.72		$	1.67		$	1.54		$	1.81		$	1.52
Diluted earnings		1.71			1.66			1.53			1.80			1.51
Cash dividends paid		0.80			0.80			0.80			0.80			0.79
Book value at year-end		16.23			15.51			14.69			13.24			12.29
Tangible book value at year-end		11.70			11.67			10.75			9.01			8.78
Average diluted common shares outstanding		33,924			34,509			33,903			32,427			33,421

Securities available for sale, at fair value	$	1,244,619		$	1,129,368		$	1,116,758		$	1,119,665		$	1,140,114
Securities held to maturity, at amortized cost		70,811			97,310			159,946			140,209			149,111
Loans and leases		3,800,203			3,610,006			3,645,398			3,651,911			3,455,851
Allowance for loan and lease losses		71,334			71,234			66,550			58,564			54,183
Assets		5,598,406			5,338,856			5,464,026			5,336,088			5,201,776
Deposits		4,367,149			4,134,352			4,093,046			3,923,258			3,872,093
Borrowings		627,358			604,730			786,097			914,123			868,776
Stockholders’ equity		538,110			533,572			505,123			431,845			397,300

Key ratios
Return on average assets		1.06	%		1.05	%		0.96	%		1.11	%		0.98	%
Return on average equity		10.73			10.92			10.90			14.16			12.60
Average equity to average assets		9.90			9.63			8.79			7.83			7.81
Net interest margin		4.09			4.15			4.04			3.95			3.61
Dividend payout ratio		46.78			48.19			52.29			44.44			52.32
Tier 1 leverage		8.74			9.16			8.35			7.17			7.14
Tier 1 risk-based capital		11.56			12.44			11.34			9.75			9.79
Total risk-based capital		12.81			13.70			12.59			11.00			11.05

Selected Quarterly Financial Data
	2011												2010
(Dollars in thousands, except share and per share data)	Fourth			Third			Second			First			Fourth			Third			Second			First
Interest, fee and dividend income	$	59,898		$	59,784		$	60,258		$	60,057		$	62,349		$	63,312		$	64,606		$	65,471
Interest expense		9,399			9,423			10,094			10,805			11,850			12,685			14,005			14,670
Net interest income		50,499			50,361			50,164			49,252			50,499			50,627			50,601			50,801
Provision for loan and lease losses		5,576			5,175			6,021			3,965			6,687			7,529			6,350			9,243
Noninterest income excluding net securities gains		20,078			20,182			19,802			20,099			20,173			19,871			20,257			20,313
Net securities gains		52			12			59			27			2,063			1,120			63			28
Noninterest expense		47,412			45,046			43,157			45,061			47,250			44,684			44,197			42,160
Net income		13,722			15,217			14,655			14,307			14,434			14,570			14,424			13,976
Basic earnings per share	$	0.42		$	0.46		$	0.43		$	0.42		$	0.42		$	0.42		$	0.42		$	0.41
Diluted earnings per share	$	0.41		$	0.45		$	0.43		$	0.41		$	0.42		$	0.42		$	0.42		$	0.41
Annualized net interest margin		3.98	%		4.14	%		4.13	%		4.11	%		4.09	%		4.15	%		4.14	%		4.21	%
Annualized return on average assets		0.97	%		1.12	%		1.09	%		1.08	%		1.05	%		1.07	%		1.06	%		1.03	%
Annualized return on average equity		10.09	%		11.21	%		10.86	%		10.78	%		10.68	%		10.89	%		11.09	%		11.05	%
Average diluted common shares outstanding		33,239			33,567			34,320			34,650			34,590			34,513			34,565			34,425

Table 1. Average Balances and Net Interest Income
	2011							2010							2009
	Average				Yield/			Average				Yield/			Average				Yield/
(Dollars in thousands)	Balance		Interest		Rate			Balance		Interest		Rate			Balance		Interest		Rate
ASSETS
Short-term interest bearing accounts	$	101,224	$	269		0.27	%	$	137,818	$	354		0.26	%	$	88,012	$	238		0.27	%
Securities available for sale (1)		1,123,215		33,319		2.97	%		1,088,376		38,759		3.56	%		1,095,609		48,951		4.47	%
Securities held to maturity (1)		81,558		4,350		5.33	%		128,727		6,104		4.74	%		151,078		7,385		4.89	%
Investment in FRB and FHLB Banks		27,089		1,389		5.13	%		31,850		1,821		5.72	%		37,878		1,966		5.19	%
Loans and leases (2)		3,677,931		205,318		5.58	%		3,629,047		214,258		5.90	%		3,641,852		221,128		6.07	%
Total interest earning assets	$	5,011,017	$	244,645		4.88	%	$	5,015,818	$	261,296		5.21	%	$	5,014,429	$	279,668		5.58	%
Other assets		434,924							438,516							414,580
Total assets	$	5,445,941						$	5,454,334						$	5,429,009

LIABILITIES AND STOCKHOLDERS' EQUITY
Money market deposit accounts	$	1,070,003		3,592		0.34	%	$	1,092,789	$	6,273		0.57	%	$	1,013,514	$	12,165		1.20	%
NOW deposit accounts		685,542		2,313		0.34	%		709,920		2,938		0.41	%		600,943		3,159		0.53	%
Savings deposits		602,918		635		0.11	%		552,660		797		0.14	%		499,079		826		0.17	%
Time deposits		913,330		16,480		1.80	%		985,504		20,346		2.06	%		1,227,199		32,346		2.64	%
Total interest bearing deposits	$	3,271,793	$	23,020		0.70	%	$	3,340,873	$	30,354		0.91	%	$	3,340,735	$	48,496		1.45	%
Short-term borrowings		153,965		205		0.13	%		158,280		402		0.25	%		140,066		552		0.39	%
Trust preferred debentures		75,422		2,092		2.77	%		75,422		4,140		5.49	%		75,422		4,247		5.63	%
Long-term debt		370,035		14,404		3.89	%		469,509		18,314		3.90	%		601,039		23,629		3.93	%
Total interest bearing liabilities	$	3,871,215	$	39,721		1.03	%	$	4,044,084	$	53,210		1.32	%	$	4,157,262	$	76,924		1.85	%
Demand deposits		966,282							805,594							718,580
Other liabilities		69,063							79,182							75,868
Stockholders' equity		539,381							525,474							477,299
Total liabilities and stockholders' equity	$	5,445,941						$	5,454,334						$	5,429,009
Net interest income (FTE)				204,924							208,086							202,744
Interest rate spread						3.85	%						3.89	%						3.73	%
Net interest margin						4.09	%						4.15	%						4.04	%
Taxable equivalent adjustment				4,648							5,558							6,275
Net interest income			$	200,276						$	202,528						$	196,469
1. Securities are shown at average amortized cost.
2. For purposes of these computations, nonaccrual loans are included in the average loan balances outstanding. The interest collected thereon is included in interest income based upon the characteristics of the related loans.

	Increase (Decrease)									Increase (Decrease)
	2011 over 2010									2010 over 2009
(In thousands)	Volume			Rate			Total			Volume			Rate			Total
Short-term interest-bearing accounts	$	(97	)	$	12		$	(85	)	$	128		$	(12	)	$	116
Securities available for sale		1,207			(6,647	)		(5,440	)		(321	)		(9,871	)		(10,192	)
Securities held to maturity		(2,445	)		691			(1,754	)		(1,066	)		(215	)		(1,281	)
Investment in FRB and FHLB Banks		(256	)		(176	)		(432	)		(333	)		188			(145	)
Loans and leases		2,855			(11,795	)		(8,940	)		(774	)		(6,096	)		(6,870	)
Total interest income		1,264			(17,915	)		(16,651	)		(2,366	)		(16,006	)		(18,372	)
Money market deposit accounts		(128	)		(2,553	)		(2,681	)		887			(6,779	)		(5,892	)
NOW deposit accounts		(98	)		(527	)		(625	)		517			(738	)		(221	)
Savings deposits		68			(230	)		(162	)		83			(112	)		(29	)
Time deposits		(1,421	)		(2,445	)		(3,866	)		(5,714	)		(6,286	)		(12,000	)
Short-term borrowings		(11	)		(186	)		(197	)		65			(215	)		(150	)
Trust preferred debentures		-			(2,048	)		(2,048	)		-			(107	)		(107	)
Long-term debt		(3,872	)		(38	)		(3,910	)		(5,132	)		(183	)		(5,315	)
Total interest expense		(5,462	)		(8,027	)		(13,489	)		(9,294	)		(14,420	)		(23,714	)
Change in FTE net interest income	$	6,726		$	(9,888	)	$	(3,162	)	$	6,928		$	(1,586	)	$	5,342

Table 3. Composition of Loan and Lease Portfolio
	December 31,
(In thousands)	2011		2010		2009		2008		2007
Residential real estate mortgages	$	581,511	$	548,394	$	618,334	$	722,723	$	719,182
Commercial		611,298		577,731		571,107		572,059		593,077
Commercial real estate		888,879		844,458		739,395		669,720		621,820
Real estate construction and development		93,977		45,444		67,168		67,859		81,350
Agricultural and agricultural real estate		108,423		112,738		122,466		113,566		116,190
Consumer		946,470		905,563		923,343		878,381		741,501
Home equity		569,645		575,678		603,585		627,603		582,731
Total loans and leases	$	3,800,203	$	3,610,006	$	3,645,398	$	3,651,911	$	3,455,851

Table 4. Maturities and Sensitivities of Certain Loans to Changes in Interest Rates
	Remaining maturity at December 31, 2011
(In thousands)	Within One Year		After One Year But Within Five Years		After Five Years		Total
Floating/adjustable rate
Commercial, commercial real estate, agricultural, and agricultural real estate	$	340,496	$	256,384	$	435,809	$	1,032,689
Real estate construction and development		21,832		7,152		29,674		58,658
Total floating rate loans		362,328		263,536		465,483		1,091,347

Fixed rate
Commercial, commercial real estate, agricultural, and agricultural real estate		64,876		263,531		247,504		575,911
Real estate construction and development		24,383		1,358		9,578		35,319
Total fixed rate loans		89,259		264,889		257,082		611,230
Total	$	451,587	$	528,425	$	722,565	$	1,702,577

Table 5. Securities Portfolio
	As of December 31,
	2011				2010				2009
	Amortized		Fair		Amortized		Fair		Amortized		Fair
(In thousands)	Cost		Value		Cost		Value		Cost		Value
Securities available for sale
U.S. Treasury	$	81,006	$	82,234	$	91,338	$	91,280	$	20,102	$	20,086
Federal Agency		254,983		255,846		350,641		349,750		310,012		313,157
State & Municipal		99,176		104,789		113,821		114,937		135,181		137,613
Mortgage-backed		310,767		325,396		233,861		244,808		269,255		280,861
Collateralized mortgage obligations		459,067		465,474		293,565		297,888		321,890		330,711
Corporate		-		-		20,005		20,489		20,011		20,674
Other securities		8,935		10,880		8,059		10,216		12,295		13,656
Total securities available for sale	$	1,213,934	$	1,244,619	$	1,111,290	$	1,129,368	$	1,088,746	$	1,116,758

Securities held to maturity
Mortgage-backed	$	1,447	$	1,660	$	1,719	$	1,919	$	2,041	$	2,213
State & Municipal		69,364		70,538		95,591		96,840		157,905		159,638
Total securities held to maturity	$	70,811	$	72,198	$	97,310	$	98,759	$	159,946	$	161,851

(In thousands)	Amortized cost		Estimated fair value		Weighted Average Yield
Debt securities classified as available for sale
Within one year	$	23,867	$	23,941		1.34	%
From one to five years		302,772		305,366		1.61	%
From five to ten years		245,058		254,864		3.74	%
After ten years		633,302		649,568		2.73	%
	$	1,204,999	$	1,233,739
Debt securities classified as held to maturity
Within one year	$	26,315	$	26,383		2.85	%
From one to five years		34,032		35,058		3.74	%
From five to ten years		7,073		7,153		4.47	%
After ten years		3,391		3,604		5.02	%
	$	70,811	$	72,198

Table 6. Maturity Distribution of Time Deposits of $100,000 or More
	December 31,
(In thousands)	2011		2010
Within three months	$	45,242	$	41,404
After three but within twelve months		85,465		85,026
After one but within three years		148,653		66,409
Over three years		26,338		71,610
Total	$	305,698	$	264,449

Table 7. Nonperforming Assets
	As of December 31,
(Dollars in thousands)	2011			%			2010			%			2009			%			2008			%			2007			%
Nonaccrual loans
Commercial and agricultural loans and real estate	$	17,506			46	%	$	24,402			57	%	$	25,521			66	%	$	15,891			66	%	$	20,491			69	%
Real estate mortgages		8,090			21	%		8,338			20	%		6,140			16	%		3,803			16	%		1,372			5	%
Consumer		8,724			23	%		8,765			21	%		6,249			16	%		3,468			14	%		2,934			10	%
Troubled debt restructured loans		3,970			10	%		962			2	%		836			2	%		1,029			4	%		4,900			16	%
Total nonaccrual loans		38,290			100	%		42,467			100	%		38,746			100	%		24,191			100	%		29,697			100	%

Loans 90 days or more past due and still accruing
Commercial and agricultural loans and real estate		50			2	%		94			4	%		59			2	%		12			1	%		51			6	%
Real estate mortgages		763			24	%		919			40	%		602			24	%		770			33	%		295			33	%
Consumer		2,377			74	%		1,312			56	%		1,865			74	%		1,523			66	%		536			61	%
Total loans 90 days or more past due and still accruing		3,190			100	%		2,325			100	%		2,526			100	%		2,305			100	%		882			100	%

Total nonperforming loans		41,480						44,792						41,272						26,496						30,579
Other real estate owned		2,160						901						2,358						665						560
Total nonperforming assets	$	43,640					$	45,693					$	43,630					$	27,161					$	31,139

Total nonperforming loans to loans and leases		1.09	%					1.24	%					1.13	%					0.73	%					0.88	%
Total nonperforming assets to total assets		0.78	%					0.86	%					0.80	%					0.51	%					0.60	%
Total allowance for loan and lease losses to nonperforming loans		171.97	%					159.03	%					161.25	%					221.03	%					177.19	%

Table 8. Allowance for Loan and Lease Losses
(Dollars in thousands)	2011			2010			2009			2008			2007
Balance at January 1	$	71,234		$	66,550		$	58,564		$	54,183		$	50,587
Loans and leases charged-off
Commercial and agricultural		8,971			12,969			11,500			14,464			20,349
Residential real estate mortgages		1,310			1,176			705			543			1,032
Consumer*		14,207			15,692			17,609			11,985			9,862
Total loans and leases charged-off		24,488			29,837			29,814			26,992			31,243
Recoveries
Commercial and agricultural		1,438			1,922			1,508			1,411			1,816
Residential real estate mortgages		6			43			133			68			125
Consumer*		2,407			2,747			2,767			2,713			2,804
Total recoveries		3,851			4,712			4,408			4,192			4,745
Net loans and leases charged-off		20,637			25,125			25,406			22,800			26,498

Provision for loan and lease losses		20,737			29,809			33,392			27,181			30,094
Balance at December 31	$	71,334		$	71,234		$	66,550		$	58,564		$	54,183
Allowance for loan and lease losses to loans and leases outstanding at end of year		1.88	%		1.97	%		1.83	%		1.60	%		1.57	%
Net charge-offs to average loans and leases outstanding		0.56	%		0.69	%		0.70	%		0.64	%		0.77	%

* Consumer charge-off and recoveries include indirect, direct, and home equity.

Table 9. Allocation of the Allowance for Loan and Lease Losses
	December 31,
	2011					2010					2009					2008					2007
			Category					Category					Category					Category					Category
			Percent of					Percent of					Percent of					Percent of					Percent of
(Dollars in thousands)	Allowance		Loans			Allowance		Loans			Allowance		Loans			Allowance		Loans			Allowance		of Loans
Commercial and agricultural	$	38,831		45	%	$	40,101		44	%	$	36,599		41	%	$	33,231		39	%	$	32,811		41	%
Real estate mortgages		6,249		15	%		4,627		15	%		3,002		17	%		3,143		20	%		3,277		21	%
Consumer		26,049		40	%		26,126		41	%		26,664		42	%		21,908		41	%		17,362		38	%
Unallocated		205		0	%		380		0	%		285		0	%		282		0	%		733		0	%
Total	$	71,334		100	%	$	71,234		100	%	$	66,550		100	%	$	58,564		100	%	$	54,183		100	%

Contractual Obligations
(In thousands)
	Payments Due by Period
	2012		2013		2014		2015		2016		Thereafter		Total
Long-term debt obligations	$	-	$	119,400	$	2,604	$	-	$	70,000	$	178,340	$	370,344
Trust preferred debentures		-		-		-		-		-		75,422		75,422
Operating lease obligations		5,337		5,200		4,786		4,365		4,121		25,081		48,890
Retirement plan obligations		5,214		5,454		5,593		7,278		5,844		31,103		60,486
Capital lease obligations		97		206		206		206		168		335		1,218
Data processing commitments		7,272		6,116		4,803		4,590		625		-		23,406
Total contractual obligations	$	17,920	$	136,376	$	17,992	$	16,439	$	80,758	$	310,281	$	579,766

Commitment Expiration of Standby Letters of Credit
Within one year	$	18,190
After one but within three years		2,336
After three but within five years		5,763
After five years		494
Total	$	26,783

Table 10. Interest Rate Sensitivity Analysis
Change in interest rates	Percent change
(In basis points)	in net interest income
+200	(2.10%)
-100	(1.14%)

Consolidated Balance Sh eets
	As of December 31,
(In thousands, except share and per share data)	2011			2010
Assets

Cash and due from banks	$	128,517		$	99,673
Short-term interest bearing accounts		864			69,119
Securities available for sale, at fair value		1,244,619			1,129,368
Securities held to maturity (fair value $72,198 and $98,759)		70,811			97,310
Trading securities		3,062			2,808
Federal Reserve and Federal Home Loan Bank stock		27,020			27,246
Loans and leases		3,800,203			3,610,006
Less allowance for loan and lease losses		71,334			71,234
Net loans and leases		3,728,869			3,538,772
Premises and equipment, net		74,541			67,404
Goodwill		132,029			114,841
Intangible assets, net		18,194			17,543
Bank owned life insurance		77,626			75,301
Other assets		92,254			99,471
Total assets	$	5,598,406		$	5,338,856
Liabilities
Demand (noninterest bearing)	$	1,052,906		$	911,741
Savings, NOW, and money market		2,381,116			2,291,833
Time		933,127			930,778
Total deposits		4,367,149			4,134,352
Short-term borrowings		181,592			159,434
Long-term debt		370,344			369,874
Trust preferred debentures		75,422			75,422
Other liabilities		65,789			66,202
Total liabilities		5,060,296			4,805,284
Stockholders’ equity
Preferred stock, $0.01 par value; authorized 2,500,000 shares at December 31, 2011 and 2010		-			-
Common stock, $0.01 par value. Authorized 50,000,000 shares at December 31, 2011 and 2010; issued 38,035,539 at December 31, 2011 and 2010		380			380
Additional paid-in-capital		317,329			314,023
Retained earnings		329,981			299,797
Accumulated other comprehensive loss		(6,104	)		(5,335	)
Common stock in treasury, at cost, 4,878,829 and 3,532,732 shares at December 31, 2011 and 2010, respectively		(103,476	)		(75,293	)
Total stockholders’ equity		538,110			533,572
Total liabilities and stockholders’ equity	$	5,598,406		$	5,338,856

Consolidated Statements of Inco me
	Years ended December 31,
(In thousands, except per share data)	2011		2010		2009
Interest, fee, and dividend income
Interest and fees on loans and leases	$	204,370	$	213,429	$	220,324
Securities available for sale		31,083		36,167		45,972
Securities held to maturity		2,886		3,968		4,894
Other		1,658		2,174		2,203
Total interest, fee, and dividend income		239,997		255,738		273,393
Interest expense
Deposits		23,020		30,354		48,496
Short-term borrowings		205		402		552
Long-term debt		14,404		18,314		23,629
Trust preferred debentures		2,092		4,140		4,247
Total interest expense		39,721		53,210		76,924
Net interest income		200,276		202,528		196,469
Provision for loan and lease losses		20,737		29,809		33,392
Net interest income after provision for loan and lease losses		179,539		172,719		163,077
Noninterest income
Service charges on deposit accounts		21,464		24,041		27,165
Insurance and other financial services revenue		20,843		18,867		17,725
Trust		8,864		7,722		6,719
Net securities gains		150		3,274		144
Bank owned life insurance income		3,085		3,316		3,135
ATM and debit card fees		11,642		10,035		9,339
Retirement plan administration fees		8,918		10,356		9,086
Other		5,345		6,277		6,818
Total noninterest income		80,311		83,888		80,131
Noninterest expense
Salaries and employee benefits		99,212		93,718		85,565
Occupancy		16,363		15,350		14,864
Equipment		8,864		8,317		8,139
Data processing and communications		12,271		12,347		13,238
Professional fees and outside services		8,921		9,032		10,508
Office supplies and postage		6,073		6,102		5,857
Amortization of intangible assets		3,046		3,072		3,246
Loan collection and other real estate owned		2,631		3,036		2,766
Advertising		3,460		3,487		3,455
FDIC expenses		4,267		6,081		8,408
Prepayment penalty on long-term debt		-		4,526		810
Other		15,568		13,223		13,710
Total noninterest expense		180,676		178,291		170,566
Income before income tax expense		79,174		78,316		72,642
Income tax expense		21,273		20,912		20,631
Net income	$	57,901	$	57,404	$	52,011
Earnings per share
Basic	$	1.72	$	1.67	$	1.54
Diluted		1.71		1.66		1.53

Consolidated Statements of Changes in Stockholders’ Eq uity

									Accumulated
Years ended December 31,			Additional						other			Common
2011, 2010, and 2009	Common		paid-in-			Retained			comprehensive			stock in
(In thousands except share and per share data)	stock		capital			earnings			(loss) income			treasury			Total

Balance at December 31, 2008		365	$	276,418		$	245,340		$	(8,204	)	$	(82,074	)	$	431,845
Net income		-		-			52,011			-			-			52,011
Cash dividends - $0.80 per share		-		-			(27,119	)		-			-			(27,119	)
Net issuance of 1,576,230 common shares		15		33,386			-			-			-			33,401
Net issuance of 203,480 shares to employee stock plans, including tax benefit		-		(1,773	)		-			-			4,258			2,485
Stock-based compensation		-		3,133			-			-			-			3,133
Other comprehensive income		-		-			-			9,367			-			9,367
Balance at December 31, 2009	$	380	$	311,164		$	270,232		$	1,163		$	(77,816	)	$	505,123
Net income		-		-			57,404			-			-			57,404
Cash dividends - $0.80 per share		-		-			(27,577	)		-			-			(27,577	)
Purchase of 23,810 treasury shares		-		-			-			-			(477	)		(477	)
Net issuance of 141,146 shares to employee stock plans, including tax benefit		-		(923	)		(262	)		-			3,000			1,815
Stock-based compensation		-		3,782			-			-			-			3,782
Other comprehensive loss		-		-			-			(6,498	)		-			(6,498	)
Balance at December 31, 2010	$	380	$	314,023		$	299,797		$	(5,335	)	$	(75,293	)	$	533,572
Net income		-		-			57,901			-			-			57,901
Cash dividends - $0.80 per share		-		-			(27,063	)		-			-			(27,063	)
Purchase of 1,458,609 treasury shares		-		-			-			-			(30,502	)		(30,502	)
Net issuance of 112,512 shares to employee stock plans, including tax benefit		-		62			(654	)		-			2,319			1,727
Stock-based compensation		-		3,244			-			-			-			3,244
Other comprehensive loss		-		-			-			(769	)		-			(769	)
Balance at December 31, 2011	$	380	$	317,329		$	329,981		$	(6,104	)	$	(103,476	)	$	538,110

Consolidated Statements of Cash Fl ows
	Years ended December 31,
(In thousands)	2011			2010			2009
Operating activities
Net income	$	57,901		$	57,404		$	52,011
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan and lease losses		20,737			29,809			33,392
Depreciation and amortization of premises and equipment		5,463			5,327			5,398
Net accretion on securities		1,597			1,468			535
Amortization of intangible assets		3,046			3,072			3,246
Stock based compensation		3,244			3,782			3,133
Bank owned life insurance income		(3,085	)		(3,316	)		(3,135	)
Trading security purchases		(447	)		(184	)		(460	)
Unrealized losses (gains) in trading securities		193			(214	)		(543	)
Deferred income tax benefit		(9,478	)		(14,955	)		(1,501	)
Proceeds from sale of loans held for sale		13,545			83,143			135,519
Originations and purchases of loans held for sale		(14,167	)		(80,469	)		(138,583	)
Net gains on sales of loans held for sale		(329	)		(911	)		(953	)
Net security gains		(150	)		(3,274	)		(144	)
Net gains on sales of other real estate owned		(2,531	)		(517	)		(306	)
Net (increase) decrease in other assets		(3,579	)		6,627			(39,324	)
Net increase in other liabilities		11,805			2,645			6,399
Net cash provided by operating activities		83,765			89,437			54,684
Investing activities
Net cash provided by acquisitions		81,467			-			-
Securities available for sale:
Proceeds from maturities, calls, and principal paydowns		541,555			511,394			434,127
Proceeds from sales		2,437			103,253			2,753
Purchases		(648,048	)		(635,319	)		(426,979	)
Securities held to maturity:
Proceeds from maturities, calls, and principal paydowns		47,186			112,399			90,668
Purchases		(20,736	)		(48,701	)		(110,496	)
Net (increase) decrease in loans		(172,920	)		7,292			(18,775	)
Net decrease in Federal Reserve and FHLB stock		226			8,733			3,066
Proceeds from bank owned life insurance		758			2,767			1,054
Purchases of premises and equipment, net		(9,954	)		(6,510	)		(6,378	)
Proceeds from sales of other real estate owned		2,531			3,186			2,512
Net cash (used in) provided by investing activities		(175,498	)		58,494			(28,448	)
Financing activities
Net increase in deposits		87,992			41,306			169,788
Net increase (decrease) in short-term borrowings		22,158			3,457			(50,515	)
Proceeds from issuance of long-term debt		156			-			-
Repayments of long-term debt		(2,146	)		(184,824	)		(77,511	)
Excess tax benefit from exercise of stock options		341			140			(243	)
Proceeds from the issuance of shares to employee benefit plans and other stock plans		1,386			1,675			2,728
Issuance of common stock		-			-			33,401
Purchase of treasury stock		(30,502	)		(477	)		-
Cash dividends and payments for fractional shares		(27,063	)		(27,577	)		(27,119	)
Net cash provided by (used in) financing activities		52,322			(166,300	)		50,529
Net (decrease) increase in cash and cash equivalents		(39,411	)		(18,369	)		76,765
Cash and cash equivalents at beginning of year		168,792			187,161			110,396
Cash and cash equivalents at end of year	$	129,381		$	168,792		$	187,161

Supplemental disclosure of cash flow informa tion	Years ended December 31,
Cash paid during the year for:	2011		2010		2009
Interest	$	40,135	$	54,668	$	79,819
Income taxes, net of refund		31,258		37,033		13,952
Noncash investing activities:
Loans transferred to other real estate owned	$	2,927	$	1,212	$	3,899
Acquisitions of non-cash assets and liabilities:
Fair value of assets acquired	$	67,020	$	-	$	-
Fair value of liabilities assumed	$	148,487		-		-

(In thousands)	Amortized cost		Unrealized gains		Unrealized losses		Estimated fair value
December 31, 2011
U.S. Treasury	$	81,006	$	1,228	$	-	$	82,234
Federal Agency		254,983		879		16		255,846
State & municipal		99,176		5,624		11		104,789
Mortgage-backed		310,767		14,629		-		325,396
Collateralized mortgage obligations		459,067		6,458		51		465,474
Corporate		-		-		-		-
Other securities		8,935		2,021		76		10,880
Total securities available for sale	$	1,213,934	$	30,839	$	154	$	1,244,619
December 31, 2010
U.S. Treasury	$	91,338	$	424	$	482	$	91,280
Federal Agency		350,641		1,905		2,796		349,750
State & municipal		113,821		1,771		655		114,937
Mortgage-backed		233,861		11,666		719		244,808
Collateralized mortgage obligations		293,565		6,574		2,251		297,888
Corporate		20,005		484		-		20,489
Other securities		8,059		2,162		5		10,216
Total securities available for sale	$	1,111,290	$	24,986	$	6,908	$	1,129,368

	Amortized		Unrealized		Unrealized		Estimated
(In thousands)	cost		gains		losses		fair value
December 31, 2011
Mortgage-backed	$	1,447	$	213	$	-	$	1,660
State & municipal		69,364		1,174		-		70,538
Total securities held to maturity	$	70,811	$	1,387	$	-	$	72,198
December 31, 2010
Mortgage-backed	$	1,719	$	200	$	-	$	1,919
State & municipal		95,591		1,249		-		96,840
Total securities held to maturity	$	97,310	$	1,449	$	-	$	98,759

	Less than 12 months							12 months or longer							Total
Security Type:	Fair Value		Unrealized losses			Number of Positions		Fair Value		Unrealized losses			Number of Positions		Fair Value		Unrealized losses			Number of Positions

December 31, 2011
U.S. Treasury	$	-	$	-			-	$	-	$	-			-	$	-	$	-			-
Federal agency		34,996		(16	)		3		-		-			-		34,996		(16	)		3
State & municipal		957		(10	)		3		377		(1	)		2		1,334		(11	)		5
Mortgage-backed		-		-			-		-		-			-		-		-			-
Collateralized mortgage obligations		27,368		(51	)		3		-		-			-		27,368		(51	)		3
Other securities		645		(76	)		2		-		-			-		645		(76	)		2
Total securities with unrealized losses	$	63,966	$	(153	)		11	$	377	$	(1	)		2	$	64,343	$	(154	)		13

December 31, 2010
U.S. Treasury	$	40,741	$	(482	)		4	$	-	$	-			-	$	40,741	$	(482	)		4
Federal agency		147,012		(2,796	)		12		-		-			-		147,012		(2,796	)		12
State & municipal		22,273		(317	)		31		7,533		(338	)		19		29,806		(655	)		50
Mortgage-backed		44,340		(719	)		3		-		-			-		44,340		(719	)		3
Collateralized mortgage obligations		72,595		(2,251	)		3		-		-			-		72,595		(2,251	)		3
Other securities		95		(5	)		1		-		-			-		95		(5	)		1
Total securities with unrealized losses	$	327,056	$	(6,570	)		54	$	7,533	$	(338	)		19	$	334,589	$	(6,908	)		73

Portfolio	Class
Commercial Loans	Commercial
	Commercial Real Estate
	Agricultural
	Agricultural Real Estate
	Business Banking

Consumer Loans	Indirect
	Home Equity
	Direct

Residential Real Estate Mortgages

(In thousands)	December 31, 2011		December 31, 2010
Commercial Loans
Commercial	$	1,699	$	5,837
Commercial Real Estate		4,868		5,687
Agricultural		3,307		4,065
Agricultural Real Estate		2,067		2,429
Business Banking		7,446		7,033
		19,387		25,051

Consumer Loans
Indirect		1,550		1,971
Home Equity		7,931		6,395
Direct		378		399
		9,859		8,765

Residential Real Estate Mortgages		9,044		8,651

Total Nonaccrual	$	38,290	$	42,467