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LOANS AND ALLOWANCE FOR LOAN LOSSES
 12 Months Ended
Dec. 31, 2022
Loans and Leases Receivable Disclosure [Abstract]  
LOANS AND ALLOWANCE FOR LOAN LOSSES LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of the loan portfolio, net of deferred loan fees is summarized as follows (in thousands):
 December 31, 2022December 31, 2021
Commercial and agricultural:
Commercial and industrial$252,044 $256,893 
Agricultural249 394 
Commercial mortgages:  
Construction108,243 82,204 
Commercial mortgages888,670 720,358 
Residential mortgages285,672 259,334 
Consumer loans:  
Home equity lines and loans81,401 70,670 
Indirect consumer loans202,124 118,569 
Direct consumer loans11,045 9,827 
Total loans, net of deferred loan fees1,829,448 1,518,249 
Interest receivable on loans6,548 4,133 
Total recorded investment in loans$1,835,996 $1,522,382 

The Corporation had no residential mortgages held for sale as of December 31, 2022 and $0.4 million as of December 31, 2021, which are not included in the above table.
Residential mortgages totaling $228.4 million at December 31, 2022 and $204.2 million at December 31, 2021 were pledged under a blanket collateral agreement for the Corporation's line of credit with the FHLBNY.
As of December 31, 2022, the Corporation had outstanding PPP loan balances of $0.7 million, which are included in commercial and industrial loans in the table above. These loans require no allowance for loan losses as of December 31, 2022 since they are government guaranteed loans.
The following tables present the activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2022 and 2021, respectively (in thousands):
 December 31, 2022
Allowance for loan lossesCommercial, and AgriculturalCommercial MortgagesResidential MortgagesConsumer LoansTotal
Beginning balance:$3,591 $13,556 $1,803 $2,075 $21,025 
Charge Offs:(20)(687)(17)(770)(1,494)
Recoveries:42 3 40 597 682 
Net (charge offs) recoveries22 (684)23 (173)(812)
Provision(240)(1,296)19 963 (554)
Ending balance$3,373 $11,576 $1,845 $2,865 $19,659 

 December 31, 2021
Allowance for loan lossesCommercial, and AgriculturalCommercial MortgagesResidential MortgagesConsumer LoansTotal
Beginning balance:$4,493 $11,496 $2,079 $2,856 $20,924 
Charge Offs:(28)(43)(75)(593)(739)
Recoveries:312 3 10 498 823 
Net recoveries (charge offs)284 (40)(65)(95)84 
Provision(1,186)2,100 (211)(686)17 
Ending balance$3,591 $13,556 $1,803 $2,075 $21,025 
The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2022 and December 31, 2021 (in thousands):
 December 31, 2022
Allowance for loan lossesCommercial
and
Agricultural		Commercial MortgagesResidential MortgagesConsumer LoansTotal
Ending allowance balance attributable to loans:
Individually evaluated for impairment$1,078 $38 $— $31 $1,147 
Collectively evaluated for impairment2,295 11,538 1,845 2,834 18,512 
Total ending allowance balance$3,373 $11,576 $1,845 $2,865 $19,659 


 December 31, 2021
Allowance for loan lossesCommercial
and
Agricultural		Commercial MortgagesResidential MortgagesConsumer LoansTotal
Ending allowance balance attributable to loans:
Individually evaluated for impairment$1,394 $1,571 $— $65 $3,030 
Collectively evaluated for impairment2,197 11,985 1,803 2,010 17,995 
Total ending allowance balance$3,591 $13,556 $1,803 $2,075 $21,025 




 December 31, 2022
Loans:Commercial
and
Agricultural		Commercial MortgagesResidential MortgagesConsumer LoansTotal
Loans individually evaluated for impairment$2,113 $4,384 $760 $265 $7,522 
Loans collectively evaluated for impairment251,178 996,477 285,685 295,134 1,828,474 
Total ending loans balance$253,291 $1,000,861 $286,445 $295,399 $1,835,996 


 December 31, 2021
Loans:Commercial
and
Agricultural		Commercial MortgagesResidential MortgagesConsumer LoansTotal
Loans individually evaluated for impairment$2,427 $7,967 $938 $315 $11,647 
Loans collectively evaluated for impairment255,586 796,858 259,029 199,262 1,510,735 
Total ending loans balance$258,013 $804,825 $259,967 $199,577 $1,522,382 
The following tables present loans individually evaluated for impairment recognized by class of loans as of December 31, 2022 and December 31, 2021, the average recorded investment and interest income recognized by class of loan as of the years ended December 31, 2022 and 2021 (in thousands):
 December 31, 2022December 31, 2021
 Unpaid Principal BalanceRecorded InvestmentAllowance for Loan Losses AllocatedUnpaid Principal BalanceRecorded InvestmentAllowance for Loan Losses Allocated
With no related allowance recorded:
Commercial and agricultural:
Commercial and industrial$1,026 $1,025 $— $954 $948 $— 
Commercial mortgages:      
Construction5 5 — 129 130 — 
Commercial mortgages4,346 4,341 — 6,940 4,278 — 
Residential mortgages767 760 — 951 938 — 
Consumer loans:      
Home equity lines and loans154 138 — 185 169 — 
With an allowance recorded:      
Commercial and agricultural:      
Commercial and industrial1,086 1,088 1,078 5,350 1,479 1,394 
Commercial mortgages:      
Commercial mortgages38 38 38 3,550 3,559 1,571 
Consumer loans:      
Home equity lines and loans126 127 31 146 146 65 
Total$7,548 $7,522 $1,147 $18,205 $11,647 $3,030 

 December 31, 2022December 31, 2021
 Average Recorded InvestmentInterest Income Recognized (1)Average Recorded InvestmentInterest Income Recognized (1)
With no related allowance recorded:
Commercial and agricultural:
Commercial and industrial$814 $— $1,505 $6 
Commercial mortgages:    
Construction71 — 159 6 
Commercial mortgages4,211 14 4,650 30 
Residential mortgages864 37 1,015 40 
Consumer loans:    
Home equity lines & loans153 — 273 7 
With an allowance recorded:    
Commercial and agricultural:    
Commercial and industrial1,453 5 1,505 8 
Commercial mortgages:    
Commercial mortgages1,258 — 2,236 49 
Consumer loans:    
Home equity lines and loans137 — 157 — 
Total$8,961 $56 $11,500 $146 
(1)  Cash basis interest income approximates interest income recognized.
The following table presents the recorded investment in non-accrual and loans past due 90 days or more and still accruing by class of loans as of December 31, 2022 and December 31, 2021 (in thousands):
Non-accrualLoans Past Due 90 Days or More and Still Accruing
2022202120222021
Commercial and agricultural:
Commercial and industrial$1,946 $1,932 $1 $4 
Commercial mortgages:
Construction5 34 — — 
Commercial mortgages3,928 3,844 — — 
Residential mortgages986 1,039 — — 
Consumer loans:
Home equity lines and loans760 790 — — 
Indirect consumer loans540 462 — — 
Direct consumer loans13 13 — — 
Total$8,178 $8,114 $1 $4 
The following tables present the aging of the recorded investment in loans as of December 31, 2022 and December 31, 2021 (in thousands):
December 31, 2022
 30 - 59 Days Past Due60 - 89 Days Past Due90 Days or More Past DueTotal Past DueLoans Not Past DueTotal
Commercial and agricultural:
Commercial and industrial$74 $3 $1 $78 $252,963 $253,041 
Agricultural— — — — 250 250 
Commercial mortgages: 
Construction— — — — 108,671 108,671 
Commercial mortgages1,066 — 486 1,552 890,638 892,190 
Residential mortgages1,386 715 294 2,395 284,050 286,445 
Consumer loans: 
Home equity lines and loans194 122 442 758 80,944 81,702 
Indirect consumer loans1,407 195 250 1,852 200,738 202,590 
Direct consumer loans2 19 1 22 11,085 11,107 
Total$4,129 $1,054 $1,474 $6,657 $1,829,339 $1,835,996 


December 31, 2021
 30 - 59 Days Past Due60 - 89 Days Past Due90 Days or More Past DueTotal Past DueLoans Not Past DueTotal
Commercial and agricultural:
Commercial and industrial$413 $148 $26 $587 $257,031 $257,618 
Agricultural— — — — 395 395 
Commercial mortgages:   
Construction— — — — 82,435 82,435 
Commercial mortgages24 224 1,302 1,550 720,840 722,390 
Residential mortgages580 32 652 1,264 258,703 259,967 
Consumer loans:   
Home equity lines and loans256 69 424 749 70,105 70,854 
Indirect consumer loans1,179 424 255 1,858 116,997 118,855 
Direct consumer loans24 11 13 48 9,820 9,868 
Total$2,476 $908 $2,672 $6,056 $1,516,326 $1,522,382 
Troubled Debt Restructurings:

A modification of a loan may result in classification as a TDR when a borrower is experiencing financial difficulty and the modification constitutes a concession. The Corporation offers various types of modifications which may involve a change in the schedule of payments, a reduction in the interest rate, an extension of the maturity date, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, requesting additional collateral, releasing collateral for consideration, substituting or adding a new borrower or guarantor, a permanent reduction of the recorded investment in the loan or a permanent reduction of the interest on the loan.
As of December 31, 2022 and 2021, the Corporation has a recorded investment in TDRs of $5.4 million and $10.3 million, respectively. There were specific reserves of $0.2 million allocated for TDRs at December 31, 2022 and $1.9 million allocated at December 31, 2021. As of December 31, 2022, TDRs totaling $1.4 million were accruing interest under the modified terms and $4.0 million were on non-accrual status. As of December 31, 2021, TDRs totaling $5.6 million were accruing interest under the modified terms and $4.7 million were on non-accrual status. The Corporation has committed no additional amounts to customers with outstanding loans that are classified as TDRs as of December 31, 2022 and 2021.
During the year ended December 31, 2022 there were no loans that were modified as TDRs.
During the year ended December 31, 2021, the terms and conditions of two commercial and industrial loans and four commercial mortgage loans were modified as TDRs. The modification of the terms of all of these loans included a postponement or reduction of the scheduled amortized payments for greater than a three month period.

The following table presents loans by class modified as troubled debt restructurings that occurred during the year ended December 31, 2021 (in thousands):
December 31, 2021Number of LoansPre-Modification Outstanding Recorded InvestmentPost-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial and agricultural:
Commercial and industrial2$502 $502 
Commercial mortgages:   
Commercial mortgages46,094 6,094 
Total6$6,596 $6,596 

The TDRs described above increased the allowance for loan losses by $1.7 million and resulted in no in charge offs during the year ended December 31, 2021.
A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.
There were no payment defaults on any loans previously modified as troubled debt restructurings during the years ended December 31, 2022 and December 31, 2021, within twelve months following the modification.

Credit Quality Indicators

The Corporation establishes a risk rating at origination for all commercial loans. The main factors considered in assigning risk ratings include, but are not limited to: historic and future debt service coverage, collateral position, operating performance, liquidity, leverage, payment history, management ability, and the customer’s industry. Commercial relationship managers monitor all loans in their respective portfolios for any changes in the borrower’s ability to service their debt and affirm the risk ratings for the loans at least annually.
For the retail loans, which include residential mortgages, indirect and direct consumer loans, home equity lines and loans, and credit cards, once a loan is properly approved and closed, the Corporation evaluates credit quality based upon loan repayment. Retail loans are not rated until they become 90 days past due.
The Corporation uses the risk rating system to identify criticized and classified loans. Commercial relationships within the criticized and classified risk ratings are analyzed quarterly. The Corporation uses the following definitions for criticized and classified loans (which are consistent with regulatory guidelines):
Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position as some future date.
Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capability of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans listed as not rated are included in groups of homogeneous loans. Based on the analyses performed as of December 31, 2022 and 2021, the risk category of the recorded investment of loans by class of loans is as follows (in thousands):
 December 31, 2022
 Not RatedPassSpecial MentionSubstandardDoubtfulTotal
Commercial and agricultural:
Commercial and industrial$— $235,900 $13,349 $2,899 $893 $253,041 
Agricultural— 250 — — — 250 
Commercial mortgages:      
Construction— 108,488 178 5 — 108,671 
Commercial mortgages— 860,389 23,938 7,825 38 892,190 
Residential mortgages285,459 — 986 — 286,445 
Consumer loans      
Home equity lines and loans80,942 — — 760 — 81,702 
Indirect consumer loans202,050 — — 540 — 202,590 
Direct consumer loans11,094 — — 13 — 11,107 
Total$579,545 $1,205,027 $37,465 $13,028 $931 $1,835,996 
 December 31, 2021
 Not RatedPassSpecial MentionSubstandardDoubtfulTotal
Commercial and agricultural:
Commercial and industrial$— $250,529 $2,892 $3,108 $1,089 $257,618 
Agricultural— 395 — — — 395 
Commercial mortgages:      
Construction— 82,404 — 31 — 82,435 
Commercial mortgages— 672,741 31,072 17,458 1,119 722,390 
Residential mortgages258,928 — — 1,039 — 259,967 
Consumer loans      
Home equity lines and loans70,064 — — 790 — 70,854 
Indirect consumer loans118,393 — — 462 — 118,855 
Direct consumer loans9,855 — — 13 — 9,868 
Total$457,240 $1,006,069 $33,964 $22,901 $2,208 $1,522,382 

The Corporation considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential and consumer loan classes, the Corporation also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. Non-performing loans include non-accrual loans and non-accrual troubled debt restructurings.

The following table presents the recorded investment in residential and consumer loans based on payment activity as of December 31, 2022 and 2021 (in thousands):
 December 31, 2022
 Consumer Loans
 Residential MortgagesHome Equity Lines and LoansIndirect Consumer LoansOther Direct Consumer Loans
Performing$285,459 $80,942 $202,050 $11,094 
Non-Performing986 760 540 13 
Total$286,445 $81,702 $202,590 $11,107 

 December 31, 2021
 Consumer Loans
 Residential MortgagesHome Equity Lines and LoansIndirect Consumer LoansOther Direct Consumer Loans
Performing$258,928 $70,064 $118,393 $9,855 
Non-Performing1,039 790 462 13 
Total$259,967 $70,854 $118,855 $9,868