10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-Q
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarterly period ended March 31, 2023

Or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 001-35741

CHEMUNG FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
New York		16-1237038
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
One Chemung Canal Plaza, Elmira, NY		14901
(Address of principal executive offices)		(Zip Code)
	(607) 737-3711 or (800) 836-3711
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class	Trading Symbol	Name of exchange on which registered
Common stock, par value $.01 per share	CHMG	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes: ☒         No: ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes: ☒        No: ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer	☐	Non-accelerated filer	☒
Accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes: ☐       No: ☒

The number of shares of the registrant's common stock, $.01 par value, outstanding on May 1, 2023 was 4,710,408.

CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES

INDEX

		PAGES
	Glossary of Abbreviations and Terms	3
PART I.	FINANCIAL INFORMATION
Item 1:	Financial Statements – Unaudited
	Consolidated Balance Sheets	7
	Consolidated Statements of Income	8
	Consolidated Statements of Comprehensive Income (Loss)	9
	Consolidated Statements of Shareholders’ Equity	10
	Consolidated Statements of Cash Flows	11
	Notes to Unaudited Consolidated Financial Statements	13
Item 2:	Management's Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	67
Item 4:	Controls and Procedures	68
PART II.	OTHER INFORMATION
Item 1:	Legal Proceedings	69
Item 1A:	Risk Factors	69
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 3:	Defaults Upon Senior Securities	70
Item 4:	Mine Safety Disclosures	70
Item 5:	Other Information	70
Item 6:	Exhibits	71
SIGNATURES		72
EXHIBIT INDEX

2

GLOSSARY OF ABBREVIATIONS AND TERMS

To assist the reader the Corporation has provided the following list of commonly used abbreviations and terms included in the Notes to the Unaudited Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Abbreviations

ACL	Allowance for Credit Losses
AFS	Available for sale securities
ALCO	Asset-Liability Committee
AOCI	Accumulated Other Comprehensive Income
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
Bank	Chemung Canal Trust Company
Basel III	The Third Basel Accord of the Basel Committee on Banking Supervision
Board of Directors	Board of Directors of Chemung Financial Corporation
BOLI	Bank Owned Life Insurance
BTFP	Bank Term Funding Program
CAM	Common area maintenance charges
CARES Act	Coronavirus Aid, Relief, and Economic Security Act
CDARS	Certificate of Deposit Account Registry Service
CDO	Collateralized Debt Obligation
CECL	Current expected credit loss
CFS	CFS Group, Inc.
Corporation	Chemung Financial Corporation
COVID-19	Coronavirus disease 2019
CRM	Chemung Risk Management, Inc.
Dodd-Frank Act	The Dodd-Frank Wall Street Reform and Consumer Protection Act
EPS	Earnings per share
Exchange Act	Securities Exchange Act of 1934
FASB	Financial Accounting Standards Board
FDIC	Federal Deposit Insurance Corporation
FHLBNY	Federal Home Loan Bank of New York
FRB	Board of Governors of the Federal Reserve System
FRBNY	Federal Reserve Bank of New York
Freddie Mac	Federal Home Loan Mortgage Corporation
GAAP	U.S. Generally Accepted Accounting Principles
HTM	Held to maturity securities
ICS	Insured Cash Sweep Service
IFRS	International Financial Reporting Standards
LGD	Loss given default
MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
NAICS	North American Industry Classification System
N/M	Not meaningful
OPEB	Other postemployment benefits

3

OREO	Other real estate owned
PD	Probability of default
Regulatory Relief Act	Economic Growth, Regulatory Relief, and Consumer Protection Act
ROA	Return on average assets
ROE	Return on average equity
RWA	Risk-weighted assets
SBA	Small Business Administration
SEC	Securities and Exchange Commission
Securities Act	Securities Act of 1933
Tax Act	Tax Cuts and Jobs Act of 2017
TDRs	Troubled debt restructurings
WMG	Wealth Management Group

Terms

Allowance for Credit Losses	Replaces the Allowance for Loan and Lease Losses as the contra asset account used to represent the lifetime amount the Corporation anticipates will be unrecoverable from its assets. The ACL conforms to the CECL requirements as outlined in ASU 2016-13, and was implemented by the Corporation on January 1, 2023.
Allowance for credit losses to total loans	Represents period-end allowance for credit losses divided by retained loans.
Assets under administration	Represents assets that are beneficially owned by clients and all investment decisions pertaining to these assets are also made by clients.
Assets under management	Represents assets that are managed on behalf of clients.
Basel I	A set of international banking regulations, which set out the minimum capital requirements of financial institutions with the goal of minimizing credit risk. The main focus was mainly on credit risk by creating a bank asset classification system.
Basel III	A comprehensive set of reform measures designed to improve the regulation, supervision, and risk management within the banking sector. The reforms require banks to maintain proper leverage ratios and meet certain capital requirements.
Benefit obligation	Refers to the projected benefit obligation for pension plans and the accumulated postretirement benefit obligation for OPEB plans.
Brokered deposits	Refers to deposits obtained from or through the mediation or assistance of a deposit broker.
Capital Bank	Division of Chemung Canal Trust Company located in the “Capital Region” of New York State and includes the counties of Albany, Saratoga ,and Schenectady.
Captive insurance company	A company that provides risk-mitigation services for its parent company.
CDARS	Product involving a network of financial institutions that exchange certificates of deposits among members in order to ensure FDIC insurance coverage on customer deposits above the single institution limit. Using a sophisticated matching system, funds are exchanged on a dollar-for-dollar basis, so that the equivalent of an original deposit comes back to the originating institution.
Collateralized debt obligation	A structured financial product that pools together cash flow-generating assets, such as mortgages, bonds, and loans.
Collateralized mortgage obligations	A type of mortgage-backed security with principal repayments organized according to their maturities and into different classes based on risk.  The mortgages serve as collateral and are organized into classes based on their risk profile.
Dodd-Frank Act	The Dodd-Frank Act was enacted on July 21, 2010 and significantly changed the bank regulatory landscape and has impacted and will continue to impact the lending, deposit, investment, trading, and operating activities of financial institutions and their holding companies. The Dodd-Frank Act requires various federal agencies to adopt a broad range of new rules and regulations, and to prepare various studies and reports for Congress.

4

Fully taxable equivalent basis	Income from tax-exempt loans and investment securities that have been increased by an amount equivalent to the taxes that would have been paid if this income were taxable at statutory rates; the corresponding income tax impact related to tax-exempt items is recorded within income tax expense.
GAAP	Accounting principles generally accepted in the United States of America.
Holding company	Consists of the operations for Chemung Financial Corporation (parent only).
ICS	Product involving a network of financial institutions that exchange interest-bearing money market deposits among members in order to ensure FDIC insurance coverage on customer deposits above the single institution limit.  Using a sophisticated matching system, funds are exchanged on a dollar-for-dollar basis, so that the equivalent of an original deposit comes back to the originating institution.
Loans held for sale	Residential real estate loans originated for sale on the secondary market with maturities from 15-30 years.
Long term lease obligation	An obligation extending beyond the current year, which is related to a long term finance lease that is considered to have the economic characteristics of asset ownership.
Mortgage-backed securities	A type of asset-backed security that is secured by a collection of mortgages.
Municipal clients	A political unit, such as a city, town, or village, incorporated for local self-government.
N/A	Data is not applicable or available for the period presented.
N/M	Not meaningful.
Non-GAAP	A calculation not made according to GAAP.
Obligations of state and political subdivisions	An obligation that is guaranteed by the full faith and credit of a state or political subdivision that has the power to tax.
Obligations of U.S. Government	A federally guaranteed obligation backed by the full power of the U.S. government, including Treasury bills, Treasury notes and Treasury bonds.
Obligations of U.S. Government sponsored enterprises	Obligations of agencies originally established or chartered by the U.S. government to serve public purposes as specified by the U.S. Congress; these obligations are not explicitly guaranteed as to the timely payment of principal and interest by the full faith and credit of the U.S. government.
OREO	Represents real property owned by the Corporation, which is not directly related to its business and is most frequently the result of a foreclosure on real property.
OTTI	Impairment charge taken on a security whose fair value has fallen below the carrying value on the balance sheet and whose value is not expected to recover through the holding period of the security.
Political subdivision	A county, city, town, or other municipal corporation, a public authority, or a publicly-owned entity that is an instrumentality of a state or a municipal corporation.
Pre-provision profit/(loss)	Represents total net revenue less non-interest expense, before income tax expense (benefit). The Corporation believes that this financial measure is useful in assessing the ability of a bank to generate income in excess of its provision for credit losses.
Regulatory Relief Act	The Economic Growth, Regulatory Relief and Consumer Protection Act was enacted on May 24, 2018 provides certain limited amendments to the Dodd-Frank Act, as well as certain targeted modifications to other post-financial crisis regulatory requirements. In addition, the legislation establishes new consumer protections and amends various securities- and investment company-related requirements.
RWA	Risk-weighted assets consist of on- and off-balance sheet assets that are assigned to one of several broad risk categories and weighted by factors representing their risk and potential for default. On-balance sheet assets are risk-weighted based on the perceived credit risk associated with the obligor or counterparty, the nature of any collateral, and the guarantor, if any. Off-balance sheet assets such as lending-related commitments, guarantees, derivatives and other applicable off-balance sheet positions are risk-weighted by multiplying the contractual amount by the appropriate credit conversion factor to determine the on-balance sheet credit equivalent amount, which is then risk-weighted based on the same factors used for on-balance sheet assets. Risk-weighted assets also incorporate a measure for market risk related to applicable trading assets-debt and equity instruments. The resulting risk-weighted values for each of the risk categories are then aggregated to determine total risk-weighted assets.

5

SBA loan pools	Business loans partially guaranteed by the SBA.
Securities sold under agreements to repurchase	Sale of securities together with an agreement for the seller to buy back the securities at a later date.
Tax Act	The Tax Act was enacted on December 22, 2017 and amended the Internal Revenue Code of 1986. The legislation reduced the U.S. federal corporate income tax rate from 35 percent to 21 percent, with some related business deductions and credits being either reduced or eliminated.
TDR	A TDR is deemed to occur when the Corporation modifies the original terms of a loan agreement by granting a concession to a borrower that is experiencing financial difficulty.
Trust preferred securities	A hybrid security with characteristics of both subordinated debt and preferred stock which allows for early redemption by the issuer, makes fixed or variable payments, and matures at face value.
Unaudited	Financial statements and information that have not been subjected to auditing procedures sufficient to permit an independent certified public accountant to express an opinion.
WMG	Provides services as executor and trustee under wills and agreements, and guardian, custodian, trustee and agent for pension, profit-sharing and other employee benefit trusts, as well as various investment, financial planning, pension, estate planning and employee benefit administration services.

6

CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)	March 31, 2023		December 31, 2022
ASSETS
Cash and due from financial institutions	$	25,109	$	29,309
Interest-earning deposits in other financial institutions	9,532		26,560
Total cash and cash equivalents	34,641		55,869
Equity investments, at estimated fair value	2,949		2,830
Securities available for sale, at estimated fair value (net of allowance for credit losses of $0 at March 31, 2023)	626,055		632,589
Securities held to maturity, estimated fair value of $1,905 at March 31, 2023 and $2,402 at December 31, 2022 (net of allowance for credit losses of $0 at March 31, 2023)	1,932		2,424
FHLBNY and FRBNY Stock, at cost	7,913		8,197
Loans, net of deferred loan fees	1,873,701		1,829,448
Allowance for credit losses (1)	(20,075)		(19,659)
Loans, net	1,853,626		1,809,789
Premises and equipment, net	15,867		16,113
Operating lease right-of-use assets	6,250		6,449
Goodwill	21,824		21,824
Bank-owned life insurance	2,881		2,871
Interest rate swap assets	22,710		27,141
Accrued interest receivable and other assets	57,535		59,457
Total assets	$	2,654,183	$	2,645,553
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing	$	690,596	$	733,329
Interest-bearing	1,641,833		1,593,898
Total deposits	2,332,429		2,327,227
FHLBNY overnight advances	90,070		95,810
Long term finance lease obligation	3,258		3,327
Operating lease liabilities	6,427		6,620
Dividends payable	1,460		1,455
Interest rate swap liabilities	22,776		27,196
Accrued interest payable and other liabilities	20,422		17,530
Total liabilities	2,476,842		2,479,165
Shareholders' equity:
Common stock, $0.01 par value per share, 10,000,000 shares authorized;   5,310,076 issued at March 31, 2023 and December 31, 2022	53		53
Additional paid-in capital	47,387		47,331
Retained earnings	216,593		211,859
Treasury stock, at cost; 600,973 shares at March 31, 2023 and 615,448   shares at December 31, 2022	(17,219)		(17,598)
Accumulated other comprehensive loss	(69,473)		(75,257)
Total shareholders' equity	177,341		166,388
Total liabilities and shareholders' equity	$	2,654,183	$	2,645,553

(1)Effective January 1, 2023, the allowance calculation is based upon Current Expected Credit loss methodology. Prior to January 1, 2023, the allowance calculation was based upon incurred loss methodology. Refer to Note 1 for further discussion.

See accompanying notes to unaudited consolidated financial statements.

7

CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	Three Months Ended   March 31,
(in thousands, except per share data)	2023		2022
Interest and dividend income:
Loans, including fees	$	22,289	$	14,481
Taxable securities	3,583		2,688
Tax exempt securities	261		270
Interest-earning deposits	97		19
Total interest and dividend income	26,230		17,458
Interest expense:
Deposits	5,387		748
Securities sold under agreements to repurchase	—		—
Borrowed funds	896		33
Total interest expense	6,283		781
Net interest income	19,947		16,677
Provision (credit) for credit losses (1)	277		(1,145)
Net interest income after provision for credit losses	19,670		17,822
Non-interest income:
WMG fee income	2,580		2,757
Service charges on deposit accounts	941		864
Interchange revenue from debit card transactions	1,133		1,130
Changes in fair value of equity investments	72		(113)
Net gains on sales of loans held for sale	5		74
Income from bank-owned life insurance	10		11
Other	682		940
Total non-interest income	5,423		5,663
Non-interest expenses:
Salaries and wages	6,783		6,223
Pension and other employee benefits	1,680		1,718
Other components of net periodic pension and postretirement benefits	(174)		(408)
Net occupancy	1,465		1,427
Furniture and equipment	418		437
Data processing	2,381		2,187
Professional services	440		521
Legal accruals and settlements	—		—
Amortization of intangible assets	—		11
Marketing and advertising	332		276
Other real estate owned	38		(37)
FDIC insurance	497		314
Loan expense	232		215
Merger and acquisition related expenses	—		—
Other	1,744		1,784
Total non-interest expenses	15,836		14,668
Income before income tax expense	9,257		8,817
Income tax expense	1,987		1,950
Net income	$	7,270	$	6,867
Weighted average shares outstanding	4,721		4,689
Basic and diluted earnings per share	$	1.54	$	1.46

(1)Effective January 1, 2023, the allowance calculation is based upon Current Expected Credit loss methodology. Prior to January 1, 2023, the allowance calculation was based upon incurred loss methodology. Refer to Note 1 for further discussion.

See accompanying notes to unaudited consolidated financial statements.

8

CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

	Three Months Ended   March 31,
(in thousands)	2023		2022
Net income	$	7,270	$	6,867
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale	7,825		(42,115)
Tax effect	2,050		(11,028)
Net of tax amount	5,775		(31,087)
Change in funded status of defined benefit pension plan and other benefit plans:
Reclassification adjustment for amortization of net actuarial loss	12		14
Total before tax effect	12		14
Tax effect	3		2
Net of tax amount	9		12
Total other comprehensive income (loss)	5,784		(31,075)
Comprehensive income (loss)	$	13,054	$	(24,208)

See accompanying notes to unaudited consolidated financial statements.

9

CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(UNAUDITED)

(in thousands, except share and per share data)	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balances at January 1, 2022	$	53	$	46,901	$	188,877	$	(17,846)	$	(6,530)	$	211,455
Net income	—		—		6,867		—		—		6,867
Other comprehensive loss	—		—		—		—		(31,075)		(31,075)
Restricted stock awards	—		179		—		—		—		179
Restricted stock units for directors' deferred compensation plan	—		5		—		—		—		5
Distribution of 3,985 shares of treasury stock grants for employee restricted stock awards	—		(112)		—		112		—		—
Cash dividends declared ($0.31 per share)	—		—		(1,449)		—		—		(1,449)
Distribution of 8,575 shares of treasury stock for directors' compensation	—		(139)		—		244		—		105
Repurchase of 15,388 shares of common stock	—		—		—		(695)		—		(695)
Sale of 2,545 shares of treasury stock (a)	—		46		—		72		—		118
Balances at March 31, 2022	$	53	$	46,880	$	194,295	$	(18,113)	$	(37,605)	$	185,510
Balances at January 1, 2023	$	53	$	47,331	$	211,859	$	(17,598)	$	(75,257)	$	166,388
Cumulative effect of accounting change (b)					(1,076)						(1,076)
Balances at January 1, 2023, as adjusted	53		47,331		210,783		(17,598)		(75,257)		165,312
Net income	—		—		7,270		—		—		7,270
Other comprehensive income									5,784		5,784
Restricted stock awards	—		263		—		—		—		263
Restricted stock units for directors' deferred compensation plan	—		5		—		—		—		5
Distribution of 4,577 shares of treasury stock grants for employee restricted stock awards	—		(131)		—		131		—		—
Cash dividends declared ($0.31 per share)	—		—		(1,460)		—		—		(1,460)
Distribution of 8,492 shares of treasury stock for directors' compensation	—		(147)		—		243		—		96
Repurchase of 2,148 shares of common stock	—		—		—		(98)		—		(98)
Sale of 3,554 shares of treasury stock (a)	—		66		—		103		—		169
Balances at March 31, 2023	$	53	$	47,387	$	216,593	$	(17,219)	$	(69,473)	$	177,341

(a) All treasury stock sales were completed at the prevailing market price with the Chemung Canal Trust Company Profit Sharing, Savings, and Investment Plan which is a defined contribution plan sponsored by the Bank.

(b) Due to implementation of ASC 326. See "Adoption of New Accounting Standards" discussion in Note 1.

See accompanying notes to unaudited consolidated financial statements.

10

CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)	Three Months Ended   March 31,
CASH FLOWS FROM OPERATING ACTIVITIES:	2023		2022
Net income	$	7,270	$	6,867
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization (increase in) of right-of-use assets	199		199
Amortization of intangible assets	—		11
Provision for credit losses (1)	277		(1,145)
Loss on disposal of fixed assets	—		20
Depreciation and amortization of fixed assets	533		579
Amortization of premiums on securities, net	656		1,146
Gain on sales of loans held for sale, net	(5)		(74)
Proceeds from sales of loans held for sale	210		3,901
Loans originated and held for sale	(205)		(3,776)
Net change in fair value of equity investments	(72)		113
Purchase of equity investments	(47)		(98)
Increase in other assets and accrued interest receivable	(132)		(1,418)
Increase in accrued interest payable	636		17
Expense related to restricted stock units for directors' deferred compensation plan	5		5
Expense related to employee stock compensation	131		—
Expense related to employee restricted stock awards	263		179
Increases in (payments on) operating leases	(193)		(192)
Net (gain) loss on interest rate swaps	11		(138)
Increase (decrease) in other liabilities	1,159		(201)
Income from bank owned life insurance	(10)		(11)
Net cash provided by operating activities	10,686		5,984
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities, calls, and principal paydowns on securities available for sale	15,901		24,813
Proceeds from maturities and principal collected on securities held to maturity	492		211
Purchases of securities available for sale	(2,199)		(22,388)
Purchase of FHLBNY and FRBNY stock	(16,853)		(1,304)
Redemption of FHLBNY and FRBNY stock	17,137		1,946
Proceeds from sales of fixed assets	—		125
Purchases of premises and equipment	(287)		(15)
Net increase in loans	(44,114)		(48,365)
Net cash used in investing activities	(29,923)		(44,977)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in demand deposits, interest-bearing demand accounts, savings accounts, and insured money market accounts	(44,507)		35,187
Increase in time deposits	49,709		58,972
Net change in FHLB overnight advances	(5,740)		(14,570)
Payments made on finance leases	(69)		(67)
Purchase of treasury stock	(98)		(695)
Sale of treasury stock	169		118
Cash dividends paid	(1,455)		(1,450)
Net cash (used in) provided by financing activities	(1,991)		77,495
Net (decrease) increase in cash and cash equivalents	(21,228)		38,502
Cash and cash equivalents, beginning of period	55,869		26,981
Cash and cash equivalents, end of period	$	34,641	$	65,483

(1)Effective January 1, 2023, the allowance calculation is based upon Current Expected Credit loss methodology. Prior to January 1, 2023, the allowance calculation was based upon incurred loss methodology. Refer to Note 1 for further discussion.

See accompanying notes to unaudited consolidated financial statements.

11

CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

(UNAUDITED)

(in thousands)	Three Months Ended   March 31,
Supplemental disclosure of cash flow information:	2023		2022
Cash paid for:
Interest	$	5,647	$	764
Income taxes	4,305		115
Supplemental disclosure of non-cash activity:
Transfer of loans to other real estate owned	—		137
Dividends declared, not yet paid	1,460		1,449

See accompanying notes to unaudited consolidated financial statements.

12

CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

The Corporation, through its wholly-owned subsidiaries, the Bank and CFS, provides a wide range of banking, financing, fiduciary and other financial services to its clients.  The Corporation and the Bank are subject to the regulations of certain federal and state agencies and undergo periodic examinations by those regulatory authorities.

CRM, a wholly-owned subsidiary of the Corporation, which was formed and began operations on May 31, 2016, is a Nevada-based captive insurance company which insures against certain risks unique to the operations of the Corporation and its subsidiaries and for which insurance may not be currently available or economically feasible in today's insurance marketplace. CRM pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves. CRM is subject to regulations of the State of Nevada and undergoes periodic examinations by the Nevada Division of Insurance.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in conformity with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 8 of Regulation S-X of the Exchange Act.  These financial statements include the accounts of the Corporation and its subsidiaries, and all significant intercompany balances and transactions are eliminated in consolidation.  Amounts in the prior periods' consolidated financial statements are reclassified whenever necessary to conform to the current period's presentation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and disclosures provided, and actual results could differ. In the opinion of management, all adjustments (consisting of normal recurring adjustments) and disclosures necessary for the fair presentation of the accompanying consolidated financial statements have been included. The unaudited consolidated financial statements should be read in conjunction with the Corporation's 2022 Annual Report on Form 10-K for the year ended December 31, 2022. The results of operations for any interim periods are not necessarily indicative of the results which may be expected for the entire year or any other period.

Reclassifications

Amounts in the prior year financial statements are reclassified whenever necessary to conform to the current year's presentation.

Recent Accounting Pronouncements

Accounting Standards Adopted in 2023:

Financial Instruments - Credit Losses - Topic 326

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The objective of the ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The ASU supersedes prior GAAP by replacing the incurred loss impairment method with a methodology that reflects lifetime expected credit losses and requires the consideration of a broader range of reasonable and supportable information to form loss estimates. In November 2019, the FASB adopted an amendment to postpone the effective date of ASU 2016-13 to January 2023, for some entities, including certain Securities and Exchange Commission filers. As a smaller reporting company, the Corporation was eligible for and elected delayed adoption.

The Corporation adopted the standard on January 1, 2023, and recognized a one-time cumulative-effect adjustment to retained earnings, of $1.5 million, or $1.1 million, net of tax effects, of which $1.1 million reflected the establishment of an allowance for credit losses on unfunded commitments, $0.4 million reflected additional allowance related to the loan portfolio, and no adjustment was recognized related to the securities portfolio.

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The quantitative component of the estimate relies on the statistical relationship between the projected value of an economic indicator and the implied historical loss experience among a curated group of peers. The Corporation utilized regression analyses of peer data, in which the Corporation was included, and where observed credit losses and selected economic factors were used to determine suitable loss drivers for modeling the lifetime rates of probability of default (PD). A loss given default rate (LGD) is assigned to each pool for each period based on these PD outcomes. The model fundamentally utilizes an expected discounted cash flow (DCF) analysis for all loan portfolio segments. The DCF analysis is run at the instrument-level and incorporates an array of loan-specific data points and segment-implied assumptions to determine the lifetime expected loss attributable to each instrument. An implicit "hypothetical loss" is derived for each period of the DCF, and helps establish the present value of future cash flows for each period. The reserve applied to a specific instrument is the difference between the sum of the present value of future cash flows and the book balance of the loan at the measurement date.

Portfolio segments are the level at which loss assumptions are applied to a pool of loans based on the similarity of risk characteristics inherent in the included instruments, relying on FFIEC Call Report codes. The loss driver for each loan portfolio segment is derived from a readily available and reasonable economic forecast, chiefly the FOMC of the Federal Reserve's projections of civilian unemployment and year-over-year U.S. GDP growth. Forecasts are applied over a four-quarter period and revert to the lookback period's historical mean for the economic indicator over an eight-quarter horizon, on a straight-line basis.

The model incorporates qualitative factor adjustments in order to calibrate the model for risk in each portfolio segment that may not be captured through quantitative analysis. Determinations regarding qualitative adjustments are reflective of management's expectation of loss conditions differing from those already captured in the quantitative component of the model. The Corporation evaluates all assets exhibiting potential credit risk, including off-balance sheet exposures on unfunded commitments, and debt securities. Allowances on unfunded commitments utilize a calculated funding rate to estimate the Corporation's future obligations, and applies the overall loss rate assigned to each concurrent pool. Securities backed by U.S. government-related agencies are determined to be zero-credit loss securities. Potential losses on obligations of states, political subdivisions, and corporate bonds and notes are analyzed by management to determine whether any of the losses may be attributable to credit-related factors on an individual basis.

The adoption of ASU 2016-13 had an initial impact on the allowance for credit losses on loans of $0.4 million, reflecting changes in the methodology when compared to the allowance for loan losses on loans at December 31, 2022. The increase represents an increase of $0.2 million in the allowance relating to commercial loans, the combined effect of changes to commercial & agricultural and commercial real estate, and an increase of $0.2 million in consumer loans, mostly in relation to indirect auto lending. The remainder of the adoption impact, or $1.1 million, related to the establishment of an allowance for unfunded commitments.

Troubled Debt Restructurings and Vintage Disclosures - Topic 326

In March 2022, the FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The ASU made certain targeted amendments specific to troubled debt restructurings (TDRs) by creditors and vintage disclosure related to gross write-offs. Upon adoption, the Corporation will be required to apply the loan and refinancing and restructuring guidance to determine whether a modification results in a new loan or a continuation of an existing loan, rather than applying the recognition and measurement guidance for TDRs. The ASU also requires companies to disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within scope of Subtopic 326-20. The Corporation adopted the standard prospectively, beginning January 1, 2023, concurrently with the aforementioned ASU 2016-13, and its impact can be found within Note 4 to the consolidated financial statements. The Corporation established a methodology for identifying and reporting the financial impact of modifications made to borrowers who are deemed to be experiencing financial difficulty.

Reference Rate Reform - ASC 848

ASU No. 2022-06, Deferral of the Sunset Date of Topic 848, was issued in December 2022 and defers the date for which accounting relief can be applied under Topic 848. ASU 2022-06 applies to entities that have contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The objective of the guidance in Topic 848 is to ease the burden in accounting related to the recognition of the effects of reference rate reform on financial reporting. A sunset provision was included within Topic 848 based on expectations of when LIBOR would cease being published. The Corporation had adopted the accounting relief provisions of Topic 848 effective October 1, 2020. The amendments in ASU 2022-06 defer the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be able to apply the accounting relief in Topic 848. ASU 2022-06 was effective for all entities upon its issuance. The adoption of the provisions of Topic 848, as amended, did not have a material impact on the Corporation’s consolidated financial statements.

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Accounting Standards Pending Adoption

None.

Risks and Uncertainties

Current Banking Environment

Industry events transpiring prior to the Corporation’s filing date, continue to present challenges to the banking sector. Market conditions and external factors may unpredictably impact the competitive landscape for deposits in the banking industry. Additionally, the rising interest rate environment has increased competition for liquidity and the premium at which liquidity is available to meet funding needs. The Corporation believes the sources of liquidity presented in the these Unaudited Consolidated Financial Statements and the Notes to the Unaudited Consolidated Financial Statements are sufficient to meet its needs on the balance sheet date.

An unexpected decrease in deposit balances due to heavy withdrawal activity could adversely impact the Corporation's ability to rely on organic deposits to primarily fund its operations, potentially requiring greater reliance on secondary sources of liquidity to meet withdrawal demands or to fund continuing operations. These sources may include proceeds from Federal Home Loan Bank advances, sales of investment securities and loans, federal funds lines of credit from correspondent banks, and out-of-market time deposits. Important Accounting Policy ramifications of such events are outlined in the previous sections of Note 1, and subsequently in the relevant Notes to the Consolidated Financial Statements.

In response to these events, the Treasury Department, Federal Reserve, and FDIC jointly announced the Bank Term Funding Program (BTFP) on March 12, 2023. This program aims to enhance liquidity by allowing institutions to pledge certain securities at the par value of the securities, and at a borrowing rate of ten basis points over the one-year overnight index swap rate. The BTFP is available to eligible U.S. federally insured depository institutions, with advances having a term of up to one year and no prepayment penalties. As of the date of the release of the Unaudited Consolidated Financial Statements, the Corporation has not accessed the BTFP.

Such reliance on secondary funding sources could increase the Corporation's overall cost of funding and thereby reduce net income. While the Corporation believes its current sources of liquidity are adequate to fund operations, there is no guarantee they will suffice to meet future liquidity demands. This may necessitate slowing or discontinuing loan growth, capital expenditures, or other investments, or liquidating assets.

For further discussion of the Corporation's liquidity practices, see pages 59-61 of this Form 10-Q.

NOTE 2        EARNINGS PER COMMON SHARE (shares in thousands)

Basic earnings per share is net income divided by the weighted average number of common shares outstanding during the period. Issuable shares, including those related to directors’ restricted stock shares, are considered outstanding and are included in the computation of basic earnings per share. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation. Restricted stock awards are grants of participating securities and are considered outstanding at grant date. Earnings per share information is adjusted to present comparative results for stock splits and stock dividends that occur. Earnings per share were computed by dividing net income by 4,721 and 4,689 weighted average shares outstanding for the three month periods ended March 31, 2023 and 2022, respectively. There were no common stock equivalents during the three month periods ended March 31, 2023 or 2022.

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NOTE 3        SECURITIES

Amortized cost and estimated fair value of securities available for sale are as follows (in thousands):

	March 31, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for credit losses		Estimated Fair Value
U.S. Treasury notes and bonds	$	61,619	$	—	$	5,291	$	—	$	56,328
Mortgage-backed securities, residential	508,906		—		76,252		—		432,654
Obligations of states and political subdivisions	39,795		19		400		—		39,414
Corporate bonds and notes	25,750		—		5,120		—		20,630
SBA loan pools	78,769		130		1,870		—		77,029
Total	$	714,839	$	149	$	88,933	$	—	$	626,055

	December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. Treasury notes and bonds	$	61,800	$	—	$	6,225	$	55,574
Mortgage-backed securities, residential	518,838		—		83,707		435,131
Obligations of states and political subdivisions	39,828		2		938		38,892
Corporate bonds and notes	25,750		—		3,780		21,970
SBA loan pools	82,982		155		2,116		81,022
Total	$	729,198	$	157	$	96,766	$	632,589

Amortized cost and estimated fair value of securities held to maturity are as follows (in thousands):

	March 31, 2023
	Amortized Cost		Unrecognized Gains		Unrecognized Losses		Allowance for credit losses		Estimated Fair Value
Obligations of states and political subdivisions	$	952	$	—	$	—	$	—	$	952
Time deposits with other financial institutions	980		—		27		—		953
Total	$	1,932	$	—	$	27	$	—	$	1,905

	December 31, 2022
	Amortized Cost		Unrecognized Gains		Unrecognized Losses		Estimated Fair Value
Obligations of states and political subdivisions	$	952	$	—	$	—	$	952
Time deposits with other financial institutions	1,472		—		22		1,450
Total	$	2,424	$	—	$	22	$	2,402

16

The amortized cost and estimated fair value of debt securities are shown below by expected maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately (in thousands):

	March 31, 2023
	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	3,141	$	3,102	$	1,004	$	1,003
After one, but within five years	104,669		98,309		928		902
After five, but within ten years	18,883		14,501		—		—
After ten years	471		460		—		—
	127,164		116,372		1,932		1,905
Mortgage-backed securities, residential	508,906		432,654		—		—
SBA loan pools	78,769		77,029		—		—
Total	$	714,839	$	626,055	$	1,932	$	1,905

There were no proceeds from sales and calls of securities resulting in gains or losses for the three month periods ended March 31, 2023 and 2022.

The following tables summarize the investment securities available for sale with unrealized losses at March 31, 2023 and December 31, 2022 by aggregated major security type and length of time in a continuous unrealized loss position (in thousands):

	Less than 12 months				12 months or longer				Total
March 31, 2023	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury notes and bonds	$	1,107	$	16	$	55,221	$	5,275	$	56,328	$	5,291
Mortgage-backed securities, residential	7,594		477		425,060		75,775		432,654		76,252
Obligations of states and political subdivisions	20,209		176		12,962		224		33,171		400
Corporate bonds and notes	2,750		250		12,064		4,870		14,814		5,120
SBA loan pools	9,279		20		56,883		1,850		66,162		1,870
Total temporarily impaired securities	$	40,939	$	939	$	562,190	$	87,994	$	603,129	$	88,933

	Less than 12 months				12 months or longer				Total
December 31, 2022	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury notes and bonds	$	1,011	$	30	$	54,563	$	6,195	$	55,574	$	6,225
Mortgage-backed securities, residential	79,891		7,621		355,240		76,086		435,131		83,707
Obligations of states and political subdivisions	37,847		938		—		—		38,785		938
Corporate bonds and notes	4,515		485		7,455		3,295		11,970		3,780
SBA loan pools	14,333		925		51,123		1,191		65,456		2,116
Total temporarily impaired securities	$	137,597	$	9,999	$	468,381	$	86,767	$	606,916	$	96,766

Assessment of Available for Sale Debt Securities for Impairment

Management assesses the decline in fair value of investment securities on a regular basis. Unrealized losses on debt securities may occur from current market conditions, increases in interest rates since the time of purchase, a structural change in an investment, volatility of earnings of a specific issuer, or deterioration in credit quality of the issuer. Management evaluates both qualitative and quantitative factors to assess whether an impairment exists. The following is a discussion of the credit quality characteristics of portfolio segments carrying material unrealized losses as of March 31, 2023.

17

Obligations of U.S. Governmental agencies and sponsored enterprises:

At March 31, 2023, the majority of the Corporation’s unrealized losses in available for sale investment securities related to mortgage-backed securities, issued by government-sponsored entities and agencies. Declines in fair value are attributable to changes in interest rates and illiquidity, not credit quality. The Corporation does not have the intent, and it is not likely to be required to, sell these securities prior to their anticipated recovery. Because the Corporation considers these obligations to carry zero loss estimates, no ACL has been recorded.

Corporate bonds and notes:

The Corporation's corporate bonds and notes portfolio is comprised of subordinated debt issues of community and regional banks. Management considers the credit quality of these investments on an individual basis. Management reviewed the collectability of these securities, taking into consideration such factors as the financial condition of the issuers, reported regulatory capital ratios of the issuers, and credit ratings when available, among other pertinent factors. All corporate bond debt securities continue to accrue interest and make payments as expected with no defaults or deferrals on the part of the issuers. Therefore, the Corporation has not recorded an ACL on its corporate bonds and notes portfolio as of March 31, 2023.

NOTE 4        LOANS AND ALLOWANCE FOR CREDIT LOSSES

The composition of the loan portfolio, net of deferred origination fees and costs, is summarized as follows (in thousands):

	March 31, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	244,174	$	252,044
Agricultural	333		249
Commercial mortgages:
Construction	118,660		108,243
Commercial mortgages, other	917,637		888,670
Residential mortgages	285,944		285,672
Consumer loans:
Home equity lines and loans	84,537		81,401
Indirect consumer loans	211,270		202,124
Direct consumer loans	11,146		11,045
Total loans, net of deferred loan fees and costs	1,873,701		1,829,448
Allowance for credit losses	(20,075)		(19,659)
Loans, net	$	1,853,626	$	1,809,789

The Corporation's concentrations of credit risk by loan type are reflected in the preceding table. The concentrations of credit risk with standby letters of credit, committed lines of credit and commitments to originate new loans generally follow the loan classifications in the table above.

Accrued interest receivable on loans amounted to $6.3 million at March 31, 2023 and $6.5 million million at December 31, 2022. Accrued interest receivable on loans is included in the "accrued interest receivable and other assets" line item on the Corporation's Consolidated Balance Sheets, and is excluded from the estimate of credit losses.

18

The following table presents the activity in the allowance for credit losses by portfolio segment for the three month period ended March 31, 2023 (in thousands):

	Three Months Ended March 31, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	3,373	$	11,576	$	1,845	$	2,865	$	19,659
Cumulative effect adjustment for the adoption of ASC 326	909		(695)		(16)		176		374
Beginning balance after cumulative effect adjustment	4,282		10,881		1,829		3,041		20,033
Charge-offs	(190)		—		—		(193)		(383)
Recoveries	6		—		—		108		114
Net recoveries (charge-offs)	(184)		—		—		(85)		(269)
Provision (1)	(45)		102		63		191		311
Ending balance	$	4,053	$	10,983	$	1,892	$	3,147	$	20,075

(1) Additional credit provision related to off-balance sheet exposure was $34 thousand for the three months ended March 31, 2023.

Refer to Note 1-Summary of Significant Accounting Policies in our Annual report on Form 10-K for the fiscal year ended December 31, 2022, for the allowance for loan losses policy effective prior to the adoption of ASC 326-Financial Instruments-Credit Losses, as of December 31, 2022.

The following table presents the activity in the allowance for loan losses by portfolio segment for the three month period ended March 31, 2022.

	Three Months Ended March 31, 2022
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	3,591	$	13,556	$	1,803	$	2,075	$	21,025
Charge-offs	(4)		—		—		(194)		(198)
Recoveries	6		1		—		239		246
Net recoveries (charge-offs)	2		1		—		45		48
Provision	(110)		(593)		(197)		(245)		(1,145)
Ending balance	$	3,483	$	12,964	$	1,606	$	1,875	$	19,928

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Unfunded Commitments

The allowance for credit losses on unfunded commitments is recognized as a liability (other liabilities in the Consolidated Balance Sheets), with adjustments to the reserve recognized in the provision for credit losses on the Consolidated Statements of Income. The Corporation established a reserve for unfunded commitments in conjunction with its adoption of ASC 326-Financial Instruments-Credit Losses.

The following table presents the activity in the allowance for credit losses on unfunded commitments for the three month periods ended March 31, 2023 and 2022:

	For the Three Months Ended
Allowance for credit losses on unfunded commitments	March 31, 2023		March 31, 2022
Beginning balance	$	—	$	—
Impact of ASC 326 adoption	1,082		—
Provision for unfunded commitments	(34)		—
Ending balance	$	1,048	$	—

The following table presents the provision for credit losses on loans and unfunded commitments for the three month period ended March 31, 2023, based upon the current expected credit loss methodology, and the provision for loan losses on loans for the three month period ended March 31, 2022, based upon the incurred loss methodology:

	For the Three Months Ended
Provision for credit losses	March 31, 2023		March 31, 2022
Provision for credit losses on loans	$	311	$	(1,145)
Provision for unfunded commitments	(34)		—
Total provision (credit) for credit losses	$	277	$	(1,145)

The following tables present the balance in the allowance for credit losses and allowance for loan losses, and the amortized cost basis in loans by portfolio segment, as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually analyzed	$	1,040	$	36	$	—	$	—	$	1,076
Collectively analyzed	3,013		10,947		1,892		3,147		18,999
Total ending allowance balance	$	4,053	$	10,983	$	1,892	$	3,147	$	20,075

	December 31, 2022
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,078	$	38	$	—	$	31	$	1,147
Collectively evaluated for impairment	2,295		11,538		1,845		2,834		18,512
Total ending allowance balance	$	3,373	$	11,576	$	1,845	$	2,865	$	19,659

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	March 31, 2023
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually analyzed	$	1,779	$	4,089	$	715	$	254	$	6,837
Loans collectively analyzed	242,728		1,032,208		285,229		306,699		1,866,864
Total ending loans balance	$	244,507	$	1,036,297	$	285,944	$	306,953	$	1,873,701

	December 31, 2022
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually evaluated for impairment	$	2,112	$	4,383	$	723	$	264	$	7,482
Loans collectively evaluated for impairment	250,181		992,530		284,949		294,306		1,821,966
Total ending loans balance	$	252,293	$	996,913	$	285,672	$	294,570	$	1,829,448

Modifications to Loans Made to Borrowers Experiencing Financial Difficulty

Effective January 1, 2023, the Corporation adopted ASU 2022-02, Financial Instruments-Credit Losses (Topic 326)-Troubled Debt Restructurings and Vintage Disclosures. The Corporation may occasionally make modifications to loans where the borrower is considered to be experiencing financial difficulty. Types of modifications considered under ASU 2022-02 include principal reductions, interest rate reductions, term extensions, or a combination thereof.

The following table summarizes the amortized cost basis of loans modified as of March 31, 2023:

	March 31, 2023
Loans modified under ASU 2022-02:	Principal Reduction		Interest Rate Reduction		Term Extension		Combination		Total		(%) of Loan Class (1)
Commercial mortgages	$	—	$	—	$	277	$	—	$	277	0.03	%
Total	$	—	$	—	$	277	$	—	$	277

(1) Represents the amortized cost basis of loans modified during the period as a percentage of the period-end loan balances by class.

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the three month period ended March 31, 2023:

	March 31, 2023
Effect of loan modifications under ASU 2022-02:	Principal Reduction (in thousands)	Weighted-average interest rate reduction (%)	Weighted-average term extension (in months)
Commercial mortgages	$—	—%	60

Individually Analyzed Loans

Effective January 1, 2023, the Corporation began analyzing loans on an individual basis when management determined that the loan no longer exhibited risk characteristics consistent with the risk characteristics existing in its designated pool of loans, under the Corporation's CECL methodology. Loans individually analyzed include certain non-accrual commercial and consumer loans, as well as certain loans previously identified under prior troubled debt restructuring (TDR) guidance.

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As of March 31, 2023, the amortized cost basis of individually analyzed loans amounted to $6.8 million, of which $6.0 million were considered collateral dependent. For collateral dependent loans where the borrower is experiencing financial difficulty and repayment is likely to be substantially provided through the sale or operation of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan, at measurement date. Certain assets held as collateral may be exposed to future deterioration in fair value, particularly due to changes in real estate markets or usage.

The following table presents the amortized cost basis and related allowance for credit loss of individually analyzed loans considered to be collateral dependent as of March 31, 2023 (in thousands):

	March 31, 2023
	Amortized Cost Basis		Related Allowance
Commercial and agricultural:
Commercial and industrial (1) (3)	$	573	$	168
Commercial mortgages:
Commercial mortgages, other (1)	4,413		36
Residential mortgages (2)	715		—
Consumer loans
Home equity lines and loans (2)	254		—
Total	$	5,955	$	204

(1) Secured by commercial real estate

(2) Secured by residential real estate

(3) Secured by business assets

Prior to January 1, 2023, the Corporation considered a loan to be impaired when, based on currently available information, it was deemed probable that the Corporation would not be able to collect on the loan's contractually determined principal and interest payments. Impaired loans included loans on non-accrual status and troubled debt restructurings (TDRs). The Corporation identified loss allocations for impaired loans on an individual basis, and in conformity with its methodology under the incurred loss framework.

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The following is a summary of impaired loans as of December 31, 2022 (in thousands):

	December 31, 2022
With no related allowance recorded:	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
Commercial and agricultural:
Commercial and industrial	$	1,026	$	1,025	$	—
Commercial mortgages:
Construction	5		5		—
Commercial mortgages, other	4,346		4,341		—
Residential mortgages	767		760		—
Consumer loans:
Home equity lines and loans	154		138		—
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,086		1,088		1,078
Commercial mortgages:
Commercial mortgages, other	38		38		38
Consumer loans:
Home equity lines and loans	126		127		31
Total	$	7,548	$	7,522	$	1,147

The following table presents the amortized cost basis and interest income of loans individually evaluated recognized by class of loans for the three month periods ended March 31, 2023 and 2022 (in thousands):

	Three Months Ended   March 31, 2023				Three Months Ended   March 31, 2022
With no related allowance recorded:	Amortized Cost Basis		Interest Income Recognized (1)		Amortized Cost Basis		Interest Income Recognized (1)
Commercial and agricultural:
Commercial and industrial	$	729	$	—	$	926	$	3
Commercial mortgages:
Construction	—		—		113		1
Commercial mortgages, other	4,053		7		4,105		7
Residential mortgages	715		9		895		11
Consumer loans:
Home equity lines & loans	254		—		161		1
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,049		2		1,414		3
Commercial mortgages:
Commercial mortgages, other	36		—		2,601		21
Consumer loans:
Home equity lines and loans	—		—		141		—
Total	$	6,836	$	18	$	10,356	$	47

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

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The following table presents the amortized cost basis in non-accrual and loans past due 90 days or more and still accruing by class of loan as of March 31, 2023 and December 31, 2022 (in thousands):

	Non-accrual with no allowance for credit losses		Non-accrual				Loans Past Due 90 Days or More and Still Accruing
	March 31, 2023		March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	730	$	1,623	$	1,946	$	6	$	1
Commercial mortgages:
Construction	—		—		5		—		—
Commercial mortgages, other	3,611		3,647		3,928		—		—
Residential mortgages	1,036		1,036		986		—		—
Consumer loans:
Home equity lines and loans	866		866		760		—		—
Indirect consumer loans	556		556		540		—		—
Direct consumer loans	3		3		13		—		—
Total	$	6,802	$	7,731	$	8,178	$	6	$	1

The following tables present the aging of the amortized cost basis of loans as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023
	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Loans Not Past Due		Total
Commercial and agricultural:
Commercial and industrial	$	67	$	8	$	16	$	91	$	244,083	$	244,174
Agricultural	—		—		—		—		333		333
Commercial mortgages:
Construction	2,284		—		—		2,284		116,376		118,660
Commercial mortgages, other	246		—		297		543		917,094		917,637
Residential mortgages	933		57		412		1,402		284,542		285,944
Consumer loans:
Home equity lines and loans	261		57		568		886		83,651		84,537
Indirect consumer loans	1,036		52		265		1,353		209,917		211,270
Direct consumer loans	10		—		—		10		11,136		11,146
Total	$	4,837	$	174	$	1,558	$	6,569	$	1,867,132	$	1,873,701

24

	December 31, 2022
	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Loans Not Past Due		Total
Commercial and agricultural:
Commercial and industrial	$	74	$	3	$	1	$	78	$	251,966	$	252,044
Agricultural	—		—		—		—		249		249
Commercial mortgages:
Construction	—		—		—		—		108,243		108,243
Commercial mortgages, other	1,058		—		486		1,544		887,126		888,670
Residential mortgages	1,360		709		294		2,363		283,309		285,672
Consumer loans:
Home equity lines and loans	193		121		442		756		80,645		81,401
Indirect consumer loans	1,397		193		250		1,840		200,284		202,124
Direct consumer loans	2		19		1		22		11,023		11,045
Total	$	4,084	$	1,045	$	1,474	$	6,603	$	1,822,845	$	1,829,448

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 its debt and affirm the risk ratings for the loans at least annually.

For 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 at 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.

Commercial loans not meeting the criteria above to be considered criticized or classified, are considered to be pass rated loans. Loans listed as not rated, are included in groups of homogeneous loans performing under terms of the loan notes.

25

Based on the analyses performed as of March 31, 2023, the risk category of the amortized cost basis of loans by class of loans and vintage, as well as the gross charge-offs by loan class and vintage for the period, are as follows (in thousands):

	Term Loans Amortized Cost by Origination Year												Revolving Loans Amortized Cost		Revolving Loans Converted to Term		Total
	2023		2022		2021		2020		2019		Prior
Commercial & industrial
Pass	$	7,750	$	43,899	$	21,452	$	14,723	$	38,017	$	12,844	$	88,666	$	—	$	227,351
Special mention	100		104		350		3		86		457		3,478		9,315		13,893
Substandard	—		36		—		412		28		370		629		588		2,063
Doubtful	—		—		—		—		—		867		—		—		867
Total	7,850		44,039		21,802		15,138		38,131		14,538		92,773		9,903		244,174
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	190	$	—	$	—	$	190
Agricultural
Pass	—		17		170		—		—		—		146		—		333
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total	—		17		170		—		—		—		146		—		333
Gross charge-offs	—		—		—		—		—		—		—		—		—
Construction
Pass	8,311		2,819		1,975		—		2,317		1,205		101,857		—		118,484
Special mention	—		176		—		—		—		—		—		—		176
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total	8,311		2,995		1,975		—		2,317		1,205		101,857		—		118,660
Gross charge-offs	—		—		—		—		—		—		—		—		—
Commercial mortgages
Pass	31,729		214,915		129,614		99,057		40,489		180,523		192,038		—		888,365
Special mention	—		2,563		8,828		1,033		—		3,867		—		6,154		22,445
Substandard	277		1,186		—		—		—		4,790		97		441		6,791
Doubtful	—		—		—		—		—		36		—		—		36
Total	32,006		218,664		138,442		100,090		40,489		189,216		192,135		6,595		917,637
Gross charge-offs	—		—		—		—		—		—		—		—		—
Residential mortgages
Not rated	5,594		52,576		52,443		75,198		16,416		52,615		30,066		—		284,908
Substandard	—		107		64		111		181		573		—		—		1,036
Total	5,594		52,683		52,507		75,309		16,597		53,188		30,066		—		285,944
Gross charge-offs	—		—		—		—		—		—		—		—		—
Home equity lines and loans
Not rated	3,945		19,073		6,477		3,827		3,110		12,740		34,500		—		83,672
Substandard	—		—		—		—		121		392		352		—		865
Total	3,945		19,073		6,477		3,827		3,231		13,132		34,852		—		84,537
Gross charge-offs	—		—		—		—		—		—		8		—		8
Indirect consumer
Not rated	26,012		123,593		32,138		14,374		7,385		7,211		—		—		210,713
Substandard	—		186		98		59		73		141		—		—		557
Total	26,012		123,779		32,236		14,433		7,458		7,352		—		—		211,270
Gross charge-offs	—		43		36		30		12		23		—		—		144
Direct consumer
Not rated	1,121		3,956		1,330		630		266		478		3,362		—		11,143
Substandard	—		—		—		—		—		3		—		—		3
Total	1,121		3,956		1,330		630		266		481		3,362		—		11,146
Gross charge-offs	—		—		1		4		—		36		—		—		41
Total loans	$	84,839	$	465,206	$	254,939	$	209,427	$	108,489	$	279,112	$	455,191	$	16,498	$	1,873,701
Total gross charge-offs	$	—	$	43	$	37	$	34	$	12	$	249	$	8	$	—	$	383

26

Prior to the adoption of ASC 326-Financial Instruments-Credit Losses, loans not meeting the criteria above that were analyzed individually as part of the above described process were considered pass rated loans as of December 31, 2022. Based upon the analyses performed as of December 31, 2022, the risk category of the recorded investment of loans by class of loans was as follows (in thousands):

	December 31, 2022
	Not Rated		Pass		Special Mention		Substandard		Doubtful		Total
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 mortgages	285,459		—		—		986		—		286,445
Consumer loans:
Home equity lines and loans	80,942		—		—		760		—		81,702
Indirect consumer loans	202,050		—		—		540		—		202,590
Direct consumer loans	11,094		—		—		13		—		11,107
Total	$	579,545	$	1,205,027	$	37,465	$	13,028	$	931	$	1,835,996

For residential and consumer loan classes, the Corporation also evaluated credit quality based on the aging status of the loan, which was previously presented, by payment activity. The following table presents the amortized cost basis in residential and consumer loans based on payment activity as of March 31, 2023 (in thousands):

	Consumer Loans
March 31, 2023	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	284,908	$	83,672	$	210,713	$	11,143
Non-Performing	1,036		865		557		3
Total	$	285,944	$	84,537	$	211,270	$	11,146

Prior to the adoption of ASC 326-Financial Instruments-Credit Losses, the Corporation also evaluated credit quality based on the aging status of the loan, which was previously presented, by payment activity. The following table presents the recorded investment in residential and consumer loans based on payment activity as of December 31, 2022 (in thousands):

	Consumer Loans
December 31, 2022	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	285,459	$	80,942	$	202,050	$	11,094
Non-Performing	986		760		540		13
Total	$	286,445	$	81,702	$	202,590	$	11,107

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NOTE 5        FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  There are three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Corporation used the following methods and significant assumptions to estimate fair value on a recurring basis:

Available for Sale Securities:  The fair values of securities available for sale are usually determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs), or matrix pricing, which is a mathematical technique widely used to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3 inputs).

Equity Investments: Securities that are held to fund a deferred compensation plan and securities that have a readily determinable fair market value, are recorded at fair value with changes in fair value included in earnings. The fair values of equity investments are determined by quoted market prices (Level 1 inputs).

Individually Analyzed Loans: At the time a loan is considered individually analyzed, it is valued at the lower of cost or fair value. Individually analyzed loans carried at fair value have been partially charged-off or receive specific allocations as part of the allowance for credit loss accounting. For collateral dependent loans, fair value is commonly based on real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, typically resulting in a Level 3 fair value classification. Impaired loans are analyzed on a quarterly basis for additional impairment and adjusted accordingly.

OREO: Assets acquired through or instead of loan foreclosures are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral dependent loans and OREO are performed by certified general appraisers (commercial properties) or certified residential appraisers (residential properties) whose qualifications and licenses have been reviewed and verified by the Corporation. Once received, appraisals are reviewed for reasonableness of assumptions, approaches utilized, Uniform Standards of Professional Appraisal Practice and other regulatory compliance, as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Appraisals are generally completed within the previous 12 month period prior to a property being placed into OREO. On impaired loans, appraisal values are adjusted based on the age of the appraisal, the position of the lien, the type of the property and its condition.

28

Derivatives: The fair values of interest rate swaps are based on valuation models using observable market data as of the measurement date (Level 2 inputs). Derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices, and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The Corporation also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counter-party's nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Corporation has considered the impact of any applicable credit enhancements, such as collateral postings. Although the Corporation has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize credit default rate assumptions (Level 3 inputs).

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

			Fair Value Measurement at March 31, 2023 Using
Financial Assets:	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Treasury notes and bonds	$	56,328	$	56,328	$	—	$	—
Mortgage-backed securities, residential	432,654		—		432,654		—
Obligations of states and political subdivisions	39,414		—		39,414		—
Corporate bonds and notes	20,630		—		11,964		8,666
SBA loan pools	77,029		—		77,029		—
Total available for sale securities	$	626,055	$	56,328	$	561,061	$	8,666
Equity investments, at fair value	$	2,311	$	2,311	$	—	$	—
Derivative assets	22,710		—		22,710		—
Financial Liabilities:
Derivative liabilities	$	22,776	$	—	$	22,776	$	—

There were no transfers between Level 1 and Level 2 during the three month period ended March 31, 2023.

			Fair Value Measurement at December 31, 2022 Using
Financial Assets:	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Treasury notes and bonds	$	55,574	$	55,574	$	—	$	—
Mortgage-backed securities, residential	435,131		—		435,131		—
Obligations of states and political subdivisions	38,892		—		38,892		—
Corporate bonds and notes	21,970		—		21,970		—
SBA loan pools	81,022		—		81,022		—
Total available for sale securities	$	632,589	$	55,574	$	577,015	$	—
Equity investments, at fair value	$	2,246	$	2,246	$	—	$	—
Derivative assets	27,141		—		27,141		—
Financial Liabilities:
Derivative liabilities	$	27,196	$	—	$	27,196	$	—

There were no transfers between Level 1 and Level 2 during the three month period ended March 31, 2022.

29

The Corporation transfers assets and liabilities between levels within the hierarchy when the methodology to obtain the fair value changes such that there are either more or fewer unobservable inputs as of the end of the reporting period. The Corporation transferred its investment in eight corporate sub-debt issuances from Level 2 to Level 3 in the three month period ended March 31, 2023. Illiquidity in new issuances of comparable bonds and the size of issuances led to pricing difficulties, and the transfer to Level 3 within the period. The Corporation utilizes a "beginning of reporting period" timing assumption when recognizing transfers between hierarchy levels, consistent with ASC 820-10-50-2.

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using unobservable inputs (Level 3) for the three months ended March 31, 2023 and March 31, 2022.

Corporate Bonds:	For the Three Months Ended
Level 3 Financial Assets	March 31, 2023		March 31, 2022
Balance of recurring Level 3 assets at January 1, 2023	$	—	$	—
Total gains and losses for the period:	—		—
Included in other comprehensive income	(1,289)		—
Transfer into Level 3	9,955		—
Balance of recurring Level 3 assets at March 31, 2023	$	8,666	$	—

March 31, 2023	Fair Value		Valuation Techniques	Unobservable Input	Range (WA)
Corporate bonds and notes	$	8,666	Discounted cash flow	Market discount rate	12.00% -12.00% [12.00%]

There were no financial assets considered to be Level 3 fair value by the Corporation at December 31, 2022.

30

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values of other financial instruments, at March 31, 2023 and December 31, 2022, are as follows (in thousands):

	March 31, 2023
Financial assets:	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Estimated Fair Value (1)
Cash and due from financial institutions	$	25,109	$	25,109	$	—	$	—	$	25,109
Interest-earning deposits in other financial institutions	9,532		9,532		—		—		9,532
Equity investments	2,949		2,949		—		—		2,949
Securities available for sale	626,055		56,328		561,061		8,666		626,055
Securities held to maturity	1,932		—		953		952		1,905
FHLBNY and FRBNY stock	7,913		—		—		—		N/A
Loans, net and loans held for sale	1,853,626		—		—		1,790,939		1,790,939
Accrued interest receivable	8,469		229		1,900		6,340		8,469
Derivative Assets	22,710		—		22,710		—		22,710
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,880,335	$	1,880,335	$	—	$	—	$	1,880,335
Time deposits	452,094		—		450,201		—		450,201
Accrued interest payable	1,500		73		1,427		—		1,500
Derivative Liabilities	22,776		—		22,776		—		22,776

(1) Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. 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.

	December 31, 2022
Financial assets:	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Estimated Fair Value (1)
Cash and due from financial institutions	$	29,309	$	29,309	$	—	$	—	$	29,309
Interest-earning deposits in other financial institutions	26,560		26,560		—		—		26,560
Equity investments	2,830		2,830		—		—		2,830
Securities available for sale	632,589		55,574		577,015		—		632,589
Securities held to maturity	2,424		—		1,639		2,157		3,796
FHLBNY and FRBNY stock	8,197		—		—		—		N/A
Loans, net and loans held for sale	1,809,789		—		—		1,757,171		1,757,171
Accrued interest receivable	8,682		132		2,002		6,548		8,682
Derivative Asset	27,141		—		27,141		—		27,141
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,924,843	$	1,924,843	$	—	$	—	$	1,924,843
Time deposits	402,384		—		403,572		—		403,572
Accrued interest payable	864		64		800		—		864
Derivative Liabilities	27,196		—		27,196		—		27,196

(1) Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. 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.

31

NOTE 6        LEASES

Operating Leases

The Corporation leases certain branch properties under long-term, operating lease agreements. The leases expire at various dates through 2033 and generally include renewal options. As of March 31, 2023, the weighted average remaining lease term was 8.43 years with a weighted average discount rate of 3.36%. Rent expense was $0.2 million for the three months ended March 31, 2023. Certain leases provide for increases in future minimum annual rent payments as defined in the lease agreements. The Corporation’s operating lease agreements contain both lease and non-lease components, which are generally accounted for separately. The Corporation’s lease agreements do not contain any residual value guarantees.

Leased branch properties at March 31, 2023 and December 31, 2022 consist of the following (in thousands):

	March 31, 2023		December 31, 2022
Operating lease right-of-use asset	$	6,449	$	7,234
Less: accumulated amortization	(199)		(785)
Less: lease termination	—		—
Add: new lease agreement and modifications	—		—
Operating lease right-of-use-assets, net	$	6,250	$	6,449

The following is a schedule by year of the undiscounted cash flows of the operating lease liabilities, excluding CAM charges, as of March 31, 2023 (in thousands):

Year	Amount
2023	$	747
2024	924
2025	841
2026	845
2027	854
2028 and thereafter	3,169
Total minimum lease payments	7,380
Less: amount representing interest	(953)
Present value of net minimum lease payments	$	6,427

As of March 31, 2023, the Corporation had no operating leases that were signed, but had not yet commenced.

Finance Leases

The Corporation leases certain buildings under finance leases. The lease arrangements require monthly payments through 2036. As of March 31, 2023, the weighted average remaining lease term was 9.99 years with a weighted average discount rate of 3.40%. The Corporation has included these leases in premises and equipment as of March 31, 2023 and December 31, 2022 as follows (in thousands):

	March 31, 2023		December 31, 2022
Buildings	$	5,572	$	5,572
Less: accumulated depreciation	(2,457)		(2,540)
Net book value	$	3,115	$	3,032

32

The following is a schedule by year of future minimum lease payments under the capitalized lease, together with the present value of net minimum lease payments as of March 31, 2023 (in thousands):

Year	Amount
2023	$	293
2024	391
2025	409
2026	425
2027	428
2028 and thereafter	1,988
Total minimum lease payments	3,934
Less: amount representing interest	(676)
Present value of net minimum lease payments	$	3,258

As of March 31, 2023, the Corporation had no finance leases that were signed, but had not yet commenced.

Related Party Transactions

The Bank leases its branch located at 1365 New Scotland Road, Slingerlands, New York, under a lease agreement through July, 2024 from a former member of the Corporation's Board of Directors with monthly rent and CAM related expenses totaling $4 thousand per month. This Board member retired from the Corporation's Board of Directors as of June 7, 2022. Rent and CAM paid to this Board member while serving on the Board totaled $13 thousand for the three month period ended March 31, 2022.

The Bank leases its branch located at 2 Rush Street, Schenectady, New York, under a lease agreement through February, 2033 from a member of the Corporation's Board of Directors with monthly rent and CAM related expenses totaling $9 thousand per month. Rent and CAM related expenses paid to this Board member totaled $26 thousand for each of the three month periods ended March 31, 2023 and 2022.

NOTE 7        GOODWILL AND INTANGIBLE ASSETS

The changes in goodwill included in the core banking segment during the three month periods ended March 31, 2023 and 2022 were as follows (in thousands):

	2023		2022
Beginning of year	$	21,824	$	21,824
Acquired goodwill	—		—
Ending balance March 31,	$	21,824	$	21,824

The Corporation had no aggregate amortization expense for the three month period ended March 31, 2023, and $11 thousand for the three month period ended March 31, 2022. As of March 31, 2023, there is no remaining estimated aggregate amortization expense.

The amount of goodwill reflected in the Corporation's Unaudited Consolidated Financial statements is required to be tested by management for impairment on at least an annual basis. Goodwill impairment testing is performed annually as of December 31 and no impairment charges were incurred.

NOTE 8        COMMITMENTS AND CONTINGENCIES

The Corporation is a party to certain financial instruments with off-balance sheet risk such as commitments under standby letters of credit, unused portions of lines of credit, overdraft protection and commitments to fund new loans. In accordance with GAAP, these financial instruments are not recorded in the financial statements. The Corporation's policy is to record such instruments when funded. These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk.  Such transactions are generally used by the Corporation to manage clients' requests for funding and other client needs.

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In conjunction with the Corporation's adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), an allowance for credit losses on unfunded commitments was established as of January 1, 2023, to comply with the accounting standard requirements. As of March 31, 2023, the allowance for credit losses on unfunded commitments was $1.0 million.

The following table lists the contractual amounts of financial instruments with off-balance sheet risk at March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023				December 31, 2022
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	40,759	$	71,151	$	44,481	$	75,028
Unused lines of credit	3,085		344,423		2,887		326,188
Standby letters of credit	—		17,425		—		17,211

On February 4, 2020, the Corporation filed a lawsuit against Pioneer Bank, Albany, New York, in the Supreme Court of the State of New York in the County of Albany. As disclosed in the Corporation’s September 12, 2019 Current Report on Form 8-K, the Bank owns a participating interest totaling $4.2 million in an approximately $36.0 million commercial credit facility on which the borrower defaulted due to fraudulent activity. The Bank’s complaint alleges that Pioneer Bank, as lead bank, breached the participation agreement and engaged in fraud and negligent misrepresentation. The Corporation received a recovery of $0.5 million in April, 2020, and continues to pursue recovery of the remaining $3.7 million and accumulated expenses as a result of purchasing the participation interest.

In the normal course of business, there are various outstanding claims and legal proceedings involving the Corporation or its subsidiaries. As of March 31, 2023, we believe that we are not a party to any additional pending legal, arbitration, or regulatory proceedings that could have a material adverse impact on our financial results or liquidity.

NOTE 9        ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) represents the net unrealized holding gains or losses on securities available for sale and the funded status of the Corporation's defined benefit pension plan and other benefit plans, as of the consolidated balance sheet dates, net of the related tax effect.

The following is a summary of the changes in accumulated other comprehensive income (loss) by component, net of tax, for the periods indicated (in thousands):

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at January 1, 2023	$	(71,296)	$	(3,961)	$	(75,257)
Other comprehensive income before reclassification	5,775		—		5,775
Amounts reclassified from accumulated other comprehensive income	—		9		9
Net current period other comprehensive income	5,775		9		5,784
Balance at March 31, 2023	$	(65,521)	$	(3,952)	$	(69,473)

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at January 1, 2022	$	(2,495)	$	(4,035)	$	(6,530)
Other comprehensive income before reclassification	(31,087)		—		(31,087)
Amounts reclassified from accumulated other comprehensive income	—		12		12
Net current period other comprehensive income (loss)	(31,087)		12		(31,075)
Balance at March 31, 2022	$	(33,582)	$	(4,023)	$	(37,605)

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The following is the reclassification out of accumulated other comprehensive income for the periods indicated (in thousands):

Details about Accumulated Other Comprehensive Income (Loss) Components	Three Months Ended   March 31,				Affected Line Item in the Statement Where Net Income is Presented
	2023		2022
Amortization of defined pension plan and other benefit plan items:
Prior service costs (a)	$	—	$	—	Other components of net periodic pension and postretirement benefits
Actuarial losses (a)	12		14		Other components of net periodic pension and postretirement benefits
Tax effect	(3)		(2)		Income tax expense
Net of tax	9		12
Total reclassification for the period, net of tax	$	9	$	12

(a) These accumulated other comprehensive income components are included in the computation of net periodic pension and other benefit plan costs (see Note 11 for additional information).

NOTE 10    REVENUE FROM CONTRACTS WITH CUSTOMERS

All of the Corporation's revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income. The following tables present the Corporation's non-interest income by revenue stream and reportable segment for the three months ended March 31, 2023 and 2022 (in thousands). Items outside the scope of ASC 606 are noted as such.

	Three Months Ended March 31, 2023
Revenue by Operating Segment: Non-interest income	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Service charges on deposit accounts
Overdraft fees	$	714	$	—	$	—	$	714
Other	227		—		—		227
Interchange revenue from debit card transactions	1,133		—		—		1,133
WMG fee income	—		2,580		—		2,580
CFS fee and commission income	—		—		241		241
Net gains (losses) on sales of OREO	—		—		—		—
Net gains on sales of loans(a)	5		—		—		5
Loan servicing fees(a)	36		—		—		36
Changes in fair value of equity investments(a)	78		—		(6)		72
Income from bank-owned life insurance(a)	10		—		—		10
Other(a)	448		—		(43)		405
Total non-interest income (loss)	$	2,651	$	2,580	$	192	$	5,423

(a) Not within scope of ASC 606.

(b) The Holding Company, CFS, and CRM column above includes amounts to eliminate transactions between segments.

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	Three Months Ended March 31, 2022
Revenue by Operating Segment: Non-interest income	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Service charges on deposit accounts
Overdraft fees	$	673	$	—	$	—	$	673
Other	191		—		—		191
Interchange revenue from debit card transactions	1,130		—		—		1,130
WMG fee income	—		2,757		—		2,757
CFS fee and commission income	—		—		253		253
Net gains on sales of loans(a)	74		—		—		74
Loan servicing fees(a)	39		—		—		39
Changes in fair value of equity investments(a)	(114)		—		1		(113)
Income from bank-owned life insurance(a)	11		—		—		11
Other(a)	689		—		(41)		648
Total non-interest income	$	2,693	$	2,757	$	213	$	5,663

(a) Not within scope of ASC 606.

(b) The Holding Company, CFS, and CRM column above includes amounts to eliminate transactions between segments.

A description of the Corporation's revenue streams accounted for under ASC 606 follows:

Service Charges on Deposit Accounts: The Corporation earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which included services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Corporation fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are recognized at the time the maintenance occurs. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance.

Interchange Income from Debit Card Transactions: The Corporation earns interchange fees from debit cardholder transactions conducted through the MasterCard payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with transaction processing services provided to the cardholder.

WMG Fee Income (Gross): The Corporation earns wealth management fees from its contracts with customers to manage assets for investment, and/or to conduct transactions on their accounts. These fees are primarily earned over time as the Corporation provides the contracted monthly or quarterly services and are generally assessed based on a tiered scale of the market value of assets under management (AUM) at quarter-end.

CFS Fee and Commission Income (Net): The Corporation earns fees from investment brokerage services provided to its customers by a third-party service provider. The Corporation receives commissions from the third-party service provider on a monthly basis based upon customer activity for the month. The Corporation (i) acts as an agent in arranging the relationship between the customer and the third-party service provider and (ii) does not control the services rendered to the customers. Investment brokerage fees are presented net of related costs. The Corporation also earns fees from tax services provided to its customers.

Net Gains/Losses on Sales of OREO: The Corporation records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Corporation finances the sale of OREO to the buyer, the Corporation assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Corporation adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.

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NOTE 11    COMPONENTS OF QUARTERLY AND YEAR TO DATE NET PERIODIC BENEFIT COSTS

The components of net periodic expense for the Corporation’s pension and other benefit plans for the periods indicated are as follows (in thousands):

	Three Months Ended   March 31,
	2023		2022
Qualified Pension Plan
Service cost, benefits earned during the period	$	—	$	—
Interest cost on projected benefit obligation	396		282
Expected return on plan assets	(596)		(713)
Amortization of unrecognized transition obligation	—		—
Amortization of unrecognized prior service cost	—		—
Amortization of unrecognized net loss	6		—
Net periodic pension benefit	$	(194)	$	(431)
Supplemental Pension Plan
Service cost, benefits earned during the period	$	—	$	—
Interest cost on projected benefit obligation	12		8
Expected return on plan assets	—		—
Amortization of unrecognized prior service cost	—		—
Amortization of unrecognized net loss	2		5
Net periodic supplemental pension cost	$	14	$	13
Postretirement Plan, Medical and Life
Service cost, benefits earned during the period	$	—	$	—
Interest cost on projected benefit obligation	1		1
Expected return on plan assets	—		—
Amortization of unrecognized prior service cost	—		—
Amortization of unrecognized net loss	5		9
Net periodic postretirement, medical and life benefit	$	6	$	10

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NOTE 12    SEGMENT REPORTING

The Corporation manages its operations through two primary business segments: core banking and WMG. The core banking segment provides revenues by attracting deposits from the general public and using such funds to originate consumer, commercial, commercial real estate, and residential mortgage loans, primarily in the Corporation’s local markets, and to invest in securities. The WMG services segment provides revenues by providing trust and investment advisory services to clients.

Accounting policies for the segments are the same as those described in Note 1 of the Corporation’s 2022 Annual Report on Form 10-K, which was filed with the SEC on March 22, 2023. Summarized financial information concerning the Corporation’s reportable segments and the reconciliation to the Corporation’s consolidated results are shown in the following table. Income taxes are allocated based on the separate taxable income of each entity and indirect overhead expenses are allocated based on reasonable and equitable allocations applicable to the reportable segment.

The Holding Company, CFS, and CRM columns below include amounts to eliminate transactions between segments (in thousands).

	Three months ended March 31, 2023
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	26,203	$	—	$	27	$	26,230
Interest expense	6,283		—		—		6,283
Net interest income	19,920		—		27		19,947
Provision for credit losses	277		—		—		277
Net interest income after provision for credit losses	19,643		—		27		19,670
Other non-interest income	2,651		2,580		192		5,423
Other non-interest expenses	13,696		1,798		342		15,836
Income (loss) before income tax expense (benefit)	8,598		782		(123)		9,257
Income tax expense (benefit)	1,831		177		(21)		1,987
Segment net income (loss)	$	6,767	$	605	$	(102)	$	7,270
Segment assets	$	2,644,158	$	8,311	$	1,714	$	2,654,183

	Three months ended March 31, 2022
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	17,451	$	—	$	7	$	17,458
Interest expense	781		—		—		781
Net interest income	16,670		—		7		16,677
Provision for credit losses	(1,145)		—		—		(1,145)
Net interest income after provision for credit losses	17,815		—		7		17,822
Other non-interest income	2,693		2,757		213		5,663
Other non-interest expenses	12,531		1,815		322		14,668
Income (loss) before income tax expense (benefit)	7,977		942		(102)		8,817
Income tax expense (benefit)	1,766		209		(25)		1,950
Segment net income (loss)	$	6,211	$	733	$	(77)	$	6,867
Segment assets	$	2,463,194	$	8,620	$	3,081	$	2,474,895

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NOTE 13    STOCK COMPENSATION

Pursuant to the Corporation's 2021 Equity Incentive Plan (the "2021 Plan") the Corporation may make discretionary grants of restricted shares of the Corporation’s common stock to or for the benefit of employees selected to participate in the 2021 Plan, the chief executive officer and members of the Board of Directors. Awards are based on the performance, responsibility and contributions of the individual and are targeted at an average of the peer group. The maximum number of shares of the Corporation’s common stock that may be awarded as restricted shares related to the 2021 Plan may not exceed 170,000, upon which time a new plan may be created. Compensation expense for shares granted will be recognized over the vesting period of the award based upon the average closing price of the Corporation's stock for each of the prior 30 trading days ending on the grant date.

During the three months ended March 31, 2023 and 2022, 13,069 and 12,560 shares, respectively, were re-issued from treasury to fund stock compensation. The expense related to the grants made in the first quarter of 2023 is recognized over a one year vesting period. Total expense related to the 2021 Plan of $0.4 million and $0.3 million was recognized during each of the three month periods ended March 31, 2023 and 2022, respectively.

A summary of restricted stock activity for the three months ended March 31, 2023 is presented below:

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at January 1, 2023	55,402	$44.57
Granted	13,069	$45.89
Vested	(14,143)	$45.38
Forfeited or cancelled	—	$—
Nonvested at March 31, 2023	54,328	$43.77

As of March 31, 2023, there was $1.9 million of total unrecognized compensation cost related to nonvested shares granted under the 2021 Plan. The cost is expected to be recognized over a weighted-average period of 3.79 years. The total fair value of shares vested was $0.6 million and $0.1 million for the three month periods ended March 31, 2023 and 2022, respectively. Due to the adoption of the 2021 Plan, certain grants were transitioned to a one-year vesting period.

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Item 2:        Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction

The following is the MD&A of the Corporation in this Quarterly Report on Form 10-Q for the three months ended March 31, 2023 and 2022. Reference should be made to the accompanying unaudited consolidated financial statements and footnotes, and the Corporation’s 2022 Annual Report on Form 10-K, which was filed with the SEC on March 22, 2023, for an understanding of the following discussion and analysis. See the list of commonly used abbreviations and terms on pages 3–6.

The MD&A included in this Form 10-Q contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of the Corporation's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. For a discussion of those risks and uncertainties and the factors that could cause the Corporation’s actual results to differ materially from those risks and uncertainties, see Forward-looking Statements below, in Part I, Item 1A, Risk Factors and on pages 20–31 of the Corporation’s 2022 Form 10-K. For a discussion of the use of non-GAAP financial measures, see pages 63-66 of the Corporation's 2022 Form 10-K, and pages 63-66 in this Form 10-Q.

The Corporation has been a financial holding company since 2000, the Bank was established in 1833, CFS in 2001, and CRM in 2016. Through the Bank and CFS, the Corporation provides a wide range of financial services, including demand, savings and time deposits, commercial, residential and consumer loans, interest rate swaps, letters of credit, wealth management services, employee benefit plans, insurance products, mutual funds and brokerage services. The Bank relies substantially on a foundation of locally generated deposits. The Corporation, on a stand-alone basis, has minimal results of operations. The Bank derives its income primarily from interest and fees on loans, interest income on investment securities, WMG fee income, and fees received in connection with deposit and other services. The Bank’s operating expenses are interest expense paid on deposits and borrowings, salaries and employee benefit plans, and general operating expenses. CRM is a Nevada-based captive insurance company which insures against certain risks unique to the operations of the Corporation and its subsidiaries and for which insurance may not be currently available or economically feasible in today's insurance marketplace. CRM pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves.

Forward-looking Statements

This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The Corporation intends its forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding the Corporation's expected financial position and operating results, the Corporation's business strategy, the Corporation's financial plans, forecasted demographic and economic trends relating to the Corporation's industry and similar matters are forward-looking statements. These statements can sometimes be identified by the Corporation's use of forward-looking words such as "may," "will," "anticipate," "estimate," "expect," or "intend." The Corporation cannot guarantee that its expectations in such forward-looking statements will turn out to be correct. The Corporation's actual results could be materially different from expectations because of various factors, including changes in economic conditions or interest rates, credit risk, inflation, cyber security risks, difficulties in managing the Corporation’s growth, recent bank failures, changes in FDIC assessments, competition, changes in law or the regulatory environment, and changes in general business and economic trends.

Information concerning these and other factors, including Risk Factors, can be found in the Corporation’s periodic filings with the SEC, including the discussion under the heading “Item 1A. Risk Factors” in the Corporation’s 2022 Annual Report on Form 10-K. These filings are available publicly on the SEC’s web site at http://www.sec.gov, on the Corporation's web site at http://www.chemungcanal.com or upon request from the Corporate Secretary at (607) 737-3746. Except as otherwise required by law, the Corporation undertakes no obligation to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.

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Critical Accounting Estimates

Critical accounting estimates include the areas where the Corporation has made what it considers to be particularly difficult, subjective or complex judgments concerning estimates, and where these estimates can significantly affect the Corporation's financial results under different assumptions and conditions. The Corporation prepares its financial statements in conformity with GAAP. As a result, the Corporation is required to make certain estimates, judgments and assumptions that it believes are reasonable based upon the information available at that time. These estimates, judgments, and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. Actual results could be different from these estimates. Significant accounting policies followed by the Corporation are presented in Note 1–Summary of Significant Accounting Policies, to the Audited Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2022, and in Note 1-"Summary of Significant Accounting Policies" of this Form 10-Q.

Allowance for Credit Losses

The allowance for credit losses (ACL) is management’s estimate of expected lifetime credit losses on financial instruments identified as possessing potential credit risk. The ACL on loans is established through a provision for credit losses recognized in the Corporation’s Consolidated Statements of Income. Additionally, the ACL on loans is reduced by charge-offs and increased by recoveries of amounts previously charged-off. The level of the ACL on loans is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past events, current conditions, and expectations of the future based on reasonable and supportable forecasts.

Because the methodology is based upon historical experience and trends, current economic data, reasonable and supportable forecasts, as well as management’s judgment, factors may arise that result in different estimations. Deteriorating conditions or assumptions could lead to further required increases in the ACL; conversely, improving conditions or assumptions could lead to further reductions in the ACL. In estimating the ACL, management considers the sensitivity of the model and significant judgments and assumptions that could result in an amount that is materially different from management’s estimate. Given the concentration of ACL allocation to the total commercial real estate and commercial and industrial portfolios, and the significant judgments made by management in deriving the qualitative loss factors, management analyzed the impact that changes in judgments could have.

At March 31, 2023 the allowance for credit losses totaled $20.1 million, compared to an allowance for loan losses of $19.7 million at December 31, 2022. A significant portion of the ACL is allocated to the commercial portfolio (both CRE and C&I). As of March 31, 2023 and December 31, 2022, the ACL (ALLL for December 31, 2022), allocated to the total commercial portfolio was $15.0 million for each period, or 74.9%, and 76.0%, respectively.

The range of impact was an ACL allocated to the total commercial loan portfolio between $11.9 million and $19.7 million at March 31, 2023. The sensitivity and related range of impact is a hypothetical analysis based on a diverse set of potential scenarios, and is not intended to represent management’s judgments or assumptions of qualitative loss factors that were utilized at March 31, 2023 in the estimation of the ACL on loans recognized on the Consolidated Balance Sheets. Estimates nearing the higher end of the impact range imply adverse conditions where the underlying assumptions regarding anticipated default are significantly decoupled from changes in the economic indicators underlying the quantitative portion of the model. These conditions could arise from a variety of occurrences, including but not limited to bubbles in specific asset classes, changes in economic conditions that are highly localized or region specific, significant legislative or regulatory action, and systemic changes to the organization.

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Consolidated Financial Highlights

	As of or for the Three Months Ended
	Mar. 31			Dec. 31			Sept. 30,			June 30,			Mar. 31
(in thousands, except per share data)	2023			2022			2022			2022			2022
RESULTS OF OPERATIONS
Interest income	$	26,230		$	18,538		$	20,999		$	18,538		$	17,458
Interest expense	6,283			897			2,009			897			781
Net interest income	19,947			17,641			18,990			17,641			16,677
Provision for credit losses	277			(1,744)			1,255			(1,744)			(1,145)
Net interest income after provision for credit losses	19,670			19,385			17,735			19,385			17,822
Non-interest income	5,423			5,319			5,036			5,319			5,663
Non-interest expense	15,836			14,342			14,577			14,342			14,668
Income before income tax expense	9,257			10,362			8,194			10,362			8,817
Income tax expense	1,987			2,338			1,741			2,338			1,950
Net income	$	7,270		$	8,024		$	6,453		$	8,024		$	6,867
Basic and diluted earnings per share	$	1.54		$	1.58		$	1.37		$	1.72		$	1.46
Average basic and diluted shares outstanding	4,721			4,698			4,692			4,690			4,689
PERFORMANCE RATIOS - Annualized
Return on average assets	1.12		%	1.15		%	1.02		%	1.32		%	1.14		%
Return on average equity	16.97		%	18.36		%	14.17		%	18.06		%	13.68		%
Return on average tangible equity (a)	19.40		%	21.25		%	16.12		%	20.58		%	15.32		%
Efficiency ratio (unadjusted) (a) (f)	62.42		%	59.69		%	60.67		%	62.47		%	65.66		%
Efficiency ratio (adjusted) (a) (b)	62.18		%	59.44		%	60.40		%	62.17		%	65.32		%
Non-interest expense to average assets	2.44		%	2.42		%	2.30		%	2.35		%	2.43		%
Loans to deposits	80.33		%	78.61		%	74.71		%	74.11		%	69.64		%
YIELDS / RATES - Fully Taxable Equivalent
Yield on loans	4.90		%	4.57		%	4.19		%	3.90		%	3.84		%
Yield on investments	2.18		%	2.09		%	1.72		%	1.60		%	1.47		%
Yield on interest-earning assets	4.12		%	3.82		%	3.41		%	3.12		%	3.00		%
Cost of interest-bearing deposits	1.34		%	0.93		%	0.47		%	0.21		%	0.20		%
Cost of borrowings	4.91		%	4.30		%	2.56		%	1.70		%	3.77		%
Cost of interest-bearing liabilities	1.49		%	0.88		%	0.51		%	0.24		%	0.21		%
Interest rate spread	2.63		%	2.94		%	2.90		%	2.88		%	2.79		%
Net interest margin, fully taxable equivalent (a)	3.14		%	3.26		%	3.08		%	2.97		%	2.87		%
CAPITAL
Total equity to total assets at end of period	6.68		%	6.29		%	6.10		%	7.13		%	7.50		%
Tangible equity to tangible assets at end of period (a)	5.91		%	5.51		%	5.29		%	6.30		%	6.67		%
Book value per share	$	37.53		$	35.32		$	33.14		$	37.24		$	39.56
Tangible book value per share (a)	32.91			30.69			28.49			32.59			34.91
Period-end market value per share	41.50			45.87			41.87			47.00			46.69
Dividends declared per share	0.31			0.31			0.31			0.31			0.31
AVERAGE BALANCES
Loans and loans held for sale (c)	$	1,849,310		$	1,787,103		$	1,675,859		$	1,587,777		$	1,532,445
Earning assets	2,592,709			2,550,834			2,457,218			2,395,704			2,371,275
Total assets	2,627,088			2,574,639			2,511,301			2,446,763			2,451,944
Deposits	2,337,476			2,347,719			2,257,394			2,203,231			2,211,442
Total equity	173,786			160,740			180,644			178,207			203,613
Tangible equity (a)	151,962			138,916			158,820			156,382			181,778

42

	As of or for the Three Months Ended
	Mar. 31			Dec. 31			Sept. 30,			June 30,			Mar. 31
	2023			2022			2022			2022			2022
ASSET QUALITY
Net charge-offs	$	269		$	52		$	109		$	699		$	(48)
Non-performing loans (d)	7,731			8,178			8,310			7,374			7,703
Non-performing assets (e)	7,927			8,373			8,503			7,665			7,956
Allowance for credit losses (g)	20,075			19,659			18,631			17,485			19,928
Annualized net charge-offs to average loans	0.06		%	0.01		%	0.03		%	0.18		%	(0.01)		%
Non-performing loans to total loans	0.41		%	0.45		%	0.48		%	0.46		%	0.49		%
Non-performing assets to total assets	0.30		%	0.32		%	0.33		%	0.31		%	0.32		%
Allowance for credit losses to total loans	1.07		%	1.07		%	1.07		%	1.08		%	1.27		%
Allowance for credit losses to non-performing loans	259.66		%	240.39		%	224.21		%	237.12		%	258.72		%
(a) See the GAAP to Non-GAAP reconciliations.
(b) Efficiency ratio (adjusted) is non-interest expense less amortization of intangible assets less legal reserve divided by the total of fully taxable equivalent net interest income plus non-interest income less changes in fair value of equity investments less net gains on securities transactions.
(c) Loans and loans held for sale do not reflect the allowance for credit losses.
(d) Non-performing loans include non-accrual loans only.
(e) Non-performing assets include non-performing loans plus other real estate owned.
(f) Efficiency ratio (unadjusted) is non-interest expense divided by the total of net interest income plus non-interest income.
(g) Corporation adopted CECL as of January 1, 2023.

In addition to analyzing the Corporation’s results on a reported basis, management uses certain non-GAAP financial measures because it believes these non-GAAP financial measures provide information to investors about the underlying operational performance and trends of the Corporation and, therefore, facilitate a comparison of the Corporation with the performance of its competitors. Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by other companies. Refer to pages 63-66 for further explanation and reconciliation of the Corporation’s use of non-GAAP measures.

43

Consolidated Results of Operations

The following section of the MD&A provides a comparative discussion of the Corporation’s Consolidated Results of Operations on a reported basis for the three months ended March 31, 2023 and 2022. For a discussion of the Critical Accounting Estimates and Risks and Uncertainties that affect the Consolidated Results of Operations, see page 41 of this Form 10-Q and page 37 of the Corporation’s 2022 Form 10-K.

Net Income

The following table presents selected financial information for the periods indicated, and the dollar and percent change (in thousands, except per share and ratio data):

	Three Months Ended   March 31,
	2023		2022		Change		% Change
Net interest income	$	19,947	$	16,677	$	3,270	19.6	%
Non-interest income	5,423		5,663		(240)		(4.2)	%
Non-interest expense	15,836		14,668		1,168		8.0	%
Pre-provision income	9,534		7,672		1,862		24.3	%
Provision (credit) for credit losses (1)	277		(1,145)		1,422		124.2	%
Income tax expense	1,987		1,950		37		1.9	%
Net income	$	7,270	$	6,867	$	403	5.9	%
Basic and diluted earnings per share	$	1.54	$	1.46	$	0.08	5.5	%

(1) Commencing January 1, 2023, the allowance calculation is based upon the Current Expected Credit loss methodology.

Prior to January 1, 2023, the allowance calculation was based upon the incurred loss methodology.

	Three Months Ended  March 31,
Selected financial ratios:	2023		2022
Return on average assets	1.12	%	1.14	%
Return on average equity	16.97	%	13.68	%
Net interest margin, fully taxable equivalent (a)	3.14	%	2.87	%
Efficiency ratio (adjusted) (a) (b)	62.18	%	65.32	%
Non-interest expenses to average assets	2.44	%	2.43	%
(a) See the GAAP to Non-GAAP reconciliations.
(b) Efficiency ratio (adjusted) is non-interest expense less amortization of intangible assets divided by the total of fully taxable equivalent net interest income plus non-interest income less changes in fair value of equity investments less net gains on securities transactions.

Net income for the first quarter of 2023 was $7.3 million, or $1.54 per share, compared to $6.9 million, or $1.46 per share, for the same period in the prior year. Return on average equity for the current quarter was 16.97%, compared to 13.68% for the same period in the prior year. The increase in net income was due primarily to an increase in net interest income, partially offset by increases in the provision for credit losses, non-interest expense, and income tax expense, and a decrease in non-interest income.

44

Net Interest Income

The following table presents net interest income for the periods indicated, and the dollar and percent change (in thousands):

	Three Months Ended   March 31,
	2023		2022		Change		Percentage Change
Interest and dividend income	$	26,230	$	17,458	$	8,772	50.2	%
Interest expense	6,283		781		5,502		704.5	%
Net interest income	$	19,947	$	16,677	$	3,270	19.6	%

Net interest income, which is the difference between the interest income earned on interest-earning assets such as loans and securities, and the interest expense paid on interest-bearing liabilities such as deposits and borrowings, is the largest contributor to the Corporation’s earnings.

Net interest income for the first quarter ended March 31, 2023 increased $3.3 million, or 19.6%, to $19.9 million compared to the same period in the prior year, due primarily to increases of $7.8 million in interest income on loans, including fees, and $0.9 million in interest and dividend income on taxable securities, offset by increases of $4.6 million in interest expense on deposits and $0.9 million in interest expense on borrowed funds.

The increase in interest income on loans, including fees was due primarily to a 106 basis points increase in the average yield on loans, reflecting increases across all loan categories due to an increase in interest rates, when compared to the same period in the prior year, and a $316.9 million increase in average loan balances, also representing increases across all loan categories, when compared to the same period in the prior year. Loan income for the first quarter of 2023 also included $0.2 million of prepayment penalty income. The increase in interest and dividend income on taxable securities when compared to the same period in the prior year, was due primarily to a 65 basis points increase in the average yield on securities due to an increase in average interest rates. Interest income on interest-earning deposits increased primarily due to an increase of 501 basis points in the average yield on interest-earning deposits in the first quarter of 2023 when compared to the same period in the prior year, as a result of the increases in the Federal Funds rate.

The increase in interest expense on deposits was due primarily to a 114 basis points increase in average rates paid on interest-bearing deposits, which included brokered deposits, and a deposit campaign in the first quarter of 2023, when compared to the same period in the prior year. The increase in interest expense on borrowed funds was due primarily to a $69.2 million increase in the average balances of overnight FHLBNY borrowings in the current quarter, and a 459 basis points increase in the average rate on overnight borrowing, when compared to the same period in the prior year.

Fully taxable equivalent net interest margin was 3.14% in the first quarter of 2023, compared to 2.87% for the same period in the prior year. Average interest-earning assets increased $221.4 million for the three months ended March 31, 2023 compared to the same period in the prior year. The average yield on interest-earning assets increased 112 basis points, and the average cost of interest-bearing liabilities increased 128 basis points in the first quarter of 2023, compared to the same period in the prior year.

45

Average Consolidated Balance Sheets and Interest Analysis

The following table presents certain information related to the Corporation’s average consolidated balance sheets and its consolidated statements of income for the three months ended March 31, 2023 and 2022. For the purpose of the table below, non-accruing loans are included in the daily average loan amounts outstanding. Daily balances were used for average balance computations. Investment securities are stated at amortized cost. Tax equivalent adjustments have been made in calculating yields on obligations of states and political subdivisions, tax-free commercial loans and dividends on equity investments. Loan fee income of $6 thousand and $1.0 million for the three month periods ended March 31, 2023, and 2022, respectively, related to the Paycheck Protection Program.

AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
	Three Months Ended   March 31, 2023						Three Months Ended   March 31, 2022
(in thousands)	Average Balance		Interest		Yield/Rate (3)		Average Balance		Interest		Yield/Rate (3)
Interest-earning assets:
Commercial loans	$	1,261,054	$	16,584	5.33	%	$	1,072,408	$	10,547	3.99	%
Mortgage loans	285,588		2,472		3.51	%	262,053		2,153		3.33	%
Consumer loans	302,668		3,285		4.40	%	197,984		1,816		3.72	%
Taxable securities	695,079		3,585		2.09	%	758,507		2,689		1.44	%
Tax-exempt securities	40,769		305		3.03	%	42,435		333		3.18	%
Interest-earning deposits	7,551		97		5.21	%	37,888		19		0.20	%
Total interest-earning assets	2,592,709		26,328		4.12	%	2,371,275		17,557		3.00	%
Non-earning assets:
Cash and due from banks	25,084						24,744
Other assets	29,393						77,153
Allowance for credit losses (4)	(20,098)						(21,228)
Total assets	$	2,627,088					$	2,451,944
Interest-bearing liabilities:
Interest-bearing demand deposits	$	291,090	$	274	0.38	%	$	293,429	$	55	0.08	%
Savings and insured money market deposits	906,947		1,648		0.74	%	955,296		212		0.09	%
Time deposits	322,710		2,092		2.63	%	241,501		481		0.81	%
Brokered deposits	113,074		1,374		4.93	%	—		—		—	%
FHLBNY overnight advances	70,699		866		4.97	%	1,491		1		0.38	%
Long-term capital leases	3,281		29		3.58	%	3,550		32		3.66	%
Total interest-bearing liabilities	1,707,801		6,283		1.49	%	1,495,267		781		0.21	%
Non-interest-bearing liabilities:
Demand deposits	703,655						721,216
Other liabilities	41,846						31,848
Total liabilities	2,453,302						2,248,331
Shareholders' equity	173,786						203,613
Total liabilities and shareholders’ equity	$	2,627,088					$	2,451,944
Fully taxable equivalent net interest income			20,045						16,776
Net interest rate spread (1)					2.63	%					2.79	%
Net interest margin, fully taxable equivalent (2)					3.14	%					2.87	%
Taxable equivalent adjustment			(98)						(99)
Net interest income			$	19,947					$	16,677

(1)  Net interest rate spread is the difference in the average yield on interest-earning assets less the average rate on interest-bearing liabilities.

(2)  Net interest margin is the ratio of fully taxable equivalent net interest income divided by average interest-earning assets.

(3) Annualized.

(4) Corporation adopted CECL as of January 1, 2023.

46

Changes Due to Rate and Volume

Net interest income can be analyzed in terms of the impact of changes in rates and volumes. The table below illustrates the extent to which changes in interest rates and the volume of average interest-earning assets and interest-bearing liabilities have affected the Corporation’s interest income and interest expense during the three months ended March 31, 2023 and 2022. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate); (ii) changes attributable to changes in rates (changes in rates multiplied by prior volume); and (iii) the net changes. For purpose of this table, changes that are not due solely to volume or rate changes have been allocated to these categories based on the respective percentage changes in average volume and rate. Due to the numerous simultaneous volume and rate changes during the periods analyzed, it is not possible to precisely allocate changes between volume and rates. In addition, average interest-earning assets include non-accrual loans and taxable equivalent adjustments were made.

RATE/VOLUME ANALYSIS OF NET INTEREST INCOME
	Three Months Ended March 31, 2023 vs. 2022
	Increase/(Decrease)
	Total Change		Due to Volume		Due to Rate
(in thousands)
Interest and dividend income on:
Commercial loans	$	6,037	$	2,076	$	3,961
Mortgage loans	319		199		120
Consumer loans	1,469		1,092		377
Taxable investment securities	896		(240)		1,136
Tax-exempt investment securities	(28)		(13)		(15)
Interest-earning deposits	78		(27)		105
Total interest and dividend income, fully taxable equivalent	8,771		3,087		5,684
Interest expense on:
Interest-bearing demand deposits	219		—		219
Savings and insured money market deposits	1,436		(11)		1,447
Time deposits	1,610		210		1,400
Brokered deposits	1,374		1,374		—
FHLBNY overnight advances	865		686		179
Long-term capital leases	(4)		(2)		(2)
Total interest expense	5,500		2,257		3,243
Net interest income, fully taxable equivalent	$	3,271	$	830	$	2,441

47

Provision for credit losses

Management has established and maintains a methodology for determining and adjusting its allowance for credit losses in conformity with the recently adopted accounting standard, commonly referred to as the “CECL methodology.” The allowance is based on a combination of quantitative and qualitative analysis and changes in the required allowance are provisioned through income. The quantitative portion of the model is significantly influenced by changes in projected economic conditions, as well as changes in the composition of the numerous loan portfolio segments. Quantitative adjustments reflect the degree to which expected future outcomes are expected to differ from those projected by the quantitative model.

Upon adoption of ASU 2016-13, the Corporation’s provision for credit losses now includes components for on-balance sheet exposures and off-balance sheet exposures. As of January 1, 2023 the Corporation recognized a $1.5 million one-time implementation adjustment, of which $1.1 million reflected the addition of an allowance for credit losses on off-balance sheet exposure related to unfunded commitments.

For the quarter ended March 31, 2023, the provision for credit losses was $0.3 million due to additional qualitative provision as a result of increased loan volume, offset by a decrease in the quantitative reserve requirement as a result of more favorable economic projections, notably a decrease in the Federal Open Market Committee (FOMC) forecasted U.S. unemployment rate. For the quarter ended March 31, 2022, the provision for loan losses was a credit of $1.1 million, primarily due to the $1.2 million release of the pandemic-related portion of the allowance, offset by additional provision related to increased loan volume.

Non-interest income

The following table presents non-interest income for the periods indicated, and the dollar and percent change (in thousands):

	Three Months Ended   March 31,
	2023		2022		Change		Percentage Change
WMG fee income	$	2,580	$	2,757	$	(177)	(6.4)	%
Service charges on deposit accounts	941		864		77		8.9	%
Interchange revenue from debit card transactions	1,133		1,130		3		0.3	%
Changes in fair value of equity investments	72		(113)		185		163.7	%
Net gains on sales of loans held for sale	5		74		(69)		(93.2)	%
Income from bank owned life insurance	10		11		(1)		(9.1)	%
CFS fee and commission income	241		253		(12)		(4.7)	%
Other	441		687		(246)		(35.8)	%
Total non-interest income	$	5,423	$	5,663	$	(240)	(4.2)	%

Total non-interest income for the first quarter of 2023 decreased $0.2 million compared to the same period in the prior year primarily due to decreases in other non-interest income, and WMG fee income, offset by an increase in changes in fair value of equity investments.

Change in Other Non-Interest Income

The decrease in other non-interest income was primarily due to decreases in interest rate swap fees, CFS other fee income and Mastercard volume bonus, when compared to the same period in the prior year.

Change in WMG Fee Income

The decrease in WMG fee income was primarily due to a decline in the market value of the total assets under management or administration when compared to the same period in the prior year.

Changes in Fair value of Equity Investments

The increase in changes in fair value of equity investments was primarily due to an increase in the market value of assets held related to the Corporation's deferred compensation plan, when compared to the same period in the prior year.

48

Non-interest expense

The following table presents non-interest expense for the periods indicated, and the dollar and percent change (in thousands):

	Three Months Ended   March 31,
	2023		2022		Change		Percentage Change
Compensation expense:
Salaries and wages	$	6,783	$	6,223	$	560	9.0	%
Pension and other employee benefits	1,680		1,718		(38)		(2.2)	%
Other components of net periodic pension and postretirement benefits	(174)		(408)		234		(57.4)	%
Total compensation expense	8,289		7,533		756		10.0	%
Non-compensation expense:
Net occupancy	1,465		1,427		38		2.7	%
Furniture and equipment	418		437		(19)		(4.3)	%
Data processing	2,381		2,187		194		8.9	%
Professional services	440		521		(81)		(15.5)	%
Amortization of intangible assets	—		11		(11)		(100.0)	%
Marketing and advertising	332		276		56		20.3	%
Other real estate owned expenses	38		(37)		75		202.7	%
FDIC insurance	497		314		183		58.3	%
Loan expenses	232		215		17		7.9	%
Other	1,744		1,784		(40)		(2.2)	%
Total non-compensation expense	7,547		7,135		412		5.8	%
Total non-interest expense	$	15,836	$	14,668	$	1,168	8.0	%

Total non-interest expense for the first quarter of 2023 increased $1.2 million compared to the same period in the prior year. The increase was due to increases in total compensation expense and total non-compensation expense. For the three months ended March 31, 2023, and 2022, non-interest expense to average assets was 2.44%.

Compensation expense

The increase in compensation expense, compared to the same period in the prior year, can be primarily attributed to increases in salaries and wages, and other components of net periodic pension and postretirement benefits. The increase in salaries and wages can be primarily attributed to base salary increases, an increase in the market value of the assets held related to the Corporation's deferred compensation plan, and an increase in restricted stock expense. The increase in other components of net periodic pension and postretirement benefits can be primarily attributed to revised actuarial adjustments to the Corporation's pension plans.

Non-compensation expense

The increase in non-compensation expense, compared to the same period in the prior year, can be primarily attributed to increases in data processing expenses and FDIC insurance. Data processing expenses increased primarily due to the timing of invoices, expenditures related to additional cyber security-related software, and an increase in debit card dispute processing, when compared to the same period in the prior year. The increase in FDIC insurance can be primarily attributed to an increase in the assessment rate effective January 1, 2023.

49

Income tax expense

The following table presents income tax expense and the effective tax rate for the periods indicated, and the dollar and percent change (in thousands):

	Three Months Ended   March 31,
	2023			2022			Change		Percentage Change
Income before income tax expense	$	9,257		$	8,817		$	440	5.0	%
Income tax expense	1,987			1,950			37		1.9	%
Effective tax rate	21.5		%	22.1		%

Income tax expense was $2.0 million for the current quarter and the same period in the prior year. The effective income tax rate decreased from 22.1% for the first quarter of 2022 to 21.5% for the first quarter of 2023.

Financial Condition

The following table presents selected financial information at the dates indicated, and the dollar and percent change (in thousands):

	March 31, 2023		December 31, 2022		Change		Percentage Change
ASSETS
Total cash and cash equivalents	$	34,641	$	55,869	$	(21,228)	(38.0)	%
Total investment securities, FHLB, and FRB stock	638,849		646,040		(7,191)		(1.1)	%
Loans, net of deferred loan fees	1,873,701		1,829,448		44,253		2.4	%
Allowance for credit losses	(20,075)		(19,659)		(416)		2.1	%
Loans, net	1,853,626		1,809,789		43,837		2.4	%
Goodwill and other intangible assets, net	21,824		21,824		—		—	%
Other assets	105,243		112,031		(6,788)		(6.1)	%
Total assets	$	2,654,183	$	2,645,553	$	8,630	0.3	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits	$	2,332,429	$	2,327,227	$	5,202	0.2	%
Advances and other debt	93,328		99,137		(5,809)		(5.9)	%
Other liabilities	51,085		52,801		(1,716)		(3.2)	%
Total liabilities	2,476,842		2,479,165		(2,323)		(0.1)	%
Total shareholders’ equity	177,341		166,388		10,953		6.6	%
Total liabilities and shareholders’ equity	$	2,654,183	$	2,645,553	$	8,630	0.3	%

50

Cash and Cash Equivalents

The decrease in cash and cash equivalents can be attributed to changes in securities, loans, deposits and borrowings.

Investment securities

The decrease in investment securities can be mostly attributed to $16.4 million in paydowns, offset by an increase in the fair value of the portfolio of $7.9 million.

Loans, net

The increase in loans, net of deferred loan fees, can be primarily attributed to increases of $39.4 million in commercial mortgages, $12.4 million in consumer loans, and $0.3 million in residential mortgages, offset by a decrease of $7.8 million in commercial and industrial loans.

Allowance for Credit Losses

The increase in the allowance for credit losses can be primarily attributed to the $0.4 million adjustments made upon the adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), and additional provisioning related to increased loan volume. The increases were offset by decreased allowance requirements forecasted by the model due to more favorable economic projections, notably a decrease in the FOMC's forecasted U.S. unemployment rate. As of January 1, 2023, the Corporation recognized a $1.5 million one-time implementation adjustment, of which $1.1 million reflected the addition of an allowance for credit losses on unfunded commitments, which is included in other liabilities on the consolidated balance sheet.

Other Assets

The decrease in other assets can be primarily attributed to a decrease of $4.4 million in interest rate swap assets.

Deposits

The increase in deposits can be attributed to increases of $53.3 million in brokered deposits, and $15.6 million in interest-bearing demand deposit accounts, offset by decreases of $42.7 million in non-interest bearing demand deposits, $9.8 million in insured money market accounts, $7.6 million in savings deposits and $3.6 million in time deposits.

Advances and Other Debt

The decrease in advances and other debt can be primarily attributed to a decrease in overnight FHLBNY borrowing.

Other liabilities

The decrease in other liabilities can be primarily attributed to a decrease of $4.4 million in interest rate swap liabilities.

Shareholders’ equity

Shareholders’ equity was $177.3 million at March 31, 2023 compared to $166.4 million at December 31, 2022. The increase can be primarily attributed to a decrease in accumulated other comprehensive loss of $5.8 million and an increase of $4.7 million in retained earnings. The decrease in accumulated other comprehensive loss can be primarily attributed to an increase in the fair market value of the securities portfolio. The increase in retained earnings can be primarily attributed to net income of $7.3 million, offset by $1.5 million in dividends declared, and a $1.5 million one-time adjustment due to the implementation of CECL, during the three months ended March 31, 2023.

Assets under management or administration

The market value of total assets under management or administration in WMG was $2.142 billion at March 31, 2023, including $393.8 million of assets held under management or administration for the Corporation, compared to $2.053 billion at December 31, 2022, including $346.5 million of assets held under management or administration for the Corporation, an increase of $89.0 million, or 4.34%, due to an increase in assets under management, mostly attributable to new business relationships.

51

Securities

The Corporation’s Funds Management Policy includes an investment policy that in general, requires debt securities purchased for the bond portfolio to carry a minimum agency rating of "Baa". After an independent credit analysis is performed, the policy also allows the Corporation to purchase local municipal obligations that are not rated. The Corporation intends to maintain a reasonable level of securities to provide adequate liquidity and in order to have securities available to pledge to secure public deposits, repurchase agreements and other types of transactions. Fluctuations in the fair value of the Corporation’s securities relate primarily to changes in interest rates. Marketable securities are classified as Available for Sale, while investments in local municipal obligations are generally classified as Held to Maturity. 

The available for sale segment of the securities portfolio totaled $626.1 million at March 31, 2023, a decrease of $6.5 million, or 1.0%, from $632.6 million at December 31, 2022. The decrease can be mostly attributed to $15.9 million in paydowns, offset by an increase in the fair value of the portfolio of $7.8 million. The held to maturity segment of the securities portfolio consists of obligations of political subdivisions in the Corporation’s market areas and certificates of deposit. These securities totaled $1.9 million at March 31, 2023 and $2.4 million at December 31, 2022.

Non-marketable equity securities at March 31, 2023 and December 31, 2022 include shares of FRBNY stock and FHLBNY stock, carried at their cost of $1.8 million and $6.1 million, respectively. The fair value of these securities is assumed to approximate their cost. The investment in these stocks is regulated by regulatory policies of the respective institutions.

Loans

The Corporation has reporting systems to monitor: (i) loan origination and concentrations, (ii) delinquent loans, (iii) non-performing assets, including non-performing loans, modifications to borrowers experiencing financial difficulty, and other real estate owned, (iv) impaired loans, and (v) potential problem loans. Management reviews these systems on a regular basis.

The table below presents the Corporation’s loan composition by segment at the dates indicated, and the dollar and percent change from December 31, 2022 to March 31, 2023 ($ in thousands):

LOAN COMPOSITION
	March 31, 2023		% of Total Loans		December 31, 2022		% of Total Loans		Dollar Change		Percentage Change
Commercial and agricultural:
Commercial and industrial	$	244,174	13.0	%	$	252,044	13.8	%	$	(7,870)	(3.1)	%
Agricultural	333		—	%	249		—	%	84		33.7	%
Commercial mortgages:
Construction	118,660		6.3	%	108,243		5.9	%	10,417		9.6	%
Commercial mortgages	917,637		49.0	%	888,670		48.7	%	28,967		3.3	%
Residential mortgages	285,944		15.3	%	285,672		15.6	%	272		0.1	%
Consumer loans:
Home equity lines and loans	84,537		4.5	%	81,401		4.4	%	3,136		3.9	%
Indirect consumer loans	211,270		11.3	%	202,124		11.0	%	9,146		4.5	%
Direct consumer loans	11,146		0.6	%	11,045		0.6	%	101		0.9	%
Total	$	1,873,701	100.0	%	$	1,829,448	100.0	%	$	44,253	2.4	%

Portfolio loans totaled $1.874 billion at March 31, 2023, an increase of $44.3 million, or 2.4%, from $1.829 billion at December 31, 2022. The increase in loans can be attributed to increases of $39.4 million in commercial mortgage loans, $9.1 million in indirect consumer loans, $3.2 million in other consumer loans, and $0.3 million in residential mortgages, offset by a decrease of $7.8 million in commercial and industrial loans.

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Residential mortgage loans totaled $285.9 million at March 31, 2023, an increase of $0.3 million, or 0.1%, from December 31, 2022. During the three months ended March 31, 2023, $6.9 million of residential mortgages were originated, of which $0.2 million were sold in the secondary market to Freddie Mac. Indirect consumer loans totaled $211.3 million at March 31, 2023, an increase of $9.1 million, or 4.5%, from December 31, 2022, as increased demand continues for automobiles. The Corporation anticipates that future growth in portfolio loans will continue to be concentrated in commercial mortgages and commercial and industrial loans, particularly within the Corporation's Western New York market.

The table below presents the Corporation’s outstanding loan balance by bank division (in thousands):

LOANS BY DIVISION
	March 31, 2023		December 31, 2022		December 31, 2021		December 31, 2020		December 31, 2019
Chemung Canal Trust Company*^	$	755,683	$	731,344	$	639,144	$	658,468	$	576,399
Capital Bank Division	1,118,018		1,098,104		879,105		877,995		732,820
Total loans	$	1,873,701	$	1,829,448	$	1,518,249	$	1,536,463	$	1,309,219

* All loans, excluding those originated by the Capital Bank division.

^ Includes $80.6 million and $79.8 million as of March 31, 2023 and December 31, 2022, respectively, in the Western New York market.

Loan concentrations are considered to exist when there are amounts loaned to a multiple number of borrowers engaged in similar activities which would cause them to be similarly impacted by economic or other conditions. Specific industries are identified using NAICS codes. The Corporation monitors specific NAICS industry classifications of commercial loans to identify concentrations greater than 10.0% of total loans. At March 31, 2023 and December 31, 2022, commercial loans to borrowers involved in the real estate, and real estate rental and lending businesses were 49.4% and 48.3% of total loans, respectively. No other concentration of loans existed in the commercial loan portfolio in excess of 10.0% of total loans as of March 31, 2023 and December 31, 2022.

The table below shows the maturity of loans outstanding as of March 31, 2023. Also provided are the amounts due after one year, classified according to fixed interest rates and variable interest rates (in thousands):

	Within One Year		After One But Within Five Years		After Five But Within 15 Years		After 15 Years		Total
Commercial and agricultural:
Commercial and industrial	$	62,684	$	108,120	$	69,568	$	3,802	$	244,174
Agricultural	98		49		186		—		333
Commercial mortgages:
Construction	8,241		54,540		55,089		790		118,660
Commercial mortgages	31,715		203,181		647,798		34,943		917,637
Residential mortgages	6,653		9,492		125,458		144,341		285,944
Consumer loans:
Home equity lines and loans	293		5,161		56,198		22,885		84,537
Indirect consumer loans	1,775		86,599		122,896		—		211,270
Direct consumer loans	469		4,467		4,210		2,000		11,146
Total	$	111,928	$	471,609	$	1,081,403	$	208,761	$	1,873,701

Loans maturing with:	After One But Within Five Years		After Five But Within 15 Years		After 15 Years		Total
Fixed interest rates	$	280,644	$	520,944	$	104,081	$	905,669
Variable interest rates	190,965		560,459		104,680		856,104
Total	$	471,609	$	1,081,403	$	208,761	$	1,761,773

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Non-Performing Assets

Non-performing assets consist of non-accrual loans and other real estate owned that has been acquired in partial or full satisfaction of loan obligations or upon foreclosure. Effective January 1, 2023, the Corporation adopted ASU 2022-02, which eliminated troubled debt restructuring accounting guidance. The Corporation monitors loan modifications made to borrowers deemed to be experiencing financial difficulty. As of March 31, 2023, there was one loan being monitored under ASU 2022-02 guidance, which was accruing.

Past due status on all loans is based on the contractual terms of the loan. It is generally the Corporation's policy that a loan 90 days past due be placed in non-accrual status unless factors exist that would eliminate the need to place a loan in this status. A loan may also be designated as non-accrual at any time if payment of principal or interest in full is not expected due to deterioration in the financial condition of the borrower. At the time loans are placed in non-accrual status, the accrual of interest is discontinued and previously accrued interest is reversed. All payments received on non-accrual loans are applied to principal. Loans are considered for return to accrual status when they become current as to principal and interest and remain current for a period of six consecutive months or when, in the opinion of management, the Corporation expects to receive all of its original principal and interest. In the case of non-accrual loans where a portion of the loan has been charged off, the remaining balance is kept in non-accrual status until the entire principal balance has been recovered.

The following table summarizes the Corporation's non-performing assets ($ in thousands):

NON-PERFORMING ASSETS
	March 31, 2023			December 31, 2022
Non-accrual loans	$	7,731		$	4,143
Non-accrual troubled debt restructurings	—			4,035
Total non-performing loans	7,731			8,178
Other real estate owned	196			195
Total non-performing assets	$	7,927		$	8,373
Ratio of non-performing loans to total loans	0.41		%	0.45		%
Ratio of non-performing assets to total assets	0.30		%	0.32		%
Ratio of allowance for credit losses to non-performing loans	259.66		%	240.39		%
Accruing loans past due 90 days or more (1)	$	6		$	1
Accruing troubled debt restructurings (1)	$	—		$	1,405

(1) Not included in non-performing assets above.

Non-Performing Loans

Non-performing loans totaled $7.7 million, or 0.41% of total loans at March 31, 2023, compared to $8.2 million, or 0.45% of total loans at December 31, 2022. Non-performing assets, which are comprised of non-performing loans and other real estate owned, was $7.9 million, or 0.30% of total assets, at March 31, 2023, compared to $8.4 million, or 0.32% of total assets, at December 31, 2022. The decrease in non-performing loans can mostly be attributed to the partial charge-off of a commercial and industrial loan, and a significant paydown on a commercial real estate property in the three month period ended March 31, 2023. The decrease in non-performing assets can be attributed to the decrease in non-performing loans.

Accruing Loans Past due 90 Days or More

There was an amortized basis in accruing loans past due 90 days of $6 thousand at March 31, 2023, compared to $1 thousand at December 31, 2022.

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Loan Modifications to Borrowers Experiencing Financial Difficulty

The Corporation works closely with borrowers that have financial difficulties to identify viable solutions that minimize the potential for loss. Previously, the Corporation applied troubled debt restructuring (TDR) accounting guidance for loan modifications made to borrowers experiencing financial difficulty, where a concession was made by the Corporation. Effective January 1, 2023, the Corporation adopted ASU 2022-02, which supersedes TDR guidance. The Corporation monitors modifications made to borrowers experiencing financial difficulty in which the contractual cash flows were directly impacted. Modifications that are included under this guidance include principal reductions, reductions in the effective interest rate, term extensions, or a combination thereof. ASU 2022-02 was implemented on a prospective basis, and as of March 31, 2023, the Corporation had one loan that was modified under the new accounting guidance, a term extension on a commercial mortgage. As of March 31, 2023, this loan was considered to be performing.

Individually Analyzed Loans

A loan is classified for individually analyzed when based on current information and events, management has determined that it no longer exhibits risk characteristics consistent with its corresponding pool. This differs from the definition of loans considered to be impaired at December 31, 2022. The amortized cost basis of individually analyzed loans at March 31, 2023 totaled $6.8 million, compared to impaired loans of $7.3 million at December 31, 2022. Included in the amortized cost basis of individually analyzed loans at March 31, 2023, were loans totaling $1.1 million for which impairment allowances of $1.1 million have been specifically allocated to the allowance for credit losses. As of December 31, 2022, the impaired loan total included $1.3 million of loans for which specific impairment allowances of $1.1 million were allocated to the allowance for loan losses.

The majority of the Corporation's individually analyzed loans are secured and measured for impairment based on collateral evaluations.  It is the Corporation's policy to obtain updated appraisals, by independent third parties, on loans secured by real estate at the time a loan is determined to require individual analysis. An impairment measurement is performed based upon the most recent appraisal on file to determine the amount of any specific allocation or charge-off. In determining the amount of any specific allocation or charge-off, the Corporation will make adjustments to reflect the estimated costs to sell the property. Upon receipt and review of the updated appraisal, an additional measurement is performed to determine if any adjustments are necessary to reflect the proper provisioning or charge-off. Individually analyzed loans are reviewed on a quarterly basis to determine if any changes in credit quality or market conditions would require any additional allocation or recognition of additional charge-offs. Real estate values in the Corporation's market area have remained stable. Non-real estate collateral may be valued using (i) an appraisal, (ii) net book value of the collateral per the borrower’s financial statements, or (iii) accounts receivable aging reports, that may be adjusted based on management’s knowledge of the client and client’s business. If market conditions warrant, future appraisals are obtained for both real estate and non-real estate collateral.

Allowance for Credit Losses

The allowance for credit losses is an amount that management believes will be adequate to absorb the estimated lifetime credit losses inherent in the assets exhibiting credit risk as of the measurement date. The allowance is in conformity with the requirements established by ASC 326-Financial Instruments-Credit Losses. The new ACL guidance was adopted effective January 1, 2023, and is a departure from the allowance for loan losses (ALLL) that the Corporation previously estimated using an incurred loss methodology. The allowance covers loans, unfunded commitments, and certain debt securities exhibiting credit risk potential, and incorporates both quantitative and qualitative components.

Loans are analyzed on either an individual basis or a pooled basis, determined by risk characteristics. Loans that no longer exhibit risk characteristics substantially consistent with those of loans analyzed within a given pool, may necessitate being evaluated individually, based on management discretion. Individually analyzed loans are primarily valuated based on the collateral method, however, select loans may be evaluated using a cash flow analysis. Pooled loans are segmented based on groups of assigned FFIEC call codes, in order to be granular enough to meaningfully capture the risk profile of each instrument, yet broad enough to accurately allow for the application of certain pool-level assumptions.

Quantitative analysis is based on an estimated discounted cash flow analysis (DCF) performed at the instrument level. The modeled reserve requirement equals the difference between the book balance of the instrument at the measurement date and the present value of assumed cash flows for the life of the loan. The underlying assumptions of the DCF are based on the relationship a projected value of an economic indicator, and the implied historical loss experience amongst a group of curated peers. The Corporation utilized a regression analysis to determine suitable loss drivers for each pool of loans. Based on these results, a probability of default (PD) and loss given default (LGD), is assigned to each potential value of an economic indicator for each pool of loans, and is then applied to the portfolio to derive the statistical loss implications thereof. A hypothetical loss for each period of the DCF, as well as implied recovery of past losses, is incorporated into the DCF. The Corporation relies on FOMC data as the source for its readily available and reasonable economic forecast. The forecasted values are applied over a four quarter period, and revert back to the historic mean of a lookback period over an eight period horizon, on a straight-line basis.

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Qualitative adjustments represent management's expectation of certain risks not being captured entirely in the quantitative portion of the model. Qualitative adjustment rates are applied to each instrument within a pool on a consistent basis. Factors considered as part of the quantitative adjustment analysis include economic considerations potentially not captured by the model, changes in conditions within the Bank such as lending standards, personnel, concentrations of credit, among others, as well as other external factors such as change in the regulatory and competitive landscape.

The allowance for credit losses is increased through a provision for credit losses, which is charged to operations. Separate provision accounts have been established for on-balance sheet credit exposures and off-balance sheet credit exposures, and are combined in the line item "Provision for credit losses" on the Corporation's Consolidated Statements of Income. Loans are charged against the allowance for credit losses when management believes that the collectability of all or a portion of the principal is unlikely. Management's evaluation of the adequacy of the allowance for credit losses is performed on a periodic basis and takes into consideration such factors as the outcomes of the quantitative analysis, a review of specific impaired loans, and considerations for qualitative adjustments. While management uses available information to recognize losses on credits, future additions to the allowance may be necessary based on changing economic conditions or portfolio composition. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation's allowance for credit losses. Such agencies may require the Corporation to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

The allowance for credit losses was $20.1 million at March 31, 2023, and $19.7 million at December 31, 2022. The allowance for credit losses was 259.66% of non-performing loans at March 31, 2023 compared to 240.39% at December 31, 2022. The ratio of allowance for credit losses to total loans was 1.07% at March 31, 2023, and December 31, 2022. The increase in the allowance for credit losses was attributable to the impact of the implementation of ASU 2016-13, as well as increased loan volume. The quantitative portion of the ACL model was impacted by an improvement in the FOMC forecasted unemployment rate, which offset additional provisioning relating to loan growth and positive qualitative adjustments to certain pooled segments. Net charge-offs for the three months ended March 31, 2023 were $0.3 million, compared to net recoveries for the three months ended March 31, 2022 of $48.0 thousand.

The table below summarizes the Corporation’s allowance for credit losses and non-accrual loans outstanding by loan category at March 31, 2023, and the allowance for loan losses and non-accrual loans outstanding by loan category at December 31, 2022 (in thousands):

ALLOWANCE BY LOAN CATEGORY
Balance at March 31, 2023	Allowance for credit losses		Allowance to loans1		Non-performing loans		Non-performing loans to loans1		Allowance to non-performing loans
Commercial and agricultural	$	4,053	1.66	%	$	1,623	0.66	%	249.72	%
Commercial mortgages	10,983		1.06	%	3,647		0.35	%	301.15	%
Residential mortgages	1,892		0.66	%	1,036		0.36	%	182.63	%
Consumer loans	3,147		1.03	%	1,425		0.46	%	220.84	%
Total	$	20,075	1.07	%	$	7,731	0.41	%	259.66	%
Balance at December 31, 2022	Allowance for loan losses		Allowance to loans1		Non-performing loans		Non-performing loans to loans1		Allowance to non-performing loans
Commercial and agricultural	$	3,373	1.34	%	$	1,946	0.77	%	173.33	%
Commercial mortgages	11,576		1.16	%	3,933		0.39	%	294.33	%
Residential mortgages	1,845		0.65	%	986		0.35	%	187.12	%
Consumer loans	2,865		0.97	%	1,313		0.45	%	218.20	%
Total	$	19,659	1.07	%	$	8,178	0.45	%	240.39	%
1 Ratio is a percentage of loan category.

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The table below summarizes the Corporation’s consolidated credit ratios at March 31, 2023 and December 31, 2022:

Consolidated Ratios	March 31, 2023		December 31, 2022
Non-performing loans to total loans	0.41	%	0.45	%
Allowance for credit losses to total loans	1.07	%	1.07	%
Allowance for credit losses to non-performing loans	259.66	%	240.39	%

The table below summarizes the Corporation’s ratio of net charge-offs and recoveries to average loans outstanding by loan category for the three months ended March 31, 2023 and March 31, 2022:

Credit Ratios	March 31, 2023		March 31, 2022
Commercial and agricultural	0.07	%	—	%
Commercial mortgages	—	%	—	%
Residential mortgages	—	%	—	%
Consumer loans	0.04	%	(0.02)	%
Total	0.02	%	—	%

The table below summarizes the Corporation’s credit loss experience for the three months ended March 31, 2023 and 2022 (in thousands):

SUMMARY OF CREDIT LOSS EXPERIENCE
	Three Months Ended   March 31,
	2023		2022
Balance of allowance for credit losses at beginning of period	$	19,659	$	21,025
Impact of ASC 326 Adoption	374		—
Charge-offs:
Commercial and agricultural	190		4
Commercial mortgages	—		—
Residential mortgages	—		—
Consumer loans	193		194
Total charge-offs	$	383	$	198
Recoveries:
Commercial and agricultural	6		6
Commercial mortgages	—		1
Residential mortgages	—		—
Consumer loans	108		239
Total recoveries	$	114	$	246
Net charge-offs (recoveries)	269		(48)
Provision (credit) for credit losses on-balance sheet exposure1	311		(1,145)
Balance of allowance for credit losses at end of period	$	20,075	$	19,928

1 Additional provision related to off-balance sheet exposure was a credit of $34 thousand for the three months ended March 31, 2023.

Other Real Estate Owned

OREO totaled $0.2 million at March 31, 2023, and December 31, 2022, respectively. There were no changes to other real estate owned in the first three months of 2023.

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Deposits

The table below summarizes the Corporation’s deposit composition by segment at March 31, 2023, and December 31, 2022, and the dollar and percent change from December 31, 2022 to March 31, 2023 (in thousands):

DEPOSITS
									March 31, 2023 v. December 31, 2022
	March 31, 2023				December 31, 2022
	Amount		% of Total		Amount		% of Total		$ Change		% Change
Non-interest-bearing demand deposits	$	690,596	29.7	%	$	733,329	31.4	%	$	(42,733)	(5.8)	%
Interest-bearing demand deposits	287,242		12.3	%	271,645		11.7	%	15,597		5.7	%
Money market accounts	631,052		27.1	%	640,840		27.5	%	(9,788)		(1.5)	%
Savings deposits	271,445		11.6	%	279,029		12.0	%	(7,584)		(2.7)	%
Certificates of deposit $250,000 or less	263,274		11.3	%	272,182		11.7	%	(8,908)		(3.3)	%
Certificates of deposit greater than $250,000	35,349		1.5	%	31,547		1.4	%	3,802		12.1	%
Brokered deposits	126,777		5.4	%	73,452		3.2	%	53,325		72.6	%
Other time deposits	26,694		1.1	%	25,203		1.1	%	1,491		5.9	%
Total	$	2,332,429	100.0	%	$	2,327,227	100.0	%	$	5,202	0.2	%

Deposits totaled $2.332 billion at March 31, 2023 compared to $2.327 billion at December 31, 2022, an increase of $5.2 million, or 0.2%. The increase was primarily attributable to increases of $49.7 million in time deposits, and $15.6 million in interest-bearing demand deposits, offset by decreases of $42.7 million in non-interest bearing demand deposits, $9.8 million in insured money market accounts, and $7.6 million in savings deposits. The growth in deposits was due primarily to increases of $0.4 million in consumer deposits, $4.6 million in public deposits, $16.4 million in ICS deposits, and $53.3 million in brokered deposits, offset by decreases of $40.5 million in commercial deposits, and $29.0 million in CDARS deposits. At March 31, 2023, demand deposit and money market accounts comprised 69.0% of total deposits compared to 70.7% at December 31, 2022. The aggregate amount of the Corporation's outstanding uninsured deposits (net of deposits pledged to secure municipal deposits), was 21.2% and 23.5% of total deposits, as of March 31, 2023 and December 31, 2022, respectively.

The table below presents the Corporation's deposits balance by bank division (in thousands):

DEPOSITS BY DIVISION
	March 31, 2023		December 31, 2022		December 31, 2021		December 31, 2020		December 31, 2019
Chemung Canal Trust Company*	$	1,927,258	$	1,892,020	$	1,739,826	$	1,686,370	$	1,317,225
Capital Bank Division	405,171		435,207		415,607		351,404		254,913
Total	$	2,332,429	$	2,327,227	$	2,155,433	$	2,037,774	$	1,572,138

*All deposits, excluding those originated by the Capital Bank division.

In addition to consumer, commercial and public deposits, other sources of funds include reciprocal brokered deposits. The Regulatory Relief Act changed the definition of brokered deposits, such that subject to certain conditions, reciprocal deposits of another depository institution obtained through a deposit placement network for purposes of obtaining maximum deposit insurance would not be considered brokered deposits subject to the FDIC’s brokered-deposit regulations. This will apply to the Corporation's participation in the CDARS and ICS programs. The CDARS and ICS programs involve a network of financial institutions that exchange funds among members in order to ensure FDIC insurance coverage on customer deposits above the single institution limit. Using a sophisticated matching system, funds are exchanged on a dollar-for-dollar basis, so that the equivalent of an original deposit comes back to the originating institution. Brokered deposits include funds obtained through brokers. Deposits obtained through the CDARS and ICS programs were $355.0 million as of March 31, 2023, including $126.8 million of brokered deposits, and $368.2 million as of December 31, 2022, which included $73.5 million of brokered deposits.

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The Corporation’s deposit strategy is to fund the Bank with stable, low-cost deposits, primarily checking account deposits and other low interest-bearing deposit accounts. A checking account is the driver of a banking relationship and consumers consider the bank where they have their checking account as their primary bank. These customers will typically turn to their primary bank first when in need of other financial services. Strategies that have been developed and implemented to generate these deposits include: (i) acquire deposits by entering new markets through branch acquisitions or de novo branching, (ii) an annual checking account marketing campaign, (iii) training branch employees to identify and meet client financial needs with Bank products and services, (iv) link business and consumer loans to the customer's primary checking account at the Bank, (v) aggressively promote direct deposit of client’s payroll checks or benefit checks and (vi) constantly monitor the Corporation’s pricing strategies to ensure competitive products and services. The Corporation also considers brokered deposits to be an element of its deposit strategy and uses brokered deposits as a secondary source of funding to support growth.

Borrowings

Borrowings decreased $5.8 million to $93.3 million at March 31, 2023 from December 31, 2022, primarily attributable to a decrease in FHLBNY overnight advances when compared to December 31, 2022. There were no outstanding FHLBNY term advances as of and for the three months and year ended March 31, 2023, and December 31, 2022, respectively.

Shareholders’ Equity

Total shareholders' equity increased $10.9 million from $166.4 million at December 31, 2022 to $177.3 million at March 31, 2023, primarily due to a decrease in accumulated other comprehensive loss, and an increase in retained earnings. The decrease in accumulated other comprehensive loss of $5.8 million can be mostly attributed to an increase in the fair market value of the available for sale securities portfolio. The increase in retained earnings of $4.7 million was due primarily to earnings of $7.3 million, offset by $1.5 million in dividends declared, and a $1.5 million one-time adjustment due to the implementation of CECL, during the three months ended March 31, 2023. Treasury stock decreased $0.4 million, primarily due to the impact of the issuance of shares related to the Corporation's employee benefit plans and grants issued under the Corporation's stock compensation plan. The total shareholders’ equity to total assets ratio was 6.68% at March 31, 2023 compared to 6.29% at December 31, 2022. The tangible equity to tangible assets ratio was 5.91% at March 31, 2023 compared to 5.51% at December 31, 2022. Book value per share increased to $37.53 at March 31, 2023 from $35.32 at December 31, 2022.

The Bank is subject to capital adequacy guidelines of the Federal Reserve which establish a framework for the classification of financial institutions into five categories: well-capitalized, adequately capitalized, under-capitalized, significantly under-capitalized and critically under-capitalized. As of March 31, 2023, the Bank’s capital ratios were in excess of those required to be considered well-capitalized under regulatory capital guidelines.

When shares of the Corporation become available in the market, the Corporation may purchase them after careful consideration of the Corporation’s liquidity and capital positions. Purchases may be made from time to time on the open market or in privately negotiated transactions at the discretion of management. On January 8, 2021, the Corporation's Board of Directors approved a new stock repurchase program. Under the new repurchase program, the Corporation may repurchase up to 250,000 shares of its common stock, or approximately 5% of its then outstanding shares. The repurchase program permits shares to be repurchased in open market or privately negotiated transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934. No shares were repurchased in the first quarter of 2023. As of March 31, 2023, the Corporation repurchased a total of 49,184 shares of common stock at a total cost of $2.0 million under the repurchase program, at the weighted average cost of $40.42 per share. Remaining buyback authority under the share repurchase program was 200,816 shares at March 31, 2023.

Liquidity

Liquidity management involves the ability to meet the cash flow requirements of deposit clients, borrowers, and the operating, investing and financing activities of the Corporation. The Corporation uses a variety of resources to meet its liquidity needs. These include short term investments, cash flow from lending and investing activities, core-deposit growth and non-core funding sources, such as time deposits of $100,000 or more, brokered deposits, securities sold under agreements to repurchase and other borrowings.

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The Corporation has a detailed Funds Management Policy that includes sections on liquidity measurement and management, and a Liquidity Contingency Plan that provide for the prompt and comprehensive response to unexpected demands for liquidity. This policy and plan are established and revised as needed by the management and Board ALCO committees. The ALCO is responsible for measuring liquidity, establishing liquidity targets and implementing strategies to achieve selected targets. The ALCO is responsible for coordinating activities across the Corporation to ensure that prudent levels of contingent or standby liquidity are available at all times. Based on the ongoing assessment of the liquidity considerations, management believes the Corporation’s sources of funding meet anticipated funding needs.

At March 31, 2023, the Corporation's cash and cash equivalents balance was $34.6 million. The Corporation also maintains an investment portfolio of securities available for sale, comprised primarily of mortgage-backed securities and municipal bonds. Although this portfolio generates interest income for the Corporation, it also serves as an available source of liquidity and capital if the need should arise. As of March 31, 2023, the Corporation's investment in securities available for sale was $626.1 million, $368.4 million of which was not pledged as collateral.

The Corporation is a member of the FHLBNY which allows it to access borrowings which enhance management's ability to satisfy future liquidity needs. The Bank has pledged $235.0 million and $228.4 million of first mortgage loans under a blanket lien arrangement at March 31, 2023 and December 31, 2022, respectively, as collateral for future borrowings. Based on this available collateral and current advances outstanding, the Corporation was eligible to borrow up to a total of $201.1 million and $195.6 million at March 31, 2023 and December 31, 2022, respectively. The Corporation borrowed $90.1 million and $95.8 million with FHLBNY overnight advances as of March 31, 2023 and December 31, 2022, respectively. The Bank's unused borrowing capacity at the Federal Home Loan Bank of New York was $111.0 million as of March 31, 2023.

The Corporation also considers brokered deposits to be an element of its deposit strategy and anticipates that it will continue using brokered deposits as a secondary source of funding to support growth. Borrowings may be used on a short-term basis for liquidity purposes or on a long-term basis to fund asset growth. Brokered deposits were $126.8 million and $73.5 million, as of March 31, 2023 and December 31, 2022, respectively.

The Corporation also had a total of $60.0 million of unsecured lines of credit with five different financial institutions, all of which was available at March 31, 2023, and $68.0 million of unsecured lines of credit with six different financial institutions, all of which was available at December 31, 2022.

The table below summarizes the Corporation’s unused funding capacity by source as of the dates indicated (in thousands):

ADDITIONAL FUNDING CAPACITY
	March 31, 2023		December 31, 2022
Federal Home Loan Bank of New York	$	111,049	$	99,761
Correspondent bank lines	60,000		68,000
Brokered deposits available per policy limit	138,642		174,465
Unpledged investment securities, at fair value	368,370		420,671
Less: Uninsured deposits	(493,659)		(548,013)
Total Additional Funding Capacity	$	184,402	$	214,884

On March 12, 2023, the Treasury Department, Federal Reserve, and FDIC jointly announced a new liquidity program, the Bank Term Funding Program (BTFP), in response to the failure of two banks earlier that week. Under the BTFP, institutions can pledge certain securities (i.e., securities eligible for purchase by the Federal Reserve Banks in open market operations) for the par value of the securities at a borrowing rate of ten basis points over the one-year overnight index swap rate. There will be no fees with the advance. Certain U.S. federally insured depository institutions are eligible to participate in the BTFP. The Bank is eligible to to participate but as of March 31, 2023, the Bank has not participated in the BTFP. The advances, which may have a term of up to one year, may be prepaid by the borrowing institution at any time (including for purposes of refinancing) without penalty. Also available to the Corporation is the Discount Window Lending provided by the Federal Reserve Bank. As of March 31, 2023, the Bank had no collateral held at the Federal Reserve Bank. The Corporation is reviewing the options to utilize these sources.

With respect to the Corporation's credit risk and lending activities, management has taken actions to identify and assess additional possible credit exposure due to the changing environment caused by the COVID-19 crisis based upon the industry types within our current loan portfolio. Lending risks, as mentioned, are being monitored by industry, based upon NAICS code, with specific attention being paid to those industries that may experience greater stress during this time.

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Consolidated Cash Flows Analysis

The table below summarizes the Corporation's cash flows for the periods indicated (in thousands):

CONSOLIDATED SUMMARY OF CASH FLOWS
(in thousands)	Three Months Ended   March 31,
	2023		2022
Net cash provided by operating activities	$	10,687	$	5,984
Net cash used in investing activities	(29,923)		(44,977)
Net cash (used) provided by financing activities	(1,991)		77,495
Net increase (decrease) in cash and cash equivalents	$	(21,227)	$	38,502

Operating activities

The Corporation believes cash flows from operations, available cash balances and its ability to generate cash through short-term and long-term borrowings are sufficient to fund the Corporation’s operating liquidity needs. Cash provided by operating activities in the first three months of 2023 and 2022 predominantly resulted from net income after non-cash operating adjustments.

Investing activities

Cash used in investing activities during the first three months of 2023 predominantly resulted from a net increase in loans, offset by maturities and principal paydowns on securities available for sale. Cash used in investing activities during the first three months of 2022 predominantly resulted from a net increase in loans and purchases of securities available for sale, offset by maturities and principal paydowns on securities available for sale.

Financing activities

Cash used by financing activities during the first three months of 2023 predominantly resulted from a net the repayment of overnight advances held at the end of the prior quarter, offset by a net increase in deposits. Cash provided by financing activities during the first three months of 2022 predominantly resulted from a net increase in deposits, offset by the repayment of overnight advances held at the end of the prior quarter.

Capital Resources

The Bank is subject to regulatory capital requirements administered by federal banking agencies. As a result of the Regulatory Relief Act, the FRB amended its small bank holding company and savings and loan holding company policy statement to provide that holding companies with consolidated assets of less than $3 billion that are (i) not engaged in significant non-banking activities, (ii) do not conduct significant off-balance sheet activities, and (iii) do not have a material amount of SEC-registered debt or equity securities, other than trust preferred securities, that contribute to an organization’s complexity, are not subject to regulatory capital requirements. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Under Basel III rules, the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer is 2.50%. Organizations that fail to maintain the minimum capital conservation buffer could face restrictions on capital distributions or discretionary bonus payments to executive officers. The net unrealized gain or loss on available for sale securities and changes in the funded status of the defined benefit pension plan and other benefit plans are not included in computing regulatory capital.

Pursuant to the Regulatory Relief Act, the FRB finalized a rule that established a community bank leverage ratio (tier 1 capital to average consolidated assets) at 9% for institutions under $10 billion in assets that such institutions may elect to utilize in lieu of the general applicable risk-based capital requirements under Basel III. Such institutions that meet the community bank leverage ratio and certain other qualifying criteria will automatically be deemed to be well-capitalized. The new rule took effect on January 1, 2020. The Bank has not elected to use the community bank leverage ratio.

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Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. Management believes that, as of March 31, 2023 and December 31, 2022, the Bank met all capital adequacy requirements to which it was subject. As of December 31, 2018, the Corporation is no longer subject to FRB consolidated capital requirements applicable to bank holding companies, which are similar to those applicable to the Bank, until it reaches $3.0 billion in assets.

As of March 31, 2023, the most recent notification from the Federal Reserve Bank of New York categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based, common equity Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below. There have been no conditions or events since that notification that management believes have changed the Bank's capital category.

The regulatory capital ratios as of March 31, 2023 and December 31, 2022 were calculated under Basel III rules. There is no threshold for well-capitalized status for bank holding companies.

The Corporation and the Bank’s capital ratios as of March 31, 2023 were as follows (in thousands, except ratio data):

	Actual				Minimum Capital Adequacy				Minimum Capital Adequacy with Capital Buffer				To Be Well Capitalized Under Prompt Corrective Action Provisions
As of March 31, 2023	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk Weighted Assets):
Consolidated	$	246,113	12.81	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	236,731	12.34	%	$	153,475	8.00	%	$	201,435	10.50	%	$	191,843	10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated	$	224,990	11.71	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	215,608	11.24	%	$	115,106	6.00	%	$	163,067	8.50	%	$	153,475	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets):
Consolidated	$	224,990	11.71	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	215,608	11.24	%	$	86,329	4.50	%	$	134,290	7.00	%	$	124,698	6.50	%
Tier 1 Capital (to Average Assets):
Consolidated	$	224,990	8.31	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	215,608	7.98	%	$	108,123	4.00	%	N/A		N/A		$	135,154	5.00	%

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The Corporation and the Bank’s capital ratios as of December 31, 2022 were as follows (in thousands, except ratio data):

	Actual				Minimum Capital Adequacy				Minimum Capital Adequacy with Capital Buffer				To Be Well Capitalized Under Prompt Corrective Action Provisions
As of December 31, 2022	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk Weighted Assets):
Consolidated	$	239,478	12.57	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	230,560	12.10	%	$	152,414	8.00	%	$	200,044	10.50	%	$	190,518	10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated	$	219,820	11.54	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	210,901	11.07	%	$	114,311	6.00	%	$	161,940	8.50	%	$	152,414	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets):
Consolidated	$	219,820	11.54	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	210,901	11.07	%	$	85,733	4.50	%	$	133,363	7.00	%	$	123,837	6.50	%
Tier 1 Capital (to Average Assets):
Consolidated	$	219,820	8.23	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	210,901	7.91	%	$	106,616	4.00	%	N/A		N/A		$	133,270	5.00	%

Dividend Restrictions

The Corporation’s principal source of funds for dividend payments is dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to current year’s net income, combined with the retained net income of the preceding two years, subject to the capital requirements in the table above. At March 31, 2023, the Bank could, without prior approval, declare dividends of approximately $46.6 million.

Adoption of New Accounting Standards

Please refer to Note 1, Summary of Significant Accounting Policies - Recent Accounting Pronouncements for a discussion of new accounting standards.

Explanation and Reconciliation of the Corporation’s Use of Non-GAAP Measures

The Corporation prepares its Consolidated Financial Statements in accordance with GAAP; these financial statements appear on pages 7–12. That presentation provides the reader with an understanding of the Corporation’s results that can be tracked consistently from year-to-year and enables a comparison of the Corporation’s performance with other companies’ GAAP financial statements.

In addition to analyzing the Corporation’s results on a reported basis, management uses certain non-GAAP financial measures, because it believes these non-GAAP financial measures provide information to investors about the underlying operational performance and trends of the Corporation and, therefore, facilitate a comparison of the Corporation with the performance of its competitors. Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by other companies.

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The SEC has adopted Regulation G, which applies to all public disclosures, including earnings releases, made by registered companies that contain “non-GAAP financial measures.” Under Regulation G, companies making public disclosures containing non-GAAP financial measures must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure and a statement of the Corporation’s reasons for utilizing the non-GAAP financial measure as part of its financial disclosures. The SEC has exempted from the definition of “non-GAAP financial measures” certain commonly used financial measures that are not based on GAAP. When these exempted measures are included in public disclosures, supplemental information is not required.  The following measures used in this Report, which are commonly utilized by financial institutions, have not been specifically exempted by the SEC and may constitute "non-GAAP financial measures" within the meaning of the SEC's rules, although we are unable to state with certainty that the SEC would so regard them.

Fully Taxable Equivalent Net Interest Income and Net Interest Margin

Net interest income is commonly presented on a tax-equivalent basis. That is, to the extent that some component of the institution's net interest income, which is presented on a before-tax basis, is exempt from taxation (e.g., is received by the institution as a result of its holdings of state or municipal obligations), an amount equal to the tax benefit derived from that component is added to the actual before-tax net interest income total. This adjustment is considered helpful in comparing one financial institution's net interest income to that of other institutions or in analyzing any institution’s net interest income trend line over time, to correct any analytical distortion that might otherwise arise from the fact that financial institutions vary widely in the proportions of their portfolios that are invested in tax-exempt securities, and that even a single institution may significantly alter over time the proportion of its own portfolio that is invested in tax-exempt obligations. Moreover, net interest income is itself a component of a second financial measure commonly used by financial institutions, net interest margin, which is the ratio of net interest income to average interest-earning assets. For purposes of this measure as well, fully taxable equivalent net interest income is generally used by financial institutions, as opposed to actual net interest income, again to provide a better basis of comparison from institution to institution and to better demonstrate a single institution’s performance over time.  The Corporation follows these practices.

	As of the Three Months Ended
(in thousands, except ratio data)	March 31,			Dec. 31,			Sept. 30,			June 30,			March 31,
NET INTEREST MARGIN - FULLY TAXABLE EQUIVALENT	2023			2022			2022			2022			2022
Net interest income (GAAP)	$	19,947		$	20,871		$	18,990		$	17,641		$	16,677
Fully taxable equivalent adjustment	98			112			112			103			99
Fully taxable equivalent net interest income (non-GAAP)	$	20,045		$	20,983		$	19,102		$	17,744		$	16,776
Average interest-earning assets (GAAP)	$	2,592,709		$	2,550,834		$	2,457,218		$	2,395,704		$	2,371,275
Net interest margin - fully taxable equivalent (non-GAAP)	3.14		%	3.26		%	3.08		%	2.97		%	2.87		%

Efficiency Ratio

The unadjusted efficiency ratio is calculated as non-interest expense divided by total revenue (net interest income and non-interest income). The adjusted efficiency ratio is a non-GAAP financial measure which represents the Corporation’s ability to turn resources into revenue and is calculated as non-interest expense divided by total revenue (fully taxable equivalent net interest income and non-interest income), adjusted for one-time occurrences and amortization. This measure is meaningful to the Corporation, as well as investors and analysts, in assessing the Corporation’s productivity measured by the amount of revenue generated for each dollar spent.

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	As of the Three Months Ended
(in thousands, except ratio data)	March 31,			Dec. 31,			Sept. 30,			June 30,			March 31,
EFFICIENCY RATIO	2023			2022			2022			2022			2022
Net interest income (GAAP)	$	19,947		$	20,871		$	18,990		$	17,641		$	16,677
Fully taxable equivalent adjustment	98			112			112			103			99
Fully taxable equivalent net interest income (non-GAAP)	$	20,045		$	20,983		$	19,102		$	17,744		$	16,776
Non-interest income (GAAP)	$	5,423		$	5,418		$	5,036		$	5,319		$	5,663
Less:  net (gains) losses on security transactions	—			—			—			—			—
Adjusted non-interest income (non-GAAP)	$	5,423		$	5,418		$	5,036		$	5,319		$	5,663
Non-interest expense (GAAP)	$	15,836		$	15,693		$	14,577		$	14,342		$	14,668
Less:  amortization of intangible assets	—			—			—			(4)			(11)
Adjusted non-interest expense (non-GAAP)	$	15,836		$	15,693		$	14,577		$	14,338		$	14,657
Efficiency ratio (unadjusted)	62.42		%	59.69		%	60.67		%	62.47		%	65.66		%
Efficiency ratio (adjusted)	62.18		%	59.44		%	60.40		%	62.17		%	65.32		%

Tangible Equity and Tangible Assets (Period-End)

Tangible equity, tangible assets, and tangible book value per share are each non-GAAP financial measures. Tangible equity represents the Corporation’s stockholders’ equity, less goodwill and intangible assets. Tangible assets represents the Corporation’s total assets, less goodwill and other intangible assets. Tangible book value per share represents the Corporation’s tangible equity divided by common shares at period-end. These measures are meaningful to the Corporation, as well as investors and analysts, in assessing the Corporation’s use of equity.

	As of or for the Three Months Ended
(in thousands, except per share and ratio data)	March 31,			Dec. 31,			Sept. 30,			June 30,			March 31,
TANGIBLE EQUITY AND TANGIBLE ASSETS (PERIOD END)	2023			2022			2022			2022			2022
Total shareholders' equity (GAAP)	$	177,341		$	166,388		$	155,518		$	174,690		$	185,510
Less: intangible assets	(21,824)			(21,824)			(21,824)			(21,824)			(21,828)
Tangible equity (non-GAAP)	$	155,517		$	144,564		$	133,694		$	152,866		$	163,682
Total assets (GAAP)	$	2,654,183		$	2,645,553		$	2,551,418		$	2,449,911		$	2,474,895
Less: intangible assets	(21,824)			(21,824)			(21,824)			(21,824)			(21,828)
Tangible assets (non-GAAP)	$	2,632,359		$	2,623,729		$	2,529,594		$	2,428,087		$	2,453,067
Total equity to total assets at end of period (GAAP)	6.68		%	6.29		%	6.10		%	7.13		%	7.49		%
Book value per share (GAAP)	$	37.53		$	35.32		$	33.14		$	37.24		$	39.56
Tangible equity to tangible assets at end of period (non-GAAP)	5.91		%	5.51		%	5.29		%	6.30		%	6.67		%
Tangible book value per share (non-GAAP)	$	32.91		$	30.69		$	28.49		$	32.59		$	34.91

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Tangible Equity (Average)

Average tangible equity and return on average tangible equity are each non-GAAP financial measures. Average tangible equity represents the Corporation’s average stockholders’ equity, less average goodwill and intangible assets for the period. Return on average tangible equity measures the Corporation’s earnings as a percentage of average tangible equity. These measures are meaningful to the Corporation, as well as investors and analysts, in assessing the Corporation’s use of equity.

	As of or for the Three Months Ended
(in thousands, except ratio data)	March 31,			Dec. 31,			Sept. 30,			June 30,			March 31,
TANGIBLE EQUITY (AVERAGE)	2023			2022			2022			2022			2022
Total average shareholders' equity (GAAP)	$	173,786		$	160,740		$	180,644		$	178,207		$	203,613
Less: average intangible assets	(21,824)			(21,824)			(21,824)			(21,825)			(21,835)
Average tangible equity (non-GAAP)	$	151,962		$	138,916		$	158,820		$	156,382		$	181,778
Return on average equity (GAAP)	16.97		%	18.36		%	14.17		%	18.06		%	13.68		%
Return on average tangible equity (non-GAAP)	19.40		%	21.25		%	16.12		%	20.58		%	15.32		%

Adjustments for Certain Items of Income or Expense

In addition to disclosures of certain GAAP financial measures, including net income, EPS, ROA, and ROE, we may also provide comparative disclosures that adjust these GAAP financial measures for a particular period by removing from the calculation thereof the impact of certain transactions or other material items of income or expense occurring during the period, including certain nonrecurring items. The Corporation believes that the resulting non-GAAP financial measures may improve an understanding of its results of operations by separating out any such transactions or items that may have had a disproportionate positive or negative impact on the Corporation’s financial results during the particular period in question. In the Corporation’s presentation of any such non-GAAP (adjusted) financial measures not specifically discussed in the preceding paragraphs, the Corporation supplies the supplemental financial information and explanations required under Regulation G.

	As of or for the Three Months Ended
(in thousands, except per share and ratio data)	March 31,			Dec. 31,			Sept. 30,			June 30,			March 31,
NON-GAAP NET INCOME	2023			2022			2022			2022			2022
Reported net income (GAAP)	$	7,270		$	7,439		$	6,453		$	8,024		$	6,867
Net (gains) losses on security transactions (net of tax)	—			—			—			—			—
Non- GAAP net income	$	7,270		$	7,439		$	6,453		$	8,024		$	6,867
Average basic and diluted shares outstanding	4,721			4,698			4,692			4,690			4,689
Reported basic and diluted earnings per share (GAAP)	$	1.54		$	1.58		$	1.37		$	1.72		$	1.46
Reported return on average assets (GAAP)	1.12		%	1.15		%	1.02		%	1.32		%	1.14		%
Reported return on average equity (GAAP)	16.97		%	18.36		%	14.17		%	18.06		%	13.68		%
Non-GAAP basic and diluted earnings per share	$	1.54		$	1.58		$	1.37		$	1.72		$	1.46
Non-GAAP return on average assets	1.12		%	1.15		%	1.02		%	1.32		%	1.14		%
Non-GAAP return on average equity	16.97		%	18.36		%	14.17		%	18.06		%	13.68		%

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ITEM 3:    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Management considers interest rate risk to be the most significant market risk for the Corporation. Market risk is the risk of loss from adverse changes in market prices and rates.  Interest rate risk is the exposure to adverse changes in the net income of the Corporation as a result of changes in interest rates.

The Corporation’s primary earnings source is net interest income, which is affected by changes in the level of interest rates, the relationship between rates, the impact of interest rate fluctuations on asset prepayments, the level and composition of deposits and liabilities, and credit quality of earning assets.

The Corporation’s objectives in its asset and liability management are to maintain a strong, stable net interest margin, to utilize its capital effectively without taking undue risks, to maintain adequate liquidity, and to reduce vulnerability of its operations to changes in interest rates. The Corporation's ALCO has the strategic responsibility for setting the policy guidelines on acceptable exposure to interest rate risk. These guidelines contain specific measures and limits regarding the risks, which are monitored on a regular basis. The ALCO is made up of the President and Chief Executive Officer, the Chief Financial Officer and Treasurer, the Asset Liability Management Officer, and other officers representing key functions.

Interest rate risk is the risk that net interest income will fluctuate as a result of a change in interest rates. It is the assumption of interest rate risk, along with credit risk, that drives the net interest margin of a financial institution. For that reason, the ALCO has established tolerance limits based upon various basis point changes in interest rates, with appropriate floors set for interest-bearing liabilities. At March 31, 2023, it is estimated that an immediate 100-basis point decrease in interest rates would positively impact the next 12 months net interest income by 3.27% and an immediate 200-basis point increase would positively impact the next 12 months net interest income by 2.32%. Both are within the Corporation's policy guidelines.

A related component of interest rate risk is the expectation that the market value of the Corporation’s equity account will fluctuate with changes in interest rates. This component is a direct corollary to the earnings-impact component: an institution exposed to earnings erosion is also exposed to a decline in market value. At March 31, 2023, it is estimated that an immediate 100-basis point decrease in interest rates would positively impact the market value of the Corporation’s capital account by 4.18%. An immediate 200-basis point increase in interest rates would negatively impact the market value by 1.56%. Both are within the Corporation's policy guidelines.

Management does recognize the need for certain hedging strategies during periods of anticipated higher fluctuations in interest rates and the Funds Management Policy provides for limited use of certain derivatives in asset liability management.

Credit Risk

The Corporation manages credit risk consistent with state and federal laws governing the making of loans through written policies and procedures; loan review to identify loan problems at the earliest possible time; collection procedures (continued even after a loan is charged off); an adequate allowance for credit losses; and continuing education and training to ensure lending expertise. Diversification by loan product is maintained through offering commercial loans, 1-4 family mortgages, and a full range of consumer loans.

The Corporation monitors its loan portfolio carefully. The Loan Committee of the Corporation's Board of Directors is designated to receive required loan reports, oversee loan policy, and approve loans above authorized individual and Senior Loan Committee lending limits.  The Senior Loan Committee, consisting of the President and Chief Executive Officer, Chief Financial Officer and Treasurer (non-voting), Chief Credit and Risk Officer, Business Client Division Manager, Retail Client Division Manager, Retail Loan Manager, Senior Commercial Real Estate Lender, and Commercial Loan Managers, implements the Board-approved loan policy.

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ITEM 4:    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Corporation's management, with the participation of its Chief Executive Officer, who is the Corporation's principal executive officer, and its Chief Financial Officer and Treasurer, who is the Corporation's principal financial officer, have evaluated the effectiveness of the Corporation's disclosure controls and procedures as of March 31, 2023 pursuant to Rule 13a-15 of the Exchange Act, as amended. Based upon that evaluation, the principal executive officer and principal financial officer have concluded that the Corporation's disclosure controls and procedures are effective as of March 31, 2023. 

Effective January 1, 2023, the Corporation adopted ASU 2016-13, Topic 326, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The Corporation designed new controls and modified existing controls as part of its adoption. These additional controls over financial reporting included controls over model creation and design, model governance, assumptions, and expanded controls over loan level data. Other than as described above, there have been no changes in the Corporation’s internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

Disclosure controls and procedures are designed with the objective of ensuring that information required to be disclosed in reports filed by the Corporation under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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PART II.    OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

On February 4, 2020, the Corporation filed a lawsuit against Pioneer Bank, Albany, New York, in the Supreme Court of the State of New York in the County of Albany. As disclosed in the Corporation’s September 12, 2019 Current Report on Form 8-K, the Bank owns a participating interest totaling $4.2 million in an approximately $36.0 million commercial credit facility on which the borrower defaulted due to fraudulent activity. The Bank’s complaint alleges that Pioneer Bank, as lead bank, breached the participation agreement and engaged in fraud and negligent misrepresentation. The Corporation received a recovery of $0.5 million in April, 2020, and continues to pursue recovery of the remaining $3.7 million and accumulated expenses as a result of purchasing the participation interest.

Other than as noted above, the Corporation believes that it is not a party to any pending legal, arbitration, or regulatory proceedings that could have a material adverse impact on our financial results or liquidity as of March 31, 2023.

ITEM 1A.    RISK FACTORS

In addition to the other information contained in this Quarterly Report on Form 10-Q, the following risk factor represent a material update and addition to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition or results of operations. Further, to the extent that any of the information contained in this Quarterly Report on Form 10-Q constitutes forward-looking statements, the risk factor set forth below also is a cautionary statement identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.

Recent events involving the failure of financial institutions may adversely affect our business, and the market price of our common stock.

Recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time at Silicon Valley Bank, Signature Bank and First Republic Bank that resulted in the failure of those institutions have resulted in decreased confidence in banks among depositors, other counterparties and investors, as well as significant disruption, volatility and reduced valuations of equity and other securities of banks in the capital markets. These events have occurred against the backdrop of a rapidly rising interest rate environment which, among other things, has resulted in unrealized losses in longer duration securities and loans held by banks, more competition for bank deposits and may increase the risk of a potential recession. These events and developments could materially and adversely impact our business or financial condition, including through potential liquidity pressures, reduced net interest margins, and potential increased credit losses. These recent events and developments have, and could continue to, adversely impact the market price and volatility of our common stock. These recent events may also result in changes to laws or regulations governing banks and bank holding companies or result in the impositions of restrictions through supervisory or enforcement activities, including higher capital requirements, which could have a material impact on our businesses. The cost of resolving the recent failures may prompt the FDIC to increase its premiums above the recently increased levels or to issue additional special assessments.

69

ITEM 2.    Unregistered Sales of Equity Securities and Use of Proceeds

    (c)    Issuer Purchases of Equity Securities (1)

Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
January 1 - January 31, 2023	—	—		—	200,816
February 1 - February 28, 2023	—	—		—	200,816
March 1 - March 31, 2023	—	—		—	200,816
Quarter ended March 31, 2023	—	$	—	—	200,816
(1) On January 8, 2021, the Corporation’s Board of Directors approved a new stock repurchase plan. Under the new repurchase program, the Corporation may repurchase up to 250,000 shares of its common stock, or approximately 5% of its outstanding shares. Purchases may be made from time to time on the open market or in private negotiated transactions and will be at the discretion of management. As of March 31, 2023 the Corporation has repurchased a total of 49,184 shares at the weighted average cost of $40.42 per share.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

        Not applicable.

ITEM 4.    MINE SAFETY DISCLOSURES

        Not applicable.

ITEM 5.    OTHER INFORMATION

        Not applicable.

70

ITEM 6.    EXHIBITS

    The following exhibits are either filed with this Form 10-Q or are incorporated herein by reference. The Corporation’s Securities Exchange Act File number is 000-13888.

3.1	Certificate of Incorporation of Chemung Financial Corporation dated December 20, 1984 (as incorporated by reference to Exhibit 3.1 to Registrant's Form 10-K for the year ended December 31, 2007 filed with the Commission on March 13, 2008).
3.2	Certificate of Amendment to the Certificate of Incorporation of Chemung Financial Corporation, dated March 28, 1988 (as incorporated by reference to Exhibit 3.2 to Registrant's Form 10-K for the year ended December 31, 2007 filed with the Commission on March 13, 2008).
3.3	Certificate of Amendment to the Certificate of Incorporation of Chemung Financial Corporation, dated May 13, 1998 (as incorporated by reference to Exhibit 3.4 to Registrant’s Form 10-K for the year ended December 31, 2005 and filed with the Commission on March 15, 2006).
3.4	Amended and Restated Bylaws of Chemung Financial Corporation, as amended August 17, 2022 (as incorporated by reference to Exhibit 3.2 to Registrant’s Form 8-K filed with the Commission on August 19, 2022).
31.1	Certification of Principal Executive Officer of the Registrant pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.*
31.2	Certification of Principal Financial Officer of the Registrant pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.*
32.1	Certification of Principal Executive Officer of the Registrant pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. §1350.*
32.2	Certification of Principal Financial Officer of the Registrant pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. §1350.*
101.INS	Instance Document*
101.SCH	XBRL Taxonomy Schema*
101.CAL	XBRL Taxonomy Calculation Linkbase*
101.DEF	XBRL Taxonomy Definition Linkbase*
101.LAB	XBRL Taxonomy Label Linkbase*
101.PRE	XBRL Taxonomy Presentation Linkbase*
*	Filed herewith.

71

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CHEMUNG FINANCIAL CORPORATION

DATED: May 12, 2023	By:  /s/ Anders M. Tomson
	Anders M. Tomson President and Chief Executive Officer (Principal Executive Officer)

DATED: May 12, 2023	By:  /s/ Karl F. Krebs
	Karl F. Krebs Chief Financial Officer and Treasurer (Principal Financial Officer)

72

EXHIBIT INDEX

The following exhibits are either filed with this Form 10-Q or are incorporated herein by reference. The Corporation’s Securities Exchange Act File number is 000-13888

3.1	Certificate of Incorporation of Chemung Financial Corporation dated December 20, 1984 (as incorporated by reference to Exhibit 3.1 to Registrant's Form 10-K for the year ended December 31, 2007 filed with the Commission on March 13, 2008).
3.2	Certificate of Amendment to the Certificate of Incorporation of Chemung Financial Corporation, dated March 28, 1988 (as incorporated by reference to Exhibit 3.2 to Registrant's Form 10-K for the year ended December 31, 2007 filed with the Commission on March 13, 2008).
3.3	Certificate of Amendment to the Certificate of Incorporation of Chemung Financial Corporation, dated May 13, 1998 (as incorporated by reference to Exhibit 3.4 to Registrant’s Form 10-K for the year ended December 31, 2005 and filed with the Commission on March 15, 2006).
3.4	Amended and Restated Bylaws of Chemung Financial Corporation, as amended August 17, 2022 (as incorporated by reference to Exhibit 3.2 to Registrant’s Form 8-K filed with the Commission on August 19, 2022).
31.1	Certification of Principal Executive Officer of the Registrant pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.*
31.2	Certification of Principal Financial Officer of the Registrant pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.*
32.1	Certification of Principal Executive Officer of the Registrant pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. §1350.*
32.2	Certification of Principal Financial Officer of the Registrant pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. §1350.*
101.INS	Instance Document*
101.SCH	XBRL Taxonomy Schema*
101.CAL	XBRL Taxonomy Calculation Linkbase*
101.DEF	XBRL Taxonomy Definition Linkbase*
101.LAB	XBRL Taxonomy Label Linkbase*
101.PRE	XBRL Taxonomy Presentation Linkbase*
*	Filed herewith.

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER OF CHEMUNG FINANCIAL CORPORATION PURSUANT TO RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934.

I, Anders M. Tomson, certify that:

1.  I have reviewed this report on Form 10-Q of Chemung Financial Corporation;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)  designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)  designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)  evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.  The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 12, 2023

By:/s/ Anders M. Tomson

Anders M. Tomson

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER OF CHEMUNG FINANCIAL CORPORATION PURSUANT TO RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934.

I, Karl F. Krebs, certify that:

1.  I have reviewed this report on Form 10-Q of Chemung Financial Corporation;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)  designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)  designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)  evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)  disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.  The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting

Date: May 12, 2023

By: /s/ Karl F. Krebs___________________

Karl F. Krebs

Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER OF CHEMUNG FINANCIAL CORPORATION PURSUANT TO RULE 13a-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934 AND 18 U.S.C. §1350.

The undersigned, the Chief Executive Officer of Chemung Financial Corporation (the "Corporation"), hereby certifies that, to his knowledge on the date hereof:

(a)the Quarterly Report on Form 10-Q of the Corporation for the period ended March 31, 2023, filed on the date hereof with the Securities and Exchange Commission (the "Report"), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(b)information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ Anders M. Tomson

Anders M. Tomson

President and Chief Executive Officer

May 12, 2023

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER OF CHEMUNG FINANCIAL CORPORATION PURSUANT TO RULE 13a-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934 AND 18 U.S.C. §1350.

The undersigned, the Chief Financial Officer of Chemung Financial Corporation (the "Corporation"), hereby certifies that, to his knowledge on the date hereof:

(a)the Quarterly Report on Form 10-Q of the Corporation for the period ended March 31, 2023, filed on the date hereof with the Securities and Exchange Commission (the "Report"), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(b)information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ Karl F. Krebs

Karl F. Krebs

Chief Financial Officer and Treasurer

May 12, 2023

XML

COVER - shares	3 Months Ended
	Mar. 31, 2023	May 01, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
Document Transition Report	false
Entity File Number	001-35741
Entity Registrant Name	CHEMUNG FINANCIAL CORP
Entity Incorporation, State or Country Code	NY
Entity Tax Identification Number	16-1237038
Entity Address, Address Line One	One Chemung Canal Plaza
Entity Address, City or Town	Elmira
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	14901
City Area Code	607
Local Phone Number	737-3711
Title of 12(b) Security	Common stock, par value $.01 per share
Trading Symbol	CHMG
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		4,710,408
Entity Central Index Key	0000763563
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands		Mar. 31, 2023	Dec. 31, 2022
ASSETS
Cash and due from financial institutions		$ 25,109	$ 29,309
Interest-earning deposits in other financial institutions		9,532	26,560
Total cash and cash equivalents		34,641	55,869
Equity investments, at estimated fair value		2,949	2,830
Securities available for sale, at estimated fair value (net of allowance for credit losses of $0 at March 31, 2023)		626,055	632,589
Securities held to maturity, estimated fair value of $1,905 at March 31, 2023 and $2,402 at December 31, 2022 (net of allowance for credit losses of $0 at March 31, 2023)		1,932	2,424
FHLBNY and FRBNY Stock, at cost		7,913	8,197
Loans, net of deferred loan fees		1,873,701	1,829,448
Allowance for credit losses	[1]	(20,075)	(19,659)
Loans, net		1,853,626	1,809,789
Premises and equipment, net		15,867	16,113
Operating lease right-of-use assets		6,250	6,449
Goodwill		21,824	21,824
Bank-owned life insurance		2,881	2,871
Interest rate swap assets		22,710	27,141
Accrued interest receivable and other assets		57,535	59,457
Total assets		2,654,183	2,645,553
Deposits:
Non-interest-bearing		690,596	733,329
Interest-bearing		1,641,833	1,593,898
Total deposits		2,332,429	2,327,227
FHLBNY overnight advances		90,070	95,810
Long term finance lease obligation		3,258	3,327
Operating lease liabilities		6,427	6,620
Dividends payable		1,460	1,455
Interest rate swap liabilities		22,776	27,196
Accrued interest payable and other liabilities		20,422	17,530
Total liabilities		2,476,842	2,479,165
Shareholders' equity:
Common stock, $0.01 par value per share, 10,000,000 shares authorized;   5,310,076 issued at March 31, 2023 and December 31, 2022		53	53
Additional paid-in capital		47,387	47,331
Retained earnings		216,593	211,859
Treasury stock, at cost; 600,973 shares at March 31, 2023 and 615,448   shares at December 31, 2022		(17,219)	(17,598)
Accumulated other comprehensive loss		(69,473)	(75,257)
Total shareholders' equity		177,341	166,388
Total liabilities and shareholders' equity		$ 2,654,183	$ 2,645,553

[1] Effective January 1, 2023, the allowance calculation is based upon Current Expected Credit loss methodology. Prior to January 1, 2023, the allowance calculation was based upon incurred loss methodology. Refer to Note 1 for further discussion.

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Available-for-sale, allowance for credit loss	$ 0
Securities held to maturity, estimated fair value	1,905,000	$ 2,402,000
Securities held to maturity, allowance for credit loss	$ 0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	10,000,000	10,000,000
Common stock, shares issued (in shares)	5,310,076	5,310,076
Treasury stock, at cost (in shares)	600,973	615,448

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands		3 Months Ended
		Mar. 31, 2023	Mar. 31, 2022
Interest and dividend income:
Loans, including fees		$ 22,289,000	$ 14,481,000
Taxable securities		3,583,000	2,688,000
Tax exempt securities		261,000	270,000
Interest-earning deposits		97,000	19,000
Total interest and dividend income		26,230,000	17,458,000
Interest expense:
Deposits		5,387,000	748,000
Securities sold under agreements to repurchase		0	0
Borrowed funds		896,000	33,000
Total interest expense		6,283,000	781,000
Net interest income		19,947,000	16,677,000
Provision (credit) for credit losses	[1]	277,000	(1,145,000)
Net interest income after provision for credit losses		19,670,000	17,822,000
Non-interest income:
Changes in fair value of equity investments		72,000	(113,000)
Net gains on sales of loans held for sale		5,000	74,000
Income from bank-owned life insurance		10,000	11,000
Other		682,000	940,000
Total non-interest income		5,423,000	5,663,000
Non-interest expenses:
Salaries and wages		6,783,000	6,223,000
Pension and other employee benefits		1,680,000	1,718,000
Other components of net periodic pension and postretirement benefits		(174,000)	(408,000)
Net occupancy		1,465,000	1,427,000
Furniture and equipment		418,000	437,000
Data processing		2,381,000	2,187,000
Professional services		440,000	521,000
Legal accruals and settlements		0	0
Amortization of intangible assets		0	11,000
Marketing and advertising		332,000	276,000
Other real estate owned		38,000	(37,000)
FDIC insurance		497,000	314,000
Loan expense		232,000	215,000
Merger and acquisition related expenses		0	0
Other		1,744,000	1,784,000
Total non-interest expenses		15,836,000	14,668,000
Income before income tax expense		9,257,000	8,817,000
Income tax expense		1,987,000	1,950,000
Net income		$ 7,270,000	$ 6,867,000
Weighted average shares outstanding, basic (in shares)		4,721	4,689
Weighted average shares outstanding, diluted (in shares)		4,721	4,689
Basic earnings per share (in dollars per share)		$ 1.54	$ 1.46
Diluted earnings per share (in dollars per share)		$ 1.54	$ 1.46
WMG fee income
Non-interest income:
Revenues from contracts with customer		$ 2,580,000	$ 2,757,000
Service charges on deposit accounts
Non-interest income:
Revenues from contracts with customer		941,000	864,000
Interchange revenue from debit card transactions
Non-interest income:
Revenues from contracts with customer		$ 1,133,000	$ 1,130,000

[1] Effective January 1, 2023, the allowance calculation is based upon Current Expected Credit loss methodology. Prior to January 1, 2023, the allowance calculation was based upon incurred loss methodology. Refer to Note 1 for further discussion.

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Statement of Comprehensive Income [Abstract]
Net income	$ 7,270	$ 6,867
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale	7,825	(42,115)
Tax effect	2,050	(11,028)
Net of tax amount	5,775	(31,087)
Change in funded status of defined benefit pension plan and other benefit plans:
Reclassification adjustment for amortization of net actuarial loss	12	14
Total before tax effect	12	14
Tax effect	3	2
Net of tax amount	9	12
Total other comprehensive income (loss)	5,784	(31,075)
Comprehensive income (loss)	$ 13,054	$ (24,208)

XML

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands		Total	Cumulative effect adjustment for the adoption of ASC 326	[2]	Cumulative Effect, Period of Adoption, Adjusted Balance	Common Stock	Common Stock Cumulative Effect, Period of Adoption, Adjusted Balance	Additional Paid-in Capital	Additional Paid-in Capital Cumulative Effect, Period of Adoption, Adjusted Balance	Retained Earnings	Retained Earnings Cumulative effect adjustment for the adoption of ASC 326	[2]	Retained Earnings Cumulative Effect, Period of Adoption, Adjusted Balance	Treasury Stock	Treasury Stock Cumulative Effect, Period of Adoption, Adjusted Balance	Accumulated Other Comprehensive Loss	Accumulated Other Comprehensive Loss Cumulative Effect, Period of Adoption, Adjusted Balance
Beginning balance at Dec. 31, 2021		$ 211,455				$ 53		$ 46,901		$ 188,877				$ (17,846)		$ (6,530)
Increase (Decrease) in Shareholders' Equity [Roll Forward]
Net income		6,867								6,867
Other comprehensive loss		(31,075)														(31,075)
Restricted stock awards		179						179
Restricted stock units for directors' deferred compensation plan		5						5
Distribution of shares of treasury stock grants for employee restricted stock awards		0						(112)						112
Cash dividends declared		(1,449)								(1,449)
Distribution of treasury stock for directors' compensation		105						(139)						244
Repurchase of shares of common stock		(695)												(695)
Sale of shares of treasury stock	[1]	118						46						72
Ending balance at Mar. 31, 2022		185,510				53		46,880		194,295				(18,113)		(37,605)
Beginning balance at Dec. 31, 2021		211,455				53		46,901		188,877				(17,846)		(6,530)
Ending balance at Dec. 31, 2022		$ 166,388	$ (1,076)		$ 165,312	53	$ 53	47,331	$ 47,331	211,859	$ (1,076)		$ 210,783	(17,598)	$ (17,598)	(75,257)	$ (75,257)
Increase (Decrease) in Shareholders' Equity [Roll Forward]
Accounting Standards Update [Extensible Enumeration]		Accounting Standards Update 2016-13 [Member]
Net income		$ 7,270								7,270
Other comprehensive loss		5,784														5,784
Restricted stock awards		263						263
Restricted stock units for directors' deferred compensation plan		5						5
Distribution of shares of treasury stock grants for employee restricted stock awards		0						(131)						131
Cash dividends declared		(1,460)								(1,460)
Distribution of treasury stock for directors' compensation		96						(147)						243
Repurchase of shares of common stock		(98)												(98)
Sale of shares of treasury stock	[1]	169						66						103
Ending balance at Mar. 31, 2023		$ 177,341				$ 53		$ 47,387		$ 216,593				$ (17,219)		$ (69,473)

[1] All treasury stock sales were completed at the prevailing market price with the Chemung Canal Trust Company Profit Sharing, Savings, and Investment Plan which is a defined contribution plan sponsored by the Bank.

[2] Due to implementation of ASC 326. See "Adoption of New Accounting Standards" discussion in Note 1.

XML

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Statement of Stockholders' Equity [Abstract]
Distribution of shares of treasury stock for employee restricted stock awards (in shares)	4,577	3,985
Cash dividends declared (in dollars per share)	$ 0.31	$ 0.31
Distribution of shares of treasury stock for director restricted stock awards (in shares)	8,492	8,575
Treasury stock acquired (in shares)	2,148	15,388
Sale of shares of treasury stock (in shares)	3,554	2,545

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)		3 Months Ended
		Mar. 31, 2023	Mar. 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$ 7,270,000	$ 6,867,000
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization (increase in) of right-of-use assets		199,000	199,000
Amortization of intangible assets		0	11,000
Provision for credit losses	[1]	277,000	(1,145,000)
Loss on disposal of fixed assets		0	20,000
Depreciation and amortization of fixed assets		533,000	579,000
Amortization of premiums on securities, net		656,000	1,146,000
Gain on sales of loans held for sale, net		(5,000)	(74,000)
Proceeds from sales of loans held for sale		210,000	3,901,000
Loans originated and held for sale		(205,000)	(3,776,000)
Net change in fair value of equity investments		(72,000)	113,000
Purchase of equity investments		(47,000)	(98,000)
Increase in other assets and accrued interest receivable		(132,000)	(1,418,000)
Increase in accrued interest payable		636,000	17,000
Expense related to restricted stock units for directors' deferred compensation plan		5,000	5,000
Expense related to employee stock compensation		131,000	0
Expense related to employee restricted stock awards		263,000	179,000
Increases in (payments on) operating leases		(193,000)	(192,000)
Net (gain) loss on interest rate swaps		11,000	(138,000)
Increase (decrease) in other liabilities		1,159,000	(201,000)
Income from bank owned life insurance		(10,000)	(11,000)
Net cash provided by operating activities		10,686,000	5,984,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities, calls, and principal paydowns on securities available for sale		15,901,000	24,813,000
Proceeds from maturities and principal collected on securities held to maturity		492,000	211,000
Purchases of securities available for sale		(2,199,000)	(22,388,000)
Purchase of FHLBNY and FRBNY stock		(16,853,000)	(1,304,000)
Redemption of FHLBNY and FRBNY stock		17,137,000	1,946,000
Proceeds from sales of fixed assets		0	125,000
Purchases of premises and equipment		(287,000)	(15,000)
Net increase in loans		(44,114,000)	(48,365,000)
Net cash used in investing activities		(29,923,000)	(44,977,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in demand deposits, interest-bearing demand accounts, savings accounts, and insured money market accounts		(44,507,000)	35,187,000
Increase in time deposits		49,709,000	58,972,000
Net change in FHLB overnight advances		(5,740,000)	(14,570,000)
Payments made on finance leases		(69,000)	(67,000)
Purchase of treasury stock		(98,000)	(695,000)
Sale of treasury stock		169,000	118,000
Cash dividends paid		(1,455,000)	(1,450,000)
Net cash (used in) provided by financing activities		(1,991,000)	77,495,000
Net (decrease) increase in cash and cash equivalents		(21,228,000)	38,502,000
Cash and cash equivalents, beginning of period		55,869,000	26,981,000
Cash and cash equivalents, end of period		34,641,000	65,483,000
Cash paid for:
Interest		5,647,000	764,000
Income taxes		4,305,000	115,000
Supplemental disclosure of non-cash activity:
Transfer of loans to other real estate owned		0	137,000
Dividends declared, not yet paid		$ 1,460,000	$ 1,449,000

[1] Effective January 1, 2023, the allowance calculation is based upon Current Expected Credit loss methodology. Prior to January 1, 2023, the allowance calculation was based upon incurred loss methodology. Refer to Note 1 for further discussion.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

The Corporation, through its wholly-owned subsidiaries, the Bank and CFS, provides a wide range of banking, financing, fiduciary and other financial services to its clients.  The Corporation and the Bank are subject to the regulations of certain federal and state agencies and undergo periodic examinations by those regulatory authorities.

CRM, a wholly-owned subsidiary of the Corporation, which was formed and began operations on May 31, 2016, is a Nevada-based captive insurance company which insures against certain risks unique to the operations of the Corporation and its subsidiaries and for which insurance may not be currently available or economically feasible in today's insurance marketplace. CRM pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves. CRM is subject to regulations of the State of Nevada and undergoes periodic examinations by the Nevada Division of Insurance.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in conformity with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 8 of Regulation S-X of the Exchange Act.  These financial statements include the accounts of the Corporation and its subsidiaries, and all significant intercompany balances and transactions are eliminated in consolidation.  Amounts in the prior periods' consolidated financial statements are reclassified whenever necessary to conform to the current period's presentation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and disclosures provided, and actual results could differ. In the opinion of management, all adjustments (consisting of normal recurring adjustments) and disclosures necessary for the fair presentation of the accompanying consolidated financial statements have been included. The unaudited consolidated financial statements should be read in conjunction with the Corporation's 2022 Annual Report on Form 10-K for the year ended December 31, 2022. The results of operations for any interim periods are not necessarily indicative of the results which may be expected for the entire year or any other period.

Reclassifications

Amounts in the prior year financial statements are reclassified whenever necessary to conform to the current year's presentation.

Recent Accounting Pronouncements

Accounting Standards Adopted in 2023:

Financial Instruments - Credit Losses - Topic 326

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The objective of the ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The ASU supersedes prior GAAP by replacing the incurred loss impairment method with a methodology that reflects lifetime expected credit losses and requires the consideration of a broader range of reasonable and supportable information to form loss estimates. In November 2019, the FASB adopted an amendment to postpone the effective date of ASU 2016-13 to January 2023, for some entities, including certain Securities and Exchange Commission filers. As a smaller reporting company, the Corporation was eligible for and elected delayed adoption.

The Corporation adopted the standard on January 1, 2023, and recognized a one-time cumulative-effect adjustment to retained earnings, of $1.5 million, or $1.1 million, net of tax effects, of which $1.1 million reflected the establishment of an allowance for credit losses on unfunded commitments, $0.4 million reflected additional allowance related to the loan portfolio, and no adjustment was recognized related to the securities portfolio.

The quantitative component of the estimate relies on the statistical relationship between the projected value of an economic indicator and the implied historical loss experience among a curated group of peers. The Corporation utilized regression analyses of peer data, in which the Corporation was included, and where observed credit losses and selected economic factors were used to determine suitable loss drivers for modeling the lifetime rates of probability of default (PD). A loss given default rate (LGD) is assigned to each pool for each period based on these PD outcomes. The model fundamentally utilizes an expected discounted cash flow (DCF) analysis for all loan portfolio segments. The DCF analysis is run at the instrument-level and incorporates an array of loan-specific data points and segment-implied assumptions to determine the lifetime expected loss attributable to each instrument. An implicit "hypothetical loss" is derived for each period of the DCF, and helps establish the present value of future cash flows for each period. The reserve applied to a specific instrument is the difference between the sum of the present value of future cash flows and the book balance of the loan at the measurement date.

Portfolio segments are the level at which loss assumptions are applied to a pool of loans based on the similarity of risk characteristics inherent in the included instruments, relying on FFIEC Call Report codes. The loss driver for each loan portfolio segment is derived from a readily available and reasonable economic forecast, chiefly the FOMC of the Federal Reserve's projections of civilian unemployment and year-over-year U.S. GDP growth. Forecasts are applied over a four-quarter period and revert to the lookback period's historical mean for the economic indicator over an eight-quarter horizon, on a straight-line basis.

The model incorporates qualitative factor adjustments in order to calibrate the model for risk in each portfolio segment that may not be captured through quantitative analysis. Determinations regarding qualitative adjustments are reflective of management's expectation of loss conditions differing from those already captured in the quantitative component of the model. The Corporation evaluates all assets exhibiting potential credit risk, including off-balance sheet exposures on unfunded commitments, and debt securities. Allowances on unfunded commitments utilize a calculated funding rate to estimate the Corporation's future obligations, and applies the overall loss rate assigned to each concurrent pool. Securities backed by U.S. government-related agencies are determined to be zero-credit loss securities. Potential losses on obligations of states, political subdivisions, and corporate bonds and notes are analyzed by management to determine whether any of the losses may be attributable to credit-related factors on an individual basis.

The adoption of ASU 2016-13 had an initial impact on the allowance for credit losses on loans of $0.4 million, reflecting changes in the methodology when compared to the allowance for loan losses on loans at December 31, 2022. The increase represents an increase of $0.2 million in the allowance relating to commercial loans, the combined effect of changes to commercial & agricultural and commercial real estate, and an increase of $0.2 million in consumer loans, mostly in relation to indirect auto lending. The remainder of the adoption impact, or $1.1 million, related to the establishment of an allowance for unfunded commitments.

Troubled Debt Restructurings and Vintage Disclosures - Topic 326

In March 2022, the FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The ASU made certain targeted amendments specific to troubled debt restructurings (TDRs) by creditors and vintage disclosure related to gross write-offs. Upon adoption, the Corporation will be required to apply the loan and refinancing and restructuring guidance to determine whether a modification results in a new loan or a continuation of an existing loan, rather than applying the recognition and measurement guidance for TDRs. The ASU also requires companies to disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within scope of Subtopic 326-20. The Corporation adopted the standard prospectively, beginning January 1, 2023, concurrently with the aforementioned ASU 2016-13, and its impact can be found within Note 4 to the consolidated financial statements. The Corporation established a methodology for identifying and reporting the financial impact of modifications made to borrowers who are deemed to be experiencing financial difficulty.

Reference Rate Reform - ASC 848

ASU No. 2022-06, Deferral of the Sunset Date of Topic 848, was issued in December 2022 and defers the date for which accounting relief can be applied under Topic 848. ASU 2022-06 applies to entities that have contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The objective of the guidance in Topic 848 is to ease the burden in accounting related to the recognition of the effects of reference rate reform on financial reporting. A sunset provision was included within Topic 848 based on expectations of when LIBOR would cease being published. The Corporation had adopted the accounting relief provisions of Topic 848 effective October 1, 2020. The amendments in ASU 2022-06 defer the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be able to apply the accounting relief in Topic 848. ASU 2022-06 was effective for all entities upon its issuance. The adoption of the provisions of Topic 848, as amended, did not have a material impact on the Corporation’s consolidated financial statements.

Accounting Standards Pending Adoption

None.

Risks and Uncertainties

Current Banking Environment

Industry events transpiring prior to the Corporation’s filing date, continue to present challenges to the banking sector. Market conditions and external factors may unpredictably impact the competitive landscape for deposits in the banking industry. Additionally, the rising interest rate environment has increased competition for liquidity and the premium at which liquidity is available to meet funding needs. The Corporation believes the sources of liquidity presented in the these Unaudited Consolidated Financial Statements and the Notes to the Unaudited Consolidated Financial Statements are sufficient to meet its needs on the balance sheet date.

An unexpected decrease in deposit balances due to heavy withdrawal activity could adversely impact the Corporation's ability to rely on organic deposits to primarily fund its operations, potentially requiring greater reliance on secondary sources of liquidity to meet withdrawal demands or to fund continuing operations. These sources may include proceeds from Federal Home Loan Bank advances, sales of investment securities and loans, federal funds lines of credit from correspondent banks, and out-of-market time deposits. Important Accounting Policy ramifications of such events are outlined in the previous sections of Note 1, and subsequently in the relevant Notes to the Consolidated Financial Statements.

In response to these events, the Treasury Department, Federal Reserve, and FDIC jointly announced the Bank Term Funding Program (BTFP) on March 12, 2023. This program aims to enhance liquidity by allowing institutions to pledge certain securities at the par value of the securities, and at a borrowing rate of ten basis points over the one-year overnight index swap rate. The BTFP is available to eligible U.S. federally insured depository institutions, with advances having a term of up to one year and no prepayment penalties. As of the date of the release of the Unaudited Consolidated Financial Statements, the Corporation has not accessed the BTFP.

Such reliance on secondary funding sources could increase the Corporation's overall cost of funding and thereby reduce net income. While the Corporation believes its current sources of liquidity are adequate to fund operations, there is no guarantee they will suffice to meet future liquidity demands. This may necessitate slowing or discontinuing loan growth, capital expenditures, or other investments, or liquidating assets.

For further discussion of the Corporation's liquidity practices, see pages 59-61 of this Form 10-Q.

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EARNINGS PER COMMON SHARE	3 Months Ended
	Mar. 31, 2023
Earnings Per Share [Abstract]
EARNINGS PER COMMON SHARE	EARNINGS PER COMMON SHARE (shares in thousands)Basic earnings per share is net income divided by the weighted average number of common shares outstanding during the period. Issuable shares, including those related to directors’ restricted stock shares, are considered outstanding and are included in the computation of basic earnings per share. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation. Restricted stock awards are grants of participating securities and are considered outstanding at grant date. Earnings per share information is adjusted to present comparative results for stock splits and stock dividends that occur. Earnings per share were computed by dividing net income by 4,721 and 4,689 weighted average shares outstanding for the three month periods ended March 31, 2023 and 2022, respectively. There were no common stock equivalents during the three month periods ended March 31, 2023 or 2022.

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SECURITIES

3 Months Ended

Mar. 31, 2023

Investments, Debt and Equity Securities [Abstract]

SECURITIES

SECURITIES

Amortized cost and estimated fair value of securities available for sale are as follows (in thousands):

	March 31, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for credit losses		Estimated Fair Value
U.S. Treasury notes and bonds	$	61,619	$	—	$	5,291	$	—	$	56,328
Mortgage-backed securities, residential	508,906		—		76,252		—		432,654
Obligations of states and political subdivisions	39,795		19		400		—		39,414
Corporate bonds and notes	25,750		—		5,120		—		20,630
SBA loan pools	78,769		130		1,870		—		77,029
Total	$	714,839	$	149	$	88,933	$	—	$	626,055

	December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. Treasury notes and bonds	$	61,800	$	—	$	6,225	$	55,574
Mortgage-backed securities, residential	518,838		—		83,707		435,131
Obligations of states and political subdivisions	39,828		2		938		38,892
Corporate bonds and notes	25,750		—		3,780		21,970
SBA loan pools	82,982		155		2,116		81,022
Total	$	729,198	$	157	$	96,766	$	632,589

Amortized cost and estimated fair value of securities held to maturity are as follows (in thousands):

	March 31, 2023
	Amortized Cost		Unrecognized Gains		Unrecognized Losses		Allowance for credit losses		Estimated Fair Value
Obligations of states and political subdivisions	$	952	$	—	$	—	$	—	$	952
Time deposits with other financial institutions	980		—		27		—		953
Total	$	1,932	$	—	$	27	$	—	$	1,905

	December 31, 2022
	Amortized Cost		Unrecognized Gains		Unrecognized Losses		Estimated Fair Value
Obligations of states and political subdivisions	$	952	$	—	$	—	$	952
Time deposits with other financial institutions	1,472		—		22		1,450
Total	$	2,424	$	—	$	22	$	2,402

The amortized cost and estimated fair value of debt securities are shown below by expected maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately (in thousands):

	March 31, 2023
	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	3,141	$	3,102	$	1,004	$	1,003
After one, but within five years	104,669		98,309		928		902
After five, but within ten years	18,883		14,501		—		—
After ten years	471		460		—		—
	127,164		116,372		1,932		1,905
Mortgage-backed securities, residential	508,906		432,654		—		—
SBA loan pools	78,769		77,029		—		—
Total	$	714,839	$	626,055	$	1,932	$	1,905

There were no proceeds from sales and calls of securities resulting in gains or losses for the three month periods ended March 31, 2023 and 2022.

The following tables summarize the investment securities available for sale with unrealized losses at March 31, 2023 and December 31, 2022 by aggregated major security type and length of time in a continuous unrealized loss position (in thousands):

	Less than 12 months				12 months or longer				Total
March 31, 2023	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury notes and bonds	$	1,107	$	16	$	55,221	$	5,275	$	56,328	$	5,291
Mortgage-backed securities, residential	7,594		477		425,060		75,775		432,654		76,252
Obligations of states and political subdivisions	20,209		176		12,962		224		33,171		400
Corporate bonds and notes	2,750		250		12,064		4,870		14,814		5,120
SBA loan pools	9,279		20		56,883		1,850		66,162		1,870
Total temporarily impaired securities	$	40,939	$	939	$	562,190	$	87,994	$	603,129	$	88,933

	Less than 12 months				12 months or longer				Total
December 31, 2022	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury notes and bonds	$	1,011	$	30	$	54,563	$	6,195	$	55,574	$	6,225
Mortgage-backed securities, residential	79,891		7,621		355,240		76,086		435,131		83,707
Obligations of states and political subdivisions	37,847		938		—		—		38,785		938
Corporate bonds and notes	4,515		485		7,455		3,295		11,970		3,780
SBA loan pools	14,333		925		51,123		1,191		65,456		2,116
Total temporarily impaired securities	$	137,597	$	9,999	$	468,381	$	86,767	$	606,916	$	96,766

Assessment of Available for Sale Debt Securities for Impairment

Management assesses the decline in fair value of investment securities on a regular basis. Unrealized losses on debt securities may occur from current market conditions, increases in interest rates since the time of purchase, a structural change in an investment, volatility of earnings of a specific issuer, or deterioration in credit quality of the issuer. Management evaluates both qualitative and quantitative factors to assess whether an impairment exists. The following is a discussion of the credit quality characteristics of portfolio segments carrying material unrealized losses as of March 31, 2023.

Obligations of U.S. Governmental agencies and sponsored enterprises:

At March 31, 2023, the majority of the Corporation’s unrealized losses in available for sale investment securities related to mortgage-backed securities, issued by government-sponsored entities and agencies. Declines in fair value are attributable to changes in interest rates and illiquidity, not credit quality. The Corporation does not have the intent, and it is not likely to be required to, sell these securities prior to their anticipated recovery. Because the Corporation considers these obligations to carry zero loss estimates, no ACL has been recorded.

Corporate bonds and notes:

The Corporation's corporate bonds and notes portfolio is comprised of subordinated debt issues of community and regional banks. Management considers the credit quality of these investments on an individual basis. Management reviewed the collectability of these securities, taking into consideration such factors as the financial condition of the issuers, reported regulatory capital ratios of the issuers, and credit ratings when available, among other pertinent factors. All corporate bond debt securities continue to accrue interest and make payments as expected with no defaults or deferrals on the part of the issuers. Therefore, the Corporation has not recorded an ACL on its corporate bonds and notes portfolio as of March 31, 2023.

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LOANS AND ALLOWANCE FOR LOAN LOSSES

3 Months Ended

Mar. 31, 2023

Credit Loss [Abstract]

LOANS AND ALLOWANCE FOR CREDIT LOSSES

LOANS AND ALLOWANCE FOR CREDIT LOSSES

The composition of the loan portfolio, net of deferred origination fees and costs, is summarized as follows (in thousands):

	March 31, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	244,174	$	252,044
Agricultural	333		249
Commercial mortgages:
Construction	118,660		108,243
Commercial mortgages, other	917,637		888,670
Residential mortgages	285,944		285,672
Consumer loans:
Home equity lines and loans	84,537		81,401
Indirect consumer loans	211,270		202,124
Direct consumer loans	11,146		11,045
Total loans, net of deferred loan fees and costs	1,873,701		1,829,448
Allowance for credit losses	(20,075)		(19,659)
Loans, net	$	1,853,626	$	1,809,789

The Corporation's concentrations of credit risk by loan type are reflected in the preceding table. The concentrations of credit risk with standby letters of credit, committed lines of credit and commitments to originate new loans generally follow the loan classifications in the table above.

Accrued interest receivable on loans amounted to $6.3 million at March 31, 2023 and $6.5 million million at December 31, 2022. Accrued interest receivable on loans is included in the "accrued interest receivable and other assets" line item on the Corporation's Consolidated Balance Sheets, and is excluded from the estimate of credit losses.

The following table presents the activity in the allowance for credit losses by portfolio segment for the three month period ended March 31, 2023 (in thousands):

	Three Months Ended March 31, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	3,373	$	11,576	$	1,845	$	2,865	$	19,659
Cumulative effect adjustment for the adoption of ASC 326	909		(695)		(16)		176		374
Beginning balance after cumulative effect adjustment	4,282		10,881		1,829		3,041		20,033
Charge-offs	(190)		—		—		(193)		(383)
Recoveries	6		—		—		108		114
Net recoveries (charge-offs)	(184)		—		—		(85)		(269)
Provision (1)	(45)		102		63		191		311
Ending balance	$	4,053	$	10,983	$	1,892	$	3,147	$	20,075

(1) Additional credit provision related to off-balance sheet exposure was $34 thousand for the three months ended March 31, 2023.

Refer to Note 1-Summary of Significant Accounting Policies in our Annual report on Form 10-K for the fiscal year ended December 31, 2022, for the allowance for loan losses policy effective prior to the adoption of ASC 326-Financial Instruments-Credit Losses, as of December 31, 2022.

The following table presents the activity in the allowance for loan losses by portfolio segment for the three month period ended March 31, 2022.

	Three Months Ended March 31, 2022
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	3,591	$	13,556	$	1,803	$	2,075	$	21,025
Charge-offs	(4)		—		—		(194)		(198)
Recoveries	6		1		—		239		246
Net recoveries (charge-offs)	2		1		—		45		48
Provision	(110)		(593)		(197)		(245)		(1,145)
Ending balance	$	3,483	$	12,964	$	1,606	$	1,875	$	19,928

Unfunded Commitments

The allowance for credit losses on unfunded commitments is recognized as a liability (other liabilities in the Consolidated Balance Sheets), with adjustments to the reserve recognized in the provision for credit losses on the Consolidated Statements of Income. The Corporation established a reserve for unfunded commitments in conjunction with its adoption of ASC 326-Financial Instruments-Credit Losses.

The following table presents the activity in the allowance for credit losses on unfunded commitments for the three month periods ended March 31, 2023 and 2022:

	For the Three Months Ended
Allowance for credit losses on unfunded commitments	March 31, 2023		March 31, 2022
Beginning balance	$	—	$	—
Impact of ASC 326 adoption	1,082		—
Provision for unfunded commitments	(34)		—
Ending balance	$	1,048	$	—

The following table presents the provision for credit losses on loans and unfunded commitments for the three month period ended March 31, 2023, based upon the current expected credit loss methodology, and the provision for loan losses on loans for the three month period ended March 31, 2022, based upon the incurred loss methodology:

	For the Three Months Ended
Provision for credit losses	March 31, 2023		March 31, 2022
Provision for credit losses on loans	$	311	$	(1,145)
Provision for unfunded commitments	(34)		—
Total provision (credit) for credit losses	$	277	$	(1,145)

The following tables present the balance in the allowance for credit losses and allowance for loan losses, and the amortized cost basis in loans by portfolio segment, as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually analyzed	$	1,040	$	36	$	—	$	—	$	1,076
Collectively analyzed	3,013		10,947		1,892		3,147		18,999
Total ending allowance balance	$	4,053	$	10,983	$	1,892	$	3,147	$	20,075

	December 31, 2022
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,078	$	38	$	—	$	31	$	1,147
Collectively evaluated for impairment	2,295		11,538		1,845		2,834		18,512
Total ending allowance balance	$	3,373	$	11,576	$	1,845	$	2,865	$	19,659

	March 31, 2023
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually analyzed	$	1,779	$	4,089	$	715	$	254	$	6,837
Loans collectively analyzed	242,728		1,032,208		285,229		306,699		1,866,864
Total ending loans balance	$	244,507	$	1,036,297	$	285,944	$	306,953	$	1,873,701

	December 31, 2022
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually evaluated for impairment	$	2,112	$	4,383	$	723	$	264	$	7,482
Loans collectively evaluated for impairment	250,181		992,530		284,949		294,306		1,821,966
Total ending loans balance	$	252,293	$	996,913	$	285,672	$	294,570	$	1,829,448

Modifications to Loans Made to Borrowers Experiencing Financial Difficulty

Effective January 1, 2023, the Corporation adopted ASU 2022-02, Financial Instruments-Credit Losses (Topic 326)-Troubled Debt Restructurings and Vintage Disclosures. The Corporation may occasionally make modifications to loans where the borrower is considered to be experiencing financial difficulty. Types of modifications considered under ASU 2022-02 include principal reductions, interest rate reductions, term extensions, or a combination thereof.

The following table summarizes the amortized cost basis of loans modified as of March 31, 2023:

	March 31, 2023
Loans modified under ASU 2022-02:	Principal Reduction		Interest Rate Reduction		Term Extension		Combination		Total		(%) of Loan Class (1)
Commercial mortgages	$	—	$	—	$	277	$	—	$	277	0.03	%
Total	$	—	$	—	$	277	$	—	$	277

(1) Represents the amortized cost basis of loans modified during the period as a percentage of the period-end loan balances by class.

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the three month period ended March 31, 2023:

	March 31, 2023
Effect of loan modifications under ASU 2022-02:	Principal Reduction (in thousands)	Weighted-average interest rate reduction (%)	Weighted-average term extension (in months)
Commercial mortgages	$—	—%	60

Individually Analyzed Loans

Effective January 1, 2023, the Corporation began analyzing loans on an individual basis when management determined that the loan no longer exhibited risk characteristics consistent with the risk characteristics existing in its designated pool of loans, under the Corporation's CECL methodology. Loans individually analyzed include certain non-accrual commercial and consumer loans, as well as certain loans previously identified under prior troubled debt restructuring (TDR) guidance.

As of March 31, 2023, the amortized cost basis of individually analyzed loans amounted to $6.8 million, of which $6.0 million were considered collateral dependent. For collateral dependent loans where the borrower is experiencing financial difficulty and repayment is likely to be substantially provided through the sale or operation of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan, at measurement date. Certain assets held as collateral may be exposed to future deterioration in fair value, particularly due to changes in real estate markets or usage.

The following table presents the amortized cost basis and related allowance for credit loss of individually analyzed loans considered to be collateral dependent as of March 31, 2023 (in thousands):

	March 31, 2023
	Amortized Cost Basis		Related Allowance
Commercial and agricultural:
Commercial and industrial (1) (3)	$	573	$	168
Commercial mortgages:
Commercial mortgages, other (1)	4,413		36
Residential mortgages (2)	715		—
Consumer loans
Home equity lines and loans (2)	254		—
Total	$	5,955	$	204

(1) Secured by commercial real estate

(2) Secured by residential real estate

(3) Secured by business assets

Prior to January 1, 2023, the Corporation considered a loan to be impaired when, based on currently available information, it was deemed probable that the Corporation would not be able to collect on the loan's contractually determined principal and interest payments. Impaired loans included loans on non-accrual status and troubled debt restructurings (TDRs). The Corporation identified loss allocations for impaired loans on an individual basis, and in conformity with its methodology under the incurred loss framework.

The following is a summary of impaired loans as of December 31, 2022 (in thousands):

	December 31, 2022
With no related allowance recorded:	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
Commercial and agricultural:
Commercial and industrial	$	1,026	$	1,025	$	—
Commercial mortgages:
Construction	5		5		—
Commercial mortgages, other	4,346		4,341		—
Residential mortgages	767		760		—
Consumer loans:
Home equity lines and loans	154		138		—
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,086		1,088		1,078
Commercial mortgages:
Commercial mortgages, other	38		38		38
Consumer loans:
Home equity lines and loans	126		127		31
Total	$	7,548	$	7,522	$	1,147

The following table presents the amortized cost basis and interest income of loans individually evaluated recognized by class of loans for the three month periods ended March 31, 2023 and 2022 (in thousands):

	Three Months Ended   March 31, 2023				Three Months Ended   March 31, 2022
With no related allowance recorded:	Amortized Cost Basis		Interest Income Recognized (1)		Amortized Cost Basis		Interest Income Recognized (1)
Commercial and agricultural:
Commercial and industrial	$	729	$	—	$	926	$	3
Commercial mortgages:
Construction	—		—		113		1
Commercial mortgages, other	4,053		7		4,105		7
Residential mortgages	715		9		895		11
Consumer loans:
Home equity lines & loans	254		—		161		1
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,049		2		1,414		3
Commercial mortgages:
Commercial mortgages, other	36		—		2,601		21
Consumer loans:
Home equity lines and loans	—		—		141		—
Total	$	6,836	$	18	$	10,356	$	47

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

The following table presents the amortized cost basis in non-accrual and loans past due 90 days or more and still accruing by class of loan as of March 31, 2023 and December 31, 2022 (in thousands):

	Non-accrual with no allowance for credit losses		Non-accrual				Loans Past Due 90 Days or More and Still Accruing
	March 31, 2023		March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	730	$	1,623	$	1,946	$	6	$	1
Commercial mortgages:
Construction	—		—		5		—		—
Commercial mortgages, other	3,611		3,647		3,928		—		—
Residential mortgages	1,036		1,036		986		—		—
Consumer loans:
Home equity lines and loans	866		866		760		—		—
Indirect consumer loans	556		556		540		—		—
Direct consumer loans	3		3		13		—		—
Total	$	6,802	$	7,731	$	8,178	$	6	$	1

The following tables present the aging of the amortized cost basis of loans as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023
	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Loans Not Past Due		Total
Commercial and agricultural:
Commercial and industrial	$	67	$	8	$	16	$	91	$	244,083	$	244,174
Agricultural	—		—		—		—		333		333
Commercial mortgages:
Construction	2,284		—		—		2,284		116,376		118,660
Commercial mortgages, other	246		—		297		543		917,094		917,637
Residential mortgages	933		57		412		1,402		284,542		285,944
Consumer loans:
Home equity lines and loans	261		57		568		886		83,651		84,537
Indirect consumer loans	1,036		52		265		1,353		209,917		211,270
Direct consumer loans	10		—		—		10		11,136		11,146
Total	$	4,837	$	174	$	1,558	$	6,569	$	1,867,132	$	1,873,701

	December 31, 2022
	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Loans Not Past Due		Total
Commercial and agricultural:
Commercial and industrial	$	74	$	3	$	1	$	78	$	251,966	$	252,044
Agricultural	—		—		—		—		249		249
Commercial mortgages:
Construction	—		—		—		—		108,243		108,243
Commercial mortgages, other	1,058		—		486		1,544		887,126		888,670
Residential mortgages	1,360		709		294		2,363		283,309		285,672
Consumer loans:
Home equity lines and loans	193		121		442		756		80,645		81,401
Indirect consumer loans	1,397		193		250		1,840		200,284		202,124
Direct consumer loans	2		19		1		22		11,023		11,045
Total	$	4,084	$	1,045	$	1,474	$	6,603	$	1,822,845	$	1,829,448

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 its debt and affirm the risk ratings for the loans at least annually.

For 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 at 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.

Commercial loans not meeting the criteria above to be considered criticized or classified, are considered to be pass rated loans. Loans listed as not rated, are included in groups of homogeneous loans performing under terms of the loan notes.

Based on the analyses performed as of March 31, 2023, the risk category of the amortized cost basis of loans by class of loans and vintage, as well as the gross charge-offs by loan class and vintage for the period, are as follows (in thousands):

	Term Loans Amortized Cost by Origination Year												Revolving Loans Amortized Cost		Revolving Loans Converted to Term		Total
	2023		2022		2021		2020		2019		Prior
Commercial & industrial
Pass	$	7,750	$	43,899	$	21,452	$	14,723	$	38,017	$	12,844	$	88,666	$	—	$	227,351
Special mention	100		104		350		3		86		457		3,478		9,315		13,893
Substandard	—		36		—		412		28		370		629		588		2,063
Doubtful	—		—		—		—		—		867		—		—		867
Total	7,850		44,039		21,802		15,138		38,131		14,538		92,773		9,903		244,174
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	190	$	—	$	—	$	190
Agricultural
Pass	—		17		170		—		—		—		146		—		333
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total	—		17		170		—		—		—		146		—		333
Gross charge-offs	—		—		—		—		—		—		—		—		—
Construction
Pass	8,311		2,819		1,975		—		2,317		1,205		101,857		—		118,484
Special mention	—		176		—		—		—		—		—		—		176
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total	8,311		2,995		1,975		—		2,317		1,205		101,857		—		118,660
Gross charge-offs	—		—		—		—		—		—		—		—		—
Commercial mortgages
Pass	31,729		214,915		129,614		99,057		40,489		180,523		192,038		—		888,365
Special mention	—		2,563		8,828		1,033		—		3,867		—		6,154		22,445
Substandard	277		1,186		—		—		—		4,790		97		441		6,791
Doubtful	—		—		—		—		—		36		—		—		36
Total	32,006		218,664		138,442		100,090		40,489		189,216		192,135		6,595		917,637
Gross charge-offs	—		—		—		—		—		—		—		—		—
Residential mortgages
Not rated	5,594		52,576		52,443		75,198		16,416		52,615		30,066		—		284,908
Substandard	—		107		64		111		181		573		—		—		1,036
Total	5,594		52,683		52,507		75,309		16,597		53,188		30,066		—		285,944
Gross charge-offs	—		—		—		—		—		—		—		—		—
Home equity lines and loans
Not rated	3,945		19,073		6,477		3,827		3,110		12,740		34,500		—		83,672
Substandard	—		—		—		—		121		392		352		—		865
Total	3,945		19,073		6,477		3,827		3,231		13,132		34,852		—		84,537
Gross charge-offs	—		—		—		—		—		—		8		—		8
Indirect consumer
Not rated	26,012		123,593		32,138		14,374		7,385		7,211		—		—		210,713
Substandard	—		186		98		59		73		141		—		—		557
Total	26,012		123,779		32,236		14,433		7,458		7,352		—		—		211,270
Gross charge-offs	—		43		36		30		12		23		—		—		144
Direct consumer
Not rated	1,121		3,956		1,330		630		266		478		3,362		—		11,143
Substandard	—		—		—		—		—		3		—		—		3
Total	1,121		3,956		1,330		630		266		481		3,362		—		11,146
Gross charge-offs	—		—		1		4		—		36		—		—		41
Total loans	$	84,839	$	465,206	$	254,939	$	209,427	$	108,489	$	279,112	$	455,191	$	16,498	$	1,873,701
Total gross charge-offs	$	—	$	43	$	37	$	34	$	12	$	249	$	8	$	—	$	383

Prior to the adoption of ASC 326-Financial Instruments-Credit Losses, loans not meeting the criteria above that were analyzed individually as part of the above described process were considered pass rated loans as of December 31, 2022. Based upon the analyses performed as of December 31, 2022, the risk category of the recorded investment of loans by class of loans was as follows (in thousands):

	December 31, 2022
	Not Rated		Pass		Special Mention		Substandard		Doubtful		Total
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 mortgages	285,459		—		—		986		—		286,445
Consumer loans:
Home equity lines and loans	80,942		—		—		760		—		81,702
Indirect consumer loans	202,050		—		—		540		—		202,590
Direct consumer loans	11,094		—		—		13		—		11,107
Total	$	579,545	$	1,205,027	$	37,465	$	13,028	$	931	$	1,835,996

For residential and consumer loan classes, the Corporation also evaluated credit quality based on the aging status of the loan, which was previously presented, by payment activity. The following table presents the amortized cost basis in residential and consumer loans based on payment activity as of March 31, 2023 (in thousands):

	Consumer Loans
March 31, 2023	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	284,908	$	83,672	$	210,713	$	11,143
Non-Performing	1,036		865		557		3
Total	$	285,944	$	84,537	$	211,270	$	11,146

Prior to the adoption of ASC 326-Financial Instruments-Credit Losses, the Corporation also evaluated credit quality based on the aging status of the loan, which was previously presented, by payment activity. The following table presents the recorded investment in residential and consumer loans based on payment activity as of December 31, 2022 (in thousands):

	Consumer Loans
December 31, 2022	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	285,459	$	80,942	$	202,050	$	11,094
Non-Performing	986		760		540		13
Total	$	286,445	$	81,702	$	202,590	$	11,107

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FAIR VALUE

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

FAIR VALUE

FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  There are three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Corporation used the following methods and significant assumptions to estimate fair value on a recurring basis:

Available for Sale Securities:  The fair values of securities available for sale are usually determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs), or matrix pricing, which is a mathematical technique widely used to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3 inputs).

Equity Investments: Securities that are held to fund a deferred compensation plan and securities that have a readily determinable fair market value, are recorded at fair value with changes in fair value included in earnings. The fair values of equity investments are determined by quoted market prices (Level 1 inputs).

Individually Analyzed Loans: At the time a loan is considered individually analyzed, it is valued at the lower of cost or fair value. Individually analyzed loans carried at fair value have been partially charged-off or receive specific allocations as part of the allowance for credit loss accounting. For collateral dependent loans, fair value is commonly based on real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, typically resulting in a Level 3 fair value classification. Impaired loans are analyzed on a quarterly basis for additional impairment and adjusted accordingly.

OREO: Assets acquired through or instead of loan foreclosures are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral dependent loans and OREO are performed by certified general appraisers (commercial properties) or certified residential appraisers (residential properties) whose qualifications and licenses have been reviewed and verified by the Corporation. Once received, appraisals are reviewed for reasonableness of assumptions, approaches utilized, Uniform Standards of Professional Appraisal Practice and other regulatory compliance, as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Appraisals are generally completed within the previous 12 month period prior to a property being placed into OREO. On impaired loans, appraisal values are adjusted based on the age of the appraisal, the position of the lien, the type of the property and its condition.

Derivatives: The fair values of interest rate swaps are based on valuation models using observable market data as of the measurement date (Level 2 inputs). Derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices, and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The Corporation also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counter-party's nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Corporation has considered the impact of any applicable credit enhancements, such as collateral postings. Although the Corporation has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize credit default rate assumptions (Level 3 inputs).

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

			Fair Value Measurement at March 31, 2023 Using
Financial Assets:	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Treasury notes and bonds	$	56,328	$	56,328	$	—	$	—
Mortgage-backed securities, residential	432,654		—		432,654		—
Obligations of states and political subdivisions	39,414		—		39,414		—
Corporate bonds and notes	20,630		—		11,964		8,666
SBA loan pools	77,029		—		77,029		—
Total available for sale securities	$	626,055	$	56,328	$	561,061	$	8,666
Equity investments, at fair value	$	2,311	$	2,311	$	—	$	—
Derivative assets	22,710		—		22,710		—
Financial Liabilities:
Derivative liabilities	$	22,776	$	—	$	22,776	$	—

There were no transfers between Level 1 and Level 2 during the three month period ended March 31, 2023.

			Fair Value Measurement at December 31, 2022 Using
Financial Assets:	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Treasury notes and bonds	$	55,574	$	55,574	$	—	$	—
Mortgage-backed securities, residential	435,131		—		435,131		—
Obligations of states and political subdivisions	38,892		—		38,892		—
Corporate bonds and notes	21,970		—		21,970		—
SBA loan pools	81,022		—		81,022		—
Total available for sale securities	$	632,589	$	55,574	$	577,015	$	—
Equity investments, at fair value	$	2,246	$	2,246	$	—	$	—
Derivative assets	27,141		—		27,141		—
Financial Liabilities:
Derivative liabilities	$	27,196	$	—	$	27,196	$	—

There were no transfers between Level 1 and Level 2 during the three month period ended March 31, 2022.

The Corporation transfers assets and liabilities between levels within the hierarchy when the methodology to obtain the fair value changes such that there are either more or fewer unobservable inputs as of the end of the reporting period. The Corporation transferred its investment in eight corporate sub-debt issuances from Level 2 to Level 3 in the three month period ended March 31, 2023. Illiquidity in new issuances of comparable bonds and the size of issuances led to pricing difficulties, and the transfer to Level 3 within the period. The Corporation utilizes a "beginning of reporting period" timing assumption when recognizing transfers between hierarchy levels, consistent with ASC 820-10-50-2.

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using unobservable inputs (Level 3) for the three months ended March 31, 2023 and March 31, 2022.

Corporate Bonds:	For the Three Months Ended
Level 3 Financial Assets	March 31, 2023		March 31, 2022
Balance of recurring Level 3 assets at January 1, 2023	$	—	$	—
Total gains and losses for the period:	—		—
Included in other comprehensive income	(1,289)		—
Transfer into Level 3	9,955		—
Balance of recurring Level 3 assets at March 31, 2023	$	8,666	$	—

March 31, 2023	Fair Value		Valuation Techniques	Unobservable Input	Range (WA)
Corporate bonds and notes	$	8,666	Discounted cash flow	Market discount rate	12.00% -12.00% [12.00%]

There were no financial assets considered to be Level 3 fair value by the Corporation at December 31, 2022.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values of other financial instruments, at March 31, 2023 and December 31, 2022, are as follows (in thousands):

	March 31, 2023
Financial assets:	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Estimated Fair Value (1)
Cash and due from financial institutions	$	25,109	$	25,109	$	—	$	—	$	25,109
Interest-earning deposits in other financial institutions	9,532		9,532		—		—		9,532
Equity investments	2,949		2,949		—		—		2,949
Securities available for sale	626,055		56,328		561,061		8,666		626,055
Securities held to maturity	1,932		—		953		952		1,905
FHLBNY and FRBNY stock	7,913		—		—		—		N/A
Loans, net and loans held for sale	1,853,626		—		—		1,790,939		1,790,939
Accrued interest receivable	8,469		229		1,900		6,340		8,469
Derivative Assets	22,710		—		22,710		—		22,710
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,880,335	$	1,880,335	$	—	$	—	$	1,880,335
Time deposits	452,094		—		450,201		—		450,201
Accrued interest payable	1,500		73		1,427		—		1,500
Derivative Liabilities	22,776		—		22,776		—		22,776

(1) Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. 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.

	December 31, 2022
Financial assets:	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Estimated Fair Value (1)
Cash and due from financial institutions	$	29,309	$	29,309	$	—	$	—	$	29,309
Interest-earning deposits in other financial institutions	26,560		26,560		—		—		26,560
Equity investments	2,830		2,830		—		—		2,830
Securities available for sale	632,589		55,574		577,015		—		632,589
Securities held to maturity	2,424		—		1,639		2,157		3,796
FHLBNY and FRBNY stock	8,197		—		—		—		N/A
Loans, net and loans held for sale	1,809,789		—		—		1,757,171		1,757,171
Accrued interest receivable	8,682		132		2,002		6,548		8,682
Derivative Asset	27,141		—		27,141		—		27,141
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,924,843	$	1,924,843	$	—	$	—	$	1,924,843
Time deposits	402,384		—		403,572		—		403,572
Accrued interest payable	864		64		800		—		864
Derivative Liabilities	27,196		—		27,196		—		27,196

(1) Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. 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.

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LEASES

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

LEASES

LEASES

Operating Leases

The Corporation leases certain branch properties under long-term, operating lease agreements. The leases expire at various dates through 2033 and generally include renewal options. As of March 31, 2023, the weighted average remaining lease term was 8.43 years with a weighted average discount rate of 3.36%. Rent expense was $0.2 million for the three months ended March 31, 2023. Certain leases provide for increases in future minimum annual rent payments as defined in the lease agreements. The Corporation’s operating lease agreements contain both lease and non-lease components, which are generally accounted for separately. The Corporation’s lease agreements do not contain any residual value guarantees.

Leased branch properties at March 31, 2023 and December 31, 2022 consist of the following (in thousands):

	March 31, 2023		December 31, 2022
Operating lease right-of-use asset	$	6,449	$	7,234
Less: accumulated amortization	(199)		(785)
Less: lease termination	—		—
Add: new lease agreement and modifications	—		—
Operating lease right-of-use-assets, net	$	6,250	$	6,449

The following is a schedule by year of the undiscounted cash flows of the operating lease liabilities, excluding CAM charges, as of March 31, 2023 (in thousands):

Year	Amount
2023	$	747
2024	924
2025	841
2026	845
2027	854
2028 and thereafter	3,169
Total minimum lease payments	7,380
Less: amount representing interest	(953)
Present value of net minimum lease payments	$	6,427

As of March 31, 2023, the Corporation had no operating leases that were signed, but had not yet commenced.

Finance Leases

The Corporation leases certain buildings under finance leases. The lease arrangements require monthly payments through 2036. As of March 31, 2023, the weighted average remaining lease term was 9.99 years with a weighted average discount rate of 3.40%. The Corporation has included these leases in premises and equipment as of March 31, 2023 and December 31, 2022 as follows (in thousands):

	March 31, 2023		December 31, 2022
Buildings	$	5,572	$	5,572
Less: accumulated depreciation	(2,457)		(2,540)
Net book value	$	3,115	$	3,032

The following is a schedule by year of future minimum lease payments under the capitalized lease, together with the present value of net minimum lease payments as of March 31, 2023 (in thousands):

Year	Amount
2023	$	293
2024	391
2025	409
2026	425
2027	428
2028 and thereafter	1,988
Total minimum lease payments	3,934
Less: amount representing interest	(676)
Present value of net minimum lease payments	$	3,258

As of March 31, 2023, the Corporation had no finance leases that were signed, but had not yet commenced.

Related Party Transactions

The Bank leases its branch located at 1365 New Scotland Road, Slingerlands, New York, under a lease agreement through July, 2024 from a former member of the Corporation's Board of Directors with monthly rent and CAM related expenses totaling $4 thousand per month. This Board member retired from the Corporation's Board of Directors as of June 7, 2022. Rent and CAM paid to this Board member while serving on the Board totaled $13 thousand for the three month period ended March 31, 2022.

The Bank leases its branch located at 2 Rush Street, Schenectady, New York, under a lease agreement through February, 2033 from a member of the Corporation's Board of Directors with monthly rent and CAM related expenses totaling $9 thousand per month. Rent and CAM related expenses paid to this Board member totaled $26 thousand for each of the three month periods ended March 31, 2023 and 2022.

LEASES

LEASES

Operating Leases

The Corporation leases certain branch properties under long-term, operating lease agreements. The leases expire at various dates through 2033 and generally include renewal options. As of March 31, 2023, the weighted average remaining lease term was 8.43 years with a weighted average discount rate of 3.36%. Rent expense was $0.2 million for the three months ended March 31, 2023. Certain leases provide for increases in future minimum annual rent payments as defined in the lease agreements. The Corporation’s operating lease agreements contain both lease and non-lease components, which are generally accounted for separately. The Corporation’s lease agreements do not contain any residual value guarantees.

Leased branch properties at March 31, 2023 and December 31, 2022 consist of the following (in thousands):

	March 31, 2023		December 31, 2022
Operating lease right-of-use asset	$	6,449	$	7,234
Less: accumulated amortization	(199)		(785)
Less: lease termination	—		—
Add: new lease agreement and modifications	—		—
Operating lease right-of-use-assets, net	$	6,250	$	6,449

The following is a schedule by year of the undiscounted cash flows of the operating lease liabilities, excluding CAM charges, as of March 31, 2023 (in thousands):

Year	Amount
2023	$	747
2024	924
2025	841
2026	845
2027	854
2028 and thereafter	3,169
Total minimum lease payments	7,380
Less: amount representing interest	(953)
Present value of net minimum lease payments	$	6,427

As of March 31, 2023, the Corporation had no operating leases that were signed, but had not yet commenced.

Finance Leases

The Corporation leases certain buildings under finance leases. The lease arrangements require monthly payments through 2036. As of March 31, 2023, the weighted average remaining lease term was 9.99 years with a weighted average discount rate of 3.40%. The Corporation has included these leases in premises and equipment as of March 31, 2023 and December 31, 2022 as follows (in thousands):

	March 31, 2023		December 31, 2022
Buildings	$	5,572	$	5,572
Less: accumulated depreciation	(2,457)		(2,540)
Net book value	$	3,115	$	3,032

The following is a schedule by year of future minimum lease payments under the capitalized lease, together with the present value of net minimum lease payments as of March 31, 2023 (in thousands):

Year	Amount
2023	$	293
2024	391
2025	409
2026	425
2027	428
2028 and thereafter	1,988
Total minimum lease payments	3,934
Less: amount representing interest	(676)
Present value of net minimum lease payments	$	3,258

As of March 31, 2023, the Corporation had no finance leases that were signed, but had not yet commenced.

Related Party Transactions

The Bank leases its branch located at 1365 New Scotland Road, Slingerlands, New York, under a lease agreement through July, 2024 from a former member of the Corporation's Board of Directors with monthly rent and CAM related expenses totaling $4 thousand per month. This Board member retired from the Corporation's Board of Directors as of June 7, 2022. Rent and CAM paid to this Board member while serving on the Board totaled $13 thousand for the three month period ended March 31, 2022.

The Bank leases its branch located at 2 Rush Street, Schenectady, New York, under a lease agreement through February, 2033 from a member of the Corporation's Board of Directors with monthly rent and CAM related expenses totaling $9 thousand per month. Rent and CAM related expenses paid to this Board member totaled $26 thousand for each of the three month periods ended March 31, 2023 and 2022.

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GOODWILL AND INTANGIBLE ASSETS

3 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

The changes in goodwill included in the core banking segment during the three month periods ended March 31, 2023 and 2022 were as follows (in thousands):

	2023		2022
Beginning of year	$	21,824	$	21,824
Acquired goodwill	—		—
Ending balance March 31,	$	21,824	$	21,824

The Corporation had no aggregate amortization expense for the three month period ended March 31, 2023, and $11 thousand for the three month period ended March 31, 2022. As of March 31, 2023, there is no remaining estimated aggregate amortization expense.

The amount of goodwill reflected in the Corporation's Unaudited Consolidated Financial statements is required to be tested by management for impairment on at least an annual basis. Goodwill impairment testing is performed annually as of December 31 and no impairment charges were incurred.

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIESThe Corporation is a party to certain financial instruments with off-balance sheet risk such as commitments under standby letters of credit, unused portions of lines of credit, overdraft protection and commitments to fund new loans. In accordance with GAAP, these financial instruments are not recorded in the financial statements. The Corporation's policy is to record such instruments when funded. These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk.  Such transactions are generally used by the Corporation to manage clients' requests for funding and other client needs.

In conjunction with the Corporation's adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), an allowance for credit losses on unfunded commitments was established as of January 1, 2023, to comply with the accounting standard requirements. As of March 31, 2023, the allowance for credit losses on unfunded commitments was $1.0 million.

The following table lists the contractual amounts of financial instruments with off-balance sheet risk at March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023				December 31, 2022
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	40,759	$	71,151	$	44,481	$	75,028
Unused lines of credit	3,085		344,423		2,887		326,188
Standby letters of credit	—		17,425		—		17,211

On February 4, 2020, the Corporation filed a lawsuit against Pioneer Bank, Albany, New York, in the Supreme Court of the State of New York in the County of Albany. As disclosed in the Corporation’s September 12, 2019 Current Report on Form 8-K, the Bank owns a participating interest totaling $4.2 million in an approximately $36.0 million commercial credit facility on which the borrower defaulted due to fraudulent activity. The Bank’s complaint alleges that Pioneer Bank, as lead bank, breached the participation agreement and engaged in fraud and negligent misrepresentation. The Corporation received a recovery of $0.5 million in April, 2020, and continues to pursue recovery of the remaining $3.7 million and accumulated expenses as a result of purchasing the participation interest.

In the normal course of business, there are various outstanding claims and legal proceedings involving the Corporation or its subsidiaries. As of March 31, 2023, we believe that we are not a party to any additional pending legal, arbitration, or regulatory proceedings that could have a material adverse impact on our financial results or liquidity.

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

3 Months Ended

Mar. 31, 2023

Equity [Abstract]

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) represents the net unrealized holding gains or losses on securities available for sale and the funded status of the Corporation's defined benefit pension plan and other benefit plans, as of the consolidated balance sheet dates, net of the related tax effect.

The following is a summary of the changes in accumulated other comprehensive income (loss) by component, net of tax, for the periods indicated (in thousands):

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at January 1, 2023	$	(71,296)	$	(3,961)	$	(75,257)
Other comprehensive income before reclassification	5,775		—		5,775
Amounts reclassified from accumulated other comprehensive income	—		9		9
Net current period other comprehensive income	5,775		9		5,784
Balance at March 31, 2023	$	(65,521)	$	(3,952)	$	(69,473)

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at January 1, 2022	$	(2,495)	$	(4,035)	$	(6,530)
Other comprehensive income before reclassification	(31,087)		—		(31,087)
Amounts reclassified from accumulated other comprehensive income	—		12		12
Net current period other comprehensive income (loss)	(31,087)		12		(31,075)
Balance at March 31, 2022	$	(33,582)	$	(4,023)	$	(37,605)

The following is the reclassification out of accumulated other comprehensive income for the periods indicated (in thousands):

Details about Accumulated Other Comprehensive Income (Loss) Components	Three Months Ended   March 31,				Affected Line Item in the Statement Where Net Income is Presented
	2023		2022
Amortization of defined pension plan and other benefit plan items:
Prior service costs (a)	$	—	$	—	Other components of net periodic pension and postretirement benefits
Actuarial losses (a)	12		14		Other components of net periodic pension and postretirement benefits
Tax effect	(3)		(2)		Income tax expense
Net of tax	9		12
Total reclassification for the period, net of tax	$	9	$	12

(a) These accumulated other comprehensive income components are included in the computation of net periodic pension and other benefit plan costs (see Note 11 for additional information).

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REVENUE FROM CONTRACTS WITH CUSTOMERS

3 Months Ended

Mar. 31, 2023

Revenue from Contract with Customer [Abstract]

REVENUE FROM CONTRACTS WITH CUSTOMERS

REVENUE FROM CONTRACTS WITH CUSTOMERS

All of the Corporation's revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income. The following tables present the Corporation's non-interest income by revenue stream and reportable segment for the three months ended March 31, 2023 and 2022 (in thousands). Items outside the scope of ASC 606 are noted as such.

	Three Months Ended March 31, 2023
Revenue by Operating Segment: Non-interest income	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Service charges on deposit accounts
Overdraft fees	$	714	$	—	$	—	$	714
Other	227		—		—		227
Interchange revenue from debit card transactions	1,133		—		—		1,133
WMG fee income	—		2,580		—		2,580
CFS fee and commission income	—		—		241		241
Net gains (losses) on sales of OREO	—		—		—		—
Net gains on sales of loans(a)	5		—		—		5
Loan servicing fees(a)	36		—		—		36
Changes in fair value of equity investments(a)	78		—		(6)		72
Income from bank-owned life insurance(a)	10		—		—		10
Other(a)	448		—		(43)		405
Total non-interest income (loss)	$	2,651	$	2,580	$	192	$	5,423

(a) Not within scope of ASC 606.

(b) The Holding Company, CFS, and CRM column above includes amounts to eliminate transactions between segments.

	Three Months Ended March 31, 2022
Revenue by Operating Segment: Non-interest income	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Service charges on deposit accounts
Overdraft fees	$	673	$	—	$	—	$	673
Other	191		—		—		191
Interchange revenue from debit card transactions	1,130		—		—		1,130
WMG fee income	—		2,757		—		2,757
CFS fee and commission income	—		—		253		253
Net gains on sales of loans(a)	74		—		—		74
Loan servicing fees(a)	39		—		—		39
Changes in fair value of equity investments(a)	(114)		—		1		(113)
Income from bank-owned life insurance(a)	11		—		—		11
Other(a)	689		—		(41)		648
Total non-interest income	$	2,693	$	2,757	$	213	$	5,663

(a) Not within scope of ASC 606.

(b) The Holding Company, CFS, and CRM column above includes amounts to eliminate transactions between segments.

A description of the Corporation's revenue streams accounted for under ASC 606 follows:

Service Charges on Deposit Accounts: The Corporation earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which included services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Corporation fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are recognized at the time the maintenance occurs. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance.

Interchange Income from Debit Card Transactions: The Corporation earns interchange fees from debit cardholder transactions conducted through the MasterCard payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with transaction processing services provided to the cardholder.

WMG Fee Income (Gross): The Corporation earns wealth management fees from its contracts with customers to manage assets for investment, and/or to conduct transactions on their accounts. These fees are primarily earned over time as the Corporation provides the contracted monthly or quarterly services and are generally assessed based on a tiered scale of the market value of assets under management (AUM) at quarter-end.

CFS Fee and Commission Income (Net): The Corporation earns fees from investment brokerage services provided to its customers by a third-party service provider. The Corporation receives commissions from the third-party service provider on a monthly basis based upon customer activity for the month. The Corporation (i) acts as an agent in arranging the relationship between the customer and the third-party service provider and (ii) does not control the services rendered to the customers. Investment brokerage fees are presented net of related costs. The Corporation also earns fees from tax services provided to its customers.

Net Gains/Losses on Sales of OREO: The Corporation records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Corporation finances the sale of OREO to the buyer, the Corporation assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Corporation adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.

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COMPONENTS OF QUARTERLY AND YEAR TO DATE NET PERIODIC BENEFIT COSTS

3 Months Ended

Mar. 31, 2023

Retirement Benefits [Abstract]

COMPONENTS OF QUARTERLY AND YEAR TO DATE NET PERIODIC BENEFIT COSTS

COMPONENTS OF QUARTERLY AND YEAR TO DATE NET PERIODIC BENEFIT COSTS

The components of net periodic expense for the Corporation’s pension and other benefit plans for the periods indicated are as follows (in thousands):

	Three Months Ended   March 31,
	2023		2022
Qualified Pension Plan
Service cost, benefits earned during the period	$	—	$	—
Interest cost on projected benefit obligation	396		282
Expected return on plan assets	(596)		(713)
Amortization of unrecognized transition obligation	—		—
Amortization of unrecognized prior service cost	—		—
Amortization of unrecognized net loss	6		—
Net periodic pension benefit	$	(194)	$	(431)
Supplemental Pension Plan
Service cost, benefits earned during the period	$	—	$	—
Interest cost on projected benefit obligation	12		8
Expected return on plan assets	—		—
Amortization of unrecognized prior service cost	—		—
Amortization of unrecognized net loss	2		5
Net periodic supplemental pension cost	$	14	$	13
Postretirement Plan, Medical and Life
Service cost, benefits earned during the period	$	—	$	—
Interest cost on projected benefit obligation	1		1
Expected return on plan assets	—		—
Amortization of unrecognized prior service cost	—		—
Amortization of unrecognized net loss	5		9
Net periodic postretirement, medical and life benefit	$	6	$	10

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SEGMENT REPORTING

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

SEGMENT REPORTING

SEGMENT REPORTING

The Corporation manages its operations through two primary business segments: core banking and WMG. The core banking segment provides revenues by attracting deposits from the general public and using such funds to originate consumer, commercial, commercial real estate, and residential mortgage loans, primarily in the Corporation’s local markets, and to invest in securities. The WMG services segment provides revenues by providing trust and investment advisory services to clients.

Accounting policies for the segments are the same as those described in Note 1 of the Corporation’s 2022 Annual Report on Form 10-K, which was filed with the SEC on March 22, 2023. Summarized financial information concerning the Corporation’s reportable segments and the reconciliation to the Corporation’s consolidated results are shown in the following table. Income taxes are allocated based on the separate taxable income of each entity and indirect overhead expenses are allocated based on reasonable and equitable allocations applicable to the reportable segment.

The Holding Company, CFS, and CRM columns below include amounts to eliminate transactions between segments (in thousands).

	Three months ended March 31, 2023
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	26,203	$	—	$	27	$	26,230
Interest expense	6,283		—		—		6,283
Net interest income	19,920		—		27		19,947
Provision for credit losses	277		—		—		277
Net interest income after provision for credit losses	19,643		—		27		19,670
Other non-interest income	2,651		2,580		192		5,423
Other non-interest expenses	13,696		1,798		342		15,836
Income (loss) before income tax expense (benefit)	8,598		782		(123)		9,257
Income tax expense (benefit)	1,831		177		(21)		1,987
Segment net income (loss)	$	6,767	$	605	$	(102)	$	7,270
Segment assets	$	2,644,158	$	8,311	$	1,714	$	2,654,183

	Three months ended March 31, 2022
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	17,451	$	—	$	7	$	17,458
Interest expense	781		—		—		781
Net interest income	16,670		—		7		16,677
Provision for credit losses	(1,145)		—		—		(1,145)
Net interest income after provision for credit losses	17,815		—		7		17,822
Other non-interest income	2,693		2,757		213		5,663
Other non-interest expenses	12,531		1,815		322		14,668
Income (loss) before income tax expense (benefit)	7,977		942		(102)		8,817
Income tax expense (benefit)	1,766		209		(25)		1,950
Segment net income (loss)	$	6,211	$	733	$	(77)	$	6,867
Segment assets	$	2,463,194	$	8,620	$	3,081	$	2,474,895

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STOCK COMPENSATION

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

STOCK COMPENSATION

STOCK COMPENSATION

Pursuant to the Corporation's 2021 Equity Incentive Plan (the "2021 Plan") the Corporation may make discretionary grants of restricted shares of the Corporation’s common stock to or for the benefit of employees selected to participate in the 2021 Plan, the chief executive officer and members of the Board of Directors. Awards are based on the performance, responsibility and contributions of the individual and are targeted at an average of the peer group. The maximum number of shares of the Corporation’s common stock that may be awarded as restricted shares related to the 2021 Plan may not exceed 170,000, upon which time a new plan may be created. Compensation expense for shares granted will be recognized over the vesting period of the award based upon the average closing price of the Corporation's stock for each of the prior 30 trading days ending on the grant date.

During the three months ended March 31, 2023 and 2022, 13,069 and 12,560 shares, respectively, were re-issued from treasury to fund stock compensation. The expense related to the grants made in the first quarter of 2023 is recognized over a one year vesting period. Total expense related to the 2021 Plan of $0.4 million and $0.3 million was recognized during each of the three month periods ended March 31, 2023 and 2022, respectively.

A summary of restricted stock activity for the three months ended March 31, 2023 is presented below:

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at January 1, 2023	55,402	$44.57
Granted	13,069	$45.89
Vested	(14,143)	$45.38
Forfeited or cancelled	—	$—
Nonvested at March 31, 2023	54,328	$43.77

As of March 31, 2023, there was $1.9 million of total unrecognized compensation cost related to nonvested shares granted under the 2021 Plan. The cost is expected to be recognized over a weighted-average period of 3.79 years. The total fair value of shares vested was $0.6 million and $0.1 million for the three month periods ended March 31, 2023 and 2022, respectively. Due to the adoption of the 2021 Plan, certain grants were transitioned to a one-year vesting period.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Organization

Organization

The Corporation, through its wholly-owned subsidiaries, the Bank and CFS, provides a wide range of banking, financing, fiduciary and other financial services to its clients.  The Corporation and the Bank are subject to the regulations of certain federal and state agencies and undergo periodic examinations by those regulatory authorities.

CRM, a wholly-owned subsidiary of the Corporation, which was formed and began operations on May 31, 2016, is a Nevada-based captive insurance company which insures against certain risks unique to the operations of the Corporation and its subsidiaries and for which insurance may not be currently available or economically feasible in today's insurance marketplace. CRM pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves. CRM is subject to regulations of the State of Nevada and undergoes periodic examinations by the Nevada Division of Insurance.

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in conformity with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 8 of Regulation S-X of the Exchange Act.  These financial statements include the accounts of the Corporation and its subsidiaries, and all significant intercompany balances and transactions are eliminated in consolidation.  Amounts in the prior periods' consolidated financial statements are reclassified whenever necessary to conform to the current period's presentation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and disclosures provided, and actual results could differ. In the opinion of management, all adjustments (consisting of normal recurring adjustments) and disclosures necessary for the fair presentation of the accompanying consolidated financial statements have been included. The unaudited consolidated financial statements should be read in conjunction with the Corporation's 2022 Annual Report on Form 10-K for the year ended December 31, 2022. The results of operations for any interim periods are not necessarily indicative of the results which may be expected for the entire year or any other period.

Reclassifications

Reclassifications

Amounts in the prior year financial statements are reclassified whenever necessary to conform to the current year's presentation.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Accounting Standards Adopted in 2023:

Financial Instruments - Credit Losses - Topic 326

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The objective of the ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The ASU supersedes prior GAAP by replacing the incurred loss impairment method with a methodology that reflects lifetime expected credit losses and requires the consideration of a broader range of reasonable and supportable information to form loss estimates. In November 2019, the FASB adopted an amendment to postpone the effective date of ASU 2016-13 to January 2023, for some entities, including certain Securities and Exchange Commission filers. As a smaller reporting company, the Corporation was eligible for and elected delayed adoption.

The Corporation adopted the standard on January 1, 2023, and recognized a one-time cumulative-effect adjustment to retained earnings, of $1.5 million, or $1.1 million, net of tax effects, of which $1.1 million reflected the establishment of an allowance for credit losses on unfunded commitments, $0.4 million reflected additional allowance related to the loan portfolio, and no adjustment was recognized related to the securities portfolio.

The quantitative component of the estimate relies on the statistical relationship between the projected value of an economic indicator and the implied historical loss experience among a curated group of peers. The Corporation utilized regression analyses of peer data, in which the Corporation was included, and where observed credit losses and selected economic factors were used to determine suitable loss drivers for modeling the lifetime rates of probability of default (PD). A loss given default rate (LGD) is assigned to each pool for each period based on these PD outcomes. The model fundamentally utilizes an expected discounted cash flow (DCF) analysis for all loan portfolio segments. The DCF analysis is run at the instrument-level and incorporates an array of loan-specific data points and segment-implied assumptions to determine the lifetime expected loss attributable to each instrument. An implicit "hypothetical loss" is derived for each period of the DCF, and helps establish the present value of future cash flows for each period. The reserve applied to a specific instrument is the difference between the sum of the present value of future cash flows and the book balance of the loan at the measurement date.

Portfolio segments are the level at which loss assumptions are applied to a pool of loans based on the similarity of risk characteristics inherent in the included instruments, relying on FFIEC Call Report codes. The loss driver for each loan portfolio segment is derived from a readily available and reasonable economic forecast, chiefly the FOMC of the Federal Reserve's projections of civilian unemployment and year-over-year U.S. GDP growth. Forecasts are applied over a four-quarter period and revert to the lookback period's historical mean for the economic indicator over an eight-quarter horizon, on a straight-line basis.

The model incorporates qualitative factor adjustments in order to calibrate the model for risk in each portfolio segment that may not be captured through quantitative analysis. Determinations regarding qualitative adjustments are reflective of management's expectation of loss conditions differing from those already captured in the quantitative component of the model. The Corporation evaluates all assets exhibiting potential credit risk, including off-balance sheet exposures on unfunded commitments, and debt securities. Allowances on unfunded commitments utilize a calculated funding rate to estimate the Corporation's future obligations, and applies the overall loss rate assigned to each concurrent pool. Securities backed by U.S. government-related agencies are determined to be zero-credit loss securities. Potential losses on obligations of states, political subdivisions, and corporate bonds and notes are analyzed by management to determine whether any of the losses may be attributable to credit-related factors on an individual basis.

The adoption of ASU 2016-13 had an initial impact on the allowance for credit losses on loans of $0.4 million, reflecting changes in the methodology when compared to the allowance for loan losses on loans at December 31, 2022. The increase represents an increase of $0.2 million in the allowance relating to commercial loans, the combined effect of changes to commercial & agricultural and commercial real estate, and an increase of $0.2 million in consumer loans, mostly in relation to indirect auto lending. The remainder of the adoption impact, or $1.1 million, related to the establishment of an allowance for unfunded commitments.

Troubled Debt Restructurings and Vintage Disclosures - Topic 326

In March 2022, the FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The ASU made certain targeted amendments specific to troubled debt restructurings (TDRs) by creditors and vintage disclosure related to gross write-offs. Upon adoption, the Corporation will be required to apply the loan and refinancing and restructuring guidance to determine whether a modification results in a new loan or a continuation of an existing loan, rather than applying the recognition and measurement guidance for TDRs. The ASU also requires companies to disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within scope of Subtopic 326-20. The Corporation adopted the standard prospectively, beginning January 1, 2023, concurrently with the aforementioned ASU 2016-13, and its impact can be found within Note 4 to the consolidated financial statements. The Corporation established a methodology for identifying and reporting the financial impact of modifications made to borrowers who are deemed to be experiencing financial difficulty.

Reference Rate Reform - ASC 848

ASU No. 2022-06, Deferral of the Sunset Date of Topic 848, was issued in December 2022 and defers the date for which accounting relief can be applied under Topic 848. ASU 2022-06 applies to entities that have contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The objective of the guidance in Topic 848 is to ease the burden in accounting related to the recognition of the effects of reference rate reform on financial reporting. A sunset provision was included within Topic 848 based on expectations of when LIBOR would cease being published. The Corporation had adopted the accounting relief provisions of Topic 848 effective October 1, 2020. The amendments in ASU 2022-06 defer the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be able to apply the accounting relief in Topic 848. ASU 2022-06 was effective for all entities upon its issuance. The adoption of the provisions of Topic 848, as amended, did not have a material impact on the Corporation’s consolidated financial statements.

Accounting Standards Pending Adoption

None.

Risks and Uncertainties

Current Banking Environment

Industry events transpiring prior to the Corporation’s filing date, continue to present challenges to the banking sector. Market conditions and external factors may unpredictably impact the competitive landscape for deposits in the banking industry. Additionally, the rising interest rate environment has increased competition for liquidity and the premium at which liquidity is available to meet funding needs. The Corporation believes the sources of liquidity presented in the these Unaudited Consolidated Financial Statements and the Notes to the Unaudited Consolidated Financial Statements are sufficient to meet its needs on the balance sheet date.

An unexpected decrease in deposit balances due to heavy withdrawal activity could adversely impact the Corporation's ability to rely on organic deposits to primarily fund its operations, potentially requiring greater reliance on secondary sources of liquidity to meet withdrawal demands or to fund continuing operations. These sources may include proceeds from Federal Home Loan Bank advances, sales of investment securities and loans, federal funds lines of credit from correspondent banks, and out-of-market time deposits. Important Accounting Policy ramifications of such events are outlined in the previous sections of Note 1, and subsequently in the relevant Notes to the Consolidated Financial Statements.

In response to these events, the Treasury Department, Federal Reserve, and FDIC jointly announced the Bank Term Funding Program (BTFP) on March 12, 2023. This program aims to enhance liquidity by allowing institutions to pledge certain securities at the par value of the securities, and at a borrowing rate of ten basis points over the one-year overnight index swap rate. The BTFP is available to eligible U.S. federally insured depository institutions, with advances having a term of up to one year and no prepayment penalties. As of the date of the release of the Unaudited Consolidated Financial Statements, the Corporation has not accessed the BTFP.

Such reliance on secondary funding sources could increase the Corporation's overall cost of funding and thereby reduce net income. While the Corporation believes its current sources of liquidity are adequate to fund operations, there is no guarantee they will suffice to meet future liquidity demands. This may necessitate slowing or discontinuing loan growth, capital expenditures, or other investments, or liquidating assets.

For further discussion of the Corporation's liquidity practices, see pages 59-61 of this Form 10-Q.

Earnings Per Common Share

Basic earnings per share is net income divided by the weighted average number of common shares outstanding during the period. Issuable shares, including those related to directors’ restricted stock shares, are considered outstanding and are included in the computation of basic earnings per share. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation. Restricted stock awards are grants of participating securities and are considered outstanding at grant date. Earnings per share information is adjusted to present comparative results for stock splits and stock dividends that occur.

Fair Value Measurement

Fair value is the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  There are three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Corporation used the following methods and significant assumptions to estimate fair value on a recurring basis:

Available for Sale Securities:  The fair values of securities available for sale are usually determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs), or matrix pricing, which is a mathematical technique widely used to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3 inputs).

Equity Investments: Securities that are held to fund a deferred compensation plan and securities that have a readily determinable fair market value, are recorded at fair value with changes in fair value included in earnings. The fair values of equity investments are determined by quoted market prices (Level 1 inputs).

Individually Analyzed Loans: At the time a loan is considered individually analyzed, it is valued at the lower of cost or fair value. Individually analyzed loans carried at fair value have been partially charged-off or receive specific allocations as part of the allowance for credit loss accounting. For collateral dependent loans, fair value is commonly based on real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, typically resulting in a Level 3 fair value classification. Impaired loans are analyzed on a quarterly basis for additional impairment and adjusted accordingly.

OREO: Assets acquired through or instead of loan foreclosures are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral dependent loans and OREO are performed by certified general appraisers (commercial properties) or certified residential appraisers (residential properties) whose qualifications and licenses have been reviewed and verified by the Corporation. Once received, appraisals are reviewed for reasonableness of assumptions, approaches utilized, Uniform Standards of Professional Appraisal Practice and other regulatory compliance, as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Appraisals are generally completed within the previous 12 month period prior to a property being placed into OREO. On impaired loans, appraisal values are adjusted based on the age of the appraisal, the position of the lien, the type of the property and its condition.

Derivatives: The fair values of interest rate swaps are based on valuation models using observable market data as of the measurement date (Level 2 inputs). Derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices, and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The Corporation also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counter-party's nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Corporation has considered the impact of any applicable credit enhancements, such as collateral postings. Although the Corporation has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize credit default rate assumptions (Level 3 inputs).

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SECURITIES (Tables)

3 Months Ended

Mar. 31, 2023

Investments, Debt and Equity Securities [Abstract]

Schedule of Amortized Cost and Estimated Fair Value of Securities Available for Sale

Amortized cost and estimated fair value of securities available for sale are as follows (in thousands):

	March 31, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for credit losses		Estimated Fair Value
U.S. Treasury notes and bonds	$	61,619	$	—	$	5,291	$	—	$	56,328
Mortgage-backed securities, residential	508,906		—		76,252		—		432,654
Obligations of states and political subdivisions	39,795		19		400		—		39,414
Corporate bonds and notes	25,750		—		5,120		—		20,630
SBA loan pools	78,769		130		1,870		—		77,029
Total	$	714,839	$	149	$	88,933	$	—	$	626,055

	December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. Treasury notes and bonds	$	61,800	$	—	$	6,225	$	55,574
Mortgage-backed securities, residential	518,838		—		83,707		435,131
Obligations of states and political subdivisions	39,828		2		938		38,892
Corporate bonds and notes	25,750		—		3,780		21,970
SBA loan pools	82,982		155		2,116		81,022
Total	$	729,198	$	157	$	96,766	$	632,589

Schedule of Amortized Cost and Estimated Fair Value of Securities Held to Maturity

Amortized cost and estimated fair value of securities held to maturity are as follows (in thousands):

	March 31, 2023
	Amortized Cost		Unrecognized Gains		Unrecognized Losses		Allowance for credit losses		Estimated Fair Value
Obligations of states and political subdivisions	$	952	$	—	$	—	$	—	$	952
Time deposits with other financial institutions	980		—		27		—		953
Total	$	1,932	$	—	$	27	$	—	$	1,905

	December 31, 2022
	Amortized Cost		Unrecognized Gains		Unrecognized Losses		Estimated Fair Value
Obligations of states and political subdivisions	$	952	$	—	$	—	$	952
Time deposits with other financial institutions	1,472		—		22		1,450
Total	$	2,424	$	—	$	22	$	2,402

Schedule of Amortized Cost and Estimated Fair Value of Debt Securities by Contractual Maturity

Securities not due at a single maturity date are shown separately (in thousands):

	March 31, 2023
	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	3,141	$	3,102	$	1,004	$	1,003
After one, but within five years	104,669		98,309		928		902
After five, but within ten years	18,883		14,501		—		—
After ten years	471		460		—		—
	127,164		116,372		1,932		1,905
Mortgage-backed securities, residential	508,906		432,654		—		—
SBA loan pools	78,769		77,029		—		—
Total	$	714,839	$	626,055	$	1,932	$	1,905

Debt Securities, Available-for-Sale, Unrealized Loss Position, Fair Value

The following tables summarize the investment securities available for sale with unrealized losses at March 31, 2023 and December 31, 2022 by aggregated major security type and length of time in a continuous unrealized loss position (in thousands):

	Less than 12 months				12 months or longer				Total
March 31, 2023	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury notes and bonds	$	1,107	$	16	$	55,221	$	5,275	$	56,328	$	5,291
Mortgage-backed securities, residential	7,594		477		425,060		75,775		432,654		76,252
Obligations of states and political subdivisions	20,209		176		12,962		224		33,171		400
Corporate bonds and notes	2,750		250		12,064		4,870		14,814		5,120
SBA loan pools	9,279		20		56,883		1,850		66,162		1,870
Total temporarily impaired securities	$	40,939	$	939	$	562,190	$	87,994	$	603,129	$	88,933

	Less than 12 months				12 months or longer				Total
December 31, 2022	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury notes and bonds	$	1,011	$	30	$	54,563	$	6,195	$	55,574	$	6,225
Mortgage-backed securities, residential	79,891		7,621		355,240		76,086		435,131		83,707
Obligations of states and political subdivisions	37,847		938		—		—		38,785		938
Corporate bonds and notes	4,515		485		7,455		3,295		11,970		3,780
SBA loan pools	14,333		925		51,123		1,191		65,456		2,116
Total temporarily impaired securities	$	137,597	$	9,999	$	468,381	$	86,767	$	606,916	$	96,766

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Tables)

3 Months Ended

Mar. 31, 2023

Credit Loss [Abstract]

Schedule of Composition of the Loan Portfolio by Type

The composition of the loan portfolio, net of deferred origination fees and costs, is summarized as follows (in thousands):

	March 31, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	244,174	$	252,044
Agricultural	333		249
Commercial mortgages:
Construction	118,660		108,243
Commercial mortgages, other	917,637		888,670
Residential mortgages	285,944		285,672
Consumer loans:
Home equity lines and loans	84,537		81,401
Indirect consumer loans	211,270		202,124
Direct consumer loans	11,146		11,045
Total loans, net of deferred loan fees and costs	1,873,701		1,829,448
Allowance for credit losses	(20,075)		(19,659)
Loans, net	$	1,853,626	$	1,809,789

Schedules of Allowance for Credit Loss

The following table presents the activity in the allowance for credit losses by portfolio segment for the three month period ended March 31, 2023 (in thousands):

	Three Months Ended March 31, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	3,373	$	11,576	$	1,845	$	2,865	$	19,659
Cumulative effect adjustment for the adoption of ASC 326	909		(695)		(16)		176		374
Beginning balance after cumulative effect adjustment	4,282		10,881		1,829		3,041		20,033
Charge-offs	(190)		—		—		(193)		(383)
Recoveries	6		—		—		108		114
Net recoveries (charge-offs)	(184)		—		—		(85)		(269)
Provision (1)	(45)		102		63		191		311
Ending balance	$	4,053	$	10,983	$	1,892	$	3,147	$	20,075

(1) Additional credit provision related to off-balance sheet exposure was $34 thousand for the three months ended March 31, 2023.

Refer to Note 1-Summary of Significant Accounting Policies in our Annual report on Form 10-K for the fiscal year ended December 31, 2022, for the allowance for loan losses policy effective prior to the adoption of ASC 326-Financial Instruments-Credit Losses, as of December 31, 2022.

The following table presents the activity in the allowance for loan losses by portfolio segment for the three month period ended March 31, 2022.

	Three Months Ended March 31, 2022
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	3,591	$	13,556	$	1,803	$	2,075	$	21,025
Charge-offs	(4)		—		—		(194)		(198)
Recoveries	6		1		—		239		246
Net recoveries (charge-offs)	2		1		—		45		48
Provision	(110)		(593)		(197)		(245)		(1,145)
Ending balance	$	3,483	$	12,964	$	1,606	$	1,875	$	19,928

Unfunded Commitments

The allowance for credit losses on unfunded commitments is recognized as a liability (other liabilities in the Consolidated Balance Sheets), with adjustments to the reserve recognized in the provision for credit losses on the Consolidated Statements of Income. The Corporation established a reserve for unfunded commitments in conjunction with its adoption of ASC 326-Financial Instruments-Credit Losses.

The following table presents the activity in the allowance for credit losses on unfunded commitments for the three month periods ended March 31, 2023 and 2022:

	For the Three Months Ended
Allowance for credit losses on unfunded commitments	March 31, 2023		March 31, 2022
Beginning balance	$	—	$	—
Impact of ASC 326 adoption	1,082		—
Provision for unfunded commitments	(34)		—
Ending balance	$	1,048	$	—

The following table presents the provision for credit losses on loans and unfunded commitments for the three month period ended March 31, 2023, based upon the current expected credit loss methodology, and the provision for loan losses on loans for the three month period ended March 31, 2022, based upon the incurred loss methodology:

	For the Three Months Ended
Provision for credit losses	March 31, 2023		March 31, 2022
Provision for credit losses on loans	$	311	$	(1,145)
Provision for unfunded commitments	(34)		—
Total provision (credit) for credit losses	$	277	$	(1,145)

The following tables present the balance in the allowance for credit losses and allowance for loan losses, and the amortized cost basis in loans by portfolio segment, as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually analyzed	$	1,040	$	36	$	—	$	—	$	1,076
Collectively analyzed	3,013		10,947		1,892		3,147		18,999
Total ending allowance balance	$	4,053	$	10,983	$	1,892	$	3,147	$	20,075

	December 31, 2022
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,078	$	38	$	—	$	31	$	1,147
Collectively evaluated for impairment	2,295		11,538		1,845		2,834		18,512
Total ending allowance balance	$	3,373	$	11,576	$	1,845	$	2,865	$	19,659

	March 31, 2023
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually analyzed	$	1,779	$	4,089	$	715	$	254	$	6,837
Loans collectively analyzed	242,728		1,032,208		285,229		306,699		1,866,864
Total ending loans balance	$	244,507	$	1,036,297	$	285,944	$	306,953	$	1,873,701

	December 31, 2022
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually evaluated for impairment	$	2,112	$	4,383	$	723	$	264	$	7,482
Loans collectively evaluated for impairment	250,181		992,530		284,949		294,306		1,821,966
Total ending loans balance	$	252,293	$	996,913	$	285,672	$	294,570	$	1,829,448

Schedule of Financing Receivable, Modified

The following table summarizes the amortized cost basis of loans modified as of March 31, 2023:

	March 31, 2023
Loans modified under ASU 2022-02:	Principal Reduction		Interest Rate Reduction		Term Extension		Combination		Total		(%) of Loan Class (1)
Commercial mortgages	$	—	$	—	$	277	$	—	$	277	0.03	%
Total	$	—	$	—	$	277	$	—	$	277

(1) Represents the amortized cost basis of loans modified during the period as a percentage of the period-end loan balances by class.

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the three month period ended March 31, 2023:

	March 31, 2023
Effect of loan modifications under ASU 2022-02:	Principal Reduction (in thousands)	Weighted-average interest rate reduction (%)	Weighted-average term extension (in months)
Commercial mortgages	$—	—%	60

Schedule of Analysis of Collateral Dependent Loans

The following table presents the amortized cost basis and related allowance for credit loss of individually analyzed loans considered to be collateral dependent as of March 31, 2023 (in thousands):

	March 31, 2023
	Amortized Cost Basis		Related Allowance
Commercial and agricultural:
Commercial and industrial (1) (3)	$	573	$	168
Commercial mortgages:
Commercial mortgages, other (1)	4,413		36
Residential mortgages (2)	715		—
Consumer loans
Home equity lines and loans (2)	254		—
Total	$	5,955	$	204

(1) Secured by commercial real estate

(2) Secured by residential real estate

(3) Secured by business assets

Schedule of Impaired Financing Receivables

The following is a summary of impaired loans as of December 31, 2022 (in thousands):

	December 31, 2022
With no related allowance recorded:	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
Commercial and agricultural:
Commercial and industrial	$	1,026	$	1,025	$	—
Commercial mortgages:
Construction	5		5		—
Commercial mortgages, other	4,346		4,341		—
Residential mortgages	767		760		—
Consumer loans:
Home equity lines and loans	154		138		—
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,086		1,088		1,078
Commercial mortgages:
Commercial mortgages, other	38		38		38
Consumer loans:
Home equity lines and loans	126		127		31
Total	$	7,548	$	7,522	$	1,147

The following table presents the amortized cost basis and interest income of loans individually evaluated recognized by class of loans for the three month periods ended March 31, 2023 and 2022 (in thousands):

	Three Months Ended   March 31, 2023				Three Months Ended   March 31, 2022
With no related allowance recorded:	Amortized Cost Basis		Interest Income Recognized (1)		Amortized Cost Basis		Interest Income Recognized (1)
Commercial and agricultural:
Commercial and industrial	$	729	$	—	$	926	$	3
Commercial mortgages:
Construction	—		—		113		1
Commercial mortgages, other	4,053		7		4,105		7
Residential mortgages	715		9		895		11
Consumer loans:
Home equity lines & loans	254		—		161		1
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,049		2		1,414		3
Commercial mortgages:
Commercial mortgages, other	36		—		2,601		21
Consumer loans:
Home equity lines and loans	—		—		141		—
Total	$	6,836	$	18	$	10,356	$	47

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

Schedule of Recorded Investment in Past Due and Non-Accrual Status by Class of Loans

The following table presents the amortized cost basis in non-accrual and loans past due 90 days or more and still accruing by class of loan as of March 31, 2023 and December 31, 2022 (in thousands):

	Non-accrual with no allowance for credit losses		Non-accrual				Loans Past Due 90 Days or More and Still Accruing
	March 31, 2023		March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	730	$	1,623	$	1,946	$	6	$	1
Commercial mortgages:
Construction	—		—		5		—		—
Commercial mortgages, other	3,611		3,647		3,928		—		—
Residential mortgages	1,036		1,036		986		—		—
Consumer loans:
Home equity lines and loans	866		866		760		—		—
Indirect consumer loans	556		556		540		—		—
Direct consumer loans	3		3		13		—		—
Total	$	6,802	$	7,731	$	8,178	$	6	$	1

The following tables present the aging of the amortized cost basis of loans as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023
	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Loans Not Past Due		Total
Commercial and agricultural:
Commercial and industrial	$	67	$	8	$	16	$	91	$	244,083	$	244,174
Agricultural	—		—		—		—		333		333
Commercial mortgages:
Construction	2,284		—		—		2,284		116,376		118,660
Commercial mortgages, other	246		—		297		543		917,094		917,637
Residential mortgages	933		57		412		1,402		284,542		285,944
Consumer loans:
Home equity lines and loans	261		57		568		886		83,651		84,537
Indirect consumer loans	1,036		52		265		1,353		209,917		211,270
Direct consumer loans	10		—		—		10		11,136		11,146
Total	$	4,837	$	174	$	1,558	$	6,569	$	1,867,132	$	1,873,701

	December 31, 2022
	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Loans Not Past Due		Total
Commercial and agricultural:
Commercial and industrial	$	74	$	3	$	1	$	78	$	251,966	$	252,044
Agricultural	—		—		—		—		249		249
Commercial mortgages:
Construction	—		—		—		—		108,243		108,243
Commercial mortgages, other	1,058		—		486		1,544		887,126		888,670
Residential mortgages	1,360		709		294		2,363		283,309		285,672
Consumer loans:
Home equity lines and loans	193		121		442		756		80,645		81,401
Indirect consumer loans	1,397		193		250		1,840		200,284		202,124
Direct consumer loans	2		19		1		22		11,023		11,045
Total	$	4,084	$	1,045	$	1,474	$	6,603	$	1,822,845	$	1,829,448

Schedule of Risk Category of the Recorded Investment of Loans by Class of Loans

Based on the analyses performed as of March 31, 2023, the risk category of the amortized cost basis of loans by class of loans and vintage, as well as the gross charge-offs by loan class and vintage for the period, are as follows (in thousands):

	Term Loans Amortized Cost by Origination Year												Revolving Loans Amortized Cost		Revolving Loans Converted to Term		Total
	2023		2022		2021		2020		2019		Prior
Commercial & industrial
Pass	$	7,750	$	43,899	$	21,452	$	14,723	$	38,017	$	12,844	$	88,666	$	—	$	227,351
Special mention	100		104		350		3		86		457		3,478		9,315		13,893
Substandard	—		36		—		412		28		370		629		588		2,063
Doubtful	—		—		—		—		—		867		—		—		867
Total	7,850		44,039		21,802		15,138		38,131		14,538		92,773		9,903		244,174
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	190	$	—	$	—	$	190
Agricultural
Pass	—		17		170		—		—		—		146		—		333
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total	—		17		170		—		—		—		146		—		333
Gross charge-offs	—		—		—		—		—		—		—		—		—
Construction
Pass	8,311		2,819		1,975		—		2,317		1,205		101,857		—		118,484
Special mention	—		176		—		—		—		—		—		—		176
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total	8,311		2,995		1,975		—		2,317		1,205		101,857		—		118,660
Gross charge-offs	—		—		—		—		—		—		—		—		—
Commercial mortgages
Pass	31,729		214,915		129,614		99,057		40,489		180,523		192,038		—		888,365
Special mention	—		2,563		8,828		1,033		—		3,867		—		6,154		22,445
Substandard	277		1,186		—		—		—		4,790		97		441		6,791
Doubtful	—		—		—		—		—		36		—		—		36
Total	32,006		218,664		138,442		100,090		40,489		189,216		192,135		6,595		917,637
Gross charge-offs	—		—		—		—		—		—		—		—		—
Residential mortgages
Not rated	5,594		52,576		52,443		75,198		16,416		52,615		30,066		—		284,908
Substandard	—		107		64		111		181		573		—		—		1,036
Total	5,594		52,683		52,507		75,309		16,597		53,188		30,066		—		285,944
Gross charge-offs	—		—		—		—		—		—		—		—		—
Home equity lines and loans
Not rated	3,945		19,073		6,477		3,827		3,110		12,740		34,500		—		83,672
Substandard	—		—		—		—		121		392		352		—		865
Total	3,945		19,073		6,477		3,827		3,231		13,132		34,852		—		84,537
Gross charge-offs	—		—		—		—		—		—		8		—		8
Indirect consumer
Not rated	26,012		123,593		32,138		14,374		7,385		7,211		—		—		210,713
Substandard	—		186		98		59		73		141		—		—		557
Total	26,012		123,779		32,236		14,433		7,458		7,352		—		—		211,270
Gross charge-offs	—		43		36		30		12		23		—		—		144
Direct consumer
Not rated	1,121		3,956		1,330		630		266		478		3,362		—		11,143
Substandard	—		—		—		—		—		3		—		—		3
Total	1,121		3,956		1,330		630		266		481		3,362		—		11,146
Gross charge-offs	—		—		1		4		—		36		—		—		41
Total loans	$	84,839	$	465,206	$	254,939	$	209,427	$	108,489	$	279,112	$	455,191	$	16,498	$	1,873,701
Total gross charge-offs	$	—	$	43	$	37	$	34	$	12	$	249	$	8	$	—	$	383

Prior to the adoption of ASC 326-Financial Instruments-Credit Losses, loans not meeting the criteria above that were analyzed individually as part of the above described process were considered pass rated loans as of December 31, 2022. Based upon the analyses performed as of December 31, 2022, the risk category of the recorded investment of loans by class of loans was as follows (in thousands):

	December 31, 2022
	Not Rated		Pass		Special Mention		Substandard		Doubtful		Total
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 mortgages	285,459		—		—		986		—		286,445
Consumer loans:
Home equity lines and loans	80,942		—		—		760		—		81,702
Indirect consumer loans	202,050		—		—		540		—		202,590
Direct consumer loans	11,094		—		—		13		—		11,107
Total	$	579,545	$	1,205,027	$	37,465	$	13,028	$	931	$	1,835,996

For residential and consumer loan classes, the Corporation also evaluated credit quality based on the aging status of the loan, which was previously presented, by payment activity. The following table presents the amortized cost basis in residential and consumer loans based on payment activity as of March 31, 2023 (in thousands):

	Consumer Loans
March 31, 2023	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	284,908	$	83,672	$	210,713	$	11,143
Non-Performing	1,036		865		557		3
Total	$	285,944	$	84,537	$	211,270	$	11,146

Prior to the adoption of ASC 326-Financial Instruments-Credit Losses, the Corporation also evaluated credit quality based on the aging status of the loan, which was previously presented, by payment activity. The following table presents the recorded investment in residential and consumer loans based on payment activity as of December 31, 2022 (in thousands):

	Consumer Loans
December 31, 2022	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	285,459	$	80,942	$	202,050	$	11,094
Non-Performing	986		760		540		13
Total	$	286,445	$	81,702	$	202,590	$	11,107

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FAIR VALUE (Tables)

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

			Fair Value Measurement at March 31, 2023 Using
Financial Assets:	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Treasury notes and bonds	$	56,328	$	56,328	$	—	$	—
Mortgage-backed securities, residential	432,654		—		432,654		—
Obligations of states and political subdivisions	39,414		—		39,414		—
Corporate bonds and notes	20,630		—		11,964		8,666
SBA loan pools	77,029		—		77,029		—
Total available for sale securities	$	626,055	$	56,328	$	561,061	$	8,666
Equity investments, at fair value	$	2,311	$	2,311	$	—	$	—
Derivative assets	22,710		—		22,710		—
Financial Liabilities:
Derivative liabilities	$	22,776	$	—	$	22,776	$	—

There were no transfers between Level 1 and Level 2 during the three month period ended March 31, 2023.

			Fair Value Measurement at December 31, 2022 Using
Financial Assets:	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Treasury notes and bonds	$	55,574	$	55,574	$	—	$	—
Mortgage-backed securities, residential	435,131		—		435,131		—
Obligations of states and political subdivisions	38,892		—		38,892		—
Corporate bonds and notes	21,970		—		21,970		—
SBA loan pools	81,022		—		81,022		—
Total available for sale securities	$	632,589	$	55,574	$	577,015	$	—
Equity investments, at fair value	$	2,246	$	2,246	$	—	$	—
Derivative assets	27,141		—		27,141		—
Financial Liabilities:
Derivative liabilities	$	27,196	$	—	$	27,196	$	—

Information Related To Level 3 Non-Recurring Fair Value Measurement

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using unobservable inputs (Level 3) for the three months ended March 31, 2023 and March 31, 2022.

Corporate Bonds:	For the Three Months Ended
Level 3 Financial Assets	March 31, 2023		March 31, 2022
Balance of recurring Level 3 assets at January 1, 2023	$	—	$	—
Total gains and losses for the period:	—		—
Included in other comprehensive income	(1,289)		—
Transfer into Level 3	9,955		—
Balance of recurring Level 3 assets at March 31, 2023	$	8,666	$	—

March 31, 2023	Fair Value		Valuation Techniques	Unobservable Input	Range (WA)
Corporate bonds and notes	$	8,666	Discounted cash flow	Market discount rate	12.00% -12.00% [12.00%]

Schedule of Carrying Value and Estimated Fair Value of Financial Instruments

The carrying amounts and estimated fair values of other financial instruments, at March 31, 2023 and December 31, 2022, are as follows (in thousands):

	March 31, 2023
Financial assets:	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Estimated Fair Value (1)
Cash and due from financial institutions	$	25,109	$	25,109	$	—	$	—	$	25,109
Interest-earning deposits in other financial institutions	9,532		9,532		—		—		9,532
Equity investments	2,949		2,949		—		—		2,949
Securities available for sale	626,055		56,328		561,061		8,666		626,055
Securities held to maturity	1,932		—		953		952		1,905
FHLBNY and FRBNY stock	7,913		—		—		—		N/A
Loans, net and loans held for sale	1,853,626		—		—		1,790,939		1,790,939
Accrued interest receivable	8,469		229		1,900		6,340		8,469
Derivative Assets	22,710		—		22,710		—		22,710
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,880,335	$	1,880,335	$	—	$	—	$	1,880,335
Time deposits	452,094		—		450,201		—		450,201
Accrued interest payable	1,500		73		1,427		—		1,500
Derivative Liabilities	22,776		—		22,776		—		22,776

(1) Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. 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.

	December 31, 2022
Financial assets:	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Estimated Fair Value (1)
Cash and due from financial institutions	$	29,309	$	29,309	$	—	$	—	$	29,309
Interest-earning deposits in other financial institutions	26,560		26,560		—		—		26,560
Equity investments	2,830		2,830		—		—		2,830
Securities available for sale	632,589		55,574		577,015		—		632,589
Securities held to maturity	2,424		—		1,639		2,157		3,796
FHLBNY and FRBNY stock	8,197		—		—		—		N/A
Loans, net and loans held for sale	1,809,789		—		—		1,757,171		1,757,171
Accrued interest receivable	8,682		132		2,002		6,548		8,682
Derivative Asset	27,141		—		27,141		—		27,141
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,924,843	$	1,924,843	$	—	$	—	$	1,924,843
Time deposits	402,384		—		403,572		—		403,572
Accrued interest payable	864		64		800		—		864
Derivative Liabilities	27,196		—		27,196		—		27,196

(1) Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. 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.

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LEASES (Tables)

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Schedule of Leased Branch Properties

Leased branch properties at March 31, 2023 and December 31, 2022 consist of the following (in thousands):

	March 31, 2023		December 31, 2022
Operating lease right-of-use asset	$	6,449	$	7,234
Less: accumulated amortization	(199)		(785)
Less: lease termination	—		—
Add: new lease agreement and modifications	—		—
Operating lease right-of-use-assets, net	$	6,250	$	6,449

Schedule of Undiscounted Cash Flows of the Operating Lease Liabilities

The following is a schedule by year of the undiscounted cash flows of the operating lease liabilities, excluding CAM charges, as of March 31, 2023 (in thousands):

Year	Amount
2023	$	747
2024	924
2025	841
2026	845
2027	854
2028 and thereafter	3,169
Total minimum lease payments	7,380
Less: amount representing interest	(953)
Present value of net minimum lease payments	$	6,427

Schedule of Leases in Premises and Equipment

The Corporation has included these leases in premises and equipment as of March 31, 2023 and December 31, 2022 as follows (in thousands):

	March 31, 2023		December 31, 2022
Buildings	$	5,572	$	5,572
Less: accumulated depreciation	(2,457)		(2,540)
Net book value	$	3,115	$	3,032

Schedule of Future Minimum Financial Lease Payments

The following is a schedule by year of future minimum lease payments under the capitalized lease, together with the present value of net minimum lease payments as of March 31, 2023 (in thousands):

Year	Amount
2023	$	293
2024	391
2025	409
2026	425
2027	428
2028 and thereafter	1,988
Total minimum lease payments	3,934
Less: amount representing interest	(676)
Present value of net minimum lease payments	$	3,258

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GOODWILL AND INTANGIBLE ASSETS (Tables)

3 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Changes in Goodwill

The changes in goodwill included in the core banking segment during the three month periods ended March 31, 2023 and 2022 were as follows (in thousands):

	2023		2022
Beginning of year	$	21,824	$	21,824
Acquired goodwill	—		—
Ending balance March 31,	$	21,824	$	21,824

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COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Schedule of Contractual Amounts of Financial Instruments with Off-Balance Sheet Risk

The following table lists the contractual amounts of financial instruments with off-balance sheet risk at March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023				December 31, 2022
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	40,759	$	71,151	$	44,481	$	75,028
Unused lines of credit	3,085		344,423		2,887		326,188
Standby letters of credit	—		17,425		—		17,211

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)

3 Months Ended

Mar. 31, 2023

Equity [Abstract]

Schedule of Components of Accumulated Other Comprehensive Loss

The following is a summary of the changes in accumulated other comprehensive income (loss) by component, net of tax, for the periods indicated (in thousands):

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at January 1, 2023	$	(71,296)	$	(3,961)	$	(75,257)
Other comprehensive income before reclassification	5,775		—		5,775
Amounts reclassified from accumulated other comprehensive income	—		9		9
Net current period other comprehensive income	5,775		9		5,784
Balance at March 31, 2023	$	(65,521)	$	(3,952)	$	(69,473)

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at January 1, 2022	$	(2,495)	$	(4,035)	$	(6,530)
Other comprehensive income before reclassification	(31,087)		—		(31,087)
Amounts reclassified from accumulated other comprehensive income	—		12		12
Net current period other comprehensive income (loss)	(31,087)		12		(31,075)
Balance at March 31, 2022	$	(33,582)	$	(4,023)	$	(37,605)

Schedule of Reclassification Out of Accumulated Other Comprehensive Income

The following is the reclassification out of accumulated other comprehensive income for the periods indicated (in thousands):

Details about Accumulated Other Comprehensive Income (Loss) Components	Three Months Ended   March 31,				Affected Line Item in the Statement Where Net Income is Presented
	2023		2022
Amortization of defined pension plan and other benefit plan items:
Prior service costs (a)	$	—	$	—	Other components of net periodic pension and postretirement benefits
Actuarial losses (a)	12		14		Other components of net periodic pension and postretirement benefits
Tax effect	(3)		(2)		Income tax expense
Net of tax	9		12
Total reclassification for the period, net of tax	$	9	$	12

(a) These accumulated other comprehensive income components are included in the computation of net periodic pension and other benefit plan costs (see Note 11 for additional information).

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REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables)

3 Months Ended

Mar. 31, 2023

Revenue from Contract with Customer [Abstract]

Schedule of Disaggregation of Revenue

The following tables present the Corporation's non-interest income by revenue stream and reportable segment for the three months ended March 31, 2023 and 2022 (in thousands). Items outside the scope of ASC 606 are noted as such.

	Three Months Ended March 31, 2023
Revenue by Operating Segment: Non-interest income	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Service charges on deposit accounts
Overdraft fees	$	714	$	—	$	—	$	714
Other	227		—		—		227
Interchange revenue from debit card transactions	1,133		—		—		1,133
WMG fee income	—		2,580		—		2,580
CFS fee and commission income	—		—		241		241
Net gains (losses) on sales of OREO	—		—		—		—
Net gains on sales of loans(a)	5		—		—		5
Loan servicing fees(a)	36		—		—		36
Changes in fair value of equity investments(a)	78		—		(6)		72
Income from bank-owned life insurance(a)	10		—		—		10
Other(a)	448		—		(43)		405
Total non-interest income (loss)	$	2,651	$	2,580	$	192	$	5,423

(a) Not within scope of ASC 606.

(b) The Holding Company, CFS, and CRM column above includes amounts to eliminate transactions between segments.

	Three Months Ended March 31, 2022
Revenue by Operating Segment: Non-interest income	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Service charges on deposit accounts
Overdraft fees	$	673	$	—	$	—	$	673
Other	191		—		—		191
Interchange revenue from debit card transactions	1,130		—		—		1,130
WMG fee income	—		2,757		—		2,757
CFS fee and commission income	—		—		253		253
Net gains on sales of loans(a)	74		—		—		74
Loan servicing fees(a)	39		—		—		39
Changes in fair value of equity investments(a)	(114)		—		1		(113)
Income from bank-owned life insurance(a)	11		—		—		11
Other(a)	689		—		(41)		648
Total non-interest income	$	2,693	$	2,757	$	213	$	5,663

(a) Not within scope of ASC 606.

(b) The Holding Company, CFS, and CRM column above includes amounts to eliminate transactions between segments.

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COMPONENTS OF QUARTERLY AND YEAR TO DATE NET PERIODIC BENEFIT COSTS (Tables)

3 Months Ended

Mar. 31, 2023

Retirement Benefits [Abstract]

Schedule of Components of Net Periodic Benefit Costs

The components of net periodic expense for the Corporation’s pension and other benefit plans for the periods indicated are as follows (in thousands):

	Three Months Ended   March 31,
	2023		2022
Qualified Pension Plan
Service cost, benefits earned during the period	$	—	$	—
Interest cost on projected benefit obligation	396		282
Expected return on plan assets	(596)		(713)
Amortization of unrecognized transition obligation	—		—
Amortization of unrecognized prior service cost	—		—
Amortization of unrecognized net loss	6		—
Net periodic pension benefit	$	(194)	$	(431)
Supplemental Pension Plan
Service cost, benefits earned during the period	$	—	$	—
Interest cost on projected benefit obligation	12		8
Expected return on plan assets	—		—
Amortization of unrecognized prior service cost	—		—
Amortization of unrecognized net loss	2		5
Net periodic supplemental pension cost	$	14	$	13
Postretirement Plan, Medical and Life
Service cost, benefits earned during the period	$	—	$	—
Interest cost on projected benefit obligation	1		1
Expected return on plan assets	—		—
Amortization of unrecognized prior service cost	—		—
Amortization of unrecognized net loss	5		9
Net periodic postretirement, medical and life benefit	$	6	$	10

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SEGMENT REPORTING (Tables)

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Schedule of Summarized Financial Information Showing Reconciliation of Segment Net Income Loss and Assets to Consolidated Results

The Holding Company, CFS, and CRM columns below include amounts to eliminate transactions between segments (in thousands).

	Three months ended March 31, 2023
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	26,203	$	—	$	27	$	26,230
Interest expense	6,283		—		—		6,283
Net interest income	19,920		—		27		19,947
Provision for credit losses	277		—		—		277
Net interest income after provision for credit losses	19,643		—		27		19,670
Other non-interest income	2,651		2,580		192		5,423
Other non-interest expenses	13,696		1,798		342		15,836
Income (loss) before income tax expense (benefit)	8,598		782		(123)		9,257
Income tax expense (benefit)	1,831		177		(21)		1,987
Segment net income (loss)	$	6,767	$	605	$	(102)	$	7,270
Segment assets	$	2,644,158	$	8,311	$	1,714	$	2,654,183

	Three months ended March 31, 2022
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	17,451	$	—	$	7	$	17,458
Interest expense	781		—		—		781
Net interest income	16,670		—		7		16,677
Provision for credit losses	(1,145)		—		—		(1,145)
Net interest income after provision for credit losses	17,815		—		7		17,822
Other non-interest income	2,693		2,757		213		5,663
Other non-interest expenses	12,531		1,815		322		14,668
Income (loss) before income tax expense (benefit)	7,977		942		(102)		8,817
Income tax expense (benefit)	1,766		209		(25)		1,950
Segment net income (loss)	$	6,211	$	733	$	(77)	$	6,867
Segment assets	$	2,463,194	$	8,620	$	3,081	$	2,474,895

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STOCK COMPENSATION (Tables)

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Schedule of Restricted Stock Activity

A summary of restricted stock activity for the three months ended March 31, 2023 is presented below:

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at January 1, 2023	55,402	$44.57
Granted	13,069	$45.89
Vested	(14,143)	$45.38
Forfeited or cancelled	—	$—
Nonvested at March 31, 2023	54,328	$43.77

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)		Mar. 31, 2023		Dec. 31, 2022		Mar. 31, 2022	Dec. 31, 2021
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity		$ (177,341,000)		$ (166,388,000)		$ (185,510,000)	$ (211,455,000)
Allowance for credit losses		20,075,000	[1]	19,659,000	[1]	19,928,000	21,025,000
Unfunded Loan Commitment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit losses		1,048,000		0		0	0
Commercial Mortgages
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit losses		10,983,000		11,576,000		12,964,000	13,556,000
Consumer Loans
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit losses		3,147,000		2,865,000		1,875,000	2,075,000
Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity		$ (216,593,000)		(211,859,000)		$ (194,295,000)	(188,877,000)
Cumulative effect adjustment for the adoption of ASC 326
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity	[2]			1,076,000
Allowance for credit losses				374,000
Cumulative effect adjustment for the adoption of ASC 326 | Unfunded Loan Commitment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit losses				1,082,000			$ 0
Cumulative effect adjustment for the adoption of ASC 326 | Loan Portfolio
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit losses				400,000
Cumulative effect adjustment for the adoption of ASC 326 | Securities Portfolio
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit losses				0
Cumulative effect adjustment for the adoption of ASC 326 | Commercial Mortgages
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit losses				(695,000)
Cumulative effect adjustment for the adoption of ASC 326 | Commercial Mortgages | Commercial And Agricultural And Commercial Real Estate
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit losses				200,000
Cumulative effect adjustment for the adoption of ASC 326 | Consumer Loans
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit losses				176,000
Cumulative effect adjustment for the adoption of ASC 326 | Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity, before tax				1,500,000
Stockholders' equity	[2]			$ 1,076,000

[1] Effective January 1, 2023, the allowance calculation is based upon Current Expected Credit loss methodology. Prior to January 1, 2023, the allowance calculation was based upon incurred loss methodology. Refer to Note 1 for further discussion.

[2] Due to implementation of ASC 326. See "Adoption of New Accounting Standards" discussion in Note 1.

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EARNINGS PER COMMON SHARE (Details) - shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Earnings Per Share [Abstract]
Weighted average shares outstanding, basic (in shares)	4,721,000	4,689,000
Weighted average shares outstanding, diluted (in shares)	4,721,000	4,689,000
Dilutive common stock equivalents (in shares)	0	0

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SECURITIES - Securities Available for Sale (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Amortized cost and estimated fair value of debt securities available-for-sale
Amortized Cost	$ 714,839,000		$ 729,198,000
Unrealized Gains	149,000		157,000
Unrealized Losses	88,933,000		96,766,000
Allowance for credit losses	0
Estimated Fair Value	626,055,000		632,589,000
Amortized Cost
Within one year	3,141,000
After one, but within five years	104,669,000
After five, but within ten years	18,883,000
After ten years	471,000
Total	127,164,000
Total	714,839,000		729,198,000
Fair Value
Within one year	3,102,000
After one, but within five years	98,309,000
After five, but within ten years	14,501,000
After ten years	460,000
Total	116,372,000
Total	626,055,000		632,589,000
Proceeds from sales and calls of securities resulting in gains or losses
Debt securities, gain (loss)	0	$ 0
U.S. Treasury notes and bonds
Amortized cost and estimated fair value of debt securities available-for-sale
Amortized Cost	61,619,000		61,800,000
Unrealized Gains	0		0
Unrealized Losses	5,291,000		6,225,000
Allowance for credit losses	0
Estimated Fair Value	56,328,000		55,574,000
Amortized Cost
Total	61,619,000		61,800,000
Fair Value
Total	56,328,000		55,574,000
Mortgage-backed securities, residential
Amortized cost and estimated fair value of debt securities available-for-sale
Amortized Cost	508,906,000		518,838,000
Unrealized Gains	0		0
Unrealized Losses	76,252,000		83,707,000
Allowance for credit losses	0
Estimated Fair Value	432,654,000		435,131,000
Amortized Cost
Without single maturity date	508,906,000
Total	508,906,000		518,838,000
Fair Value
Without single maturity date	432,654,000
Total	432,654,000		435,131,000
Obligations of states and political subdivisions
Amortized cost and estimated fair value of debt securities available-for-sale
Amortized Cost	39,795,000		39,828,000
Unrealized Gains	19,000		2,000
Unrealized Losses	400,000		938,000
Allowance for credit losses	0
Estimated Fair Value	39,414,000		38,892,000
Amortized Cost
Total	39,795,000		39,828,000
Fair Value
Total	39,414,000		38,892,000
Corporate bonds and notes
Amortized cost and estimated fair value of debt securities available-for-sale
Amortized Cost	25,750,000		25,750,000
Unrealized Gains	0		0
Unrealized Losses	5,120,000		3,780,000
Allowance for credit losses	0
Estimated Fair Value	20,630,000		21,970,000
Amortized Cost
Total	25,750,000		25,750,000
Fair Value
Total	20,630,000		21,970,000
SBA loan pools
Amortized cost and estimated fair value of debt securities available-for-sale
Amortized Cost	78,769,000		82,982,000
Unrealized Gains	130,000		155,000
Unrealized Losses	1,870,000		2,116,000
Allowance for credit losses	0
Estimated Fair Value	77,029,000		81,022,000
Amortized Cost
Without single maturity date	78,769,000
Total	78,769,000		82,982,000
Fair Value
Without single maturity date	77,029,000
Total	$ 77,029,000		$ 81,022,000

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SECURITIES - Securities Held to Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Amortized cost and estimated fair value of securities held to maturity
Amortized Cost	$ 1,932	$ 2,424
Unrecognized Gains	0	0
Unrecognized Losses	27	22
Allowance for credit losses	0
Estimated Fair Value	1,905	2,402
Amortized Cost
Within one year	1,004
After one, but within five years	928
After five, but within ten years	0
After ten years	0
Total	1,932
Amortized Cost	1,932	2,424
Fair Value
Within one year	1,003
After one, but within five years	902
After five, but within ten years	0
After ten years	0
Total	1,905
Total	1,905	2,402
Obligations of states and political subdivisions
Amortized cost and estimated fair value of securities held to maturity
Amortized Cost	952	952
Unrecognized Gains	0	0
Unrecognized Losses	0	0
Allowance for credit losses	0
Estimated Fair Value	952	952
Amortized Cost
Amortized Cost	952	952
Fair Value
Total	952	952
Time deposits with other financial institutions
Amortized cost and estimated fair value of securities held to maturity
Amortized Cost	980	1,472
Unrecognized Gains	0	0
Unrecognized Losses	27	22
Allowance for credit losses	0
Estimated Fair Value	953	1,450
Amortized Cost
Amortized Cost	980	1,472
Fair Value
Total	953	$ 1,450
Mortgage-backed securities, residential
Amortized Cost
Without single maturity date	0
Fair Value
Without single maturity date	0
SBA loan pools
Amortized Cost
Without single maturity date	0
Fair Value
Without single maturity date	$ 0

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SECURITIES - Investment Securities Available for Sale in Continuous Unrealized Loss Position (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Fair Value
Less than 12 months	$ 40,939	$ 137,597
12 months or longer	562,190	468,381
Total	603,129	606,916
Unrealized Losses
Less than 12 months	939	9,999
12 months or longer	87,994	86,767
Total	88,933	96,766
U.S. Treasury notes and bonds
Fair Value
Less than 12 months	1,107	1,011
12 months or longer	55,221	54,563
Total	56,328	55,574
Unrealized Losses
Less than 12 months	16	30
12 months or longer	5,275	6,195
Total	5,291	6,225
Mortgage-backed securities, residential
Fair Value
Less than 12 months	7,594	79,891
12 months or longer	425,060	355,240
Total	432,654	435,131
Unrealized Losses
Less than 12 months	477	7,621
12 months or longer	75,775	76,086
Total	76,252	83,707
Obligations of states and political subdivisions
Fair Value
Less than 12 months	20,209	37,847
12 months or longer	12,962	0
Total	33,171	38,785
Unrealized Losses
Less than 12 months	176	938
12 months or longer	224	0
Total	400	938
Corporate bonds and notes
Fair Value
Less than 12 months	2,750	4,515
12 months or longer	12,064	7,455
Total	14,814	11,970
Unrealized Losses
Less than 12 months	250	485
12 months or longer	4,870	3,295
Total	5,120	3,780
SBA loan pools
Fair Value
Less than 12 months	9,279	14,333
12 months or longer	56,883	51,123
Total	66,162	65,456
Unrealized Losses
Less than 12 months	20	925
12 months or longer	1,850	1,191
Total	$ 1,870	$ 2,116

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LOANS AND ALLOWANCE FOR LOAN LOSSES - Loan Portfolio (Details) - USD ($) $ in Thousands	Mar. 31, 2023		Dec. 31, 2022		Mar. 31, 2022	Dec. 31, 2021
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	$ 1,873,701		$ 1,829,448
Allowance for credit losses	(20,075)	[1]	(19,659)	[1]	$ (19,928)	$ (21,025)
Loans, net	1,853,626		1,809,789
Construction
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	118,660
Commercial mortgages, other
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	917,637
Home equity lines and loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	84,537
Indirect consumer loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	211,270
Direct consumer loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	11,146
Commercial and Agricultural
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	244,507		252,293
Allowance for credit losses	(4,053)		(3,373)		(3,483)	(3,591)
Commercial Mortgages
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	1,036,297		996,913
Allowance for credit losses	(10,983)		(11,576)		(12,964)	(13,556)
Commercial Mortgages | Construction
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	118,660		108,243
Commercial Mortgages | Commercial mortgages, other
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	917,637		888,670
Residential Mortgages
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	285,944		285,672
Allowance for credit losses	(1,892)		(1,845)		(1,606)	(1,803)
Consumer Loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	306,953		294,570
Allowance for credit losses	(3,147)		(2,865)		$ (1,875)	$ (2,075)
Consumer Loans | Home equity lines and loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	84,537		81,401
Consumer Loans | Indirect consumer loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	211,270		202,124
Consumer Loans | Direct consumer loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	11,146		11,045
Commercial and industrial
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	244,174
Commercial and industrial | Commercial and Agricultural
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	244,174		252,044
Agricultural
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	333
Agricultural | Commercial and Agricultural
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	$ 333		$ 249

[1] Effective January 1, 2023, the allowance calculation is based upon Current Expected Credit loss methodology. Prior to January 1, 2023, the allowance calculation was based upon incurred loss methodology. Refer to Note 1 for further discussion.

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LOANS AND ALLOWANCE FOR LOAN LOSSES - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Credit Loss [Abstract]
Accrued interest	$ 6,300	$ 6,500
Number of days past due after which a retail loan is rated	90 days
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually analyzed	$ 6,837	$ 7,482
Collateral Pledged
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually analyzed	$ 5,955

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LOANS AND ALLOWANCE FOR LOAN LOSSES - Allowances For Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023		Mar. 31, 2022
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	$ 19,659	[1]	$ 21,025
Charge-offs	(383)		(198)
Recoveries	114		246
Net recoveries (charge-offs)	(269)		48
Provision	311		(1,145)
Ending balance	20,075	[1]	19,928
Credit provision related to off-balance sheet exposure	34
Cumulative effect adjustment for the adoption of ASC 326
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	374
Cumulative Effect, Period of Adoption, Adjusted Balance
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	20,033
Commercial and Agricultural
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	3,373		3,591
Charge-offs	(190)		(4)
Recoveries	6		6
Net recoveries (charge-offs)	(184)		2
Provision	(45)		(110)
Ending balance	4,053		3,483
Commercial and Agricultural | Cumulative effect adjustment for the adoption of ASC 326
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	909
Commercial and Agricultural | Cumulative Effect, Period of Adoption, Adjusted Balance
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	4,282
Commercial Mortgages
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	11,576		13,556
Charge-offs	0		0
Recoveries	0		1
Net recoveries (charge-offs)	0		1
Provision	102		(593)
Ending balance	10,983		12,964
Commercial Mortgages | Cumulative effect adjustment for the adoption of ASC 326
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	(695)
Commercial Mortgages | Cumulative Effect, Period of Adoption, Adjusted Balance
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	10,881
Residential Mortgages
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	1,845		1,803
Charge-offs	0		0
Recoveries	0		0
Net recoveries (charge-offs)	0		0
Provision	63		(197)
Ending balance	1,892		1,606
Residential Mortgages | Cumulative effect adjustment for the adoption of ASC 326
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	(16)
Residential Mortgages | Cumulative Effect, Period of Adoption, Adjusted Balance
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	1,829
Consumer Loans
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	2,865		2,075
Charge-offs	(193)		(194)
Recoveries	108		239
Net recoveries (charge-offs)	(85)		45
Provision	191		(245)
Ending balance	3,147		1,875
Consumer Loans | Cumulative effect adjustment for the adoption of ASC 326
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	176
Consumer Loans | Cumulative Effect, Period of Adoption, Adjusted Balance
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	3,041
Unfunded Loan Commitment
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	0		0
Provision	(34)		0
Ending balance	1,048		0
Unfunded Loan Commitment | Cumulative effect adjustment for the adoption of ASC 326
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	$ 1,082		$ 0

[1] Effective January 1, 2023, the allowance calculation is based upon Current Expected Credit loss methodology. Prior to January 1, 2023, the allowance calculation was based upon incurred loss methodology. Refer to Note 1 for further discussion.

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LOANS AND ALLOWANCE FOR LOAN LOSSES - Provision for Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Financing Receivable, Allowance for Credit Loss [Line Items]
Provision	$ 311	$ (1,145)
Loans And Unfunded Commitments
Financing Receivable, Allowance for Credit Loss [Line Items]
Provision	277	(1,145)
Loans Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
Provision	311	(1,145)
Unfunded Loan Commitment
Financing Receivable, Allowance for Credit Loss [Line Items]
Provision	$ (34)	$ 0

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LOANS AND ALLOWANCE FOR LOAN LOSSES - Allowances by Impairment (Details) - USD ($) $ in Thousands	Mar. 31, 2023		Dec. 31, 2022		Mar. 31, 2022	Dec. 31, 2021
Allowance for loan losses
Individually evaluated for impairment	$ 1,076		$ 1,147
Collectively evaluated for impairment	18,999		18,512
Total ending allowance balance	20,075	[1]	19,659	[1]	$ 19,928	$ 21,025
Loans:
Loans individually analyzed	6,837		7,482
Loans collectively analyzed	1,866,864		1,821,966
Total loans, net of deferred loan fees and costs	1,873,701		1,829,448
Collateral Pledged
Allowance for loan losses
Total ending allowance balance	204
Loans:
Loans individually analyzed	5,955
Commercial and Agricultural
Allowance for loan losses
Individually evaluated for impairment	1,040		1,078
Collectively evaluated for impairment	3,013		2,295
Total ending allowance balance	4,053		3,373		3,483	3,591
Loans:
Loans individually analyzed	1,779		2,112
Loans collectively analyzed	242,728		250,181
Total loans, net of deferred loan fees and costs	244,507		252,293
Commercial Mortgages
Allowance for loan losses
Individually evaluated for impairment	36		38
Collectively evaluated for impairment	10,947		11,538
Total ending allowance balance	10,983		11,576		12,964	13,556
Loans:
Loans individually analyzed	4,089		4,383
Loans collectively analyzed	1,032,208		992,530
Total loans, net of deferred loan fees and costs	1,036,297		996,913
Residential Mortgages
Allowance for loan losses
Individually evaluated for impairment	0		0
Collectively evaluated for impairment	1,892		1,845
Total ending allowance balance	1,892		1,845		1,606	1,803
Loans:
Loans individually analyzed	715		723
Loans collectively analyzed	285,229		284,949
Total loans, net of deferred loan fees and costs	285,944		285,672
Consumer Loans
Allowance for loan losses
Individually evaluated for impairment	0		31
Collectively evaluated for impairment	3,147		2,834
Total ending allowance balance	3,147		2,865		$ 1,875	$ 2,075
Loans:
Loans individually analyzed	254		264
Loans collectively analyzed	306,699		294,306
Total loans, net of deferred loan fees and costs	$ 306,953		$ 294,570

[1] Effective January 1, 2023, the allowance calculation is based upon Current Expected Credit loss methodology. Prior to January 1, 2023, the allowance calculation was based upon incurred loss methodology. Refer to Note 1 for further discussion.

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LOANS AND ALLOWANCE FOR LOAN LOSSES - Modifications (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	$ 277
Weighted-average term extension (in months)	60 months
Commercial Mortgages
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	$ 277
% of Loan Class	0.03%
Weighted-average interest rate reduction (%)	0.00%
Principal Reduction
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	$ 0
Principal Reduction (in thousands)	0
Principal Reduction | Commercial Mortgages
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0
Interest Rate Reduction
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0
Interest Rate Reduction | Commercial Mortgages
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0
Term Extension
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	277
Term Extension | Commercial Mortgages
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	277
Combination
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0
Combination | Commercial Mortgages
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	$ 0

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES - Collateral Dependent (Details) - USD ($) $ in Thousands	Mar. 31, 2023		Dec. 31, 2022		Mar. 31, 2022	Dec. 31, 2021
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually analyzed	$ 6,837		$ 7,482
Allowance for credit losses	20,075	[1]	19,659	[1]	$ 19,928	$ 21,025
Commercial and Agricultural
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually analyzed	1,779		2,112
Allowance for credit losses	4,053		3,373		3,483	3,591
Commercial Mortgages
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually analyzed	4,089		4,383
Allowance for credit losses	10,983		11,576		12,964	13,556
Residential Mortgages
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually analyzed	715		723
Allowance for credit losses	1,892		1,845		1,606	1,803
Consumer Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually analyzed	254		264
Allowance for credit losses	3,147		$ 2,865		$ 1,875	$ 2,075
Collateral Pledged
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually analyzed	5,955
Allowance for credit losses	204
Commercial Real Estate And Business Assets | Commercial and Agricultural | Commercial and industrial
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually analyzed	573
Allowance for credit losses	168
Commercial Real Estate | Commercial Mortgages | Commercial mortgages, other
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually analyzed	4,413
Allowance for credit losses	36
Residential Real Estate | Residential Mortgages
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually analyzed	715
Allowance for credit losses	0
Residential Real Estate | Consumer Loans | Home equity lines and loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually analyzed	254
Allowance for credit losses	$ 0

[1] Effective January 1, 2023, the allowance calculation is based upon Current Expected Credit loss methodology. Prior to January 1, 2023, the allowance calculation was based upon incurred loss methodology. Refer to Note 1 for further discussion.

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES - Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Total			$ 7,548
Impaired Financing Receivable, Recorded Investment [Abstract]
Total			7,522
Allowance for Loan Losses Allocated			1,147
Amortized Cost Basis
Average recorded investment, total	$ 6,836	$ 10,356
Interest Income Recognized
Total	18	47
Residential Mortgages
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
With no related allowance recorded			767
Impaired Financing Receivable, Recorded Investment [Abstract]
With no related allowance recorded			760
Amortized Cost Basis
With no related allowance recorded	715	895
Interest Income Recognized
With no related allowance recorded	9	11
Construction | Commercial Mortgages
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
With no related allowance recorded			5
Impaired Financing Receivable, Recorded Investment [Abstract]
With no related allowance recorded			5
Amortized Cost Basis
With no related allowance recorded	0	113
Interest Income Recognized
With no related allowance recorded	0	1
Commercial mortgages, other | Commercial Mortgages
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
With no related allowance recorded			4,346
With an allowance recorded			38
Impaired Financing Receivable, Recorded Investment [Abstract]
With no related allowance recorded			4,341
With an allowance recorded			38
Allowance for Loan Losses Allocated			38
Amortized Cost Basis
With no related allowance recorded	4,053	4,105
With an allowance recorded	36	2,601
Interest Income Recognized
With no related allowance recorded	7	7
With an allowance recorded	0	21
Home equity lines and loans | Consumer Loans
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
With no related allowance recorded			154
With an allowance recorded			126
Impaired Financing Receivable, Recorded Investment [Abstract]
With no related allowance recorded			138
With an allowance recorded			127
Allowance for Loan Losses Allocated			31
Amortized Cost Basis
With no related allowance recorded	254	161
With an allowance recorded	0	141
Interest Income Recognized
With no related allowance recorded	0	1
With an allowance recorded	0	0
Commercial and industrial | Commercial and Agricultural
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
With no related allowance recorded			1,026
With an allowance recorded			1,086
Impaired Financing Receivable, Recorded Investment [Abstract]
With no related allowance recorded			1,025
With an allowance recorded			1,088
Allowance for Loan Losses Allocated			$ 1,078
Amortized Cost Basis
With no related allowance recorded	729	926
With an allowance recorded	1,049	1,414
Interest Income Recognized
With no related allowance recorded	0	3
With an allowance recorded	$ 2	$ 3

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES - Receivables Past Due (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Financing Receivable, Past Due [Line Items]
Non-accrual with no allowance for credit losses	$ 6,802
Non-accrual	7,731	$ 8,178
Loans Past Due 90 Days or More and Still Accruing	6	1
Financing receivable	1,873,701	1,829,448
Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	6,569	6,603
30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	4,837	4,084
60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	174	1,045
90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,558	1,474
Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,867,132	1,822,845
Construction
Financing Receivable, Past Due [Line Items]
Financing receivable	118,660
Commercial mortgages, other
Financing Receivable, Past Due [Line Items]
Financing receivable	917,637
Home equity lines and loans
Financing Receivable, Past Due [Line Items]
Financing receivable	84,537
Indirect consumer loans
Financing Receivable, Past Due [Line Items]
Financing receivable	211,270
Direct consumer loans
Financing Receivable, Past Due [Line Items]
Financing receivable	11,146
Commercial and Agricultural
Financing Receivable, Past Due [Line Items]
Financing receivable	244,507	252,293
Commercial Mortgages
Financing Receivable, Past Due [Line Items]
Financing receivable	1,036,297	996,913
Commercial Mortgages | Construction
Financing Receivable, Past Due [Line Items]
Non-accrual with no allowance for credit losses	0
Non-accrual	0	5
Loans Past Due 90 Days or More and Still Accruing	0	0
Financing receivable	118,660	108,243
Commercial Mortgages | Construction | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	2,284	0
Commercial Mortgages | Construction | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	2,284	0
Commercial Mortgages | Construction | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	0
Commercial Mortgages | Construction | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	0
Commercial Mortgages | Construction | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	116,376	108,243
Commercial Mortgages | Commercial mortgages, other
Financing Receivable, Past Due [Line Items]
Non-accrual with no allowance for credit losses	3,611
Non-accrual	3,647	3,928
Loans Past Due 90 Days or More and Still Accruing	0	0
Financing receivable	917,637	888,670
Commercial Mortgages | Commercial mortgages, other | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	543	1,544
Commercial Mortgages | Commercial mortgages, other | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	246	1,058
Commercial Mortgages | Commercial mortgages, other | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	0
Commercial Mortgages | Commercial mortgages, other | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	297	486
Commercial Mortgages | Commercial mortgages, other | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	917,094	887,126
Residential Mortgages
Financing Receivable, Past Due [Line Items]
Non-accrual with no allowance for credit losses	1,036
Non-accrual	1,036	986
Loans Past Due 90 Days or More and Still Accruing	0	0
Financing receivable	285,944	285,672
Residential Mortgages | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,402	2,363
Residential Mortgages | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	933	1,360
Residential Mortgages | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	57	709
Residential Mortgages | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	412	294
Residential Mortgages | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	284,542	283,309
Consumer Loans
Financing Receivable, Past Due [Line Items]
Financing receivable	306,953	294,570
Consumer Loans | Home equity lines and loans
Financing Receivable, Past Due [Line Items]
Non-accrual with no allowance for credit losses	866
Non-accrual	866	760
Loans Past Due 90 Days or More and Still Accruing	0	0
Financing receivable	84,537	81,401
Consumer Loans | Home equity lines and loans | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	886	756
Consumer Loans | Home equity lines and loans | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	261	193
Consumer Loans | Home equity lines and loans | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	57	121
Consumer Loans | Home equity lines and loans | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	568	442
Consumer Loans | Home equity lines and loans | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	83,651	80,645
Consumer Loans | Indirect consumer loans
Financing Receivable, Past Due [Line Items]
Non-accrual with no allowance for credit losses	556
Non-accrual	556	540
Loans Past Due 90 Days or More and Still Accruing	0	0
Financing receivable	211,270	202,124
Consumer Loans | Indirect consumer loans | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,353	1,840
Consumer Loans | Indirect consumer loans | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,036	1,397
Consumer Loans | Indirect consumer loans | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	52	193
Consumer Loans | Indirect consumer loans | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	265	250
Consumer Loans | Indirect consumer loans | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	209,917	200,284
Consumer Loans | Direct consumer loans
Financing Receivable, Past Due [Line Items]
Non-accrual with no allowance for credit losses	3
Non-accrual	3	13
Loans Past Due 90 Days or More and Still Accruing	0	0
Financing receivable	11,146	11,045
Consumer Loans | Direct consumer loans | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	10	22
Consumer Loans | Direct consumer loans | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	10	2
Consumer Loans | Direct consumer loans | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	19
Consumer Loans | Direct consumer loans | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	1
Consumer Loans | Direct consumer loans | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	11,136	11,023
Commercial and industrial
Financing Receivable, Past Due [Line Items]
Financing receivable	244,174
Commercial and industrial | Commercial and Agricultural
Financing Receivable, Past Due [Line Items]
Non-accrual with no allowance for credit losses	730
Non-accrual	1,623	1,946
Loans Past Due 90 Days or More and Still Accruing	6	1
Financing receivable	244,174	252,044
Commercial and industrial | Commercial and Agricultural | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	91	78
Commercial and industrial | Commercial and Agricultural | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	67	74
Commercial and industrial | Commercial and Agricultural | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	8	3
Commercial and industrial | Commercial and Agricultural | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	16	1
Commercial and industrial | Commercial and Agricultural | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	244,083	251,966
Agricultural
Financing Receivable, Past Due [Line Items]
Financing receivable	333
Agricultural | Commercial and Agricultural
Financing Receivable, Past Due [Line Items]
Financing receivable	333	249
Agricultural | Commercial and Agricultural | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	0
Agricultural | Commercial and Agricultural | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	0
Agricultural | Commercial and Agricultural | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	0
Agricultural | Commercial and Agricultural | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	0
Agricultural | Commercial and Agricultural | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	$ 333	$ 249

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES - Credit Quality Indicator (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	$ 84,839
2022	465,206
2021	254,939
2020	209,427
2019	108,489
Prior	279,112
Revolving Loans Amortized Cost	455,191
Revolving Loans Converted to Term	16,498
Total loans, net of deferred loan fees and costs	1,873,701		$ 1,829,448
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
2023	0
2022	43
2021	37
2020	34
2019	12
Prior	249
Revolving Loans Amortized Cost	8
Revolving Loans Converted to Term	0
Total	383	$ 198
Recorded investment			1,835,996
Not rated
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			579,545
Pass
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			1,205,027
Special mention
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			37,465
Substandard
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			13,028
Doubtful
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			931
Construction
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	8,311
2022	2,995
2021	1,975
2020	0
2019	2,317
Prior	1,205
Revolving Loans Amortized Cost	101,857
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	118,660
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total	0
Construction | Pass
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	8,311
2022	2,819
2021	1,975
2020	0
2019	2,317
Prior	1,205
Revolving Loans Amortized Cost	101,857
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	118,484
Construction | Special mention
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0
2022	176
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	176
Construction | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	0
Construction | Doubtful
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	0
Commercial mortgages, other
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	32,006
2022	218,664
2021	138,442
2020	100,090
2019	40,489
Prior	189,216
Revolving Loans Amortized Cost	192,135
Revolving Loans Converted to Term	6,595
Total loans, net of deferred loan fees and costs	917,637
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total	0
Commercial mortgages, other | Pass
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	31,729
2022	214,915
2021	129,614
2020	99,057
2019	40,489
Prior	180,523
Revolving Loans Amortized Cost	192,038
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	888,365
Commercial mortgages, other | Special mention
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0
2022	2,563
2021	8,828
2020	1,033
2019	0
Prior	3,867
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	6,154
Total loans, net of deferred loan fees and costs	22,445
Commercial mortgages, other | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	277
2022	1,186
2021	0
2020	0
2019	0
Prior	4,790
Revolving Loans Amortized Cost	97
Revolving Loans Converted to Term	441
Total loans, net of deferred loan fees and costs	6,791
Commercial mortgages, other | Doubtful
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	36
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	36
Home equity lines and loans
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	3,945
2022	19,073
2021	6,477
2020	3,827
2019	3,231
Prior	13,132
Revolving Loans Amortized Cost	34,852
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	84,537
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost	8
Revolving Loans Converted to Term	0
Total	8
Home equity lines and loans | Not rated
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	3,945
2022	19,073
2021	6,477
2020	3,827
2019	3,110
Prior	12,740
Revolving Loans Amortized Cost	34,500
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	83,672
Home equity lines and loans | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0
2022	0
2021	0
2020	0
2019	121
Prior	392
Revolving Loans Amortized Cost	352
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	865
Indirect consumer
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	26,012
2022	123,779
2021	32,236
2020	14,433
2019	7,458
Prior	7,352
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	211,270
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
2023	0
2022	43
2021	36
2020	30
2019	12
Prior	23
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total	144
Indirect consumer | Not rated
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	26,012
2022	123,593
2021	32,138
2020	14,374
2019	7,385
Prior	7,211
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	210,713
Indirect consumer | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0
2022	186
2021	98
2020	59
2019	73
Prior	141
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	557
Direct consumer
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	1,121
2022	3,956
2021	1,330
2020	630
2019	266
Prior	481
Revolving Loans Amortized Cost	3,362
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	11,146
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
2023	0
2022	0
2021	1
2020	4
2019	0
Prior	36
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total	41
Direct consumer | Not rated
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	1,121
2022	3,956
2021	1,330
2020	630
2019	266
Prior	478
Revolving Loans Amortized Cost	3,362
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	11,143
Direct consumer | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	3
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	3
Commercial and industrial
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	7,850
2022	44,039
2021	21,802
2020	15,138
2019	38,131
Prior	14,538
Revolving Loans Amortized Cost	92,773
Revolving Loans Converted to Term	9,903
Total loans, net of deferred loan fees and costs	244,174
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	190
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total	190
Commercial and industrial | Pass
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	7,750
2022	43,899
2021	21,452
2020	14,723
2019	38,017
Prior	12,844
Revolving Loans Amortized Cost	88,666
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	227,351
Commercial and industrial | Special mention
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	100
2022	104
2021	350
2020	3
2019	86
Prior	457
Revolving Loans Amortized Cost	3,478
Revolving Loans Converted to Term	9,315
Total loans, net of deferred loan fees and costs	13,893
Commercial and industrial | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0
2022	36
2021	0
2020	412
2019	28
Prior	370
Revolving Loans Amortized Cost	629
Revolving Loans Converted to Term	588
Total loans, net of deferred loan fees and costs	2,063
Commercial and industrial | Doubtful
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	867
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	867
Agricultural
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0
2022	17
2021	170
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost	146
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	333
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total	0
Agricultural | Pass
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0
2022	17
2021	170
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost	146
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	333
Agricultural | Special mention
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	0
Agricultural | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	0
Agricultural | Doubtful
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	0
Commercial and Agricultural
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	244,507		252,293
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Total	190	4
Commercial and Agricultural | Commercial and industrial
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	244,174		252,044
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			253,041
Commercial and Agricultural | Commercial and industrial | Not rated
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Commercial and Agricultural | Commercial and industrial | Pass
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			235,900
Commercial and Agricultural | Commercial and industrial | Special mention
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			13,349
Commercial and Agricultural | Commercial and industrial | Substandard
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			2,899
Commercial and Agricultural | Commercial and industrial | Doubtful
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			893
Commercial and Agricultural | Agricultural
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	333		249
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			250
Commercial and Agricultural | Agricultural | Not rated
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Commercial and Agricultural | Agricultural | Pass
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			250
Commercial and Agricultural | Agricultural | Special mention
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Commercial and Agricultural | Agricultural | Substandard
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Commercial and Agricultural | Agricultural | Doubtful
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Commercial Mortgages
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	1,036,297		996,913
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Total	0	0
Commercial Mortgages | Construction
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	118,660		108,243
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			108,671
Commercial Mortgages | Construction | Not rated
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Commercial Mortgages | Construction | Pass
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			108,488
Commercial Mortgages | Construction | Special mention
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			178
Commercial Mortgages | Construction | Substandard
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			5
Commercial Mortgages | Construction | Doubtful
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Commercial Mortgages | Commercial mortgages, other
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	917,637		888,670
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			892,190
Commercial Mortgages | Commercial mortgages, other | Not rated
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Commercial Mortgages | Commercial mortgages, other | Pass
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			860,389
Commercial Mortgages | Commercial mortgages, other | Special mention
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			23,938
Commercial Mortgages | Commercial mortgages, other | Substandard
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			7,825
Commercial Mortgages | Commercial mortgages, other | Doubtful
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			38
Residential Mortgages
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	5,594
2022	52,683
2021	52,507
2020	75,309
2019	16,597
Prior	53,188
Revolving Loans Amortized Cost	30,066
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	285,944		285,672
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total	0	0
Recorded investment			286,445
Residential Mortgages | Not rated
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	5,594
2022	52,576
2021	52,443
2020	75,198
2019	16,416
Prior	52,615
Revolving Loans Amortized Cost	30,066
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	284,908
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			285,459
Residential Mortgages | Pass
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Residential Mortgages | Special mention
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Residential Mortgages | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0
2022	107
2021	64
2020	111
2019	181
Prior	573
Revolving Loans Amortized Cost	0
Revolving Loans Converted to Term	0
Total loans, net of deferred loan fees and costs	1,036
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			986
Residential Mortgages | Doubtful
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Consumer Loans
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	306,953		294,570
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Total	193	$ 194
Consumer Loans | Home equity lines and loans
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	84,537		81,401
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			81,702
Consumer Loans | Home equity lines and loans | Performing
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	83,672
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			80,942
Consumer Loans | Home equity lines and loans | Non-Performing
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	865
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			760
Consumer Loans | Home equity lines and loans | Not rated
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			80,942
Consumer Loans | Home equity lines and loans | Pass
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Consumer Loans | Home equity lines and loans | Special mention
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Consumer Loans | Home equity lines and loans | Substandard
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			760
Consumer Loans | Home equity lines and loans | Doubtful
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Consumer Loans | Indirect consumer
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	211,270		202,124
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			202,590
Consumer Loans | Indirect consumer | Performing
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	210,713
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			202,050
Consumer Loans | Indirect consumer | Non-Performing
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	557
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			540
Consumer Loans | Indirect consumer | Not rated
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			202,050
Consumer Loans | Indirect consumer | Pass
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Consumer Loans | Indirect consumer | Special mention
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Consumer Loans | Indirect consumer | Substandard
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			540
Consumer Loans | Indirect consumer | Doubtful
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Consumer Loans | Direct consumer
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	11,146		11,045
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			11,107
Consumer Loans | Direct consumer | Not rated
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			11,094
Consumer Loans | Direct consumer | Pass
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Consumer Loans | Direct consumer | Special mention
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Consumer Loans | Direct consumer | Substandard
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			13
Consumer Loans | Direct consumer | Doubtful
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			0
Consumer Loans | Residential mortgages
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	285,944
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			286,445
Consumer Loans | Residential mortgages | Performing
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	284,908
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			285,459
Consumer Loans | Residential mortgages | Non-Performing
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	1,036
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			986
Consumer Loans | Other Direct Consumer Loans
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	11,146
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			11,107
Consumer Loans | Other Direct Consumer Loans | Performing
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	11,143
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			11,094
Consumer Loans | Other Direct Consumer Loans | Non-Performing
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	$ 3
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment			$ 13

XML

FAIR VALUE - Assets and Liabilities Measured at Fair Value (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Financial Assets:
Total	$ 626,055	$ 632,589
Derivative assets	22,710	27,141
Financial Liabilities:
Derivative liabilities	22,776	27,196
Recurring
Financial Assets:
U.S. Treasury notes and bonds	56,328	55,574
Mortgage-backed securities, residential	432,654	435,131
Obligations of states and political subdivisions	39,414	38,892
Corporate bonds and notes	20,630	21,970
SBA loan pools	77,029	81,022
Total	626,055	632,589
Equity investments, at fair value	2,311	2,246
Derivative assets	22,710	27,141
Financial Liabilities:
Derivative liabilities	22,776	27,196
Quoted Prices in Active Markets for Identical Assets (Level 1) | Recurring
Financial Assets:
U.S. Treasury notes and bonds	56,328	55,574
Mortgage-backed securities, residential	0	0
Obligations of states and political subdivisions	0	0
Corporate bonds and notes	0	0
SBA loan pools	0	0
Total	56,328	55,574
Equity investments, at fair value	2,311	2,246
Derivative assets	0	0
Financial Liabilities:
Derivative liabilities	0	0
Significant Other Observable Inputs (Level 2) | Recurring
Financial Assets:
U.S. Treasury notes and bonds	0	0
Mortgage-backed securities, residential	432,654	435,131
Obligations of states and political subdivisions	39,414	38,892
Corporate bonds and notes	11,964	21,970
SBA loan pools	77,029	81,022
Total	561,061	577,015
Equity investments, at fair value	0	0
Derivative assets	22,710	27,141
Financial Liabilities:
Derivative liabilities	22,776	27,196
Significant Unobservable Inputs (Level 3) | Recurring
Financial Assets:
U.S. Treasury notes and bonds	0	0
Mortgage-backed securities, residential	0	0
Obligations of states and political subdivisions	0	0
Corporate bonds and notes	8,666	0
SBA loan pools	0	0
Total	8,666	0
Equity investments, at fair value	0	0
Derivative assets	0	0
Financial Liabilities:
Derivative liabilities	$ 0	$ 0

XML

FAIR VALUE - Narrative (Details)	Dec. 31, 2022 USD ($)
Significant Unobservable Inputs (Level 3)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, fair value disclosure	$ 0

XML

FAIR VALUE - Unobservable Inputs (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance of recurring Level 3 assets at January 1, 2023	$ 0	$ 0
Included in other comprehensive income	(1,289)	0
Transfer into Level 3	9,955	0
Balance of recurring Level 3 assets at March 31, 2023	$ 8,666	$ 0

XML

FAIR VALUE - Quantitative Information (Details) - Corporate Bonds And Notes $ in Thousands	Mar. 31, 2023 USD ($)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Assets, fair value disclosure	$ 8,666
Market discount rate | Discounted cash flow | Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Financial asset, measurement input	0.1200
Market discount rate | Discounted cash flow | Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Financial asset, measurement input	0.1200
Market discount rate | Discounted cash flow | Weighted Average
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Financial asset, measurement input	0.1200

XML

FAIR VALUE - Carrying Amounts and Estimated Fair Values of Other Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Financial assets:
Cash and due from financial institutions	$ 25,109	$ 29,309
Interest-earning deposits in other financial institutions	9,532	26,560
Securities available for sale	626,055	632,589
Securities held to maturity	1,932	2,424
Loans, net and loans held for sale	1,853,626	1,809,789
Derivative assets	22,710	27,141
Deposits [Abstract]
Derivative Liabilities	22,776	27,196
Recurring
Financial assets:
Securities available for sale	626,055	632,589
Derivative assets	22,710	27,141
Deposits [Abstract]
Derivative Liabilities	22,776	27,196
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets:
Securities available for sale	56,328	55,574
Derivative assets	0	0
Deposits [Abstract]
Derivative Liabilities	0	0
Recurring | Significant Other Observable Inputs (Level 2)
Financial assets:
Securities available for sale	561,061	577,015
Derivative assets	22,710	27,141
Deposits [Abstract]
Derivative Liabilities	22,776	27,196
Recurring | Significant Unobservable Inputs (Level 3)
Financial assets:
Securities available for sale	8,666	0
Derivative assets	0	0
Deposits [Abstract]
Derivative Liabilities	0	0
Recurring | Carrying Amount
Financial assets:
Cash and due from financial institutions	25,109	29,309
Interest-earning deposits in other financial institutions	9,532	26,560
Equity investments	2,949	2,830
Securities available for sale	626,055	632,589
Securities held to maturity	1,932	2,424
FHLBNY and FRBNY stock	7,913	8,197
Loans, net and loans held for sale	1,853,626	1,809,789
Accrued interest receivable	8,469	8,682
Derivative assets	22,710	27,141
Deposits [Abstract]
Demand, savings, and insured money market accounts	1,880,335	1,924,843
Time deposits	452,094	402,384
Accrued interest payable	1,500	864
Derivative Liabilities	22,776	27,196
Recurring | Estimated Fair Value
Financial assets:
Cash and due from financial institutions	25,109	29,309
Interest-earning deposits in other financial institutions	9,532	26,560
Equity investments	2,949	2,830
Securities available for sale	626,055	632,589
Securities held to maturity	1,905	3,796
Loans, net and loans held for sale	1,790,939	1,757,171
Accrued interest receivable	8,469	8,682
Derivative assets	22,710	27,141
Deposits [Abstract]
Demand, savings, and insured money market accounts	1,880,335	1,924,843
Time deposits	450,201	403,572
Accrued interest payable	1,500	864
Derivative Liabilities	22,776	27,196
Recurring | Estimated Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets:
Cash and due from financial institutions	25,109	29,309
Interest-earning deposits in other financial institutions	9,532	26,560
Equity investments	2,949	2,830
Securities available for sale	56,328	55,574
Securities held to maturity	0	0
FHLBNY and FRBNY stock	0	0
Loans, net and loans held for sale	0	0
Accrued interest receivable	229	132
Derivative assets	0	0
Deposits [Abstract]
Demand, savings, and insured money market accounts	1,880,335	1,924,843
Time deposits	0	0
Accrued interest payable	73	64
Derivative Liabilities	0	0
Recurring | Estimated Fair Value | Significant Other Observable Inputs (Level 2)
Financial assets:
Cash and due from financial institutions	0	0
Interest-earning deposits in other financial institutions	0	0
Equity investments	0	0
Securities available for sale	561,061	577,015
Securities held to maturity	953	1,639
FHLBNY and FRBNY stock	0	0
Loans, net and loans held for sale	0	0
Accrued interest receivable	1,900	2,002
Derivative assets	22,710	27,141
Deposits [Abstract]
Demand, savings, and insured money market accounts	0	0
Time deposits	450,201	403,572
Accrued interest payable	1,427	800
Derivative Liabilities	22,776	27,196
Recurring | Estimated Fair Value | Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and due from financial institutions	0	0
Interest-earning deposits in other financial institutions	0	0
Equity investments	0	0
Securities available for sale	8,666	0
Securities held to maturity	952	2,157
FHLBNY and FRBNY stock	0	0
Loans, net and loans held for sale	1,790,939	1,757,171
Accrued interest receivable	6,340	6,548
Derivative assets	0	0
Deposits [Abstract]
Demand, savings, and insured money market accounts	0	0
Time deposits	0	0
Accrued interest payable	0	0
Derivative Liabilities	$ 0	$ 0

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LEASES - Narrative (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Lessee, Lease, Description [Line Items]
Operating lease, weighted average remaining lease term (years)	8 years 5 months 4 days
Operating lease, weighted average discount rate	3.36%
Operating lease, rent expense	$ 200,000
Operating lease not yet commenced	$ 0
Finance lease, weighted average remaining lease term (years)	9 years 11 months 26 days
Finance lease, weighted average discount rate	3.40%
Finance lease not yet commenced	$ 0
1365 New Scotland Road, Slingerlands, New York | Director
Lessee, Lease, Description [Line Items]
Monthly rent and common area maintenance expense	4,000
Rent and common area maintenance expense		$ 13,000
2 Rush Street, Schenectady, New York | Director
Lessee, Lease, Description [Line Items]
Operating lease, rent expense	26,000	$ 26,000
Monthly rent and common area maintenance expense	$ 9,000

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LEASES - Leased Branch Properties (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Leases [Abstract]
Operating lease right-of-use asset	$ 6,449	$ 7,234
Less: accumulated amortization	(199)	(785)
Less: lease termination	0	0
Add: new lease agreement and modifications	0	0
Operating lease right-of-use assets	$ 6,250	$ 6,449

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LEASES - Maturities of Operating Lease Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Leases [Abstract]
2023	$ 747
2024	924
2025	841
2026	845
2027	854
2027 and thereafter	3,169
Total minimum lease payments	7,380
Less: amount representing interest	(953)
Present value of net minimum lease payments	$ 6,427	$ 6,620

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LEASES - Premises and Equipment (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Leases [Abstract]
Finance Lease, Liability, Statement of Financial Position [Extensible Enumeration]	Premises and equipment, net	Premises and equipment, net
Buildings	$ 5,572	$ 5,572
Less: accumulated depreciation	(2,457)	(2,540)
Net book value	$ 3,115	$ 3,032

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LEASES - Future Minimum Lease Payment Obligations Under Finance Leases (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Leases [Abstract]
2023	$ 293
2024	391
2025	409
2026	425
2027	428
2027 and thereafter	1,988
Total minimum lease payments	3,934
Less: amount representing interest	(676)
Present value of net minimum lease payments	$ 3,258	$ 3,327

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GOODWILL AND INTANGIBLE ASSETS - Changes in Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Goodwill [Roll Forward]
Beginning of year	$ 21,824	$ 21,824
Acquired goodwill	0	0
Ending balance	$ 21,824	$ 21,824

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GOODWILL AND INTANGIBLE ASSETS - Narrative (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Jun. 30, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of intangible assets	$ 0	$ 11,000
Goodwill impairment charges			$ 0

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COMMITMENTS AND CONTINGENCIES - Narrative (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended
	Apr. 30, 2020	Mar. 31, 2023		Dec. 31, 2022		Mar. 31, 2022	Dec. 31, 2021	Feb. 04, 2020
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Allowance for credit losses		$ 20,075	[1]	$ 19,659	[1]	$ 19,928	$ 21,025
Participating credit facility receivable, ownership interest, amount								$ 4,200
Participating credit facility receivable, amount								$ 36,000
Unfunded Loan Commitment
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Allowance for credit losses		1,048		0		$ 0	0
Cumulative effect adjustment for the adoption of ASC 326
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Allowance for credit losses				374
Cumulative effect adjustment for the adoption of ASC 326 | Unfunded Loan Commitment
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Allowance for credit losses				$ 1,082			$ 0
Pioneer Bank Litigation
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Litigation settlement, recovery received	$ 500
Loss contingency, damages sought		$ 3,700

[1] Effective January 1, 2023, the allowance calculation is based upon Current Expected Credit loss methodology. Prior to January 1, 2023, the allowance calculation was based upon incurred loss methodology. Refer to Note 1 for further discussion.

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COMMITMENTS AND CONTINGENCIES - Contractual Amounts of Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Commitments to make loans | Fixed Rate
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Contractual amounts of financial instruments with off-balance sheet risk	$ 40,759	$ 44,481
Commitments to make loans | Variable Rate
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Contractual amounts of financial instruments with off-balance sheet risk	71,151	75,028
Unused lines of credit | Fixed Rate
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Contractual amounts of financial instruments with off-balance sheet risk	3,085	2,887
Unused lines of credit | Variable Rate
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Contractual amounts of financial instruments with off-balance sheet risk	344,423	326,188
Standby letters of credit | Fixed Rate
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Contractual amounts of financial instruments with off-balance sheet risk	0	0
Standby letters of credit | Variable Rate
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Contractual amounts of financial instruments with off-balance sheet risk	$ 17,425	$ 17,211

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Summary of Changes in Accumulated Other Comprehensive Income or Loss by Component (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Changes in accumulated other comprehensive income or loss by component, net of tax [Roll Forward]
Beginning balance	$ 166,388	$ 211,455
Other comprehensive income before reclassification	5,775	(31,087)
Amounts reclassified from accumulated other comprehensive income	9	12
Total other comprehensive income (loss)	5,784	(31,075)
Ending balance	177,341	185,510
Total
Changes in accumulated other comprehensive income or loss by component, net of tax [Roll Forward]
Beginning balance	(75,257)	(6,530)
Total other comprehensive income (loss)	5,784	(31,075)
Ending balance	(69,473)	(37,605)
Unrealized Gains and Losses on Securities Available for Sale
Changes in accumulated other comprehensive income or loss by component, net of tax [Roll Forward]
Beginning balance	(71,296)	(2,495)
Other comprehensive income before reclassification	5,775	(31,087)
Amounts reclassified from accumulated other comprehensive income	0	0
Total other comprehensive income (loss)	5,775	(31,087)
Ending balance	(65,521)	(33,582)
Defined Benefit and Other Benefit Plans
Changes in accumulated other comprehensive income or loss by component, net of tax [Roll Forward]
Beginning balance	(3,961)	(4,035)
Other comprehensive income before reclassification	0	0
Amounts reclassified from accumulated other comprehensive income	9	12
Total other comprehensive income (loss)	9	12
Ending balance	$ (3,952)	$ (4,023)

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Details about Accumulated Other Comprehensive Income Components (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax effect	$ (1,987)	$ (1,950)
Total reclassification for the period, net of tax	7,270	6,867
Reclassification out of Accumulated Other Comprehensive Income
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total reclassification for the period, net of tax	9	12
Prior service costs | Reclassification out of Accumulated Other Comprehensive Income
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Pension and other employee benefits	0	0
Actuarial losses | Reclassification out of Accumulated Other Comprehensive Income
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Pension and other employee benefits	12	14
Defined Benefit and Other Benefit Plans | Reclassification out of Accumulated Other Comprehensive Income
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax effect	(3)	(2)
Total reclassification for the period, net of tax	$ 9	$ 12

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REVENUE FROM CONTRACTS WITH CUSTOMERS (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Disaggregation of Revenue [Line Items]
Changes in fair value of equity investments	$ 72	$ (113)
Income from bank owned life insurance	10	11
Other non-interest income	5,423	5,663
Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Other non-interest income	192	213
Overdraft fees
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	714	673
Other
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	227	191
Interchange revenue from debit card transactions
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	1,133	1,130
WMG fee income
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	2,580	2,757
CFS fee and commission income
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	241	253
Net gains (losses) on sales of OREO
Disaggregation of Revenue [Line Items]
Net gains (losses) on sales of OREO	0
Net gains on sales of loans
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	5	74
Loan servicing fees
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	36	39
Income from bank-owned life insurance
Disaggregation of Revenue [Line Items]
Income from bank owned life insurance	10	11
Other
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	405	648
Core Banking | Operating Segments
Disaggregation of Revenue [Line Items]
Changes in fair value of equity investments	78	(114)
Other non-interest income	2,651	2,693
Core Banking | Overdraft fees | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	714	673
Core Banking | Other | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	227	191
Core Banking | Interchange revenue from debit card transactions | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	1,133	1,130
Core Banking | WMG fee income | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0
Core Banking | CFS fee and commission income | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0
Core Banking | Net gains (losses) on sales of OREO | Operating Segments
Disaggregation of Revenue [Line Items]
Net gains (losses) on sales of OREO	0
Core Banking | Net gains on sales of loans | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	5	74
Core Banking | Loan servicing fees | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	36	39
Core Banking | Income from bank-owned life insurance | Operating Segments
Disaggregation of Revenue [Line Items]
Income from bank owned life insurance	10	11
Core Banking | Other | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	448	689
WMG | Operating Segments
Disaggregation of Revenue [Line Items]
Changes in fair value of equity investments	0	0
Other non-interest income	2,580	2,757
WMG | Overdraft fees | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0
WMG | Other | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0
WMG | Interchange revenue from debit card transactions | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0
WMG | WMG fee income | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	2,580	2,757
WMG | CFS fee and commission income | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0
WMG | Net gains (losses) on sales of OREO | Operating Segments
Disaggregation of Revenue [Line Items]
Net gains (losses) on sales of OREO	0
WMG | Net gains on sales of loans | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	0	0
WMG | Loan servicing fees | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	0	0
WMG | Income from bank-owned life insurance | Operating Segments
Disaggregation of Revenue [Line Items]
Income from bank owned life insurance	0	0
WMG | Other | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	0	0
Holding Company, CFS, and CRM | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Changes in fair value of equity investments	(6)	1
Other non-interest income	192	213
Holding Company, CFS, and CRM | Overdraft fees | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0
Holding Company, CFS, and CRM | Other | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0
Holding Company, CFS, and CRM | Interchange revenue from debit card transactions | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0
Holding Company, CFS, and CRM | WMG fee income | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0
Holding Company, CFS, and CRM | CFS fee and commission income | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	241	253
Holding Company, CFS, and CRM | Net gains (losses) on sales of OREO | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Net gains (losses) on sales of OREO	0
Holding Company, CFS, and CRM | Net gains on sales of loans | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	0	0
Holding Company, CFS, and CRM | Loan servicing fees | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	0	0
Holding Company, CFS, and CRM | Income from bank-owned life insurance | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Income from bank owned life insurance	0	0
Holding Company, CFS, and CRM | Other | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	$ (43)	$ (41)

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COMPONENTS OF QUARTERLY AND YEAR TO DATE NET PERIODIC BENEFIT COSTS (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Qualified Pension Plan
Defined Benefit Plan, Net Periodic Benefit Cost (Credit) [Abstract]
Service cost, benefits earned during the period	$ 0	$ 0
Interest cost on projected benefit obligation	396	282
Expected return on plan assets	(596)	(713)
Amortization of unrecognized transition obligation	0	0
Amortization of unrecognized prior service cost	0	0
Amortization of unrecognized net loss	6	0
Net periodic pension benefit	(194)	(431)
Supplemental Pension Plan
Defined Benefit Plan, Net Periodic Benefit Cost (Credit) [Abstract]
Service cost, benefits earned during the period	0	0
Interest cost on projected benefit obligation	12	8
Expected return on plan assets	0	0
Amortization of unrecognized prior service cost	0	0
Amortization of unrecognized net loss	2	5
Net periodic pension benefit	14	13
Postretirement Plan, Medical and Life
Defined Benefit Plan, Net Periodic Benefit Cost (Credit) [Abstract]
Service cost, benefits earned during the period	0	0
Interest cost on projected benefit obligation	1	1
Expected return on plan assets	0	0
Amortization of unrecognized prior service cost	0	0
Amortization of unrecognized net loss	5	9
Net periodic pension benefit	$ 6	$ 10

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SEGMENT REPORTING - Narrative (Details)	3 Months Ended
	Mar. 31, 2023 segment
Segment Reporting [Abstract]
Number of primary business segments	2

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SEGMENT REPORTING - Reconciliation of Segment Net Income Loss and Assets (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Reportable segments and reconciliation to consolidated results [Abstract]
Interest and dividend income		$ 26,230	$ 17,458
Interest expense		6,283	781
Net interest income		19,947	16,677
Provision for credit losses	[1]	277	(1,145)
Net interest income after provision for credit losses		19,670	17,822
Other non-interest income		5,423	5,663
Other non-interest expenses		15,836	14,668
Income (loss) before income tax expense (benefit)		9,257	8,817
Income tax expense (benefit)		1,987	1,950
Segment net income (loss)		7,270	6,867
Assets		2,654,183	2,474,895	$ 2,645,553
Operating Segments | Core Banking
Reportable segments and reconciliation to consolidated results [Abstract]
Interest and dividend income		26,203	17,451
Interest expense		6,283	781
Net interest income		19,920	16,670
Provision for credit losses		277	(1,145)
Net interest income after provision for credit losses		19,643	17,815
Other non-interest income		2,651	2,693
Other non-interest expenses		13,696	12,531
Income (loss) before income tax expense (benefit)		8,598	7,977
Income tax expense (benefit)		1,831	1,766
Segment net income (loss)		6,767	6,211
Assets		2,644,158	2,463,194
Operating Segments | WMG
Reportable segments and reconciliation to consolidated results [Abstract]
Interest and dividend income		0	0
Interest expense		0	0
Net interest income		0	0
Provision for credit losses		0	0
Net interest income after provision for credit losses		0	0
Other non-interest income		2,580	2,757
Other non-interest expenses		1,798	1,815
Income (loss) before income tax expense (benefit)		782	942
Income tax expense (benefit)		177	209
Segment net income (loss)		605	733
Assets		8,311	8,620
Intersegment Eliminations
Reportable segments and reconciliation to consolidated results [Abstract]
Interest and dividend income		27	7
Interest expense		0	0
Net interest income		27	7
Provision for credit losses		0	0
Net interest income after provision for credit losses		27	7
Other non-interest income		192	213
Other non-interest expenses		342	322
Income (loss) before income tax expense (benefit)		(123)	(102)
Income tax expense (benefit)		(21)	(25)
Segment net income (loss)		(102)	(77)
Assets		$ 1,714	$ 3,081

[1] Effective January 1, 2023, the allowance calculation is based upon Current Expected Credit loss methodology. Prior to January 1, 2023, the allowance calculation was based upon incurred loss methodology. Refer to Note 1 for further discussion.

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STOCK COMPENSATION - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of treasury shares reissued to fund stock compensation (in shares)	13,069	12,560
Vesting period	1 year
Expenses related to stock based compensation recognized	$ 400	$ 300
Restricted Stock
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Total unrecognized compensation cost related to nonvested shares granted under the Plan	$ 1,900
Weighted-average period for recognition (in years)	3 years 9 months 14 days
Total fair value of shares vested	$ 600	$ 100
2021 Plan
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of shares authorized (in shares)	170,000
Trading days period	30 days

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STOCK COMPENSATION - Restricted Stock Activity For Officers And Employees (Details) - Restricted Stock	3 Months Ended
	Mar. 31, 2023 $ / shares shares
Shares
Nonvested, beginning balance (in shares) | shares	55,402
Granted (in shares) | shares	13,069
Vested (in shares) | shares	(14,143)
Forfeited or cancelled (in shares) | shares	0
Nonvested, ending balance (in shares) | shares	54,328
Weighted–Average Grant Date Fair Value
Nonvested, beginning balance (in dollars per share) | $ / shares	$ 44.57
Granted (in dollars per share) | $ / shares	45.89
Vested (in dollars per share) | $ / shares	45.38
Forfeitures or cancelled (in dollars per share) | $ / shares	0
Nonvested, ending balance (in dollars per share) | $ / shares	$ 43.77