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 June 30, 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 August 1, 2023 was 4,719,816.

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	12
	Notes to Unaudited Consolidated Financial Statements	14
Item 2:	Management's Discussion and Analysis of Financial Condition and Results of Operations	47
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	81
Item 4:	Controls and Procedures	83
PART II.	OTHER INFORMATION
Item 1:	Legal Proceedings	84
Item 1A:	Risk Factors	84
Item 2:	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchase of Equity Securities	85
Item 3:	Defaults Upon Senior Securities	85
Item 4:	Mine Safety Disclosures	85
Item 5:	Other Information	85
Item 6:	Exhibits	86
SIGNATURES		87
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	Prior to the adoption of ASU 2022-02 on January 1, 2023, a TDR was deemed to occur when the Corporation modified the original terms of a loan agreement by granting a concession to a borrower that was 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)	June 30, 2023		December 31, 2022
ASSETS
Cash and due from financial institutions	$	25,499	$	29,309
Interest-earning deposits in other financial institutions	28,727		26,560
Total cash and cash equivalents	54,226		55,869
Equity investments, at estimated fair value	2,841		2,830
Securities available for sale, at estimated fair value (amortized cost of $700,253, net of allowance for credit losses of $0 at June 30, 2023; and amortized cost of $729,198, net of allowance for credit losses on securities of $0 at December 31, 2022)	604,313		632,589
Securities held to maturity, estimated fair value of $1,778 at June 30, 2023 and $2,402 at December 31, 2022 (net of allowance for credit losses of $0 at June 30, 2023)	1,804		2,424
FHLBNY and FRBNY Stock, at cost	6,328		8,197
Loans, net of deferred loan fees	1,893,906		1,829,448
Allowance for credit losses (1)	(20,172)		(19,659)
Loans, net	1,873,734		1,809,789
Loans held for sale	785		—
Premises and equipment, net	15,496		16,113
Operating lease right-of-use assets	6,050		6,449
Goodwill	21,824		21,824
Bank-owned life insurance	2,892		2,871
Interest rate swap assets	26,450		27,141
Accrued interest receivable and other assets	57,930		59,457
Total assets	$	2,674,673	$	2,645,553
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing	$	671,643	$	733,329
Interest-bearing	1,718,551		1,593,898
Total deposits	2,390,194		2,327,227
FHLBNY overnight advances	50,760		95,810
Long term finance lease obligation	3,189		3,327
Operating lease liabilities	6,228		6,620
Dividends payable	1,462		1,455
Interest rate swap liabilities	26,450		27,196
Accrued interest payable and other liabilities	18,964		17,530
Total liabilities	2,497,247		2,479,165
Shareholders' equity:
Common stock, $0.01 par value per share, 10,000,000 shares authorized;   5,310,076 issued at June 30, 2023 and December 31, 2022	53		53
Additional paid-in capital	47,740		47,331
Retained earnings	221,412		211,859
Treasury stock, at cost; 594,344 shares at June 30, 2023 and 615,448   shares at December 31, 2022	(17,033)		(17,598)
Accumulated other comprehensive loss	(74,746)		(75,257)
Total shareholders' equity	177,426		166,388
Total liabilities and shareholders' equity	$	2,674,673	$	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   June 30,				Six Months Ended   June 30,
(in thousands, except per share data)	2023		2022		2023		2022
Interest and dividend income:
Loans, including fees	$	23,791	$	15,390	$	46,080	$	29,871
Taxable securities	3,630		2,863		7,213		5,551
Tax exempt securities	259		268		520		538
Interest-earning deposits	116		17		213		36
Total interest and dividend income	27,796		18,538		54,026		35,996
Interest expense:
Deposits	8,469		769		13,856		1,517
Borrowed funds	732		128		1,628		161
Total interest expense	9,201		897		15,484		1,678
Net interest income	18,595		17,641		38,542		34,318
Provision (credit) for credit losses (1)	236		(1,744)		513		(2,889)
Net interest income after provision for credit losses	18,359		19,385		38,029		37,207
Non-interest income:
WMG fee income	2,603		2,628		5,183		5,385
Service charges on deposit accounts	959		936		1,900		1,800
Interchange revenue from debit card transactions	1,194		1,206		2,327		2,336
Changes in fair value of equity investments	(103)		(242)		(31)		(355)
Net gains on sales of loans held for sale	18		25		23		99
Net gains on sales of other real estate owned	14		46		14		46
Income from bank-owned life insurance	11		11		21		22
Other	751		709		1,433		1,649
Total non-interest income	5,447		5,319		10,870		10,982
Non-interest expenses:
Salaries and wages	6,704		6,056		13,487		12,279
Pension and other employee benefits	1,808		1,937		3,488		3,655
Other components of net periodic pension and postretirement benefits	(174)		(403)		(348)		(811)
Net occupancy	1,440		1,369		2,905		2,796
Furniture and equipment	461		410		879		847
Data processing	2,473		2,468		4,854		4,655
Professional services	602		664		1,042		1,185
Amortization of intangible assets	—		4		—		15
Marketing and advertising	170		184		502		460
Other real estate owned	1		8		39		(29)
FDIC insurance	586		284		1,083		598
Loan expense	308		176		540		391
Other	1,534		1,185		3,278		2,969
Total non-interest expenses	15,913		14,342		31,749		29,010
Income before income tax expense	7,893		10,362		17,150		19,179
Income tax expense	1,613		2,338		3,600		4,288
Net income	$	6,280	$	8,024	$	13,550	$	14,891
Weighted average shares outstanding	4,729		4,690		4,725		4,690
Basic and diluted earnings per share	$	1.33	$	1.72	$	2.87	$	3.18

(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   June 30,				Six Months Ended   June 30,
(in thousands)	2023		2022		2023		2022
Net income	$	6,280	$	8,024	$	13,550	$	14,891
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities available for sale	(7,156)		(24,050)		669		(66,165)
Tax effect	(1,874)		(6,303)		176		(17,331)
Net of tax amount	(5,282)		(17,747)		493		(48,834)
Change in funded status of defined benefit pension plan and other benefit plans:
Reclassification adjustment for amortization of net actuarial loss	12		11		24		25
Total before tax effect	12		11		24		25
Tax effect	3		4		6		6
Net of tax amount	9		7		18		19
Total other comprehensive income (loss)	(5,273)		(17,740)		511		(48,815)
Comprehensive income (loss)	$	1,007	$	(9,716)	$	14,061	$	(33,924)

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 March 31, 2022	$	53	$	46,880	$	194,295	$	(18,113)	$	(37,605)	$	185,510
Net income	—		—		8,024		—		—		8,024
Other comprehensive loss	—		—		—		—		(17,740)		(17,740)
Restricted stock awards	—		154		—		—		—		154
Restricted stock units for directors' deferred compensation plan	—		95		—		—		—		95
Cash dividends declared ($0.31 per share)	—		—		(1,449)		—		—		(1,449)
Sale of 2,137 shares of treasury stock (a)	—		37		—		61		—		98
Forfeiture of 681 shares of restricted stock awards	—		30		—		(32)		—		(2)
Balances at June 30, 2022	$	53	$	47,196	$	200,870	$	(18,084)	$	(55,345)	$	174,690
Balances at March 31, 2023	$	53	$	47,387	$	216,594	$	(17,219)	$	(69,473)	$	177,342
Net income	—		—		6,280		—		—		6,280
Other comprehensive income	—		—		—		—		(5,273)		(5,273)
Restricted stock awards	—		285		—		—		—		285
Restricted stock units for directors' deferred compensation plan	—		5		—		—		—		5
Cash dividends declared ($0.31 per share)	—		—		(1,462)		—		—		(1,462)
Sale of 6,955 shares of treasury stock (a)	—		52		—		198		—		250
Forfeiture of 326 shares of restricted stock awards	—		11		—		(12)		—		(1)
Balances at June 30, 2023	$	53	$	47,740	$	221,412	$	(17,033)	$	(74,746)	$	177,426

(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.

See accompanying notes to unaudited consolidated financial statements.

10

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	—		—		14,891		—		—		14,891
Other comprehensive loss	—		—		—		—		(48,815)		(48,815)
Restricted stock awards	—		333		—		—		—		333
Restricted stock units for directors' deferred compensation plan	—		100		—		—		—		100
Distribution of 3,985 shares of treasury stock grants for employee restricted stock awards	—		(112)		—		112		—		—
Cash dividends declared ($0.62 per share)	—		—		(2,898)		—		—		(2,898)
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 4,682 shares of treasury stock (a)	—		83		—		133		—		216
Forfeiture of 681 shares of restricted stock awards	—		30		—		(32)		—		(2)
Balances at June 30, 2022	$	53	$	47,196	$	200,870	$	(18,084)	$	(55,345)	$	174,690
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	—		—		13,550		—		—		13,550
Other comprehensive loss	—		—		—		—		511		511
Restricted stock awards	—		548		—		—		—		548
Restricted stock units for directors' deferred compensation plan	—		10		—		—		—		10
Distribution of 4,577 shares of treasury stock grants for employee restricted stock awards	—		(131)		—		131		—		—
Cash dividends declared ($0.62 per share)	—		—		(2,921)		—		—		(2,921)
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 10,509 shares of treasury stock (a)	—		118		—		301		—		419
Forfeiture of 326 shares of restricted stock awards	—		11		—		(12)		—		(1)
Balances at June 30, 2023	$	53	$	47,740	$	221,412	$	(17,033)	$	(74,746)	$	177,426

(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.

11

CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)	Six Months Ended   June 30,
CASH FLOWS FROM OPERATING ACTIVITIES:	2023		2022
Net income	$	13,550	$	14,891
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization (increase in) of right-of-use assets	399		393
Amortization of intangible assets	—		15
Provision (credit) for credit losses (1)	513		(2,889)
Loss on disposal of fixed assets	3		20
Depreciation and amortization of fixed assets	1,060		1,147
Amortization of premiums on securities, net	1,270		2,172
Gain on sales of loans held for sale, net	(23)		(99)
Proceeds from sales of loans held for sale	1,318		5,575
Loans originated and held for sale	(2,080)		(5,080)
Net gains on sale of other real estate owned	(14)		(46)
Write-downs on other real estate owned	(3)		—
Net change in fair value of equity investments	31		355
Proceeds from sales of trading assets	39		37
Purchase of equity investments	(81)		(178)
Decrease (Increase) in other assets and accrued interest receivable	1,317		(8,656)
Increase in accrued interest payable	1,964		25
Expense related to restricted stock units for directors' deferred compensation plan	10		100
Expense related to employee restricted stock awards	548		333
Increases in (payments on) operating leases	(392)		(380)
Net (gain) loss on interest rate swaps	(55)		(199)
(Decrease) increase in other liabilities	(1,488)		10,371
Income from bank owned life insurance	(21)		(22)
Net cash provided by operating activities	17,865		17,885
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities, calls, and principal paydowns on securities available for sale	30,883		53,412
Proceeds from maturities and principal collected on securities held to maturity	619		842
Purchases of securities available for sale	(3,207)		(22,713)
Purchase of FHLBNY and FRBNY stock	(29,969)		(13,096)
Redemption of FHLBNY and FRBNY stock	31,838		11,417
Proceeds from sales of fixed assets	—		125
Purchases of premises and equipment	(446)		(135)
Proceeds from sale of other real estate owned	154		159
Net increase in loans	(64,566)		(100,256)
Net cash used in investing activities	(34,694)		(70,245)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand deposits, interest-bearing demand accounts, savings accounts, and insured money market accounts	(80,135)		(59,925)
Increase in time deposits	143,102		87,283
Net change in FHLB overnight advances	(45,050)		31,300
Payments made on finance leases	(138)		(133)
Purchase of treasury stock	(98)		(695)
Sale of treasury stock	419		216
Cash dividends paid	(2,914)		(2,899)
Net cash provided by financing activities	15,186		55,147
Net (decrease) increase in cash and cash equivalents	(1,643)		2,787
Cash and cash equivalents, beginning of period	55,869		26,981
Cash and cash equivalents, end of period	$	54,226	$	29,768

(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.

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CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

(UNAUDITED)

(in thousands)	Six Months Ended   June 30,
Supplemental disclosure of cash flow information:	2023		2022
Cash paid for:
Interest	$	13,520	$	1,653
Income taxes	4,056		2,545
Supplemental disclosure of non-cash activity:
Transfer of loans to other real estate owned	108		292
Dividends declared, not yet paid	1,462		1,449

See accompanying notes to unaudited consolidated financial statements.

13

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 these Unaudited Consolidated Financial Statements and the Notes to the Unaudited Consolidated Financial Statements are sufficient to meet its needs as of 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.

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 73-75 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 4,729 and 4,690 weighted average shares outstanding for the three month periods ended June 30, 2023 and 2022, respectively. Earnings per share were computed by dividing net income by 4,725 and 4,690 weighted average shares outstanding for the six month periods ended June 30, 2023 and 2022, respectively. There were no common stock equivalents during the three and six month periods ended June 30, 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):

	June 30, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
U.S. Treasury notes and bonds	$	62,156	$	—	$	5,959	$	—	$	56,197
Mortgage-backed securities, residential	497,995		—		80,630		—		417,365
Obligations of states and political subdivisions	39,568		1		985		—		38,584
Corporate bonds and notes	25,750		—		5,879		—		19,871
SBA loan pools	74,784		112		2,600		—		72,296
Total	$	700,253	$	113	$	96,053	$	—	$	604,313

	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):

	June 30, 2023
	Amortized Cost		Unrecognized Gains		Unrecognized Losses		Allowance for Credit Losses		Estimated Fair Value
Obligations of states and political subdivisions	$	824	$	—	$	—	$	—	$	824
Time deposits with other financial institutions	980		—		26		—		954
Total	$	1,804	$	—	$	26	$	—	$	1,778

	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

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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):

	June 30, 2023
	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	5,804	$	5,732	$	284	$	283
After one, but within five years	103,670		94,774		880		855
After five, but within ten years	17,531		13,698		640		640
After ten years	469		448		—		—
	127,474		114,652		1,804		1,778
Mortgage-backed securities, residential	497,995		417,365		—		—
SBA loan pools	74,784		72,296		—		—
Total	$	700,253	$	604,313	$	1,804	$	1,778

There were no proceeds from sales and calls of securities resulting in gains or losses for the six month periods ended June 30, 2023 and 2022.

The following tables summarize the investment securities available for sale with unrealized losses at June 30, 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
June 30, 2023	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury notes and bonds	$	1,920	$	19	$	54,277	$	5,940	$	56,197	$	5,959
Mortgage-backed securities, residential	6,705		616		410,660		80,014		417,365		80,630
Obligations of states and political subdivisions	25,467		485		13,006		500		38,473		985
Corporate bonds and notes	6,939		3,061		12,932		2,818		19,871		5,879
SBA loan pools	8,249		24		53,991		2,576		62,240		2,600
Total temporarily impaired securities	$	49,280	$	4,205	$	544,866	$	91,848	$	594,146	$	96,053

	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		—		—		37,847		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	$	605,978	$	96,766

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Assessment of Available for Sale Debt Securities for Credit Risk

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 June 30, 2023.

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

At June 30, 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 as of June 30, 2023.

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 considers the potential credit risk of the issuers to be immaterial, and has not allocated an ACL on its corporate bonds and notes portfolio as of June 30, 2023.

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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):

	June 30, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	253,501	$	252,044
Agricultural	305		249
Commercial mortgages:
Construction	124,942		108,243
Commercial mortgages, other	923,585		888,670
Residential mortgages	285,084		285,672
Consumer loans:
Home equity lines and loans	85,283		81,401
Indirect consumer loans	210,532		202,124
Direct consumer loans	10,674		11,045
Total loans, net of deferred loan fees and costs	1,893,906		1,829,448
Allowance for credit losses	(20,172)		(19,659)
Loans, net	$	1,873,734	$	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 $6.6 million at June 30, 2023 and $6.5 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 June 30, 2023 (in thousands):

	Three Months Ended June 30, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, April 1, 2023	$	4,053	$	10,983	$	1,892	$	3,147	$	20,075
Charge-offs	(9)		—		—		(242)		(251)
Recoveries	3		1		—		101		105
Net recoveries (charge-offs)	(6)		1		—		(141)		(146)
Provision (1)	74		10		13		146		243
Ending balance, June 30, 2023	$	4,121	$	10,994	$	1,905	$	3,152	$	20,172

(1) Additional credit provision related to off-balance sheet exposure was $7 thousand for the three months ended June 30, 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.

20

The following table presents the activity in the allowance for loan losses by portfolio segment for the three month period ended June 30, 2022 (in thousands):

	Three Months Ended June 30, 2022
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, April 1, 2022	$	3,485	$	12,963	$	1,606	$	1,874	$	19,928
Charge-offs	(16)		(687)		—		(128)		(831)
Recoveries	23		1		—		108		132
Net recoveries (charge-offs)	7		(686)		—		(20)		(699)
Provision	72		(1,963)		108		39		(1,744)
Ending balance, June 30, 2022	$	3,564	$	10,314	$	1,714	$	1,893	$	17,485

The following table presents the activity in the allowance for credit losses by portfolio segment for the six month period ended June 30, 2023 (in thousands):

	Six Months Ended June 30, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, January 1, 2023	$	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, January 1, 2023	4,282		10,881		1,829		3,041		20,033
Charge-offs	(199)		—		—		(437)		(636)
Recoveries	8		1		—		212		221
Net recoveries (charge-offs)	(191)		1		—		(225)		(415)
Provision (1)	30		112		76		336		554
Ending balance, June 30, 2023	$	4,121	$	10,994	$	1,905	$	3,152	$	20,172

(1) Additional credit provision related to off-balance sheet exposure was $41 thousand for the six months ended June 30, 2023.

The following table presents the activity in the allowance for loan losses by portfolio segment for the six month period ended June 30, 2022 (in thousands):

	Six Months Ended June 30, 2022
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, January 1, 2022	$	3,591	$	13,556	$	1,803	$	2,075	$	21,025
Charge-offs	(20)		(687)		—		(322)		(1,029)
Recoveries	30		2		—		346		378
Net recoveries (charge-offs)	10		(685)		—		24		(651)
Provision	(37)		(2,557)		(89)		(206)		(2,889)
Ending balance, June 30, 2022	$	3,564	$	10,314	$	1,714	$	1,893	$	17,485

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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 June 30, 2023 and 2022:

	For the Three Months Ended
Allowance for credit losses on unfunded commitments	June 30, 2023		June 30, 2022
Beginning balance	$	1,048	$	—
Impact of ASC 326 adoption	—		—
Provision for unfunded commitments	(7)		—
Ending balance	$	1,041	$	—

The following table presents the provision for credit losses on loans and unfunded commitments for the three month period ended June 30, 2023, based upon the current expected credit loss methodology, and the provision for loan losses on loans for the three month period ended June 30, 2022, based upon the incurred loss methodology:

	For the Three Months Ended
Provision for credit losses	June 30, 2023		June 30, 2022
Provision for credit losses on loans	$	243	$	(1,744)
Provision for unfunded commitments	(7)		—
Total provision (credit) for credit losses	$	236	$	(1,744)

The following table presents the activity in the allowance for credit losses on unfunded commitments for the six month periods ended June 30, 2023 and 2022:

	For the Six Months Ended
Allowance for credit losses on unfunded commitments	June 30, 2023		June 30, 2022
Beginning balance	$	—	$	—
Impact of ASC 326 adoption	1,082		—
Provision for unfunded commitments	(41)		—
Ending balance	$	1,041	$	—

The following table presents the provision for credit losses on loans and unfunded commitments for the six month period ended June 30, 2023, based upon the current expected credit loss methodology, and the provision for loan losses on loans for the six month period ended June 30, 2022, based upon the incurred loss methodology:

	For the Six Months Ended
Provision for credit losses	June 30, 2023		June 30, 2022
Provision for credit losses on loans	$	554	$	(2,889)
Provision for unfunded commitments	(41)		—
Total provision (credit) for credit losses	$	513	$	(2,889)

22

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 June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually analyzed	$	996	$	33	$	—	$	61	$	1,090
Collectively analyzed	3,125		10,961		1,905		3,091		19,082
Total ending allowance balance	$	4,121	$	10,994	$	1,905	$	3,152	$	20,172

	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

	June 30, 2023
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually analyzed	$	1,714	$	3,964	$	—	$	259	$	5,937
Loans collectively analyzed	252,092		1,044,563		285,084		306,230		1,887,969
Total ending loans balance	$	253,806	$	1,048,527	$	285,084	$	306,489	$	1,893,906

	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

23

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 tables summarize the amortized cost basis of loans modified during the three and six month periods ended June 30, 2023:

	Three Months Ended June 30, 2023
Loans modified under ASU 2022-02:	Principal Reduction		Interest Rate Reduction		Term Extension		Payment Delay		Combination		Total		(%) of Loan Class (1)
Commercial mortgages, other	$	—	$	—	$	—	$	1,920	$	—	$	1,920	0.21	%
Total	$	—	$	—	$	—	$	1,920	$	—	$	1,920

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

	Six Months Ended June 30, 2023
Loans modified under ASU 2022-02:	Principal Reduction		Interest Rate Reduction		Term Extension		Payment Delay		Combination		Total		(%) of Loan Class (1)
Commercial mortgages, other	$	—	$	—	$	275	$	1,920	$	—	$	2,195	0.24	%
Total	$	—	$	—	$	275	$	1,920	$	—	$	2,195

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the six month period ended June 30, 2023:

	Six Months Ended June 30, 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, other	$—	—%	60

There was one loan, with an amortized basis of $1.9 million, classified as a commercial mortgage, other, to a borrower experiencing financial difficulty which was modified during the three months ended June 30, 2023. The modification granted was in the form of a four month payment delay, during which the borrower was making interest-only payments. The delay did not result in a principal reduction, reduction in interest rate, or an extension of term, and the note balloons at maturity.

There were no loans modified to borrowers experiencing financial difficulty during the prior twelve months that experienced payment default during the three and six month periods ended June 30, 2023.

24

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 June 30, 2023, the amortized cost basis of individually analyzed loans amounted to $5.9 million, of which $5.1 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 June 30, 2023 (in thousands):

	June 30, 2023
	Amortized Cost Basis		Related Allowance
Commercial and agricultural:
Commercial and industrial (1) (3)	$	570	$	156
Commercial mortgages:
Commercial mortgages, other (1)	4,267		33
Consumer loans:
Home equity lines and loans (2)	259		61
Total	$	5,096	$	250

(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.

25

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 tables present the average amortized cost basis and interest income recognized on loans individually evaluated, by class of loans, for the three and six month periods ended June 30, 2023 and 2022 (in thousands):

	Three Months Ended   June 30, 2023				Three Months Ended   June 30, 2022
With no related allowance recorded:	Average Amortized Cost Basis		Interest Income Recognized (1)		Average Amortized Cost Basis		Interest Income Recognized (1)
Commercial and agricultural:
Commercial and industrial	$	516	$	—	$	765	$	—
Commercial mortgages:
Construction	—		—		105		1
Commercial mortgages, other	3,992		8		4,086		7
Residential mortgages	358		—		909		11
Consumer loans:
Home equity lines & loans	178		—		157		—
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,230		2		1,369		3
Commercial mortgages:
Commercial mortgages, other	34		—		1,326		—
Consumer loans:
Home equity lines and loans	78		3		139		—
Total	$	6,386	$	13	$	8,856	$	22

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

26

	Six Months Ended   June 30, 2023				Six Months Ended   June 30, 2022
With no related allowance recorded:	Average Amortized Cost Basis		Interest Income Recognized (1)		Average Amortized Cost Basis		Interest Income Recognized (1)
Commercial and agricultural:
Commercial and industrial	$	686	$	—	$	825	$	3
Commercial mortgages:
Construction	2		—		113		2
Commercial mortgages, other	4,138		14		4,149		14
Residential mortgages	479		—		895		22
Consumer loans:
Home equity lines & loans	165		—		161		2
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,183		4		1,405		5
Commercial mortgages:
Commercial mortgages, other	35		—		2,065		21
Consumer loans:
Home equity lines and loans	63		3		141		—
Total	$	6,751	$	21	$	9,754	$	69

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

The following table presents the amortized cost basis in non-accrual, loans past due 90 days or more and still accruing, and the amortized basis of non-accrual loans with no associated allocation in the allowance for credit losses related to non-accrual loans, by class of loan as of June 30, 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
	June 30, 2023		June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	303	1,565		1,946		$	—	$	1
Commercial mortgages:
Construction	—		—		5		—		—
Commercial mortgages, other	3,500		3,534		3,928		—		—
Residential mortgages	926		926		986		—		—
Consumer loans:
Home equity lines and loans	749		749		760		—		—
Indirect consumer loans	527		527		540		—		—
Direct consumer loans	3		3		13		—		—
Total	$	6,008	$	7,304	$	8,178	$	—	$	1

27

The following tables present the aging of the amortized cost basis of loans as of June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 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	$	526	$	455	$	—	$	981	$	252,520	$	253,501
Agricultural	—		—		—		—		305		305
Commercial mortgages:
Construction	2,163		2,244		—		4,407		120,535		124,942
Commercial mortgages, other	340		—		256		596		922,989		923,585
Residential mortgages	1,463		482		362		2,307		282,777		285,084
Consumer loans:
Home equity lines and loans	9		—		545		554		84,729		85,283
Indirect consumer loans	1,242		374		217		1,833		208,699		210,532
Direct consumer loans	11		11		3		25		10,649		10,674
Total	$	5,754	$	3,566	$	1,383	$	10,703	$	1,883,203	$	1,893,906

	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

28

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, and home equity lines and loans, 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.

29

Based on the analyses performed as of June 30, 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	$	24,636	$	41,406	$	19,345	$	12,963	$	36,855	$	11,242	$	88,858	$	—	$	235,305
Special mention	296		98		328		—		3		448		4,282		9,040		14,495
Substandard	—		32		875		384		26		345		627		570		2,859
Doubtful	—		—		—		—		—		841		1		—		842
Total	24,932		41,536		20,548		13,347		36,884		12,876		93,768		9,610		253,501
Gross charge-offs	—		—		—		—		9		190		—		—		199
Agricultural
Pass	—		17		163		—		—		—		125		—		305
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total	—		17		163		—		—		—		125		—		305
Gross charge-offs	—		—		—		—		—		—		—		—		—
Construction
Pass	5,211		2,721		1,975		—		31		1,196		111,388		—		122,522
Special mention	—		176		—		—		—		—		—		—		176
Substandard	—		—		—		—		2,244		—		—		—		2,244
Doubtful	—		—		—		—		—		—		—		—		—
Total	5,211		2,897		1,975		—		2,275		1,196		111,388		—		124,942
Gross charge-offs	—		—		—		—		—		—		—		—		—
Commercial mortgages
Pass	53,923		214,143		127,609		96,993		40,067		173,743		188,483		—		894,961
Special mention	—		2,553		8,733		1,023		—		3,776		—		6,070		22,155
Substandard	275		1,160		—		—		—		4,474		97		430		6,436
Doubtful	—		—		—		—		—		33		—		—		33
Total	54,198		217,856		136,342		98,016		40,067		182,026		188,580		6,500		923,585
Gross charge-offs	—		—		—		—		—		—		—		—		—
Residential mortgages
Not rated	9,067		52,157		51,736		72,741		16,111		50,205		32,141		—		284,158
Substandard	—		107		63		—		177		579		—		—		926
Total	9,067		52,264		51,799		72,741		16,288		50,784		32,141		—		285,084
Gross charge-offs	—		—		—		—		—		—		—		—		—
Home equity lines and loans
Not rated	7,901		18,052		6,291		3,464		3,097		11,995		33,734		—		84,534
Substandard	—		76		—		—		—		419		254		—		749
Total	7,901		18,128		6,291		3,464		3,097		12,414		33,988		—		85,283
Gross charge-offs	—		—		—		—		—		—		9		—		9
Indirect consumer
Not rated	42,931		114,337		28,762		12,270		6,143		5,562		—		—		210,005
Substandard	13		159		131		58		52		114		—		—		527
Total	42,944		114,496		28,893		12,328		6,195		5,676		—		—		210,532
Gross charge-offs	12		155		73		65		16		40		—		—		361
Direct consumer
Not rated	1,854		3,529		1,130		499		184		414		3,061		—		10,671
Substandard	—		—		—		—		—		3		—		—		3
Total	1,854		3,529		1,130		499		184		417		3,061		—		10,674
Gross charge-offs	—		8		1		4		—		54		—		—		67
Total loans	$	146,107	$	450,723	$	247,141	$	200,395	$	104,990	$	265,389	$	463,051	$	16,110	$	1,893,906
Total gross charge-offs	$	12	$	163	$	74	$	69	$	25	$	284	$	9	$	—	$	636

30

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 presented by payment activity. The following table presents the amortized cost basis in residential and consumer loans based on payment activity as of June 30, 2023 (in thousands):

	Consumer Loans
June 30, 2023	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	284,158	$	84,534	$	210,005	$	10,671
Non-Performing	926		749		527		3
Total	$	285,084	$	85,283	$	210,532	$	10,674

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 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

31

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 in lieu 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.

32

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 June 30, 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	$	56,197	$	56,197	$	—	$	—
Mortgage-backed securities, residential	417,365		—		417,365		—
Obligations of states and political subdivisions	38,584		—		38,584		—
Corporate bonds and notes	19,871		—		11,278		8,593
SBA loan pools	72,296		—		72,296		—
Total available for sale securities	$	604,313	$	56,197	$	539,523	$	8,593
Equity investments, at fair value	$	2,348	$	2,348	$	—	$	—
Derivative assets	26,450		—		26,450		—
Financial Liabilities:
Derivative liabilities	$	26,450	$	—	$	26,450	$	—

There were no transfers between Level 1 and Level 2 during the three and six month periods ended June 30, 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 and six month periods ended June 30, 2022.

33

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 six month period ended June 30, 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 and six months ended June 30, 2023 and June 30, 2022.

Corporate Bonds:	For the Three Months Ended
Level 3 Financial Assets	June 30, 2023		June 30, 2022
Balance of recurring Level 3 assets at April 1, 2023	$	8,666	$	—
Total gains and losses for the period:	—		—
Included in other comprehensive income	(73)		—
Transfer into Level 3	—		—
Balance of recurring Level 3 assets at June 30, 2023	$	8,593	$	—

Corporate Bonds:	For the Six Months Ended
Level 3 Financial Assets	June 30, 2023		June 30, 2022
Balance of recurring Level 3 assets at January 1, 2023	$	—	$	—
Total gains and losses for the period:	—		—
Included in other comprehensive income	(1,362)		—
Transfer into Level 3	9,955		—
Balance of recurring Level 3 assets at June 30, 2023	$	8,593	$	—

June 30, 2023	Fair Value		Valuation Techniques	Unobservable Input	Range (WA)
Corporate bonds and notes	$	8,594	Discounted cash flow	Market discount rate	12.00% -12.00% [12.00%]

There were no financial assets measured on a recurring basis that were considered to be Level 3 fair value by the Corporation at December 31, 2022.

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

			Fair Value Measurement at June 30, 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)		Total Gains (Losses)
Individually Analyzed Loans:
Commercial and agricultural:
Commercial and industrial	$	414	$	—	$	—	$	414	$	—
Total individually analyzed loans	$	414	$	—	$	—	$	414	$	—

Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2022 were considered to be immaterial to the presentation of the consolidated financial statements.

34

The following table presents information related to Level 3 non-recurring fair value measurement at June 30, 2023 (in thousands):

Description	Fair Value at June 30, 2023		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at June 30, 2023
Individually analyzed loans:
Commercial and agricultural:
Commercial and industrial	$	414	Sales comparison	Discount to appraised value	10.00%-50.00% [14.57%]
Total	$	414

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values of other financial instruments, at June 30, 2023 and December 31, 2022, are as follows (in thousands):

	June 30, 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	$	25,499	$	25,499	$	—	$	—	$	25,499
Interest-earning deposits in other financial institutions	28,727		28,727		—		—		28,727
Equity investments	2,841		2,841		—		—		2,841
Securities available for sale	604,313		56,197		539,523		8,593		604,313
Securities held to maturity	1,804		—		954		824		1,778
FHLBNY and FRBNY stock	6,328		—		—		—		N/A
Loans, net and loans held for sale	1,874,519		—		—		1,807,870		1,807,870
Accrued interest receivable	8,691		112		2,014		6,565		8,691
Derivative Assets	26,450		—		26,450		—		26,450
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,844,708	$	1,844,708	$	—	$	—	$	1,844,708
Time deposits	545,486		—		542,449		—		542,449
FHLBNY overnight advances	50,760		—		50,762		—		50,762
Accrued interest payable	2,828		79		2,749		—		2,828
Derivative Liabilities	26,450		—		26,450		—		26,450

(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.

35

	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		—		1,450		952		2,402
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
FHLBNY overnight advances	95,810		—		95,819		—		95,819
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.

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 June 30, 2023, the weighted average remaining lease term was 8.24 years with a weighted average discount rate of 3.37%. Rent expense was $0.2 million for the three months ended June 30, 2023. Rent expense was $0.5 million for the six months ended June 30, 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 June 30, 2023 and December 31, 2022 consist of the following (in thousands):

	June 30, 2023		December 31, 2022
Operating lease right-of-use asset	$	6,449	$	7,234
Less: accumulated amortization	(399)		(785)
Less: lease termination	—		—
Add: new lease agreement and modifications	—		—
Operating lease right-of-use-assets, net	$	6,050	$	6,449

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The following is a schedule by year of the undiscounted cash flows of the operating lease liabilities, excluding CAM charges, as of June 30, 2023 (in thousands):

Year	Amount
2023	$	498
2024	924
2025	841
2026	845
2027	854
2028 and thereafter	3,169
Total minimum lease payments	7,131
Less: amount representing interest	(903)
Present value of net minimum lease payments	$	6,228

As of June 30, 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 June 30, 2023, the weighted average remaining lease term was 9.77 years with a weighted average discount rate of 3.41%. The Corporation has included these leases in premises and equipment as of June 30, 2023 and December 31, 2022 as follows (in thousands):

	June 30, 2023		December 31, 2022
Buildings	$	5,572	$	5,572
Less: accumulated depreciation	(2,706)		(2,540)
Net book value	$	2,866	$	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 June 30, 2023 (in thousands):

Year	Amount
2023	$	195
2024	391
2025	409
2026	425
2027	428
2028 and thereafter	1,988
Total minimum lease payments	3,836
Less: amount representing interest	(647)
Present value of net minimum lease payments	$	3,189

As of June 30, 2023, the Corporation had no finance leases that were signed, but had not yet commenced.

37

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 $25 thousand for the six month period ended June 30, 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 $27 thousand and $25 thousand for the three month periods ended June 30, 2023 and 2022, respectively. Rent and CAM related expenses paid to this Board of Directors member totaled $53 thousand and $51 thousand for the six month periods ended June 30, 2023 and 2022, respectively.

NOTE 7        GOODWILL AND INTANGIBLE ASSETS

The changes in goodwill included in the core banking segment during the six month periods ended June 30, 2023 and 2022 were as follows (in thousands):

	2023		2022
Beginning of year	$	21,824	$	21,824
Acquired goodwill	—		—
Ending balance June 30,	$	21,824	$	21,824

The Corporation had no aggregate amortization expense for the three month period ended June 30, 2023, and $4 thousand for the three month period ended June 30, 2022. The Corporation had no aggregate amortization expense for the six month period ended June 30, 2023, and $15 thousand for the six month period ended June 30, 2022.

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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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.

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 June 30, 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 June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023				December 31, 2022
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	40,345	$	62,386	$	44,481	$	75,028
Unused lines of credit	3,015		343,039		2,887		326,188
Standby letters of credit	—		16,502		—		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 June 30, 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 April 1, 2023	$	(65,521)	$	(3,952)	$	(69,473)
Other comprehensive income before reclassification	(5,282)		—		(5,282)
Amounts reclassified from accumulated other comprehensive income	—		9		9
Net current period other comprehensive income (loss)	(5,282)		9		(5,273)
Balance at June 30, 2023	$	(70,803)	$	(3,943)	$	(74,746)

39

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at April 1, 2022	$	(33,582)	$	(4,023)	$	(37,605)
Other comprehensive income before reclassification	(17,747)		—		(17,747)
Amounts reclassified from accumulated other comprehensive income	—		7		7
Net current period other comprehensive income (loss)	(17,747)		7		(17,740)
Balance at June 30, 2022	$	(51,329)	$	(4,016)	$	(55,345)

	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	493		—		493
Amounts reclassified from accumulated other comprehensive income	—		18		18
Net current period other comprehensive income	493		18		511
Balance at June 30, 2023	$	(70,803)	$	(3,943)	$	(74,746)

	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	(48,834)		—		(48,834)
Amounts reclassified from accumulated other comprehensive income	—		19		19
Net current period other comprehensive income	(48,834)		19		(48,815)
Balance at June 30, 2022	$	(51,329)	$	(4,016)	$	(55,345)

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   June 30,				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		11		Other components of net periodic pension and postretirement benefits
Tax effect	(3)		(4)		Income tax expense
Net of tax	9		7
Total reclassification for the period, net of tax	$	9	$	7

(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).

40

Details about Accumulated Other Comprehensive Income (Loss) Components	Six Months Ended June 30,				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)	24		25		Other components of net periodic pension and postretirement benefits
Tax effect	(6)		(6)		Income tax expense
Net of tax	18		19
Total reclassification for the period, net of tax	$	18	$	19

(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 and six months ended June 30, 2023 and 2022 (in thousands). Items outside the scope of ASC 606 are noted as such.

	Three Months Ended June 30, 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	$	777	$	—	$	—	$	777
Other	182		—		—		182
Interchange revenue from debit card transactions	1,194		—		—		1,194
WMG fee income	—		2,603		—		2,603
CFS fee and commission income	—		—		265		265
Net gains (losses) on sales of OREO	14		—		—		14
Net gains on sales of loans(a)	18		—		—		18
Loan servicing fees(a)	36		—		—		36
Changes in fair value of equity investments(a)	71		—		(174)		(103)
Income from bank-owned life insurance(a)	11		—		—		11
Other(a)	398		—		52		450
Total non-interest income (loss)	$	2,701	$	2,603	$	143	$	5,447

(a) Not within scope of ASC 606.

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

41

	Three Months Ended June 30, 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	$	727	$	—	$	—	$	727
Other	209		—		—		209
Interchange revenue from debit card transactions	1,206		—		—		1,206
WMG fee income	—		2,628		—		2,628
CFS fee and commission income	—		—		271		271
Net gains (losses) on sales of OREO	46		—		—		46
Net gains on sales of loans(a)	25		—		—		25
Loan servicing fees(a)	38		—		—		38
Changes in fair value of equity investments(a)	(236)		—		(6)		(242)
Income from bank-owned life insurance(a)	11		—		—		11
Other(a)	416		—		(16)		400
Total non-interest income	$	2,442	$	2,628	$	249	$	5,319

(a) Not within scope of ASC 606.

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

	Six Months Ended June 30, 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	$	1,491	$	—	$	—	$	1,491
Other	409		—		—		409
Interchange revenue from debit card transactions	2,327		—		—		2,327
WMG fee income	—		5,183		—		5,183
CFS fee and commission income	—		—		506		506
Net gains (losses) on sales of OREO	14		—		—		14
Net gains on sales of loans(a)	23		—		—		23
Loan servicing fees(a)	72		—		—		72
Net gains on sales of securities(a)	—		—		—		—
Changes in fair value of equity investments(a)	149		—		(180)		(31)
Income from bank-owned life insurance(a)	21		—		—		21
Other(a)	846		—		9		855
Total non-interest income	$	5,352	$	5,183	$	335	$	10,870

(a) Not within scope of ASC 606.

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

42

	Six Months Ended June 30, 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	$	1,400	$	—	$	—	$	1,400
Other	400		—		—		400
Interchange revenue from debit card transactions	2,336		—		—		2,336
WMG fee income	—		5,385		—		5,385
CFS fee and commission income	—		—		524		524
Net gains on sales of OREO	46		—		—		46
Net gains on sales of loans(a)	99		—		—		99
Loan servicing fees(a)	77		—		—		77
Net gains on sales of securities(a)	—		—		—		—
Change in fair value of equity securities(a)	(350)		—		(5)		(355)
Income from bank-owned life insurance(a)	22		—		—		22
Other(a)	1,105		—		(57)		1,048
Total non-interest income	$	5,135	$	5,385	$	462	$	10,982

(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   June 30,				Six Months Ended   June 30,
	2023		2022		2023		2022
Qualified Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	397		284		793		566
Expected return on plan assets	(594)		(708)		(1,190)		(1,421)
Amortization of unrecognized transition obligation	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	5		—		11		—
Net periodic pension benefit	$	(192)	$	(424)	$	(386)	$	(855)
Supplemental Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	11		9		23		17
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	2		4		4		9
Net periodic supplemental pension cost	$	13	$	13	$	27	$	26
Postretirement Plan, Medical and Life
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	1		1		2		2
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	4		7		9		16
Net periodic postretirement, medical and life benefit	$	5	$	8	$	11	$	18

44

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 June 30, 2023
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	27,757	$	—	$	39	$	27,796
Interest expense	9,201		—		—		9,201
Net interest income	18,556		—		39		18,595
Provision for credit losses	236		—		—		236
Net interest income after provision for credit losses	18,320		—		39		18,359
Other non-interest income	2,701		2,603		143		5,447
Other non-interest expenses	13,894		1,699		320		15,913
Income (loss) before income tax expense (benefit)	7,127		904		(138)		7,893
Income tax expense (benefit)	1,476		198		(61)		1,613
Segment net income (loss)	$	5,651	$	706	$	(77)	$	6,280

	Three months ended June 30, 2022
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	18,531	$	—	$	7	$	18,538
Interest expense	897		—		—		897
Net interest income	17,634		—		7		17,641
Provision for credit losses	(1,744)		—		—		(1,744)
Net interest income after provision for credit losses	19,378		—		7		19,385
Other non-interest income	2,442		2,628		249		5,319
Legal accruals and settlements	—		—		—		—
Other non-interest expenses	12,226		1,650		466		14,342
Income (loss) before income tax expense (benefit)	9,594		978		(210)		10,362
Income tax expense (benefit)	2,167		229		(58)		2,338
Segment net income (loss)	$	7,427	$	749	$	(152)	$	8,024

45

	Six months ended June 30, 2023
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	53,960	$	—	$	66	$	54,026
Interest expense	15,484		—		—		15,484
Net interest income	38,476		—		66		38,542
Provision for credit losses	513		—		—		513
Net interest income after provision for credit losses	37,963		—		66		38,029
Other non-interest income	5,352		5,183		335		10,870
Other non-interest expenses	27,590		3,497		662		31,749
Income (loss) before income tax expense (benefit)	15,725		1,686		(261)		17,150
Income tax expense (benefit)	3,307		375		(82)		3,600
Segment net income (loss)	$	12,418	$	1,311	$	(179)	$	13,550
Segment assets	$	2,667,404	$	2,584	$	4,685	$	2,674,673

	Six months ended June 30, 2022
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	35,982	$	—	$	14	$	35,996
Interest expense	1,678		—		—		1,678
Net interest income	34,304		—		14		34,318
Provision for credit losses	(2,889)		—		—		(2,889)
Net interest income after provision for credit losses	37,193		—		14		37,207
Other non-interest income	5,135		5,385		462		10,982
Legal accruals and settlements	—		—		—		—
Other non-interest expenses	24,757		3,465		788		29,010
Income (loss) before income tax expense (benefit)	17,571		1,920		(312)		19,179
Income tax expense (benefit)	3,933		438		(83)		4,288
Segment net income (loss)	$	13,638	$	1,482	$	(229)	$	14,891
Segment assets	$	2,441,375	$	2,723	$	5,813	$	2,449,911

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 closing price of the Corporation's stock on the grant date.

46

During the six months ended June 30, 2023 and 2022, 13,069 and 12,560 shares, respectively, were re-issued from treasury to fund stock compensation. The expense related to these grants is recognized over a one year vesting period. Total expense related to the 2021 Plan of $0.3 million and $0.2 million was recognized during each of the three month periods ended June 30, 2023 and 2022, respectively. Total expense related to the 2021 Plan of $0.6 million was recognized during each of the six month periods ended June 30, 2023 and 2022.

A summary of restricted stock activity for the three and six months ended June 30, 2023 is presented below:

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at April 1, 2023	54,328	$43.77
Granted	—
Vested	—
Forfeited or cancelled	(326)	$43.73
Nonvested at June 30, 2023	54,002	$44.68

	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	(326)	$43.73
Nonvested at June 30, 2023	54,002	$44.68

As of June 30, 2023, there was $1.6 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 3.59 years. The total fair value of shares vested was $0.6 million and $0.1 million for the six month periods ended June 30, 2023 and 2022, respectively. Due to the adoption of the 2021 Plan, certain grants were transitioned to a one-year vesting period.

NOTE 14    SUBSEQUENT EVENTS

On June 22, 2023, the Corporation filed a Form S-3 Registration Statement under the Securities Act of 1933. The Corporation's Board of Directors approved the filing with the SEC of a Shelf Registration Statement to register for sale from time to time up to $75 million of the following securities: (i) shares of common stock; (ii) unsecured debt securities, which may consist of notes, debentures or other evidences of indebtedness; (iii) warrants; (iv) purchase contracts; (v) units consisting of any combination of the foregoing; and (vi) subscription rights to purchase shares of common stock or debt securities. The SEC declared the registration statement effective on July 13, 2023.

47

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 and six months ended June 30, 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 77-80 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.

48

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 June 30, 2023 the allowance for credit losses totaled $20.2 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 June 30, 2023 and December 31, 2022, the ACL (ALLL for December 31, 2022), allocated to the total commercial portfolio was $15.1 million and $15.0 million respectively, 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 $20.0 million at June 30, 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 June 30, 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.

49

Consolidated Financial Highlights

																As of or for the
	As of or for the Three Months Ended															Six Months Ended
	June 30,			Mar. 31			Dec. 31			Sept. 30,			June 30,			June 30,			June 30,
(in thousands, except per share data)	2023			2023			2022			2022			2022			2023			2022
RESULTS OF OPERATIONS
Interest income	$	27,796		$	26,230		$	24,480		$	20,999		$	18,538		$	54,026		$	35,996
Interest expense	9,201			6,283			3,609			2,009			897			15,484			1,678
Net interest income	18,595			19,947			20,871			18,990			17,641			38,542			34,318
Provision for credit losses	236			277			1,080			1,255			(1,744)			513			(2,889)
Net interest income after provision for credit losses	18,359			19,670			19,791			17,735			19,385			38,029			37,207
Non-interest income	5,447			5,423			5,418			5,036			5,319			10,870			10,982
Non-interest expense	15,913			15,836			15,693			14,577			14,342			31,749			29,010
Income before income tax expense	7,893			9,257			9,516			8,194			10,362			17,150			19,179
Income tax expense	1,613			1,987			2,077			1,741			2,338			3,600			4,288
Net income	$	6,280		$	7,270		$	7,439		$	6,453		$	8,024		$	13,550		$	14,891
Basic and diluted earnings per share	$	1.33		$	1.54		$	1.58		$	1.37		$	1.72		$	2.87		$	3.18
Average basic and diluted shares outstanding	4,729			4,721			4,698			4,692			4,690			4,725			4,690
PERFORMANCE RATIOS - Annualized
Return on average assets	0.95		%	1.12		%	1.15		%	1.02		%	1.32		%	1.03		%	1.23		%
Return on average equity	13.97		%	16.97		%	18.36		%	14.17		%	18.06		%	15.43		%	15.73		%
Return on average tangible equity (a)	15.89		%	19.40		%	21.25		%	16.12		%	20.58		%	17.60		%	17.77		%
Efficiency ratio (unadjusted) (a) (f)	66.19		%	62.42		%	59.69		%	60.67		%	62.47		%	64.25		%	64.04		%
Efficiency ratio (adjusted) (a) (b)	65.94		%	62.18		%	59.44		%	60.40		%	62.17		%	64.01		%	63.72		%
Non-interest expense to average assets	2.41		%	2.44		%	2.42		%	2.30		%	2.35		%	2.42		%	2.39		%
Loans to deposits	79.24		%	80.33		%	78.61		%	74.71		%	74.11		%	79.24		%	74.11		%
YIELDS / RATES - Fully Taxable Equivalent
Yield on loans	5.09		%	4.90		%	4.57		%	4.19		%	3.90		%	4.99		%	3.87		%
Yield on investments	2.22		%	2.18		%	2.09		%	1.72		%	1.60		%	2.20		%	1.53		%
Yield on interest-earning assets	4.29		%	4.12		%	3.82		%	3.41		%	3.12		%	4.20		%	3.06		%
Cost of interest-bearing deposits	2.01		%	1.34		%	0.93		%	0.47		%	0.21		%	1.68		%	0.21		%
Cost of borrowings	5.13		%	4.91		%	4.30		%	2.56		%	1.70		%	5.01		%	1.83		%
Cost of interest-bearing liabilities	2.11		%	1.49		%	0.88		%	0.51		%	0.24		%	1.81		%	0.23		%
Interest rate spread	2.18		%	2.63		%	2.94		%	2.90		%	2.88		%	2.39		%	2.83		%
Net interest margin, fully taxable equivalent (a)	2.87		%	3.14		%	3.26		%	3.08		%	2.97		%	3.00		%	2.92		%
CAPITAL
Total equity to total assets at end of period	6.63		%	6.68		%	6.29		%	6.10		%	7.13		%	6.63		%	7.13		%
Tangible equity to tangible assets at end of period (a)	5.87		%	5.91		%	5.51		%	5.29		%	6.30		%	5.87		%	6.30		%
Book value per share	$	37.49		$	37.53		$	35.32		$	33.14		$	37.24		$	37.49		$	37.24
Tangible book value per share (a)	32.88			32.91			30.69			28.49			32.59			32.88			32.59
Period-end market value per share	38.41			41.50			45.87			41.87			47.00			38.41			47.00
Dividends declared per share	0.31			0.31			0.31			0.31			0.31			0.62			0.62
AVERAGE BALANCES
Loans and loans held for sale (c)	$	1,880,224		$	1,849,310		$	1,787,103		$	1,675,859		$	1,587,777		$	1,864,853		$	1,560,264
Earning assets	2,609,893			2,592,709			2,550,834			2,457,218			2,395,704			2,601,349			2,383,557
Total assets	2,649,399			2,627,088			2,574,639			2,511,301			2,446,763			2,643,964			2,449,339
Deposits	2,363,847			2,337,476			2,347,719			2,257,394			2,203,231			2,350,734			2,207,314
Total equity	180,357			173,786			160,740			180,644			178,207			177,089			190,841
Tangible equity (a)	158,533			151,962			138,916			158,820			156,382			155,265			169,011

50

	As of or for the Three Months Ended															Six Months Ended
	June 30,			Mar. 31			Dec. 31			Sept. 30,			June 30,			June 30,			June 30,
	2023			2023			2022			2022			2022			2023			2022
ASSET QUALITY
Net charge-offs	$	146		$	269		$	52		$	109		$	699		$	415		$	651
Non-performing loans (d)	7,304			7,731			8,178			8,310			7,374			7,304			7,374
Non-performing assets (e)	7,471			7,927			8,373			8,503			7,665			7,471			7,665
Allowance for credit losses (g)	20,172			20,075			19,659			18,631			17,485			20,172			17,485
Annualized net charge-offs to average loans	0.03		%	0.06		%	0.01		%	0.03		%	0.18		%	0.04		%	0.08		%
Non-performing loans to total loans	0.39		%	0.41		%	0.45		%	0.48		%	0.46		%	0.39		%	0.46		%
Non-performing assets to total assets	0.28		%	0.30		%	0.32		%	0.33		%	0.31		%	0.28		%	0.31		%
Allowance for credit losses to total loans	1.07		%	1.07		%	1.07		%	1.07		%	1.08		%	1.07		%	1.08		%
Allowance for credit losses to non-performing loans	276.17		%	259.66		%	240.39		%	224.21		%	237.12		%	276.17		%	237.12		%
(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 other companies. 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 77-80 for further explanation and reconciliation of the Corporation’s use of non-GAAP measures.

51

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 and six months ended June 30, 2023 and 2022. For a discussion of the Critical Accounting Estimates and Risks and Uncertainties that affect the Consolidated Results of Operations, see page 49 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   June 30,								Six Months Ended   June 30,
	2023		2022		Change		% Change		2023		2022		Change		% Change
Net interest income	$	18,595	$	17,641	$	954	5.4	%	$	38,542	$	34,318	$	4,224	12.3	%
Non-interest income	5,447		5,319		128		2.4	%	10,870		10,982		(112)		(1.0)	%
Non-interest expense	15,913		14,342		1,571		11.0	%	31,749		29,010		2,739		9.4	%
Pre-provision income	8,129		8,618		(489)		(5.7)	%	17,663		16,290		1,373		8.4	%
Provision (credit) for credit losses(1)	236		(1,744)		1,980		113.5	%	513		(2,889)		3,402		117.8	%
Income tax expense	1,613		2,338		(725)		(31.0)	%	3,600		4,288		(688)		(16.0)	%
Net income	$	6,280	$	8,024	$	(1,744)	(21.7)	%	$	13,550	$	14,891	$	(1,341)	(9.0)	%
Basic and diluted earnings per share	$	1.33	$	1.72	$	(0.39)	(22.7)	%	$	2.87	$	3.18	$	(0.31)	(9.7)	%

(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 June 30,				Six Months Ended   June 30,
Selected financial ratios:	2023		2022		2023		2022
Return on average assets	0.95	%	1.32	%	1.03	%	1.23	%
Return on average equity	13.97	%	18.06	%	15.43	%	15.73	%
Net interest margin, fully taxable equivalent (a)	2.87	%	2.97	%	3.00	%	2.92	%
Efficiency ratio (adjusted) (a) (b)	65.94	%	62.17	%	64.01	%	63.72	%
Non-interest expenses to average assets	2.41	%	2.35	%	2.42	%	2.39	%
(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 second quarter of 2023 was $6.3 million, or $1.33 per share, compared to $8.0 million, or $1.72 per share, for the same period in the prior year. Return on average equity for the current quarter was 13.97%, compared to 18.06% for the same period in the prior year. The decrease in net income was due primarily to increases in the provision for credit losses and non-interest expense, offset by increases in net interest income and non-interest income, and a decrease in income tax expense.

Net income for the six months ended June 30, 2023 was $13.6 million, or $2.87 per share, compared to $14.9 million, or $3.18 per share, for the same period in the prior year. Return on average equity for the six months ended June 30, 2023 was 15.43%, compared to 15.73% for the same period in the prior year. The decrease in net income was attributable to increases in the provision for credit losses and non-interest expense, and a decrease in non-interest income, offset by an increase in net interest income and a decrease in income tax expense.

52

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   June 30,
	2023		2022		Change		Percentage Change
Interest and dividend income	$	27,796	$	18,538	$	9,258	49.9	%
Interest expense	9,201		897		8,304		925.8	%
Net interest income	$	18,595	$	17,641	$	954	5.4	%

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 second quarter ended June 30, 2023 increased $1.0 million, or 5.4%, to $18.6 million compared to the same period in the prior year, due primarily to increases of $8.4 million in interest income on loans, including fees, and $0.8 million in interest and dividend income on taxable securities, offset by increases of $7.7 million in interest expense on deposits and $0.6 million in interest expense on borrowed funds.

The increase in interest income on loans, including fees was due primarily to a 119 basis points increase in the average yield on loans, primarily reflecting increases in interest rates in the commercial portfolio, when compared to the same period in the prior year, and a $292.4 million increase in average loan balances, representing increases across all loan categories, when compared to the same period in the prior year. 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 61 basis points increase in the average yield on securities due to an increase in average interest rates, despite a decrease of $71.8 million in average balances when compared to the same period in the prior year primarily due to paydowns on certain securities held in the portfolio between the second quarter of 2022 and the second quarter of 2023.

The increase in interest expense on deposits was due primarily to a 180 basis points increase in average rates paid on interest-bearing deposits, which included brokered deposits, a shift in the mix of deposits towards higher cost interest-bearing accounts, and a deposit campaign in the second 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 $27.2 million increase in the average balances of overnight FHLBNY borrowings in the current quarter, and a 378 basis points increase in the average rate on overnight borrowings, when compared to the same period in the prior year.

Fully taxable equivalent net interest margin was 2.87% in the second quarter of 2023, compared to 2.97% for the same period in the prior year. Average interest-earning assets increased $214.2 million for the three months ended June 30, 2023 compared to the same period in the prior year. The average yield on interest-earning assets increased 117 basis points to 4.29%, and the average cost of interest-bearing liabilities increased 187 basis points to 2.11%, for the three months ended June 30, 2023, when compared to the same period in the prior year, due to a shift in the overall deposit mix to higher cost deposits, and the rising interest rate environment, when compared to the same period in the prior year.

53

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

	Six Months Ended   June 30,
	2023		2022		Change		Percentage Change
Interest and dividend income	$	54,026	$	35,996	$	18,030	50.1	%
Interest expense	15,484		1,678		13,806		822.8	%
Net interest income	$	38,542	$	34,318	$	4,224	12.3	%

Net interest income for the six months ended June 30, 2023 totaled $38.5 million compared to $34.3 million for the same period in the prior year, an increase of $4.2 million, or 12.3% due primarily to an increase of $18.0 million in interest and dividend income, partially offset by an increase of $13.8 million in interest expense. The increase in interest and dividend income for the first six months of 2023 was primarily attributed to increases of $16.2 million in interest income on loans, including fees, and $1.7 million in interest and dividend income on taxable securities. The increase in interest expense for the first six months of 2023 was primarily attributed to increases of $12.4 million in interest expense on deposits and $1.5 million in interest expense on borrowed funds.

The increase in interest income on loans, including fees, was mostly attributable to increases of $182.4 million, $19.1 million, and $103.0 million in the average balances of the commercial, residential mortgage, and consumer loan portfolios, respectively, and an increase in the average yield on the commercial loan portfolio of 142 basis points due to increases in average interest rates on new loan originations and increases on adjustable rate loans.

The increase in interest income on taxable securities was mostly attributable to a 64 basis points increase in the average yield due to an increase in average interest rates, despite a $67.6 million decrease in average balances of taxable securities. The decrease in the average balances of taxable securities was mostly attributable to paydowns on some of the securities within the portfolio, and a decrease in the market value of some of the available for sale securities held in the portfolio, due to the rising interest rate environment.

The increase in interest expense on deposits was due primarily to an increase in the average balances on customer time deposits and brokered certificates of deposits of $93.4 million and $133.9 million respectively, as well as increases of 208 basis points and 297 basis points in the average interest rates paid on customer time deposits and brokered deposits, respectively. The increases in average balances were primarily to fund loan growth, as well as a shift in demand for deposits towards interest-bearing options. The increases in the average interest rates paid were due primarily to the increasing interest rate environment, as well as competitive pressures to attract and retain customer time deposits. Also contributing to the increase in interest expense on deposits was an increase of $4.2 million in interest expense on savings and money market accounts, due to an increase of 95 basis points in the average interest rates paid, despite a decrease of $54.1 million in the average balances on savings and money market accounts.

The $1.5 million increase in interest expense on borrowed funds was due primarily to a $48.1 million increase in average balances of overnight advances, and a 368 basis points increase in the average interest rate paid on overnight advances, when compared to the same period in the prior year, in order to fund loan growth.

The average yield on interest-earning assets increased 114 basis points, to 4.20%, and the average cost of interest-bearing liabilities increased 158 basis points, to 1.81% for the six months ended June 30, 2023 compared to the same period in the prior year. Average interest-earning assets increased $217.8 million for the six months ended June 30, 2023 compared to the same period in the prior year. Fully taxable equivalent net interest margin was 3.00% for the six months ended June 30, 2023 compared to 2.92% for the same period in the prior year.

54

Average Consolidated Balance Sheets and Interest Analysis

The following tables present certain information related to the Corporation’s average consolidated balance sheets and its consolidated statements of income for the three and six months ended June 30, 2023 and 2022. For the purpose of the tables 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 $3 thousand and $0.6 million for the three month periods ended June 30, 2023, and 2022, respectively, related to the Paycheck Protection Program. Loan fee income of $10 thousand and $1.7 million for the six month periods ended June 30, 2023 and 2022, respectively, related to the Paycheck Protection Program.

AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
	Three Months Ended   June 30, 2023						Three Months Ended   June 30, 2022
(in thousands)	Average Balance		Interest		Yield/Rate (3)		Average Balance		Interest		Yield/Rate (3)
Interest-earning assets:
Commercial loans	$	1,288,113	$	17,791	5.54	%	$	1,111,854	$	11,244	4.06	%
Mortgage loans	284,916		2,509		3.53	%	270,112		2,256		3.35	%
Consumer loans	307,195		3,545		4.63	%	205,811		1,927		3.76	%
Taxable securities	680,020		3,633		2.14	%	751,784		2,866		1.53	%
Tax-exempt securities	40,541		294		2.91	%	42,222		330		3.13	%
Interest-earning deposits	9,108		116		5.11	%	13,921		18		0.52	%
Total interest-earning assets	2,609,893		27,888		4.29	%	2,395,704		18,641		3.12	%
Non-earning assets:
Cash and due from banks	25,168						23,702
Other assets	34,478						47,471
Allowance for credit losses (4)	(20,140)						(20,114)
Total assets	$	2,649,399					$	2,446,763
Interest-bearing liabilities:
Interest-bearing demand deposits	$	286,573	$	723	1.01	%	$	273,723	$	51	0.07	%
Savings and insured money market deposits	902,741		3,050		1.36	%	962,501		242		0.10	%
Time deposits	346,953		2,679		3.10	%	240,979		465		0.77	%
Brokered deposits	156,196		2,017		5.18	%	2,178		11		2.09	%
FHLBNY overnight advances	53,965		703		5.23	%	26,780		97		1.45	%
Long-term capital leases	3,213		29		3.62	%	3,485		31		3.57	%
Total interest-bearing liabilities	1,749,641		9,201		2.11	%	1,509,646		897		0.24	%
Non-interest-bearing liabilities:
Demand deposits	671,384						723,849
Other liabilities	48,017						35,061
Total liabilities	2,469,042						2,268,556
Shareholders' equity	180,357						178,207
Total liabilities and shareholders’ equity	$	2,649,399					$	2,446,763
Fully taxable equivalent net interest income			18,687						17,744
Net interest rate spread (1)					2.18	%					2.88	%
Net interest margin, fully taxable equivalent (2)					2.87	%					2.97	%
Taxable equivalent adjustment			(92)						(103)
Net interest income			$	18,595					$	17,641

(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.

55

AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
	Six Months Ended   June 30, 2023						Six Months Ended   June 30, 2022
(in thousands)	Average Balance		Interest		Yield/ Rate (3)		Average Balance		Interest		Yield/ Rate (3)
Interest-earning assets:
Commercial loans	$	1,274,658	$	34,376	5.44	%	$	1,092,240	$	21,791	4.02	%
Mortgage loans	285,251		4,981		3.52	%	266,105		4,409		3.34	%
Consumer loans	304,944		6,830		4.52	%	201,919		3,743		3.74	%
Taxable securities	687,508		7,218		2.12	%	755,127		5,556		1.48	%
Tax-exempt securities	40,654		599		2.97	%	42,328		663		3.16	%
Interest-earning deposits	8,334		213		5.15	%	25,838		36		0.28	%
Total interest-earning assets	2,601,349		54,217		4.20	%	2,383,557		36,198		3.06	%
Non-earning assets:
Cash and due from banks	25,126						24,220
Other assets	37,608						62,230
Allowance for credit losses (4)	(20,119)						(20,668)
Total assets	$	2,643,964					$	2,449,339
Interest-bearing liabilities:
Interest-bearing demand deposits	$	288,819	$	996	0.70	%	$	283,521	$	107	0.08	%
Savings and insured money market deposits	904,832		4,699		1.05	%	958,919		454		0.10	%
Time deposits	334,662		4,771		2.87	%	241,239		945		0.79	%
Brokered deposits	134,991		3,390		5.06	%	1,095		11		2.09	%
FHLBNY overnight advances	62,286		1,570		5.08	%	14,205		99		1.40	%
Long-term capital leases	3,247		58		3.60	%	3,517		62		3.57	%
Total interest-bearing liabilities	1,728,837		15,484		1.81	%	1,502,496		1,678		0.23	%
Non-interest-bearing liabilities:
Demand deposits	687,430						722,540
Other liabilities	50,608						33,462
Total liabilities	2,466,875						2,258,498
Shareholders' equity	177,089						190,841
Total liabilities and shareholders’ equity	$	2,643,964					$	2,449,339
Fully taxable equivalent net interest income			38,733						34,520
Net interest rate spread (1)					2.39	%					2.83	%
Net interest margin, fully taxable equivalent (2)					3.00	%					2.92	%
Taxable equivalent adjustment			(191)						(202)
Net interest income			$	38,542					$	34,318

(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.

56

Changes Due to Rate and Volume

Net interest income can be analyzed in terms of the impact of changes in rates and volumes. The tables 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 and six months ended June 30, 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 these tables, 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 June 30, 2023 vs. 2022
	Increase/(Decrease)
	Total Change		Due to Volume		Due to Rate
(in thousands)
Interest and dividend income on:
Commercial loans	$	6,547	$	1,984	$	4,563
Mortgage loans	253		128		125
Consumer loans	1,618		1,101		517
Taxable investment securities	767		(294)		1,061
Tax-exempt investment securities	(36)		(13)		(23)
Interest-earning deposits	98		(8)		106
Total interest and dividend income, fully taxable equivalent	9,247		2,898		6,349
Interest expense on:
Interest-bearing demand deposits	672		2		670
Savings and insured money market deposits	2,808		(16)		2,824
Time deposits	2,214		281		1,933
Brokered deposits	2,006		1,965		41
FHLBNY overnight advances	606		170		436
Long-term capital leases	(2)		(2)		—
Total interest expense	8,304		2,400		5,904
Net interest income, fully taxable equivalent	$	943	$	498	$	445

57

	Six Months Ended June 30, 2023 vs. 2022
	Increase/(Decrease)
	Total Change		Due to Volume		Due to Rate
(in thousands)
Interest and dividend income on:
Commercial loans	$	12,585	$	4,040	$	8,545
Mortgage loans	572		327		245
Consumer loans	3,087		2,191		896
Taxable investment securities	1,662		(537)		2,199
Tax-exempt investment securities	(64)		(25)		(39)
Interest-earning deposits	177		(40)		217
Total interest and dividend income, fully taxable equivalent	18,019		5,956		12,063
Interest expense on:
Interest-bearing demand deposits	889		2		887
Savings and insured money market deposits	4,245		(28)		4,273
Time deposits	3,826		491		3,335
Brokered deposits	3,379		3,340		39
FHLBNY overnight advances	1,471		828		643
Long-term Capital leases	(4)		(5)		1
Total interest expense	13,806		4,628		9,178
Net interest income, fully taxable equivalent	$	4,213	$	1,328	$	2,885

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 recorded through income as a provision. 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. Qualitative adjustments reflect the degree to which management anticipates future outcomes could differ from those projected by the quantitative model.

Upon adoption of ASU 2016-13, the Corporation’s provision for credit losses 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 three months ended June 30, 2023, the provision for credit losses was $0.2 million primarily due to additional provisioning resulting from increased loan volume, offset by a decrease in the quantitative reserve requirement rates as a result of more favorable economic projections, notably a decrease in the Federal Open Market Committee's (FOMC) forecasted U.S. unemployment rate. For the three months ended June 30, 2022, the provision for loan losses was a credit of $1.7 million, primarily due to the $1.5 million release of a specific reserve related to the settlement of a large commercial real estate credit, and the positive impacts of $0.8 million related to upgrades of two commercial credits, and a $1.0 million decrease in the historical loss factor due to the roll-off of a commercial real estate owner occupied property previously charged off in the second quarter of 2020, offset by additional provision related to increased loan growth.

58

The provision for credit losses for the six months ended June 30, 2023, was $0.5 million compared to a credit of $2.9 million, for the same period in the prior year. The $3.4 million increase in the provision for credit losses in the six months ended June 30, 2023, when compared to the same period in the prior year, was primarily due to the $1.2 million release of the pandemic related portion of the allowance in the first quarter of 2022, the $1.5 million release of a specific reserve related to the settlement of a large commercial real estate credit, positive impacts of $0.8 million related to upgrades of two large commercial credits, and a $1.0 million decrease in the historical loss factor due to the roll-off of a commercial real estate owner occupied property previously charged off in the second quarter of 2020. These decreases in the provision during the first six months of 2022 were offset by additional provisioning of $1.4 million related to increased loan growth.

Net charge-offs for the three months ended June 30, 2023 were $0.1 million, compared to $0.7 million for the same period in the prior year. Net charge-offs in the three months ended June 30, 2023 were primarily in the consumer indirect auto portfolio. Net charge-offs in the three months ended June 30, 2022 were mostly attributable to the settlement of a large commercial real estate credit.

Net charge-offs for the six months ended June 30, 2023 were $0.4 million, compared to net charge-offs of $0.7 million for the same period in 2022. The $0.4 million net charge-off for the six months ended June 30, 2023, was mostly attributed to the charge off of a commercial and industrial loan, and charge-off activity in the indirect auto portfolio. The $0.7 million net charge-off for the six month period ended June 30, 2022 was mostly attributed to the settlement of a large commercial real estate credit.

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   June 30,
	2023		2022		Change		Percentage Change
WMG fee income	$	2,603	$	2,628	$	(25)	(1.0)	%
Service charges on deposit accounts	959		936		23		2.5	%
Interchange revenue from debit card transactions	1,194		1,206		(12)		(1.0)	%
Changes in fair value of equity investments	(103)		(242)		139		57.4	%
Net gains on sales of loans held for sale	18		25		(7)		(28.0)	%
Net gains (losses) on sales of other real estate owned	14		46		(32)		N/M
Income from bank owned life insurance	11		11		—		N/A
CFS fee and commission income	265		271		(6)		(2.2)	%
Other	486		438		48		11.0	%
Total non-interest income	$	5,447	$	5,319	$	128	2.4	%

Total non-interest income for the second quarter of 2023 increased $0.1 million compared to the same period in the prior year primarily due to an increase in the change in fair value of equity investments. The remaining components of non-interest income in the second quarter of 2023 were relatively consistent, when compared to the same period in the prior year.

Change in Fair value of Equity Investments

The increase in change 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, due to a comparative improvement in financial markets, when compared to the same period in the prior year. This increase was partially offset by a decrease in the fair value of a particular equity method investment held by the Corporation.

59

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

	Six Months Ended   June 30,
	2023		2022		Change		Percentage Change
WMG fee income	$	5,183	$	5,385	$	(202)	(3.8)	%
Service charges on deposit accounts	1,900		1,800		100		5.6	%
Interchange revenue from debit card transactions	2,327		2,336		(9)		(0.4)	%
Changes in fair value of equity investments	(31)		(355)		324		91.3	%
Net gains on sales of loans held for sale	23		99		(76)		(76.8)	%
Net gains (losses) on sales of other real estate owned	14		46		(32)		(69.6)	%
Income from bank owned life insurance	21		22		(1)		(4.5)	%
CFS fee and commission income	506		524		(18)		(3.4)	%
Other	927		1,125		(198)		(17.6)	%
Total non-interest income	$	10,870	$	10,982	$	(112)	(1.0)	%

Total non-interest income for the six months ended June 30, 2023 decreased $0.1 million compared to the same period in the prior year. The decrease was primarily due to decreases in WMG fee income and other non-interest income, offset by increases in the change in fair value of equity investments and service charges on deposit accounts.

WMG fee income

The decrease in WMG fee income can primarily be attributed to a decrease in the average market value of assets under management when compared to the same period in the prior year.

Change in Other Non-Interest Income

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

Change in Fair Value of Equity Investments

The increase in the change 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, related to improvement in the financial markets when compared to the same period in the prior year. This increase was partially offset by a decrease in the fair value of a particular equity investment held by the Corporation.

Change in Service Charges on Deposit Accounts

The increase in service charges on deposit accounts was primarily due to an increase in non-sufficient fund and overdraft fees when compared to the same period in the prior year.

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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   June 30,
	2023		2022		Change		Percentage Change
Compensation expense:
Salaries and wages	$	6,704	$	6,056	$	648	10.7	%
Pension and other employee benefits	1,808		1,937		(129)		(6.7)	%
Other components of net periodic pension and postretirement benefits	(174)		(403)		229		(56.8)	%
Total compensation expense	8,338		7,590		748		9.9	%
Non-compensation expense:
Net occupancy	1,440		1,369		71		5.2	%
Furniture and equipment	461		410		51		12.4	%
Data processing	2,473		2,468		5		0.2	%
Professional services	602		664		(62)		(9.3)	%
Amortization of intangible assets	—		4		(4)		(100.0)	%
Marketing and advertising	170		184		(14)		(7.6)	%
Other real estate owned expenses	1		8		(7)		87.5	%
FDIC insurance	586		284		302		106.3	%
Loan expenses	308		176		132		75.0	%
Other	1,534		1,185		349		29.5	%
Total non-compensation expense	7,575		6,752		823		12.2	%
Total non-interest expense	$	15,913	$	14,342	$	1,571	11.0	%

Total non-interest expense for the second quarter of 2023 increased $1.6 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 June 30, 2023, non-interest expense to average assets was 2.41%, compared to 2.35% for the same period in the prior year.

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. These increases were partially offset by a decrease in pension and other employee benefits. The increase in salaries and wages can be primarily attributed to base salary increases and an increase in the market value of the assets held related to the Corporation's deferred compensation plan. The increase in other components of net periodic pension and postretirement benefits can be primarily attributed to actuarial adjustments made to the Corporation's pension plans. The decrease in pension and other employee benefits can be primarily attributed to a decrease in healthcare-related expenses when compared to the same period in the prior year.

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 other non-interest expense, FDIC insurance, and loan expenses, partially offset by a decrease in professional services. The increase in other non-interest expense was primarily attributed to the recapture of $0.2 million of accrued expenses related to a telecom contract dispute in the second quarter of 2022. The increase in FDIC insurance can be primarily attributed to an increase in the assessment rate effective January 1, 2023. The increase in loan expenses was mostly attributable to a decrease in the deferred costs recognized for dealer flat fees related to the Corporation's indirect auto lending portfolio, when compared to the same period in the prior year. The decrease in professional services was primarily due to decreased spending as well as the timing of consulting engagements during the first six months of 2023, when compared to the same period in the prior year.

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

	Six Months Ended   June 30,
	2023		2022		Change		Percentage Change
Compensation expense:
Salaries and wages	$	13,487	$	12,279	$	1,208	9.8	%
Pension and other employee benefits	3,488		3,655		(167)		(4.6)	%
Other components of net periodic pension and postretirement benefits	(348)		(811)		463		(57.1)	%
Total compensation expense	16,627		15,123		1,504		9.9	%
Non-compensation expense:
Net occupancy	2,905		2,796		109		3.9	%
Furniture and equipment	879		847		32		3.8	%
Data processing	4,854		4,655		199		4.3	%
Professional services	1,042		1,185		(143)		(12.1)	%
Amortization of intangible assets	—		15		(15)		(100.0)	%
Marketing and advertising	502		460		42		9.1	%
Other real estate owned expenses	39		(29)		68		234.5	%
FDIC insurance	1,083		598		485		81.1	%
Loan expenses	540		391		149		38.1	%
Other	3,278		2,969		309		10.4	%
Total non-compensation expense	15,122		13,887		1,235		8.9	%
Total non-interest expense	$	31,749	$	29,010	$	2,739	9.4	%

Total non-interest expense for the six months ended June 30, 2023 increased $2.7 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 six months ended June 30, 2023, non-interest expense to average assets was 2.42%, compared to 2.39% for the same period in the prior year.

Compensation expense

The increase in compensation expense, compared to the same period in the prior year, can be mostly attributable to increases in salaries and wages and other components of net periodic pension and postretirement benefits, and partially offset by a decrease in pension and other employee benefits. The increase in salaries and wages was primarily due to base salary increases, an increase in restricted stock expense, and an increase in the market value of the Corporation's deferred compensation plan, when compared to the same period in the prior year. The increase in pension and other components of net periodic pension and postretirement benefits was primarily due to actuarial adjustments related to the Corporation's pension plans. The decrease in pension and other employee benefits was attributable to a decrease in healthcare-related expenses, when compared to the same period in the prior year.

Non-compensation expense

The increase in non-compensation expense can mostly be attributable to increases in FDIC insurance expense, other non-interest expense, data processing, and loan expenses, offset by a decrease in professional services. The increase in FDIC insurance expense was primarily attributable to an increase in the assessment rate effective January 1, 2023. The increase in other-non interest expense was primarily attributable to the recapture of $0.2 million of accrued expenses related to a telecom contract dispute in the second quarter of 2022. The increase in data processing expense was attributable to additional expenditures related to cybersecurity improvement initiatives, and increased software expenses. The increase in loan expenses was primarily attributable to an increase in dealer flat fee expenses when compared to the same period in the prior year. The decrease in professional services was primarily due to decreased spending as well as the timing, of consulting engagements during the first six months of 2023, when compared to the same period in the prior year.

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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   June 30,
	2023			2022			Change		Percentage Change
Income before income tax expense	$	7,893		$	10,362		$	(2,469)	(23.8)	%
Income tax expense	1,613			2,338			(725)		(31.0)	%
Effective tax rate	20.4		%	22.6		%

Income tax expense for the three months ended June 30, 2023 and 2022 were $1.6 million and $2.3 million, respectively. The decrease in income tax expense was due primarily to a decrease of $2.0 million in income before income tax expense. The effective income tax rate decreased from 22.6% for the second quarter of 2022 to 20.4% for the second quarter of 2023.

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

	Six Months Ended   June 30,
	2023			2022			Change		Percentage Change
Income before income tax expense	$	17,150		$	19,179		$	(2,029)	(10.6)	%
Income tax expense	3,600			4,288			(688)		(16.0)	%
Effective tax rate	21.0		%	22.4		%

Income tax expense for the six months ended June 30, 2023 and 2022 were $3.6 million and $4.3 million, respectively. The decrease in income tax expense was due primarily to a decrease of $2.0 million in income before income tax expense. The effective income tax rate decreased from 22.4% for the six months ended June 30, 2022 to 21.0% for the six months ended June 30, 2023.

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Financial Condition

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

	June 30, 2023		December 31, 2022		Change		Percentage Change
ASSETS
Total cash and cash equivalents	$	54,226	$	55,869	$	(1,643)	(2.9)	%
Total investment securities, FHLB, and FRB stock	615,286		646,040		(30,754)		(4.8)	%
Loans, net of deferred loan fees	1,893,906		1,829,448		64,458		3.5	%
Allowance for credit losses	(20,172)		(19,659)		(513)		2.6	%
Loans, net	1,873,734		1,809,789		63,945		3.5	%
Goodwill and other intangible assets, net	21,824		21,824		—		—	%
Other assets	109,603		112,031		(2,428)		(2.2)	%
Total assets	$	2,674,673	$	2,645,553	$	29,120	1.1	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits	$	2,390,194	$	2,327,227	$	62,967	2.7	%
Advances and other debt	53,949		99,137		(45,188)		(45.6)	%
Other liabilities	53,104		52,801		303		0.6	%
Total liabilities	2,497,247		2,479,165		18,082		0.7	%
Total shareholders’ equity	177,426		166,388		11,038		6.6	%
Total liabilities and shareholders’ equity	$	2,674,673	$	2,645,553	$	29,120	1.1	%

Cash and Cash Equivalents

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

Investment securities

The decrease in investment securities can be mostly attributed to $30.9 million in paydowns and maturities in the securities available for sale portfolio, offset by an increase in the fair value of the available for sale portfolio of $0.7 million.

Loans, net

The increase in loans, net of deferred loan fees, can be primarily attributed to increases of $51.6 million in commercial mortgages, $11.9 million in consumer loans, and $1.5 million in commercial and industrial loans, offset by a decrease of $0.6 million in residential mortgages.

Allowance for Credit Losses

The increase in the allowance for credit losses can be primarily attributed to the $0.4 million in adjustments made upon the adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), and additional provisioning related to increased loan volume. These increases were offset by decreased requirements forecasted by the model due to more favorable economic projections, notably a decrease in the FOMC's forecasted U.S. unemployment rate for year-end 2023 from 4.6% in January to 4.1% in June, as well as an improvement in the FOMC's projected U.S. Gross Domestic Product growth rate from 0.5% to 1.0%. 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.

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Other Assets

The decrease in other assets can be primarily attributed to decreases of $1.2 million in the deferred tax asset, $0.7 million in interest rate swap assets, and $0.2 million in prepaid dealer flat fees.

Deposits

The increase in deposits can be attributed to increases of $112.0 million in brokered deposits, $31.1 million in time deposits, and $1.7 million in interest-bearing demand deposit accounts, offset by decreases of $61.7 million in non-interest bearing demand deposits, $10.9 million in insured money market accounts, and $9.3 million in savings 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 increase in other liabilities can be primarily attributed to an increase of $2.0 million in accrued interest payable on time deposits, including brokered deposits, and the addition of a $1.0 million allowance due to adoption of ASU 2016-13 on January 1, 2023 related to unfunded commitments, offset by decreases of $1.2 million in income tax liability, $0.7 million in interest rate swap liabilities, and a $0.4 million actuarial adjustment to the pension reserve.

Shareholders’ equity

Shareholders’ equity was $177.4 million at June 30, 2023 compared to $166.4 million at December 31, 2022. The increase can be primarily attributed to an increase of $9.6 million in retained earnings and a decrease in accumulated other comprehensive loss of $0.5 million. 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 $13.6 million, offset by $2.9 million in dividends declared, and a $1.5 million one-time adjustment due to the implementation of CECL, during the six months ended June 30, 2023.

Assets under management or administration

The market value of total assets under management or administration in WMG was $2.166 billion at June 30, 2023, including $363.3 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 $113.0 million, or 5.5%, due to an increase in assets under management, due primarily to broad improvements in financial markets.

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 $604.3 million at June 30, 2023, a decrease of $28.3 million, or 4.5%, from $632.6 million at December 31, 2022. The decrease can be mostly attributed to $30.9 million in paydowns, offset by an increase in the fair value of the portfolio of $0.7 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 $1.8 million at June 30, 2023 and $2.4 million at December 31, 2022.

Non-marketable equity securities at June 30, 2023 include shares of FRBNY stock and FHLBNY stock, carried at their cost of $1.8 million and $4.5 million, respectively. Non-marketable equity securities at December 31, 2022 include shares of FRBNY stock and FHLBNY stock, carried at their cost of $1.8 million and $6.4 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.

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Loans

The Corporation has reporting systems to monitor: (i) loan origination and concentrations, (ii) delinquent loans, (iii) non-performing assets, including non-performing loans, certain loans made with 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 June 30, 2023 ($ in thousands):

LOAN COMPOSITION
	June 30, 2023		% of Total Loans		December 31, 2022		% of Total Loans		Dollar Change		Percentage Change
Commercial and agricultural:
Commercial and industrial	$	253,501	13.4	%	$	252,044	13.8	%	$	1,457	0.6	%
Agricultural	305		—	%	249		—	%	56		22.5	%
Commercial mortgages:
Construction	124,942		6.5	%	108,243		5.9	%	16,699		15.4	%
Commercial mortgages	923,585		48.8	%	888,670		48.7	%	34,915		3.9	%
Residential mortgages	285,084		15.1	%	285,672		15.6	%	(588)		(0.2)	%
Consumer loans:
Home equity lines and loans	85,283		4.5	%	81,401		4.4	%	3,882		4.8	%
Indirect consumer loans	210,532		11.1	%	202,124		11.0	%	8,408		4.2	%
Direct consumer loans	10,674		0.6	%	11,045		0.6	%	(371)		(3.4)	%
Total	$	1,893,906	100.0	%	$	1,829,448	100.0	%	$	64,458	3.5	%

Portfolio loans totaled $1.894 billion at June 30, 2023, an increase of $64.5 million, or 3.5%, from $1.829 billion at December 31, 2022. The increase in loans can be attributed to increases of $51.6 million in commercial mortgage loans, $8.4 million in indirect consumer loans, $3.5 million in other consumer loans, and $1.5 million in commercial and industrial loans, offset by a decrease of $0.6 million in residential mortgages.

Residential mortgage loans totaled $285.1 million at June 30, 2023, a decrease of $0.6 million, or 0.2%, from December 31, 2022. During the six months ended June 30, 2023, $14.9 million of residential mortgages were originated, of which $1.3 million were sold in the secondary market to Freddie Mac. Indirect consumer loans totaled $210.5 million at June 30, 2023, an increase of $8.4 million, or 4.2%, from December 31, 2022, as consumer demand for automobiles remains strong, and prices remain elevated when compared to pre-pandemic levels.

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

LOANS BY DIVISION
	June 30, 2023		December 31, 2022		December 31, 2021		December 31, 2020		December 31, 2019
Chemung Canal Trust Company*^	$	749,911	$	731,344	$	639,144	$	658,468	$	576,399
Capital Bank Division	1,143,995		1,098,104		879,105		877,995		732,820
Total loans	$	1,893,906	$	1,829,448	$	1,518,249	$	1,536,463	$	1,309,219

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

^ Includes $83.3 million and $79.8 million as of June 30, 2023 and December 31, 2022, respectively, in the Western New York market.

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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 June 30, 2023 and December 31, 2022, commercial loans to borrowers involved in the real estate, and real estate rental and leasing businesses were 50.5% 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 June 30, 2023 and December 31, 2022.

The table below shows the maturity of loans outstanding as of June 30, 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	$	63,076	$	114,028	$	72,697	$	3,700	$	253,501
Agricultural	79		52		174		—		305
Commercial mortgages:
Construction	31,500		31,387		60,558		1,497		124,942
Commercial mortgages	28,183		222,298		639,184		33,920		923,585
Residential mortgages	5,776		9,959		122,002		147,347		285,084
Consumer loans:
Home equity lines and loans	278		5,616		56,688		22,701		85,283
Indirect consumer loans	1,870		88,561		120,099		2		210,532
Direct consumer loans	354		6,429		2,170		1,721		10,674
Total	$	131,116	$	478,330	$	1,073,572	$	210,888	$	1,893,906

Loans maturing with:	After One But Within Five Years		After Five But Within 15 Years		After 15 Years		Total
Fixed interest rates	$	303,411	$	494,672	$	105,651	$	903,734
Variable interest rates	174,919		578,900		105,237		859,056
Total	$	478,330	$	1,073,572	$	210,888	$	1,762,790

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. Prior to adoption, non-accrual troubled debt restructurings were considered to be non-performing assets. The Corporation monitors loan modifications made to borrowers deemed to be experiencing financial difficulty. As of June 30, 2023, there were two loans being monitored under ASU 2022-02 guidance, one of which was accruing, and one of which was non-accrual, and therefore included in non-performing loans.

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 on 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.

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

NON-PERFORMING ASSETS
	June 30, 2023			December 31, 2022
Non-accrual loans	$	7,304		$	4,143
Non-accrual troubled debt restructurings	—			4,035
Total non-performing loans	7,304			8,178
Other real estate owned	167			195
Total non-performing assets	$	7,471		$	8,373
Ratio of non-performing loans to total loans	0.39		%	0.45		%
Ratio of non-performing assets to total assets	0.28		%	0.32		%
Ratio of allowance for credit losses to non-performing loans	276.17		%	240.39		%
Accruing loans past due 90 days or more (1)	$	—		$	1
Accruing troubled debt restructurings (1)	$	—		$	1,405

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

Non-Performing Loans

Non-performing loans totaled $7.3 million, or 0.39% of total loans at June 30, 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 $7.5 million, or 0.28% of total assets, at June 30, 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 significant paydown activity among a group of commercial real estate properties in the six month period ended June 30, 2023. The decrease in non-performing assets can be attributed to the decrease in non-performing loans.

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 June 30, 2023, the Corporation had two loans that were modified under the new accounting guidance, a term extension on a commercial mortgage, and a four month payment delay deemed to be greater than insignificant on a commercial mortgage. As of June 30, 2023, the commercial mortgage that was given a term extension was considered to be performing, while the commercial mortgage that was given a payment delay is on non-accrual.

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Individually Analyzed Loans

A loan is classified for individual analysis, when based on current information and events, management has determined that it no longer exhibits risk characteristics consistent with its designated 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 June 30, 2023 totaled $5.9 million, compared to impaired loans of $7.5 million at December 31, 2022. Included in the amortized cost basis of individually analyzed loans at June 30, 2023, were loans totaling $1.6 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 credit loss 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. A 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 updated appraisals, an additional measurement is performed to determine if any adjustments are necessary to reflect proper provisioning or charge-offs. 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 each of the Corporation's market areas 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 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 loan 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 between 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.

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 qualitative 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

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basis and takes into consideration such factors as the outcomes of the quantitative analysis, a review of specific individually analyzed 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 $20.2 million at June 30, 2023, and $19.7 million at December 31, 2022. The allowance for credit losses was 276.17% of non-performing loans at June 30, 2023 compared to 240.39% at December 31, 2022. The ratio of allowance for credit losses to total loans was 1.07% at June 30, 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 six months ended June 30, 2023 were $0.4 million, compared to net charge-offs for the six months ended June 30, 2022 of $0.7 million.

The table below summarizes the Corporation’s allowance for credit losses and non-accrual loans outstanding by loan category at June 30, 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 June 30, 2023	Allowance for credit losses		Allowance to loans1		Non-performing loans		Non-performing loans to loans1		Allowance to non-performing loans
Commercial and agricultural	$	4,121	1.62	%	$	1,565	0.62	%	263.32	%
Commercial mortgages	10,994		1.05	%	3,534		0.34	%	311.09	%
Residential mortgages	1,905		0.67	%	926		0.32	%	205.72	%
Consumer loans	3,152		1.03	%	1,279		0.42	%	246.44	%
Total	$	20,172	1.07	%	$	7,304	0.39	%	276.17	%
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.

The table below summarizes the Corporation’s consolidated credit ratios at June 30, 2023 and December 31, 2022:

Consolidated Ratios	June 30, 2023		December 31, 2022
Non-performing loans to total loans	0.39	%	0.45	%
Allowance for credit losses to total loans	1.07	%	1.07	%
Allowance for credit losses, inclusive of unfunded commitments, to total loans	1.13	%	1.07	%
Allowance for credit losses to non-performing loans	276.17	%	240.39	%

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The table below summarizes the Corporation’s ratio of net charge-offs and recoveries to average loans outstanding by loan category for the six months ended June 30, 2023 and June 30, 2022:

Credit Ratios	June 30, 2023		June 30, 2022
Commercial and agricultural	0.08	%	—	%
Commercial mortgages	—	%	0.08	%
Residential mortgages	—	%	—	%
Consumer loans	0.07	%	0.01	%
Total	0.04	%	0.08	%

The table below summarizes the Corporation’s credit loss experience for the six months ended June 30, 2023 and 2022 (in thousands):

SUMMARY OF CREDIT LOSS EXPERIENCE
	Six Months Ended   June 30,
	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	199		20
Commercial mortgages	—		687
Residential mortgages	—		—
Consumer loans	437		322
Total charge-offs	$	636	$	1,029
Recoveries:
Commercial and agricultural	8		30
Commercial mortgages	1		2
Residential mortgages	—		—
Consumer loans	212		346
Total recoveries	$	221	$	378
Net charge-offs (recoveries)	415		651
Provision (credit) for credit losses on-balance sheet exposure1	554		(2,889)
Balance of allowance for credit losses at end of period	$	20,172	$	17,485

1 Additional provision related to off-balance sheet exposure was a credit of $41 thousand for the six months ended June 30, 2023.

Other Real Estate Owned

OREO totaled $0.2 million at June 30, 2023, and December 31, 2022, respectively. There was one residential mortgage property added to, and two residential mortgages properties sold, from other real estate owned in the first six months of 2023.

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Deposits

The table below summarizes the Corporation’s deposit composition by segment at June 30, 2023, and December 31, 2022, and the dollar and percent change from December 31, 2022 to June 30, 2023 (in thousands):

DEPOSITS
									June 30, 2023 v. December 31, 2022
	June 30, 2023				December 31, 2022
	Amount		% of Total		Amount		% of Total		$ Change		% Change
Non-interest-bearing demand deposits	$	671,643	28.1	%	$	733,329	31.4	%	$	(61,686)	(8.4)	%
Interest-bearing demand deposits	273,380		11.4	%	271,645		11.7	%	1,735		0.6	%
Money market accounts	629,985		26.4	%	640,840		27.5	%	(10,855)		(1.7)	%
Savings deposits	269,700		11.3	%	279,029		12.0	%	(9,329)		(3.3)	%
Certificates of deposit $250,000 or less	289,547		12.1	%	272,182		11.7	%	17,365		6.4	%
Certificates of deposit greater than $250,000	43,036		1.8	%	31,547		1.4	%	11,489		36.4	%
Brokered deposits	185,492		7.8	%	73,452		3.2	%	112,040		152.5	%
Other time deposits	27,411		1.1	%	25,203		1.1	%	2,208		8.8	%
Total	$	2,390,194	100.0	%	$	2,327,227	100.0	%	$	62,967	2.7	%

Deposits totaled $2.390 billion at June 30, 2023 compared to $2.327 billion at December 31, 2022, an increase of $63.0 million, or 2.7%. The increase was primarily attributable to increases of $112.0 million in brokered deposits, $31.1 million in time deposits excluding brokered deposits, and $1.7 million in interest-bearing demand deposits, offset by decreases of $61.7 million in non-interest bearing demand deposits, $10.9 million in insured money market accounts, and $9.3 million in savings deposits. The growth in deposits was due primarily to increases of $112.0 million in brokered deposits and $43.9 million in ICS deposits, offset by decreases of $26.6 million in CDARS deposits, $26.7 million in public deposits, $22.7 million in consumer deposits, and $17.5 million in commercial deposits. At June 30, 2023, demand deposit and money market accounts comprised 65.9% of total deposits compared to 70.7% at December 31, 2022. The aggregate amount of the Corporation's outstanding uninsured deposits, was 25.7% and 30.1% of total deposits, as of June 30, 2023 and December 31, 2022, respectively.

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

DEPOSITS BY DIVISION
	June 30, 2023		December 31, 2022		December 31, 2021		December 31, 2020		December 31, 2019
Chemung Canal Trust Company*	$	2,006,542	$	1,892,020	$	1,739,826	$	1,686,370	$	1,317,225
Capital Bank Division	383,652		435,207		415,607		351,404		254,913
Total	$	2,390,194	$	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 applies 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 $385.5 million as of June 30, 2023, including $185.5 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) acquiring 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) linking business and consumer loans to the customer's primary checking account at the Bank, (v) aggressively promoting direct deposit of client’s payroll checks or benefit checks and (vi) constantly monitoring 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 $45.2 million to $53.9 million at June 30, 2023 from December 31, 2022, primarily attributable to a decrease in FHLBNY overnight advances of $45.1 million when compared to December 31, 2022. There were no outstanding FHLBNY term advances as of and for the six months and year ended June 30, 2023, and December 31, 2022, respectively.

Shareholders’ Equity

Total shareholders' equity increased $11.0 million from $166.4 million at December 31, 2022 to $177.4 million at June 30, 2023, primarily due to an increase in retained earnings and a decrease in accumulated other comprehensive loss. The increase in retained earnings of $9.6 million was due primarily to earnings of $13.6 million, offset by $2.9 million in dividends declared, and a $1.5 million one-time adjustment due to the implementation of CECL, during the six months ended June 30, 2023. The decrease in accumulated other comprehensive loss of $0.5 million can be mostly attributed to an increase in the fair market value of the available for sale securities portfolio. Treasury stock decreased $0.6 million, primarily due to 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 6.63% at June 30, 2023 compared to 6.29% at December 31, 2022. The tangible equity to tangible assets ratio was 5.87% at June 30, 2023 compared to 5.51% at December 31, 2022. Book value per share increased to $37.49 at June 30, 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 June 30, 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 second quarter of 2023. As of June 30, 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 June 30, 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 $250,000 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 June 30, 2023, the Corporation's cash and cash equivalents balance was $54.2 million. The Corporation also maintains an investment portfolio of securities available for sale, comprised primarily of mortgage-backed securities, U.S. Gov't Treasury securities, Small Business Administration loan pools, 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 June 30, 2023, the Corporation's investment in securities available for sale was $604.3 million, $298.2 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 $231.1 million and $228.4 million of first mortgage loans under a blanket lien arrangement at June 30, 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 $244.7 million and $195.6 million at June 30, 2023 and December 31, 2022, respectively. The Corporation borrowed $50.8 million and $95.8 million with FHLBNY overnight advances as of June 30, 2023 and December 31, 2022, respectively. The Bank's unused borrowing capacity at the Federal Home Loan Bank of New York was $193.9 million as of June 30, 2023.

Uninsured deposits totaled $613.7 million as of June 30, 2023, and $700.9 million as of December 31, 2022, which included $130.6 million and $152.9 million of municipal deposits that were collateralized by pledged assets, respectively. The Corporation considers the level of uninsured deposits to be an important factor when considering liquidity management and strategic decisions due to their fluidity.

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 $185.5 million and $73.5 million, as of June 30, 2023 and December 31, 2022, respectively. As of June 30, 2023, the Corporation has entered into brokered deposit arrangements with terms of four, thirteen, and twenty-six weeks.

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 June 30, 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 RESOURCES
	June 30, 2023		December 31, 2022
Federal Home Loan Bank of New York	$	193,944	$	99,761
Correspondent bank lines	60,000		68,000
Brokered deposits available per policy limit	81,975		174,465
Unpledged investment securities, at fair value	298,227		420,671
Total Additional Funding Resources	$	634,146	$	762,897

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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 participate but as of June 30, 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 June 30, 2023, the Bank had no collateral held at the Federal Reserve Bank. The Corporation is continually reviewing the option to utilize these sources.

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)	Six Months Ended   June 30,
	2023		2022
Net cash provided by operating activities	$	17,865	$	17,885
Net cash used in investing activities	(34,694)		(70,245)
Net cash provided by financing activities	15,186		55,147
Net increase (decrease) in cash and cash equivalents	$	(1,643)	$	2,787

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 six 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 six 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 six 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 provided by financing activities during the first six months of 2023 predominantly resulted from a net 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 six 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.

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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.

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 June 30, 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 June 30, 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 June 30, 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 June 30, 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 June 30, 2023	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk Weighted Assets):
Consolidated	$	251,561	12.96	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	241,661	12.45	%	$	155,248	8.00	%	$	203,763	10.50	%	$	194,060	10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated	$	230,348	11.87	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	220,447	11.36	%	$	116,436	6.00	%	$	164,951	8.50	%	$	155,248	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets):
Consolidated	$	230,348	11.87	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	220,447	11.36	%	$	87,327	4.50	%	$	135,842	7.00	%	$	126,139	6.50	%
Tier 1 Capital (to Average Assets):
Consolidated	$	230,348	8.48	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	220,447	8.13	%	$	108,509	4.00	%	N/A		N/A		$	135,637	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 June 30, 2023, the Bank could, without prior approval, declare dividends of approximately $51.1 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 7–13. 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 other companies. 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
(in thousands, except ratio data)	As of the Three Months Ended															Six Months Ended
NET INTEREST MARGIN - FULLY TAXABLE EQUIVALENT	June 30,			March 31,			Dec. 31,			Sept. 30,			June 30,			June 30,			June 30,
	2023			2023			2022			2022			2022			2023			2022
Net interest income (GAAP)	$	18,595		$	19,947		$	20,871		$	18,990		$	17,641		$	38,542		$	34,318
Fully taxable equivalent adjustment	92			98			112			112			103			191			202
Fully taxable equivalent net interest income (non-GAAP)	$	18,687		$	20,045		$	20,983		$	19,102		$	17,744		$	38,733		$	34,520
Average interest-earning assets (GAAP)	$	2,609,893		$	2,592,709		$	2,550,834		$	2,457,218		$	2,395,704		$	2,601,349		$	2,383,557
Net interest margin - fully taxable equivalent (non-GAAP)	2.87		%	3.14		%	3.26		%	3.08		%	2.97		%	3.00		%	2.92		%

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.

78

																As of the
(in thousands, except ratio data)	As of the Three Months Ended															Six Months Ended
EFFICIENCY RATIO	June 30,			March 31,			Dec. 31,			Sept. 30,			June 30,			June 30,			June 30,
	2023			2023			2022			2022			2022			2023			2022
Net interest income (GAAP)	$	18,595		$	19,947		$	20,871		$	18,990		$	17,641		$	38,542		$	34,318
Fully taxable equivalent adjustment	92			98			112			112			103			191			202
Fully taxable equivalent net interest income (non-GAAP)	$	18,687		$	20,045		$	20,983		$	19,102		$	17,744		$	38,733		$	34,520
Non-interest income (GAAP)	$	5,447		$	5,423		$	5,418		$	5,036		$	5,319		$	10,870		$	10,982
Less:  net (gains) losses on security transactions	—			—			—			—			—			—			—
Adjusted non-interest income (non-GAAP)	$	5,447		$	5,423		$	5,418		$	5,036		$	5,319		$	10,870		$	10,982
Non-interest expense (GAAP)	$	15,913		$	15,836		$	15,693		$	14,577		$	14,342		$	31,749		$	29,010
Less:  amortization of intangible assets	—			—			—			—			(4)			—			(15)
Adjusted non-interest expense (non-GAAP)	$	15,913		$	15,836		$	15,693		$	14,577		$	14,338		$	31,749		$	28,995
Efficiency ratio (unadjusted)	66.19		%	62.42		%	59.69		%	60.67		%	62.47		%	64.25		%	64.04		%
Efficiency ratio (adjusted)	65.94		%	62.18		%	59.44		%	60.40		%	62.17		%	64.01		%	63.72		%

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
(in thousands, except per share and ratio data)	As of or for the Three Months Ended															Six Months Ended
TANGIBLE EQUITY AND TANGIBLE ASSETS (PERIOD END)	June 30,			March 31,			Dec. 31,			Sept. 30,			June 30,			June 30,			June 30,
	2023			2023			2022			2022			2022			2023			2022
Total shareholders' equity (GAAP)	$	177,426		$	177,341		$	166,388		$	155,518		$	174,690		$	177,426		$	174,690
Less: intangible assets	(21,824)			(21,824)			(21,824)			(21,824)			(21,824)			(21,824)			(21,824)
Tangible equity (non-GAAP)	$	155,602		$	155,517		$	144,564		$	133,694		$	152,866		$	155,602		$	152,866
Total assets (GAAP)	$	2,674,673		$	2,654,183		$	2,645,553		$	2,551,418		$	2,449,911		$	2,674,673		$	2,449,911
Less: intangible assets	(21,824)			(21,824)			(21,824)			(21,824)			(21,824)			(21,824)			(21,824)
Tangible assets (non-GAAP)	$	2,652,849		$	2,632,359		$	2,623,729		$	2,529,594		$	2,428,087		$	2,652,849		$	2,428,087
Total equity to total assets at end of period (GAAP)	6.63		%	6.68		%	6.29		%	6.10		%	7.13		%	6.63		%	7.13		%
Book value per share (GAAP)	$	37.49		$	37.53		$	35.32		$	33.14		$	37.24		$	37.49		$	37.24
Tangible equity to tangible assets at end of period (non-GAAP)	5.87		%	5.91		%	5.51		%	5.29		%	6.30		%	5.87		%	6.30		%
Tangible book value per share (non-GAAP)	$	32.88		$	32.91		$	30.69		$	28.49		$	32.59		$	32.88		$	32.59

79

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
(in thousands, except ratio data)	As of or for the Three Months Ended															Six Months Ended
TANGIBLE EQUITY (AVERAGE)	June 30,			March 31,			Dec. 31,			Sept. 30,			June 30,			June 30,			June 30,
	2023			2023			2022			2022			2022			2023			2022
Total average shareholders' equity (GAAP)	$	180,357		$	173,786		$	160,740		$	180,644		$	178,207		$	177,089		$	190,841
Less: average intangible assets	(21,824)			(21,824)			(21,824)			(21,824)			(21,825)			(21,824)			(21,830)
Average tangible equity (non-GAAP)	$	158,533		$	151,962		$	138,916		$	158,820		$	156,382		$	155,265		$	169,011
Return on average equity (GAAP)	13.97		%	16.97		%	18.36		%	14.17		%	18.06		%	15.43		%	15.73		%
Return on average tangible equity (non-GAAP)	15.89		%	19.40		%	21.25		%	16.12		%	20.58		%	17.60		%	17.77		%

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
(in thousands, except per share and ratio data)	As of or for the Three Months Ended															Six Months Ended
NON-GAAP NET INCOME	June 30,			March 31,			Dec. 31,			Sept. 30,			June 30,			June 30,			June 30,
	2023			2023			2022			2022			2022			2023			2022
Reported net income (GAAP)	$	6,280		$	7,270		$	7,439		$	6,453		$	8,024		$	13,550		$	14,891
Net (gains) losses on security transactions (net of tax)	—			—			—			—			—			—			—
Non- GAAP net income	$	6,280		$	7,270		$	7,439		$	6,453		$	8,024		$	13,550		$	14,891
Average basic and diluted shares outstanding	4,729			4,721			4,698			4,692			4,690			4,725			4,690
Reported basic and diluted earnings per share (GAAP)	$	1.33		$	1.54		$	1.58		$	1.37		$	1.72		$	2.87		$	3.18
Reported return on average assets (GAAP)	0.95		%	1.12		%	1.15		%	1.02		%	1.32		%	1.03		%	1.23		%
Reported return on average equity (GAAP)	13.97		%	16.97		%	18.36		%	14.17		%	18.06		%	15.43		%	15.73		%
Non-GAAP basic and diluted earnings per share	$	1.33		$	1.54		$	1.58		$	1.37		$	1.72		$	2.87		$	3.18
Non-GAAP return on average assets	0.95		%	1.12		%	1.15		%	1.02		%	1.32		%	1.03		%	1.23		%
Non-GAAP return on average equity	13.97		%	16.97		%	18.36		%	14.17		%	18.06		%	15.43		%	15.73		%

80

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 June 30, 2023, it is estimated that immediate decreases in interest rates of 100-basis points and 200-basis points would positively impact the next 12 months net interest income by 3.85% and 5.94% respectively. Immediate increases in interest rates of 100-basis points and 200-basis points would positively impact the next 12 months net interest income by 0.80% and 1.54% respectively. All scenarios are within the Corporation's policy guidelines.

Change in interest rates	Percentage Increase (Decrease) in Net Interest Income over 12 Months
100 basis points decrease	3.85%
200 basis points decrease	5.94%
100 basis points increase	0.80%
200 basis points increase	1.54%

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 June 30, 2023, it is estimated that immediate decreases in interest rates of 100-basis points and 200-basis points would positively impact the market value of the Corporation’s capital account by 5.56% and 8.83% respectively. Immediate increases in interest rates of 100-basis points and 200-basis points would negatively impact the market value by 1.19% and 2.29% respectively. All scenarios are within the Corporation's policy guidelines.

Change in interest rates	Percentage Increase (Decrease) in Present Value of Corporation's Equity
100 basis points decrease	5.56%
200 basis points decrease	8.83%
100 basis points increase	(1.19)%
200 basis points increase	(2.29)%

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.

81

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.

82

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 June 30, 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 June 30, 2023. 

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.

83

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 June 30, 2023.

ITEM 1A.    RISK FACTORS

In addition to the other information contained in this Quarterly Report on Form 10-Q, the following risk factor represents 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 and First Republic Bank, and the liquidity management practices at Signature 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.

84

ITEM 2.    Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

    (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
April 1 - April 30, 2023	—	—		—	200,816
May 1 - May 31, 2023	—	—		—	200,816
June 1 - June 30, 2023	—	—		—	200,816
Quarter ended June 30, 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 June 30, 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.

85

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.

86

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: August 10, 2023	By:  /s/ Anders M. Tomson
	Anders M. Tomson President and Chief Executive Officer (Principal Executive Officer)

DATED: August 10, 2023	By:  /s/ Dale M. McKim, III
	Dale M. McKim, III Chief Financial Officer and Treasurer (Principal Financial Officer)

87

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: August 10, 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: August 10, 2023

By: /s/ Dale M. McKim, III

Dale M. McKim, III

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 June 30, 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

August 10, 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 June 30, 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/ Dale M. McKim, III

Dale M. McKim, III

Chief Financial Officer and Treasurer

August 10, 2023

XML

COVER - shares	6 Months Ended
	Jun. 30, 2023	Aug. 01, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 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		4,719,816
Entity Central Index Key	0000763563
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands		Jun. 30, 2023	Dec. 31, 2022
ASSETS
Cash and due from financial institutions		$ 25,499	$ 29,309
Interest-earning deposits in other financial institutions		28,727	26,560
Total cash and cash equivalents		54,226	55,869
Equity investments, at estimated fair value		2,841	2,830
Securities available for sale, at estimated fair value (amortized cost of $700,253, net of allowance for credit losses of $0 at June 30, 2023; and amortized cost of $729,198, net of allowance for credit losses on securities of $0 at December 31, 2022)		604,313	632,589
Securities held to maturity, estimated fair value of $1,778 at June 30, 2023 and $2,402 at December 31, 2022 (net of allowance for credit losses of $0 at June 30, 2023)		1,804	2,424
FHLBNY and FRBNY Stock, at cost		6,328	8,197
Loans, net of deferred loan fees		1,893,906	1,829,448
Allowance for credit losses	[1]	(20,172)	(19,659)
Loans, net		1,873,734	1,809,789
Loans held for sale		785	0
Premises and equipment, net		15,496	16,113
Operating lease right-of-use assets		6,050	6,449
Goodwill		21,824	21,824
Bank-owned life insurance		2,892	2,871
Interest rate swap assets		26,450	27,141
Accrued interest receivable and other assets		57,930	59,457
Total assets		2,674,673	2,645,553
Deposits:
Non-interest-bearing		671,643	733,329
Interest-bearing		1,718,551	1,593,898
Total deposits		2,390,194	2,327,227
FHLBNY overnight advances		50,760	95,810
Long term finance lease obligation		3,189	3,327
Operating lease liabilities		6,228	6,620
Dividends payable		1,462	1,455
Interest rate swap liabilities		26,450	27,196
Accrued interest payable and other liabilities		18,964	17,530
Total liabilities		2,497,247	2,479,165
Shareholders' equity:
Common stock, $0.01 par value per share, 10,000,000 shares authorized;   5,310,076 issued at June 30, 2023 and December 31, 2022		53	53
Additional paid-in capital		47,740	47,331
Retained earnings		221,412	211,859
Treasury stock, at cost; 594,344 shares at June 30, 2023 and 615,448   shares at December 31, 2022		(17,033)	(17,598)
Accumulated other comprehensive loss		(74,746)	(75,257)
Total shareholders' equity		177,426	166,388
Total liabilities and shareholders' equity		$ 2,674,673	$ 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 ($)	Jun. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Available-for-sale, amortized cost, net	$ 700,253,000	$ 729,198,000
Available-for-sale, allowance for credit loss	0	0
Securities held to maturity, estimated fair value	1,778,000	$ 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)	594,344	615,448

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Interest and dividend income:
Loans, including fees		$ 23,791,000	$ 15,390,000	$ 46,080,000	$ 29,871,000
Taxable securities		3,630,000	2,863,000	7,213,000	5,551,000
Tax exempt securities		259,000	268,000	520,000	538,000
Interest-earning deposits		116,000	17,000	213,000	36,000
Total interest and dividend income		27,796,000	18,538,000	54,026,000	35,996,000
Interest expense:
Deposits		8,469,000	769,000	13,856,000	1,517,000
Borrowed funds		732,000	128,000	1,628,000	161,000
Total interest expense		9,201,000	897,000	15,484,000	1,678,000
Net interest income		18,595,000	17,641,000	38,542,000	34,318,000
Provision (credit) for credit losses	[1]	236,000	(1,744,000)	513,000	(2,889,000)
Net interest income after provision for credit losses		18,359,000	19,385,000	38,029,000	37,207,000
Non-interest income:
Changes in fair value of equity investments		(103,000)	(242,000)	(31,000)	(355,000)
Net gains on sales of loans held for sale		18,000	25,000	23,000	99,000
Net gains on sales of other real estate owned		14,000	46,000	14,000	46,000
Income from bank-owned life insurance		11,000	11,000	21,000	22,000
Other		751,000	709,000	1,433,000	1,649,000
Total non-interest income		5,447,000	5,319,000	10,870,000	10,982,000
Non-interest expenses:
Salaries and wages		6,704,000	6,056,000	13,487,000	12,279,000
Pension and other employee benefits		1,808,000	1,937,000	3,488,000	3,655,000
Other components of net periodic pension and postretirement benefits		(174,000)	(403,000)	(348,000)	(811,000)
Net occupancy		1,440,000	1,369,000	2,905,000	2,796,000
Furniture and equipment		461,000	410,000	879,000	847,000
Data processing		2,473,000	2,468,000	4,854,000	4,655,000
Professional services		602,000	664,000	1,042,000	1,185,000
Amortization of intangible assets		0	4,000	0	15,000
Marketing and advertising		170,000	184,000	502,000	460,000
Other real estate owned		1,000	8,000	39,000	(29,000)
FDIC insurance		586,000	284,000	1,083,000	598,000
Loan expense		308,000	176,000	540,000	391,000
Other		1,534,000	1,185,000	3,278,000	2,969,000
Total non-interest expenses		15,913,000	14,342,000	31,749,000	29,010,000
Income before income tax expense		7,893,000	10,362,000	17,150,000	19,179,000
Income tax expense		1,613,000	2,338,000	3,600,000	4,288,000
Net income		$ 6,280,000	$ 8,024,000	$ 13,550,000	$ 14,891,000
Weighted average shares outstanding, basic (in shares)		4,729	4,690	4,725	4,690
Weighted average shares outstanding, diluted (in shares)		4,729	4,690	4,725	4,690
Basic earnings per share (in dollars per share)		$ 1.33	$ 1.72	$ 2.87	$ 3.18
Diluted earnings per share (in dollars per share)		$ 1.33	$ 1.72	$ 2.87	$ 3.18
WMG fee income
Non-interest income:
Revenues from contracts with customer		$ 2,603,000	$ 2,628,000	$ 5,183,000	$ 5,385,000
Service charges on deposit accounts
Non-interest income:
Revenues from contracts with customer		959,000	936,000	1,900,000	1,800,000
Interchange revenue from debit card transactions
Non-interest income:
Revenues from contracts with customer		$ 1,194,000	$ 1,206,000	$ 2,327,000	$ 2,336,000

[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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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Statement of Comprehensive Income [Abstract]
Net income	$ 6,280	$ 8,024	$ 13,550	$ 14,891
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities available for sale	(7,156)	(24,050)	669	(66,165)
Tax effect	(1,874)	(6,303)	176	(17,331)
Net of tax amount	(5,282)	(17,747)	493	(48,834)
Change in funded status of defined benefit pension plan and other benefit plans:
Reclassification adjustment for amortization of net actuarial loss	12	11	24	25
Total before tax effect	12	11	24	25
Tax effect	3	4	6	6
Net of tax amount	9	7	18	19
Total other comprehensive income (loss)	(5,273)	(17,740)	511	(48,815)
Comprehensive income (loss)	$ 1,007	$ (9,716)	$ 14,061	$ (33,924)

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands		Total	Cumulative effect adjustment for the adoption of ASC 326	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	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		14,891							14,891
Other comprehensive loss		(48,815)												(48,815)
Restricted stock awards		333					333
Restricted stock units for directors' deferred compensation plan		100					100
Distribution of shares of treasury stock grants for employee restricted stock awards		0					(112)					112
Cash dividends declared		(2,898)							(2,898)
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]	216					83					133
Forfeitures of shares of restricted stock awards		(2)					30					(32)
Ending balance at Jun. 30, 2022		174,690			53		47,196		200,870			(18,084)		(55,345)
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]
Beginning balance at Mar. 31, 2022		$ 185,510			53		46,880		194,295			(18,113)		(37,605)
Increase (Decrease) in Shareholders' Equity [Roll Forward]
Net income		8,024							8,024
Other comprehensive loss		(17,740)												(17,740)
Restricted stock awards		154					154
Restricted stock units for directors' deferred compensation plan		95					95
Cash dividends declared		(1,449)							(1,449)
Sale of shares of treasury stock	[1]	98					37					61
Forfeitures of shares of restricted stock awards		(2)					30					(32)
Ending balance at Jun. 30, 2022		174,690			53		47,196		200,870			(18,084)		(55,345)
Beginning 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]
Net income		13,550							13,550
Other comprehensive loss		511												511
Restricted stock awards		548					548
Restricted stock units for directors' deferred compensation plan		10					10
Distribution of shares of treasury stock grants for employee restricted stock awards		0					(131)					131
Cash dividends declared		(2,921)							(2,921)
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]	419					118					301
Forfeitures of shares of restricted stock awards		(1)					11					(12)
Ending balance at Jun. 30, 2023		177,426			53		47,740		221,412			(17,033)		(74,746)
Beginning balance at Mar. 31, 2023		177,342			53		47,387		216,594	$ (1,100)		(17,219)		(69,473)
Increase (Decrease) in Shareholders' Equity [Roll Forward]
Net income		6,280							6,280
Other comprehensive loss		(5,273)												(5,273)
Restricted stock awards		285					285
Restricted stock units for directors' deferred compensation plan		5					5
Cash dividends declared		(1,462)							(1,462)
Sale of shares of treasury stock	[1]	250					52					198
Forfeitures of shares of restricted stock awards		(1)					11					(12)
Ending balance at Jun. 30, 2023		$ 177,426			$ 53		$ 47,740		$ 221,412			$ (17,033)		$ (74,746)

[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.

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Statement of Stockholders' Equity [Abstract]
Cash dividends declared (in dollars per share)	$ 0.31	$ 0.31	$ 0.62	$ 0.62
Sale of shares of treasury stock (in shares)	6,955	2,137	10,509	4,682
Forfeitures of shares of restricted stock awards (in shares)	326	681	326	681
Distribution of shares of treasury stock for employee restricted stock awards (in shares)			4,577	3,985
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

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)		6 Months Ended
		Jun. 30, 2023	Jun. 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$ 13,550,000	$ 14,891,000
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization (increase in) of right-of-use assets		399,000	393,000
Amortization of intangible assets		0	15,000
Provision for credit losses	[1]	513,000	(2,889,000)
Loss on disposal of fixed assets		3,000	20,000
Depreciation and amortization of fixed assets		1,060,000	1,147,000
Amortization of premiums on securities, net		1,270,000	2,172,000
Gain on sales of loans held for sale, net		(23,000)	(99,000)
Proceeds from sales of loans held for sale		1,318,000	5,575,000
Loans originated and held for sale		(2,080,000)	(5,080,000)
Net gains on sale of other real estate owned		(14,000)	(46,000)
Write-downs on other real estate owned		(3,000)	0
Net change in fair value of equity investments		31,000	355,000
Proceeds from sales of trading assets		39,000	37,000
Purchase of equity investments		(81,000)	(178,000)
Decrease (Increase) in other assets and accrued interest receivable		1,317,000	(8,656,000)
Increase in accrued interest payable		1,964,000	25,000
Expense related to restricted stock units for directors' deferred compensation plan		10,000	100,000
Expense related to employee restricted stock awards		548,000	333,000
Increases in (payments on) operating leases		(392,000)	(380,000)
Net (gain) loss on interest rate swaps		(55,000)	(199,000)
(Decrease) increase in other liabilities		(1,488,000)	10,371,000
Income from bank owned life insurance		(21,000)	(22,000)
Net cash provided by operating activities		17,865,000	17,885,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities, calls, and principal paydowns on securities available for sale		30,883,000	53,412,000
Proceeds from maturities and principal collected on securities held to maturity		619,000	842,000
Purchases of securities available for sale		(3,207,000)	(22,713,000)
Purchase of FHLBNY and FRBNY stock		(29,969,000)	(13,096,000)
Redemption of FHLBNY and FRBNY stock		31,838,000	11,417,000
Proceeds from sales of fixed assets		0	125,000
Purchases of premises and equipment		(446,000)	(135,000)
Proceeds from sale of other real estate owned		154,000	159,000
Net increase in loans		(64,566,000)	(100,256,000)
Net cash used in investing activities		(34,694,000)	(70,245,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand deposits, interest-bearing demand accounts, savings accounts, and insured money market accounts		(80,135,000)	(59,925,000)
Increase in time deposits		143,102,000	87,283,000
Net change in FHLB overnight advances		(45,050,000)
Net change in FHLB overnight advances			31,300,000
Payments made on finance leases		(138,000)	(133,000)
Purchase of treasury stock		(98,000)	(695,000)
Sale of treasury stock		419,000	216,000
Cash dividends paid		(2,914,000)	(2,899,000)
Net cash provided by financing activities		15,186,000	55,147,000
Net (decrease) increase in cash and cash equivalents		(1,643,000)	2,787,000
Cash and cash equivalents, beginning of period		55,869,000	26,981,000
Cash and cash equivalents, end of period		54,226,000	29,768,000
Cash paid for:
Interest		13,520,000	1,653,000
Income taxes		4,056,000	2,545,000
Supplemental disclosure of non-cash activity:
Transfer of loans to other real estate owned		108,000	292,000
Dividends declared, not yet paid		$ 1,462,000	$ 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

6 Months Ended

Jun. 30, 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 these Unaudited Consolidated Financial Statements and the Notes to the Unaudited Consolidated Financial Statements are sufficient to meet its needs as of 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.

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 73-75 of this Form 10-Q.

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EARNINGS PER COMMON SHARE	6 Months Ended
	Jun. 30, 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 4,729 and 4,690 weighted average shares outstanding for the three month periods ended June 30, 2023 and 2022, respectively. Earnings per share were computed by dividing net income by 4,725 and 4,690 weighted average shares outstanding for the six month periods ended June 30, 2023 and 2022, respectively. There were no common stock equivalents during the three and six month periods ended June 30, 2023 or 2022.

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SECURITIES

6 Months Ended

Jun. 30, 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):

	June 30, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
U.S. Treasury notes and bonds	$	62,156	$	—	$	5,959	$	—	$	56,197
Mortgage-backed securities, residential	497,995		—		80,630		—		417,365
Obligations of states and political subdivisions	39,568		1		985		—		38,584
Corporate bonds and notes	25,750		—		5,879		—		19,871
SBA loan pools	74,784		112		2,600		—		72,296
Total	$	700,253	$	113	$	96,053	$	—	$	604,313

	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):

	June 30, 2023
	Amortized Cost		Unrecognized Gains		Unrecognized Losses		Allowance for Credit Losses		Estimated Fair Value
Obligations of states and political subdivisions	$	824	$	—	$	—	$	—	$	824
Time deposits with other financial institutions	980		—		26		—		954
Total	$	1,804	$	—	$	26	$	—	$	1,778

	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):

	June 30, 2023
	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	5,804	$	5,732	$	284	$	283
After one, but within five years	103,670		94,774		880		855
After five, but within ten years	17,531		13,698		640		640
After ten years	469		448		—		—
	127,474		114,652		1,804		1,778
Mortgage-backed securities, residential	497,995		417,365		—		—
SBA loan pools	74,784		72,296		—		—
Total	$	700,253	$	604,313	$	1,804	$	1,778

There were no proceeds from sales and calls of securities resulting in gains or losses for the six month periods ended June 30, 2023 and 2022.

The following tables summarize the investment securities available for sale with unrealized losses at June 30, 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
June 30, 2023	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury notes and bonds	$	1,920	$	19	$	54,277	$	5,940	$	56,197	$	5,959
Mortgage-backed securities, residential	6,705		616		410,660		80,014		417,365		80,630
Obligations of states and political subdivisions	25,467		485		13,006		500		38,473		985
Corporate bonds and notes	6,939		3,061		12,932		2,818		19,871		5,879
SBA loan pools	8,249		24		53,991		2,576		62,240		2,600
Total temporarily impaired securities	$	49,280	$	4,205	$	544,866	$	91,848	$	594,146	$	96,053

	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		—		—		37,847		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	$	605,978	$	96,766

Assessment of Available for Sale Debt Securities for Credit Risk

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 June 30, 2023.

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

At June 30, 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 as of June 30, 2023.

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 considers the potential credit risk of the issuers to be immaterial, and has not allocated an ACL on its corporate bonds and notes portfolio as of June 30, 2023.

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LOANS AND ALLOWANCE FOR CREDIT LOSSES

6 Months Ended

Jun. 30, 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):

	June 30, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	253,501	$	252,044
Agricultural	305		249
Commercial mortgages:
Construction	124,942		108,243
Commercial mortgages, other	923,585		888,670
Residential mortgages	285,084		285,672
Consumer loans:
Home equity lines and loans	85,283		81,401
Indirect consumer loans	210,532		202,124
Direct consumer loans	10,674		11,045
Total loans, net of deferred loan fees and costs	1,893,906		1,829,448
Allowance for credit losses	(20,172)		(19,659)
Loans, net	$	1,873,734	$	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 $6.6 million at June 30, 2023 and $6.5 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 June 30, 2023 (in thousands):

	Three Months Ended June 30, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, April 1, 2023	$	4,053	$	10,983	$	1,892	$	3,147	$	20,075
Charge-offs	(9)		—		—		(242)		(251)
Recoveries	3		1		—		101		105
Net recoveries (charge-offs)	(6)		1		—		(141)		(146)
Provision (1)	74		10		13		146		243
Ending balance, June 30, 2023	$	4,121	$	10,994	$	1,905	$	3,152	$	20,172

(1) Additional credit provision related to off-balance sheet exposure was $7 thousand for the three months ended June 30, 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 June 30, 2022 (in thousands):

	Three Months Ended June 30, 2022
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, April 1, 2022	$	3,485	$	12,963	$	1,606	$	1,874	$	19,928
Charge-offs	(16)		(687)		—		(128)		(831)
Recoveries	23		1		—		108		132
Net recoveries (charge-offs)	7		(686)		—		(20)		(699)
Provision	72		(1,963)		108		39		(1,744)
Ending balance, June 30, 2022	$	3,564	$	10,314	$	1,714	$	1,893	$	17,485

The following table presents the activity in the allowance for credit losses by portfolio segment for the six month period ended June 30, 2023 (in thousands):

	Six Months Ended June 30, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, January 1, 2023	$	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, January 1, 2023	4,282		10,881		1,829		3,041		20,033
Charge-offs	(199)		—		—		(437)		(636)
Recoveries	8		1		—		212		221
Net recoveries (charge-offs)	(191)		1		—		(225)		(415)
Provision (1)	30		112		76		336		554
Ending balance, June 30, 2023	$	4,121	$	10,994	$	1,905	$	3,152	$	20,172

(1) Additional credit provision related to off-balance sheet exposure was $41 thousand for the six months ended June 30, 2023.

The following table presents the activity in the allowance for loan losses by portfolio segment for the six month period ended June 30, 2022 (in thousands):

	Six Months Ended June 30, 2022
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, January 1, 2022	$	3,591	$	13,556	$	1,803	$	2,075	$	21,025
Charge-offs	(20)		(687)		—		(322)		(1,029)
Recoveries	30		2		—		346		378
Net recoveries (charge-offs)	10		(685)		—		24		(651)
Provision	(37)		(2,557)		(89)		(206)		(2,889)
Ending balance, June 30, 2022	$	3,564	$	10,314	$	1,714	$	1,893	$	17,485

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 June 30, 2023 and 2022:

	For the Three Months Ended
Allowance for credit losses on unfunded commitments	June 30, 2023		June 30, 2022
Beginning balance	$	1,048	$	—
Impact of ASC 326 adoption	—		—
Provision for unfunded commitments	(7)		—
Ending balance	$	1,041	$	—

The following table presents the provision for credit losses on loans and unfunded commitments for the three month period ended June 30, 2023, based upon the current expected credit loss methodology, and the provision for loan losses on loans for the three month period ended June 30, 2022, based upon the incurred loss methodology:

	For the Three Months Ended
Provision for credit losses	June 30, 2023		June 30, 2022
Provision for credit losses on loans	$	243	$	(1,744)
Provision for unfunded commitments	(7)		—
Total provision (credit) for credit losses	$	236	$	(1,744)

The following table presents the activity in the allowance for credit losses on unfunded commitments for the six month periods ended June 30, 2023 and 2022:

	For the Six Months Ended
Allowance for credit losses on unfunded commitments	June 30, 2023		June 30, 2022
Beginning balance	$	—	$	—
Impact of ASC 326 adoption	1,082		—
Provision for unfunded commitments	(41)		—
Ending balance	$	1,041	$	—

The following table presents the provision for credit losses on loans and unfunded commitments for the six month period ended June 30, 2023, based upon the current expected credit loss methodology, and the provision for loan losses on loans for the six month period ended June 30, 2022, based upon the incurred loss methodology:

	For the Six Months Ended
Provision for credit losses	June 30, 2023		June 30, 2022
Provision for credit losses on loans	$	554	$	(2,889)
Provision for unfunded commitments	(41)		—
Total provision (credit) for credit losses	$	513	$	(2,889)

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 June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually analyzed	$	996	$	33	$	—	$	61	$	1,090
Collectively analyzed	3,125		10,961		1,905		3,091		19,082
Total ending allowance balance	$	4,121	$	10,994	$	1,905	$	3,152	$	20,172

	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

	June 30, 2023
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually analyzed	$	1,714	$	3,964	$	—	$	259	$	5,937
Loans collectively analyzed	252,092		1,044,563		285,084		306,230		1,887,969
Total ending loans balance	$	253,806	$	1,048,527	$	285,084	$	306,489	$	1,893,906

	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 tables summarize the amortized cost basis of loans modified during the three and six month periods ended June 30, 2023:

	Three Months Ended June 30, 2023
Loans modified under ASU 2022-02:	Principal Reduction		Interest Rate Reduction		Term Extension		Payment Delay		Combination		Total		(%) of Loan Class (1)
Commercial mortgages, other	$	—	$	—	$	—	$	1,920	$	—	$	1,920	0.21	%
Total	$	—	$	—	$	—	$	1,920	$	—	$	1,920

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

	Six Months Ended June 30, 2023
Loans modified under ASU 2022-02:	Principal Reduction		Interest Rate Reduction		Term Extension		Payment Delay		Combination		Total		(%) of Loan Class (1)
Commercial mortgages, other	$	—	$	—	$	275	$	1,920	$	—	$	2,195	0.24	%
Total	$	—	$	—	$	275	$	1,920	$	—	$	2,195

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the six month period ended June 30, 2023:

	Six Months Ended June 30, 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, other	$—	—%	60

There was one loan, with an amortized basis of $1.9 million, classified as a commercial mortgage, other, to a borrower experiencing financial difficulty which was modified during the three months ended June 30, 2023. The modification granted was in the form of a four month payment delay, during which the borrower was making interest-only payments. The delay did not result in a principal reduction, reduction in interest rate, or an extension of term, and the note balloons at maturity.

There were no loans modified to borrowers experiencing financial difficulty during the prior twelve months that experienced payment default during the three and six month periods ended June 30, 2023.

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 June 30, 2023, the amortized cost basis of individually analyzed loans amounted to $5.9 million, of which $5.1 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 June 30, 2023 (in thousands):

	June 30, 2023
	Amortized Cost Basis		Related Allowance
Commercial and agricultural:
Commercial and industrial (1) (3)	$	570	$	156
Commercial mortgages:
Commercial mortgages, other (1)	4,267		33
Consumer loans:
Home equity lines and loans (2)	259		61
Total	$	5,096	$	250

(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 tables present the average amortized cost basis and interest income recognized on loans individually evaluated, by class of loans, for the three and six month periods ended June 30, 2023 and 2022 (in thousands):

	Three Months Ended   June 30, 2023				Three Months Ended   June 30, 2022
With no related allowance recorded:	Average Amortized Cost Basis		Interest Income Recognized (1)		Average Amortized Cost Basis		Interest Income Recognized (1)
Commercial and agricultural:
Commercial and industrial	$	516	$	—	$	765	$	—
Commercial mortgages:
Construction	—		—		105		1
Commercial mortgages, other	3,992		8		4,086		7
Residential mortgages	358		—		909		11
Consumer loans:
Home equity lines & loans	178		—		157		—
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,230		2		1,369		3
Commercial mortgages:
Commercial mortgages, other	34		—		1,326		—
Consumer loans:
Home equity lines and loans	78		3		139		—
Total	$	6,386	$	13	$	8,856	$	22

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

	Six Months Ended   June 30, 2023				Six Months Ended   June 30, 2022
With no related allowance recorded:	Average Amortized Cost Basis		Interest Income Recognized (1)		Average Amortized Cost Basis		Interest Income Recognized (1)
Commercial and agricultural:
Commercial and industrial	$	686	$	—	$	825	$	3
Commercial mortgages:
Construction	2		—		113		2
Commercial mortgages, other	4,138		14		4,149		14
Residential mortgages	479		—		895		22
Consumer loans:
Home equity lines & loans	165		—		161		2
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,183		4		1,405		5
Commercial mortgages:
Commercial mortgages, other	35		—		2,065		21
Consumer loans:
Home equity lines and loans	63		3		141		—
Total	$	6,751	$	21	$	9,754	$	69

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

The following table presents the amortized cost basis in non-accrual, loans past due 90 days or more and still accruing, and the amortized basis of non-accrual loans with no associated allocation in the allowance for credit losses related to non-accrual loans, by class of loan as of June 30, 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
	June 30, 2023		June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	303	1,565		1,946		$	—	$	1
Commercial mortgages:
Construction	—		—		5		—		—
Commercial mortgages, other	3,500		3,534		3,928		—		—
Residential mortgages	926		926		986		—		—
Consumer loans:
Home equity lines and loans	749		749		760		—		—
Indirect consumer loans	527		527		540		—		—
Direct consumer loans	3		3		13		—		—
Total	$	6,008	$	7,304	$	8,178	$	—	$	1

The following tables present the aging of the amortized cost basis of loans as of June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 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	$	526	$	455	$	—	$	981	$	252,520	$	253,501
Agricultural	—		—		—		—		305		305
Commercial mortgages:
Construction	2,163		2,244		—		4,407		120,535		124,942
Commercial mortgages, other	340		—		256		596		922,989		923,585
Residential mortgages	1,463		482		362		2,307		282,777		285,084
Consumer loans:
Home equity lines and loans	9		—		545		554		84,729		85,283
Indirect consumer loans	1,242		374		217		1,833		208,699		210,532
Direct consumer loans	11		11		3		25		10,649		10,674
Total	$	5,754	$	3,566	$	1,383	$	10,703	$	1,883,203	$	1,893,906

	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, and home equity lines and loans, 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 June 30, 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	$	24,636	$	41,406	$	19,345	$	12,963	$	36,855	$	11,242	$	88,858	$	—	$	235,305
Special mention	296		98		328		—		3		448		4,282		9,040		14,495
Substandard	—		32		875		384		26		345		627		570		2,859
Doubtful	—		—		—		—		—		841		1		—		842
Total	24,932		41,536		20,548		13,347		36,884		12,876		93,768		9,610		253,501
Gross charge-offs	—		—		—		—		9		190		—		—		199
Agricultural
Pass	—		17		163		—		—		—		125		—		305
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total	—		17		163		—		—		—		125		—		305
Gross charge-offs	—		—		—		—		—		—		—		—		—
Construction
Pass	5,211		2,721		1,975		—		31		1,196		111,388		—		122,522
Special mention	—		176		—		—		—		—		—		—		176
Substandard	—		—		—		—		2,244		—		—		—		2,244
Doubtful	—		—		—		—		—		—		—		—		—
Total	5,211		2,897		1,975		—		2,275		1,196		111,388		—		124,942
Gross charge-offs	—		—		—		—		—		—		—		—		—
Commercial mortgages
Pass	53,923		214,143		127,609		96,993		40,067		173,743		188,483		—		894,961
Special mention	—		2,553		8,733		1,023		—		3,776		—		6,070		22,155
Substandard	275		1,160		—		—		—		4,474		97		430		6,436
Doubtful	—		—		—		—		—		33		—		—		33
Total	54,198		217,856		136,342		98,016		40,067		182,026		188,580		6,500		923,585
Gross charge-offs	—		—		—		—		—		—		—		—		—
Residential mortgages
Not rated	9,067		52,157		51,736		72,741		16,111		50,205		32,141		—		284,158
Substandard	—		107		63		—		177		579		—		—		926
Total	9,067		52,264		51,799		72,741		16,288		50,784		32,141		—		285,084
Gross charge-offs	—		—		—		—		—		—		—		—		—
Home equity lines and loans
Not rated	7,901		18,052		6,291		3,464		3,097		11,995		33,734		—		84,534
Substandard	—		76		—		—		—		419		254		—		749
Total	7,901		18,128		6,291		3,464		3,097		12,414		33,988		—		85,283
Gross charge-offs	—		—		—		—		—		—		9		—		9
Indirect consumer
Not rated	42,931		114,337		28,762		12,270		6,143		5,562		—		—		210,005
Substandard	13		159		131		58		52		114		—		—		527
Total	42,944		114,496		28,893		12,328		6,195		5,676		—		—		210,532
Gross charge-offs	12		155		73		65		16		40		—		—		361
Direct consumer
Not rated	1,854		3,529		1,130		499		184		414		3,061		—		10,671
Substandard	—		—		—		—		—		3		—		—		3
Total	1,854		3,529		1,130		499		184		417		3,061		—		10,674
Gross charge-offs	—		8		1		4		—		54		—		—		67
Total loans	$	146,107	$	450,723	$	247,141	$	200,395	$	104,990	$	265,389	$	463,051	$	16,110	$	1,893,906
Total gross charge-offs	$	12	$	163	$	74	$	69	$	25	$	284	$	9	$	—	$	636

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 presented by payment activity. The following table presents the amortized cost basis in residential and consumer loans based on payment activity as of June 30, 2023 (in thousands):

	Consumer Loans
June 30, 2023	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	284,158	$	84,534	$	210,005	$	10,671
Non-Performing	926		749		527		3
Total	$	285,084	$	85,283	$	210,532	$	10,674

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 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

6 Months Ended

Jun. 30, 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 in lieu 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 June 30, 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	$	56,197	$	56,197	$	—	$	—
Mortgage-backed securities, residential	417,365		—		417,365		—
Obligations of states and political subdivisions	38,584		—		38,584		—
Corporate bonds and notes	19,871		—		11,278		8,593
SBA loan pools	72,296		—		72,296		—
Total available for sale securities	$	604,313	$	56,197	$	539,523	$	8,593
Equity investments, at fair value	$	2,348	$	2,348	$	—	$	—
Derivative assets	26,450		—		26,450		—
Financial Liabilities:
Derivative liabilities	$	26,450	$	—	$	26,450	$	—

There were no transfers between Level 1 and Level 2 during the three and six month periods ended June 30, 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 and six month periods ended June 30, 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 six month period ended June 30, 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 and six months ended June 30, 2023 and June 30, 2022.

Corporate Bonds:	For the Three Months Ended
Level 3 Financial Assets	June 30, 2023		June 30, 2022
Balance of recurring Level 3 assets at April 1, 2023	$	8,666	$	—
Total gains and losses for the period:	—		—
Included in other comprehensive income	(73)		—
Transfer into Level 3	—		—
Balance of recurring Level 3 assets at June 30, 2023	$	8,593	$	—

Corporate Bonds:	For the Six Months Ended
Level 3 Financial Assets	June 30, 2023		June 30, 2022
Balance of recurring Level 3 assets at January 1, 2023	$	—	$	—
Total gains and losses for the period:	—		—
Included in other comprehensive income	(1,362)		—
Transfer into Level 3	9,955		—
Balance of recurring Level 3 assets at June 30, 2023	$	8,593	$	—

June 30, 2023	Fair Value		Valuation Techniques	Unobservable Input	Range (WA)
Corporate bonds and notes	$	8,594	Discounted cash flow	Market discount rate	12.00% -12.00% [12.00%]

There were no financial assets measured on a recurring basis that were considered to be Level 3 fair value by the Corporation at December 31, 2022.

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

			Fair Value Measurement at June 30, 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)		Total Gains (Losses)
Individually Analyzed Loans:
Commercial and agricultural:
Commercial and industrial	$	414	$	—	$	—	$	414	$	—
Total individually analyzed loans	$	414	$	—	$	—	$	414	$	—

Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2022 were considered to be immaterial to the presentation of the consolidated financial statements.

The following table presents information related to Level 3 non-recurring fair value measurement at June 30, 2023 (in thousands):

Description	Fair Value at June 30, 2023		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at June 30, 2023
Individually analyzed loans:
Commercial and agricultural:
Commercial and industrial	$	414	Sales comparison	Discount to appraised value	10.00%-50.00% [14.57%]
Total	$	414

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values of other financial instruments, at June 30, 2023 and December 31, 2022, are as follows (in thousands):

	June 30, 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	$	25,499	$	25,499	$	—	$	—	$	25,499
Interest-earning deposits in other financial institutions	28,727		28,727		—		—		28,727
Equity investments	2,841		2,841		—		—		2,841
Securities available for sale	604,313		56,197		539,523		8,593		604,313
Securities held to maturity	1,804		—		954		824		1,778
FHLBNY and FRBNY stock	6,328		—		—		—		N/A
Loans, net and loans held for sale	1,874,519		—		—		1,807,870		1,807,870
Accrued interest receivable	8,691		112		2,014		6,565		8,691
Derivative Assets	26,450		—		26,450		—		26,450
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,844,708	$	1,844,708	$	—	$	—	$	1,844,708
Time deposits	545,486		—		542,449		—		542,449
FHLBNY overnight advances	50,760		—		50,762		—		50,762
Accrued interest payable	2,828		79		2,749		—		2,828
Derivative Liabilities	26,450		—		26,450		—		26,450

(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		—		1,450		952		2,402
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
FHLBNY overnight advances	95,810		—		95,819		—		95,819
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

6 Months Ended

Jun. 30, 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 June 30, 2023, the weighted average remaining lease term was 8.24 years with a weighted average discount rate of 3.37%. Rent expense was $0.2 million for the three months ended June 30, 2023. Rent expense was $0.5 million for the six months ended June 30, 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 June 30, 2023 and December 31, 2022 consist of the following (in thousands):

	June 30, 2023		December 31, 2022
Operating lease right-of-use asset	$	6,449	$	7,234
Less: accumulated amortization	(399)		(785)
Less: lease termination	—		—
Add: new lease agreement and modifications	—		—
Operating lease right-of-use-assets, net	$	6,050	$	6,449

The following is a schedule by year of the undiscounted cash flows of the operating lease liabilities, excluding CAM charges, as of June 30, 2023 (in thousands):

Year	Amount
2023	$	498
2024	924
2025	841
2026	845
2027	854
2028 and thereafter	3,169
Total minimum lease payments	7,131
Less: amount representing interest	(903)
Present value of net minimum lease payments	$	6,228

As of June 30, 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 June 30, 2023, the weighted average remaining lease term was 9.77 years with a weighted average discount rate of 3.41%. The Corporation has included these leases in premises and equipment as of June 30, 2023 and December 31, 2022 as follows (in thousands):

	June 30, 2023		December 31, 2022
Buildings	$	5,572	$	5,572
Less: accumulated depreciation	(2,706)		(2,540)
Net book value	$	2,866	$	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 June 30, 2023 (in thousands):

Year	Amount
2023	$	195
2024	391
2025	409
2026	425
2027	428
2028 and thereafter	1,988
Total minimum lease payments	3,836
Less: amount representing interest	(647)
Present value of net minimum lease payments	$	3,189

As of June 30, 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 $25 thousand for the six month period ended June 30, 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 $27 thousand and $25 thousand for the three month periods ended June 30, 2023 and 2022, respectively. Rent and CAM related expenses paid to this Board of Directors member totaled $53 thousand and $51 thousand for the six month periods ended June 30, 2023 and 2022, respectively.

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 June 30, 2023, the weighted average remaining lease term was 8.24 years with a weighted average discount rate of 3.37%. Rent expense was $0.2 million for the three months ended June 30, 2023. Rent expense was $0.5 million for the six months ended June 30, 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 June 30, 2023 and December 31, 2022 consist of the following (in thousands):

	June 30, 2023		December 31, 2022
Operating lease right-of-use asset	$	6,449	$	7,234
Less: accumulated amortization	(399)		(785)
Less: lease termination	—		—
Add: new lease agreement and modifications	—		—
Operating lease right-of-use-assets, net	$	6,050	$	6,449

The following is a schedule by year of the undiscounted cash flows of the operating lease liabilities, excluding CAM charges, as of June 30, 2023 (in thousands):

Year	Amount
2023	$	498
2024	924
2025	841
2026	845
2027	854
2028 and thereafter	3,169
Total minimum lease payments	7,131
Less: amount representing interest	(903)
Present value of net minimum lease payments	$	6,228

As of June 30, 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 June 30, 2023, the weighted average remaining lease term was 9.77 years with a weighted average discount rate of 3.41%. The Corporation has included these leases in premises and equipment as of June 30, 2023 and December 31, 2022 as follows (in thousands):

	June 30, 2023		December 31, 2022
Buildings	$	5,572	$	5,572
Less: accumulated depreciation	(2,706)		(2,540)
Net book value	$	2,866	$	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 June 30, 2023 (in thousands):

Year	Amount
2023	$	195
2024	391
2025	409
2026	425
2027	428
2028 and thereafter	1,988
Total minimum lease payments	3,836
Less: amount representing interest	(647)
Present value of net minimum lease payments	$	3,189

As of June 30, 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 $25 thousand for the six month period ended June 30, 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 $27 thousand and $25 thousand for the three month periods ended June 30, 2023 and 2022, respectively. Rent and CAM related expenses paid to this Board of Directors member totaled $53 thousand and $51 thousand for the six month periods ended June 30, 2023 and 2022, respectively.

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GOODWILL AND INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 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 six month periods ended June 30, 2023 and 2022 were as follows (in thousands):

	2023		2022
Beginning of year	$	21,824	$	21,824
Acquired goodwill	—		—
Ending balance June 30,	$	21,824	$	21,824

The Corporation had no aggregate amortization expense for the three month period ended June 30, 2023, and $4 thousand for the three month period ended June 30, 2022. The Corporation had no aggregate amortization expense for the six month period ended June 30, 2023, and $15 thousand for the six month period ended June 30, 2022.

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

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

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.

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 June 30, 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 June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023				December 31, 2022
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	40,345	$	62,386	$	44,481	$	75,028
Unused lines of credit	3,015		343,039		2,887		326,188
Standby letters of credit	—		16,502		—		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 June 30, 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)

6 Months Ended

Jun. 30, 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 April 1, 2023	$	(65,521)	$	(3,952)	$	(69,473)
Other comprehensive income before reclassification	(5,282)		—		(5,282)
Amounts reclassified from accumulated other comprehensive income	—		9		9
Net current period other comprehensive income (loss)	(5,282)		9		(5,273)
Balance at June 30, 2023	$	(70,803)	$	(3,943)	$	(74,746)

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at April 1, 2022	$	(33,582)	$	(4,023)	$	(37,605)
Other comprehensive income before reclassification	(17,747)		—		(17,747)
Amounts reclassified from accumulated other comprehensive income	—		7		7
Net current period other comprehensive income (loss)	(17,747)		7		(17,740)
Balance at June 30, 2022	$	(51,329)	$	(4,016)	$	(55,345)

	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	493		—		493
Amounts reclassified from accumulated other comprehensive income	—		18		18
Net current period other comprehensive income	493		18		511
Balance at June 30, 2023	$	(70,803)	$	(3,943)	$	(74,746)

	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	(48,834)		—		(48,834)
Amounts reclassified from accumulated other comprehensive income	—		19		19
Net current period other comprehensive income	(48,834)		19		(48,815)
Balance at June 30, 2022	$	(51,329)	$	(4,016)	$	(55,345)

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   June 30,				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		11		Other components of net periodic pension and postretirement benefits
Tax effect	(3)		(4)		Income tax expense
Net of tax	9		7
Total reclassification for the period, net of tax	$	9	$	7

(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).

Details about Accumulated Other Comprehensive Income (Loss) Components	Six Months Ended June 30,				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)	24		25		Other components of net periodic pension and postretirement benefits
Tax effect	(6)		(6)		Income tax expense
Net of tax	18		19
Total reclassification for the period, net of tax	$	18	$	19

(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

6 Months Ended

Jun. 30, 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 and six months ended June 30, 2023 and 2022 (in thousands). Items outside the scope of ASC 606 are noted as such.

	Three Months Ended June 30, 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	$	777	$	—	$	—	$	777
Other	182		—		—		182
Interchange revenue from debit card transactions	1,194		—		—		1,194
WMG fee income	—		2,603		—		2,603
CFS fee and commission income	—		—		265		265
Net gains (losses) on sales of OREO	14		—		—		14
Net gains on sales of loans(a)	18		—		—		18
Loan servicing fees(a)	36		—		—		36
Changes in fair value of equity investments(a)	71		—		(174)		(103)
Income from bank-owned life insurance(a)	11		—		—		11
Other(a)	398		—		52		450
Total non-interest income (loss)	$	2,701	$	2,603	$	143	$	5,447

(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 June 30, 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	$	727	$	—	$	—	$	727
Other	209		—		—		209
Interchange revenue from debit card transactions	1,206		—		—		1,206
WMG fee income	—		2,628		—		2,628
CFS fee and commission income	—		—		271		271
Net gains (losses) on sales of OREO	46		—		—		46
Net gains on sales of loans(a)	25		—		—		25
Loan servicing fees(a)	38		—		—		38
Changes in fair value of equity investments(a)	(236)		—		(6)		(242)
Income from bank-owned life insurance(a)	11		—		—		11
Other(a)	416		—		(16)		400
Total non-interest income	$	2,442	$	2,628	$	249	$	5,319

(a) Not within scope of ASC 606.

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

	Six Months Ended June 30, 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	$	1,491	$	—	$	—	$	1,491
Other	409		—		—		409
Interchange revenue from debit card transactions	2,327		—		—		2,327
WMG fee income	—		5,183		—		5,183
CFS fee and commission income	—		—		506		506
Net gains (losses) on sales of OREO	14		—		—		14
Net gains on sales of loans(a)	23		—		—		23
Loan servicing fees(a)	72		—		—		72
Net gains on sales of securities(a)	—		—		—		—
Changes in fair value of equity investments(a)	149		—		(180)		(31)
Income from bank-owned life insurance(a)	21		—		—		21
Other(a)	846		—		9		855
Total non-interest income	$	5,352	$	5,183	$	335	$	10,870

(a) Not within scope of ASC 606.

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

	Six Months Ended June 30, 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	$	1,400	$	—	$	—	$	1,400
Other	400		—		—		400
Interchange revenue from debit card transactions	2,336		—		—		2,336
WMG fee income	—		5,385		—		5,385
CFS fee and commission income	—		—		524		524
Net gains on sales of OREO	46		—		—		46
Net gains on sales of loans(a)	99		—		—		99
Loan servicing fees(a)	77		—		—		77
Net gains on sales of securities(a)	—		—		—		—
Change in fair value of equity securities(a)	(350)		—		(5)		(355)
Income from bank-owned life insurance(a)	22		—		—		22
Other(a)	1,105		—		(57)		1,048
Total non-interest income	$	5,135	$	5,385	$	462	$	10,982

(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

6 Months Ended

Jun. 30, 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   June 30,				Six Months Ended   June 30,
	2023		2022		2023		2022
Qualified Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	397		284		793		566
Expected return on plan assets	(594)		(708)		(1,190)		(1,421)
Amortization of unrecognized transition obligation	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	5		—		11		—
Net periodic pension benefit	$	(192)	$	(424)	$	(386)	$	(855)
Supplemental Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	11		9		23		17
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	2		4		4		9
Net periodic supplemental pension cost	$	13	$	13	$	27	$	26
Postretirement Plan, Medical and Life
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	1		1		2		2
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	4		7		9		16
Net periodic postretirement, medical and life benefit	$	5	$	8	$	11	$	18

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SEGMENT REPORTING

6 Months Ended

Jun. 30, 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 June 30, 2023
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	27,757	$	—	$	39	$	27,796
Interest expense	9,201		—		—		9,201
Net interest income	18,556		—		39		18,595
Provision for credit losses	236		—		—		236
Net interest income after provision for credit losses	18,320		—		39		18,359
Other non-interest income	2,701		2,603		143		5,447
Other non-interest expenses	13,894		1,699		320		15,913
Income (loss) before income tax expense (benefit)	7,127		904		(138)		7,893
Income tax expense (benefit)	1,476		198		(61)		1,613
Segment net income (loss)	$	5,651	$	706	$	(77)	$	6,280

	Three months ended June 30, 2022
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	18,531	$	—	$	7	$	18,538
Interest expense	897		—		—		897
Net interest income	17,634		—		7		17,641
Provision for credit losses	(1,744)		—		—		(1,744)
Net interest income after provision for credit losses	19,378		—		7		19,385
Other non-interest income	2,442		2,628		249		5,319
Legal accruals and settlements	—		—		—		—
Other non-interest expenses	12,226		1,650		466		14,342
Income (loss) before income tax expense (benefit)	9,594		978		(210)		10,362
Income tax expense (benefit)	2,167		229		(58)		2,338
Segment net income (loss)	$	7,427	$	749	$	(152)	$	8,024

	Six months ended June 30, 2023
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	53,960	$	—	$	66	$	54,026
Interest expense	15,484		—		—		15,484
Net interest income	38,476		—		66		38,542
Provision for credit losses	513		—		—		513
Net interest income after provision for credit losses	37,963		—		66		38,029
Other non-interest income	5,352		5,183		335		10,870
Other non-interest expenses	27,590		3,497		662		31,749
Income (loss) before income tax expense (benefit)	15,725		1,686		(261)		17,150
Income tax expense (benefit)	3,307		375		(82)		3,600
Segment net income (loss)	$	12,418	$	1,311	$	(179)	$	13,550
Segment assets	$	2,667,404	$	2,584	$	4,685	$	2,674,673

	Six months ended June 30, 2022
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	35,982	$	—	$	14	$	35,996
Interest expense	1,678		—		—		1,678
Net interest income	34,304		—		14		34,318
Provision for credit losses	(2,889)		—		—		(2,889)
Net interest income after provision for credit losses	37,193		—		14		37,207
Other non-interest income	5,135		5,385		462		10,982
Legal accruals and settlements	—		—		—		—
Other non-interest expenses	24,757		3,465		788		29,010
Income (loss) before income tax expense (benefit)	17,571		1,920		(312)		19,179
Income tax expense (benefit)	3,933		438		(83)		4,288
Segment net income (loss)	$	13,638	$	1,482	$	(229)	$	14,891
Segment assets	$	2,441,375	$	2,723	$	5,813	$	2,449,911

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STOCK COMPENSATION

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

STOCK COMPENSATION

STOCK COMPENSATIONPursuant 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 closing price of the Corporation's stock on the grant date.

During the six months ended June 30, 2023 and 2022, 13,069 and 12,560 shares, respectively, were re-issued from treasury to fund stock compensation. The expense related to these grants is recognized over a one year vesting period. Total expense related to the 2021 Plan of $0.3 million and $0.2 million was recognized during each of the three month periods ended June 30, 2023 and 2022, respectively. Total expense related to the 2021 Plan of $0.6 million was recognized during each of the six month periods ended June 30, 2023 and 2022.

A summary of restricted stock activity for the three and six months ended June 30, 2023 is presented below:

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at April 1, 2023	54,328	$43.77
Granted	—
Vested	—
Forfeited or cancelled	(326)	$43.73
Nonvested at June 30, 2023	54,002	$44.68

	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	(326)	$43.73
Nonvested at June 30, 2023	54,002	$44.68

As of June 30, 2023, there was $1.6 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 3.59 years. The total fair value of shares vested was $0.6 million and $0.1 million for the six month periods ended June 30, 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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SUBSEQUENT EVENTS	6 Months Ended
	Jun. 30, 2023
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	SUBSEQUENT EVENTSOn June 22, 2023, the Corporation filed a Form S-3 Registration Statement under the Securities Act of 1933. The Corporation's Board of Directors approved the filing with the SEC of a Shelf Registration Statement to register for sale from time to time up to $75 million of the following securities: (i) shares of common stock; (ii) unsecured debt securities, which may consist of notes, debentures or other evidences of indebtedness; (iii) warrants; (iv) purchase contracts; (v) units consisting of any combination of the foregoing; and (vi) subscription rights to purchase shares of common stock or debt securities. The SEC declared the registration statement effective on July 13, 2023.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 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 these Unaudited Consolidated Financial Statements and the Notes to the Unaudited Consolidated Financial Statements are sufficient to meet its needs as of 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.

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 73-75 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 in lieu 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)

6 Months Ended

Jun. 30, 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):

	June 30, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
U.S. Treasury notes and bonds	$	62,156	$	—	$	5,959	$	—	$	56,197
Mortgage-backed securities, residential	497,995		—		80,630		—		417,365
Obligations of states and political subdivisions	39,568		1		985		—		38,584
Corporate bonds and notes	25,750		—		5,879		—		19,871
SBA loan pools	74,784		112		2,600		—		72,296
Total	$	700,253	$	113	$	96,053	$	—	$	604,313

	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):

	June 30, 2023
	Amortized Cost		Unrecognized Gains		Unrecognized Losses		Allowance for Credit Losses		Estimated Fair Value
Obligations of states and political subdivisions	$	824	$	—	$	—	$	—	$	824
Time deposits with other financial institutions	980		—		26		—		954
Total	$	1,804	$	—	$	26	$	—	$	1,778

	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):

	June 30, 2023
	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	5,804	$	5,732	$	284	$	283
After one, but within five years	103,670		94,774		880		855
After five, but within ten years	17,531		13,698		640		640
After ten years	469		448		—		—
	127,474		114,652		1,804		1,778
Mortgage-backed securities, residential	497,995		417,365		—		—
SBA loan pools	74,784		72,296		—		—
Total	$	700,253	$	604,313	$	1,804	$	1,778

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

The following tables summarize the investment securities available for sale with unrealized losses at June 30, 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
June 30, 2023	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury notes and bonds	$	1,920	$	19	$	54,277	$	5,940	$	56,197	$	5,959
Mortgage-backed securities, residential	6,705		616		410,660		80,014		417,365		80,630
Obligations of states and political subdivisions	25,467		485		13,006		500		38,473		985
Corporate bonds and notes	6,939		3,061		12,932		2,818		19,871		5,879
SBA loan pools	8,249		24		53,991		2,576		62,240		2,600
Total temporarily impaired securities	$	49,280	$	4,205	$	544,866	$	91,848	$	594,146	$	96,053

	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		—		—		37,847		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	$	605,978	$	96,766

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LOANS AND ALLOWANCE FOR CREDIT LOSSES (Tables)

6 Months Ended

Jun. 30, 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):

	June 30, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	253,501	$	252,044
Agricultural	305		249
Commercial mortgages:
Construction	124,942		108,243
Commercial mortgages, other	923,585		888,670
Residential mortgages	285,084		285,672
Consumer loans:
Home equity lines and loans	85,283		81,401
Indirect consumer loans	210,532		202,124
Direct consumer loans	10,674		11,045
Total loans, net of deferred loan fees and costs	1,893,906		1,829,448
Allowance for credit losses	(20,172)		(19,659)
Loans, net	$	1,873,734	$	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 June 30, 2023 (in thousands):

	Three Months Ended June 30, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, April 1, 2023	$	4,053	$	10,983	$	1,892	$	3,147	$	20,075
Charge-offs	(9)		—		—		(242)		(251)
Recoveries	3		1		—		101		105
Net recoveries (charge-offs)	(6)		1		—		(141)		(146)
Provision (1)	74		10		13		146		243
Ending balance, June 30, 2023	$	4,121	$	10,994	$	1,905	$	3,152	$	20,172

(1) Additional credit provision related to off-balance sheet exposure was $7 thousand for the three months ended June 30, 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 June 30, 2022 (in thousands):

	Three Months Ended June 30, 2022
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, April 1, 2022	$	3,485	$	12,963	$	1,606	$	1,874	$	19,928
Charge-offs	(16)		(687)		—		(128)		(831)
Recoveries	23		1		—		108		132
Net recoveries (charge-offs)	7		(686)		—		(20)		(699)
Provision	72		(1,963)		108		39		(1,744)
Ending balance, June 30, 2022	$	3,564	$	10,314	$	1,714	$	1,893	$	17,485

The following table presents the activity in the allowance for credit losses by portfolio segment for the six month period ended June 30, 2023 (in thousands):

	Six Months Ended June 30, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, January 1, 2023	$	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, January 1, 2023	4,282		10,881		1,829		3,041		20,033
Charge-offs	(199)		—		—		(437)		(636)
Recoveries	8		1		—		212		221
Net recoveries (charge-offs)	(191)		1		—		(225)		(415)
Provision (1)	30		112		76		336		554
Ending balance, June 30, 2023	$	4,121	$	10,994	$	1,905	$	3,152	$	20,172

(1) Additional credit provision related to off-balance sheet exposure was $41 thousand for the six months ended June 30, 2023.

The following table presents the activity in the allowance for loan losses by portfolio segment for the six month period ended June 30, 2022 (in thousands):

	Six Months Ended June 30, 2022
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, January 1, 2022	$	3,591	$	13,556	$	1,803	$	2,075	$	21,025
Charge-offs	(20)		(687)		—		(322)		(1,029)
Recoveries	30		2		—		346		378
Net recoveries (charge-offs)	10		(685)		—		24		(651)
Provision	(37)		(2,557)		(89)		(206)		(2,889)
Ending balance, June 30, 2022	$	3,564	$	10,314	$	1,714	$	1,893	$	17,485

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 June 30, 2023 and 2022:

	For the Three Months Ended
Allowance for credit losses on unfunded commitments	June 30, 2023		June 30, 2022
Beginning balance	$	1,048	$	—
Impact of ASC 326 adoption	—		—
Provision for unfunded commitments	(7)		—
Ending balance	$	1,041	$	—

The following table presents the provision for credit losses on loans and unfunded commitments for the three month period ended June 30, 2023, based upon the current expected credit loss methodology, and the provision for loan losses on loans for the three month period ended June 30, 2022, based upon the incurred loss methodology:

	For the Three Months Ended
Provision for credit losses	June 30, 2023		June 30, 2022
Provision for credit losses on loans	$	243	$	(1,744)
Provision for unfunded commitments	(7)		—
Total provision (credit) for credit losses	$	236	$	(1,744)

The following table presents the activity in the allowance for credit losses on unfunded commitments for the six month periods ended June 30, 2023 and 2022:

	For the Six Months Ended
Allowance for credit losses on unfunded commitments	June 30, 2023		June 30, 2022
Beginning balance	$	—	$	—
Impact of ASC 326 adoption	1,082		—
Provision for unfunded commitments	(41)		—
Ending balance	$	1,041	$	—

The following table presents the provision for credit losses on loans and unfunded commitments for the six month period ended June 30, 2023, based upon the current expected credit loss methodology, and the provision for loan losses on loans for the six month period ended June 30, 2022, based upon the incurred loss methodology:

	For the Six Months Ended
Provision for credit losses	June 30, 2023		June 30, 2022
Provision for credit losses on loans	$	554	$	(2,889)
Provision for unfunded commitments	(41)		—
Total provision (credit) for credit losses	$	513	$	(2,889)

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 June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually analyzed	$	996	$	33	$	—	$	61	$	1,090
Collectively analyzed	3,125		10,961		1,905		3,091		19,082
Total ending allowance balance	$	4,121	$	10,994	$	1,905	$	3,152	$	20,172

	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

	June 30, 2023
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually analyzed	$	1,714	$	3,964	$	—	$	259	$	5,937
Loans collectively analyzed	252,092		1,044,563		285,084		306,230		1,887,969
Total ending loans balance	$	253,806	$	1,048,527	$	285,084	$	306,489	$	1,893,906

	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 tables summarize the amortized cost basis of loans modified during the three and six month periods ended June 30, 2023:

	Three Months Ended June 30, 2023
Loans modified under ASU 2022-02:	Principal Reduction		Interest Rate Reduction		Term Extension		Payment Delay		Combination		Total		(%) of Loan Class (1)
Commercial mortgages, other	$	—	$	—	$	—	$	1,920	$	—	$	1,920	0.21	%
Total	$	—	$	—	$	—	$	1,920	$	—	$	1,920

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

	Six Months Ended June 30, 2023
Loans modified under ASU 2022-02:	Principal Reduction		Interest Rate Reduction		Term Extension		Payment Delay		Combination		Total		(%) of Loan Class (1)
Commercial mortgages, other	$	—	$	—	$	275	$	1,920	$	—	$	2,195	0.24	%
Total	$	—	$	—	$	275	$	1,920	$	—	$	2,195

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the six month period ended June 30, 2023:

	Six Months Ended June 30, 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, other	$—	—%	60

There was one loan, with an amortized basis of $1.9 million, classified as a commercial mortgage, other, to a borrower experiencing financial difficulty which was modified during the three months ended June 30, 2023. The modification granted was in the form of a four month payment delay, during which the borrower was making interest-only payments. The delay did not result in a principal reduction, reduction in interest rate, or an extension of term, and the note balloons at maturity.

There were no loans modified to borrowers experiencing financial difficulty during the prior twelve months that experienced payment default during the three and six month periods ended June 30, 2023.

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 June 30, 2023 (in thousands):

	June 30, 2023
	Amortized Cost Basis		Related Allowance
Commercial and agricultural:
Commercial and industrial (1) (3)	$	570	$	156
Commercial mortgages:
Commercial mortgages, other (1)	4,267		33
Consumer loans:
Home equity lines and loans (2)	259		61
Total	$	5,096	$	250

(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 tables present the average amortized cost basis and interest income recognized on loans individually evaluated, by class of loans, for the three and six month periods ended June 30, 2023 and 2022 (in thousands):

	Three Months Ended   June 30, 2023				Three Months Ended   June 30, 2022
With no related allowance recorded:	Average Amortized Cost Basis		Interest Income Recognized (1)		Average Amortized Cost Basis		Interest Income Recognized (1)
Commercial and agricultural:
Commercial and industrial	$	516	$	—	$	765	$	—
Commercial mortgages:
Construction	—		—		105		1
Commercial mortgages, other	3,992		8		4,086		7
Residential mortgages	358		—		909		11
Consumer loans:
Home equity lines & loans	178		—		157		—
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,230		2		1,369		3
Commercial mortgages:
Commercial mortgages, other	34		—		1,326		—
Consumer loans:
Home equity lines and loans	78		3		139		—
Total	$	6,386	$	13	$	8,856	$	22

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

	Six Months Ended   June 30, 2023				Six Months Ended   June 30, 2022
With no related allowance recorded:	Average Amortized Cost Basis		Interest Income Recognized (1)		Average Amortized Cost Basis		Interest Income Recognized (1)
Commercial and agricultural:
Commercial and industrial	$	686	$	—	$	825	$	3
Commercial mortgages:
Construction	2		—		113		2
Commercial mortgages, other	4,138		14		4,149		14
Residential mortgages	479		—		895		22
Consumer loans:
Home equity lines & loans	165		—		161		2
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,183		4		1,405		5
Commercial mortgages:
Commercial mortgages, other	35		—		2,065		21
Consumer loans:
Home equity lines and loans	63		3		141		—
Total	$	6,751	$	21	$	9,754	$	69

(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, loans past due 90 days or more and still accruing, and the amortized basis of non-accrual loans with no associated allocation in the allowance for credit losses related to non-accrual loans, by class of loan as of June 30, 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
	June 30, 2023		June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	303	1,565		1,946		$	—	$	1
Commercial mortgages:
Construction	—		—		5		—		—
Commercial mortgages, other	3,500		3,534		3,928		—		—
Residential mortgages	926		926		986		—		—
Consumer loans:
Home equity lines and loans	749		749		760		—		—
Indirect consumer loans	527		527		540		—		—
Direct consumer loans	3		3		13		—		—
Total	$	6,008	$	7,304	$	8,178	$	—	$	1

The following tables present the aging of the amortized cost basis of loans as of June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 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	$	526	$	455	$	—	$	981	$	252,520	$	253,501
Agricultural	—		—		—		—		305		305
Commercial mortgages:
Construction	2,163		2,244		—		4,407		120,535		124,942
Commercial mortgages, other	340		—		256		596		922,989		923,585
Residential mortgages	1,463		482		362		2,307		282,777		285,084
Consumer loans:
Home equity lines and loans	9		—		545		554		84,729		85,283
Indirect consumer loans	1,242		374		217		1,833		208,699		210,532
Direct consumer loans	11		11		3		25		10,649		10,674
Total	$	5,754	$	3,566	$	1,383	$	10,703	$	1,883,203	$	1,893,906

	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 June 30, 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	$	24,636	$	41,406	$	19,345	$	12,963	$	36,855	$	11,242	$	88,858	$	—	$	235,305
Special mention	296		98		328		—		3		448		4,282		9,040		14,495
Substandard	—		32		875		384		26		345		627		570		2,859
Doubtful	—		—		—		—		—		841		1		—		842
Total	24,932		41,536		20,548		13,347		36,884		12,876		93,768		9,610		253,501
Gross charge-offs	—		—		—		—		9		190		—		—		199
Agricultural
Pass	—		17		163		—		—		—		125		—		305
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total	—		17		163		—		—		—		125		—		305
Gross charge-offs	—		—		—		—		—		—		—		—		—
Construction
Pass	5,211		2,721		1,975		—		31		1,196		111,388		—		122,522
Special mention	—		176		—		—		—		—		—		—		176
Substandard	—		—		—		—		2,244		—		—		—		2,244
Doubtful	—		—		—		—		—		—		—		—		—
Total	5,211		2,897		1,975		—		2,275		1,196		111,388		—		124,942
Gross charge-offs	—		—		—		—		—		—		—		—		—
Commercial mortgages
Pass	53,923		214,143		127,609		96,993		40,067		173,743		188,483		—		894,961
Special mention	—		2,553		8,733		1,023		—		3,776		—		6,070		22,155
Substandard	275		1,160		—		—		—		4,474		97		430		6,436
Doubtful	—		—		—		—		—		33		—		—		33
Total	54,198		217,856		136,342		98,016		40,067		182,026		188,580		6,500		923,585
Gross charge-offs	—		—		—		—		—		—		—		—		—
Residential mortgages
Not rated	9,067		52,157		51,736		72,741		16,111		50,205		32,141		—		284,158
Substandard	—		107		63		—		177		579		—		—		926
Total	9,067		52,264		51,799		72,741		16,288		50,784		32,141		—		285,084
Gross charge-offs	—		—		—		—		—		—		—		—		—
Home equity lines and loans
Not rated	7,901		18,052		6,291		3,464		3,097		11,995		33,734		—		84,534
Substandard	—		76		—		—		—		419		254		—		749
Total	7,901		18,128		6,291		3,464		3,097		12,414		33,988		—		85,283
Gross charge-offs	—		—		—		—		—		—		9		—		9
Indirect consumer
Not rated	42,931		114,337		28,762		12,270		6,143		5,562		—		—		210,005
Substandard	13		159		131		58		52		114		—		—		527
Total	42,944		114,496		28,893		12,328		6,195		5,676		—		—		210,532
Gross charge-offs	12		155		73		65		16		40		—		—		361
Direct consumer
Not rated	1,854		3,529		1,130		499		184		414		3,061		—		10,671
Substandard	—		—		—		—		—		3		—		—		3
Total	1,854		3,529		1,130		499		184		417		3,061		—		10,674
Gross charge-offs	—		8		1		4		—		54		—		—		67
Total loans	$	146,107	$	450,723	$	247,141	$	200,395	$	104,990	$	265,389	$	463,051	$	16,110	$	1,893,906
Total gross charge-offs	$	12	$	163	$	74	$	69	$	25	$	284	$	9	$	—	$	636

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 presented by payment activity. The following table presents the amortized cost basis in residential and consumer loans based on payment activity as of June 30, 2023 (in thousands):

	Consumer Loans
June 30, 2023	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	284,158	$	84,534	$	210,005	$	10,671
Non-Performing	926		749		527		3
Total	$	285,084	$	85,283	$	210,532	$	10,674

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 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)

6 Months Ended

Jun. 30, 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 June 30, 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	$	56,197	$	56,197	$	—	$	—
Mortgage-backed securities, residential	417,365		—		417,365		—
Obligations of states and political subdivisions	38,584		—		38,584		—
Corporate bonds and notes	19,871		—		11,278		8,593
SBA loan pools	72,296		—		72,296		—
Total available for sale securities	$	604,313	$	56,197	$	539,523	$	8,593
Equity investments, at fair value	$	2,348	$	2,348	$	—	$	—
Derivative assets	26,450		—		26,450		—
Financial Liabilities:
Derivative liabilities	$	26,450	$	—	$	26,450	$	—

There were no transfers between Level 1 and Level 2 during the three and six month periods ended June 30, 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 and six months ended June 30, 2023 and June 30, 2022.

Corporate Bonds:	For the Three Months Ended
Level 3 Financial Assets	June 30, 2023		June 30, 2022
Balance of recurring Level 3 assets at April 1, 2023	$	8,666	$	—
Total gains and losses for the period:	—		—
Included in other comprehensive income	(73)		—
Transfer into Level 3	—		—
Balance of recurring Level 3 assets at June 30, 2023	$	8,593	$	—

Corporate Bonds:	For the Six Months Ended
Level 3 Financial Assets	June 30, 2023		June 30, 2022
Balance of recurring Level 3 assets at January 1, 2023	$	—	$	—
Total gains and losses for the period:	—		—
Included in other comprehensive income	(1,362)		—
Transfer into Level 3	9,955		—
Balance of recurring Level 3 assets at June 30, 2023	$	8,593	$	—

June 30, 2023	Fair Value		Valuation Techniques	Unobservable Input	Range (WA)
Corporate bonds and notes	$	8,594	Discounted cash flow	Market discount rate	12.00% -12.00% [12.00%]

The following table presents information related to Level 3 non-recurring fair value measurement at June 30, 2023 (in thousands):

Description	Fair Value at June 30, 2023		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at June 30, 2023
Individually analyzed loans:
Commercial and agricultural:
Commercial and industrial	$	414	Sales comparison	Discount to appraised value	10.00%-50.00% [14.57%]
Total	$	414

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

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

			Fair Value Measurement at June 30, 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)		Total Gains (Losses)
Individually Analyzed Loans:
Commercial and agricultural:
Commercial and industrial	$	414	$	—	$	—	$	414	$	—
Total individually analyzed loans	$	414	$	—	$	—	$	414	$	—

Schedule of Carrying Value and Estimated Fair Value of Financial Instruments

The carrying amounts and estimated fair values of other financial instruments, at June 30, 2023 and December 31, 2022, are as follows (in thousands):

	June 30, 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	$	25,499	$	25,499	$	—	$	—	$	25,499
Interest-earning deposits in other financial institutions	28,727		28,727		—		—		28,727
Equity investments	2,841		2,841		—		—		2,841
Securities available for sale	604,313		56,197		539,523		8,593		604,313
Securities held to maturity	1,804		—		954		824		1,778
FHLBNY and FRBNY stock	6,328		—		—		—		N/A
Loans, net and loans held for sale	1,874,519		—		—		1,807,870		1,807,870
Accrued interest receivable	8,691		112		2,014		6,565		8,691
Derivative Assets	26,450		—		26,450		—		26,450
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,844,708	$	1,844,708	$	—	$	—	$	1,844,708
Time deposits	545,486		—		542,449		—		542,449
FHLBNY overnight advances	50,760		—		50,762		—		50,762
Accrued interest payable	2,828		79		2,749		—		2,828
Derivative Liabilities	26,450		—		26,450		—		26,450

(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		—		1,450		952		2,402
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
FHLBNY overnight advances	95,810		—		95,819		—		95,819
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)

6 Months Ended

Jun. 30, 2023

Leases [Abstract]

Schedule of Leased Branch Properties

Leased branch properties at June 30, 2023 and December 31, 2022 consist of the following (in thousands):

	June 30, 2023		December 31, 2022
Operating lease right-of-use asset	$	6,449	$	7,234
Less: accumulated amortization	(399)		(785)
Less: lease termination	—		—
Add: new lease agreement and modifications	—		—
Operating lease right-of-use-assets, net	$	6,050	$	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 June 30, 2023 (in thousands):

Year	Amount
2023	$	498
2024	924
2025	841
2026	845
2027	854
2028 and thereafter	3,169
Total minimum lease payments	7,131
Less: amount representing interest	(903)
Present value of net minimum lease payments	$	6,228

Schedule of Leases in Premises and Equipment

The Corporation has included these leases in premises and equipment as of June 30, 2023 and December 31, 2022 as follows (in thousands):

	June 30, 2023		December 31, 2022
Buildings	$	5,572	$	5,572
Less: accumulated depreciation	(2,706)		(2,540)
Net book value	$	2,866	$	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 June 30, 2023 (in thousands):

Year	Amount
2023	$	195
2024	391
2025	409
2026	425
2027	428
2028 and thereafter	1,988
Total minimum lease payments	3,836
Less: amount representing interest	(647)
Present value of net minimum lease payments	$	3,189

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GOODWILL AND INTANGIBLE ASSETS (Tables)

6 Months Ended

Jun. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Changes in Goodwill

The changes in goodwill included in the core banking segment during the six month periods ended June 30, 2023 and 2022 were as follows (in thousands):

	2023		2022
Beginning of year	$	21,824	$	21,824
Acquired goodwill	—		—
Ending balance June 30,	$	21,824	$	21,824

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COMMITMENTS AND CONTINGENCIES (Tables)

6 Months Ended

Jun. 30, 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 June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023				December 31, 2022
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	40,345	$	62,386	$	44,481	$	75,028
Unused lines of credit	3,015		343,039		2,887		326,188
Standby letters of credit	—		16,502		—		17,211

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)

6 Months Ended

Jun. 30, 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 April 1, 2023	$	(65,521)	$	(3,952)	$	(69,473)
Other comprehensive income before reclassification	(5,282)		—		(5,282)
Amounts reclassified from accumulated other comprehensive income	—		9		9
Net current period other comprehensive income (loss)	(5,282)		9		(5,273)
Balance at June 30, 2023	$	(70,803)	$	(3,943)	$	(74,746)

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at April 1, 2022	$	(33,582)	$	(4,023)	$	(37,605)
Other comprehensive income before reclassification	(17,747)		—		(17,747)
Amounts reclassified from accumulated other comprehensive income	—		7		7
Net current period other comprehensive income (loss)	(17,747)		7		(17,740)
Balance at June 30, 2022	$	(51,329)	$	(4,016)	$	(55,345)

	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	493		—		493
Amounts reclassified from accumulated other comprehensive income	—		18		18
Net current period other comprehensive income	493		18		511
Balance at June 30, 2023	$	(70,803)	$	(3,943)	$	(74,746)

	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	(48,834)		—		(48,834)
Amounts reclassified from accumulated other comprehensive income	—		19		19
Net current period other comprehensive income	(48,834)		19		(48,815)
Balance at June 30, 2022	$	(51,329)	$	(4,016)	$	(55,345)

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   June 30,				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		11		Other components of net periodic pension and postretirement benefits
Tax effect	(3)		(4)		Income tax expense
Net of tax	9		7
Total reclassification for the period, net of tax	$	9	$	7

(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).

Details about Accumulated Other Comprehensive Income (Loss) Components	Six Months Ended June 30,				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)	24		25		Other components of net periodic pension and postretirement benefits
Tax effect	(6)		(6)		Income tax expense
Net of tax	18		19
Total reclassification for the period, net of tax	$	18	$	19

(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)

6 Months Ended

Jun. 30, 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 and six months ended June 30, 2023 and 2022 (in thousands). Items outside the scope of ASC 606 are noted as such.

	Three Months Ended June 30, 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	$	777	$	—	$	—	$	777
Other	182		—		—		182
Interchange revenue from debit card transactions	1,194		—		—		1,194
WMG fee income	—		2,603		—		2,603
CFS fee and commission income	—		—		265		265
Net gains (losses) on sales of OREO	14		—		—		14
Net gains on sales of loans(a)	18		—		—		18
Loan servicing fees(a)	36		—		—		36
Changes in fair value of equity investments(a)	71		—		(174)		(103)
Income from bank-owned life insurance(a)	11		—		—		11
Other(a)	398		—		52		450
Total non-interest income (loss)	$	2,701	$	2,603	$	143	$	5,447

(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 June 30, 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	$	727	$	—	$	—	$	727
Other	209		—		—		209
Interchange revenue from debit card transactions	1,206		—		—		1,206
WMG fee income	—		2,628		—		2,628
CFS fee and commission income	—		—		271		271
Net gains (losses) on sales of OREO	46		—		—		46
Net gains on sales of loans(a)	25		—		—		25
Loan servicing fees(a)	38		—		—		38
Changes in fair value of equity investments(a)	(236)		—		(6)		(242)
Income from bank-owned life insurance(a)	11		—		—		11
Other(a)	416		—		(16)		400
Total non-interest income	$	2,442	$	2,628	$	249	$	5,319

(a) Not within scope of ASC 606.

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

	Six Months Ended June 30, 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	$	1,491	$	—	$	—	$	1,491
Other	409		—		—		409
Interchange revenue from debit card transactions	2,327		—		—		2,327
WMG fee income	—		5,183		—		5,183
CFS fee and commission income	—		—		506		506
Net gains (losses) on sales of OREO	14		—		—		14
Net gains on sales of loans(a)	23		—		—		23
Loan servicing fees(a)	72		—		—		72
Net gains on sales of securities(a)	—		—		—		—
Changes in fair value of equity investments(a)	149		—		(180)		(31)
Income from bank-owned life insurance(a)	21		—		—		21
Other(a)	846		—		9		855
Total non-interest income	$	5,352	$	5,183	$	335	$	10,870

(a) Not within scope of ASC 606.

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

	Six Months Ended June 30, 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	$	1,400	$	—	$	—	$	1,400
Other	400		—		—		400
Interchange revenue from debit card transactions	2,336		—		—		2,336
WMG fee income	—		5,385		—		5,385
CFS fee and commission income	—		—		524		524
Net gains on sales of OREO	46		—		—		46
Net gains on sales of loans(a)	99		—		—		99
Loan servicing fees(a)	77		—		—		77
Net gains on sales of securities(a)	—		—		—		—
Change in fair value of equity securities(a)	(350)		—		(5)		(355)
Income from bank-owned life insurance(a)	22		—		—		22
Other(a)	1,105		—		(57)		1,048
Total non-interest income	$	5,135	$	5,385	$	462	$	10,982

(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)

6 Months Ended

Jun. 30, 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   June 30,				Six Months Ended   June 30,
	2023		2022		2023		2022
Qualified Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	397		284		793		566
Expected return on plan assets	(594)		(708)		(1,190)		(1,421)
Amortization of unrecognized transition obligation	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	5		—		11		—
Net periodic pension benefit	$	(192)	$	(424)	$	(386)	$	(855)
Supplemental Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	11		9		23		17
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	2		4		4		9
Net periodic supplemental pension cost	$	13	$	13	$	27	$	26
Postretirement Plan, Medical and Life
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	1		1		2		2
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	4		7		9		16
Net periodic postretirement, medical and life benefit	$	5	$	8	$	11	$	18

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SEGMENT REPORTING (Tables)

6 Months Ended

Jun. 30, 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 June 30, 2023
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	27,757	$	—	$	39	$	27,796
Interest expense	9,201		—		—		9,201
Net interest income	18,556		—		39		18,595
Provision for credit losses	236		—		—		236
Net interest income after provision for credit losses	18,320		—		39		18,359
Other non-interest income	2,701		2,603		143		5,447
Other non-interest expenses	13,894		1,699		320		15,913
Income (loss) before income tax expense (benefit)	7,127		904		(138)		7,893
Income tax expense (benefit)	1,476		198		(61)		1,613
Segment net income (loss)	$	5,651	$	706	$	(77)	$	6,280

	Three months ended June 30, 2022
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	18,531	$	—	$	7	$	18,538
Interest expense	897		—		—		897
Net interest income	17,634		—		7		17,641
Provision for credit losses	(1,744)		—		—		(1,744)
Net interest income after provision for credit losses	19,378		—		7		19,385
Other non-interest income	2,442		2,628		249		5,319
Legal accruals and settlements	—		—		—		—
Other non-interest expenses	12,226		1,650		466		14,342
Income (loss) before income tax expense (benefit)	9,594		978		(210)		10,362
Income tax expense (benefit)	2,167		229		(58)		2,338
Segment net income (loss)	$	7,427	$	749	$	(152)	$	8,024

	Six months ended June 30, 2023
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	53,960	$	—	$	66	$	54,026
Interest expense	15,484		—		—		15,484
Net interest income	38,476		—		66		38,542
Provision for credit losses	513		—		—		513
Net interest income after provision for credit losses	37,963		—		66		38,029
Other non-interest income	5,352		5,183		335		10,870
Other non-interest expenses	27,590		3,497		662		31,749
Income (loss) before income tax expense (benefit)	15,725		1,686		(261)		17,150
Income tax expense (benefit)	3,307		375		(82)		3,600
Segment net income (loss)	$	12,418	$	1,311	$	(179)	$	13,550
Segment assets	$	2,667,404	$	2,584	$	4,685	$	2,674,673

	Six months ended June 30, 2022
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	35,982	$	—	$	14	$	35,996
Interest expense	1,678		—		—		1,678
Net interest income	34,304		—		14		34,318
Provision for credit losses	(2,889)		—		—		(2,889)
Net interest income after provision for credit losses	37,193		—		14		37,207
Other non-interest income	5,135		5,385		462		10,982
Legal accruals and settlements	—		—		—		—
Other non-interest expenses	24,757		3,465		788		29,010
Income (loss) before income tax expense (benefit)	17,571		1,920		(312)		19,179
Income tax expense (benefit)	3,933		438		(83)		4,288
Segment net income (loss)	$	13,638	$	1,482	$	(229)	$	14,891
Segment assets	$	2,441,375	$	2,723	$	5,813	$	2,449,911

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STOCK COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

Schedule of Restricted Stock Activity

A summary of restricted stock activity for the three and six months ended June 30, 2023 is presented below:

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at April 1, 2023	54,328	$43.77
Granted	—
Vested	—
Forfeited or cancelled	(326)	$43.73
Nonvested at June 30, 2023	54,002	$44.68

	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	(326)	$43.73
Nonvested at June 30, 2023	54,002	$44.68

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)	Jun. 30, 2023		Mar. 31, 2023	Dec. 31, 2022		Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity	$ (177,426,000)		$ (177,342,000)	$ (166,388,000)		$ (174,690,000)	$ (185,510,000)	$ (211,455,000)
Allowance for credit losses	20,172,000	[1]	20,075,000	19,659,000	[1]	17,485,000	19,928,000	21,025,000
Unfunded Loan Commitment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit losses	1,041,000		1,048,000	0		0	0	0
Commercial Mortgages
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit losses	10,994,000		10,983,000	11,576,000		10,314,000	12,963,000	13,556,000
Consumer Loans
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit losses	3,152,000		3,147,000	2,865,000		1,893,000	1,874,000	2,075,000
Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity	$ (221,412,000)		(216,594,000)	(211,859,000)		$ (200,870,000)	(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				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			0	1,082,000			$ 0	$ 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			$ 1,100,000	$ 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.

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EARNINGS PER COMMON SHARE (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Earnings Per Share [Abstract]
Weighted average shares outstanding, basic (in shares)	4,729,000	4,690,000	4,725,000	4,690,000
Weighted average shares outstanding, diluted (in shares)	4,729,000	4,690,000	4,725,000	4,690,000
Dilutive common stock equivalents (in shares)	0	0	0	0

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SECURITIES - Securities Available for Sale (Details) - USD ($)	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Amortized cost and estimated fair value of debt securities available-for-sale
Amortized Cost	$ 700,253,000		$ 729,198,000
Unrealized Gains	113,000		157,000
Unrealized Losses	96,053,000		96,766,000
Allowance for Credit Losses	0
Estimated Fair Value	604,313,000		632,589,000
Amortized Cost
Within one year	5,804,000
After one, but within five years	103,670,000
After five, but within ten years	17,531,000
After ten years	469,000
Total	127,474,000
Total	700,253,000		729,198,000
Fair Value
Within one year	5,732,000
After one, but within five years	94,774,000
After five, but within ten years	13,698,000
After ten years	448,000
Total	114,652,000
Total	604,313,000		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	62,156,000		61,800,000
Unrealized Gains	0		0
Unrealized Losses	5,959,000		6,225,000
Allowance for Credit Losses	0
Estimated Fair Value	56,197,000		55,574,000
Amortized Cost
Total	62,156,000		61,800,000
Fair Value
Total	56,197,000		55,574,000
Mortgage-backed securities, residential
Amortized cost and estimated fair value of debt securities available-for-sale
Amortized Cost	497,995,000		518,838,000
Unrealized Gains	0		0
Unrealized Losses	80,630,000		83,707,000
Allowance for Credit Losses	0
Estimated Fair Value	417,365,000		435,131,000
Amortized Cost
Without single maturity date	497,995,000
Total	497,995,000		518,838,000
Fair Value
Without single maturity date	417,365,000
Total	417,365,000		435,131,000
Obligations of states and political subdivisions
Amortized cost and estimated fair value of debt securities available-for-sale
Amortized Cost	39,568,000		39,828,000
Unrealized Gains	1,000		2,000
Unrealized Losses	985,000		938,000
Allowance for Credit Losses	0
Estimated Fair Value	38,584,000		38,892,000
Amortized Cost
Total	39,568,000		39,828,000
Fair Value
Total	38,584,000		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	5,879,000		3,780,000
Allowance for Credit Losses	0
Estimated Fair Value	19,871,000		21,970,000
Amortized Cost
Total	25,750,000		25,750,000
Fair Value
Total	19,871,000		21,970,000
SBA loan pools
Amortized cost and estimated fair value of debt securities available-for-sale
Amortized Cost	74,784,000		82,982,000
Unrealized Gains	112,000		155,000
Unrealized Losses	2,600,000		2,116,000
Allowance for Credit Losses	0
Estimated Fair Value	72,296,000		81,022,000
Amortized Cost
Without single maturity date	74,784,000
Total	74,784,000		82,982,000
Fair Value
Without single maturity date	72,296,000
Total	$ 72,296,000		$ 81,022,000

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SECURITIES - Securities Held to Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Amortized cost and estimated fair value of securities held to maturity
Amortized Cost	$ 1,804	$ 2,424
Unrecognized Gains	0	0
Unrecognized Losses	26	22
Allowance for Credit Losses	0
Estimated Fair Value	1,778	2,402
Amortized Cost
Within one year	284
After one, but within five years	880
After five, but within ten years	640
After ten years	0
Total	1,804
Amortized Cost	1,804	2,424
Fair Value
Within one year	283
After one, but within five years	855
After five, but within ten years	640
After ten years	0
Total	1,778
Total	1,778	2,402
Obligations of states and political subdivisions
Amortized cost and estimated fair value of securities held to maturity
Amortized Cost	824	952
Unrecognized Gains	0	0
Unrecognized Losses	0	0
Allowance for Credit Losses	0
Estimated Fair Value	824	952
Amortized Cost
Amortized Cost	824	952
Fair Value
Total	824	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	26	22
Allowance for Credit Losses	0
Estimated Fair Value	954	1,450
Amortized Cost
Amortized Cost	980	1,472
Fair Value
Total	954	$ 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	Jun. 30, 2023	Dec. 31, 2022
Fair Value
Less than 12 months	$ 49,280	$ 137,597
12 months or longer	544,866	468,381
Total	594,146	605,978
Unrealized Losses
Less than 12 months	4,205	9,999
12 months or longer	91,848	86,767
Total	96,053	96,766
U.S. Treasury notes and bonds
Fair Value
Less than 12 months	1,920	1,011
12 months or longer	54,277	54,563
Total	56,197	55,574
Unrealized Losses
Less than 12 months	19	30
12 months or longer	5,940	6,195
Total	5,959	6,225
Mortgage-backed securities, residential
Fair Value
Less than 12 months	6,705	79,891
12 months or longer	410,660	355,240
Total	417,365	435,131
Unrealized Losses
Less than 12 months	616	7,621
12 months or longer	80,014	76,086
Total	80,630	83,707
Obligations of states and political subdivisions
Fair Value
Less than 12 months	25,467	37,847
12 months or longer	13,006	0
Total	38,473	37,847
Unrealized Losses
Less than 12 months	485	938
12 months or longer	500	0
Total	985	938
Corporate bonds and notes
Fair Value
Less than 12 months	6,939	4,515
12 months or longer	12,932	7,455
Total	19,871	11,970
Unrealized Losses
Less than 12 months	3,061	485
12 months or longer	2,818	3,295
Total	5,879	3,780
SBA loan pools
Fair Value
Less than 12 months	8,249	14,333
12 months or longer	53,991	51,123
Total	62,240	65,456
Unrealized Losses
Less than 12 months	24	925
12 months or longer	2,576	1,191
Total	$ 2,600	$ 2,116

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LOANS AND ALLOWANCE FOR CREDIT LOSSES - Loan Portfolio (Details) - USD ($) $ in Thousands	Jun. 30, 2023		Mar. 31, 2023	Dec. 31, 2022		Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	$ 1,893,906			$ 1,829,448
Allowance for credit losses	(20,172)	[1]	$ (20,075)	(19,659)	[1]	$ (17,485)	$ (19,928)	$ (21,025)
Loans, net	1,873,734			1,809,789
Construction
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	124,942
Commercial mortgages, other
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	923,585
Home equity lines and loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	85,283
Indirect consumer loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	210,532
Direct consumer loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	10,674
Commercial and Agricultural
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	253,806			252,293
Allowance for credit losses	(4,121)		(4,053)	(3,373)		(3,564)	(3,485)	(3,591)
Commercial Mortgages
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	1,048,527			996,913
Allowance for credit losses	(10,994)		(10,983)	(11,576)		(10,314)	(12,963)	(13,556)
Commercial Mortgages | Construction
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	124,942			108,243
Commercial Mortgages | Commercial mortgages, other
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	923,585			888,670
Residential Mortgages
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	285,084			285,672
Allowance for credit losses	(1,905)		(1,892)	(1,845)		(1,714)	(1,606)	(1,803)
Consumer Loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	306,489			294,570
Allowance for credit losses	(3,152)		$ (3,147)	(2,865)		$ (1,893)	$ (1,874)	$ (2,075)
Consumer Loans | Home equity lines and loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	85,283			81,401
Consumer Loans | Indirect consumer loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	210,532			202,124
Consumer Loans | Direct consumer loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	10,674			11,045
Commercial and industrial
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	253,501
Commercial and industrial | Commercial and Agricultural
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	253,501			252,044
Agricultural
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	305
Agricultural | Commercial and Agricultural
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	$ 305			$ 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 CREDIT LOSSES - Narrative (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2023 USD ($)	Jun. 30, 2023 USD ($) loan	Jun. 30, 2022 loan	Dec. 31, 2022 USD ($)
Credit Loss [Abstract]
Number of modified loans | loan		1	0
Modification, payment delay period		4 months
Accrued interest	$ 6,600	$ 6,600		$ 6,500
Number of days past due after which a retail loan is rated		90 days
Financing Receivable, Allowance for Credit Loss [Line Items]
Amortized cost basis	1,920	$ 2,195
Loans individually analyzed	5,937	5,937		7,482
Commercial Mortgages
Financing Receivable, Allowance for Credit Loss [Line Items]
Amortized cost basis	1,920	2,195
Loans individually analyzed	3,964	3,964		$ 4,383
Collateral Pledged
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually analyzed	$ 5,096	$ 5,096

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LOANS AND ALLOWANCE FOR CREDIT LOSSES - Allowances For Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2023		Jun. 30, 2022	Jun. 30, 2023		Jun. 30, 2022
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	$ 20,075		$ 19,928	$ 19,659	[1]	$ 21,025
Charge-offs	(251)		(831)	(636)		(1,029)
Recoveries	105		132	221		378
Net recoveries (charge-offs)	(146)		(699)	(415)		(651)
Provision	243		(1,744)	554		(2,889)
Ending balance	20,172	[1]	17,485	20,172	[1]	17,485
Credit provision related to off-balance sheet exposure	7			41
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	4,053		3,485	3,373		3,591
Charge-offs	(9)		(16)	(199)		(20)
Recoveries	3		23	8		30
Net recoveries (charge-offs)	(6)		7	(191)		10
Provision	74		72	30		(37)
Ending balance	4,121		3,564	4,121		3,564
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	10,983		12,963	11,576		13,556
Charge-offs	0		(687)	0		(687)
Recoveries	1		1	1		2
Net recoveries (charge-offs)	1		(686)	1		(685)
Provision	10		(1,963)	112		(2,557)
Ending balance	10,994		10,314	10,994		10,314
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	1,892		1,606	1,845		1,803
Charge-offs	0		0	0		0
Recoveries	0		0	0		0
Net recoveries (charge-offs)	0		0	0		0
Provision	13		108	76		(89)
Ending balance	1,905		1,714	1,905		1,714
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	3,147		1,874	2,865		2,075
Charge-offs	(242)		(128)	(437)		(322)
Recoveries	101		108	212		346
Net recoveries (charge-offs)	(141)		(20)	(225)		24
Provision	146		39	336		(206)
Ending balance	3,152		1,893	3,152		1,893
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	1,048		0	0		0
Provision	(7)		0	(41)		0
Ending balance	1,041		0	1,041		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	$ 0		$ 0	$ 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 CREDIT LOSSES - Provision for Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Financing Receivable, Allowance for Credit Loss [Line Items]
Provision	$ 243	$ (1,744)	$ 554	$ (2,889)
Loans And Unfunded Commitments
Financing Receivable, Allowance for Credit Loss [Line Items]
Provision	236	(1,744)	513	(2,889)
Loans Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
Provision	243	(1,744)	554	(2,889)
Unfunded Loan Commitment
Financing Receivable, Allowance for Credit Loss [Line Items]
Provision	$ (7)	$ 0	$ (41)	$ 0

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LOANS AND ALLOWANCE FOR CREDIT LOSSES - Allowances by Impairment (Details) - USD ($) $ in Thousands	Jun. 30, 2023		Mar. 31, 2023	Dec. 31, 2022		Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021
Allowance for loan losses
Individually evaluated for impairment	$ 1,090			$ 1,147
Collectively evaluated for impairment	19,082			18,512
Total ending allowance balance	20,172	[1]	$ 20,075	19,659	[1]	$ 17,485	$ 19,928	$ 21,025
Loans:
Loans individually analyzed	5,937			7,482
Loans collectively analyzed	1,887,969			1,821,966
Total loans, net of deferred loan fees and costs	1,893,906			1,829,448
Collateral Pledged
Allowance for loan losses
Total ending allowance balance	250
Loans:
Loans individually analyzed	5,096
Commercial and Agricultural
Allowance for loan losses
Individually evaluated for impairment	996			1,078
Collectively evaluated for impairment	3,125			2,295
Total ending allowance balance	4,121		4,053	3,373		3,564	3,485	3,591
Loans:
Loans individually analyzed	1,714			2,112
Loans collectively analyzed	252,092			250,181
Total loans, net of deferred loan fees and costs	253,806			252,293
Commercial Mortgages
Allowance for loan losses
Individually evaluated for impairment	33			38
Collectively evaluated for impairment	10,961			11,538
Total ending allowance balance	10,994		10,983	11,576		10,314	12,963	13,556
Loans:
Loans individually analyzed	3,964			4,383
Loans collectively analyzed	1,044,563			992,530
Total loans, net of deferred loan fees and costs	1,048,527			996,913
Residential Mortgages
Allowance for loan losses
Individually evaluated for impairment	0			0
Collectively evaluated for impairment	1,905			1,845
Total ending allowance balance	1,905		1,892	1,845		1,714	1,606	1,803
Loans:
Loans individually analyzed	0			723
Loans collectively analyzed	285,084			284,949
Total loans, net of deferred loan fees and costs	285,084			285,672
Consumer Loans
Allowance for loan losses
Individually evaluated for impairment	61			31
Collectively evaluated for impairment	3,091			2,834
Total ending allowance balance	3,152		$ 3,147	2,865		$ 1,893	$ 1,874	$ 2,075
Loans:
Loans individually analyzed	259			264
Loans collectively analyzed	306,230			294,306
Total loans, net of deferred loan fees and costs	$ 306,489			$ 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 CREDIT LOSSES - Modifications (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2023 USD ($)	Jun. 30, 2023 USD ($)
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	$ 1,920	$ 2,195
Commercial Mortgages
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	$ 1,920	$ 2,195
% of Loan Class	0.21%	0.24%
Weighted-average interest rate reduction (%)		0.00%
Weighted-average term extension (in months)		60 months
Principal Reduction
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	$ 0	$ 0
Principal Reduction | Commercial Mortgages
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0	0
Principal Reduction	0	0
Interest Rate Reduction
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0	0
Interest Rate Reduction | Commercial Mortgages
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0	0
Term Extension
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0	275
Term Extension | Commercial Mortgages
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0	275
Payment Delay
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	1,920	1,920
Payment Delay | Commercial Mortgages
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	1,920	1,920
Combination
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0	0
Combination | Commercial Mortgages
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	$ 0	$ 0

XML

LOANS AND ALLOWANCE FOR CREDIT LOSSES - Collateral Dependent (Details) - USD ($) $ in Thousands	Jun. 30, 2023		Mar. 31, 2023	Dec. 31, 2022		Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021
Financing Receivable, Allowance for Credit Loss [Line Items]
Amortized Cost Basis	$ 5,937			$ 7,482
Related Allowance	20,172	[1]	$ 20,075	19,659	[1]	$ 17,485	$ 19,928	$ 21,025
Commercial and Agricultural
Financing Receivable, Allowance for Credit Loss [Line Items]
Amortized Cost Basis	1,714			2,112
Related Allowance	4,121		4,053	3,373		3,564	3,485	3,591
Commercial Mortgages
Financing Receivable, Allowance for Credit Loss [Line Items]
Amortized Cost Basis	3,964			4,383
Related Allowance	10,994		10,983	11,576		10,314	12,963	13,556
Consumer Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Amortized Cost Basis	259			264
Related Allowance	3,152		$ 3,147	$ 2,865		$ 1,893	$ 1,874	$ 2,075
Collateral Pledged
Financing Receivable, Allowance for Credit Loss [Line Items]
Amortized Cost Basis	5,096
Related Allowance	250
Commercial Real Estate And Business Assets | Commercial and Agricultural | Commercial and industrial
Financing Receivable, Allowance for Credit Loss [Line Items]
Amortized Cost Basis	570
Related Allowance	156
Commercial Real Estate | Commercial Mortgages | Commercial mortgages, other
Financing Receivable, Allowance for Credit Loss [Line Items]
Amortized Cost Basis	4,267
Related Allowance	33
Residential Real Estate | Consumer Loans | Home equity lines and loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Amortized Cost Basis	259
Related Allowance	$ 61

[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 CREDIT LOSSES - Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 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
Average Amortized Cost Basis
Average recorded investment, total	$ 6,386	$ 8,856	$ 6,751	$ 9,754
Interest Income Recognized
Total	13	22	21	69
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
Average Amortized Cost Basis
With no related allowance recorded	358	909	479	895
Interest Income Recognized
With no related allowance recorded	0	11	0	22
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
Average Amortized Cost Basis
With no related allowance recorded	0	105	2	113
Interest Income Recognized
With no related allowance recorded	0	1	0	2
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
Average Amortized Cost Basis
With no related allowance recorded	3,992	4,086	4,138	4,149
With an allowance recorded	34	1,326	35	2,065
Interest Income Recognized
With no related allowance recorded	8	7	14	14
With an allowance recorded	0	0	0	21
Home equity lines & 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
Average Amortized Cost Basis
With no related allowance recorded	178	157	165	161
With an allowance recorded	78	139	63	141
Interest Income Recognized
With no related allowance recorded	0	0	0	2
With an allowance recorded	3	0	3	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
Average Amortized Cost Basis
With no related allowance recorded	516	765	686	825
With an allowance recorded	1,230	1,369	1,183	1,405
Interest Income Recognized
With no related allowance recorded	0	0	0	3
With an allowance recorded	$ 2	$ 3	$ 4	$ 5

XML

LOANS AND ALLOWANCE FOR CREDIT LOSSES - Receivables Past Due (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Financing Receivable, Past Due [Line Items]
Non-accrual with no allowance for credit losses	$ 6,008
Non-accrual	7,304	$ 8,178
Loans Past Due 90 Days or More and Still Accruing	0	1
Financing receivable	1,893,906	1,829,448
Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	10,703	6,603
30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	5,754	4,084
60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	3,566	1,045
90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,383	1,474
Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,883,203	1,822,845
Construction
Financing Receivable, Past Due [Line Items]
Financing receivable	124,942
Commercial mortgages, other
Financing Receivable, Past Due [Line Items]
Financing receivable	923,585
Home equity lines and loans
Financing Receivable, Past Due [Line Items]
Financing receivable	85,283
Indirect consumer loans
Financing Receivable, Past Due [Line Items]
Financing receivable	210,532
Direct consumer loans
Financing Receivable, Past Due [Line Items]
Financing receivable	10,674
Commercial and Agricultural
Financing Receivable, Past Due [Line Items]
Financing receivable	253,806	252,293
Commercial Mortgages
Financing Receivable, Past Due [Line Items]
Financing receivable	1,048,527	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	124,942	108,243
Commercial Mortgages | Construction | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	4,407	0
Commercial Mortgages | Construction | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	2,163	0
Commercial Mortgages | Construction | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	2,244	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	120,535	108,243
Commercial Mortgages | Commercial mortgages, other
Financing Receivable, Past Due [Line Items]
Non-accrual with no allowance for credit losses	3,500
Non-accrual	3,534	3,928
Loans Past Due 90 Days or More and Still Accruing	0	0
Financing receivable	923,585	888,670
Commercial Mortgages | Commercial mortgages, other | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	596	1,544
Commercial Mortgages | Commercial mortgages, other | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	340	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	256	486
Commercial Mortgages | Commercial mortgages, other | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	922,989	887,126
Residential Mortgages
Financing Receivable, Past Due [Line Items]
Non-accrual with no allowance for credit losses	926
Non-accrual	926	986
Loans Past Due 90 Days or More and Still Accruing	0	0
Financing receivable	285,084	285,672
Residential Mortgages | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	2,307	2,363
Residential Mortgages | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,463	1,360
Residential Mortgages | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	482	709
Residential Mortgages | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	362	294
Residential Mortgages | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	282,777	283,309
Consumer Loans
Financing Receivable, Past Due [Line Items]
Financing receivable	306,489	294,570
Consumer Loans | Home equity lines and loans
Financing Receivable, Past Due [Line Items]
Non-accrual with no allowance for credit losses	749
Non-accrual	749	760
Loans Past Due 90 Days or More and Still Accruing	0	0
Financing receivable	85,283	81,401
Consumer Loans | Home equity lines and loans | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	554	756
Consumer Loans | Home equity lines and loans | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	9	193
Consumer Loans | Home equity lines and loans | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	121
Consumer Loans | Home equity lines and loans | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	545	442
Consumer Loans | Home equity lines and loans | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	84,729	80,645
Consumer Loans | Indirect consumer loans
Financing Receivable, Past Due [Line Items]
Non-accrual with no allowance for credit losses	527
Non-accrual	527	540
Loans Past Due 90 Days or More and Still Accruing	0	0
Financing receivable	210,532	202,124
Consumer Loans | Indirect consumer loans | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,833	1,840
Consumer Loans | Indirect consumer loans | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,242	1,397
Consumer Loans | Indirect consumer loans | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	374	193
Consumer Loans | Indirect consumer loans | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	217	250
Consumer Loans | Indirect consumer loans | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	208,699	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	10,674	11,045
Consumer Loans | Direct consumer loans | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	25	22
Consumer Loans | Direct consumer loans | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	11	2
Consumer Loans | Direct consumer loans | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	11	19
Consumer Loans | Direct consumer loans | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	3	1
Consumer Loans | Direct consumer loans | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	10,649	11,023
Commercial and industrial
Financing Receivable, Past Due [Line Items]
Financing receivable	253,501
Commercial and industrial | Commercial and Agricultural
Financing Receivable, Past Due [Line Items]
Non-accrual with no allowance for credit losses	303
Non-accrual	1,565	1,946
Loans Past Due 90 Days or More and Still Accruing	0	1
Financing receivable	253,501	252,044
Commercial and industrial | Commercial and Agricultural | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	981	78
Commercial and industrial | Commercial and Agricultural | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	526	74
Commercial and industrial | Commercial and Agricultural | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	455	3
Commercial and industrial | Commercial and Agricultural | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	1
Commercial and industrial | Commercial and Agricultural | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	252,520	251,966
Agricultural
Financing Receivable, Past Due [Line Items]
Financing receivable	305
Agricultural | Commercial and Agricultural
Financing Receivable, Past Due [Line Items]
Financing receivable	305	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	$ 305	$ 249

XML

LOANS AND ALLOWANCE FOR CREDIT LOSSES - Credit Quality Indicator (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	$ 146,107		$ 146,107
2022	450,723		450,723
2021	247,141		247,141
2020	200,395		200,395
2019	104,990		104,990
Prior	265,389		265,389
Revolving Loans Amortized Cost	463,051		463,051
Revolving Loans Converted to Term	16,110		16,110
Total loans, net of deferred loan fees and costs	1,893,906		1,893,906		$ 1,829,448
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
2023			12
2022			163
2021			74
2020			69
2019			25
Prior			284
Revolving Loans Amortized Cost			9
Revolving Loans Converted to Term			0
Total	251	$ 831	636	$ 1,029
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	5,211		5,211
2022	2,897		2,897
2021	1,975		1,975
2020	0		0
2019	2,275		2,275
Prior	1,196		1,196
Revolving Loans Amortized Cost	111,388		111,388
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	124,942		124,942
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	5,211		5,211
2022	2,721		2,721
2021	1,975		1,975
2020	0		0
2019	31		31
Prior	1,196		1,196
Revolving Loans Amortized Cost	111,388		111,388
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	122,522		122,522
Construction | Special mention
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	176		176
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	176		176
Construction | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	2,244		2,244
Prior	0		0
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	2,244		2,244
Construction | Doubtful
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	0		0
Commercial mortgages, other
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	54,198		54,198
2022	217,856		217,856
2021	136,342		136,342
2020	98,016		98,016
2019	40,067		40,067
Prior	182,026		182,026
Revolving Loans Amortized Cost	188,580		188,580
Revolving Loans Converted to Term	6,500		6,500
Total loans, net of deferred loan fees and costs	923,585		923,585
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	53,923		53,923
2022	214,143		214,143
2021	127,609		127,609
2020	96,993		96,993
2019	40,067		40,067
Prior	173,743		173,743
Revolving Loans Amortized Cost	188,483		188,483
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	894,961		894,961
Commercial mortgages, other | Special mention
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	2,553		2,553
2021	8,733		8,733
2020	1,023		1,023
2019	0		0
Prior	3,776		3,776
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	6,070		6,070
Total loans, net of deferred loan fees and costs	22,155		22,155
Commercial mortgages, other | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	275		275
2022	1,160		1,160
2021	0		0
2020	0		0
2019	0		0
Prior	4,474		4,474
Revolving Loans Amortized Cost	97		97
Revolving Loans Converted to Term	430		430
Total loans, net of deferred loan fees and costs	6,436		6,436
Commercial mortgages, other | Doubtful
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	33		33
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	33		33
Home equity lines and loans
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	7,901		7,901
2022	18,128		18,128
2021	6,291		6,291
2020	3,464		3,464
2019	3,097		3,097
Prior	12,414		12,414
Revolving Loans Amortized Cost	33,988		33,988
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	85,283		85,283
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			9
Revolving Loans Converted to Term			0
Total			9
Home equity lines and loans | Not rated
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	7,901		7,901
2022	18,052		18,052
2021	6,291		6,291
2020	3,464		3,464
2019	3,097		3,097
Prior	11,995		11,995
Revolving Loans Amortized Cost	33,734		33,734
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	84,534		84,534
Home equity lines and loans | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	76		76
2021	0		0
2020	0		0
2019	0		0
Prior	419		419
Revolving Loans Amortized Cost	254		254
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	749		749
Indirect consumer
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	42,944		42,944
2022	114,496		114,496
2021	28,893		28,893
2020	12,328		12,328
2019	6,195		6,195
Prior	5,676		5,676
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	210,532		210,532
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
2023			12
2022			155
2021			73
2020			65
2019			16
Prior			40
Revolving Loans Amortized Cost			0
Revolving Loans Converted to Term			0
Total			361
Indirect consumer | Not rated
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	42,931		42,931
2022	114,337		114,337
2021	28,762		28,762
2020	12,270		12,270
2019	6,143		6,143
Prior	5,562		5,562
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	210,005		210,005
Indirect consumer | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	13		13
2022	159		159
2021	131		131
2020	58		58
2019	52		52
Prior	114		114
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	527		527
Direct consumer
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	1,854		1,854
2022	3,529		3,529
2021	1,130		1,130
2020	499		499
2019	184		184
Prior	417		417
Revolving Loans Amortized Cost	3,061		3,061
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	10,674		10,674
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
2023			0
2022			8
2021			1
2020			4
2019			0
Prior			54
Revolving Loans Amortized Cost			0
Revolving Loans Converted to Term			0
Total			67
Direct consumer | Not rated
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	1,854		1,854
2022	3,529		3,529
2021	1,130		1,130
2020	499		499
2019	184		184
Prior	414		414
Revolving Loans Amortized Cost	3,061		3,061
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	10,671		10,671
Direct consumer | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	3		3
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	3		3
Commercial and industrial
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	24,932		24,932
2022	41,536		41,536
2021	20,548		20,548
2020	13,347		13,347
2019	36,884		36,884
Prior	12,876		12,876
Revolving Loans Amortized Cost	93,768		93,768
Revolving Loans Converted to Term	9,610		9,610
Total loans, net of deferred loan fees and costs	253,501		253,501
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
2023			0
2022			0
2021			0
2020			0
2019			9
Prior			190
Revolving Loans Amortized Cost			0
Revolving Loans Converted to Term			0
Total			199
Commercial and industrial | Pass
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	24,636		24,636
2022	41,406		41,406
2021	19,345		19,345
2020	12,963		12,963
2019	36,855		36,855
Prior	11,242		11,242
Revolving Loans Amortized Cost	88,858		88,858
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	235,305		235,305
Commercial and industrial | Special mention
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	296		296
2022	98		98
2021	328		328
2020	0		0
2019	3		3
Prior	448		448
Revolving Loans Amortized Cost	4,282		4,282
Revolving Loans Converted to Term	9,040		9,040
Total loans, net of deferred loan fees and costs	14,495		14,495
Commercial and industrial | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	32		32
2021	875		875
2020	384		384
2019	26		26
Prior	345		345
Revolving Loans Amortized Cost	627		627
Revolving Loans Converted to Term	570		570
Total loans, net of deferred loan fees and costs	2,859		2,859
Commercial and industrial | Doubtful
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	841		841
Revolving Loans Amortized Cost	1		1
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	842		842
Agricultural
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	17		17
2021	163		163
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost	125		125
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	305		305
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		0
2022	17		17
2021	163		163
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost	125		125
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	305		305
Agricultural | Special mention
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	0		0
Agricultural | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	0		0
Agricultural | Doubtful
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	0		0
2021	0		0
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	0		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	253,806		253,806		252,293
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Total	9	16	199	20
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	253,501		253,501		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	305		305		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	1,048,527		1,048,527		996,913
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Total	0	687	0	687
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	124,942		124,942		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	923,585		923,585		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	9,067		9,067
2022	52,264		52,264
2021	51,799		51,799
2020	72,741		72,741
2019	16,288		16,288
Prior	50,784		50,784
Revolving Loans Amortized Cost	32,141		32,141
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	285,084		285,084		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	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	9,067		9,067
2022	52,157		52,157
2021	51,736		51,736
2020	72,741		72,741
2019	16,111		16,111
Prior	50,205		50,205
Revolving Loans Amortized Cost	32,141		32,141
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	284,158		284,158
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		0
2022	107		107
2021	63		63
2020	0		0
2019	177		177
Prior	579		579
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	926		926
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	306,489		306,489		294,570
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Total	242	$ 128	437	$ 322
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	85,283		85,283		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	84,534		84,534
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	749		749
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	210,532		210,532		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	210,005		210,005
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	527		527
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	10,674		10,674		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	285,084		285,084
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	284,158		284,158
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	926		926
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	10,674		10,674
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	10,671		10,671
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		$ 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	Jun. 30, 2023	Dec. 31, 2022
Financial Assets:
Total	$ 604,313	$ 632,589
Derivative assets	26,450	27,141
Financial Liabilities:
Derivative liabilities	26,450	27,196
Recurring
Financial Assets:
U.S. Treasury notes and bonds	56,197	55,574
Mortgage-backed securities, residential	417,365	435,131
Obligations of states and political subdivisions	38,584	38,892
Corporate bonds and notes	19,871	21,970
SBA loan pools	72,296	81,022
Total	604,313	632,589
Equity investments, at fair value	2,348	2,246
Derivative assets	26,450	27,141
Financial Liabilities:
Derivative liabilities	26,450	27,196
Quoted Prices in Active Markets for Identical Assets (Level 1) | Recurring
Financial Assets:
U.S. Treasury notes and bonds	56,197	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	56,197	55,574
Equity investments, at fair value	2,348	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	417,365	435,131
Obligations of states and political subdivisions	38,584	38,892
Corporate bonds and notes	11,278	21,970
SBA loan pools	72,296	81,022
Total	539,523	577,015
Equity investments, at fair value	0	0
Derivative assets	26,450	27,141
Financial Liabilities:
Derivative liabilities	26,450	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	8,593	0
SBA loan pools	0	0
Total	8,593	0
Equity investments, at fair value	0	0
Derivative assets	0	0
Financial Liabilities:
Derivative liabilities	$ 0	$ 0

XML

FAIR VALUE - Narrative (Details)	6 Months Ended
	Jun. 30, 2023 investment	Dec. 31, 2022 USD ($)
Fair Value Disclosures [Abstract]
Number of corporate sub-debt issuances | investment	8
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		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance of recurring Level 3 assets at April 1, 2023	$ 8,666	$ 0	$ 0	$ 0
Included in other comprehensive income	(73)	0	(1,362)	0
Transfer into Level 3	0	0	9,955	0
Balance of recurring Level 3 assets at June 30, 2023	$ 8,593	$ 0	$ 8,593	$ 0

XML

FAIR VALUE - Quantitative Information (Details)	Jun. 30, 2023 USD ($)	Dec. 31, 2022 USD ($)
Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Assets, fair value disclosure		$ 0
Corporate Bonds And Notes
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Assets, fair value disclosure	$ 8,594,000
Commercial and industrial | Significant Unobservable Inputs (Level 3) | Non-recurring
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Assets, fair value disclosure	$ 414,000
Market discount rate | Corporate Bonds And Notes | Discounted cash flow | Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Financial asset, measurement input	0.1200
Market discount rate | Corporate Bonds And Notes | Discounted cash flow | Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Financial asset, measurement input	0.1200
Market discount rate | Corporate Bonds And Notes | Discounted cash flow | Weighted Average
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Financial asset, measurement input	0.1200
Market discount rate | Commercial and industrial | Discounted cash flow | Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Financial asset, measurement input	0.1000
Market discount rate | Commercial and industrial | Discounted cash flow | Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Financial asset, measurement input	0.5000
Market discount rate | Commercial and industrial | Discounted cash flow | Weighted Average
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Financial asset, measurement input	0.1457

XML

FAIR VALUE - Nonreccurring (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans individually analyzed	$ 5,937	$ 7,482
Non-recurring | Commercial and industrial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans individually analyzed	414
Total Gains (Losses)	0
Non-recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Commercial and industrial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans individually analyzed	0
Non-recurring | Significant Other Observable Inputs (Level 2) | Commercial and industrial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans individually analyzed	0
Non-recurring | Significant Unobservable Inputs (Level 3) | Commercial and industrial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans individually analyzed	$ 414

XML

FAIR VALUE - Carrying Amounts and Estimated Fair Values of Other Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Financial assets:
Cash and due from financial institutions	$ 25,499	$ 29,309
Interest-earning deposits in other financial institutions	28,727	26,560
Securities available for sale	604,313	632,589
Securities held to maturity	1,804	2,424
Loans, net and loans held for sale	1,873,734	1,809,789
Derivative assets	26,450	27,141
Deposits [Abstract]
FHLBNY overnight advances	50,760	95,810
Derivative Liabilities	26,450	27,196
Recurring
Financial assets:
Securities available for sale	604,313	632,589
Derivative assets	26,450	27,141
Deposits [Abstract]
Derivative Liabilities	26,450	27,196
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets:
Securities available for sale	56,197	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	539,523	577,015
Derivative assets	26,450	27,141
Deposits [Abstract]
Derivative Liabilities	26,450	27,196
Recurring | Significant Unobservable Inputs (Level 3)
Financial assets:
Securities available for sale	8,593	0
Derivative assets	0	0
Deposits [Abstract]
Derivative Liabilities	0	0
Recurring | Carrying Amount
Financial assets:
Cash and due from financial institutions	25,499	29,309
Interest-earning deposits in other financial institutions	28,727	26,560
Equity investments	2,841	2,830
Securities available for sale	604,313	632,589
Securities held to maturity	1,804	2,424
FHLBNY and FRBNY stock	6,328	8,197
Loans, net and loans held for sale	1,874,519	1,809,789
Accrued interest receivable	8,691	8,682
Derivative assets	26,450	27,141
Deposits [Abstract]
Demand, savings, and insured money market accounts	1,844,708	1,924,843
Time deposits	545,486	402,384
FHLBNY overnight advances	50,760	95,810
Accrued interest payable	2,828	864
Derivative Liabilities	26,450	27,196
Recurring | Estimated Fair Value
Financial assets:
Cash and due from financial institutions	25,499	29,309
Interest-earning deposits in other financial institutions	28,727	26,560
Equity investments	2,841	2,830
Securities available for sale	604,313	632,589
Securities held to maturity	1,778	2,402
Loans, net and loans held for sale	1,807,870	1,757,171
Accrued interest receivable	8,691	8,682
Derivative assets	26,450	27,141
Deposits [Abstract]
Demand, savings, and insured money market accounts	1,844,708	1,924,843
Time deposits	542,449	403,572
FHLBNY overnight advances	50,762	95,819
Accrued interest payable	2,828	864
Derivative Liabilities	26,450	27,196
Recurring | Estimated Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets:
Cash and due from financial institutions	25,499	29,309
Interest-earning deposits in other financial institutions	28,727	26,560
Equity investments	2,841	2,830
Securities available for sale	56,197	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	112	132
Derivative assets	0	0
Deposits [Abstract]
Demand, savings, and insured money market accounts	1,844,708	1,924,843
Time deposits	0	0
FHLBNY overnight advances	0	0
Accrued interest payable	79	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	539,523	577,015
Securities held to maturity	954	1,450
FHLBNY and FRBNY stock	0	0
Loans, net and loans held for sale	0	0
Accrued interest receivable	2,014	2,002
Derivative assets	26,450	27,141
Deposits [Abstract]
Demand, savings, and insured money market accounts	0	0
Time deposits	542,449	403,572
FHLBNY overnight advances	50,762	95,819
Accrued interest payable	2,749	800
Derivative Liabilities	26,450	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	8,593	0
Securities held to maturity	824	952
FHLBNY and FRBNY stock	0	0
Loans, net and loans held for sale	1,807,870	1,757,171
Accrued interest receivable	6,565	6,548
Derivative assets	0	0
Deposits [Abstract]
Demand, savings, and insured money market accounts	0	0
Time deposits	0	0
FHLBNY overnight advances	0	0
Accrued interest payable	0	0
Derivative Liabilities	$ 0	$ 0

XML

LEASES - Narrative (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Lessee, Lease, Description [Line Items]
Operating lease, weighted average remaining lease term (years)	8 years 2 months 26 days		8 years 2 months 26 days
Operating lease, weighted average discount rate	3.37%		3.37%
Operating lease, rent expense	$ 200,000		$ 500,000
Operating lease not yet commenced	$ 0		$ 0
Finance lease, weighted average remaining lease term (years)	9 years 9 months 7 days		9 years 9 months 7 days
Finance lease, weighted average discount rate	3.41%		3.41%
Finance lease not yet commenced	$ 0		$ 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				$ 25,000
2 Rush Street, Schenectady, New York | Director
Lessee, Lease, Description [Line Items]
Operating lease, rent expense	$ 27,000	$ 25,000	53,000	$ 51,000
Monthly rent and common area maintenance expense			$ 9,000

XML

LEASES - Leased Branch Properties (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Leases [Abstract]
Operating lease right-of-use asset	$ 6,449	$ 7,234
Less: accumulated amortization	(399)	(785)
Less: lease termination	0	0
Add: new lease agreement and modifications	0	0
Operating lease right-of-use assets	$ 6,050	$ 6,449

XML

LEASES - Maturities of Operating Lease Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Leases [Abstract]
2023	$ 498
2024	924
2025	841
2026	845
2027	854
2027 and thereafter	3,169
Total minimum lease payments	7,131
Less: amount representing interest	(903)
Present value of net minimum lease payments	$ 6,228	$ 6,620

XML

LEASES - Premises and Equipment (Details) - USD ($) $ in Thousands	Jun. 30, 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	(2,706)	(2,540)
Net book value	$ 2,866	$ 3,032

XML

LEASES - Future Minimum Lease Payment Obligations Under Finance Leases (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Leases [Abstract]
2023	$ 195
2024	391
2025	409
2026	425
2027	428
2027 and thereafter	1,988
Total minimum lease payments	3,836
Less: amount representing interest	(647)
Present value of net minimum lease payments	$ 3,189	$ 3,327

XML

GOODWILL AND INTANGIBLE ASSETS - Changes in Goodwill (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Goodwill [Roll Forward]
Beginning of year	$ 21,824	$ 21,824
Acquired goodwill	0	0
Ending balance	$ 21,824	$ 21,824

XML

GOODWILL AND INTANGIBLE ASSETS - Narrative (Details) - USD ($)	3 Months Ended		6 Months Ended		9 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Sep. 30, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of intangible assets	$ 0	$ 4,000	$ 0	$ 15,000
Goodwill impairment charges					$ 0

XML

COMMITMENTS AND CONTINGENCIES - Narrative (Details) - USD ($) $ in Thousands	1 Months Ended	6 Months Ended
	Apr. 30, 2020	Jun. 30, 2023		Mar. 31, 2023	Dec. 31, 2022		Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021	Feb. 04, 2020
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Allowance for credit losses		$ 20,172	[1]	$ 20,075	$ 19,659	[1]	$ 17,485	$ 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		1,041		1,048	0		$ 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				$ 0	$ 1,082			$ 0	$ 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.

XML

COMMITMENTS AND CONTINGENCIES - Contractual Amounts of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 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	$ 40,345	$ 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	62,386	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	3,015	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	343,039	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	$ 16,502	$ 17,211

XML

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Summary of Changes in Accumulated Other Comprehensive Income or Loss by Component (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Changes in accumulated other comprehensive income or loss by component, net of tax [Roll Forward]
Beginning balance	$ 177,342	$ 185,510	$ 166,388	$ 211,455
Other comprehensive income before reclassification	(5,282)	(17,747)	493	(48,834)
Amounts reclassified from accumulated other comprehensive income	9	7	18	19
Total other comprehensive income (loss)	(5,273)	(17,740)	511	(48,815)
Ending balance	177,426	174,690	177,426	174,690
Total
Changes in accumulated other comprehensive income or loss by component, net of tax [Roll Forward]
Beginning balance	(69,473)	(37,605)	(75,257)	(6,530)
Total other comprehensive income (loss)	(5,273)	(17,740)	511	(48,815)
Ending balance	(74,746)	(55,345)	(74,746)	(55,345)
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	(65,521)	(33,582)	(71,296)	(2,495)
Other comprehensive income before reclassification	(5,282)	(17,747)	493	(48,834)
Amounts reclassified from accumulated other comprehensive income	0	0	0	0
Total other comprehensive income (loss)	(5,282)	(17,747)	493	(48,834)
Ending balance	(70,803)	(51,329)	(70,803)	(51,329)
Defined Benefit and Other Benefit Plans
Changes in accumulated other comprehensive income or loss by component, net of tax [Roll Forward]
Beginning balance	(3,952)	(4,023)	(3,961)	(4,035)
Other comprehensive income before reclassification	0	0	0	0
Amounts reclassified from accumulated other comprehensive income	9	7	18	19
Total other comprehensive income (loss)	9	7	18	19
Ending balance	$ (3,943)	$ (4,016)	$ (3,943)	$ (4,016)

XML

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Details about Accumulated Other Comprehensive Income Components (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax effect	$ (1,613)	$ (2,338)	$ (3,600)	$ (4,288)
Total reclassification for the period, net of tax	6,280	8,024	13,550	14,891
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	7	18	19
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	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	11	24	25
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)	(4)	(6)	(6)
Total reclassification for the period, net of tax	$ 9	$ 7	$ 18	$ 19

XML

REVENUE FROM CONTRACTS WITH CUSTOMERS (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Disaggregation of Revenue [Line Items]
Net gains (losses) on sales of OREO	$ 14	$ 46	$ 14	$ 46
Changes in fair value of equity investments	(103)	(242)	(31)	(355)
Income from bank owned life insurance	11	11	21	22
Other non-interest income	5,447	5,319	10,870	10,982
Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Other non-interest income	143	249	335	462
Overdraft fees
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	777	727	1,491	1,400
Other
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	182	209	409	400
Interchange revenue from debit card transactions
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	1,194	1,206	2,327	2,336
WMG fee income
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	2,603	2,628	5,183	5,385
CFS fee and commission income
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	265	271	506	524
Net gains (losses) on sales of OREO
Disaggregation of Revenue [Line Items]
Net gains (losses) on sales of OREO	14	46	14	46
Net gains on sales of loans
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	18	25	23	99
Loan servicing fees
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	36	38	72	77
Income from bank-owned life insurance
Disaggregation of Revenue [Line Items]
Income from bank owned life insurance	11	11	21	22
Other
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	450	400	855	1,048
Net gains on sales of securities
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer			0	0
Core Banking | Operating Segments
Disaggregation of Revenue [Line Items]
Changes in fair value of equity investments	71	(236)	149	(350)
Other non-interest income	2,701	2,442	5,352	5,135
Core Banking | Overdraft fees | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	777	727	1,491	1,400
Core Banking | Other | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	182	209	409	400
Core Banking | Interchange revenue from debit card transactions | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	1,194	1,206	2,327	2,336
Core Banking | WMG fee income | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0	0	0
Core Banking | CFS fee and commission income | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0	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	14	46	14	46
Core Banking | Net gains on sales of loans | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	18	25	23	99
Core Banking | Loan servicing fees | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	36	38	72	77
Core Banking | Income from bank-owned life insurance | Operating Segments
Disaggregation of Revenue [Line Items]
Income from bank owned life insurance	11	11	21	22
Core Banking | Other | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	398	416	846	1,105
Core Banking | Net gains on sales of securities | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer			0	0
WMG | Operating Segments
Disaggregation of Revenue [Line Items]
Changes in fair value of equity investments	0	0	0	0
Other non-interest income	2,603	2,628	5,183	5,385
WMG | Overdraft fees | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0	0	0
WMG | Other | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0	0	0
WMG | Interchange revenue from debit card transactions | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0	0	0
WMG | WMG fee income | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	2,603	2,628	5,183	5,385
WMG | CFS fee and commission income | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0	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	0	0	0
WMG | Net gains on sales of loans | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	0	0	0	0
WMG | Loan servicing fees | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	0	0	0	0
WMG | Income from bank-owned life insurance | Operating Segments
Disaggregation of Revenue [Line Items]
Income from bank owned life insurance	0	0	0	0
WMG | Other | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	0	0	0	0
WMG | Net gains on sales of securities | 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	(174)	(6)	(180)	(5)
Other non-interest income	143	249	335	462
Holding Company, CFS, and CRM | Overdraft fees | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0	0	0
Holding Company, CFS, and CRM | Other | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0	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	0	0
Holding Company, CFS, and CRM | WMG fee income | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	0	0	0	0
Holding Company, CFS, and CRM | CFS fee and commission income | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	265	271	506	524
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	0	0	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	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	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	0	0
Holding Company, CFS, and CRM | Other | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	$ 52	$ (16)	9	(57)
Holding Company, CFS, and CRM | Net gains on sales of securities | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer			$ 0	$ 0

XML

COMPONENTS OF QUARTERLY AND YEAR TO DATE NET PERIODIC BENEFIT COSTS (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Qualified Pension Plan
Defined Benefit Plan, Net Periodic Benefit Cost (Credit) [Abstract]
Service cost, benefits earned during the period	$ 0	$ 0	$ 0	$ 0
Interest cost on projected benefit obligation	397	284	793	566
Expected return on plan assets	(594)	(708)	(1,190)	(1,421)
Amortization of unrecognized transition obligation	0	0	0	0
Amortization of unrecognized prior service cost	0	0	0	0
Amortization of unrecognized net loss	5	0	11	0
Net periodic pension benefit	(192)	(424)	(386)	(855)
Supplemental Pension Plan
Defined Benefit Plan, Net Periodic Benefit Cost (Credit) [Abstract]
Service cost, benefits earned during the period	0	0	0	0
Interest cost on projected benefit obligation	11	9	23	17
Expected return on plan assets	0	0	0	0
Amortization of unrecognized prior service cost	0	0	0	0
Amortization of unrecognized net loss	2	4	4	9
Net periodic pension benefit	13	13	27	26
Postretirement Plan, Medical and Life
Defined Benefit Plan, Net Periodic Benefit Cost (Credit) [Abstract]
Service cost, benefits earned during the period	0	0	0	0
Interest cost on projected benefit obligation	1	1	2	2
Expected return on plan assets	0	0	0	0
Amortization of unrecognized prior service cost	0	0	0	0
Amortization of unrecognized net loss	4	7	9	16
Net periodic pension benefit	$ 5	$ 8	$ 11	$ 18

XML

SEGMENT REPORTING - Narrative (Details)	6 Months Ended
	Jun. 30, 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		6 Months Ended
		Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Reportable segments and reconciliation to consolidated results [Abstract]
Interest and dividend income		$ 27,796	$ 18,538	$ 54,026	$ 35,996
Interest expense		9,201	897	15,484	1,678
Net interest income		18,595	17,641	38,542	34,318
Provision for credit losses	[1]	236	(1,744)	513	(2,889)
Net interest income after provision for credit losses		18,359	19,385	38,029	37,207
Other non-interest income		5,447	5,319	10,870	10,982
Legal accruals and settlements			0		0
Other non-interest expenses		15,913	14,342	31,749	29,010
Income (loss) before income tax expense (benefit)		7,893	10,362	17,150	19,179
Income tax expense (benefit)		1,613	2,338	3,600	4,288
Segment net income (loss)		6,280	8,024	13,550	14,891
Assets		2,674,673	2,449,911	2,674,673	2,449,911	$ 2,645,553
Operating Segments | Core Banking
Reportable segments and reconciliation to consolidated results [Abstract]
Interest and dividend income		27,757	18,531	53,960	35,982
Interest expense		9,201	897	15,484	1,678
Net interest income		18,556	17,634	38,476	34,304
Provision for credit losses		236	(1,744)	513	(2,889)
Net interest income after provision for credit losses		18,320	19,378	37,963	37,193
Other non-interest income		2,701	2,442	5,352	5,135
Legal accruals and settlements			0		0
Other non-interest expenses		13,894	12,226	27,590	24,757
Income (loss) before income tax expense (benefit)		7,127	9,594	15,725	17,571
Income tax expense (benefit)		1,476	2,167	3,307	3,933
Segment net income (loss)		5,651	7,427	12,418	13,638
Assets		2,667,404	2,441,375	2,667,404	2,441,375
Operating Segments | WMG
Reportable segments and reconciliation to consolidated results [Abstract]
Interest and dividend income		0	0	0	0
Interest expense		0	0	0	0
Net interest income		0	0	0	0
Provision for credit losses		0	0	0	0
Net interest income after provision for credit losses		0	0	0	0
Other non-interest income		2,603	2,628	5,183	5,385
Legal accruals and settlements			0		0
Other non-interest expenses		1,699	1,650	3,497	3,465
Income (loss) before income tax expense (benefit)		904	978	1,686	1,920
Income tax expense (benefit)		198	229	375	438
Segment net income (loss)		706	749	1,311	1,482
Assets		2,584	2,723	2,584	2,723
Intersegment Eliminations
Reportable segments and reconciliation to consolidated results [Abstract]
Interest and dividend income		39	7	66	14
Interest expense		0	0	0	0
Net interest income		39	7	66	14
Provision for credit losses		0	0	0	0
Net interest income after provision for credit losses		39	7	66	14
Other non-interest income		143	249	335	462
Legal accruals and settlements			0		0
Other non-interest expenses		320	466	662	788
Income (loss) before income tax expense (benefit)		(138)	(210)	(261)	(312)
Income tax expense (benefit)		(61)	(58)	(82)	(83)
Segment net income (loss)		(77)	(152)	(179)	(229)
Assets		$ 4,685	$ 5,813	$ 4,685	$ 5,813

[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		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 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	$ 300	$ 200	$ 600
Restricted Stock
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Total unrecognized compensation cost related to nonvested shares granted under the Plan	$ 1,600		$ 1,600
Weighted-average period for recognition (in years)			3 years 7 months 2 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		170,000

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STOCK COMPENSATION - Restricted Stock Activity For Officers And Employees (Details) - Restricted Stock - $ / shares	3 Months Ended	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2023
Shares
Nonvested, beginning balance (in shares)	54,328	55,402
Granted (in shares)	0	13,069
Vested (in shares)	0	(14,143)
Forfeited or cancelled (in shares)	(326)	(326)
Nonvested, ending balance (in shares)	54,002	54,002
Weighted–Average Grant Date Fair Value
Nonvested, beginning balance (in dollars per share)	$ 43.77	$ 44.57
Granted (in dollars per share)		45.89
Vested (in dollars per share)		45.38
Forfeitures or cancelled (in dollars per share)	43.73	43.73
Nonvested, ending balance (in dollars per share)	$ 44.68	$ 44.68

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SUBSEQUENT EVENTS (Details)	Jul. 13, 2023 USD ($)
Subsequent Event
Subsequent Event [Line Items]
Shares reserved for future issuance	$ 75,000,000