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 September 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 November 1, 2023 was 4,722,636.

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	46
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
CDARS	Certificate of Deposit Account Registry Service
CDO	Collateralized Debt Obligation
CECL	Current expected credit loss
CFS	CFS Group, Inc.
Corporation	Chemung Financial Corporation
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
OREO	Other real estate owned
PD	Probability of default

3

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.
Employee Retention Tax Credit	The Employee Retention Tax Credit is a refundable payroll tax credit available to eligible employers as defined by the CARES Act of 2020, and amended by the Consolidated Appropriations Act of 2021 and American Rescue Plan Act of 2021.

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.
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.
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.

5

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)	September 30, 2023		December 31, 2022
ASSETS
Cash and due from financial institutions	$	52,563	$	29,309
Interest-earning deposits in other financial institutions	23,017		26,560
Total cash and cash equivalents	75,580		55,869
Equity investments, at estimated fair value	2,811		2,830
Securities available for sale, at estimated fair value (amortized cost of $683,837, net of allowance for credit losses of $0 at September 30, 2023; and amortized cost of $729,198, net of allowance for credit losses on securities of $0 at December 31, 2022)	569,004		632,589
Securities held to maturity, estimated fair value of $1,779 at September 30, 2023 and $2,402 at December 31, 2022 (net of allowance for credit losses of $0 at September 30, 2023 and December 31, 2022, respectively)	1,804		2,424
FHLBNY and FRBNY Stock, at cost	4,053		8,197
Loans, net of deferred loan fees	1,930,688		1,829,448
Allowance for credit losses (1)	(20,252)		(19,659)
Loans, net	1,910,436		1,809,789
Premises and equipment, net	15,036		16,113
Operating lease right-of-use assets	5,850		6,449
Goodwill	21,824		21,824
Bank-owned life insurance	2,903		2,871
Interest rate swap assets	32,923		27,141
Accrued interest receivable and other assets	65,610		59,457
Total assets	$	2,707,834	$	2,645,553
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing	$	683,348	$	733,329
Interest-bearing	1,790,151		1,593,898
Total deposits	2,473,499		2,327,227
FHLBNY overnight advances	—		95,810
Long term finance lease obligation	3,120		3,327
Operating lease liabilities	6,028		6,620
Dividends payable	1,463		1,455
Interest rate swap liabilities	32,923		27,196
Accrued interest payable and other liabilities	20,737		17,530
Total liabilities	2,537,770		2,479,165
Shareholders' equity:
Common stock, $0.01 par value per share, 10,000,000 shares authorized;   5,310,076 issued at September 30, 2023 and December 31, 2022	53		53
Additional paid-in capital	47,974		47,331
Retained earnings	227,596		211,859
Treasury stock, at cost; 589,004 shares at September 30, 2023 and 615,448   shares at December 31, 2022	(16,880)		(17,598)
Accumulated other comprehensive loss	(88,679)		(75,257)
Total shareholders' equity	170,064		166,388
Total liabilities and shareholders' equity	$	2,707,834	$	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   September 30,				Nine Months Ended   September 30,
(in thousands, except per share data)	2023		2022		2023		2022
Interest and dividend income:
Loans, including fees	$	25,033	$	17,670	$	71,113	$	47,541
Taxable securities	3,537		2,982		10,750		8,533
Tax exempt securities	258		267		778		805
Interest-earning deposits	187		80		400		116
Total interest and dividend income	29,015		20,999		83,041		56,995
Interest expense:
Deposits	10,721		1,805		24,577		3,322
Borrowed funds	277		204		1,905		365
Total interest expense	10,998		2,009		26,482		3,687
Net interest income	18,017		18,990		56,559		53,308
Provision (credit) for credit losses (1)	449		1,255		962		(1,634)
Net interest income after provision for credit losses	17,568		17,735		55,597		54,942
Non-interest income:
WMG fee income	2,533		2,403		7,716		7,788
Service charges on deposit accounts	1,018		989		2,918		2,789
Interchange revenue from debit card transactions	1,141		1,126		3,468		3,462
Changes in fair value of equity investments	(68)		(93)		(99)		(448)
Net gains (losses) on sales of loans held for sale	67		7		90		106
Net gains on sales of other real estate owned	—		22		14		68
Income from bank-owned life insurance	11		12		32		34
Other	3,106		570		4,539		2,219
Total non-interest income	7,808		5,036		18,678		16,018
Non-interest expenses:
Salaries and wages	6,542		6,550		20,029		18,829
Pension and other employee benefits	1,979		2,024		5,467		5,679
Other components of net periodic pension and postretirement benefits	(174)		(413)		(522)		(1,224)
Net occupancy	1,337		1,269		4,242		4,065
Furniture and equipment	353		493		1,232		1,340
Data processing	2,480		2,087		7,334		6,742
Professional services	554		442		1,596		1,627
Amortization of intangible assets	—		—		—		15
Marketing and advertising	218		266		720		726
Other real estate owned	10		12		49		(17)
FDIC insurance	525		389		1,608		987
Loan expense	249		(64)		789		327
Other	1,595		1,522		4,873		4,491
Total non-interest expenses	15,668		14,577		47,417		43,587
Income before income tax expense	9,708		8,194		26,858		27,373
Income tax expense	2,060		1,741		5,660		6,029
Net income	$	7,648	$	6,453	$	21,198	$	21,344
Weighted average shares outstanding	4,736		4,692		4,729		4,691
Basic and diluted earnings per share	$	1.61	$	1.37	$	4.48	$	4.55

(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   September 30,				Nine Months Ended   September 30,
(in thousands)	2023		2022		2023		2022
Net income	$	7,648	$	6,453	$	21,198	$	21,344
Other comprehensive loss
Unrealized holding losses on securities available for sale	(18,893)		(33,266)		(18,224)		(99,431)
Tax effect	(4,952)		(8,719)		(4,776)		(26,050)
Net of tax amount	(13,941)		(24,547)		(13,448)		(73,381)
Change in funded status of defined benefit pension plan and other benefit plans:
Reclassification adjustment for amortization of net actuarial loss	12		16		36		41
Total before tax effect	12		16		36		41
Tax effect	4		5		10		11
Net of tax amount	8		11		26		30
Total other comprehensive loss	(13,933)		(24,536)		(13,422)		(73,351)
Comprehensive income (loss)	$	(6,285)	$	(18,083)	$	7,776	$	(52,007)

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 June 30, 2022	$	53	$	47,196	$	200,870	$	(18,084)	$	(55,345)	$	174,690
Net income	—		—		6,453		—		—		6,453
Other comprehensive loss	—		—		—		—		(24,536)		(24,536)
Restricted stock awards	—		153		—		—		—		153
Restricted stock units for directors' deferred compensation plan	—		95		—		—		—		95
Cash dividends declared ($0.31 per share)	—		—		(1,449)		—		—		(1,449)
Sale of 2,540 shares of treasury stock (a)	—		41		—		71		—		112
Forfeiture of 48 shares of restricted stock awards	—		2		—		(2)		—		—
Balances at September 30, 2022	$	53	$	47,487	$	205,874	$	(18,015)	$	(79,881)	$	155,518
Balances at June 30, 2023	$	53	$	47,740	$	221,412	$	(17,033)	$	(74,746)	$	177,426
Net income	—		—		7,648		—		—		7,648
Other comprehensive loss	—		—		—		—		(13,933)		(13,933)
Restricted stock awards	—		289		—		—		—		289
Restricted stock units for directors' deferred compensation plan	—		5		—		—		—		5
Distribution of 2,981 shares of treasury stock grants for employee restricted stock awards	—		(86)		—		86		—		—
Cash dividends declared ($0.31 per share)	—		—		(1,464)		—		—		(1,464)
Sale of 2,359 shares of treasury stock (a)	—		26		—		67		—		93
Balances at September 30, 2023	$	53	$	47,974	$	227,596	$	(16,880)	$	(88,679)	$	170,064

(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	—		—		21,344		—		—		21,344
Other comprehensive loss	—		—		—		—		(73,351)		(73,351)
Restricted stock awards	—		486		—		—		—		486
Restricted stock units for directors' deferred compensation plan	—		195		—		—		—		195
Distribution of 3,985 shares of treasury stock grants for employee restricted stock awards	—		(112)		—		112		—		—
Cash dividends declared ($0.93 per share)	—		—		(4,347)		—		—		(4,347)
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 7,222 shares of treasury stock (a)	—		124		—		204		—		328
Forfeiture of 729 shares of restricted stock awards	—		32		—		(34)		—		(2)
Balances at September 30, 2022	$	53	$	47,487	$	205,874	$	(18,015)	$	(79,881)	$	155,518
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	—		—		21,198		—		—		21,198
Other comprehensive loss	—		—		—		—		(13,422)		(13,422)
Restricted stock awards	—		837		—		—		—		837
Restricted stock units for directors' deferred compensation plan	—		15		—		—		—		15
Distribution of 7,558 shares of treasury stock grants for employee restricted stock awards	—		(217)		—		217		—		—
Cash dividends declared ($0.93 per share)	—		—		(4,385)		—		—		(4,385)
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 12,868 shares of treasury stock (a)	—		144		—		368		—		512
Forfeiture of 326 shares of restricted stock awards	—		11		—		(12)		—		(1)
Balances at September 30, 2023	$	53	$	47,974	$	227,596	$	(16,880)	$	(88,679)	$	170,064

(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)	Nine Months Ended   September 30,
CASH FLOWS FROM OPERATING ACTIVITIES:	2023		2022
Net income	$	21,198	$	21,344
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of right-of-use assets	599		588
Amortization of intangible assets	—		15
Provision (credit) for credit losses (1)	962		(1,634)
Loss on disposal of fixed assets	3		20
Depreciation and amortization of fixed assets	1,533		1,691
Amortization of premiums on securities, net	1,880		3,143
Gain on sales of loans held for sale, net	(90)		(106)
Proceeds from sales of loans held for sale	3,064		342
Loans originated and held for sale	(2,974)		160
Net gains on sale of other real estate owned	(14)		(68)
Fair value adjustment on other real estate owned	(3)		—
Net change in fair value of equity investments	99		448
Proceeds from sales of trading assets	39		36
Purchase of equity investments	(119)		(197)
Increase in other assets and accrued interest receivable	(1,350)		(19,518)
Increase in accrued interest payable	3,225		133
Expense related to restricted stock units for directors' deferred compensation plan	15		195
Expense related to employee restricted stock awards	837		486
Payments on operating leases	(592)		(568)
Net gain on interest rate swaps	(55)		(225)
(Decrease) increase in other liabilities	(964)		26,434
Income from bank owned life insurance	(32)		(34)
Net cash provided by operating activities	27,261		32,685
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities, calls, and principal paydowns on securities available for sale	46,687		72,611
Proceeds from maturities and principal collected on securities held to maturity	619		1,306
Purchases of securities available for sale	(3,207)		(23,502)
Purchases of securities held to maturity	—		(735)
Purchase of FHLBNY and FRBNY stock	(42,878)		(3,175)
Redemption of FHLBNY and FRBNY stock	47,022		3,521
Proceeds from sales of fixed assets	—		125
Purchases of premises and equipment	(459)		(448)
Proceeds from sale of other real estate owned	154		279
Net increase in loans	(101,780)		(225,558)
Net cash used in investing activities	(53,842)		(175,576)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in demand deposits, interest-bearing demand accounts, savings accounts, and insured money market accounts	(42,532)		23,600
Increase in time deposits	188,804		153,507
Net change in FHLB overnight advances	(95,810)		(13,860)
Payments made on finance leases	(207)		(200)
Purchase of treasury stock	(98)		(695)
Sale of treasury stock	512		328
Cash dividends paid	(4,377)		(4,347)
Net cash provided by financing activities	46,292		158,333
Net increase in cash and cash equivalents	19,711		15,442
Cash and cash equivalents, beginning of period	55,869		26,981
Cash and cash equivalents, end of period	$	75,580	$	42,423

(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.

12

CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

(UNAUDITED)

(in thousands)	Nine Months Ended   September 30,
Supplemental disclosure of cash flow information:	2023		2022
Cash paid for:
Interest	$	23,257	$	3,554
Income taxes	6,038		4,305
Supplemental disclosure of non-cash activity:
Transfer of loans to other real estate owned	171		292
Dividends declared, not yet paid	1,463		1,450

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, and $0.4 million reflected additional allowance related to the loan portfolio. 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 credit losses 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 was required to apply the loan and refinancing 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 the 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

Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative

ASU 2023-06, Disclosure Improvements, was issued in October 2023 and modifies the disclosure or presentation requirements of a variety of Topics in the Accounting Standards Codification, in response to SEC Release No. 33-10532, Disclosure Update and Simplifications, issued on August 17, 2018. The SEC identified several disclosure requirements that overlap with U.S. GAAP, but require incremental information to comply with disclosure standards in Regulations S-X and Regulation S-K. ASU 2023-06 codifies specific amendments to align the codification with SEC regulations. The effective date for each amendment is that date on which each disclosure requirement is removed from Regulation S-K and Regulation S-X. The Corporation anticipates that certain amendments will pertain to the Corporation's financial disclosures or presentation, but cannot determine with certainty which amendments are applicable until removal from Regulation S-K or Regulation S-X.

Use of Analogous Accounting Standards

Under U.S. GAAP, there is no specific guidance related to government assistance received by a for-profit entity that is not in the form of a loan, income tax credit, or revenue from a contract with a customer. Therefore, the Corporation must rely upon analogous accounting standards to determine appropriate treatment when such circumstances arise. The Corporation accounted for the recognition of the Employee Retention Tax Credit (ERTC) using ASC 958-605, Revenue Recognition for Not-for-Profit entities. ASC 958-10-15-1 specifies that certain Subtopics within ASC 958-605 also apply to business entities.

The Corporation considers the recognition of the ERTC to be analogous to the stipulations for "conditional contributions" under ASC 958-605-20. Conditional contributions have at least one barrier needing to be overcome before the recipient is entitled to the assets transferred or promised; there must be a right-of-return to the contributor; and barriers to the condition should be measurable. The Corporation recognized the gross amount of the ERTC through non-interest income during the period in which the barrier was overcome, identified as the period during which amended tax returns were filed. The Corporation incurred and recognized additional income tax expense during the period in relation to its amended tax returns.

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 4,736 and 4,692 weighted average shares outstanding for the three month periods ended September 30, 2023 and 2022, respectively. Earnings per share were computed by dividing net income by 4,729 and 4,691 weighted average shares outstanding for the nine month periods ended September 30, 2023 and 2022, respectively. There were no common stock equivalents during the three and nine month periods ended September 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):

	September 30, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
U.S. Treasury notes and bonds	$	61,033	$	—	$	6,033	$	—	$	55,000
Mortgage-backed securities, residential	486,189		—		97,158		—		389,031
Obligations of states and political subdivisions	39,535		—		3,382		—		36,153
Corporate bonds and notes	25,750		—		5,405		—		20,345
SBA loan pools	71,330		96		2,951		—		68,475
Total	$	683,837	$	96	$	114,929	$	—	$	569,004

	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):

	September 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		—		25		—		955
Total	$	1,804	$	—	$	25	$	—	$	1,779

	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):

	September 30, 2023
	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	5,480	$	5,243	$	529	$	523
After one, but within five years	101,840		91,028		635		616
After five, but within ten years	18,528		14,821		640		640
After ten years	470		406		—		—
	126,318		111,498		1,804		1,779
Mortgage-backed securities, residential	486,189		389,031		—		—
SBA loan pools	71,330		68,475		—		—
Total	$	683,837	$	569,004	$	1,804	$	1,779

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

The following tables summarize the investment securities available for sale with unrealized losses at September 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
September 30, 2023	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury notes and bonds	$	981	$	14	$	54,019	$	6,019	$	55,000	$	6,033
Mortgage-backed securities, residential	—		—		389,031		97,158		389,031		97,158
Obligations of states and political subdivisions	16,794		1,460		19,359		1,922		36,153		3,382
Corporate bonds and notes	7,269		2,732		13,076		2,673		20,345		5,405
SBA loan pools	6,474		15		54,094		2,936		60,568		2,951
Total temporarily impaired securities	$	31,518	$	4,221	$	529,579	$	110,708	$	561,097	$	114,929

	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 September 30, 2023.

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

At September 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 September 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 September 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):

	September 30, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	254,215	$	252,044
Agricultural	269		249
Commercial mortgages:
Construction	140,480		108,243
Commercial mortgages, other	946,053		888,670
Residential mortgages	281,361		285,672
Consumer loans:
Home equity lines and loans	87,078		81,401
Indirect consumer loans	211,046		202,124
Direct consumer loans	10,186		11,045
Total loans, net of deferred loan fees and costs	1,930,688		1,829,448
Allowance for credit losses	(20,252)		(19,659)
Loans, net	$	1,910,436	$	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 $7.2 million at September 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 September 30, 2023 (in thousands):

	Three Months Ended September 30, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, July 1, 2023	$	4,121	$	10,994	$	1,905	$	3,152	$	20,172
Charge-offs	(81)		—		—		(350)		(431)
Recoveries	4		1		—		70		75
Net recoveries (charge-offs)	(77)		1		—		(280)		(356)
Provision (1)	102		30		(37)		341		436
Ending balance, September 30, 2023	$	4,146	$	11,025	$	1,868	$	3,213	$	20,252

(1)Additional provision related to off-balance sheet exposure was $(13)thousand for the three months ended September 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.

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

	Three Months Ended September 30, 2022
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, July 1, 2022	$	3,564	$	10,314	$	1,714	$	1,893	$	17,485
Charge-offs	—		—		—		(277)		(277)
Recoveries	6		1		40		121		168
Net recoveries (charge-offs)	6		1		40		(156)		(109)
Provision	(55)		671		42		597		1,255
Ending balance, September 30, 2022	$	3,515	$	10,986	$	1,796	$	2,334	$	18,631

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

	Nine Months Ended September 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	(281)		—		—		(785)		(1,066)
Recoveries	13		1		—		281		295
Net recoveries (charge-offs)	(268)		1		—		(504)		(771)
Provision (1)	132		143		39		676		990
Ending balance, September 30, 2023	$	4,146	$	11,025	$	1,868	$	3,213	$	20,252

(1)Additional provision related to off-balance sheet exposure was $(28) thousand for the nine months ended September 30, 2023.

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

	Nine Months Ended September 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)		—		(599)		(1,306)
Recoveries	37		3		40		466		546
Net recoveries (charge-offs)	17		(684)		40		(133)		(760)
Provision	(93)		(1,886)		(47)		392		(1,634)
Ending balance, September 30, 2022	$	3,515	$	10,986	$	1,796	$	2,334	$	18,631

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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 September 30, 2023 and 2022:

	For the Three Months Ended
Allowance for credit losses on unfunded commitments	September 30, 2023		September 30, 2022
Beginning balance	$	1,041	$	—
Impact of ASC 326 adoption	—		—
Provision for unfunded commitments	13		—
Ending balance	$	1,054	$	—

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

	For the Three Months Ended
Provision for credit losses	September 30, 2023		September 30, 2022
Provision for credit losses on loans	$	436	$	1,255
Provision for unfunded commitments	13		—
Total provision (credit) for credit losses	$	449	$	1,255

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

	For the Nine Months Ended
Allowance for credit losses on unfunded commitments	September 30, 2023		September 30, 2022
Beginning balance	$	—	$	—
Impact of ASC 326 adoption	1,082		—
Provision for unfunded commitments	(28)		—
Ending balance	$	1,054	$	—

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

	For the Nine Months Ended
Provision for credit losses	September 30, 2023		September 30, 2022
Provision for credit losses on loans	$	990	$	(1,634)
Provision for unfunded commitments	(28)		—
Total provision (credit) for credit losses	$	962	$	(1,634)

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

	September 30, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually analyzed	$	1,089	$	30	$	—	$	—	$	1,119
Collectively analyzed	3,057		10,995		1,868		3,213		19,133
Total ending allowance balance	$	4,146	$	11,025	$	1,868	$	3,213	$	20,252

	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

	September 30, 2023
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually analyzed	$	1,174	$	3,825	$	—	$	—	$	4,999
Loans collectively analyzed	253,310		1,082,708		281,361		308,310		1,925,689
Total ending loans balance	$	254,484	$	1,086,533	$	281,361	$	308,310	$	1,930,688

	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 nine month periods ended September 30, 2023:

	Three Months Ended September 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	$	—	$	—	$	875	$	—	$	—	$	875	0.09	%
Home equity lines and loans	—		—		117		—		—		117		0.13	%
Total	$	—	$	—	$	992	$	—	$	—	$	992

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

	Nine Months Ended September 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	$	—	$	—	$	1,150	$	1,920	$	—	$	3,070	0.32	%
Home equity lines and loans	—		—		117		—		—		117		0.13	%
Total	$	—	$	—	$	1,267	$	1,920	$	—	$	3,187

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

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

	Three Months Ended September 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)	Weighted-average payment delay (in months)
Commercial mortgages, other	$—	—%	6	—
Home equity lines and loans	—	—%	180	—

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

	Nine Months Ended September 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)	Weighted-average payment delay (in months)
Commercial mortgages, other	$—	—%	19	4
Home equity lines and loans	—	—%	180	—

There were no loans modified to borrowers experiencing financial difficulty during the prior twelve months that experienced payment default during the three and nine month periods ended September 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. This differs from the definition of loans considered to be impaired at December 31, 2022. 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 September 30, 2023, the amortized cost basis of individually analyzed loans amounted to $5.0 million, of which $4.1 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 September 30, 2023 (in thousands):

	September 30, 2023
	Amortized Cost Basis		Related Allowance
Commercial and agricultural:
Commercial and industrial (1) (3)	$	286	$	211
Commercial mortgages:
Commercial mortgages, other (1) (2)	3,847		30
Total	$	4,133	$	241

(1) Secured by commercial real estate

(2) Secured by residential real estate

(3) Secured by business assets

25

As of January 1, 2023, 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 as of December 31, 2022. 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. 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

26

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 nine month periods ended September 30, 2023 and 2022 (in thousands):

	Three Months Ended   September 30, 2023				Three Months Ended   September 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	$	163	$	—	$	585	$	—
Agricultural	—		—		—		—
Commercial mortgages:
Construction	—		—		55		—
Commercial mortgages, other	3,863		3		4,150		7
Residential mortgages	—		—		846		9
Consumer loans:
Home equity lines & loans	51		—		149		—
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,268		4		1,643		2
Agricultural	14		—		—		—
Commercial mortgages:
Commercial mortgages, other	31		—		42		—
Consumer loans:
Home equity lines and loans	78		—		134		—
Total	$	5,468	$	7	$	7,604	$	18

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

	Nine Months Ended   September 30, 2023				Nine Months Ended   September 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	$	520	$	—	$	761	$	—
Agricultural	—		—		—		—
Commercial mortgages:
Construction	2		—		88		—
Commercial mortgages, other	4,052		12		4,171		14
Residential mortgages	359		—		890		19
Consumer loans:
Home equity lines & loans	123		—		157		—
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,168		13		1,545		5
Agricultural	7		—		—		—
Commercial mortgages:
Commercial mortgages, other	34		—		1,563		—
Consumer loans:
Home equity lines and loans	42		—		139		—
Total	$	6,307	$	25	$	9,314	$	38

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

27

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 September 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
	September 30, 2023		September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	22	$	1,004	1,946		$	—	$	1
Agricultural	—		28		—		—		—
Commercial mortgages:
Construction	—		—		5		—		—
Commercial mortgages, other	3,795		3,824		3,928		—		—
Residential mortgages	776		776		986		—		—
Consumer loans:
Home equity lines and loans	565		565		760		—		—
Indirect consumer loans	621		621		540		—		—
Direct consumer loans	8		8		13		—		—
Total	$	5,787	$	6,826	$	8,178	$	—	$	1

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

	September 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	$	195	$	16	$	—	$	211	$	254,004	$	254,215
Agricultural	—		—		—		—		269		269
Commercial mortgages:
Construction	2,206		—		—		2,206		138,274		140,480
Commercial mortgages, other	1,073		4		261		1,338		944,715		946,053
Residential mortgages	1,217		63		255		1,535		279,826		281,361
Consumer loans:
Home equity lines and loans	151		49		421		621		86,457		87,078
Indirect consumer loans	1,313		312		368		1,993		209,053		211,046
Direct consumer loans	9		—		6		15		10,171		10,186
Total	$	6,164	$	444	$	1,311	$	7,919	$	1,922,769	$	1,930,688

28

	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.

29

Based on the analyses performed as of September 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	$	26,871	$	39,555	$	18,180	$	11,240	$	34,620	$	8,896	$	98,625	$	—	$	237,987
Special mention	191		—		195		—		—		442		4,142		8,765		13,735
Substandard	—		28		992		122		25		318		—		169		1,654
Doubtful	—		—		—		—		—		815		—		24		839
Total	27,062		39,583		19,367		11,362		34,645		10,471		102,767		8,958		254,215
Gross charge-offs	—		—		—		—		9		272		—		—		281
Agricultural
Pass	—		16		157		—		—		—		68		—		241
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		28		28
Doubtful	—		—		—		—		—		—		—		—		—
Total	—		16		157		—		—		—		68		28		269
Gross charge-offs	—		—		—		—		—		—		—		—		—
Construction
Pass	11,309		2,898		—		—		104		1,187		122,838		—		138,336
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		2,144		—		—		—		2,144
Doubtful	—		—		—		—		—		—		—		—		—
Total	11,309		2,898		—		—		2,248		1,187		122,838		—		140,480
Gross charge-offs	—		—		—		—		—		—		—		—		—
Commercial mortgages
Pass	76,617		213,196		124,125		94,752		39,742		170,439		199,582		—		918,453
Special mention	—		2,543		8,286		1,016		—		3,562		—		5,516		20,923
Substandard	273		1,133		350		—		—		4,794		97		—		6,647
Doubtful	—		—		—		—		—		30		—		—		30
Total	76,890		216,872		132,761		95,768		39,742		178,825		199,679		5,516		946,053
Gross charge-offs	—		—		—		—		—		—		—		—		—
Residential mortgages
Not rated	11,858		51,718		50,393		70,699		15,602		47,380		32,935		—		280,585
Substandard	—		107		63		—		173		433		—		—		776
Total	11,858		51,825		50,456		70,699		15,775		47,813		32,935		—		281,361
Gross charge-offs	—		—		—		—		—		—		—		—		—
Home equity lines and loans
Not rated	11,622		17,562		5,948		3,242		2,949		11,183		34,007		—		86,513
Substandard	—		76		—		—		—		290		199		—		565
Total	11,622		17,638		5,948		3,242		2,949		11,473		34,206		—		87,078
Gross charge-offs	—		—		—		—		—		—		12		—		12
Indirect consumer
Not rated	58,871		105,980		25,749		10,666		4,903		4,256		—		—		210,425
Substandard	105		191		128		40		44		113		—		—		621
Total	58,976		106,171		25,877		10,706		4,947		4,369		—		—		211,046
Gross charge-offs	88		276		176		94		20		45		—		—		699
Direct consumer
Not rated	2,599		3,125		945		390		108		379		2,631		—		10,177
Substandard	—		6		—		3		—		—		—		—		9
Total	2,599		3,131		945		393		108		379		2,631		—		10,186
Gross charge-offs	—		8		8		4		—		54		—		—		74
Total loans	$	200,316	$	438,134	$	235,511	$	192,170	$	100,414	$	254,517	$	495,124	$	14,502	$	1,930,688
Total gross charge-offs	$	88	$	284	$	184	$	98	$	29	$	371	$	12	$	—	$	1,066

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 September 30, 2023 (in thousands):

	Consumer Loans
September 30, 2023	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	280,585	$	86,513	$	210,425	$	10,178
Non-Performing	776		565		621		8
Total	$	281,361	$	87,078	$	211,046	$	10,186

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 September 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	$	55,000	$	55,000	$	—	$	—
Mortgage-backed securities, residential	389,031		—		389,031		—
Obligations of states and political subdivisions	36,153		—		36,153		—
Corporate bonds and notes	20,345		—		12,885		7,460
SBA loan pools	68,475		—		68,475		—
Total available for sale securities	$	569,004	$	55,000	$	506,544	$	7,460
Equity investments, at fair value	$	2,318	$	2,318	$	—	$	—
Derivative assets	$	32,923	$	—	$	32,923	$	—
Financial Liabilities:
Derivative liabilities	$	32,923	$	—	$	32,923	$	—

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

Corporate Bonds:	For the Three Months Ended
Level 3 Financial Assets	September 30, 2023		September 30, 2022
Balance of recurring Level 3 assets at July 1, 2023	$	8,593	$	—
Total gains and losses for the period:	—		—
Included in other comprehensive income	190		—
Transfers into Level 3	—		—
Transfers out of Level 3	(1,323)
Balance of recurring Level 3 assets at September 30, 2023	$	7,460	$	—

Corporate Bonds:	For the Nine Months Ended
Level 3 Financial Assets	September 30, 2023		September 30, 2022
Balance of recurring Level 3 assets at January 1, 2023	$	—	$	—
Total gains and losses for the period:	—		—
Included in other comprehensive income	(1,172)		—
Transfers into Level 3	9,955		—
Transfers out of Level 3	(1,323)
Balance of recurring Level 3 assets at September 30, 2023	$	7,460	$	—

September 30, 2023	Fair Value		Valuation Techniques	Unobservable Input	Range [Weighted Average] at September 30, 2023
Corporate bonds and notes	$	7,460	Discounted cash flow	Market discount rate	12.00% -12.00% [12.00%]

There were two corporate bonds with a fair value of $1.3 million which were transferred out of Level 3 and into Level 2 during the three and nine month period ended September 30, 2023 based on the availability of observable market data for these investments.

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 at September 30, 2023 and December 31, 2022 were considered to be immaterial to the presentation of the consolidated financial statements.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

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

	September 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	$	52,563	$	52,563	$	—	$	—	$	52,563
Interest-earning deposits in other financial institutions	23,017		23,017		—		—		23,017
Equity investments	2,811		2,811		—		—		2,811
Securities available for sale	569,004		55,000		506,544		7,460		569,004
Securities held to maturity	1,804		—		955		824		1,779
FHLBNY and FRBNY stock	4,053		—		—		—		N/A
Loans, net and loans held for sale	1,910,436		—		—		1,830,014		1,830,014
Accrued interest receivable	9,422		233		1,957		7,232		9,422
Derivative Assets	32,923		—		32,923		—		32,923
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,882,311	$	1,882,311	$	—	$	—	$	1,882,311
Time deposits	591,188		—		593,637		—		593,637
FHLBNY overnight advances	—		—		—		—		—
Accrued interest payable	4,089		121		3,968		—		4,089
Derivative Liabilities	32,923		—		32,923		—		32,923

(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		66		798		—		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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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 September 30, 2023, the weighted average remaining lease term was 8.03 years with a weighted average discount rate of 3.38%. Rent expense was $0.2 million for the three months ended September 30, 2023. Rent expense was $0.7 million for the nine months ended September 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 September 30, 2023 and December 31, 2022 consist of the following (in thousands):

	September 30, 2023		December 31, 2022
Operating lease right-of-use asset	$	6,449	$	7,234
Less: accumulated amortization	(599)		(785)
Less: lease termination	—		—
Add: new lease agreement and modifications	—		—
Operating lease right-of-use-assets, net	$	5,850	$	6,449

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

Year	Amount
2023	$	249
2024	924
2025	841
2026	845
2027	854
2028 and thereafter	3,168
Total minimum lease payments	6,881
Less: amount representing interest	(853)
Present value of net minimum lease payments	$	6,028

The Corporation had one operating lease that was signed on October 19, 2023, 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 September 30, 2023, the weighted average remaining lease term was 9.55 years with a weighted average discount rate of 3.41%. The Corporation has included these leases in premises and equipment as of September 30, 2023 and December 31, 2022 as follows (in thousands):

	September 30, 2023		December 31, 2022
Buildings	$	5,572	$	5,572
Less: accumulated depreciation	(2,789)		(2,540)
Net book value	$	2,783	$	3,032

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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 September 30, 2023 (in thousands):

Year	Amount
2023	$	98
2024	391
2025	409
2026	425
2027	428
2028 and thereafter	1,987
Total minimum lease payments	3,738
Less: amount representing interest	(618)
Present value of net minimum lease payments	$	3,120

As of September 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, 2029 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 nine month period ended September 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 $28 thousand and $25 thousand for the three month periods ended September 30, 2023 and 2022, respectively. Rent and CAM related expenses paid to this Board member totaled $81 thousand and $76 thousand for the nine month periods ended September 30, 2023 and 2022, respectively.

NOTE 7        GOODWILL AND INTANGIBLE ASSETS

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

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

The Corporation had no aggregate amortization expense for the three month periods ended September 30, 2023 and 2022. The Corporation had no aggregate amortization expense for the nine month period ended September 30, 2023, and $15 thousand for the nine month period ended September 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.

NOTE 8        COMMITMENTS AND CONTINGENCIES

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

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In conjunction with the Corporation's adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), an allowance for credit losses on unfunded commitments was established as of January 1, 2023, to comply with the accounting standard requirements. As of September 30, 2023, the allowance for credit losses on unfunded commitments was $1.1 million.

The following table lists the contractual amounts of financial instruments with off-balance sheet risk at September 30, 2023 and December 31, 2022 (in thousands):

	September 30, 2023				December 31, 2022
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	32,776	$	84,198	$	44,481	$	75,028
Unused lines of credit	3,475		338,636		2,887		326,188
Standby letters of credit	—		17,987		—		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 September 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 July 1, 2023	$	(70,803)	$	(3,943)	$	(74,746)
Other comprehensive income before reclassification	(13,941)		—		(13,941)
Amounts reclassified from accumulated other comprehensive income	—		8		8
Net current period other comprehensive income (loss)	(13,941)		8		(13,933)
Balance at September 30, 2023	$	(84,744)	$	(3,935)	$	(88,679)

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at July 1, 2022	$	(51,329)	$	(4,016)	$	(55,345)
Other comprehensive income before reclassification	(24,547)		—		(24,547)
Amounts reclassified from accumulated other comprehensive income	—		11		11
Net current period other comprehensive income (loss)	(24,547)		11		(24,536)
Balance at September 30, 2022	$	(75,876)	$	(4,005)	$	(79,881)

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	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	(13,448)		—		(13,448)
Amounts reclassified from accumulated other comprehensive income	—		26		26
Net current period other comprehensive income	(13,448)		26		(13,422)
Balance at September 30, 2023	$	(84,744)	$	(3,935)	$	(88,679)

	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	(73,381)		—		(73,381)
Amounts reclassified from accumulated other comprehensive income	—		30		30
Net current period other comprehensive income	(73,381)		30		(73,351)
Balance at September 30, 2022	$	(75,876)	$	(4,005)	$	(79,881)

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   September 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		16		Other components of net periodic pension and postretirement benefits
Tax effect	(4)		(5)		Income tax expense
Net of tax	8		11
Total reclassification for the period, net of tax	$	8	$	11

(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	Nine Months Ended September 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)	36		41		Other components of net periodic pension and postretirement benefits
Tax effect	(10)		(11)		Income tax expense
Net of tax	26		30
Total reclassification for the period, net of tax	$	26	$	30

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

	Three Months Ended September 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	$	817	$	—	$	—	$	817
Other	201		—		—		201
Interchange revenue from debit card transactions	1,141		—		—		1,141
WMG fee income	—		2,533		—		2,533
CFS fee and commission income	—		—		243		243
Net gains (losses) on sales of OREO	—		—		—		—
Net gains on sales of loans(a)	67		—		—		67
Loan servicing fees(a)	35		—		—		35
Changes in fair value of equity investments(a)	(82)		—		14		(68)
Income from bank-owned life insurance(a)	11		—		—		11
Other(a)	2,812		—		16		2,828
Total non-interest income (loss)	$	5,002	$	2,533	$	273	$	7,808

(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 September 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	$	846	$	—	$	—	$	846
Other	143		—		—		143
Interchange revenue from debit card transactions	1,126		—		—		1,126
WMG fee income	—		2,403		—		2,403
CFS fee and commission income	—		—		251		251
Net gains (losses) on sales of OREO	22		—		—		22
Net gains on sales of loans(a)	7		—		—		7
Loan servicing fees(a)	38		—		—		38
Changes in fair value of equity investments(a)	(96)		—		3		(93)
Income from bank-owned life insurance(a)	12		—		—		12
Other(a)	319		—		(38)		281
Total non-interest income	$	2,417	$	2,403	$	216	$	5,036

(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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	Nine Months Ended September 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	$	2,308	$	—	$	—	$	2,308
Other	610		—		—		610
Interchange revenue from debit card transactions	3,468		—		—		3,468
WMG fee income	—		7,716		—		7,716
CFS fee and commission income	—		—		749		749
Net gains (losses) on sales of OREO	14		—		—		14
Net gains on sales of loans(a)	90		—		—		90
Loan servicing fees(a)	107		—		—		107
Net gains on sales of securities(a)	—		—		—		—
Changes in fair value of equity investments(a)	67		—		(166)		(99)
Income from bank-owned life insurance(a)	32		—		—		32
Other(a)	3,658		—		25		3,683
Total non-interest income	$	10,354	$	7,716	$	608	$	18,678

(a) Not within scope of ASC 606.

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

	Nine Months Ended September 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	$	2,246	$	—	$	—	$	2,246
Other	543		—		—		543
Interchange revenue from debit card transactions	3,462		—		—		3,462
WMG fee income	—		7,788		—		7,788
CFS fee and commission income	—		—		775		775
Net gains on sales of OREO	68		—		—		68
Net gains on sales of loans(a)	106		—		—		106
Loan servicing fees(a)	115		—		—		115
Net gains on sales of securities(a)	—		—		—		—
Change in fair value of equity securities(a)	(446)		—		(2)		(448)
Income from bank-owned life insurance(a)	34		—		—		34
Other(a)	1,424		—		(95)		1,329
Total non-interest income	$	7,552	$	7,788	$	678	$	16,018

(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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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.

42

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   September 30,				Nine Months Ended   September 30,
	2023		2022		2023		2022
Qualified Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	396		282		1,189		848
Expected return on plan assets	(596)		(720)		(1,786)		(2,141)
Amortization of unrecognized transition obligation	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	6		—		17		—
Net periodic pension benefit	$	(194)	$	(438)	$	(580)	$	(1,293)
Supplemental Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	12		8		35		25
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	2		6		6		15
Net periodic supplemental pension cost	$	14	$	14	$	41	$	40
Postretirement Plan, Medical and Life
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	1		1		3		3
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	5		10		14		26
Net periodic postretirement, medical and life benefit	$	6	$	11	$	17	$	29

43

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 September 30, 2023
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	28,979	$	—	$	36	$	29,015
Interest expense	10,998		—		—		10,998
Net interest income	17,981		—		36		18,017
Provision for credit losses	449		—		—		449
Net interest income after provision for credit losses	17,532		—		36		17,568
Other non-interest income	5,002		2,533		273		7,808
Other non-interest expenses	13,597		1,796		275		15,668
Income (loss) before income tax expense (benefit)	8,937		737		34		9,708
Income tax expense (benefit)	1,908		161		(9)		2,060
Segment net income (loss)	$	7,029	$	576	$	43	$	7,648

	Three months ended September 30, 2022
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	20,983	$	—	$	16	$	20,999
Interest expense	2,009		—		—		2,009
Net interest income	18,974		—		16		18,990
Provision for credit losses	1,255		—		—		1,255
Net interest income after provision for credit losses	17,719		—		16		17,735
Other non-interest income	2,417		2,403		216		5,036
Legal accruals and settlements	—		—		—		—
Other non-interest expenses	12,559		1,715		303		14,577
Income (loss) before income tax expense (benefit)	7,577		688		(71)		8,194
Income tax expense (benefit)	1,590		167		(16)		1,741
Segment net income (loss)	$	5,987	$	521	$	(55)	$	6,453

44

	Nine months ended September 30, 2023
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	82,939	$	—	$	102	$	83,041
Interest expense	26,482		—		—		26,482
Net interest income	56,457		—		102		56,559
Provision for credit losses	962		—		—		962
Net interest income after provision for credit losses	55,495		—		102		55,597
Other non-interest income	10,354		7,716		608		18,678
Other non-interest expenses	41,187		5,293		937		47,417
Income (loss) before income tax expense (benefit)	24,662		2,423		(227)		26,858
Income tax expense (benefit)	5,215		536		(91)		5,660
Segment net income (loss)	$	19,447	$	1,887	$	(136)	$	21,198
Segment assets	$	2,701,959	$	2,596	$	3,279	$	2,707,834

	Nine months ended September 30, 2022
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	56,965	$	—	$	30	$	56,995
Interest expense	3,687		—		—		3,687
Net interest income	53,278		—		30		53,308
Provision for credit losses	(1,634)		—		—		(1,634)
Net interest income after provision for credit losses	54,912		—		30		54,942
Other non-interest income	7,552		7,788		678		16,018
Legal accruals and settlements	—		—		—		—
Other non-interest expenses	37,316		5,180		1,091		43,587
Income (loss) before income tax expense (benefit)	25,148		2,608		(383)		27,373
Income tax expense (benefit)	5,523		605		(99)		6,029
Segment net income (loss)	$	19,625	$	2,003	$	(284)	$	21,344
Segment assets	$	2,544,528	$	2,804	$	4,090	$	2,551,422

45

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.

During the nine months ended September 30, 2023 and 2022, 16,050 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 or a five 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 September 30, 2023 and 2022, respectively. Total expense related to the 2021 Plan of $0.7 million and $0.8 million was recognized during each of the nine month periods ended September 30, 2023 and 2022, respectively.

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

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at July 1, 2023	54,002	$44.68
Granted	2,981	$38.59
Vested	(139)	$43.34
Forfeited or cancelled	—	—
Nonvested at September 30, 2023	56,844	$44.40

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at January 1, 2023	55,402	$44.57
Granted	16,050	$44.53
Vested	(14,282)	$45.36
Forfeited or cancelled	(326)	$43.73
Nonvested at September 30, 2023	56,844	$44.40

As of September 30, 2023, there was $1.7 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 3.50 years. The total fair value of shares vested was $0.6 million and $0.1 million for the nine month periods ended September 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 October 18, 2023, the Corporation's Board of Directors approved the dissolution of Chemung Risk Management, Inc. The impact to the Corporation is not material in nature and is expected to be completed by March 31, 2023.

46

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 nine months ended September 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.

47

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 September 30, 2023 the allowance for credit losses totaled $20.3 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 September 30, 2023 and December 31, 2022, the ACL (ALLL for December 31, 2022), allocated to the total commercial portfolio was $15.2 million and $14.9 million respectively, or 75.1% and 75.8%, respectively.

The range of impact was an ACL allocated to the total commercial loan portfolio between $11.8 million and $20.5 million at September 30, 2023. For residential mortgages and consumer loans, the range of impact was an ACL between $1.4 million and $2.9 million, and $2.6 million and $4.4 million, respectively. Overall, the range of impact was an ACL between $15.8 million and $27.8 million.

Changes in the FOMC's median forecasted U.S. civilian unemployment rate and year-over-year change in U.S. GDP could have a material impact on the model's calculated allowance requirements. FOMC projections are sourced from a quarterly Summary of Projections, which accompanies select FOMC meetings. Each participant's projections represent the value to which selected variables would be expected to converge over time under appropriate monetary policy, and considering all information currently available. An immediate increase of 1.0% in the FOMC's projected rate of U.S. civilian unemployment, and a decrease in the FOMC's projected rate of U.S. GDP growth of 0.5% would increase the model's total allowance calculation by $1.7 million, or 8.4%, to $22.0 million, assuming that qualitative adjustments are held at current levels.

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 factors that were utilized at September 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.

48

Consolidated Financial Highlights

																As of or for the
	As of or for the Three Months Ended															Nine Months Ended
	Sept. 30,			June 30,			Mar. 31			Dec. 31			Sept. 30,			Sept. 30,			Sept. 30,
(in thousands, except per share data)	2023			2023			2023			2022			2022			2023			2022
RESULTS OF OPERATIONS
Interest income	$	29,015		$	27,796		$	26,230		$	24,480		$	20,999		$	83,041		$	56,995
Interest expense	10,998			9,201			6,283			3,609			2,009			26,482			3,687
Net interest income	18,017			18,595			19,947			20,871			18,990			56,559			53,308
Provision for credit losses	449			236			277			1,080			1,255			962			(1,634)
Net interest income after provision for credit losses	17,568			18,359			19,670			19,791			17,735			55,597			54,942
Non-interest income	7,808			5,447			5,423			5,418			5,036			18,678			16,018
Non-interest expense	15,668			15,913			15,836			15,693			14,577			47,417			43,587
Income before income tax expense	9,708			7,893			9,257			9,516			8,194			26,858			27,373
Income tax expense	2,060			1,613			1,987			2,077			1,741			5,660			6,029
Net income	$	7,648		$	6,280		$	7,270		$	7,439		$	6,453		$	21,198		$	21,344
Basic and diluted earnings per share	$	1.61		$	1.33		$	1.54		$	1.58		$	1.37		$	4.48		$	4.55
Average basic and diluted shares outstanding	4,736			4,729			4,721			4,698			4,692			4,729			4,691
PERFORMANCE RATIOS - Annualized
Return on average assets	1.14		%	0.95		%	1.12		%	1.15		%	1.02		%	1.07		%	1.16		%
Return on average equity	16.89		%	13.97		%	16.97		%	18.36		%	14.17		%	15.93		%	15.23		%
Return on average tangible equity (a)	19.22		%	15.89		%	19.40		%	21.25		%	16.12		%	18.15		%	17.23		%
Efficiency ratio (unadjusted) (a) (f)	60.67		%	66.19		%	62.42		%	59.69		%	60.67		%	63.02		%	62.87		%
Efficiency ratio (adjusted) (a) (b)	66.55		%	65.94		%	62.18		%	59.44		%	60.40		%	64.83		%	62.57		%
Non-interest expense to average assets	2.33		%	2.41		%	2.44		%	2.42		%	2.30		%	2.39		%	2.36		%
Loans to deposits	78.05		%	79.24		%	80.33		%	78.61		%	74.71		%	78.05		%	74.71		%
YIELDS / RATES - Fully Taxable Equivalent
Yield on loans	5.21		%	5.09		%	4.90		%	4.57		%	4.19		%	5.07		%	3.98		%
Yield on investments	2.22		%	2.22		%	2.18		%	2.09		%	1.72		%	2.21		%	1.59		%
Yield on interest-earning assets	4.40		%	4.29		%	4.12		%	3.82		%	3.41		%	4.27		%	3.18		%
Cost of interest-bearing deposits	2.44		%	2.01		%	1.34		%	0.93		%	0.47		%	1.94		%	0.30		%
Cost of borrowings	5.25		%	5.13		%	4.91		%	4.30		%	2.56		%	5.04		%	2.17		%
Cost of interest-bearing liabilities	2.47		%	2.11		%	1.49		%	0.88		%	0.51		%	2.03		%	0.32		%
Interest rate spread	1.93		%	2.18		%	2.63		%	2.94		%	2.90		%	2.24		%	2.86		%
Net interest margin, fully taxable equivalent (a)	2.73		%	2.87		%	3.14		%	3.26		%	3.08		%	2.91		%	2.98		%
CAPITAL
Total equity to total assets at end of period	6.28		%	6.63		%	6.68		%	6.29		%	6.10		%	6.28		%	6.10		%
Tangible equity to tangible assets at end of period (a)	5.52		%	5.87		%	5.91		%	5.51		%	5.29		%	5.52		%	5.29		%
Book value per share	$	35.90		$	37.49		$	37.53		$	35.32		$	33.14		$	35.90		$	33.14
Tangible book value per share (a)	31.29			32.88			32.91			30.69			28.49			31.29			28.49
Period-end market value per share	39.61			38.41			41.50			45.87			41.87			39.61			41.87
Dividends declared per share	0.31			0.31			0.31			0.31			0.31			0.93			0.93
AVERAGE BALANCES
Loans and loans held for sale (c)	$	1,909,100		$	1,880,224		$	1,849,310		$	1,787,103		$	1,675,859		$	1,879,765		$	1,599,218
Earning assets	2,627,012			2,609,893			2,592,709			2,550,834			2,457,218			2,609,999			2,408,379
Total assets	2,664,570			2,649,399			2,627,088			2,574,639			2,511,301			2,650,908			2,469,631
Deposits	2,410,931			2,363,847			2,337,476			2,347,719			2,257,394			2,371,021			2,224,190
Total equity	179,700			180,357			173,786			160,740			180,644			177,969			187,409
Tangible equity (a)	157,876			158,533			151,962			138,916			158,820			156,145			165,581

49

																As of or for the
	As of or for the Three Months Ended															Nine Months Ended
	Sept. 30,			June 30,			Mar. 31			Dec. 31			Sept. 30,			Sept. 30,			Sept. 30,
	2023			2023			2023			2022			2022			2023			2022
ASSET QUALITY
Net charge-offs	$	356		$	146		$	269		$	52		$	109		$	771		$	760
Non-performing loans (d)	6,826			7,304			7,731			8,178			8,310			6,826			8,310
Non-performing assets (e)	7,055			7,471			7,927			8,373			8,503			7,055			8,503
Allowance for credit losses (g)	20,252			20,172			20,075			19,659			18,631			20,252			18,631
Annualized net charge-offs to average loans	0.07		%	0.03		%	0.06		%	0.01		%	0.03		%	0.05		%	0.06		%
Non-performing loans to total loans	0.35		%	0.39		%	0.41		%	0.45		%	0.48		%	0.35		%	0.48		%
Non-performing assets to total assets	0.26		%	0.28		%	0.30		%	0.32		%	0.33		%	0.26		%	0.33		%
Allowance for credit losses to total loans	1.05		%	1.07		%	1.07		%	1.07		%	1.07		%	1.05		%	1.07		%
Allowance for credit losses to non-performing loans	296.69		%	276.17		%	259.66		%	240.39		%	224.21		%	296.69		%	224.21		%
(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 recognition of the employee retention tax credit.
(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.

50

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 nine months ended September 30, 2023 and 2022. For a discussion of the Critical Accounting Estimates that affect the Consolidated Results of Operations, see page 48 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   September 30,								Nine Months Ended   September 30,
	2023		2022		Change		% Change		2023		2022		Change		% Change
Net interest income	$	18,017	$	18,990	$	(973)	(5.1)	%	$	56,559	$	53,308	$	3,251	6.1	%
Non-interest income	7,808		5,036		2,772		55.0	%	18,678		16,018		2,660		16.6	%
Non-interest expense	15,668		14,577		1,091		7.5	%	47,417		43,587		3,830		8.8	%
Pre-provision income	10,157		9,449		708		7.5	%	27,820		25,739		2,081		8.1	%
Provision (credit) for credit losses(1)	449		1,255		(806)		(64.2)	%	962		(1,634)		2,596		158.9	%
Income tax expense	2,060		1,741		319		18.3	%	5,660		6,029		(369)		(6.1)	%
Net income	$	7,648	$	6,453	$	1,195	18.5	%	$	21,198	$	21,344	$	(146)	(0.7)	%
Basic and diluted earnings per share	$	1.61	$	1.37	$	0.24	17.5	%	$	4.48	$	4.55	$	(0.07)	(1.5)	%

(1) Effective 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   September 30,				Nine Months Ended   September 30,
Selected financial ratios:	2023		2022		2023		2022
Return on average assets	1.14	%	1.02	%	1.07	%	1.16	%
Return on average equity	16.89	%	14.17	%	15.93	%	15.23	%
Net interest margin, fully taxable equivalent (a)	2.73	%	3.08	%	2.91	%	2.98	%
Efficiency ratio (adjusted) (a) (b)	66.55	%	60.40	%	64.83	%	62.57	%
Non-interest expenses to average assets	2.33	%	2.30	%	2.39	%	2.36	%
(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 recognition of employee retention tax credit.

Net income for the third quarter of 2023 was $7.6 million, or $1.61 per share, compared to $6.5 million, or $1.37 per share, for the same period in the prior year. Return on average equity for the current quarter was 16.89%, compared to 14.17% for the same period in the prior year. The increase in net income was due primarily to an increase in non-interest income and a decrease in the provision for credit losses, offset by a decrease in net interest income, an increase in non-interest expense, and an increase in income tax expense.

Net income for the nine months ended September 30, 2023 was $21.2 million, or $4.48 per share, compared to $21.3 million, or $4.55 per share, for the same period in the prior year. Return on average equity for the nine months ended September 30, 2023 was 15.93%, compared to 15.23% for the same period in the prior year. The decrease in net income was attributable to increases in non-interest expense and the provision for credit losses, offset by increases in net interest income and non-interest income, and a decrease in income tax expense.

51

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   September 30,
	2023		2022		Change		Percentage Change
Interest and dividend income	$	29,015	$	20,999	$	8,016	38.2	%
Interest expense	10,998		2,009		8,989		447.4	%
Net interest income	$	18,017	$	18,990	$	(973)	(5.1)	%

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 third quarter ended September 30, 2023 decreased $1.0 million, or 5.1%, to $18.0 million compared to the same period in the prior year, due primarily to an increase of $8.9 million in interest expense on deposits, offset by increases of $7.4 million in interest income on loans, including fees, and $0.6 million in interest and dividend income on taxable securities. Interest expense paid on borrowed funds increased $0.1 million for the third quarter 2023, when compared to the same period in the prior year.

The increase in interest expense on deposits was due primarily to a 197 basis points increase in average rates paid on interest-bearing deposits which included brokered deposits, due to the higher interest rate environment, and a shift in the mix of deposits towards higher cost interest-bearing accounts such as time deposits, when compared to the same period in the prior year. The average balance of interest-bearing deposits increased $214.1 million in the third quarter 2023, when compared to the same period in the prior year. The increase in interest expense on borrowed funds was due primarily to an increase in interest rates, offset by a $10.4 million decrease in the average balances of overnight FHLBNY borrowings in the current quarter, when compared to the same period in the prior year.

The increase in interest income on loans, including fees was due primarily to a $233.2 million increase in average loan balances in the current quarter, primarily in the commercial loan portfolio, when compared to the same period in the prior year. The average yield on loans increased 102 basis points in the current quarter, reflecting an increase in the average interest rates of the commercial and consumer loan portfolios of 115 basis points and 118 basis points, respectively, when compared to the same period in the prior year. The average yield on the residential mortgage loan portfolio increased 21 basis points in the current quarter, when compared to the same period in the prior year.

The increase in interest and dividend income on taxable securities in the current quarter, when compared to the same period in the prior year, was due primarily to a 48 basis points increase in the average yield on securities, due to an increase in average interest rates as a result of the higher interest rate environment. This increase was despite a decrease of $60.4 million in average balances of taxable securities when compared to the same period in the prior year, primarily due to paydowns on securities held in the portfolio between the third quarter of 2022 and the third quarter of 2023.

Fully taxable equivalent net interest margin was 2.73% in the third quarter of 2023, compared to 3.08% for the same period in the prior year. Average interest-earning assets increased $169.8 million for the three months ended September 30, 2023 compared to the same period in the prior year. The average yield on interest-earning assets increased 99 basis points to 4.40%, and the average cost of interest-bearing liabilities increased 196 basis points to 2.47%, for the three months ended September 30, 2023, when compared to the same period in the prior year, due to the rising rate environment, as well as a shift in the overall deposit mix to higher cost deposits, when compared to the same period in the prior year.

52

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

	Nine Months Ended   September 30,
	2023		2022		Change		Percentage Change
Interest and dividend income	$	83,041	$	56,995	$	26,046	45.7	%
Interest expense	26,482		3,687		22,795		618.3	%
Net interest income	$	56,559	$	53,308	$	3,251	6.1	%

Net interest income for the nine months ended September 30, 2023 totaled $56.6 million compared to $53.3 million for the same period in the prior year, an increase of $3.3 million, or 6.1% due primarily to an increase of $26.0 million in interest and dividend income, partially offset by an increase of $22.8 million in interest expense. The increase in interest and dividend income for the first nine months of 2023 was primarily attributed to increases of $23.6 million in interest income on loans, including fees, and $2.2 million in interest and dividend income on taxable securities. The increase in interest expense for the first nine months of 2023 was primarily attributed to increases of $21.3 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 $173.0 million, $13.9 million, and $93.7 million in the average balances of the commercial, residential mortgage, and consumer loan portfolios, respectively, for the nine months ended September 30, 2023 when compared to the same period in the prior year. Average yields on the commercial, residential mortgage and consumer loan portfolios increased 132 basis points, 19 basis points, and 92 basis points, respectively, for the nine months ended September 30, 2023, when compared to the same period in the prior year, due to increases in average interest rates on new loan originations and increases on variable rate loans.

The increase in interest income on taxable securities was mostly attributable to a 59 basis points increase in the average yield, due to an increase in average interest rates, despite a $65.2 million decrease in average balances of taxable securities, for the nine months ended September 30, 2023, when compared to the same period in the prior year. The decrease in the average balances of taxable securities was mostly attributable to paydowns on 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 increases of 229 basis points and 272 basis points in the average interest rates paid on customer time deposits and brokered deposits, respectively, as well as increases of $112.3 million and $115.6 million in the average balances of customer time deposits and brokered deposits, respectively, for the first nine months of 2023, when compared to the same period in the prior year. The increases in average balances were primarily attributable to a need to fund loan growth, as well as a shift in deposit demand towards higher cost 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 $7.6 million in interest expense on savings and money market accounts, due to an increase of 113 basis points in the average interest rates paid, despite a decrease of $48.5 million in the average balances on savings and money market accounts, for the nine months ended September 30, 2023, when compared to the same period in the prior year. The $1.5 million increase in interest expense on borrowed funds was due primarily to a 323 basis points increase in the average interest rate paid on overnight advances, and a $28.4 million increase in average balances of overnight advances for the current nine months, when compared to the same period in the prior year, in order to fund loan growth.

The average yield on interest-earning assets increased 109 basis points, to 4.27%, and the average cost of interest-bearing liabilities increased 171 basis points, to 2.03% for the nine months ended September 30, 2023 compared to the same period in the prior year. Average interest-earning assets increased $201.6 million for the nine months ended September 30, 2023 compared to the same period in the prior year. Fully taxable equivalent net interest margin was 2.91% for the nine months ended September 30, 2023 compared to 2.98% for the same period in the prior year.

53

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 nine months ended September 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 $0.1 million for the three month periods ended September 30, 2023, and 2022, respectively, related to the Paycheck Protection Program. Loan fee income of $4 thousand and $0.1 million for the nine month periods ended September 30, 2023 and 2022, respectively, related to the Paycheck Protection Program.

AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
	Three Months Ended   September 30, 2023						Three Months Ended   September 30, 2022
($ in thousands)	Average Balance		Interest		Yield/Rate (3)		Average Balance		Interest		Yield/Rate (3)
Interest-earning assets:
Commercial loans	$	1,319,110	$	18,672	5.62	%	$	1,164,783	$	13,120	4.47	%
Mortgage loans	282,578		2,572		3.61	%	279,102		2,389		3.40	%
Consumer loans	307,412		3,843		4.96	%	231,974		2,211		3.78	%
Taxable securities	663,240		3,540		2.12	%	723,602		2,985		1.64	%
Tax-exempt securities	40,380		288		2.83	%	41,918		326		3.09	%
Interest-earning deposits	14,292		187		5.19	%	15,839		80		2.00	%
Total interest-earning assets	2,627,012		29,102		4.40	%	2,457,218		21,111		3.41	%
Non-earning assets:
Cash and due from banks	26,272						24,494
Other assets	31,496						47,256
Allowance for credit losses (4)	(20,210)						(17,667)
Total assets	$	2,664,570					$	2,511,301
Interest-bearing liabilities:
Interest-bearing demand deposits	$	281,106	$	963	1.36	%	$	258,420	$	112	0.17	%
Savings and insured money market deposits	890,109		3,945		1.76	%	927,737		575		0.25	%
Time deposits	383,786		3,269		3.38	%	232,798		430		0.73	%
Brokered deposits	189,628		2,543		5.32	%	111,565		688		2.45	%
FHLBNY overnight advances	17,879		249		5.53	%	28,229		173		2.43	%
Long-term capital leases	3,144		29		3.66	%	3,417		31		3.60	%
Total interest-bearing liabilities	1,765,652		10,998		2.47	%	1,562,166		2,009		0.51	%
Non-interest-bearing liabilities:
Demand deposits	666,302						726,874
Other liabilities	52,916						41,617
Total liabilities	2,484,870						2,330,657
Shareholders' equity	179,700						180,644
Total liabilities and shareholders’ equity	$	2,664,570					$	2,511,301
Fully taxable equivalent net interest income			18,104						19,102
Net interest rate spread (1)					1.93	%					2.90	%
Net interest margin, fully taxable equivalent (2)					2.73	%					3.08	%
Taxable equivalent adjustment			(87)						(112)
Net interest income			$	18,017					$	18,990

(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.

54

AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
	Nine Months Ended   September 30, 2023						Nine Months Ended   September 30, 2022
($ in thousands)	Average Balance		Interest		Yield/ Rate (3)		Average Balance		Interest		Yield/ Rate (3)
Interest-earning assets:
Commercial loans	$	1,289,638	$	53,047	5.50	%	$	1,116,687	$	34,911	4.18	%
Mortgage loans	284,351		7,553		3.55	%	270,484		6,798		3.36	%
Consumer loans	305,776		10,673		4.67	%	212,047		5,953		3.75	%
Taxable securities	679,330		10,758		2.12	%	744,503		8,542		1.53	%
Tax-exempt securities	40,562		887		2.92	%	42,190		989		3.13	%
Interest-earning deposits	10,342		400		5.17	%	22,468		116		0.69	%
Total interest-earning assets	2,609,999		83,318		4.27	%	2,408,379		57,309		3.18	%
Non-earning assets:
Cash and due from banks	25,512						24,317
Other assets	35,547						56,592
Allowance for credit losses (4)	(20,150)						(19,657)
Total assets	$	2,650,908					$	2,469,631
Interest-bearing liabilities:
Interest-bearing demand deposits	$	286,220	$	1,959	0.92	%	$	275,062	$	219	0.11	%
Savings and insured money market deposits	899,871		8,645		1.28	%	948,411		1,029		0.15	%
Time deposits	350,846		8,041		3.06	%	238,568		1,378		0.77	%
Brokered deposits	153,774		5,932		5.16	%	38,149		697		2.44	%
FHLBNY overnight advances	47,321		1,819		5.14	%	18,931		271		1.91	%
Long-term capital leases	3,212		86		3.58	%	3,483		93		3.57	%
Total interest-bearing liabilities	1,741,244		26,482		2.03	%	1,522,604		3,687		0.32	%
Non-interest-bearing liabilities:
Demand deposits	680,310						724,000
Other liabilities	51,385						35,618
Total liabilities	2,472,939						2,282,222
Shareholders' equity	177,969						187,409
Total liabilities and shareholders’ equity	$	2,650,908					$	2,469,631
Fully taxable equivalent net interest income			56,836						53,622
Net interest rate spread (1)					2.24	%					2.86	%
Net interest margin, fully taxable equivalent (2)					2.91	%					2.98	%
Taxable equivalent adjustment			(277)						(314)
Net interest income			$	56,559					$	53,308

(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

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 nine months ended September 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 Sept 30, 2023 vs. 2022
	Increase/(Decrease)
	Total Change		Due to Volume		Due to Rate
(in thousands)
Interest and dividend income on:
Commercial loans	$	5,552	$	1,887	$	3,665
Mortgage loans	183		31		152
Consumer loans	1,632		833		799
Taxable investment securities	555		(265)		820
Tax-exempt investment securities	(38)		(12)		(26)
Interest-earning deposits	107		(9)		116
Total interest and dividend income, fully taxable equivalent	7,991		2,465		5,526
Interest expense on:
Interest-bearing demand deposits	851		11		840
Savings and insured money market deposits	3,370		(25)		3,395
Time deposits	2,839		430		2,409
Brokered deposits	1,855		694		1,161
FHLBNY overnight advances	76		(81)		157
Long-term capital leases	(2)		(3)		1
Total interest expense	8,989		1,026		7,963
Net interest income, fully taxable equivalent	$	(998)	$	1,439	$	(2,437)

56

	Nine Months Ended Sept. 30, 2023 vs. 2022
	Increase/(Decrease)
	Total Change		Due to Volume		Due to Rate
(in thousands)
Interest and dividend income on:
Commercial loans	$	18,136	$	5,968	$	12,168
Mortgage loans	755		359		396
Consumer loans	4,720		3,035		1,685
Taxable investment securities	2,216		(806)		3,022
Tax-exempt investment securities	(102)		(37)		(65)
Interest-earning deposits	284		(94)		378
Total interest and dividend income, fully taxable equivalent	26,009		8,425		17,584
Interest expense on:
Interest-bearing demand deposits	1,740		10		1,730
Savings and insured money market deposits	7,616		(57)		7,673
Time deposits	6,663		910		5,752
Brokered deposits	5,235		3,828		1,408
FHLBNY overnight advances	1,548		728		820
Long-term Capital leases	(7)		(7)		—
Total interest expense	22,795		5,412		17,383
Net interest income, fully taxable equivalent	$	3,214	$	3,013	$	201

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.

The provision for credit losses decreased $0.8 million for the third quarter of 2023, when compared to the third quarter of 2022. Significant provisioning related to loan growth occurred in the third quarter of 2022, as well as additional qualitative provisioning under the incurred loss methodology. In the third quarter of 2023, the provision was primarily the result of changes in net charge offs, as well as additional qualitative provisioning under the current expected credit loss (CECL) methodology in the consumer portfolio, due to economic considerations that may not be reflected in Federal Open Market Committee (FOMC) forecasted data points, but may adversely impact consumers financial strength. This build up can be attributable to observable headwinds, as well as management's judgement on their impact in relation to the loan portfolio. The model reflects a four quarter rolling forecast period, and in the third quarter of 2023, the 2024 year-end forecast became more influential, as the forecast for national unemployment improved from 4.5% in June, 2023 to 4.1% in September, 2023.

57

The provision for credit losses for the nine months ended September 30, 2023, was $1.0 million compared to a credit of $1.6 million, for the same period in the prior year. The $2.6 million increase in the provision for credit losses in the nine months ended September 30, 2023, when compared to the same period in the prior year, was primarily due to the $2.4 million release of the pandemic related portion of the allowance in 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 nine months of 2022 were offset by additional provisioning of $1.7 million related to increased loan growth, along with additional qualitative allocations. Provision in the current period was primarily attributable to increased loan volume, offset by favorable economic forecasts, particularly the FOMC's unemployment forecast in the current period, which improved from 4.5% to 3.8% for year-end-2023, as well as the FOMC's forecast for U.S. GDP growth, which improved from 0.5% to 2.1% for year-end 2023.

Net charge-offs for the three months ended September 30, 2023 were $0.4 million, compared to $0.1 million for the same period in the prior year. Net charge-offs in the three months ended September 30, 2023 were primarily in the consumer indirect auto portfolio. Net charge-offs in the three months ended September 30, 2022 were mostly attributable to consumer loans.

Net charge-offs for the nine months ended September 30, 2023 and 2022 were $0.8 million. The $0.8 million net charge-off for the nine months ended September 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 $0.8 million net charge-off for the nine month period ended September 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   September 30,
	2023		2022		Change		Percentage Change
WMG fee income	$	2,533	$	2,403	$	130	5.4	%
Service charges on deposit accounts	1,018		989		29		2.9	%
Interchange revenue from debit card transactions	1,141		1,126		15		1.3	%
Net gains on securities transactions	—		—		—		N/A
Changes in fair value of equity investments	(68)		(93)		25		26.9	%
Net gains on sales of loans held for sale	67		7		60		N/M
Net gains (losses) on sales of other real estate owned	—		22		(22)		N/M
Income from bank owned life insurance	11		12		(1)		(8.3)	%
CFS fee and commission income	243		251		(8)		(3.2)	%
Other	2,863		319		2,544		797.5	%
Total non-interest income	$	7,808	$	5,036	$	2,772	55.0	%

Total non-interest income for the third quarter of 2023 increased $2.8 million compared to the same period in the prior year primarily due to increases in other non-interest income and WMG fee income. The remaining components of non-interest income in the third quarter of 2023 were relatively consistent, when compared to the same period in the prior year.

Other Non-Interest Income

The increase in other non-interest income was primarily due to recognition of a $2.4 million employee retention tax credit in the third quarter of 2023 and a $0.1 million increase in interest rate swap fee income. The Corporation filed amended prior period tax returns reflecting the credit during the current period.

WMG Fee Income

The increase in WMG fee income can primarily be attributed to new customer relationships when compared to the same period in the prior year.

58

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

	Nine Months Ended   September 30,
	2023		2022		Change		Percentage Change
WMG fee income	$	7,716	$	7,788	$	(72)	(0.9)	%
Service charges on deposit accounts	2,918		2,789		129		4.6	%
Interchange revenue from debit card transactions	3,468		3,462		6		0.2	%
Changes in fair value of equity investments	(99)		(448)		349		77.9	%
Net gains on sales of loans held for sale	90		106		(16)		(15.1)	%
Net gains (losses) on sales of other real estate owned	14		68		(54)		(79.4)	%
Income from bank owned life insurance	32		34		(2)		(5.9)	%
CFS fee and commission income	749		775		(26)		(3.4)	%
Other	3,790		1,444		2,346		162.5	%
Total non-interest income	$	18,678	$	16,018	$	2,660	16.6	%

Total non-interest income for the nine months ended September 30, 2023 increased $2.7 million compared to the same period in the prior year. The increase was primarily due to increases in other non-interest income, changes in fair value of equity investments, and service charges on deposit accounts.

Change in Other Non-Interest Income

The increase in other non-interest income was primarily due to recognition of a $2.4 million employee retention tax credit in the third quarter of 2023. The Corporation filed amended prior period tax returns reflecting the credit during the current period.

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, relating to improvements 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 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   September 30,
	2023		2022		Change		Percentage Change
Compensation expense:
Salaries and wages	$	6,542	$	6,550	$	(8)	(0.1)	%
Pension and other employee benefits	1,979		2,024		(45)		(2.2)	%
Other components of net periodic pension and postretirement benefits	(174)		(413)		239		57.9	%
Total compensation expense	8,347		8,161		186		2.3	%
Non-compensation expense:
Net occupancy	1,337		1,269		68		5.4	%
Furniture and equipment	353		493		(140)		(28.4)	%
Data processing	2,480		2,087		393		18.8	%
Professional services	554		442		112		25.3	%
Marketing and advertising	218		266		(48)		(18.0)	%
Other real estate owned expenses	10		12		(2)		(16.7)	%
FDIC insurance	525		389		136		35.0	%
Loan expenses	249		(64)		313		489.1	%
Other	1,595		1,522		73		4.8	%
Total non-compensation expense	7,321		6,416		905		14.1	%
Total non-interest expense	$	15,668	$	14,577	$	1,091	7.5	%

Total non-interest expense for the third quarter of 2023 increased $1.1 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 September 30, 2023, non-interest expense to average assets was 2.33%, compared to 2.30% for the same period in the prior year.

Compensation expense

The increase in compensation expense for the current period, compared to the same period in the prior year, can be primarily attributed to an increase in other components of net periodic pension and postretirement benefits, primarily due to actuarial adjustments made to the Corporation's pension plans.

Non-compensation expense

The increase in non-compensation expense for the current period, compared to the same period in the prior year, can be primarily attributed to increases in data processing expense, loan expenses, FDIC insurance expense and professional services expenditures. The increase in data processing expense was primarily due to expenditures related to ongoing cybersecurity improvement initiatives and other increases in software expenses, when compared to the same period in the prior year. The increase in loan expenses was primarily due to the re-alignment of dealer flat fee payments in the third quarter of the prior year, resulting in lower expense recognition in that period, which normalized in the current period. The increase in FDIC insurance can be primarily attributed to an increase in the assessment rate effective January 1, 2023. The increase in professional services was primarily due to the timing of consulting engagements during the current period, 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):

	Nine Months Ended   September 30,
	2023		2022		Change		Percentage Change
Compensation expense:
Salaries and wages	$	20,029	$	18,829	$	1,200	6.4	%
Pension and other employee benefits	5,467		5,679		(212)		(3.7)	%
Other components of net periodic pension and postretirement benefits	(522)		(1,224)		702		57.4	%
Total compensation expense	24,974		23,284		1,690		7.3	%
Non-compensation expense:
Net occupancy	4,242		4,065		177		4.4	%
Furniture and equipment	1,232		1,340		(108)		(8.1)	%
Data processing	7,334		6,742		592		8.8	%
Professional services	1,596		1,627		(31)		(1.9)	%
Amortization of intangible assets	—		15		(15)		(100.0)	%
Marketing and advertising	720		726		(6)		(0.8)	%
Other real estate owned expenses	49		(17)		66		388.2	%
FDIC insurance	1,608		987		621		62.9	%
Loan expenses	789		327		462		141.3	%
Other	4,873		4,491		382		8.5	%
Total non-compensation expense	22,443		20,303		2,140		10.5	%
Total non-interest expense	$	47,417	$	43,587	$	3,830	8.8	%

Total non-interest expense for the nine months ended September 30, 2023 increased $3.8 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 nine months ended September 30, 2023, non-interest expense to average assets was 2.39%, compared to 2.36% for the same period in the prior year.

Compensation expense

The increase in compensation expense for the current period, 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, partially offset by a decrease in pension and other employee benefits. The increase in salaries and wages was primarily due to increases in base salaries and wages and restricted stock expense, as well as an increase in the market value of the Corporation's deferred compensation plan for the current period, when compared to the same period in the prior year. The increase in 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 for the current period, 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, data processing expenses, loan expenses and other non-interest expense.

The increase in FDIC insurance expense was primarily attributable to an increase in the assessment rate effective January 1, 2023. The increase in data processing expense was attributable to additional expenditures related to cybersecurity improvement initiatives, and other increases in software expenses. The increase in loan expenses was primarily attributable to the re-alignment of dealer flat fee payments in the third quarter of the prior year. 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.

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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   September 30,
	2023			2022			Change		Percentage Change
Income before income tax expense	$	9,708		$	8,194		$	1,514	18.5	%
Income tax expense	2,060			1,741			319		18.3	%
Effective tax rate	21.2		%	21.2		%

Income tax expense for the three months ended September 30, 2023 and 2022 were $2.1 million and $1.7 million, respectively. The increase in income tax expense was due primarily to an increase of $1.5 million in income before income tax expense. The effective income tax rate for both periods was 21.2%.

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

	Nine Months Ended   September 30,
	2023			2022			Change		Percentage Change
Income before income tax expense	$	26,858		$	27,373		$	(515)	(1.9)	%
Income tax expense	5,660			6,029			(369)		(6.1)	%
Effective tax rate	21.1		%	22.0		%

Income tax expense for the nine months ended September 30, 2023 and 2022 were $5.7 million and $6.0 million, respectively. The decrease in income tax expense was due primarily to a decrease of $0.5 million in income before income tax expense. The effective income tax rate decreased from 22.0% for the nine months ended September 30, 2022 to 21.1% for the nine months ended September 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):

	September 30, 2023		December 31, 2022		Change		Percentage Change
ASSETS
Total cash and cash equivalents	$	75,580	$	55,869	$	19,711	35.3	%
Total investment securities, FHLB, and FRB stock	577,672		646,040		(68,368)		(10.6)	%
Loans, net of deferred loan fees	1,930,688		1,829,448		101,240		5.5	%
Allowance for credit losses	(20,252)		(19,659)		(593)		3.0	%
Loans, net	1,910,436		1,809,789		100,647		5.6	%
Goodwill and other intangible assets, net	21,824		21,824		—		—	%
Other assets	122,322		112,031		10,291		9.2	%
Total assets	$	2,707,834	$	2,645,553	$	62,281	2.4	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits	$	2,473,499	$	2,327,227	$	146,272	6.3	%
Advances and other debt	3,120		99,137		(96,017)		(96.9)	%
Other liabilities	61,151		52,801		8,350		15.8	%
Total liabilities	2,537,770		2,479,165		58,605		2.4	%
Total shareholders’ equity	170,064		166,388		3,676		2.2	%
Total liabilities and shareholders’ equity	$	2,707,834	$	2,645,553	$	62,281	2.4	%

Cash and Cash Equivalents

The increase 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 $46.7 million in paydowns and maturities in the securities available for sale portfolio, and a decrease in the fair value of the available for sale portfolio of $18.2 million.

Loans, net

The increase in loans, net of deferred loan fees, can be primarily attributed to increases of $89.6 million in commercial mortgages, $13.7 million in consumer loans, and $2.2 million in commercial and industrial loans, offset by a decrease of $4.3 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), additional provisioning related to increased loan volume, and qualitative adjustments made during the period. Improvements in the underlying forecasted metrics on which the model is based offset these increases. During the period, the FOMC's forecasted U.S. civilian unemployment rate for year-end 2023 decreased from 4.6% as of December 2022 to 3.8% as of September 2023. Because the model utilizes a rolling four quarter forecast period, the FOMC's 2024 projections for year-end unemployment became increasingly impactful on the model during 2023. The FOMC's projection for year-end U.S. civilian unemployment improved from 4.5% in June, 2023 to 4.1% in September, 2023. Qualitative adjustments made during the period primarily reflected changing conditions in the consumer portfolio. Management qualitatively increased the allowance in the consumer portfolio due to economic headwinds that may adversely impact consumers, but are not entirely reflected in the improvements to the FOMC's data points.

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Other Assets

The increase in other assets can be primarily attributed to increases of $5.6 million in the deferred tax asset, primarily related to a decline in the fair value of the Corporation's available for sale portfolio of $18.2 million, and an increase of $5.8 million in interest rate swap assets.

Deposits

The increase in deposits can be attributed to increases of $101.5 million in brokered deposits, $87.3 million in time deposits, and $39.2 million in interest-bearing demand deposit accounts, offset by decreases of $50.0 million in non-interest bearing demand deposits, $14.6 million in insured money market accounts, and $17.2 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 $5.7 million in interest rate swap liabilities and the establishment of a $1.0 million allowance due to adoption of ASU 2016-13 on January 1, 2023 related to unfunded commitments, which was $1.1 million at September 30, 2023.

Shareholders’ equity

Shareholders’ equity was $170.1 million at September 30, 2023 compared to $166.4 million at December 31, 2022. The increase can be primarily attributed to an increase of $15.7 million in retained earnings, partially offset by an increase in accumulated other comprehensive loss of $13.4 million. The increase in retained earnings can be primarily attributed to net income of $21.2 million, offset by $4.4 million in dividends declared, and a $1.1 million one-time adjustment, net of tax, due to the implementation of CECL, during the nine months ended September 30, 2023. The increase in accumulated other comprehensive loss can be primarily attributed to a decrease in the fair market value of the available for sale securities portfolio.

Assets under management or administration

The market value of total assets under management or administration in WMG was $2.126 billion at September 30, 2023, including $379.8 million of assets held under management or administration for the Corporation, compared to $2.053 billion at December 31, 2022, including $346.5 million of assets held under management or administration for the Corporation, an increase of $73.2 million, or 3.6%, 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 $569.0 million at September 30, 2023, a decrease of $63.6 million, or 10.1%, from $632.6 million at December 31, 2022. The decrease can be mostly attributed to $46.7 million in paydowns, and a decrease in the fair value of the portfolio of $18.2 million. The held to maturity 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 September 30, 2023 and $2.4 million at December 31, 2022.

Non-marketable equity securities at September 30, 2023 include shares of FRBNY stock and FHLBNY stock, carried at their cost of $1.8 million and $2.2 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) loans analyzed on an individual basis for credit risk, 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 September 30, 2023 ($ in thousands):

LOAN COMPOSITION
	September 30, 2023		% of Total Loans		December 31, 2022		% of Total Loans		Dollar Change		Percentage Change
Commercial and agricultural:
Commercial and industrial	$	254,215	13.2	%	$	252,044	13.8	%	$	2,171	0.9	%
Agricultural	269		—	%	249		—	%	20		8.0	%
Commercial mortgages:
Construction	140,480		7.3	%	108,243		5.9	%	32,237		29.8	%
Commercial mortgages	946,053		49.0	%	888,670		48.7	%	57,383		6.5	%
Residential mortgages	281,361		14.6	%	285,672		15.6	%	(4,311)		(1.5)	%
Consumer loans:
Home equity lines and loans	87,078		4.5	%	81,401		4.4	%	5,677		7.0	%
Indirect consumer loans	211,046		10.9	%	202,124		11.0	%	8,922		4.4	%
Direct consumer loans	10,186		0.5	%	11,045		0.6	%	(859)		(7.8)	%
Total	$	1,930,688	100.0	%	$	1,829,448	100.0	%	$	101,240	5.5	%

Portfolio loans totaled $1.931 billion at September 30, 2023, an increase of $101.2 million, or 5.5%, from $1.829 billion at December 31, 2022. The increase in loans can be attributed to increases of $89.6 million in commercial mortgage loans, $8.9 million in indirect consumer loans, $4.8 million in other consumer loans, and $2.2 million in commercial and industrial loans, offset by a decrease of $4.3 million in residential mortgages.

Commercial real estate lending continues to be the primary driver of asset growth for the Corporation, as demand for project financing remains robust across the Corporation's footprint, particularly in the Albany and Buffalo regions. At September 30, 2023, commercial real estate loans in the Albany and Buffalo regions have grown $60.8 million and $17.0 million from December 31, 2022, respectively.

Residential mortgage loans totaled $281.4 million at September 30, 2023, a decrease of $4.3 million, or 1.5%, from December 31, 2022. During the nine months ended September 30, 2023, $21.4 million of residential mortgages were originated, of which $4.3 million were sold in the secondary market to Freddie Mac. Indirect consumer loans totaled $211.0 million at September 30, 2023, an increase of $8.9 million, or 4.4%, 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
	September 30, 2023		December 31, 2022		December 31, 2021		December 31, 2020		December 31, 2019
Chemung Canal Trust Company*^	$	756,645	$	731,344	$	639,144	$	658,468	$	576,399
Capital Bank Division	1,174,043		1,098,104		879,105		877,995		732,820
Total loans	$	1,930,688	$	1,829,448	$	1,518,249	$	1,536,463	$	1,309,219

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

^ Includes $95.8 million and $79.8 million as of September 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 September 30, 2023 and December 31, 2022, commercial loans to borrowers involved in the real estate, and real estate rental and leasing businesses were 49.1% 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 September 30, 2023 and December 31, 2022.

The table below shows the maturity of loans outstanding as of September 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	$	78,173	$	106,526	$	65,834	$	3,682	$	254,215
Agricultural	—		84		185		—		269
Commercial mortgages:
Construction	34,775		33,415		71,012		1,278		140,480
Commercial mortgages	41,479		233,149		642,520		28,905		946,053
Residential mortgages	3,545		9,875		118,062		149,879		281,361
Consumer loans:
Home equity lines and loans	237		5,864		57,963		23,014		87,078
Indirect consumer loans	1,646		100,176		109,219		5		211,046
Direct consumer loans	340		6,479		1,940		1,427		10,186
Total	$	160,195	$	495,568	$	1,066,735	$	208,190	$	1,930,688

Loans maturing with fixed interest rates:	After One But Within Five Years		After Five But Within 15 Years		After 15 Years		Total
Commercial and agricultural:
Commercial and industrial	$	65,775	$	31,803	$	434	$	98,012
Agricultural	16		185		—		201
Commercial mortgages:
Construction	5,205		16,887		650		22,742
Commercial mortgages	129,063		157,946		2,752		289,761
Residential mortgages	9,424		113,625		104,157		227,206
Consumer loans:
Home equity lines and loans	5,155		46,490		727		52,372
Indirect consumer loans	100,176		109,219		5		209,400
Direct consumer loans	6,391		981		201		7,573
Total	$	321,205	$	477,136	$	108,926	$	907,267

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Loans maturing with variable interest rates:	After One But Within Five Years		After Five But Within 15 Years		After 15 Years		Total
Commercial and agricultural:
Commercial and industrial	$	40,429	$	34,348	$	3,248	$	78,025
Agricultural	68		—		—		68
Commercial mortgages:							—
Construction	28,272		54,033		628		82,933
Commercial mortgages	104,275		484,093		26,481		614,849
Residential mortgages	520		4,741		45,342		50,603
Consumer loans:							—
Home equity lines and loans	712		11,418		22,338		34,468
Indirect consumer loans	—		—		—		—
Direct consumer loans	87		966		1,227		2,280
Total	$	174,363	$	589,599	$	99,264	$	863,226

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 September 30, 2023, there were four loans being monitored under ASU 2022-02 guidance, three of which were 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 classify a loan as such. A loan may also be designated as non-accrual at any time if payment of principal or interest in full is not expected due to deterioration in the financial condition of the borrower. At the time loans are placed in non-accrual status, the accrual of interest is discontinued and previously accrued interest is reversed. All payments received on non-accrual loans are applied to principal. Loans are considered for return to accrual status when they become current as to principal and interest and remain current for a period of six consecutive months or when, in the opinion of management, the Corporation expects to receive all of its original principal and interest. In the case of non-accrual loans where a portion of the loan has been charged off, the remaining balance is kept in non-accrual status until the entire principal balance has been recovered.

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

NON-PERFORMING ASSETS
	September 30, 2023			December 31, 2022
Non-accrual loans	$	6,826		$	4,143
Non-accrual troubled debt restructurings	—			4,035
Total non-performing loans	6,826			8,178
Other real estate owned	229			195
Total non-performing assets	$	7,055		$	8,373
Ratio of non-performing loans to total loans	0.35		%	0.45		%
Ratio of non-performing assets to total assets	0.26		%	0.32		%
Ratio of allowance for credit losses to non-performing loans	296.69		%	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.

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Non-Performing Loans

Non-performing loans totaled $6.8 million, or 0.35% of total loans at September 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 $7.1 million, or 0.26% of total assets, at September 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 paydown activity on non-performing commercial loans, the removal of a large commercial and industrial loan from non-accrual status, and the charge-off of one commercial and industrial loan, offset by the addition of a few smaller commercial loans to non-performing status. 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 September 30, 2023, the Corporation had four loans that were modified under the new accounting guidance, term extensions on two commercial mortgages and one home equity loan, as well as a four month payment delay deemed to be greater than insignificant on a commercial mortgage. As of September 30, 2023, the commercial mortgages and home equity loan that were given term extensions were all considered to be performing, while the commercial mortgage that was given a payment delay is currently non-accrual.

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. This differs from the definition of loans considered to be impaired at December 31, 2022. The amortized cost basis of individually analyzed loans at September 30, 2023 totaled $5.0 million, compared to impaired loans of $7.5 million at December 31, 2022. Included in the amortized cost basis of individually analyzed loans at September 30, 2023, were loans totaling $1.2 million for which 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.

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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 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 $20.3 million at September 30, 2023, and the allowance for loan losses was $19.7 million at December 31, 2022. The allowance for credit losses was 296.69% of non-performing loans at September 30, 2023 compared to 240.39% of the allowance for loan losses at December 31, 2022. The ratio of allowance for credit losses to total loans was 1.05% at September 30, 2023, and the ratio of the allowance for loan losses to total loans was 1.07% at December 31, 2022. The increase in the allowance for credit losses was attributable to the impact of the implementation of ASU 2016-13, increased loan volume, and the impact of changes in the economic forecasts that the model relies on. The quantitative portion of the ACL model was impacted by improvements in the FOMC forecasted unemployment rate and U.S. GDP growth rate for both year-end 2023 and 2024, which offset additional provisioning relating to loan growth and additional qualitative provisioning in the consumer portfolio segment, in relation to economic headwinds that may adversely impact consumers in coming periods, but are not directly represented in the FOMC's forecasted data points. Net charge-offs for both the nine months ended September 30, 2023 and September 30, 2022 were $0.8 million.

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The table below summarizes the Corporation’s allowance for credit losses and non-accrual loans outstanding by loan category at September 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 September 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	$	4,146	1.63	%	$	1,032	0.41	%	401.74	%
Commercial mortgages	11,025		1.01	%	3,824		0.35	%	288.31	%
Residential mortgages	1,868		0.66	%	776		0.28	%	240.72	%
Consumer loans	3,213		1.04	%	1,194		0.39	%	269.10	%
Total	$	20,252	1.05	%	$	6,826	0.35	%	296.69	%
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 September 30, 2023 and December 31, 2022:

Consolidated Ratios	September 30, 2023		December 31, 2022
Non-performing loans to total loans	0.35	%	0.45	%
Allowance for credit losses to total loans (1)	1.05	%	1.07	%
Allowance for credit losses, inclusive of unfunded commitments, to total loans (1)	1.10	%	1.07	%
Allowance for credit losses to non-performing loans (1)	296.69	%	240.39	%

(1) December 31, 2022 ratios reflect the Corporations's allowance for loan losses

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

Credit Ratios	September 30, 2023		September 30, 2022
Commercial and agricultural	0.11	%	—	%
Commercial mortgages	—	%	—	%
Residential mortgages	—	%	(0.01)	%
Consumer loans	0.16	%	0.07	%
Total	0.06	%	0.01	%

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

SUMMARY OF CREDIT LOSS EXPERIENCE
	Nine Months Ended   September 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	281		20
Commercial mortgages	—		687
Residential mortgages	—		—
Consumer loans	785		599
Total charge-offs	$	1,066	$	1,306
Recoveries:
Commercial and agricultural	13		37
Commercial mortgages	1		3
Residential mortgages	—		40
Consumer loans	281		466
Total recoveries	$	295	$	546
Net charge-offs (recoveries)	771		760
Provision (credit) for credit losses on-balance sheet exposure1	990		(1,634)
Balance of allowance for credit losses at end of period	$	20,252	$	18,631

1 Additional provision related to off-balance sheet exposure was ($28 thousand) for the nine months ended September 30, 2023.

Other Real Estate Owned

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

Deposits

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

DEPOSITS
									September 30, 2023 v. December 31, 2022
	September 30, 2023				December 31, 2022
	Amount		% of Total		Amount		% of Total		$ Change		% Change
Non-interest-bearing demand deposits	$	683,348	27.5	%	$	733,329	31.4	%	$	(49,981)	(6.8)	%
Interest-bearing demand deposits	310,885		12.6	%	271,645		11.7	%	39,240		14.4	%
Money market accounts	626,256		25.3	%	640,840		27.5	%	(14,584)		(2.3)	%
Savings deposits	261,822		10.6	%	279,029		12.0	%	(17,207)		(6.2)	%
Certificates of deposit $250,000 or less	341,045		13.8	%	272,182		11.7	%	68,863		25.3	%
Certificates of deposit greater than $250,000	48,390		2.0	%	31,547		1.4	%	16,843		53.4	%
Brokered deposits	175,000		7.1	%	73,452		3.2	%	101,548		138.3	%
Other time deposits	26,753		1.1	%	25,203		1.1	%	1,550		6.2	%
Total	$	2,473,499	100.0	%	$	2,327,227	100.0	%	$	146,272	6.3	%

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Deposits totaled $2.473 billion at September 30, 2023 compared to $2.327 billion at December 31, 2022, an increase of $146.3 million, or 6.3%. The increase was primarily attributable to increases of $101.5 million in brokered deposits, $87.3 million in time deposits excluding brokered deposits, and $39.2 million in interest-bearing demand deposits, offset by decreases of $50.0 million in non-interest bearing demand deposits, $17.2 million in savings deposits, and $14.6 million in insured money market accounts. The growth in deposits was due primarily to increases of $101.5 million in brokered deposits, $49.3 million in ICS deposits, $16.5 million in public deposits, and $1.0 million in CDARS deposits, offset by decreases of $13.1 million in consumer deposits, and $9.7 million in commercial deposits. At September 30, 2023, demand deposit and money market accounts comprised 65.5% of total deposits compared to 70.7% at December 31, 2022. The aggregate amount of the Corporation's outstanding uninsured deposits, was 27.2% and 30.1% of total deposits, as of September 30, 2023 and December 31, 2022, respectively.

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

DEPOSITS BY DIVISION
	September 30, 2023		December 31, 2022		December 31, 2021		December 31, 2020		December 31, 2019
Chemung Canal Trust Company*	$	2,081,581	$	1,892,020	$	1,739,826	$	1,686,370	$	1,317,225
Capital Bank Division	391,918		435,207		415,607		351,404		254,913
Total	$	2,473,499	$	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 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 $418.5 million as of September 30, 2023, including $175.0 million of brokered deposits, and $368.2 million as of December 31, 2022, which included $73.5 million of brokered deposits.

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 $96.0 million to $3.1 million at September 30, 2023 from December 31, 2022, primarily attributable to a decrease in FHLBNY overnight advances of $95.8 million when compared to December 31, 2022. There were no outstanding FHLBNY term advances as of and for the nine months ended September 30, 2023, and as of and for the year ended December 31, 2022.

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Shareholders’ Equity

Total shareholders' equity increased $3.7 million from $166.4 million at December 31, 2022 to $170.1 million at September 30, 2023, primarily due to an increase in retained earnings, offset by an increase in accumulated other comprehensive loss. The increase in retained earnings of $15.7 million was due primarily to earnings of $21.2 million, offset by $4.4 million in dividends declared, and a $1.1 million one-time adjustment due to the implementation of CECL, net of deferred tax, during the nine months ended September 30, 2023. The increase in accumulated other comprehensive loss of $13.4 million can be mostly attributed to a decrease in the fair market value of the available for sale securities portfolio, due to the rising interest rate environment. Treasury stock decreased $0.7 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 6.28% at September 30, 2023 compared to 6.29% at December 31, 2022. The tangible equity to tangible assets ratio was 5.52% at September 30, 2023 compared to 5.51% at December 31, 2022. Book value per share increased to $35.90 at September 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 September 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 third quarter of 2023. As of September 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 September 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.

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 September 30, 2023, the Corporation's cash and cash equivalents balance was $75.6 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 September 30, 2023, the Corporation's investment in securities available for sale was $569.0 million, $296.3 million of which was not pledged as collateral.

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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 $220.4 million and $228.4 million of first mortgage loans under a blanket lien arrangement at September 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 $231.3 million and $195.6 million at September 30, 2023 and December 31, 2022, respectively. The Corporation did not borrow with the FHLBNY as of September 30, 2023, and borrowed FHLBNY overnight advances of $95.8 million as of December 31, 2022. The Bank's unused borrowing capacity at the Federal Home Loan Bank of New York was $231.3 million as of September 30, 2023. Borrowings may be used on a short-terms basis for liquidity purposes or on a long-term basis to fund asset growth.

Uninsured deposits totaled $671.9 million as of September 30, 2023, and $700.9 million as of December 31, 2022, which included $174.5 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 $175.0 million and $73.5 million, as of September 30, 2023 and December 31, 2022, respectively. As of September 30, 2023, all brokered deposits carried terms of three months with staggered maturities.

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 September 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.

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 September 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 September 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)	Nine Months Ended   September 30,
	2023		2022
Net cash provided by operating activities	$	27,261	$	32,685
Net cash used in investing activities	(53,842)		(175,576)
Net cash provided by financing activities	46,292		158,333
Net increase in cash and cash equivalents	$	19,711	$	15,442

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 nine months of 2023 and 2022 predominantly resulted from net income after non-cash operating adjustments.

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Investing activities

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

Capital Resources

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

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

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 September 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 September 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 September 30, 2023 and December 31, 2022 were calculated under Basel III rules. There is no threshold for well-capitalized status for bank holding companies.

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The Corporation and the Bank’s capital ratios as of September 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 September 30, 2023	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk Weighted Assets):
Consolidated	$	258,225	13.02	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	248,131	12.51	%	$	158,663	8.00	%	$	208,246	10.50	%	$	198,329	10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated	$	236,919	11.94	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	226,825	11.44	%	$	118,997	6.00	%	$	168,580	8.50	%	$	158,663	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets):
Consolidated	$	236,919	11.94	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	226,825	11.44	%	$	89,248	4.50	%	$	138,830	7.00	%	$	128,914	6.50	%
Tier 1 Capital (to Average Assets):
Consolidated	$	236,919	8.64	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	226,825	8.29	%	$	109,489	4.00	%	N/A		N/A		$	136,862	5.00	%

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	%

76

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 September 30, 2023, the Bank could, without prior approval, declare dividends of approximately $57.2 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.

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.

77

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															Nine Months Ended
NET INTEREST MARGIN - FULLY TAXABLE EQUIVALENT	Sept. 30,			June 30,			March 31,			Dec. 31,			Sept. 30,			Sept. 30,			Sept. 30,
	2023			2023			2023			2022			2022			2023			2022
Net interest income (GAAP)	$	18,017		$	18,595		$	19,947		$	20,871		$	18,990		$	56,559		$	53,308
Fully taxable equivalent adjustment	87			92			98			112			112			277			314
Fully taxable equivalent net interest income (non-GAAP)	$	18,104		$	18,687		$	20,045		$	20,983		$	19,102		$	56,836		$	53,622
Average interest-earning assets (GAAP)	$	2,627,012		$	2,609,893		$	2,592,709		$	2,550,834		$	2,457,218		$	2,609,999		$	2,408,379
Net interest margin - fully taxable equivalent (non-GAAP)	2.73		%	2.87		%	3.14		%	3.26		%	3.08		%	2.91		%	2.98		%

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.

																As of the
(in thousands, except ratio data)	As of the Three Months Ended															Nine Months Ended
EFFICIENCY RATIO	Sept. 30,			June 30,			March 31,			Dec. 31,			Sept. 30,			Sept. 30,			Sept. 30,
	2023			2023			2023			2022			2022			2023			2022
Net interest income (GAAP)	$	18,017		$	18,595		$	19,947		$	20,871		$	18,990		$	56,559		$	53,308
Fully taxable equivalent adjustment	87			92			98			112			112			277			314
Fully taxable equivalent net interest income (non-GAAP)	$	18,104		$	18,687		$	20,045		$	20,983		$	19,102		$	56,836		$	53,622
Non-interest income (GAAP)	$	7,808		$	5,447		$	5,423		$	5,418		$	5,036		$	18,678		$	16,018
Less:  recognition of employee retention tax credit	(2,370)			—			—			—			—			(2,370)			—
Adjusted non-interest income (non-GAAP)	$	5,438		$	5,447		$	5,423		$	5,418		$	5,036		$	16,308		$	16,018
Non-interest expense (GAAP)	$	15,668		$	15,913		$	15,836		$	15,693		$	14,577		$	47,417		$	43,587
Less:  amortization of intangible assets	—			—			—			—			—			—			(15)
Less: legal reserve	—			—			—			—			—			—			—
Adjusted non-interest expense (non-GAAP)	$	15,668		$	15,913		$	15,836		$	15,693		$	14,577		$	47,417		$	43,572
Efficiency ratio (unadjusted)	60.67		%	66.19		%	62.42		%	59.69		%	60.67		%	63.02		%	62.87		%
Efficiency ratio (adjusted)	66.55		%	65.94		%	62.18		%	59.44		%	60.40		%	64.83		%	62.57		%

78

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															Nine Months Ended
TANGIBLE EQUITY AND TANGIBLE ASSETS (PERIOD END)	Sept. 30,			June 30,			March 31,			Dec. 31,			Sept. 30,			Sept. 30,			Sept. 30,
	2023			2023			2023			2022			2022			2023			2022
Total shareholders' equity (GAAP)	$	170,064		$	177,426		$	177,341		$	166,388		$	155,518		$	170,064		$	155,518
Less: intangible assets	(21,824)			(21,824)			(21,824)			(21,824)			(21,824)			(21,824)			(21,824)
Tangible equity (non-GAAP)	$	148,240		$	155,602		$	155,517		$	144,564		$	133,694		$	148,240		$	133,694
Total assets (GAAP)	$	2,707,834		$	2,674,673		$	2,654,183		$	2,645,553		$	2,551,422		$	2,707,834		$	2,551,422
Less: intangible assets	(21,824)			(21,824)			(21,824)			(21,824)			(21,824)			(21,824)			(21,824)
Tangible assets (non-GAAP)	$	2,686,010		$	2,652,849		$	2,632,359		$	2,623,729		$	2,529,598		$	2,686,010		$	2,529,598
Total equity to total assets at end of period (GAAP)	6.28		%	6.63		%	6.68		%	6.29		%	6.10		%	6.28		%	6.10		%
Book value per share (GAAP)	$	35.90		$	37.49		$	37.53		$	35.32		$	33.14		$	35.90		$	33.14
Tangible equity to tangible assets at end of period (non-GAAP)	5.52		%	5.87		%	5.91		%	5.51		%	5.29		%	5.52		%	5.29		%
Tangible book value per share (non-GAAP)	$	31.29		$	32.88		$	32.91		$	30.69		$	28.49		$	31.29		$	28.49

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															Nine Months Ended
TANGIBLE EQUITY (AVERAGE)	Sept. 30,			June 30,			March 31,			Dec. 31,			Sept. 30,			Sept. 30,			Sept. 30,
	2023			2023			2023			2022			2022			2023			2022
Total average shareholders' equity (GAAP)	$	179,700		$	180,357		$	173,786		$	160,740		$	180,644		$	177,969		$	187,409
Less: average intangible assets	(21,824)			(21,824)			(21,824)			(21,824)			(21,824)			(21,824)			(21,828)
Average tangible equity (non-GAAP)	$	157,876		$	158,533		$	151,962		$	138,916		$	158,820		$	156,145		$	165,581
Return on average equity (GAAP)	16.89		%	13.97		%	16.97		%	18.36		%	14.17		%	15.93		%	15.23		%
Return on average tangible equity (non-GAAP)	19.22		%	15.89		%	19.40		%	21.25		%	16.12		%	18.15		%	17.23		%

79

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															Nine Months Ended
NON-GAAP NET INCOME	Sept. 30,			June 30,			March 31,			Dec. 31,			Sept. 30,			Sept. 30,			Sept. 30,
	2023			2023			2023			2022			2022			2023			2022
Reported net income (GAAP)	$	7,648		$	6,280		$	7,270		$	7,439		$	6,453		$	21,198		$	21,344
Recognition of employee retention tax credit	(1,873)			—			—			—			—			(1,873)			—
Non- GAAP net income	$	5,775		$	6,280		$	7,270		$	7,439		$	6,453		$	19,325		$	21,344
Average basic and diluted shares outstanding	4,736			4,729			4,721			4,698			4,692			4,729			4,691
Reported basic and diluted earnings per share (GAAP)	$	1.61		$	1.33		$	1.54		$	1.58		$	1.37		$	4.48		$	4.55
Reported return on average assets (GAAP)	1.14		%	0.95		%	1.12		%	1.15		%	1.02		%	1.07		%	1.16		%
Reported return on average equity (GAAP)	16.89		%	13.97		%	16.97		%	18.36		%	14.17		%	15.93		%	15.23		%
Non-GAAP basic and diluted earnings per share	$	1.21		$	1.33		$	1.54		$	1.58		$	1.37		$	4.08		$	4.55
Non-GAAP return on average assets	0.86		%	0.95		%	1.12		%	1.15		%	1.02		%	0.97		%	1.16		%
Non-GAAP return on average equity	12.75		%	13.97		%	16.97		%	18.36		%	14.17		%	14.52		%	15.23		%

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 September 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 3.78% and 6.16%, 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 1.59% and 3.16%, 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	3.78%
200 basis points decrease	6.16%
100 basis points increase	1.59%
200 basis points increase	3.16%

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 September 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 4.36% and 6.96% respectively. Immediate increases in interest rates of 100-basis points and 200-basis points would positively impact the market value by 0.50% and 1.17% 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	4.36%
200 basis points decrease	6.96%
100 basis points increase	0.50%
200 basis points increase	1.17%

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 and accounting officer, have evaluated the effectiveness of the Corporation's disclosure controls and procedures as of September 30, 2023 pursuant to Rule 13a-15 of the Exchange Act, as amended. Based upon that evaluation, the principal executive officer and principal financial and accounting officer have concluded that the Corporation's disclosure controls and procedures are effective as of September 30, 2023. In addition, there have been no changes in the Corporation's internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Corporation's internal control over financial reporting.

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

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 September 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, 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 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.

An unexpected decrease in deposit balances due to withdrawal activity could adversely impact the Corporation's ability to rely on organic deposits to primarily fund its operations, requiring greater reliance on secondary sources of liquidity to meet withdrawal demands or to fund continuing operations. These sources include proceeds from Federal Home Loan Bank advances, sales of investment securities and loans, 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, allowing institutions to pledge certain securities at par value, 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 advance terms 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, other investments, or liquidating assets.

For further discussion of the Corporation's liquidity practices, see pages 73-75 of this Form 10-Q.

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
July 1 - July 31, 2023	—	—		—	200,816
August 1 - August 31, 2023	—	—		—	200,816
September 1 - September 30, 2023	—	—		—	200,816
Quarter ended September 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 September 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: November 9, 2023	By:  /s/ Anders M. Tomson
	Anders M. Tomson President and Chief Executive Officer (Principal Executive Officer)

DATED: November 9, 2023	By:  /s/ Dale M. McKim, III
	Dale M. McKim, III Chief Financial Officer and Treasurer (Principal Financial and Accounting 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: November 9, 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: November 9, 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 September 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

November 9, 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 September 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

November 9, 2023

XML

COVER - shares	9 Months Ended
	Sep. 30, 2023	Nov. 01, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 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		4,722,636
Entity Central Index Key	0000763563
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands		Sep. 30, 2023	Dec. 31, 2022
ASSETS
Cash and due from financial institutions		$ 52,563	$ 29,309
Interest-earning deposits in other financial institutions		23,017	26,560
Total cash and cash equivalents		75,580	55,869
Equity investments, at estimated fair value		2,811	2,830
Securities available for sale, at estimated fair value (amortized cost of $683,837, net of allowance for credit losses of $0 at September 30, 2023; and amortized cost of $729,198, net of allowance for credit losses on securities of $0 at December 31, 2022)		569,004	632,589
Securities held to maturity, estimated fair value of $1,779 at September 30, 2023 and $2,402 at December 31, 2022 (net of allowance for credit losses of $0 at September 30, 2023 and December 31, 2022, respectively)		1,804	2,424
FHLBNY and FRBNY Stock, at cost		4,053	8,197
Loans, net of deferred loan fees		1,930,688	1,829,448
Allowance for credit losses	[1]	(20,252)	(19,659)
Loans, net		1,910,436	1,809,789
Premises and equipment, net		15,036	16,113
Operating lease right-of-use assets		5,850	6,449
Goodwill		21,824	21,824
Bank-owned life insurance		2,903	2,871
Interest rate swap assets		32,923	27,141
Accrued interest receivable and other assets		65,610	59,457
Total assets		2,707,834	2,645,553
Deposits:
Non-interest-bearing		683,348	733,329
Interest-bearing		1,790,151	1,593,898
Total deposits		2,473,499	2,327,227
FHLBNY overnight advances		0	95,810
Long term finance lease obligation		3,120	3,327
Operating lease liabilities		6,028	6,620
Dividends payable		1,463	1,455
Interest rate swap liabilities		32,923	27,196
Accrued interest payable and other liabilities		20,737	17,530
Total liabilities		2,537,770	2,479,165
Shareholders' equity:
Common stock, $0.01 par value per share, 10,000,000 shares authorized;   5,310,076 issued at September 30, 2023 and December 31, 2022		53	53
Additional paid-in capital		47,974	47,331
Retained earnings		227,596	211,859
Treasury stock, at cost; 589,004 shares at September 30, 2023 and 615,448   shares at December 31, 2022		(16,880)	(17,598)
Accumulated other comprehensive loss		(88,679)	(75,257)
Total shareholders' equity		170,064	166,388
Total liabilities and shareholders' equity		$ 2,707,834	$ 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 ($)	Sep. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Available-for-sale, amortized cost, net	$ 683,837,000	$ 729,198,000
Available-for-sale, allowance for credit loss	0	0
Securities held to maturity, estimated fair value	1,779,000	$ 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)	589,004	615,448

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Interest and dividend income:
Loans, including fees		$ 25,033,000	$ 17,670,000	$ 71,113,000	$ 47,541,000
Taxable securities		3,537,000	2,982,000	10,750,000	8,533,000
Tax exempt securities		258,000	267,000	778,000	805,000
Interest-earning deposits		187,000	80,000	400,000	116,000
Total interest and dividend income		29,015,000	20,999,000	83,041,000	56,995,000
Interest expense:
Deposits		10,721,000	1,805,000	24,577,000	3,322,000
Borrowed funds		277,000	204,000	1,905,000	365,000
Total interest expense		10,998,000	2,009,000	26,482,000	3,687,000
Net interest income		18,017,000	18,990,000	56,559,000	53,308,000
Provision (credit) for credit losses	[1]	449,000	1,255,000	962,000	(1,634,000)
Net interest income after provision for credit losses		17,568,000	17,735,000	55,597,000	54,942,000
Non-interest income:
Changes in fair value of equity investments		(68,000)	(93,000)	(99,000)	(448,000)
Net gains (losses) on sales of loans held for sale		67,000	7,000	90,000	106,000
Net gains on sales of other real estate owned		0	22,000	14,000	68,000
Net gains on sales of other real estate owned		11,000	12,000	32,000	34,000
Other		3,106,000	570,000	4,539,000	2,219,000
Total non-interest income		7,808,000	5,036,000	18,678,000	16,018,000
Non-interest expenses:
Salaries and wages		6,542,000	6,550,000	20,029,000	18,829,000
Pension and other employee benefits		1,979,000	2,024,000	5,467,000	5,679,000
Other components of net periodic pension and postretirement benefits		(174,000)	(413,000)	(522,000)	(1,224,000)
Net occupancy		1,337,000	1,269,000	4,242,000	4,065,000
Furniture and equipment		353,000	493,000	1,232,000	1,340,000
Data processing		2,480,000	2,087,000	7,334,000	6,742,000
Professional services		554,000	442,000	1,596,000	1,627,000
Amortization of intangible assets		0	0	0	15,000
Marketing and advertising		218,000	266,000	720,000	726,000
Other real estate owned		10,000	12,000	49,000	(17,000)
FDIC insurance		525,000	389,000	1,608,000	987,000
Loan expense		249,000	(64,000)	789,000	327,000
Other		1,595,000	1,522,000	4,873,000	4,491,000
Total non-interest expenses		15,668,000	14,577,000	47,417,000	43,587,000
Income before income tax expense		9,708,000	8,194,000	26,858,000	27,373,000
Income tax expense		2,060,000	1,741,000	5,660,000	6,029,000
Net income		$ 7,648,000	$ 6,453,000	$ 21,198,000	$ 21,344,000
Weighted average shares outstanding, basic (in shares)		4,736	4,692	4,729	4,691
Weighted average shares outstanding, diluted (in shares)		4,736	4,692	4,729	4,691
Basic earnings per share (in dollars per share)		$ 1.61	$ 1.37	$ 4.48	$ 4.55
Diluted earnings per share (in dollars per share)		$ 1.61	$ 1.37	$ 4.48	$ 4.55
WMG fee income
Non-interest income:
Revenues from contracts with customer		$ 2,533,000	$ 2,403,000	$ 7,716,000	$ 7,788,000
Service charges on deposit accounts
Non-interest income:
Revenues from contracts with customer		1,018,000	989,000	2,918,000	2,789,000
Interchange revenue from debit card transactions
Non-interest income:
Revenues from contracts with customer		$ 1,141,000	$ 1,126,000	$ 3,468,000	$ 3,462,000

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

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Statement of Comprehensive Income [Abstract]
Net income	$ 7,648	$ 6,453	$ 21,198	$ 21,344
Other comprehensive loss
Unrealized holding losses on securities available for sale	(18,893)	(33,266)	(18,224)	(99,431)
Tax effect	(4,952)	(8,719)	(4,776)	(26,050)
Net of tax amount	(13,941)	(24,547)	(13,448)	(73,381)
Change in funded status of defined benefit pension plan and other benefit plans:
Reclassification adjustment for amortization of net actuarial loss	12	16	36	41
Total before tax effect	12	16	36	41
Tax effect	4	5	10	11
Net of tax amount	8	11	26	30
Total other comprehensive loss	(13,933)	(24,536)	(13,422)	(73,351)
Comprehensive income (loss)	$ (6,285)	$ (18,083)	$ 7,776	$ (52,007)

XML

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands		Total	Cumulative effect adjustment for the adoption of ASC 326	[2]	Cumulative Effect, Period of Adoption, Adjusted Balance	Common Stock	Common Stock Cumulative Effect, Period of Adoption, Adjusted Balance	Additional Paid-in Capital	Additional Paid-in Capital Cumulative Effect, Period of Adoption, Adjusted Balance	Retained Earnings	Retained Earnings Cumulative effect adjustment for the adoption of ASC 326	[2]	Retained Earnings Cumulative Effect, Period of Adoption, Adjusted Balance	Treasury Stock	Treasury Stock Cumulative Effect, Period of Adoption, Adjusted Balance	Accumulated Other Comprehensive Loss	Accumulated Other Comprehensive Loss Cumulative Effect, Period of Adoption, Adjusted Balance
Beginning balance at Dec. 31, 2021		$ 211,455				$ 53		$ 46,901		$ 188,877				$ (17,846)		$ (6,530)
Increase (Decrease) in Shareholders' Equity [Roll Forward]
Net income		21,344								21,344
Other comprehensive loss		(73,351)														(73,351)
Restricted stock awards		486						486
Restricted stock units for directors' deferred compensation plan		195						195
Distribution of shares of treasury stock grants for employee restricted stock awards		0						(112)						112
Cash dividends declared		(4,347)								(4,347)
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]	328						124						204
Forfeitures of shares of restricted stock awards		(2)						32						(34)
Ending balance at Sep. 30, 2022		155,518				53		47,487		205,874				(18,015)		(79,881)
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 Jun. 30, 2022		$ 174,690				53		47,196		200,870				(18,084)		(55,345)
Increase (Decrease) in Shareholders' Equity [Roll Forward]
Net income		6,453								6,453
Other comprehensive loss		(24,536)														(24,536)
Restricted stock awards		153						153
Restricted stock units for directors' deferred compensation plan		95						95
Cash dividends declared		(1,449)								(1,449)
Sale of shares of treasury stock	[1]	112						41						71
Forfeitures of shares of restricted stock awards								2						(2)
Ending balance at Sep. 30, 2022		155,518				53		47,487		205,874				(18,015)		(79,881)
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		21,198								21,198
Other comprehensive loss		(13,422)														(13,422)
Restricted stock awards		837						837
Restricted stock units for directors' deferred compensation plan		15						15
Distribution of shares of treasury stock grants for employee restricted stock awards		0						(217)						217
Cash dividends declared		(4,385)								(4,385)
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]	512						144						368
Forfeitures of shares of restricted stock awards		(1)						11						(12)
Ending balance at Sep. 30, 2023		170,064				53		47,974		227,596				(16,880)		(88,679)
Beginning balance at Jun. 30, 2023		177,426				53		47,740		221,412				(17,033)		(74,746)
Increase (Decrease) in Shareholders' Equity [Roll Forward]
Net income		7,648								7,648
Other comprehensive loss		(13,933)														(13,933)
Restricted stock awards		289						289
Restricted stock units for directors' deferred compensation plan		5						5
Distribution of shares of treasury stock grants for employee restricted stock awards		0						(86)						86
Cash dividends declared		(1,464)								(1,464)
Sale of shares of treasury stock	[1]	93						26						67
Ending balance at Sep. 30, 2023		$ 170,064				$ 53		$ 47,974		$ 227,596				$ (16,880)		$ (88,679)

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

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

XML

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Statement of Stockholders' Equity [Abstract]
Cash dividends declared (in dollars per share)	$ 0.31	$ 0.31	$ 0.93	$ 0.93
Sale of shares of treasury stock (in shares)	2,359	2,540	12,868	7,222
Forfeitures of shares of restricted stock awards (in shares)		48	326	729
Distribution of shares of treasury stock for employee restricted stock awards (in shares)	2,981		7,558	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

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)		9 Months Ended
		Sep. 30, 2023	Sep. 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$ 21,198,000	$ 21,344,000
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of right-of-use assets		599,000	588,000
Amortization of intangible assets		0	15,000
Provision for credit losses	[1]	962,000	(1,634,000)
Loss on disposal of fixed assets		3,000	20,000
Depreciation and amortization of fixed assets		1,533,000	1,691,000
Amortization of premiums on securities, net		1,880,000	3,143,000
Gain on sales of loans held for sale, net		(90,000)	(106,000)
Proceeds from sales of loans held for sale		3,064,000	342,000
Loans originated and held for sale		(2,974,000)	160,000
Net gains on sale of other real estate owned		(14,000)	(68,000)
Fair value adjustment on other real estate owned		(3,000)	0
Net change in fair value of equity investments		99,000	448,000
Proceeds from sales of trading assets		39,000	36,000
Purchase of equity investments		(119,000)	(197,000)
Increase in other assets and accrued interest receivable		(1,350,000)	(19,518,000)
Increase in accrued interest payable		3,225,000	133,000
Expense related to restricted stock units for directors' deferred compensation plan		15,000	195,000
Expense related to employee restricted stock awards		837,000	486,000
Payments on operating leases		(592,000)	(568,000)
Net gain on interest rate swaps		(55,000)	(225,000)
(Decrease) increase in other liabilities		(964,000)	26,434,000
Income from bank owned life insurance		(32,000)	(34,000)
Net cash provided by operating activities		27,261,000	32,685,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities, calls, and principal paydowns on securities available for sale		46,687,000	72,611,000
Proceeds from maturities and principal collected on securities held to maturity		619,000	1,306,000
Purchases of securities available for sale		(3,207,000)	(23,502,000)
Purchases of securities held to maturity		0	(735,000)
Purchase of FHLBNY and FRBNY stock		(42,878,000)	(3,175,000)
Redemption of FHLBNY and FRBNY stock		47,022,000	3,521,000
Proceeds from sales of fixed assets		0	125,000
Purchases of premises and equipment		(459,000)	(448,000)
Proceeds from sale of other real estate owned		154,000	279,000
Net increase in loans		(101,780,000)	(225,558,000)
Net cash used in investing activities		(53,842,000)	(175,576,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in demand deposits, interest-bearing demand accounts, savings accounts, and insured money market accounts		(42,532,000)	23,600,000
Increase in time deposits		188,804,000	153,507,000
Net change in FHLB overnight advances		(95,810,000)	(13,860,000)
Payments made on finance leases		(207,000)	(200,000)
Purchase of treasury stock		(98,000)	(695,000)
Sale of treasury stock		512,000	328,000
Cash dividends paid		(4,377,000)	(4,347,000)
Net cash provided by financing activities		46,292,000	158,333,000
Net increase in cash and cash equivalents		19,711,000	15,442,000
Cash and cash equivalents, beginning of period		55,869,000	26,981,000
Cash and cash equivalents, end of period		75,580,000	42,423,000
Cash paid for:
Interest		23,257,000	3,554,000
Income taxes		6,038,000	4,305,000
Supplemental disclosure of non-cash activity:
Transfer of loans to other real estate owned		171,000	292,000
Dividends declared, not yet paid		$ 1,463,000	$ 1,450,000

[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

9 Months Ended

Sep. 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, and $0.4 million reflected additional allowance related to the loan portfolio. 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 credit losses 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 was required to apply the loan and refinancing 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 the 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

Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative

ASU 2023-06, Disclosure Improvements, was issued in October 2023 and modifies the disclosure or presentation requirements of a variety of Topics in the Accounting Standards Codification, in response to SEC Release No. 33-10532, Disclosure Update and Simplifications, issued on August 17, 2018. The SEC identified several disclosure requirements that overlap with U.S. GAAP, but require incremental information to comply with disclosure standards in Regulations S-X and Regulation S-K. ASU 2023-06 codifies specific amendments to align the codification with SEC regulations. The effective date for each amendment is that date on which each disclosure requirement is removed from Regulation S-K and Regulation S-X. The Corporation anticipates that certain amendments will pertain to the Corporation's financial disclosures or presentation, but cannot determine with certainty which amendments are applicable until removal from Regulation S-K or Regulation S-X.

Use of Analogous Accounting Standards

Under U.S. GAAP, there is no specific guidance related to government assistance received by a for-profit entity that is not in the form of a loan, income tax credit, or revenue from a contract with a customer. Therefore, the Corporation must rely upon analogous accounting standards to determine appropriate treatment when such circumstances arise. The Corporation accounted for the recognition of the Employee Retention Tax Credit (ERTC) using ASC 958-605, Revenue Recognition for Not-for-Profit entities. ASC 958-10-15-1 specifies that certain Subtopics within ASC 958-605 also apply to business entities.

The Corporation considers the recognition of the ERTC to be analogous to the stipulations for "conditional contributions" under ASC 958-605-20. Conditional contributions have at least one barrier needing to be overcome before the recipient is entitled to the assets transferred or promised; there must be a right-of-return to the contributor; and barriers to the condition should be measurable. The Corporation recognized the gross amount of the ERTC through non-interest income during the period in which the barrier was overcome, identified as the period during which amended tax returns were filed. The Corporation incurred and recognized additional income tax expense during the period in relation to its amended tax returns.

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EARNINGS PER COMMON SHARE	9 Months Ended
	Sep. 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 4,736 and 4,692 weighted average shares outstanding for the three month periods ended September 30, 2023 and 2022, respectively. Earnings per share were computed by dividing net income by 4,729 and 4,691 weighted average shares outstanding for the nine month periods ended September 30, 2023 and 2022, respectively. There were no common stock equivalents during the three and nine month periods ended September 30, 2023 or 2022.

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SECURITIES

9 Months Ended

Sep. 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):

	September 30, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
U.S. Treasury notes and bonds	$	61,033	$	—	$	6,033	$	—	$	55,000
Mortgage-backed securities, residential	486,189		—		97,158		—		389,031
Obligations of states and political subdivisions	39,535		—		3,382		—		36,153
Corporate bonds and notes	25,750		—		5,405		—		20,345
SBA loan pools	71,330		96		2,951		—		68,475
Total	$	683,837	$	96	$	114,929	$	—	$	569,004

	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):

	September 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		—		25		—		955
Total	$	1,804	$	—	$	25	$	—	$	1,779

	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):

	September 30, 2023
	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	5,480	$	5,243	$	529	$	523
After one, but within five years	101,840		91,028		635		616
After five, but within ten years	18,528		14,821		640		640
After ten years	470		406		—		—
	126,318		111,498		1,804		1,779
Mortgage-backed securities, residential	486,189		389,031		—		—
SBA loan pools	71,330		68,475		—		—
Total	$	683,837	$	569,004	$	1,804	$	1,779

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

The following tables summarize the investment securities available for sale with unrealized losses at September 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
September 30, 2023	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury notes and bonds	$	981	$	14	$	54,019	$	6,019	$	55,000	$	6,033
Mortgage-backed securities, residential	—		—		389,031		97,158		389,031		97,158
Obligations of states and political subdivisions	16,794		1,460		19,359		1,922		36,153		3,382
Corporate bonds and notes	7,269		2,732		13,076		2,673		20,345		5,405
SBA loan pools	6,474		15		54,094		2,936		60,568		2,951
Total temporarily impaired securities	$	31,518	$	4,221	$	529,579	$	110,708	$	561,097	$	114,929

	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 September 30, 2023.

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

At September 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 September 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 September 30, 2023.

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LOANS AND ALLOWANCE FOR CREDIT LOSSES

9 Months Ended

Sep. 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):

	September 30, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	254,215	$	252,044
Agricultural	269		249
Commercial mortgages:
Construction	140,480		108,243
Commercial mortgages, other	946,053		888,670
Residential mortgages	281,361		285,672
Consumer loans:
Home equity lines and loans	87,078		81,401
Indirect consumer loans	211,046		202,124
Direct consumer loans	10,186		11,045
Total loans, net of deferred loan fees and costs	1,930,688		1,829,448
Allowance for credit losses	(20,252)		(19,659)
Loans, net	$	1,910,436	$	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 $7.2 million at September 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 September 30, 2023 (in thousands):

	Three Months Ended September 30, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, July 1, 2023	$	4,121	$	10,994	$	1,905	$	3,152	$	20,172
Charge-offs	(81)		—		—		(350)		(431)
Recoveries	4		1		—		70		75
Net recoveries (charge-offs)	(77)		1		—		(280)		(356)
Provision (1)	102		30		(37)		341		436
Ending balance, September 30, 2023	$	4,146	$	11,025	$	1,868	$	3,213	$	20,252

(1)Additional provision related to off-balance sheet exposure was $(13)thousand for the three months ended September 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 September 30, 2022 (in thousands):

	Three Months Ended September 30, 2022
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, July 1, 2022	$	3,564	$	10,314	$	1,714	$	1,893	$	17,485
Charge-offs	—		—		—		(277)		(277)
Recoveries	6		1		40		121		168
Net recoveries (charge-offs)	6		1		40		(156)		(109)
Provision	(55)		671		42		597		1,255
Ending balance, September 30, 2022	$	3,515	$	10,986	$	1,796	$	2,334	$	18,631

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

	Nine Months Ended September 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	(281)		—		—		(785)		(1,066)
Recoveries	13		1		—		281		295
Net recoveries (charge-offs)	(268)		1		—		(504)		(771)
Provision (1)	132		143		39		676		990
Ending balance, September 30, 2023	$	4,146	$	11,025	$	1,868	$	3,213	$	20,252

(1)Additional provision related to off-balance sheet exposure was $(28) thousand for the nine months ended September 30, 2023.

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

	Nine Months Ended September 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)		—		(599)		(1,306)
Recoveries	37		3		40		466		546
Net recoveries (charge-offs)	17		(684)		40		(133)		(760)
Provision	(93)		(1,886)		(47)		392		(1,634)
Ending balance, September 30, 2022	$	3,515	$	10,986	$	1,796	$	2,334	$	18,631

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 September 30, 2023 and 2022:

	For the Three Months Ended
Allowance for credit losses on unfunded commitments	September 30, 2023		September 30, 2022
Beginning balance	$	1,041	$	—
Impact of ASC 326 adoption	—		—
Provision for unfunded commitments	13		—
Ending balance	$	1,054	$	—

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

	For the Three Months Ended
Provision for credit losses	September 30, 2023		September 30, 2022
Provision for credit losses on loans	$	436	$	1,255
Provision for unfunded commitments	13		—
Total provision (credit) for credit losses	$	449	$	1,255

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

	For the Nine Months Ended
Allowance for credit losses on unfunded commitments	September 30, 2023		September 30, 2022
Beginning balance	$	—	$	—
Impact of ASC 326 adoption	1,082		—
Provision for unfunded commitments	(28)		—
Ending balance	$	1,054	$	—

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

	For the Nine Months Ended
Provision for credit losses	September 30, 2023		September 30, 2022
Provision for credit losses on loans	$	990	$	(1,634)
Provision for unfunded commitments	(28)		—
Total provision (credit) for credit losses	$	962	$	(1,634)

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

	September 30, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually analyzed	$	1,089	$	30	$	—	$	—	$	1,119
Collectively analyzed	3,057		10,995		1,868		3,213		19,133
Total ending allowance balance	$	4,146	$	11,025	$	1,868	$	3,213	$	20,252

	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

	September 30, 2023
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually analyzed	$	1,174	$	3,825	$	—	$	—	$	4,999
Loans collectively analyzed	253,310		1,082,708		281,361		308,310		1,925,689
Total ending loans balance	$	254,484	$	1,086,533	$	281,361	$	308,310	$	1,930,688

	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 nine month periods ended September 30, 2023:

	Three Months Ended September 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	$	—	$	—	$	875	$	—	$	—	$	875	0.09	%
Home equity lines and loans	—		—		117		—		—		117		0.13	%
Total	$	—	$	—	$	992	$	—	$	—	$	992

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

	Nine Months Ended September 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	$	—	$	—	$	1,150	$	1,920	$	—	$	3,070	0.32	%
Home equity lines and loans	—		—		117		—		—		117		0.13	%
Total	$	—	$	—	$	1,267	$	1,920	$	—	$	3,187

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

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

	Three Months Ended September 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)	Weighted-average payment delay (in months)
Commercial mortgages, other	$—	—%	6	—
Home equity lines and loans	—	—%	180	—

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

	Nine Months Ended September 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)	Weighted-average payment delay (in months)
Commercial mortgages, other	$—	—%	19	4
Home equity lines and loans	—	—%	180	—

There were no loans modified to borrowers experiencing financial difficulty during the prior twelve months that experienced payment default during the three and nine month periods ended September 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. This differs from the definition of loans considered to be impaired at December 31, 2022. 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 September 30, 2023, the amortized cost basis of individually analyzed loans amounted to $5.0 million, of which $4.1 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 September 30, 2023 (in thousands):

	September 30, 2023
	Amortized Cost Basis		Related Allowance
Commercial and agricultural:
Commercial and industrial (1) (3)	$	286	$	211
Commercial mortgages:
Commercial mortgages, other (1) (2)	3,847		30
Total	$	4,133	$	241

(1) Secured by commercial real estate

(2) Secured by residential real estate

(3) Secured by business assets

As of January 1, 2023, 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 as of December 31, 2022. 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. 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 nine month periods ended September 30, 2023 and 2022 (in thousands):

	Three Months Ended   September 30, 2023				Three Months Ended   September 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	$	163	$	—	$	585	$	—
Agricultural	—		—		—		—
Commercial mortgages:
Construction	—		—		55		—
Commercial mortgages, other	3,863		3		4,150		7
Residential mortgages	—		—		846		9
Consumer loans:
Home equity lines & loans	51		—		149		—
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,268		4		1,643		2
Agricultural	14		—		—		—
Commercial mortgages:
Commercial mortgages, other	31		—		42		—
Consumer loans:
Home equity lines and loans	78		—		134		—
Total	$	5,468	$	7	$	7,604	$	18

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

	Nine Months Ended   September 30, 2023				Nine Months Ended   September 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	$	520	$	—	$	761	$	—
Agricultural	—		—		—		—
Commercial mortgages:
Construction	2		—		88		—
Commercial mortgages, other	4,052		12		4,171		14
Residential mortgages	359		—		890		19
Consumer loans:
Home equity lines & loans	123		—		157		—
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,168		13		1,545		5
Agricultural	7		—		—		—
Commercial mortgages:
Commercial mortgages, other	34		—		1,563		—
Consumer loans:
Home equity lines and loans	42		—		139		—
Total	$	6,307	$	25	$	9,314	$	38

(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 September 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
	September 30, 2023		September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	22	$	1,004	1,946		$	—	$	1
Agricultural	—		28		—		—		—
Commercial mortgages:
Construction	—		—		5		—		—
Commercial mortgages, other	3,795		3,824		3,928		—		—
Residential mortgages	776		776		986		—		—
Consumer loans:
Home equity lines and loans	565		565		760		—		—
Indirect consumer loans	621		621		540		—		—
Direct consumer loans	8		8		13		—		—
Total	$	5,787	$	6,826	$	8,178	$	—	$	1

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

	September 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	$	195	$	16	$	—	$	211	$	254,004	$	254,215
Agricultural	—		—		—		—		269		269
Commercial mortgages:
Construction	2,206		—		—		2,206		138,274		140,480
Commercial mortgages, other	1,073		4		261		1,338		944,715		946,053
Residential mortgages	1,217		63		255		1,535		279,826		281,361
Consumer loans:
Home equity lines and loans	151		49		421		621		86,457		87,078
Indirect consumer loans	1,313		312		368		1,993		209,053		211,046
Direct consumer loans	9		—		6		15		10,171		10,186
Total	$	6,164	$	444	$	1,311	$	7,919	$	1,922,769	$	1,930,688

	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 September 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	$	26,871	$	39,555	$	18,180	$	11,240	$	34,620	$	8,896	$	98,625	$	—	$	237,987
Special mention	191		—		195		—		—		442		4,142		8,765		13,735
Substandard	—		28		992		122		25		318		—		169		1,654
Doubtful	—		—		—		—		—		815		—		24		839
Total	27,062		39,583		19,367		11,362		34,645		10,471		102,767		8,958		254,215
Gross charge-offs	—		—		—		—		9		272		—		—		281
Agricultural
Pass	—		16		157		—		—		—		68		—		241
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		28		28
Doubtful	—		—		—		—		—		—		—		—		—
Total	—		16		157		—		—		—		68		28		269
Gross charge-offs	—		—		—		—		—		—		—		—		—
Construction
Pass	11,309		2,898		—		—		104		1,187		122,838		—		138,336
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		2,144		—		—		—		2,144
Doubtful	—		—		—		—		—		—		—		—		—
Total	11,309		2,898		—		—		2,248		1,187		122,838		—		140,480
Gross charge-offs	—		—		—		—		—		—		—		—		—
Commercial mortgages
Pass	76,617		213,196		124,125		94,752		39,742		170,439		199,582		—		918,453
Special mention	—		2,543		8,286		1,016		—		3,562		—		5,516		20,923
Substandard	273		1,133		350		—		—		4,794		97		—		6,647
Doubtful	—		—		—		—		—		30		—		—		30
Total	76,890		216,872		132,761		95,768		39,742		178,825		199,679		5,516		946,053
Gross charge-offs	—		—		—		—		—		—		—		—		—
Residential mortgages
Not rated	11,858		51,718		50,393		70,699		15,602		47,380		32,935		—		280,585
Substandard	—		107		63		—		173		433		—		—		776
Total	11,858		51,825		50,456		70,699		15,775		47,813		32,935		—		281,361
Gross charge-offs	—		—		—		—		—		—		—		—		—
Home equity lines and loans
Not rated	11,622		17,562		5,948		3,242		2,949		11,183		34,007		—		86,513
Substandard	—		76		—		—		—		290		199		—		565
Total	11,622		17,638		5,948		3,242		2,949		11,473		34,206		—		87,078
Gross charge-offs	—		—		—		—		—		—		12		—		12
Indirect consumer
Not rated	58,871		105,980		25,749		10,666		4,903		4,256		—		—		210,425
Substandard	105		191		128		40		44		113		—		—		621
Total	58,976		106,171		25,877		10,706		4,947		4,369		—		—		211,046
Gross charge-offs	88		276		176		94		20		45		—		—		699
Direct consumer
Not rated	2,599		3,125		945		390		108		379		2,631		—		10,177
Substandard	—		6		—		3		—		—		—		—		9
Total	2,599		3,131		945		393		108		379		2,631		—		10,186
Gross charge-offs	—		8		8		4		—		54		—		—		74
Total loans	$	200,316	$	438,134	$	235,511	$	192,170	$	100,414	$	254,517	$	495,124	$	14,502	$	1,930,688
Total gross charge-offs	$	88	$	284	$	184	$	98	$	29	$	371	$	12	$	—	$	1,066

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 September 30, 2023 (in thousands):

	Consumer Loans
September 30, 2023	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	280,585	$	86,513	$	210,425	$	10,178
Non-Performing	776		565		621		8
Total	$	281,361	$	87,078	$	211,046	$	10,186

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

9 Months Ended

Sep. 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 September 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	$	55,000	$	55,000	$	—	$	—
Mortgage-backed securities, residential	389,031		—		389,031		—
Obligations of states and political subdivisions	36,153		—		36,153		—
Corporate bonds and notes	20,345		—		12,885		7,460
SBA loan pools	68,475		—		68,475		—
Total available for sale securities	$	569,004	$	55,000	$	506,544	$	7,460
Equity investments, at fair value	$	2,318	$	2,318	$	—	$	—
Derivative assets	$	32,923	$	—	$	32,923	$	—
Financial Liabilities:
Derivative liabilities	$	32,923	$	—	$	32,923	$	—

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

Corporate Bonds:	For the Three Months Ended
Level 3 Financial Assets	September 30, 2023		September 30, 2022
Balance of recurring Level 3 assets at July 1, 2023	$	8,593	$	—
Total gains and losses for the period:	—		—
Included in other comprehensive income	190		—
Transfers into Level 3	—		—
Transfers out of Level 3	(1,323)
Balance of recurring Level 3 assets at September 30, 2023	$	7,460	$	—

Corporate Bonds:	For the Nine Months Ended
Level 3 Financial Assets	September 30, 2023		September 30, 2022
Balance of recurring Level 3 assets at January 1, 2023	$	—	$	—
Total gains and losses for the period:	—		—
Included in other comprehensive income	(1,172)		—
Transfers into Level 3	9,955		—
Transfers out of Level 3	(1,323)
Balance of recurring Level 3 assets at September 30, 2023	$	7,460	$	—

September 30, 2023	Fair Value		Valuation Techniques	Unobservable Input	Range [Weighted Average] at September 30, 2023
Corporate bonds and notes	$	7,460	Discounted cash flow	Market discount rate	12.00% -12.00% [12.00%]

There were two corporate bonds with a fair value of $1.3 million which were transferred out of Level 3 and into Level 2 during the three and nine month period ended September 30, 2023 based on the availability of observable market data for these investments.

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 at September 30, 2023 and December 31, 2022 were considered to be immaterial to the presentation of the consolidated financial statements.

FAIR VALUE OF FINANCIAL INSTRUMENTS

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

	September 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	$	52,563	$	52,563	$	—	$	—	$	52,563
Interest-earning deposits in other financial institutions	23,017		23,017		—		—		23,017
Equity investments	2,811		2,811		—		—		2,811
Securities available for sale	569,004		55,000		506,544		7,460		569,004
Securities held to maturity	1,804		—		955		824		1,779
FHLBNY and FRBNY stock	4,053		—		—		—		N/A
Loans, net and loans held for sale	1,910,436		—		—		1,830,014		1,830,014
Accrued interest receivable	9,422		233		1,957		7,232		9,422
Derivative Assets	32,923		—		32,923		—		32,923
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,882,311	$	1,882,311	$	—	$	—	$	1,882,311
Time deposits	591,188		—		593,637		—		593,637
FHLBNY overnight advances	—		—		—		—		—
Accrued interest payable	4,089		121		3,968		—		4,089
Derivative Liabilities	32,923		—		32,923		—		32,923

(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		66		798		—		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

9 Months Ended

Sep. 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 September 30, 2023, the weighted average remaining lease term was 8.03 years with a weighted average discount rate of 3.38%. Rent expense was $0.2 million for the three months ended September 30, 2023. Rent expense was $0.7 million for the nine months ended September 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 September 30, 2023 and December 31, 2022 consist of the following (in thousands):

	September 30, 2023		December 31, 2022
Operating lease right-of-use asset	$	6,449	$	7,234
Less: accumulated amortization	(599)		(785)
Less: lease termination	—		—
Add: new lease agreement and modifications	—		—
Operating lease right-of-use-assets, net	$	5,850	$	6,449

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

Year	Amount
2023	$	249
2024	924
2025	841
2026	845
2027	854
2028 and thereafter	3,168
Total minimum lease payments	6,881
Less: amount representing interest	(853)
Present value of net minimum lease payments	$	6,028

The Corporation had one operating lease that was signed on October 19, 2023, 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 September 30, 2023, the weighted average remaining lease term was 9.55 years with a weighted average discount rate of 3.41%. The Corporation has included these leases in premises and equipment as of September 30, 2023 and December 31, 2022 as follows (in thousands):

	September 30, 2023		December 31, 2022
Buildings	$	5,572	$	5,572
Less: accumulated depreciation	(2,789)		(2,540)
Net book value	$	2,783	$	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 September 30, 2023 (in thousands):

Year	Amount
2023	$	98
2024	391
2025	409
2026	425
2027	428
2028 and thereafter	1,987
Total minimum lease payments	3,738
Less: amount representing interest	(618)
Present value of net minimum lease payments	$	3,120

As of September 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, 2029 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 nine month period ended September 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 $28 thousand and $25 thousand for the three month periods ended September 30, 2023 and 2022, respectively. Rent and CAM related expenses paid to this Board member totaled $81 thousand and $76 thousand for the nine month periods ended September 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 September 30, 2023, the weighted average remaining lease term was 8.03 years with a weighted average discount rate of 3.38%. Rent expense was $0.2 million for the three months ended September 30, 2023. Rent expense was $0.7 million for the nine months ended September 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 September 30, 2023 and December 31, 2022 consist of the following (in thousands):

	September 30, 2023		December 31, 2022
Operating lease right-of-use asset	$	6,449	$	7,234
Less: accumulated amortization	(599)		(785)
Less: lease termination	—		—
Add: new lease agreement and modifications	—		—
Operating lease right-of-use-assets, net	$	5,850	$	6,449

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

Year	Amount
2023	$	249
2024	924
2025	841
2026	845
2027	854
2028 and thereafter	3,168
Total minimum lease payments	6,881
Less: amount representing interest	(853)
Present value of net minimum lease payments	$	6,028

The Corporation had one operating lease that was signed on October 19, 2023, 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 September 30, 2023, the weighted average remaining lease term was 9.55 years with a weighted average discount rate of 3.41%. The Corporation has included these leases in premises and equipment as of September 30, 2023 and December 31, 2022 as follows (in thousands):

	September 30, 2023		December 31, 2022
Buildings	$	5,572	$	5,572
Less: accumulated depreciation	(2,789)		(2,540)
Net book value	$	2,783	$	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 September 30, 2023 (in thousands):

Year	Amount
2023	$	98
2024	391
2025	409
2026	425
2027	428
2028 and thereafter	1,987
Total minimum lease payments	3,738
Less: amount representing interest	(618)
Present value of net minimum lease payments	$	3,120

As of September 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, 2029 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 nine month period ended September 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 $28 thousand and $25 thousand for the three month periods ended September 30, 2023 and 2022, respectively. Rent and CAM related expenses paid to this Board member totaled $81 thousand and $76 thousand for the nine month periods ended September 30, 2023 and 2022, respectively.

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GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Sep. 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 nine month periods ended September 30, 2023 and 2022 were as follows (in thousands):

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

The Corporation had no aggregate amortization expense for the three month periods ended September 30, 2023 and 2022. The Corporation had no aggregate amortization expense for the nine month period ended September 30, 2023, and $15 thousand for the nine month period ended September 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

9 Months Ended

Sep. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

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

In conjunction with the Corporation's adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), an allowance for credit losses on unfunded commitments was established as of January 1, 2023, to comply with the accounting standard requirements. As of September 30, 2023, the allowance for credit losses on unfunded commitments was $1.1 million.

The following table lists the contractual amounts of financial instruments with off-balance sheet risk at September 30, 2023 and December 31, 2022 (in thousands):

	September 30, 2023				December 31, 2022
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	32,776	$	84,198	$	44,481	$	75,028
Unused lines of credit	3,475		338,636		2,887		326,188
Standby letters of credit	—		17,987		—		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 September 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)

9 Months Ended

Sep. 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 July 1, 2023	$	(70,803)	$	(3,943)	$	(74,746)
Other comprehensive income before reclassification	(13,941)		—		(13,941)
Amounts reclassified from accumulated other comprehensive income	—		8		8
Net current period other comprehensive income (loss)	(13,941)		8		(13,933)
Balance at September 30, 2023	$	(84,744)	$	(3,935)	$	(88,679)

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at July 1, 2022	$	(51,329)	$	(4,016)	$	(55,345)
Other comprehensive income before reclassification	(24,547)		—		(24,547)
Amounts reclassified from accumulated other comprehensive income	—		11		11
Net current period other comprehensive income (loss)	(24,547)		11		(24,536)
Balance at September 30, 2022	$	(75,876)	$	(4,005)	$	(79,881)

	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	(13,448)		—		(13,448)
Amounts reclassified from accumulated other comprehensive income	—		26		26
Net current period other comprehensive income	(13,448)		26		(13,422)
Balance at September 30, 2023	$	(84,744)	$	(3,935)	$	(88,679)

	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	(73,381)		—		(73,381)
Amounts reclassified from accumulated other comprehensive income	—		30		30
Net current period other comprehensive income	(73,381)		30		(73,351)
Balance at September 30, 2022	$	(75,876)	$	(4,005)	$	(79,881)

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   September 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		16		Other components of net periodic pension and postretirement benefits
Tax effect	(4)		(5)		Income tax expense
Net of tax	8		11
Total reclassification for the period, net of tax	$	8	$	11

(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	Nine Months Ended September 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)	36		41		Other components of net periodic pension and postretirement benefits
Tax effect	(10)		(11)		Income tax expense
Net of tax	26		30
Total reclassification for the period, net of tax	$	26	$	30

(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

9 Months Ended

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

	Three Months Ended September 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	$	817	$	—	$	—	$	817
Other	201		—		—		201
Interchange revenue from debit card transactions	1,141		—		—		1,141
WMG fee income	—		2,533		—		2,533
CFS fee and commission income	—		—		243		243
Net gains (losses) on sales of OREO	—		—		—		—
Net gains on sales of loans(a)	67		—		—		67
Loan servicing fees(a)	35		—		—		35
Changes in fair value of equity investments(a)	(82)		—		14		(68)
Income from bank-owned life insurance(a)	11		—		—		11
Other(a)	2,812		—		16		2,828
Total non-interest income (loss)	$	5,002	$	2,533	$	273	$	7,808

(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 September 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	$	846	$	—	$	—	$	846
Other	143		—		—		143
Interchange revenue from debit card transactions	1,126		—		—		1,126
WMG fee income	—		2,403		—		2,403
CFS fee and commission income	—		—		251		251
Net gains (losses) on sales of OREO	22		—		—		22
Net gains on sales of loans(a)	7		—		—		7
Loan servicing fees(a)	38		—		—		38
Changes in fair value of equity investments(a)	(96)		—		3		(93)
Income from bank-owned life insurance(a)	12		—		—		12
Other(a)	319		—		(38)		281
Total non-interest income	$	2,417	$	2,403	$	216	$	5,036

(a) Not within scope of ASC 606.

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

	Nine Months Ended September 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	$	2,308	$	—	$	—	$	2,308
Other	610		—		—		610
Interchange revenue from debit card transactions	3,468		—		—		3,468
WMG fee income	—		7,716		—		7,716
CFS fee and commission income	—		—		749		749
Net gains (losses) on sales of OREO	14		—		—		14
Net gains on sales of loans(a)	90		—		—		90
Loan servicing fees(a)	107		—		—		107
Net gains on sales of securities(a)	—		—		—		—
Changes in fair value of equity investments(a)	67		—		(166)		(99)
Income from bank-owned life insurance(a)	32		—		—		32
Other(a)	3,658		—		25		3,683
Total non-interest income	$	10,354	$	7,716	$	608	$	18,678

(a) Not within scope of ASC 606.

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

	Nine Months Ended September 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	$	2,246	$	—	$	—	$	2,246
Other	543		—		—		543
Interchange revenue from debit card transactions	3,462		—		—		3,462
WMG fee income	—		7,788		—		7,788
CFS fee and commission income	—		—		775		775
Net gains on sales of OREO	68		—		—		68
Net gains on sales of loans(a)	106		—		—		106
Loan servicing fees(a)	115		—		—		115
Net gains on sales of securities(a)	—		—		—		—
Change in fair value of equity securities(a)	(446)		—		(2)		(448)
Income from bank-owned life insurance(a)	34		—		—		34
Other(a)	1,424		—		(95)		1,329
Total non-interest income	$	7,552	$	7,788	$	678	$	16,018

(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

9 Months Ended

Sep. 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   September 30,				Nine Months Ended   September 30,
	2023		2022		2023		2022
Qualified Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	396		282		1,189		848
Expected return on plan assets	(596)		(720)		(1,786)		(2,141)
Amortization of unrecognized transition obligation	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	6		—		17		—
Net periodic pension benefit	$	(194)	$	(438)	$	(580)	$	(1,293)
Supplemental Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	12		8		35		25
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	2		6		6		15
Net periodic supplemental pension cost	$	14	$	14	$	41	$	40
Postretirement Plan, Medical and Life
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	1		1		3		3
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	5		10		14		26
Net periodic postretirement, medical and life benefit	$	6	$	11	$	17	$	29

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SEGMENT REPORTING

9 Months Ended

Sep. 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 September 30, 2023
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	28,979	$	—	$	36	$	29,015
Interest expense	10,998		—		—		10,998
Net interest income	17,981		—		36		18,017
Provision for credit losses	449		—		—		449
Net interest income after provision for credit losses	17,532		—		36		17,568
Other non-interest income	5,002		2,533		273		7,808
Other non-interest expenses	13,597		1,796		275		15,668
Income (loss) before income tax expense (benefit)	8,937		737		34		9,708
Income tax expense (benefit)	1,908		161		(9)		2,060
Segment net income (loss)	$	7,029	$	576	$	43	$	7,648

	Three months ended September 30, 2022
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	20,983	$	—	$	16	$	20,999
Interest expense	2,009		—		—		2,009
Net interest income	18,974		—		16		18,990
Provision for credit losses	1,255		—		—		1,255
Net interest income after provision for credit losses	17,719		—		16		17,735
Other non-interest income	2,417		2,403		216		5,036
Legal accruals and settlements	—		—		—		—
Other non-interest expenses	12,559		1,715		303		14,577
Income (loss) before income tax expense (benefit)	7,577		688		(71)		8,194
Income tax expense (benefit)	1,590		167		(16)		1,741
Segment net income (loss)	$	5,987	$	521	$	(55)	$	6,453

	Nine months ended September 30, 2023
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	82,939	$	—	$	102	$	83,041
Interest expense	26,482		—		—		26,482
Net interest income	56,457		—		102		56,559
Provision for credit losses	962		—		—		962
Net interest income after provision for credit losses	55,495		—		102		55,597
Other non-interest income	10,354		7,716		608		18,678
Other non-interest expenses	41,187		5,293		937		47,417
Income (loss) before income tax expense (benefit)	24,662		2,423		(227)		26,858
Income tax expense (benefit)	5,215		536		(91)		5,660
Segment net income (loss)	$	19,447	$	1,887	$	(136)	$	21,198
Segment assets	$	2,701,959	$	2,596	$	3,279	$	2,707,834

	Nine months ended September 30, 2022
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	56,965	$	—	$	30	$	56,995
Interest expense	3,687		—		—		3,687
Net interest income	53,278		—		30		53,308
Provision for credit losses	(1,634)		—		—		(1,634)
Net interest income after provision for credit losses	54,912		—		30		54,942
Other non-interest income	7,552		7,788		678		16,018
Legal accruals and settlements	—		—		—		—
Other non-interest expenses	37,316		5,180		1,091		43,587
Income (loss) before income tax expense (benefit)	25,148		2,608		(383)		27,373
Income tax expense (benefit)	5,523		605		(99)		6,029
Segment net income (loss)	$	19,625	$	2,003	$	(284)	$	21,344
Segment assets	$	2,544,528	$	2,804	$	4,090	$	2,551,422

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STOCK COMPENSATION

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

STOCK COMPENSATION

STOCK COMPENSATION

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

During the nine months ended September 30, 2023 and 2022, 16,050 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 or a five 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 September 30, 2023 and 2022, respectively. Total expense related to the 2021 Plan of $0.7 million and $0.8 million was recognized during each of the nine month periods ended September 30, 2023 and 2022, respectively.

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

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at July 1, 2023	54,002	$44.68
Granted	2,981	$38.59
Vested	(139)	$43.34
Forfeited or cancelled	—	—
Nonvested at September 30, 2023	56,844	$44.40

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at January 1, 2023	55,402	$44.57
Granted	16,050	$44.53
Vested	(14,282)	$45.36
Forfeited or cancelled	(326)	$43.73
Nonvested at September 30, 2023	56,844	$44.40

As of September 30, 2023, there was $1.7 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 3.50 years. The total fair value of shares vested was $0.6 million and $0.1 million for the nine month periods ended September 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	9 Months Ended
	Sep. 30, 2023
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	SUBSEQUENT EVENTSOn October 18, 2023, the Corporation's Board of Directors approved the dissolution of Chemung Risk Management, Inc. The impact to the Corporation is not material in nature and is expected to be completed by March 31, 2023.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 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, and $0.4 million reflected additional allowance related to the loan portfolio. 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 credit losses 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 was required to apply the loan and refinancing 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 the 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

Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative

ASU 2023-06, Disclosure Improvements, was issued in October 2023 and modifies the disclosure or presentation requirements of a variety of Topics in the Accounting Standards Codification, in response to SEC Release No. 33-10532, Disclosure Update and Simplifications, issued on August 17, 2018. The SEC identified several disclosure requirements that overlap with U.S. GAAP, but require incremental information to comply with disclosure standards in Regulations S-X and Regulation S-K. ASU 2023-06 codifies specific amendments to align the codification with SEC regulations. The effective date for each amendment is that date on which each disclosure requirement is removed from Regulation S-K and Regulation S-X. The Corporation anticipates that certain amendments will pertain to the Corporation's financial disclosures or presentation, but cannot determine with certainty which amendments are applicable until removal from Regulation S-K or Regulation S-X.

Use of Analogous Accounting Standards

Under U.S. GAAP, there is no specific guidance related to government assistance received by a for-profit entity that is not in the form of a loan, income tax credit, or revenue from a contract with a customer. Therefore, the Corporation must rely upon analogous accounting standards to determine appropriate treatment when such circumstances arise. The Corporation accounted for the recognition of the Employee Retention Tax Credit (ERTC) using ASC 958-605, Revenue Recognition for Not-for-Profit entities. ASC 958-10-15-1 specifies that certain Subtopics within ASC 958-605 also apply to business entities.

The Corporation considers the recognition of the ERTC to be analogous to the stipulations for "conditional contributions" under ASC 958-605-20. Conditional contributions have at least one barrier needing to be overcome before the recipient is entitled to the assets transferred or promised; there must be a right-of-return to the contributor; and barriers to the condition should be measurable. The Corporation recognized the gross amount of the ERTC through non-interest income during the period in which the barrier was overcome, identified as the period during which amended tax returns were filed. The Corporation incurred and recognized additional income tax expense during the period in relation to its amended tax returns.

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)

9 Months Ended

Sep. 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):

	September 30, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
U.S. Treasury notes and bonds	$	61,033	$	—	$	6,033	$	—	$	55,000
Mortgage-backed securities, residential	486,189		—		97,158		—		389,031
Obligations of states and political subdivisions	39,535		—		3,382		—		36,153
Corporate bonds and notes	25,750		—		5,405		—		20,345
SBA loan pools	71,330		96		2,951		—		68,475
Total	$	683,837	$	96	$	114,929	$	—	$	569,004

	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):

	September 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		—		25		—		955
Total	$	1,804	$	—	$	25	$	—	$	1,779

	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):

	September 30, 2023
	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	5,480	$	5,243	$	529	$	523
After one, but within five years	101,840		91,028		635		616
After five, but within ten years	18,528		14,821		640		640
After ten years	470		406		—		—
	126,318		111,498		1,804		1,779
Mortgage-backed securities, residential	486,189		389,031		—		—
SBA loan pools	71,330		68,475		—		—
Total	$	683,837	$	569,004	$	1,804	$	1,779

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

The following tables summarize the investment securities available for sale with unrealized losses at September 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
September 30, 2023	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury notes and bonds	$	981	$	14	$	54,019	$	6,019	$	55,000	$	6,033
Mortgage-backed securities, residential	—		—		389,031		97,158		389,031		97,158
Obligations of states and political subdivisions	16,794		1,460		19,359		1,922		36,153		3,382
Corporate bonds and notes	7,269		2,732		13,076		2,673		20,345		5,405
SBA loan pools	6,474		15		54,094		2,936		60,568		2,951
Total temporarily impaired securities	$	31,518	$	4,221	$	529,579	$	110,708	$	561,097	$	114,929

	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)

9 Months Ended

Sep. 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):

	September 30, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	254,215	$	252,044
Agricultural	269		249
Commercial mortgages:
Construction	140,480		108,243
Commercial mortgages, other	946,053		888,670
Residential mortgages	281,361		285,672
Consumer loans:
Home equity lines and loans	87,078		81,401
Indirect consumer loans	211,046		202,124
Direct consumer loans	10,186		11,045
Total loans, net of deferred loan fees and costs	1,930,688		1,829,448
Allowance for credit losses	(20,252)		(19,659)
Loans, net	$	1,910,436	$	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 September 30, 2023 (in thousands):

	Three Months Ended September 30, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, July 1, 2023	$	4,121	$	10,994	$	1,905	$	3,152	$	20,172
Charge-offs	(81)		—		—		(350)		(431)
Recoveries	4		1		—		70		75
Net recoveries (charge-offs)	(77)		1		—		(280)		(356)
Provision (1)	102		30		(37)		341		436
Ending balance, September 30, 2023	$	4,146	$	11,025	$	1,868	$	3,213	$	20,252

(1)Additional provision related to off-balance sheet exposure was $(13)thousand for the three months ended September 30, 2023.

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

	Three Months Ended September 30, 2022
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance, July 1, 2022	$	3,564	$	10,314	$	1,714	$	1,893	$	17,485
Charge-offs	—		—		—		(277)		(277)
Recoveries	6		1		40		121		168
Net recoveries (charge-offs)	6		1		40		(156)		(109)
Provision	(55)		671		42		597		1,255
Ending balance, September 30, 2022	$	3,515	$	10,986	$	1,796	$	2,334	$	18,631

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

	Nine Months Ended September 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	(281)		—		—		(785)		(1,066)
Recoveries	13		1		—		281		295
Net recoveries (charge-offs)	(268)		1		—		(504)		(771)
Provision (1)	132		143		39		676		990
Ending balance, September 30, 2023	$	4,146	$	11,025	$	1,868	$	3,213	$	20,252

(1)Additional provision related to off-balance sheet exposure was $(28) thousand for the nine months ended September 30, 2023.

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

	Nine Months Ended September 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)		—		(599)		(1,306)
Recoveries	37		3		40		466		546
Net recoveries (charge-offs)	17		(684)		40		(133)		(760)
Provision	(93)		(1,886)		(47)		392		(1,634)
Ending balance, September 30, 2022	$	3,515	$	10,986	$	1,796	$	2,334	$	18,631

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

	For the Three Months Ended
Allowance for credit losses on unfunded commitments	September 30, 2023		September 30, 2022
Beginning balance	$	1,041	$	—
Impact of ASC 326 adoption	—		—
Provision for unfunded commitments	13		—
Ending balance	$	1,054	$	—

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

	For the Three Months Ended
Provision for credit losses	September 30, 2023		September 30, 2022
Provision for credit losses on loans	$	436	$	1,255
Provision for unfunded commitments	13		—
Total provision (credit) for credit losses	$	449	$	1,255

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

	For the Nine Months Ended
Allowance for credit losses on unfunded commitments	September 30, 2023		September 30, 2022
Beginning balance	$	—	$	—
Impact of ASC 326 adoption	1,082		—
Provision for unfunded commitments	(28)		—
Ending balance	$	1,054	$	—

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

	For the Nine Months Ended
Provision for credit losses	September 30, 2023		September 30, 2022
Provision for credit losses on loans	$	990	$	(1,634)
Provision for unfunded commitments	(28)		—
Total provision (credit) for credit losses	$	962	$	(1,634)

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

	September 30, 2023
Allowance for credit losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually analyzed	$	1,089	$	30	$	—	$	—	$	1,119
Collectively analyzed	3,057		10,995		1,868		3,213		19,133
Total ending allowance balance	$	4,146	$	11,025	$	1,868	$	3,213	$	20,252

	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

	September 30, 2023
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually analyzed	$	1,174	$	3,825	$	—	$	—	$	4,999
Loans collectively analyzed	253,310		1,082,708		281,361		308,310		1,925,689
Total ending loans balance	$	254,484	$	1,086,533	$	281,361	$	308,310	$	1,930,688

	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 nine month periods ended September 30, 2023:

	Three Months Ended September 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	$	—	$	—	$	875	$	—	$	—	$	875	0.09	%
Home equity lines and loans	—		—		117		—		—		117		0.13	%
Total	$	—	$	—	$	992	$	—	$	—	$	992

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

	Nine Months Ended September 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	$	—	$	—	$	1,150	$	1,920	$	—	$	3,070	0.32	%
Home equity lines and loans	—		—		117		—		—		117		0.13	%
Total	$	—	$	—	$	1,267	$	1,920	$	—	$	3,187

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

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

	Three Months Ended September 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)	Weighted-average payment delay (in months)
Commercial mortgages, other	$—	—%	6	—
Home equity lines and loans	—	—%	180	—

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

	Nine Months Ended September 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)	Weighted-average payment delay (in months)
Commercial mortgages, other	$—	—%	19	4
Home equity lines and loans	—	—%	180	—

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 September 30, 2023 (in thousands):

	September 30, 2023
	Amortized Cost Basis		Related Allowance
Commercial and agricultural:
Commercial and industrial (1) (3)	$	286	$	211
Commercial mortgages:
Commercial mortgages, other (1) (2)	3,847		30
Total	$	4,133	$	241

(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 nine month periods ended September 30, 2023 and 2022 (in thousands):

	Three Months Ended   September 30, 2023				Three Months Ended   September 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	$	163	$	—	$	585	$	—
Agricultural	—		—		—		—
Commercial mortgages:
Construction	—		—		55		—
Commercial mortgages, other	3,863		3		4,150		7
Residential mortgages	—		—		846		9
Consumer loans:
Home equity lines & loans	51		—		149		—
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,268		4		1,643		2
Agricultural	14		—		—		—
Commercial mortgages:
Commercial mortgages, other	31		—		42		—
Consumer loans:
Home equity lines and loans	78		—		134		—
Total	$	5,468	$	7	$	7,604	$	18

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

	Nine Months Ended   September 30, 2023				Nine Months Ended   September 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	$	520	$	—	$	761	$	—
Agricultural	—		—		—		—
Commercial mortgages:
Construction	2		—		88		—
Commercial mortgages, other	4,052		12		4,171		14
Residential mortgages	359		—		890		19
Consumer loans:
Home equity lines & loans	123		—		157		—
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,168		13		1,545		5
Agricultural	7		—		—		—
Commercial mortgages:
Commercial mortgages, other	34		—		1,563		—
Consumer loans:
Home equity lines and loans	42		—		139		—
Total	$	6,307	$	25	$	9,314	$	38

(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 September 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
	September 30, 2023		September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Commercial and agricultural:
Commercial and industrial	$	22	$	1,004	1,946		$	—	$	1
Agricultural	—		28		—		—		—
Commercial mortgages:
Construction	—		—		5		—		—
Commercial mortgages, other	3,795		3,824		3,928		—		—
Residential mortgages	776		776		986		—		—
Consumer loans:
Home equity lines and loans	565		565		760		—		—
Indirect consumer loans	621		621		540		—		—
Direct consumer loans	8		8		13		—		—
Total	$	5,787	$	6,826	$	8,178	$	—	$	1

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

	September 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	$	195	$	16	$	—	$	211	$	254,004	$	254,215
Agricultural	—		—		—		—		269		269
Commercial mortgages:
Construction	2,206		—		—		2,206		138,274		140,480
Commercial mortgages, other	1,073		4		261		1,338		944,715		946,053
Residential mortgages	1,217		63		255		1,535		279,826		281,361
Consumer loans:
Home equity lines and loans	151		49		421		621		86,457		87,078
Indirect consumer loans	1,313		312		368		1,993		209,053		211,046
Direct consumer loans	9		—		6		15		10,171		10,186
Total	$	6,164	$	444	$	1,311	$	7,919	$	1,922,769	$	1,930,688

	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 September 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	$	26,871	$	39,555	$	18,180	$	11,240	$	34,620	$	8,896	$	98,625	$	—	$	237,987
Special mention	191		—		195		—		—		442		4,142		8,765		13,735
Substandard	—		28		992		122		25		318		—		169		1,654
Doubtful	—		—		—		—		—		815		—		24		839
Total	27,062		39,583		19,367		11,362		34,645		10,471		102,767		8,958		254,215
Gross charge-offs	—		—		—		—		9		272		—		—		281
Agricultural
Pass	—		16		157		—		—		—		68		—		241
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		28		28
Doubtful	—		—		—		—		—		—		—		—		—
Total	—		16		157		—		—		—		68		28		269
Gross charge-offs	—		—		—		—		—		—		—		—		—
Construction
Pass	11,309		2,898		—		—		104		1,187		122,838		—		138,336
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		2,144		—		—		—		2,144
Doubtful	—		—		—		—		—		—		—		—		—
Total	11,309		2,898		—		—		2,248		1,187		122,838		—		140,480
Gross charge-offs	—		—		—		—		—		—		—		—		—
Commercial mortgages
Pass	76,617		213,196		124,125		94,752		39,742		170,439		199,582		—		918,453
Special mention	—		2,543		8,286		1,016		—		3,562		—		5,516		20,923
Substandard	273		1,133		350		—		—		4,794		97		—		6,647
Doubtful	—		—		—		—		—		30		—		—		30
Total	76,890		216,872		132,761		95,768		39,742		178,825		199,679		5,516		946,053
Gross charge-offs	—		—		—		—		—		—		—		—		—
Residential mortgages
Not rated	11,858		51,718		50,393		70,699		15,602		47,380		32,935		—		280,585
Substandard	—		107		63		—		173		433		—		—		776
Total	11,858		51,825		50,456		70,699		15,775		47,813		32,935		—		281,361
Gross charge-offs	—		—		—		—		—		—		—		—		—
Home equity lines and loans
Not rated	11,622		17,562		5,948		3,242		2,949		11,183		34,007		—		86,513
Substandard	—		76		—		—		—		290		199		—		565
Total	11,622		17,638		5,948		3,242		2,949		11,473		34,206		—		87,078
Gross charge-offs	—		—		—		—		—		—		12		—		12
Indirect consumer
Not rated	58,871		105,980		25,749		10,666		4,903		4,256		—		—		210,425
Substandard	105		191		128		40		44		113		—		—		621
Total	58,976		106,171		25,877		10,706		4,947		4,369		—		—		211,046
Gross charge-offs	88		276		176		94		20		45		—		—		699
Direct consumer
Not rated	2,599		3,125		945		390		108		379		2,631		—		10,177
Substandard	—		6		—		3		—		—		—		—		9
Total	2,599		3,131		945		393		108		379		2,631		—		10,186
Gross charge-offs	—		8		8		4		—		54		—		—		74
Total loans	$	200,316	$	438,134	$	235,511	$	192,170	$	100,414	$	254,517	$	495,124	$	14,502	$	1,930,688
Total gross charge-offs	$	88	$	284	$	184	$	98	$	29	$	371	$	12	$	—	$	1,066

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 September 30, 2023 (in thousands):

	Consumer Loans
September 30, 2023	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	280,585	$	86,513	$	210,425	$	10,178
Non-Performing	776		565		621		8
Total	$	281,361	$	87,078	$	211,046	$	10,186

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)

9 Months Ended

Sep. 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 September 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	$	55,000	$	55,000	$	—	$	—
Mortgage-backed securities, residential	389,031		—		389,031		—
Obligations of states and political subdivisions	36,153		—		36,153		—
Corporate bonds and notes	20,345		—		12,885		7,460
SBA loan pools	68,475		—		68,475		—
Total available for sale securities	$	569,004	$	55,000	$	506,544	$	7,460
Equity investments, at fair value	$	2,318	$	2,318	$	—	$	—
Derivative assets	$	32,923	$	—	$	32,923	$	—
Financial Liabilities:
Derivative liabilities	$	32,923	$	—	$	32,923	$	—

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

Corporate Bonds:	For the Three Months Ended
Level 3 Financial Assets	September 30, 2023		September 30, 2022
Balance of recurring Level 3 assets at July 1, 2023	$	8,593	$	—
Total gains and losses for the period:	—		—
Included in other comprehensive income	190		—
Transfers into Level 3	—		—
Transfers out of Level 3	(1,323)
Balance of recurring Level 3 assets at September 30, 2023	$	7,460	$	—

Corporate Bonds:	For the Nine Months Ended
Level 3 Financial Assets	September 30, 2023		September 30, 2022
Balance of recurring Level 3 assets at January 1, 2023	$	—	$	—
Total gains and losses for the period:	—		—
Included in other comprehensive income	(1,172)		—
Transfers into Level 3	9,955		—
Transfers out of Level 3	(1,323)
Balance of recurring Level 3 assets at September 30, 2023	$	7,460	$	—

September 30, 2023	Fair Value		Valuation Techniques	Unobservable Input	Range [Weighted Average] at September 30, 2023
Corporate bonds and notes	$	7,460	Discounted cash flow	Market discount rate	12.00% -12.00% [12.00%]

Schedule of Carrying Value and Estimated Fair Value of Financial Instruments

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

	September 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	$	52,563	$	52,563	$	—	$	—	$	52,563
Interest-earning deposits in other financial institutions	23,017		23,017		—		—		23,017
Equity investments	2,811		2,811		—		—		2,811
Securities available for sale	569,004		55,000		506,544		7,460		569,004
Securities held to maturity	1,804		—		955		824		1,779
FHLBNY and FRBNY stock	4,053		—		—		—		N/A
Loans, net and loans held for sale	1,910,436		—		—		1,830,014		1,830,014
Accrued interest receivable	9,422		233		1,957		7,232		9,422
Derivative Assets	32,923		—		32,923		—		32,923
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,882,311	$	1,882,311	$	—	$	—	$	1,882,311
Time deposits	591,188		—		593,637		—		593,637
FHLBNY overnight advances	—		—		—		—		—
Accrued interest payable	4,089		121		3,968		—		4,089
Derivative Liabilities	32,923		—		32,923		—		32,923

(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		66		798		—		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)

9 Months Ended

Sep. 30, 2023

Leases [Abstract]

Schedule of Leased Branch Properties

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

	September 30, 2023		December 31, 2022
Operating lease right-of-use asset	$	6,449	$	7,234
Less: accumulated amortization	(599)		(785)
Less: lease termination	—		—
Add: new lease agreement and modifications	—		—
Operating lease right-of-use-assets, net	$	5,850	$	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 September 30, 2023 (in thousands):

Year	Amount
2023	$	249
2024	924
2025	841
2026	845
2027	854
2028 and thereafter	3,168
Total minimum lease payments	6,881
Less: amount representing interest	(853)
Present value of net minimum lease payments	$	6,028

Schedule of Leases in Premises and Equipment

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

	September 30, 2023		December 31, 2022
Buildings	$	5,572	$	5,572
Less: accumulated depreciation	(2,789)		(2,540)
Net book value	$	2,783	$	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 September 30, 2023 (in thousands):

Year	Amount
2023	$	98
2024	391
2025	409
2026	425
2027	428
2028 and thereafter	1,987
Total minimum lease payments	3,738
Less: amount representing interest	(618)
Present value of net minimum lease payments	$	3,120

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GOODWILL AND INTANGIBLE ASSETS (Tables)

9 Months Ended

Sep. 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 nine month periods ended September 30, 2023 and 2022 were as follows (in thousands):

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

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COMMITMENTS AND CONTINGENCIES (Tables)

9 Months Ended

Sep. 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 September 30, 2023 and December 31, 2022 (in thousands):

	September 30, 2023				December 31, 2022
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	32,776	$	84,198	$	44,481	$	75,028
Unused lines of credit	3,475		338,636		2,887		326,188
Standby letters of credit	—		17,987		—		17,211

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)

9 Months Ended

Sep. 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 July 1, 2023	$	(70,803)	$	(3,943)	$	(74,746)
Other comprehensive income before reclassification	(13,941)		—		(13,941)
Amounts reclassified from accumulated other comprehensive income	—		8		8
Net current period other comprehensive income (loss)	(13,941)		8		(13,933)
Balance at September 30, 2023	$	(84,744)	$	(3,935)	$	(88,679)

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at July 1, 2022	$	(51,329)	$	(4,016)	$	(55,345)
Other comprehensive income before reclassification	(24,547)		—		(24,547)
Amounts reclassified from accumulated other comprehensive income	—		11		11
Net current period other comprehensive income (loss)	(24,547)		11		(24,536)
Balance at September 30, 2022	$	(75,876)	$	(4,005)	$	(79,881)

	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	(13,448)		—		(13,448)
Amounts reclassified from accumulated other comprehensive income	—		26		26
Net current period other comprehensive income	(13,448)		26		(13,422)
Balance at September 30, 2023	$	(84,744)	$	(3,935)	$	(88,679)

	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	(73,381)		—		(73,381)
Amounts reclassified from accumulated other comprehensive income	—		30		30
Net current period other comprehensive income	(73,381)		30		(73,351)
Balance at September 30, 2022	$	(75,876)	$	(4,005)	$	(79,881)

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   September 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		16		Other components of net periodic pension and postretirement benefits
Tax effect	(4)		(5)		Income tax expense
Net of tax	8		11
Total reclassification for the period, net of tax	$	8	$	11

(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	Nine Months Ended September 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)	36		41		Other components of net periodic pension and postretirement benefits
Tax effect	(10)		(11)		Income tax expense
Net of tax	26		30
Total reclassification for the period, net of tax	$	26	$	30

(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)

9 Months Ended

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

	Three Months Ended September 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	$	817	$	—	$	—	$	817
Other	201		—		—		201
Interchange revenue from debit card transactions	1,141		—		—		1,141
WMG fee income	—		2,533		—		2,533
CFS fee and commission income	—		—		243		243
Net gains (losses) on sales of OREO	—		—		—		—
Net gains on sales of loans(a)	67		—		—		67
Loan servicing fees(a)	35		—		—		35
Changes in fair value of equity investments(a)	(82)		—		14		(68)
Income from bank-owned life insurance(a)	11		—		—		11
Other(a)	2,812		—		16		2,828
Total non-interest income (loss)	$	5,002	$	2,533	$	273	$	7,808

(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 September 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	$	846	$	—	$	—	$	846
Other	143		—		—		143
Interchange revenue from debit card transactions	1,126		—		—		1,126
WMG fee income	—		2,403		—		2,403
CFS fee and commission income	—		—		251		251
Net gains (losses) on sales of OREO	22		—		—		22
Net gains on sales of loans(a)	7		—		—		7
Loan servicing fees(a)	38		—		—		38
Changes in fair value of equity investments(a)	(96)		—		3		(93)
Income from bank-owned life insurance(a)	12		—		—		12
Other(a)	319		—		(38)		281
Total non-interest income	$	2,417	$	2,403	$	216	$	5,036

(a) Not within scope of ASC 606.

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

	Nine Months Ended September 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	$	2,308	$	—	$	—	$	2,308
Other	610		—		—		610
Interchange revenue from debit card transactions	3,468		—		—		3,468
WMG fee income	—		7,716		—		7,716
CFS fee and commission income	—		—		749		749
Net gains (losses) on sales of OREO	14		—		—		14
Net gains on sales of loans(a)	90		—		—		90
Loan servicing fees(a)	107		—		—		107
Net gains on sales of securities(a)	—		—		—		—
Changes in fair value of equity investments(a)	67		—		(166)		(99)
Income from bank-owned life insurance(a)	32		—		—		32
Other(a)	3,658		—		25		3,683
Total non-interest income	$	10,354	$	7,716	$	608	$	18,678

(a) Not within scope of ASC 606.

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

	Nine Months Ended September 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	$	2,246	$	—	$	—	$	2,246
Other	543		—		—		543
Interchange revenue from debit card transactions	3,462		—		—		3,462
WMG fee income	—		7,788		—		7,788
CFS fee and commission income	—		—		775		775
Net gains on sales of OREO	68		—		—		68
Net gains on sales of loans(a)	106		—		—		106
Loan servicing fees(a)	115		—		—		115
Net gains on sales of securities(a)	—		—		—		—
Change in fair value of equity securities(a)	(446)		—		(2)		(448)
Income from bank-owned life insurance(a)	34		—		—		34
Other(a)	1,424		—		(95)		1,329
Total non-interest income	$	7,552	$	7,788	$	678	$	16,018

(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)

9 Months Ended

Sep. 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   September 30,				Nine Months Ended   September 30,
	2023		2022		2023		2022
Qualified Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	396		282		1,189		848
Expected return on plan assets	(596)		(720)		(1,786)		(2,141)
Amortization of unrecognized transition obligation	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	6		—		17		—
Net periodic pension benefit	$	(194)	$	(438)	$	(580)	$	(1,293)
Supplemental Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	12		8		35		25
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	2		6		6		15
Net periodic supplemental pension cost	$	14	$	14	$	41	$	40
Postretirement Plan, Medical and Life
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	1		1		3		3
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	5		10		14		26
Net periodic postretirement, medical and life benefit	$	6	$	11	$	17	$	29

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SEGMENT REPORTING (Tables)

9 Months Ended

Sep. 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 September 30, 2023
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	28,979	$	—	$	36	$	29,015
Interest expense	10,998		—		—		10,998
Net interest income	17,981		—		36		18,017
Provision for credit losses	449		—		—		449
Net interest income after provision for credit losses	17,532		—		36		17,568
Other non-interest income	5,002		2,533		273		7,808
Other non-interest expenses	13,597		1,796		275		15,668
Income (loss) before income tax expense (benefit)	8,937		737		34		9,708
Income tax expense (benefit)	1,908		161		(9)		2,060
Segment net income (loss)	$	7,029	$	576	$	43	$	7,648

	Three months ended September 30, 2022
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	20,983	$	—	$	16	$	20,999
Interest expense	2,009		—		—		2,009
Net interest income	18,974		—		16		18,990
Provision for credit losses	1,255		—		—		1,255
Net interest income after provision for credit losses	17,719		—		16		17,735
Other non-interest income	2,417		2,403		216		5,036
Legal accruals and settlements	—		—		—		—
Other non-interest expenses	12,559		1,715		303		14,577
Income (loss) before income tax expense (benefit)	7,577		688		(71)		8,194
Income tax expense (benefit)	1,590		167		(16)		1,741
Segment net income (loss)	$	5,987	$	521	$	(55)	$	6,453

	Nine months ended September 30, 2023
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	82,939	$	—	$	102	$	83,041
Interest expense	26,482		—		—		26,482
Net interest income	56,457		—		102		56,559
Provision for credit losses	962		—		—		962
Net interest income after provision for credit losses	55,495		—		102		55,597
Other non-interest income	10,354		7,716		608		18,678
Other non-interest expenses	41,187		5,293		937		47,417
Income (loss) before income tax expense (benefit)	24,662		2,423		(227)		26,858
Income tax expense (benefit)	5,215		536		(91)		5,660
Segment net income (loss)	$	19,447	$	1,887	$	(136)	$	21,198
Segment assets	$	2,701,959	$	2,596	$	3,279	$	2,707,834

	Nine months ended September 30, 2022
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	56,965	$	—	$	30	$	56,995
Interest expense	3,687		—		—		3,687
Net interest income	53,278		—		30		53,308
Provision for credit losses	(1,634)		—		—		(1,634)
Net interest income after provision for credit losses	54,912		—		30		54,942
Other non-interest income	7,552		7,788		678		16,018
Legal accruals and settlements	—		—		—		—
Other non-interest expenses	37,316		5,180		1,091		43,587
Income (loss) before income tax expense (benefit)	25,148		2,608		(383)		27,373
Income tax expense (benefit)	5,523		605		(99)		6,029
Segment net income (loss)	$	19,625	$	2,003	$	(284)	$	21,344
Segment assets	$	2,544,528	$	2,804	$	4,090	$	2,551,422

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STOCK COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Schedule of Restricted Stock Activity

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

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at July 1, 2023	54,002	$44.68
Granted	2,981	$38.59
Vested	(139)	$43.34
Forfeited or cancelled	—	—
Nonvested at September 30, 2023	56,844	$44.40

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at January 1, 2023	55,402	$44.57
Granted	16,050	$44.53
Vested	(14,282)	$45.36
Forfeited or cancelled	(326)	$43.73
Nonvested at September 30, 2023	56,844	$44.40

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)		Sep. 30, 2023		Jun. 30, 2023	Dec. 31, 2022		Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity		$ (170,064,000)		$ (177,426,000)	$ (166,388,000)		$ (155,518,000)	$ (174,690,000)	$ (211,455,000)
Allowance for credit losses		20,252,000	[1]	20,172,000	19,659,000	[1]	18,631,000	17,485,000	21,025,000
Unfunded Loan Commitment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit losses		1,054,000		1,041,000	0		0	0	0
Commercial Mortgages
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit losses		11,025,000		10,994,000	11,576,000		10,986,000	10,314,000	13,556,000
Consumer Loans
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit losses		3,213,000		3,152,000	2,865,000		2,334,000	1,893,000	2,075,000
Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity		$ (227,596,000)		(221,412,000)	(211,859,000)		$ (205,874,000)	(200,870,000)	(188,877,000)
Cumulative effect adjustment for the adoption of ASC 326
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity	[2]				1,076,000
Allowance for credit losses					374,000
Cumulative effect adjustment for the adoption of ASC 326 | Unfunded Loan Commitment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit losses				$ 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	[2]				$ 1,076,000

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

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

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EARNINGS PER COMMON SHARE (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Earnings Per Share [Abstract]
Weighted average shares outstanding, basic (in shares)	4,736,000	4,692,000	4,729,000	4,691,000
Weighted average shares outstanding, diluted (in shares)	4,736,000	4,692,000	4,729,000	4,691,000
Dilutive common stock equivalents (in shares)	0	0	0	0

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SECURITIES - Securities Available for Sale (Details) - USD ($)	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Amortized cost and estimated fair value of debt securities available-for-sale
Amortized Cost	$ 683,837,000		$ 729,198,000
Unrealized Gains	96,000		157,000
Unrealized Losses	114,929,000		96,766,000
Allowance for Credit Losses	0
Estimated Fair Value	569,004,000		632,589,000
Amortized Cost
Within one year	5,480,000
After one, but within five years	101,840,000
After five, but within ten years	18,528,000
After ten years	470,000
Total	126,318,000
Total	683,837,000		729,198,000
Fair Value
Within one year	5,243,000
After one, but within five years	91,028,000
After five, but within ten years	14,821,000
After ten years	406,000
Total	111,498,000
Total	569,004,000		632,589,000
Proceeds from sales and calls of securities resulting in gains or losses
Debt securities, gain (loss)	0	$ 0
U.S. Treasury notes and bonds
Amortized cost and estimated fair value of debt securities available-for-sale
Amortized Cost	61,033,000		61,800,000
Unrealized Gains	0		0
Unrealized Losses	6,033,000		6,225,000
Allowance for Credit Losses	0
Estimated Fair Value	55,000,000		55,574,000
Amortized Cost
Total	61,033,000		61,800,000
Fair Value
Total	55,000,000		55,574,000
Mortgage-backed securities, residential
Amortized cost and estimated fair value of debt securities available-for-sale
Amortized Cost	486,189,000		518,838,000
Unrealized Gains	0		0
Unrealized Losses	97,158,000		83,707,000
Allowance for Credit Losses	0
Estimated Fair Value	389,031,000		435,131,000
Amortized Cost
Without single maturity date	486,189,000
Total	486,189,000		518,838,000
Fair Value
Without single maturity date	389,031,000
Total	389,031,000		435,131,000
Obligations of states and political subdivisions
Amortized cost and estimated fair value of debt securities available-for-sale
Amortized Cost	39,535,000		39,828,000
Unrealized Gains	0		2,000
Unrealized Losses	3,382,000		938,000
Allowance for Credit Losses	0
Estimated Fair Value	36,153,000		38,892,000
Amortized Cost
Total	39,535,000		39,828,000
Fair Value
Total	36,153,000		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	5,405,000		3,780,000
Allowance for Credit Losses	0
Estimated Fair Value	20,345,000		21,970,000
Amortized Cost
Total	25,750,000		25,750,000
Fair Value
Total	20,345,000		21,970,000
SBA loan pools
Amortized cost and estimated fair value of debt securities available-for-sale
Amortized Cost	71,330,000		82,982,000
Unrealized Gains	96,000		155,000
Unrealized Losses	2,951,000		2,116,000
Allowance for Credit Losses	0
Estimated Fair Value	68,475,000		81,022,000
Amortized Cost
Without single maturity date	71,330,000
Total	71,330,000		82,982,000
Fair Value
Without single maturity date	68,475,000
Total	$ 68,475,000		$ 81,022,000

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SECURITIES - Securities Held to Maturity (Details) - USD ($) $ in Thousands	Sep. 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	25	22
Allowance for Credit Losses	0
Estimated Fair Value	1,779	2,402
Amortized Cost
Within one year	529
After one, but within five years	635
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	523
After one, but within five years	616
After five, but within ten years	640
After ten years	0
Total	1,779
Total	1,779	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	25	22
Allowance for Credit Losses	0
Estimated Fair Value	955	1,450
Amortized Cost
Amortized Cost	980	1,472
Fair Value
Total	955	$ 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	Sep. 30, 2023	Dec. 31, 2022
Fair Value
Less than 12 months	$ 31,518	$ 137,597
12 months or longer	529,579	468,381
Total	561,097	605,978
Unrealized Losses
Less than 12 months	4,221	9,999
12 months or longer	110,708	86,767
Total	114,929	96,766
U.S. Treasury notes and bonds
Fair Value
Less than 12 months	981	1,011
12 months or longer	54,019	54,563
Total	55,000	55,574
Unrealized Losses
Less than 12 months	14	30
12 months or longer	6,019	6,195
Total	6,033	6,225
Mortgage-backed securities, residential
Fair Value
Less than 12 months	0	79,891
12 months or longer	389,031	355,240
Total	389,031	435,131
Unrealized Losses
Less than 12 months	0	7,621
12 months or longer	97,158	76,086
Total	97,158	83,707
Obligations of states and political subdivisions
Fair Value
Less than 12 months	16,794	37,847
12 months or longer	19,359	0
Total	36,153	37,847
Unrealized Losses
Less than 12 months	1,460	938
12 months or longer	1,922	0
Total	3,382	938
Corporate bonds and notes
Fair Value
Less than 12 months	7,269	4,515
12 months or longer	13,076	7,455
Total	20,345	11,970
Unrealized Losses
Less than 12 months	2,732	485
12 months or longer	2,673	3,295
Total	5,405	3,780
SBA loan pools
Fair Value
Less than 12 months	6,474	14,333
12 months or longer	54,094	51,123
Total	60,568	65,456
Unrealized Losses
Less than 12 months	15	925
12 months or longer	2,936	1,191
Total	$ 2,951	$ 2,116

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LOANS AND ALLOWANCE FOR CREDIT LOSSES - Loan Portfolio (Details) - USD ($) $ in Thousands	Sep. 30, 2023		Jun. 30, 2023	Dec. 31, 2022		Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	$ 1,930,688			$ 1,829,448
Allowance for credit losses	(20,252)	[1]	$ (20,172)	(19,659)	[1]	$ (18,631)	$ (17,485)	$ (21,025)
Loans, net	1,910,436			1,809,789
Construction
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	140,480
Commercial mortgages, other
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	946,053
Home equity lines and loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	87,078
Indirect consumer loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	211,046
Direct consumer loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	10,186
Commercial and Agricultural
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	254,484			252,293
Allowance for credit losses	(4,146)		(4,121)	(3,373)		(3,515)	(3,564)	(3,591)
Commercial mortgages, other
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	1,086,533			996,913
Allowance for credit losses	(11,025)		(10,994)	(11,576)		(10,986)	(10,314)	(13,556)
Commercial mortgages, other | Construction
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	140,480			108,243
Commercial mortgages, other | Commercial mortgages, other
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	946,053			888,670
Residential Mortgages
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	281,361			285,672
Allowance for credit losses	(1,868)		(1,905)	(1,845)		(1,796)	(1,714)	(1,803)
Consumer Loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	308,310			294,570
Allowance for credit losses	(3,213)		$ (3,152)	(2,865)		$ (2,334)	$ (1,893)	$ (2,075)
Consumer Loans | Home equity lines and loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	87,078			81,401
Consumer Loans | Indirect consumer loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	211,046			202,124
Consumer Loans | Direct consumer loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	10,186			11,045
Commercial & industrial
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	254,215
Commercial & industrial | Commercial and Agricultural
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	254,215			252,044
Agricultural
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	269
Agricultural | Commercial and Agricultural
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	$ 269			$ 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	9 Months Ended
	Sep. 30, 2023 USD ($)	Sep. 30, 2022 loan	Dec. 31, 2022 USD ($)
Financing Receivable, Allowance for Credit Loss [Line Items]
Accrued interest	$ 7,200		$ 6,500
Number of modified loans | loan		0
Loans individually analyzed	$ 4,999		7,482
Number of days past due after which a retail loan is rated	90 days
Commercial Mortgages
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually analyzed	$ 3,825		$ 4,383
Collateral Pledged
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually analyzed	$ 4,133

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LOANS AND ALLOWANCE FOR CREDIT LOSSES - Allowances For Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2023		Sep. 30, 2022	Sep. 30, 2023		Sep. 30, 2022
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]
Beginning balance	$ 20,172		$ 17,485	$ 19,659	[1]	$ 21,025
Charge-offs	(431)		(277)	(1,066)		(1,306)
Recoveries	75		168	295		546
Net recoveries (charge-offs)	(356)		(109)	(771)		(760)
Provision	436		1,255	990		(1,634)
Ending balance	20,252	[1]	18,631	20,252	[1]	18,631
Credit (reversal) expense related to off-balance sheet exposure	(13)			(28)
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	4,121		3,564	3,373		3,591
Charge-offs	(81)		0	(281)		(20)
Recoveries	4		6	13		37
Net recoveries (charge-offs)	(77)		6	(268)		17
Provision	102		(55)	132		(93)
Ending balance	4,146		3,515	4,146		3,515
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	10,994		10,314	11,576		13,556
Charge-offs	0		0	0		(687)
Recoveries	1		1	1		3
Net recoveries (charge-offs)	1		1	1		(684)
Provision	30		671	143		(1,886)
Ending balance	11,025		10,986	11,025		10,986
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	1,905		1,714	1,845		1,803
Charge-offs	0		0	0		0
Recoveries	0		40	0		40
Net recoveries (charge-offs)	0		40	0		40
Provision	(37)		42	39		(47)
Ending balance	1,868		1,796	1,868		1,796
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	3,152		1,893	2,865		2,075
Charge-offs	(350)		(277)	(785)		(599)
Recoveries	70		121	281		466
Net recoveries (charge-offs)	(280)		(156)	(504)		(133)
Provision	341		597	676		392
Ending balance	3,213		2,334	3,213		2,334
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	1,041		0	0		0
Provision	13		0	(28)		0
Ending balance	1,054		0	1,054		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.

XML

LOANS AND ALLOWANCE FOR CREDIT LOSSES - Provision for Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Financing Receivable, Allowance for Credit Loss [Line Items]
Provision	$ 436	$ 1,255	$ 990	$ (1,634)
Loans And Unfunded Commitments
Financing Receivable, Allowance for Credit Loss [Line Items]
Provision	449	1,255	962	(1,634)
Loans Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
Provision	436	1,255	990	(1,634)
Unfunded Loan Commitment
Financing Receivable, Allowance for Credit Loss [Line Items]
Provision	$ 13	$ 0	$ (28)	$ 0

XML

LOANS AND ALLOWANCE FOR CREDIT LOSSES - Allowances by Impairment (Details) - USD ($) $ in Thousands	Sep. 30, 2023		Jun. 30, 2023	Dec. 31, 2022		Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Allowance for loan losses
Individually evaluated for impairment	$ 1,119			$ 1,147
Collectively evaluated for impairment	19,133			18,512
Total ending allowance balance	20,252	[1]	$ 20,172	19,659	[1]	$ 18,631	$ 17,485	$ 21,025
Loans:
Loans individually analyzed	4,999			7,482
Loans collectively analyzed	1,925,689			1,821,966
Total loans, net of deferred loan fees and costs	1,930,688			1,829,448
Collateral Pledged
Allowance for loan losses
Total ending allowance balance	241
Loans:
Loans individually analyzed	4,133
Commercial and Agricultural
Allowance for loan losses
Individually evaluated for impairment	1,089			1,078
Collectively evaluated for impairment	3,057			2,295
Total ending allowance balance	4,146		4,121	3,373		3,515	3,564	3,591
Loans:
Loans individually analyzed	1,174			2,112
Loans collectively analyzed	253,310			250,181
Total loans, net of deferred loan fees and costs	254,484			252,293
Commercial Mortgages
Allowance for loan losses
Individually evaluated for impairment	30			38
Collectively evaluated for impairment	10,995			11,538
Total ending allowance balance	11,025		10,994	11,576		10,986	10,314	13,556
Loans:
Loans individually analyzed	3,825			4,383
Loans collectively analyzed	1,082,708			992,530
Total loans, net of deferred loan fees and costs	1,086,533			996,913
Residential Mortgages
Allowance for loan losses
Individually evaluated for impairment	0			0
Collectively evaluated for impairment	1,868			1,845
Total ending allowance balance	1,868		1,905	1,845		1,796	1,714	1,803
Loans:
Loans individually analyzed	0			723
Loans collectively analyzed	281,361			284,949
Total loans, net of deferred loan fees and costs	281,361			285,672
Consumer Loans
Allowance for loan losses
Individually evaluated for impairment	0			31
Collectively evaluated for impairment	3,213			2,834
Total ending allowance balance	3,213		$ 3,152	2,865		$ 2,334	$ 1,893	$ 2,075
Loans:
Loans individually analyzed	0			264
Loans collectively analyzed	308,310			294,306
Total loans, net of deferred loan fees and costs	$ 308,310			$ 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.

XML

LOANS AND ALLOWANCE FOR CREDIT LOSSES - Modifications (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2023 USD ($)	Sep. 30, 2023 USD ($)
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	$ 992	$ 3,187
Commercial mortgages, other
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	$ 875	$ 3,070
% of Loan Class	0.09%	0.32%
Weighted-average interest rate reduction (%)	0.00%	0.00%
Weighted-average term extension (in months)	6 months	19 months
Weighted-average payment delay (in months)		4 months
Home equity lines and loans
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	$ 117	$ 117
% of Loan Class	0.13%	0.13%
Weighted-average interest rate reduction (%)	0.00%	0.00%
Weighted-average term extension (in months)	180 months	180 months
Principal Reduction
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	$ 0	$ 0
Principal Reduction | Commercial mortgages, other
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0	0
Principal Reduction	0	0
Principal Reduction | Home equity lines and loans
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, other
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0	0
Interest Rate Reduction | Home equity lines and loans
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0	0
Term Extension
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	992	1,267
Term Extension | Commercial mortgages, other
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	875	1,150
Term Extension | Home equity lines and loans
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	117	117
Payment Delay
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0	1,920
Payment Delay | Commercial mortgages, other
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0	1,920
Payment Delay | Home equity lines and loans
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0	0
Combination
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0	0
Combination | Commercial mortgages, other
Financing Receivable, Troubled Debt Restructuring [Line Items]
Amortized cost basis	0	0
Combination | Home equity lines and loans
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	Sep. 30, 2023		Jun. 30, 2023	Dec. 31, 2022		Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Financing Receivable, Allowance for Credit Loss [Line Items]
Amortized Cost Basis	$ 4,999			$ 7,482
Related Allowance	20,252	[1]	$ 20,172	19,659	[1]	$ 18,631	$ 17,485	$ 21,025
Commercial and Agricultural
Financing Receivable, Allowance for Credit Loss [Line Items]
Amortized Cost Basis	1,174			2,112
Related Allowance	4,146		4,121	3,373		3,515	3,564	3,591
Commercial Mortgages
Financing Receivable, Allowance for Credit Loss [Line Items]
Amortized Cost Basis	3,825			4,383
Related Allowance	11,025		$ 10,994	$ 11,576		$ 10,986	$ 10,314	$ 13,556
Collateral Pledged
Financing Receivable, Allowance for Credit Loss [Line Items]
Amortized Cost Basis	4,133
Related Allowance	241
Commercial Real Estate And Business Assets | Commercial and Agricultural | Commercial and industrial
Financing Receivable, Allowance for Credit Loss [Line Items]
Amortized Cost Basis	286
Related Allowance	211
Commercial Real Estate and Residential Real Estate | Commercial Mortgages | Commercial mortgages, other
Financing Receivable, Allowance for Credit Loss [Line Items]
Amortized Cost Basis	3,847
Related Allowance	$ 30

[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		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 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	$ 5,468	$ 7,604	$ 6,307	$ 9,314
Interest Income Recognized
Total	7	18	25	38
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	0	846	359	890
Interest Income Recognized
With no related allowance recorded	0	9	0	19
Construction | Commercial mortgages, other
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	55	2	88
Interest Income Recognized
With no related allowance recorded	0	0	0	0
Commercial mortgages, other | Commercial mortgages, other
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	3,863	4,150	4,052	4,171
With an allowance recorded	31	42	34	1,563
Interest Income Recognized
With no related allowance recorded	3	7	12	14
With an allowance recorded	0	0	0	0
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	51	149	123	157
With an allowance recorded	78	134	42	139
Interest Income Recognized
With no related allowance recorded	0	0	0	0
With an allowance recorded	0	0	0	0
Commercial and Agricultural Sector | Commercial and industrial
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	163	585	520	761
With an allowance recorded	1,268	1,643	1,168	1,545
Interest Income Recognized
With no related allowance recorded	0	0	0	0
With an allowance recorded	4	2	13	5
Commercial and Agricultural Sector | Agricultural
Average Amortized Cost Basis
With no related allowance recorded	0	0	0	0
With an allowance recorded	14	0	7	0
Interest Income Recognized
With no related allowance recorded	0	0	0	0
With an allowance recorded	$ 0	$ 0	$ 0	$ 0

XML

LOANS AND ALLOWANCE FOR CREDIT LOSSES - Receivables Past Due (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Financing Receivable, Past Due [Line Items]
Non-accrual with no allowance for credit losses	$ 5,787
Non-accrual	6,826	$ 8,178
Loans Past Due 90 Days or More and Still Accruing	0	1
Financing receivable	1,930,688	1,829,448
Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	7,919	6,603
30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	6,164	4,084
60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	444	1,045
90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,311	1,474
Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,922,769	1,822,845
Construction
Financing Receivable, Past Due [Line Items]
Financing receivable	140,480
Commercial mortgages, other
Financing Receivable, Past Due [Line Items]
Financing receivable	946,053
Home equity lines and loans
Financing Receivable, Past Due [Line Items]
Financing receivable	87,078
Indirect consumer loans
Financing Receivable, Past Due [Line Items]
Financing receivable	211,046
Direct consumer loans
Financing Receivable, Past Due [Line Items]
Financing receivable	10,186
Commercial mortgages, other
Financing Receivable, Past Due [Line Items]
Financing receivable	1,086,533	996,913
Commercial mortgages, other | Construction
Financing Receivable, Past Due [Line Items]
Non-accrual	0	5
Loans Past Due 90 Days or More and Still Accruing	0	0
Financing receivable	140,480	108,243
Commercial mortgages, other | Construction | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	2,206	0
Commercial mortgages, other | Construction | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	2,206	0
Commercial mortgages, other | Construction | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	0
Commercial mortgages, other | Construction | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	0
Commercial mortgages, other | Construction | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	138,274	108,243
Commercial mortgages, other | Commercial mortgages, other
Financing Receivable, Past Due [Line Items]
Non-accrual	3,824	3,928
Loans Past Due 90 Days or More and Still Accruing	0	0
Financing receivable	946,053	888,670
Commercial mortgages, other | Commercial mortgages, other | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,338	1,544
Commercial mortgages, other | Commercial mortgages, other | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,073	1,058
Commercial mortgages, other | Commercial mortgages, other | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	4	0
Commercial mortgages, other | Commercial mortgages, other | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	261	486
Commercial mortgages, other | Commercial mortgages, other | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	944,715	887,126
Residential Mortgages
Financing Receivable, Past Due [Line Items]
Non-accrual	776	986
Loans Past Due 90 Days or More and Still Accruing	0	0
Financing receivable	281,361	285,672
Residential Mortgages | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,535	2,363
Residential Mortgages | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,217	1,360
Residential Mortgages | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	63	709
Residential Mortgages | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	255	294
Residential Mortgages | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	279,826	283,309
Consumer Loans
Financing Receivable, Past Due [Line Items]
Financing receivable	308,310	294,570
Consumer Loans | Home equity lines and loans
Financing Receivable, Past Due [Line Items]
Non-accrual	565	760
Loans Past Due 90 Days or More and Still Accruing	0	0
Financing receivable	87,078	81,401
Consumer Loans | Home equity lines and loans | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	621	756
Consumer Loans | Home equity lines and loans | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	151	193
Consumer Loans | Home equity lines and loans | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	49	121
Consumer Loans | Home equity lines and loans | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	421	442
Consumer Loans | Home equity lines and loans | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	86,457	80,645
Consumer Loans | Indirect consumer loans
Financing Receivable, Past Due [Line Items]
Non-accrual	621	540
Loans Past Due 90 Days or More and Still Accruing	0	0
Financing receivable	211,046	202,124
Consumer Loans | Indirect consumer loans | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,993	1,840
Consumer Loans | Indirect consumer loans | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	1,313	1,397
Consumer Loans | Indirect consumer loans | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	312	193
Consumer Loans | Indirect consumer loans | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	368	250
Consumer Loans | Indirect consumer loans | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	209,053	200,284
Consumer Loans | Direct consumer loans
Financing Receivable, Past Due [Line Items]
Non-accrual with no allowance for credit losses	8
Non-accrual	8	13
Loans Past Due 90 Days or More and Still Accruing	0	0
Financing receivable	10,186	11,045
Consumer Loans | Direct consumer loans | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	15	22
Consumer Loans | Direct consumer loans | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	9	2
Consumer Loans | Direct consumer loans | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	19
Consumer Loans | Direct consumer loans | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	6	1
Consumer Loans | Direct consumer loans | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	10,171	11,023
Commercial and Agricultural Sector | Commercial and industrial
Financing Receivable, Past Due [Line Items]
Non-accrual	1,004	1,946
Loans Past Due 90 Days or More and Still Accruing	0	1
Financing receivable	254,215	252,044
Commercial and Agricultural Sector | Commercial and industrial | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	211	78
Commercial and Agricultural Sector | Commercial and industrial | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	195	74
Commercial and Agricultural Sector | Commercial and industrial | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	16	3
Commercial and Agricultural Sector | Commercial and industrial | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	1
Commercial and Agricultural Sector | Commercial and industrial | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	254,004	251,966
Commercial and Agricultural Sector | Agricultural
Financing Receivable, Past Due [Line Items]
Non-accrual with no allowance for credit losses	0
Non-accrual	28	0
Loans Past Due 90 Days or More and Still Accruing	0	0
Financing receivable	269	249
Commercial and Agricultural Sector | Agricultural | Total Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	0
Commercial and Agricultural Sector | Agricultural | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	0
Commercial and Agricultural Sector | Agricultural | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	0
Commercial and Agricultural Sector | Agricultural | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	0	0
Commercial and Agricultural Sector | Agricultural | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Financing receivable	$ 269	$ 249

XML

LOANS AND ALLOWANCE FOR CREDIT LOSSES - Credit Quality Indicator (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	$ 200,316		$ 200,316
2022	438,134		438,134
2021	235,511		235,511
2020	192,170		192,170
2019	100,414		100,414
Prior	254,517		254,517
Revolving Loans Amortized Cost	495,124		495,124
Revolving Loans Converted to Term	14,502		14,502
Total loans, net of deferred loan fees and costs	1,930,688		1,930,688		$ 1,829,448
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
2023			88
2022			284
2021			184
2020			98
2019			29
Prior			371
Revolving Loans Amortized Cost			12
Revolving Loans Converted to Term			0
Total	431	$ 277	1,066	$ 1,306
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	11,309		11,309
2022	2,898		2,898
2021	0		0
2020	0		0
2019	2,248		2,248
Prior	1,187		1,187
Revolving Loans Amortized Cost	122,838		122,838
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	140,480		140,480
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	11,309		11,309
2022	2,898		2,898
2021	0		0
2020	0		0
2019	104		104
Prior	1,187		1,187
Revolving Loans Amortized Cost	122,838		122,838
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	138,336		138,336
Construction | 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
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	2,144		2,144
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	2,144		2,144
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	76,890		76,890
2022	216,872		216,872
2021	132,761		132,761
2020	95,768		95,768
2019	39,742		39,742
Prior	178,825		178,825
Revolving Loans Amortized Cost	199,679		199,679
Revolving Loans Converted to Term	5,516		5,516
Total loans, net of deferred loan fees and costs	946,053		946,053
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	76,617		76,617
2022	213,196		213,196
2021	124,125		124,125
2020	94,752		94,752
2019	39,742		39,742
Prior	170,439		170,439
Revolving Loans Amortized Cost	199,582		199,582
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	918,453		918,453
Commercial mortgages, other | Special mention
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	2,543		2,543
2021	8,286		8,286
2020	1,016		1,016
2019	0		0
Prior	3,562		3,562
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	5,516		5,516
Total loans, net of deferred loan fees and costs	20,923		20,923
Commercial mortgages, other | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	273		273
2022	1,133		1,133
2021	350		350
2020	0		0
2019	0		0
Prior	4,794		4,794
Revolving Loans Amortized Cost	97		97
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	6,647		6,647
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	30		30
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	30		30
Home equity lines and loans
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	11,622		11,622
2022	17,638		17,638
2021	5,948		5,948
2020	3,242		3,242
2019	2,949		2,949
Prior	11,473		11,473
Revolving Loans Amortized Cost	34,206		34,206
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	87,078		87,078
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			12
Revolving Loans Converted to Term			0
Total			12
Home equity lines and loans | Not rated
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	11,622		11,622
2022	17,562		17,562
2021	5,948		5,948
2020	3,242		3,242
2019	2,949		2,949
Prior	11,183		11,183
Revolving Loans Amortized Cost	34,007		34,007
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	86,513		86,513
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	290		290
Revolving Loans Amortized Cost	199		199
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	565		565
Indirect consumer
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	58,976		58,976
2022	106,171		106,171
2021	25,877		25,877
2020	10,706		10,706
2019	4,947		4,947
Prior	4,369		4,369
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	211,046		211,046
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
2023			88
2022			276
2021			176
2020			94
2019			20
Prior			45
Revolving Loans Amortized Cost			0
Revolving Loans Converted to Term			0
Total			699
Indirect consumer | Not rated
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	58,871		58,871
2022	105,980		105,980
2021	25,749		25,749
2020	10,666		10,666
2019	4,903		4,903
Prior	4,256		4,256
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	210,425		210,425
Indirect consumer | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	105		105
2022	191		191
2021	128		128
2020	40		40
2019	44		44
Prior	113		113
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	621		621
Direct consumer
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	2,599		2,599
2022	3,131		3,131
2021	945		945
2020	393		393
2019	108		108
Prior	379		379
Revolving Loans Amortized Cost	2,631		2,631
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	10,186		10,186
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
2023			0
2022			8
2021			8
2020			4
2019			0
Prior			54
Revolving Loans Amortized Cost			0
Revolving Loans Converted to Term			0
Total			74
Direct consumer | Not rated
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	2,599		2,599
2022	3,125		3,125
2021	945		945
2020	390		390
2019	108		108
Prior	379		379
Revolving Loans Amortized Cost	2,631		2,631
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	10,177		10,177
Direct consumer | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	6		6
2021	0		0
2020	3		3
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	9		9
Commercial & industrial
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	27,062		27,062
2022	39,583		39,583
2021	19,367		19,367
2020	11,362		11,362
2019	34,645		34,645
Prior	10,471		10,471
Revolving Loans Amortized Cost	102,767		102,767
Revolving Loans Converted to Term	8,958		8,958
Total loans, net of deferred loan fees and costs	254,215		254,215
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			272
Revolving Loans Amortized Cost			0
Revolving Loans Converted to Term			0
Total			281
Commercial & industrial | Pass
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	26,871		26,871
2022	39,555		39,555
2021	18,180		18,180
2020	11,240		11,240
2019	34,620		34,620
Prior	8,896		8,896
Revolving Loans Amortized Cost	98,625		98,625
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	237,987		237,987
Commercial & industrial | Special mention
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	191		191
2022	0		0
2021	195		195
2020	0		0
2019	0		0
Prior	442		442
Revolving Loans Amortized Cost	4,142		4,142
Revolving Loans Converted to Term	8,765		8,765
Total loans, net of deferred loan fees and costs	13,735		13,735
Commercial & industrial | Substandard
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	28		28
2021	992		992
2020	122		122
2019	25		25
Prior	318		318
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	169		169
Total loans, net of deferred loan fees and costs	1,654		1,654
Commercial & 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	815		815
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	24		24
Total loans, net of deferred loan fees and costs	839		839
Agricultural
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
2023	0		0
2022	16		16
2021	157		157
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost	68		68
Revolving Loans Converted to Term	28		28
Total loans, net of deferred loan fees and costs	269		269
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	16		16
2021	157		157
2020	0		0
2019	0		0
Prior	0		0
Revolving Loans Amortized Cost	68		68
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	241		241
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	28		28
Total loans, net of deferred loan fees and costs	28		28
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	254,484		254,484		252,293
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Total	81	0	281	20
Commercial and Agricultural | Commercial & industrial
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	254,215		254,215		252,044
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					253,041
Commercial and Agricultural | Commercial & industrial | Not rated
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					0
Commercial and Agricultural | Commercial & industrial | Pass
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					235,900
Commercial and Agricultural | Commercial & 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 & industrial | Substandard
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					2,899
Commercial and Agricultural | Commercial & 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	269		269		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, other
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	1,086,533		1,086,533		996,913
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Total	0	0	0	687
Commercial mortgages, other | Construction
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	140,480		140,480		108,243
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					108,671
Commercial mortgages, other | Construction | Not rated
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					0
Commercial mortgages, other | Construction | Pass
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					108,488
Commercial mortgages, other | Construction | Special mention
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					178
Commercial mortgages, other | Construction | Substandard
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					5
Commercial mortgages, other | Construction | Doubtful
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					0
Commercial mortgages, other | 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	946,053		946,053		888,670
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					892,190
Commercial mortgages, other | Commercial mortgages, other | Not rated
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					0
Commercial mortgages, other | Commercial mortgages, other | Pass
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					860,389
Commercial mortgages, other | 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, other | Commercial mortgages, other | Substandard
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					7,825
Commercial mortgages, other | 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	11,858		11,858
2022	51,825		51,825
2021	50,456		50,456
2020	70,699		70,699
2019	15,775		15,775
Prior	47,813		47,813
Revolving Loans Amortized Cost	32,935		32,935
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	281,361		281,361		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	11,858		11,858
2022	51,718		51,718
2021	50,393		50,393
2020	70,699		70,699
2019	15,602		15,602
Prior	47,380		47,380
Revolving Loans Amortized Cost	32,935		32,935
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	280,585		280,585
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	173		173
Prior	433		433
Revolving Loans Amortized Cost	0		0
Revolving Loans Converted to Term	0		0
Total loans, net of deferred loan fees and costs	776		776
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	308,310		308,310		294,570
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Total	350	$ 277	785	$ 599
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	87,078		87,078		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	86,513		86,513
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	565		565
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					760
Consumer Loans | Home equity lines and loans | Not rated
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					80,942
Consumer Loans | Home equity lines and loans | Pass
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					0
Consumer Loans | Home equity lines and loans | Special mention
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					0
Consumer Loans | Home equity lines and loans | Substandard
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					760
Consumer Loans | Home equity lines and loans | Doubtful
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					0
Consumer Loans | Indirect consumer
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss, by Origination Year [Abstract]
Total loans, net of deferred loan fees and costs	211,046		211,046		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	210,425		210,425
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	621		621
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	10,186		10,186		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	281,361		281,361
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	280,585		280,585
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	776		776
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	10,186		10,186
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	10,178		10,178
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	$ 8		$ 8
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss, Writeoff, by Origination Year [Abstract]
Recorded investment					$ 13

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FAIR VALUE - Assets and Liabilities Measured at Fair Value (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Financial Assets:
Total	$ 569,004	$ 632,589
Derivative assets	32,923	27,141
Financial Liabilities:
Derivative liabilities	32,923	27,196
Recurring
Financial Assets:
U.S. Treasury notes and bonds	55,000	55,574
Mortgage-backed securities, residential	389,031	435,131
Obligations of states and political subdivisions	36,153	38,892
Corporate bonds and notes	20,345	21,970
SBA loan pools	68,475	81,022
Total	569,004	632,589
Equity investments, at fair value	2,318	2,246
Derivative assets	32,923	27,141
Financial Liabilities:
Derivative liabilities	32,923	27,196
Quoted Prices in Active Markets for Identical Assets (Level 1) | Recurring
Financial Assets:
U.S. Treasury notes and bonds	55,000	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	55,000	55,574
Equity investments, at fair value	2,318	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	389,031	435,131
Obligations of states and political subdivisions	36,153	38,892
Corporate bonds and notes	12,885	21,970
SBA loan pools	68,475	81,022
Total	506,544	577,015
Equity investments, at fair value	0	0
Derivative assets	32,923	27,141
Financial Liabilities:
Derivative liabilities	32,923	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	7,460	0
SBA loan pools	0	0
Total	7,460	0
Equity investments, at fair value	0	0
Derivative assets	0	0
Financial Liabilities:
Derivative liabilities	$ 0	$ 0

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FAIR VALUE - Narrative (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2023 USD ($) investment	Sep. 30, 2022 USD ($)	Sep. 30, 2023 USD ($) investment	Sep. 30, 2022 USD ($)	Dec. 31, 2022 USD ($)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Number of investments transferred | investment			8
Transfers out of Level 3 | $	$ 1,323,000		$ 1,323,000
Number of corporate sub-debt issuances | investment	2		2
Significant Unobservable Inputs (Level 3)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, fair value disclosure | $					$ 0

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FAIR VALUE - Unobservable Inputs (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	$ 8,593	$ 0	$ 0	$ 0
Included in other comprehensive income	190	0	(1,172)	0
Transfers into Level 3	0	0	9,955	0
Transfers out of Level 3	(1,323)		(1,323)
Ending balance	$ 7,460	$ 0	$ 7,460	$ 0

XML

FAIR VALUE - Quantitative Information (Details) - Corporate Bonds And Notes $ in Thousands	Sep. 30, 2023 USD ($)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Assets, fair value disclosure	$ 7,460
Market discount rate | Discounted cash flow | Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Financial asset, measurement input	0.1200
Market discount rate | Discounted cash flow | Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Financial asset, measurement input	0.1200
Market discount rate | Discounted cash flow | Weighted Average
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Financial asset, measurement input	0.1200

XML

FAIR VALUE - Carrying Amounts and Estimated Fair Values of Other Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Financial assets:
Cash and due from financial institutions	$ 52,563	$ 29,309
Interest-earning deposits in other financial institutions	23,017	26,560
Securities available for sale	569,004	632,589
Securities held to maturity	1,804	2,424
Loans, net and loans held for sale	1,910,436	1,809,789
Derivative assets	32,923	27,141
Deposits [Abstract]
FHLBNY overnight advances	0	95,810
Derivative Liabilities	32,923	27,196
Recurring
Financial assets:
Securities available for sale	569,004	632,589
Derivative assets	32,923	27,141
Deposits [Abstract]
Derivative Liabilities	32,923	27,196
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets:
Securities available for sale	55,000	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	506,544	577,015
Derivative assets	32,923	27,141
Deposits [Abstract]
Derivative Liabilities	32,923	27,196
Recurring | Significant Unobservable Inputs (Level 3)
Financial assets:
Securities available for sale	7,460	0
Derivative assets	0	0
Deposits [Abstract]
Derivative Liabilities	0	0
Recurring | Carrying Amount
Financial assets:
Cash and due from financial institutions	52,563	29,309
Interest-earning deposits in other financial institutions	23,017	26,560
Equity investments	2,811	2,830
Securities available for sale	569,004	632,589
Securities held to maturity	1,804	2,424
FHLBNY and FRBNY stock	4,053	8,197
Loans, net and loans held for sale	1,910,436	1,809,789
Accrued interest receivable	9,422	8,682
Derivative assets	32,923	27,141
Deposits [Abstract]
Demand, savings, and insured money market accounts	1,882,311	1,924,843
Time deposits	591,188	402,384
FHLBNY overnight advances	0	95,810
Accrued interest payable	4,089	864
Derivative Liabilities	32,923	27,196
Recurring | Estimated Fair Value
Financial assets:
Cash and due from financial institutions	52,563	29,309
Interest-earning deposits in other financial institutions	23,017	26,560
Equity investments	2,811	2,830
Securities available for sale	569,004	632,589
Securities held to maturity	1,779	2,402
Loans, net and loans held for sale	1,830,014	1,757,171
Accrued interest receivable	9,422	8,682
Derivative assets	32,923	27,141
Deposits [Abstract]
Demand, savings, and insured money market accounts	1,882,311	1,924,843
Time deposits	593,637	403,572
FHLBNY overnight advances	0	95,819
Accrued interest payable	4,089	864
Derivative Liabilities	32,923	27,196
Recurring | Estimated Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets:
Cash and due from financial institutions	52,563	29,309
Interest-earning deposits in other financial institutions	23,017	26,560
Equity investments	2,811	2,830
Securities available for sale	55,000	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	233	132
Derivative assets	0	0
Deposits [Abstract]
Demand, savings, and insured money market accounts	1,882,311	1,924,843
Time deposits	0	0
FHLBNY overnight advances	0	0
Accrued interest payable	121	66
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	506,544	577,015
Securities held to maturity	955	1,450
FHLBNY and FRBNY stock	0	0
Loans, net and loans held for sale	0	0
Accrued interest receivable	1,957	2,002
Derivative assets	32,923	27,141
Deposits [Abstract]
Demand, savings, and insured money market accounts	0	0
Time deposits	593,637	403,572
FHLBNY overnight advances	0	95,819
Accrued interest payable	3,968	798
Derivative Liabilities	32,923	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	7,460	0
Securities held to maturity	824	952
FHLBNY and FRBNY stock	0	0
Loans, net and loans held for sale	1,830,014	1,757,171
Accrued interest receivable	7,232	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

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LEASES - Narrative (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2023 USD ($) lease	Sep. 30, 2022 USD ($)	Sep. 30, 2023 USD ($) lease	Sep. 30, 2022 USD ($)
Lessee, Lease, Description [Line Items]
Operating lease, weighted average remaining lease term (years)	8 years 10 days		8 years 10 days
Operating lease, weighted average discount rate	3.38%		3.38%
Operating lease, rent expense	$ 200,000		$ 700,000
Operating lease not yet commenced | lease	1		1
Finance lease, weighted average remaining lease term (years)	9 years 6 months 18 days		9 years 6 months 18 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	$ 28,000	$ 25,000	81,000	$ 76,000
Monthly rent and common area maintenance expense			$ 9,000

XML

LEASES - Leased Branch Properties (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Leases [Abstract]
Operating lease right-of-use asset	$ 6,449	$ 7,234
Less: accumulated amortization	(599)	(785)
Less: lease termination	0	0
Add: new lease agreement and modifications	0	0
Operating lease right-of-use assets	$ 5,850	$ 6,449

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LEASES - Maturities of Operating Lease Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Leases [Abstract]
2023	$ 249
2024	924
2025	841
2026	845
2027	854
2027 and thereafter	3,168
Total minimum lease payments	6,881
Less: amount representing interest	(853)
Present value of net minimum lease payments	$ 6,028	$ 6,620

XML

LEASES - Premises and Equipment (Details) - USD ($) $ in Thousands	Sep. 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	(2,789)	(2,540)
Net book value	$ 2,783	$ 3,032

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LEASES - Future Minimum Lease Payment Obligations Under Finance Leases (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Leases [Abstract]
2023	$ 98
2024	391
2025	409
2026	425
2027	428
2027 and thereafter	1,987
Total minimum lease payments	3,738
Less: amount representing interest	(618)
Present value of net minimum lease payments	$ 3,120	$ 3,327

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GOODWILL AND INTANGIBLE ASSETS - Changes in Goodwill (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Goodwill [Roll Forward]
Beginning of year	$ 21,824	$ 21,824
Acquired goodwill	0	0
Ending balance	$ 21,824	$ 21,824

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GOODWILL AND INTANGIBLE ASSETS - Narrative (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of intangible assets	$ 0	$ 0	$ 0	$ 15,000
Goodwill impairment charges					$ 0

XML

COMMITMENTS AND CONTINGENCIES - Narrative (Details) - USD ($) $ in Thousands	1 Months Ended	9 Months Ended
	Apr. 30, 2020	Sep. 30, 2023		Jun. 30, 2023	Dec. 31, 2022		Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021	Feb. 04, 2020
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Allowance for credit losses		$ 20,252	[1]	$ 20,172	$ 19,659	[1]	$ 18,631	$ 17,485	$ 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		1,054		1,041	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	Sep. 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	$ 32,776	$ 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	84,198	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	3,475	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	338,636	326,188
Standby letters of credit | Fixed Rate
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Contractual amounts of financial instruments with off-balance sheet risk	0	0
Standby letters of credit | Variable Rate
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Contractual amounts of financial instruments with off-balance sheet risk	$ 17,987	$ 17,211

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Summary of Changes in Accumulated Other Comprehensive Income or Loss by Component (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Changes in accumulated other comprehensive income or loss by component, net of tax [Roll Forward]
Beginning balance	$ 177,426	$ 174,690	$ 166,388	$ 211,455
Other comprehensive income before reclassification	(13,941)	(24,547)	(13,448)	(73,381)
Amounts reclassified from accumulated other comprehensive income	8	11	26	30
Total other comprehensive loss	(13,933)	(24,536)	(13,422)	(73,351)
Ending balance	170,064	155,518	170,064	155,518
Total
Changes in accumulated other comprehensive income or loss by component, net of tax [Roll Forward]
Beginning balance	(74,746)	(55,345)	(75,257)	(6,530)
Total other comprehensive loss	(13,933)	(24,536)	(13,422)	(73,351)
Ending balance	(88,679)	(79,881)	(88,679)	(79,881)
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	(70,803)	(51,329)	(71,296)	(2,495)
Other comprehensive income before reclassification	(13,941)	(24,547)	(13,448)	(73,381)
Amounts reclassified from accumulated other comprehensive income	0	0	0	0
Total other comprehensive loss	(13,941)	(24,547)	(13,448)	(73,381)
Ending balance	(84,744)	(75,876)	(84,744)	(75,876)
Defined Benefit and Other Benefit Plans
Changes in accumulated other comprehensive income or loss by component, net of tax [Roll Forward]
Beginning balance	(3,943)	(4,016)	(3,961)	(4,035)
Other comprehensive income before reclassification	0	0	0	0
Amounts reclassified from accumulated other comprehensive income	8	11	26	30
Total other comprehensive loss	8	11	26	30
Ending balance	$ (3,935)	$ (4,005)	$ (3,935)	$ (4,005)

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Details about Accumulated Other Comprehensive Income Components (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax effect	$ (2,060)	$ (1,741)	$ (5,660)	$ (6,029)
Total reclassification for the period, net of tax	7,648	6,453	21,198	21,344
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	8	11	26	30
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	16	36	41
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	(4)	(5)	(10)	(11)
Total reclassification for the period, net of tax	$ 8	$ 11	$ 26	$ 30

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REVENUE FROM CONTRACTS WITH CUSTOMERS (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Disaggregation of Revenue [Line Items]
Net gains (losses) on sales of OREO	$ 0	$ 22	$ 14	$ 68
Changes in fair value of equity investments	(68)	(93)	(99)	(448)
Income from bank owned life insurance	11	12	32	34
Other non-interest income	7,808	5,036	18,678	16,018
Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Other non-interest income	273	216	608	678
Overdraft fees
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	817	846	2,308	2,246
Other
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	201	143	610	543
Interchange revenue from debit card transactions
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	1,141	1,126	3,468	3,462
WMG fee income
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	2,533	2,403	7,716	7,788
CFS fee and commission income
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	243	251	749	775
Net gains (losses) on sales of OREO
Disaggregation of Revenue [Line Items]
Net gains (losses) on sales of OREO	0	22	14	68
Net gains on sales of loans
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	67	7	90	106
Loan servicing fees
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	35	38	107	115
Income from bank-owned life insurance
Disaggregation of Revenue [Line Items]
Income from bank owned life insurance	11	12	32	34
Other
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	2,828	281	3,683	1,329
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	(82)	(96)	67	(446)
Other non-interest income	5,002	2,417	10,354	7,552
Core Banking | Overdraft fees | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	817	846	2,308	2,246
Core Banking | Other | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	201	143	610	543
Core Banking | Interchange revenue from debit card transactions | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues from contracts with customer	1,141	1,126	3,468	3,462
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	0	22	14	68
Core Banking | Net gains on sales of loans | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	67	7	90	106
Core Banking | Loan servicing fees | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	35	38	107	115
Core Banking | Income from bank-owned life insurance | Operating Segments
Disaggregation of Revenue [Line Items]
Income from bank owned life insurance	11	12	32	34
Core Banking | Other | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	2,812	319	3,658	1,424
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	2,533	2,403	7,716	7,788
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	2,533	2,403	7,716	7,788
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	14	3	(166)	(2)
Other non-interest income	273	216	608	678
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	243	251	749	775
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	$ 16	$ (38)	25	(95)
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

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COMPONENTS OF QUARTERLY AND YEAR TO DATE NET PERIODIC BENEFIT COSTS (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 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	396	282	1,189	848
Expected return on plan assets	(596)	(720)	(1,786)	(2,141)
Amortization of unrecognized transition obligation	0	0	0	0
Amortization of unrecognized prior service cost	0	0	0	0
Amortization of unrecognized net loss	6	0	17	0
Net periodic pension benefit	(194)	(438)	(580)	(1,293)
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	12	8	35	25
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	6	6	15
Net periodic pension benefit	14	14	41	40
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	3	3
Expected return on plan assets	0	0	0	0
Amortization of unrecognized prior service cost	0	0	0	0
Amortization of unrecognized net loss	5	10	14	26
Net periodic pension benefit	$ 6	$ 11	$ 17	$ 29

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SEGMENT REPORTING - Narrative (Details)	9 Months Ended
	Sep. 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		9 Months Ended
		Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Reportable segments and reconciliation to consolidated results [Abstract]
Interest and dividend income		$ 29,015	$ 20,999	$ 83,041	$ 56,995
Interest expense		10,998	2,009	26,482	3,687
Net interest income		18,017	18,990	56,559	53,308
Provision for credit losses	[1]	449	1,255	962	(1,634)
Net interest income after provision for credit losses		17,568	17,735	55,597	54,942
Other non-interest income		7,808	5,036	18,678	16,018
Legal accruals and settlements			0		0
Other non-interest expenses		15,668	14,577	47,417	43,587
Income (loss) before income tax expense (benefit)		9,708	8,194	26,858	27,373
Income tax expense (benefit)		2,060	1,741	5,660	6,029
Segment net income (loss)		7,648	6,453	21,198	21,344
Assets		2,707,834	2,551,422	2,707,834	2,551,422	$ 2,645,553
Operating Segments | Core Banking
Reportable segments and reconciliation to consolidated results [Abstract]
Interest and dividend income		28,979	20,983	82,939	56,965
Interest expense		10,998	2,009	26,482	3,687
Net interest income		17,981	18,974	56,457	53,278
Provision for credit losses		449	1,255	962	(1,634)
Net interest income after provision for credit losses		17,532	17,719	55,495	54,912
Other non-interest income		5,002	2,417	10,354	7,552
Legal accruals and settlements			0		0
Other non-interest expenses		13,597	12,559	41,187	37,316
Income (loss) before income tax expense (benefit)		8,937	7,577	24,662	25,148
Income tax expense (benefit)		1,908	1,590	5,215	5,523
Segment net income (loss)		7,029	5,987	19,447	19,625
Assets		2,701,959	2,544,528	2,701,959	2,544,528
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		2,533	2,403	7,716	7,788
Legal accruals and settlements			0		0
Other non-interest expenses		1,796	1,715	5,293	5,180
Income (loss) before income tax expense (benefit)		737	688	2,423	2,608
Income tax expense (benefit)		161	167	536	605
Segment net income (loss)		576	521	1,887	2,003
Assets		2,596	2,804	2,596	2,804
Intersegment Eliminations
Reportable segments and reconciliation to consolidated results [Abstract]
Interest and dividend income		36	16	102	30
Interest expense		0	0	0	0
Net interest income		36	16	102	30
Provision for credit losses		0	0	0	0
Net interest income after provision for credit losses		36	16	102	30
Other non-interest income		273	216	608	678
Legal accruals and settlements			0		0
Other non-interest expenses		275	303	937	1,091
Income (loss) before income tax expense (benefit)		34	(71)	(227)	(383)
Income tax expense (benefit)		(9)	(16)	(91)	(99)
Segment net income (loss)		43	(55)	(136)	(284)
Assets		$ 3,279	$ 4,090	$ 3,279	$ 4,090

[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		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Restricted Stock
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Weighted-average period for recognition (in years)			3 years 6 months
Vesting period			1 year
Total unrecognized compensation cost related to nonvested shares granted under the Plan	$ 1,700		$ 1,700
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
Number of treasury shares reissued to fund stock compensation (in shares)			16,050	12,560
Weighted-average period for recognition (in years)			1 year
Vesting period			5 years
Expenses related to stock based compensation recognized	$ 300	$ 200	$ 700	$ 800

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STOCK COMPENSATION - Restricted Stock Activity For Officers And Employees (Details) - Restricted Stock - $ / shares	3 Months Ended	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2023
Shares
Nonvested, beginning balance (in shares)	54,002	55,402
Granted (in shares)	2,981	16,050
Vested (in shares)	(139)	(14,282)
Forfeited or cancelled (in shares)	0	(326)
Nonvested, ending balance (in shares)	56,844	56,844
Weighted–Average Grant Date Fair Value
Nonvested, beginning balance (in dollars per share)	$ 44.68	$ 44.57
Granted (in dollars per share)	38.59	44.53
Vested (in dollars per share)	43.34	45.36
Forfeitures or cancelled (in dollars per share)	0	43.73
Nonvested, ending balance (in dollars per share)	$ 44.40	$ 44.40