FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2017

Summary 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, 2017 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)
Obligations of U.S. Government and U.S. Government sponsored enterprises	$	15,584	$	—	$	15,584	$	—
Mortgage-backed securities, residential	236,661		—		236,661		—
Obligations of states and political subdivisions	54,728		—		54,728		—
Corporate bonds and notes	242		—		242		—
SBA loan pools	4,485		—		4,485		—
Corporate stocks	526		194		332		—
Total available for sale securities	$	312,226	$	194	$	312,032	$	—

Trading assets	$	909	$	909	$	—	$	—
Derivative assets	670		—		670		—

Financial Liabilities:
Derivative liabilities	$	741	$	—	$	670	$	71

During the three months ended September 30, 2017, the Corporation transferred corporate bonds with a fair market value of $242 thousand from Level 3 to Level 2 due to the availability of pricing in secondary markets.



			Fair Value Measurement at December 31, 2016 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)
Obligations of U.S. Government and U.S. Government sponsored enterprises	$	17,455	$	—	$	17,455	$	—
Mortgage-backed securities, residential	245,866		—		245,866		—
Obligations of states and political subdivisions	38,740		—		38,740		—
Corporate bonds and notes	250		—		—		250
SBA loan pools	570		—		570		—
Corporate stocks	521		170		351		—
Total available for sale securities	$	303,402	$	170	$	302,982	$	250

Trading assets	$	774	$	774	$	—	$	—
Derivative assets	693		—		693		—

Financial Liabilities:
Derivative liabilities	$	761	$	—	$	693	$	68

Reconciliation of all assets measured at fair value

The table below presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three-month periods ended September 30, 2017 and September 30, 2016 (in thousands):



	Assets (Liabilities)
	Corporate Bonds and Notes						Derivative Liabilities
	2017			2016			2017			2016
Balance of recurring Level 3 assets at July 1	$	252		$	256		$	(71	)	$	(120	)
Derivative instruments entered into	—			—			—			—
Total gains or losses for the period:
Included in earnings - other non-interest income	—			—			—			26
Included in other comprehensive income	(10		)	(1		)	—			—
Transfers out of Level 3	(242		)	—			—			—
Balance of recurring Level 3 assets at September 30	$	—		$	255		$	(71	)	$	(94	)

The table below presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine month periods ended September 30, 2017 and September 30, 2016 (in thousands):



	Assets (Liabilities)
	Corporate Bonds and Notes					Derivative Liabilities
	2017			2016		2017			2016
Balance of recurring Level 3 assets at January 1	$	250		$	248	$	(68	)	$	(48	)
Derivative instruments entered into	—			—		(1		)	(25		)
Total gains or losses for the period:
Included in earnings - other non-interest income	—			—		(2		)	(21		)
Included in other comprehensive income	(8		)	7		—			—
Transfers out of Level 3	(242		)	—		—			—
Balance of recurring Level 3 assets at September 30	$	—		$	255	$	(71	)	$	(94	)

Reconciliation of liabilities measured at fair value



	Assets (Liabilities)
	Corporate Bonds and Notes						Derivative Liabilities
	2017			2016			2017			2016
Balance of recurring Level 3 assets at July 1	$	252		$	256		$	(71	)	$	(120	)
Derivative instruments entered into	—			—			—			—
Total gains or losses for the period:
Included in earnings - other non-interest income	—			—			—			26
Included in other comprehensive income	(10		)	(1		)	—			—
Transfers out of Level 3	(242		)	—			—			—
Balance of recurring Level 3 assets at September 30	$	—		$	255		$	(71	)	$	(94	)



	Assets (Liabilities)
	Corporate Bonds and Notes					Derivative Liabilities
	2017			2016		2017			2016
Balance of recurring Level 3 assets at January 1	$	250		$	248	$	(68	)	$	(48	)
Derivative instruments entered into	—			—		(1		)	(25		)
Total gains or losses for the period:
Included in earnings - other non-interest income	—			—		(2		)	(21		)
Included in other comprehensive income	(8		)	7		—			—
Transfers out of Level 3	(242		)	—		—			—
Balance of recurring Level 3 assets at September 30	$	—		$	255	$	(71	)	$	(94	)

Summary of assets and liabilities measured at fair value on a non-recurring basis

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



			Fair Value Measurement at September 30, 2017 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)
Impaired Loans:
Commercial and agricultural:
Commercial and industrial	$	85	$	—	$	—	$	85
Commercial mortgages:
Commercial mortgages, other	3,157		—		—		3,157
Total impaired loans	$	3,242	$	—	$	—	$	3,242
Other real estate owned:
Residential mortgages	$	179	$	—	$	—	$	179
Total other real estate owned, net	$	179	$	—	$	—	$	179



			Fair Value Measurement at December 31, 2016 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)
Impaired Loans:
Commercial mortgages:
Commercial mortgages, other	$	2,631	$	—	$	—	$	2,631
Consumer loans:
Home equity lines and loans	219		—		—		219
Total impaired loans	$	2,850	$	—	$	—	$	2,850
Other real estate owned:
Residential mortgages	$	344	$	—	$	—	$	344
Total other real estate owned, net	$	344	$	—	$	—	$	344

Nonrecurring fair value measurement, valuation techniques

The following tables presents information related to Level 3 non-recurring fair value measurement at September 30, 2017 and December 31, 2016 (in thousands):



Description	Fair Value at September 30, 2017		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at September 30, 2017
Impaired loans:
Commercial and agricultural:
Commercial and industrial	$	85	Sales comparison	Discount to appraised value	36.07%-36.07% [36.07%]
Commercial mortgages:
Commercial mortgages, other	707		Sales comparison	Discount to appraised value	10.00% - 44.52% [20.34%]
	2,450		Income approach	Capitalization rate	9.00% - 10.00% [9.52%]
	$	3,242

OREO:
Residential mortgages	$	179	Sales comparison	Discount to appraised value	17.28% - 27.97% [20.73%]
	$	179



Description	Fair Value at December 31, 2016		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at December 31, 2016
Impaired loans:
Commercial mortgages:
Commercial mortgages, other	$	2,631	Income approach	Capitalization rate	9.00% - 10.00% [9.52%]
Consumer loans:
Home equity lines and loans	219		Sales comparison	Discount to appraised value	22.98% - 22.98% [22.98%]
	$	2,850

OREO:
Residential mortgages	$	344	Sales comparison	Discount to appraised value	20.80% - 48.17% [30.50%]
	$	344

The following table presents information related to Level 3 recurring fair value measurements at September 30, 2017 and December 31, 2016 (in thousands):



Description	Fair Value at September 30, 2017		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at September 30, 2017
Derivative liabilities	$	71	Historical trend	Credit default rate	5.15% - 5.15% [5.15%]



Description	Fair Value at December 31, 2016		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at December 31, 2016
Corporate bonds and notes	$	250	Discounted cash flow	Credit spread	1.73% - 1.73% [1.73%]

Derivative liabilities	$	68	Historical trend	Credit default rate	4.92% - 4.92% [4.92%]

Carrying value and estimated fair value of financial instruments

The carrying amounts and estimated fair values of other financial instruments, at September 30, 2017 and December 31, 2016, are as follows (in thousands):



	September 30, 2017
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	$	34,572	$	34,572	$	—	$	—	$	34,572
Interest-bearing deposits in other financial institutions	21,806		21,806		—		—		21,806
Trading assets	909		909		—		—		909
Securities available for sale	312,226		194		312,032		—		312,226
Securities held to maturity	3,865		—		1,831		2,030		3,861
FHLBNY and FRBNY stock	3,497		—		—		—		N/A
Loans, net	1,273,119		—		—		1,277,896		1,277,896
Loans held for sale	1,246		—		1,246		—		1,246
Accrued interest receivable	4,516		2		1,050		3,464		4,516
Derivative assets	670		—		670		—		670

Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,410,836	$	1,410,836	$	—	$	—	$	1,410,836
Time deposits	126,182		—		126,445		—		126,445
Securities sold under agreements to repurchase	10,000		—		10,117		—		10,117
FHLBNY term advances	9,009		—		9,030		—		9,030
Accrued interest payable	184		21		163		—		184
Derivative liabilities	741		—		670		71		741

(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, 2016
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	$	28,205	$	28,205	$	—	$	—	$	28,205
Interest-bearing deposits in other financial institutions	45,957		45,957		—		—		45,957
Trading assets	774		774		—		—		774
Securities available for sale	303,402		170		302,982		250		303,402
Securities held to maturity	4,705		—		981		3,931		4,912
FHLBNY and FRBNY stock	4,041		—		—		—		N/A
Loans, net	1,186,037		—		—		1,205,814		1,205,814
Loans held for sale	412		—		412		—		412
Accrued interest receivable	4,000		9		784		3,207		4,000
Derivative assets	693		—		693		—		693

Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,312,237	$	1,312,237	$	—	$	—	$	1,312,237
Time deposits	144,106		—		144,460		—		144,460
Securities sold under agreements to repurchase	27,606		—		27,880		—		27,880
FHLBNY term advances	9,093		—		9,189		—		9,189
Accrued interest payable	210		25		185		—		210
Derivative liabilities	761		—		693		68		761