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, 2021

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 5, 2021 was 4,664,078.

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	42
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	77
Item 4:	Controls and Procedures	78
PART II.	OTHER INFORMATION
Item 1:	Legal Proceedings	79
Item 1A:	Risk Factors	79
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	79
Item 3:	Defaults Upon Senior Securities	79
Item 4:	Mine Safety Disclosures	79
Item 5:	Other Information	79
Item 6:	Exhibits	80
SIGNATURES		81
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

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
CAM	Common area maintenance charges
CARES Act	Coronavirus Aid, Relief, and Economic Security Act
CDARS	Certificate of Deposit Account Registry Service
CDO	Collateralized Debt Obligation
CECL	Current expected credit loss
CFS	CFS Group, Inc.
Corporation	Chemung Financial Corporation
COVID-19	Coronavirus disease 2019
CRM	Chemung Risk Management, Inc.
Dodd-Frank Act	The Dodd-Frank Wall Street Reform and Consumer Protection Act
EPS	Earnings per share
Exchange Act	Securities Exchange Act of 1934
FASB	Financial Accounting Standards Board
FDIC	Federal Deposit Insurance Corporation
FHLBNY	Federal Home Loan Bank of New York
FRB	Board of Governors of the Federal Reserve System
FRBNY	Federal Reserve Bank of New York
Freddie Mac	Federal Home Loan Mortgage Corporation
GAAP	U.S. Generally Accepted Accounting Principles
HTM	Held to maturity securities
ICS	Insured Cash Sweep Service
IFRS	International Financial Reporting Standards
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
OTTI	Other-than-temporary impairment
PCI	Purchased credit impaired

3

PPP	Paycheck Protection Program
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 loan losses to total loans	Represents period-end allowance for loan 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.
Capital Bank	Division of Chemung Canal Trust Company located in the “Capital Region” of New York State and includes the counties of Albany and Saratoga.
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.
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).

4

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 enterprise obligations	Obligations of agencies originally established or chartered by the U.S. government to serve public purposes as specified by the U.S. Congress; these obligations are not explicitly guaranteed as to the timely payment of principal and interest by the full faith and credit of the U.S. government.
OREO	Represents real property owned by the Corporation, which is not directly related to its business and is most frequently the result of a foreclosure on real property.
OTTI	Impairment charge taken on a security whose fair value has fallen below the carrying value on the balance sheet and whose value is not expected to recover through the holding period of the security.
PCI loans	Represents loans that were acquired in the Fort Orange Financial Corp. transaction and deemed to be credit-impaired on the acquisition date in accordance with the guidance of FASB.
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	A TDR is deemed to occur when the Corporation modifies the original terms of a loan agreement by granting a concession to a borrower that is experiencing financial difficulty.
Trust preferred securities	A hybrid security with characteristics of both subordinated debt and preferred stock which allows for early redemption by the issuer, makes fixed or variable payments, and matures at face value.
Unaudited	Financial statements and information that have not been subjected to auditing procedures sufficient to permit an independent certified public accountant to express an opinion.
WMG	Provides services as executor and trustee under wills and agreements, and guardian, custodian, trustee and agent for pension, profit-sharing and other employee benefit trusts, as well as various investment, financial planning, pension, estate planning and employee benefit administration services.

6

CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)	September 30, 2021		December 31, 2020
ASSETS
Cash and due from financial institutions	$	28,859	$	29,467
Interest-earning deposits in other financial institutions	32,838		79,071
Total cash and cash equivalents	61,697		108,538
Equity investments, at estimated fair value	2,933		2,542
Securities available for sale, at estimated fair value	761,531		554,611
Securities held to maturity, estimated fair value of $3,194 at September 30, 2021   and $2,501 at December 31, 2020	3,183		2,469
FHLBNY and FRBNY Stock, at cost	3,562		3,150
Loans, net of deferred loan fees	1,516,668		1,536,463
Allowance for loan losses	(20,940)		(20,924)
Loans, net	1,495,728		1,515,539
Loans held for sale	224		170
Premises and equipment, net	18,370		20,119
Operating lease right-of-use assets	7,084		7,145
Goodwill	21,824		21,824
Other intangible assets, net	26		258
Bank-owned life insurance	2,812		3,059
Accrued interest receivable and other assets	38,682		40,027
Total assets	$	2,417,656	$	2,279,451
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing	$	725,181	$	620,423
Interest-bearing	1,448,641		1,417,351
Total deposits	2,173,822		2,037,774
Long term finance lease obligation	3,659		3,849
Operating lease liabilities	7,227		7,264
Dividends payable	1,445		1,214
Accrued interest payable and other liabilities	25,364		29,651
Total liabilities	2,211,517		2,079,752
Shareholders' equity:
Common stock, $0.01 par value per share, 10,000,000 shares authorized;   5,310,076 issued at September 30, 2021 and December 31, 2020	53		53
Additional paid-in capital	47,203		46,764
Retained earnings	183,873		168,006
Treasury stock, at cost; 647,273 shares at September 30, 2021 and 642,239   shares at December 31, 2020	(17,924)		(17,525)
Accumulated other comprehensive income (loss)	(7,066)		2,401
Total shareholders' equity	206,139		199,699
Total liabilities and shareholders' equity	$	2,417,656	$	2,279,451

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)	2021		2020		2021		2020
Interest and dividend income:
Loans, including fees	$	14,655	$	14,876	$	43,964	$	43,770
Taxable securities	2,678		1,474		6,431		4,358
Tax exempt securities	265		263		792		799
Interest-earning deposits	35		101		131		643
Total interest and dividend income	17,633		16,714		51,318		49,570
Interest expense:
Deposits	768		809		2,521		2,922
Borrowed funds	33		36		100		126
Total interest expense	801		845		2,621		3,048
Net interest income	16,832		15,869		48,697		46,522
Provision (credit) for loan losses	356		679		(53)		3,989
Net interest income after provision for loan losses	16,476		15,190		48,750		42,533
Non-interest income:
WMG fee income	2,765		2,416		8,246		6,968
Service charges on deposit accounts	856		740		2,305		2,294
Interchange revenue from debit card transactions	1,237		1,082		3,622		2,989
Changes in fair value of equity investments	15		57		203		(33)
Net gains on sales of loans held for sale	242		553		884		916
Net gains (losses) on sales of other real estate owned	—		6		(18)		(71)
Income from bank-owned life insurance	13		14		39		147
Other	842		471		2,802		1,940
Total non-interest income	5,970		5,339		18,083		15,150
Non-interest expenses:
Salaries and wages	6,259		6,088		18,058		17,678
Pension and other employee benefits	1,511		1,245		4,450		4,095
Other components of net periodic pension and postretirement benefits	(391)		(254)		(1,173)		(762)
Net occupancy	1,432		1,454		4,446		4,406
Furniture and equipment	409		538		1,185		1,573
Data processing	2,210		1,777		6,261		5,630
Professional services	542		453		1,531		1,313
Amortization of intangible assets	42		120		232		371
Marketing and advertising	162		140		572		546
Other real estate owned	7		53		24		87
FDIC insurance	356		247		1,075		726
Loan expense	196		301		720		798
Other	1,365		1,200		3,923		3,878
Total non-interest expenses	14,100		13,362		41,304		40,339
Income before income tax expense	8,346		7,167		25,529		17,344
Income tax expense	1,700		1,456		5,558		3,315
Net income	$	6,646	$	5,711	$	19,971	$	14,029
Weighted average shares outstanding	4,684		4,773		4,687		4,836
Basic and diluted earnings per share	$	1.42	$	1.19	$	4.26	$	2.90

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)	2021		2020		2021		2020
Net income	$	6,646	$	5,711	$	19,971	$	14,029
Other comprehensive income (loss):
Net unrealized gains (losses)	(4,348)		(692)		(12,715)		9,919
Tax effect	(1,139)		(176)		(3,246)		2,530
Net of tax amount	(3,209)		(516)		(9,469)		7,389
Change in funded status of defined benefit pension plan and other benefit plans:
Reclassification adjustment for amortization of prior service costs	(55)		(55)		(165)		(165)
Reclassification adjustment for amortization of net actuarial loss	57		77		169		231
Total before tax effect	2		22		4		66
Tax effect	1		6		2		14
Net of tax amount	1		16		2		52
Total other comprehensive income (loss)	(3,208)		(500)		(9,467)		7,441
Comprehensive income	$	3,438	$	5,211	$	10,504	$	21,470

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 Income (Loss)		Total
Balances at June 30, 2020	53		46,758		159,505		(13,869)		2,142		194,589
Net income	—		—		5,711		—		—		5,711
Other comprehensive loss	—		—		—		—		(500)		(500)
Restricted stock awards	—		125		—		—		—		125
Restricted stock units for directors' deferred compensation plan	—		5		—		—		—		5
Cash dividends declared ($0.26 per share)	—		—		(1,229)		—		—		(1,229)
Repurchase of 64,185 shares of common stock	—		—		—		(1,816)		—		(1,816)
Sale of 18,202 shares of treasury stock (a)	—		4		—		116		—		120
Balances at September 30, 2020	$	53	$	46,892	$	163,987	$	(15,569)	$	1,642	$	197,005
Balances at June 30, 2021	$	53	$	47,081	$	178,673	$	(17,972)	$	(3,858)	$	203,977
Net income	—		—		6,646		—		—		6,646
Other comprehensive loss	—		—		—		—		(3,208)		(3,208)
Restricted stock awards	—		84		—		—		—		84
Restricted stock units for directors' deferred compensation plan	—		5		—		—		—		5
Cash dividends declared ($0.31 per share)	—		—		(1,446)		—		—		(1,446)
Repurchase of 97 shares of common stock	—		—		—		(4)		—		(4)
Sale of 1,887 shares of treasury stock (a)	—		33		—		52		—		85
Balances at September 30, 2021	$	53	$	47,203	$	183,873	$	(17,924)	$	(7,066)	$	206,139

(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 Income (Loss)		Total
Balances at January 1, 2020	$	53	$	46,382	$	153,701	$	(11,710)	$	(5,799)	$	182,627
Net income	—		—		14,029		—		—		14,029
Other comprehensive income	—		—		—		—		7,441		7,441
Restricted stock awards	—		431		—		—		—		431
Restricted stock units for directors' deferred compensation plan	—		25		—		—		—		25
Distribution of 255 shares of treasury stock grants for employee restricted stock awards	—		(7)		—		7		—		—
Cash dividends declared ($0.78 per share)	—		—		(3,743)		—		—		(3,743)
Distribution of 7,923 shares of treasury stock for directors' compensation	—		144		—		206		—		350
Distribution of 2,274 shares of treasury stock for employee compensation	—		41		—		59		—		100
Distribution of 6,426 shares of treasury stock for for deferred directors' compensation	—		(180)		—		168		—		(12)
Repurchase of 186,206 shares of common stock	—		—		—		(5,137)		—		(5,137)
Sale of 32,387 shares of treasury stock (a)	—		51		—		843		—		894
Forfeiture of 112 shares of restricted stock awards	—		5		—		(5)		—		—
Balances at September 30, 2020	$	53	$	46,892	$	163,987	$	(15,569)	$	1,642	$	197,005
Balances at January 1, 2021	$	53	$	46,764	$	168,006	$	(17,525)	$	2,401	$	199,699
Net income	—		—		19,971		—		—		19,971
Other comprehensive loss	—		—		—		—		(9,467)		(9,467)
Restricted stock awards	—		307		—		—		—		307
Restricted stock units for directors' deferred compensation plan	—		14		—		—		—		14
Cash dividends declared ($0.88 per share)	—		—		(4,104)		—		—		(4,104)
Distribution of 9,291 shares of treasury stock for directors' compensation	—		64		—		253		—		317
Distribution of 3,860 shares of treasury stock for employee compensation	—		27		—		105		—		132
Distribution of 2,707 shares of treasury stock for deferred directors’ compensation	—		(72)		—		75		—		3
Repurchase of 28,803 shares of common stock	—		—		—		(1,050)		—		(1,050)
Sale of 7,911 shares of treasury stock (a)	—		99		—		218		—		317
Balances at September 30, 2021	$	53	$	47,203	$	183,873	$	(17,924)	$	(7,066)	$	206,139

(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.

11

CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)	Nine Months Ended   September 30,
CASH FLOWS FROM OPERATING ACTIVITIES:	2021		2020
Net income	$	19,971	$	14,029
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of right-of-use assets	559		527
Amortization of intangible assets	232		371
Provision for loan losses	(53)		3,989
(Gains) Loss on disposal of fixed assets	(61)		7
Depreciation and amortization of fixed assets	1,896		2,215
Amortization of premiums on securities, net	4,020		1,003
Gain on sales of loans held for sale, net	(884)		(916)
Proceeds from sales of loans held for sale	29,840		17,216
Loans originated and held for sale	(29,010)		(17,174)
Net losses on sale of other real estate owned	18		71
Write-downs on other real estate owned	—		38
Net change in fair value of equity investments	(203)		33
Proceeds from sales of trading assets	41		24
Purchase of equity investments	(229)		(174)
Decrease (Increase) in other assets and accrued interest receivable	1,279		(10,264)
Increase (decrease) in accrued interest payable	27		(38)
Expense related to restricted stock units for directors' deferred compensation plan	14		25
Expense related to employee stock compensation	132		102
Expense related to employee restricted stock awards	307		431
Payments on operating leases	(37)		(500)
(Decrease) increase in other liabilities	(1,242)		9,119
Income from bank owned life insurance	(39)		(147)
Net cash provided by operating activities	26,578		19,987
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities, calls, and principal paydowns on securities available for sale	109,736		39,508
Proceeds from maturities and principal collected on securities held to maturity	558		1,349
Purchases of securities available for sale	(333,376)		(142,797)
Purchases of securities held to maturity	(1,287)		(1,286)
Purchase of FHLBNY and FRBNY stock	(412)		(51)
Proceeds from sales of fixed assets	451		—
Purchases of premises and equipment	(537)		(696)
Proceeds from sale of other real estate owned	128		253
Proceeds from bank owned life insurance	286		213
Net (increase) decrease in loans	19,784		(232,582)
Net cash used in investing activities	(204,669)		(336,089)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, interest-bearing demand accounts, savings accounts, and insured money market accounts	191,360		307,723
(Decrease) increase in time deposits	(55,312)		44,327
Payments made on finance leases	(190)		(175)
Purchase of treasury stock	(1,050)		(5,137)
Sale of treasury stock	315		894
Cash dividends paid	(3,873)		(3,777)
Net cash provided by financing activities	131,250		344,100
Net (decrease) increase in cash and cash equivalents	(46,841)		27,998
Cash and cash equivalents, beginning of period	108,538		121,904
Cash and cash equivalents, end of period	$	61,697	$	149,902

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:	2021		2020
Cash paid for:
Interest	$	2,594	$	3,086
Income taxes	4,375		3,785
Supplemental disclosure of non-cash activity:
Transfer of loans to other real estate owned	80		431
Dividends declared, not yet paid	1,445		1,229
Repurchase of common stock in lieu of employee payroll taxes	80		54
Operating lease right-of-use assets	(498)		—
Distribution of treasury stock for directors' compensation	317		350
Distribution of treasury stock for deferred directors' compensation	4		(12)
Forfeiture of shares of restricted stock awards	—		(5)

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 2020 Annual Report on Form 10-K for the year ended December 31, 2020. 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

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 by replacing the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to form credit loss estimates. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2019, though entities may adopt the amendments earlier for fiscal years beginning after December 15, 2018. In November 2019, the FASB adopted changes to delay the effective date of ASU 2016-13 to January 2023 for certain entities, including certain Securities and Exchange Commission filers, public business entities, and private companies. As a smaller reporting company, the Corporation is eligible for the delay. The Corporation has established a committee to oversee the implementation of CECL and has selected a vendor to assist in the implementation process. The model chosen utilizes a loss driver analysis which includes reasonable and supportable forecasts to estimate future losses. This analysis includes different methods such as discounted cash flows, remaining life and vintage analysis, which are used depending on the nature of the portfolio segment. The Corporation is running its current incurred loss model and a CECL model concurrently. The Corporation is in the process of updating its policies and internal controls accordingly. The corporation expects to recognize a one-time cumulative-effect adjustment to our allowance for loan losses upon adoption of CECL, effective of January 1, 2023, consistent with regulatory expectations set forth in interagency guidance.

14

Section 4013 of the CARES Act gives entities temporary relief from the accounting and disclosure requirements for troubled debt restructurings (TDRs) under ASC 310-40, Receivables: Troubled Debt Restructurings by Creditors, in certain situations. Section 4013 of the CARES Act permits the suspension of ASC 310-40 for loan modifications that are made by financial institutions in response to the COVID-19 pandemic if (1) the borrower was not more than 30 days past due as of December 31, 2019, and (2) the modifications are related to arrangements that defer or delay the payment of principal or interest, or change the interest rate on the loan. All loan modifications made by the Corporation in response to the COVID-19 pandemic have been in accordance with Section 4013 of the CARES Act.

Adoption of New Accounting Standards

On January 1, 2020, the Corporation adopted ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The objective of the ASU is to simplify the manner in which an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Additionally, the ASU removes the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails such qualitative test, to perform Step 2 of the goodwill impairment test. The adoption of the ASU did not have a significant impact on the Corporation's consolidated financial statements.

Risks and Uncertainties - COVID-19

The COVID-19 pandemic has caused significant economic dislocation in the United States as many state and local governments have ordered non-essential businesses to close and residents to shelter in place at home. As of September 30, 2021 many restrictions have been removed or lessened and many non-essential businesses have been allowed to re-open in limited capacity adhering to social distancing and disinfection guidelines. However, these restrictions and other consequences have resulted in an unprecedented slow-down in economic activity and a related increase in unemployment. Since the COVID-19 pandemic began, millions of people have filed claims for unemployment and stock markets have remained volatile. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 pandemic on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be fully reopened.

The Corporation's unaudited consolidated financial statements reflect estimates and assumptions that affect the reported amounts of assets and liabilities, including the amount of the allowance for loan losses established. Management evaluated the potential impact of the COVID-19 pandemic as it related to the loan portfolio and as part of this analysis, management identified what it believes to be higher risk loans through a detailed analysis of industry codes. Certain allowance qualitative factors were increased based on an assessment of the impact of the current pandemic on local, national and global economic conditions as well as the perceived risks inherent in specific industries and credit characteristics.

Management has taken actions to identify and assess additional possible credit exposure due to the COVID-19 pandemic based upon the industry types within the current loan portfolio. While most industries have and will continue to experience adverse impacts as a result of the COVID-19 pandemic, Management has designated certain industries as most impacted by COVID-19. For a discussion of the effect of COVID-19 on our business, see pages 60-62 of this Form 10-Q.

NOTE 2        EARNINGS PER COMMON SHARE (shares in thousands)

Basic earnings per share is net income divided by the weighted average number of common shares outstanding during the period. Issuable shares, including those related to directors’ restricted stock units and directors’ stock compensation, 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 non-forfeitable 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 4,684 and 4,773 weighted average shares outstanding for the three month periods ended September 30, 2021 and 2020, respectively. Earnings per share were computed by dividing net income by 4,687 and 4,836 weighted average shares outstanding for the nine month periods ended September 30, 2021 and 2020, respectively. There were no common stock equivalents during the three and nine month periods ended September 30, 2021 or 2020.

15

NOTE 3        SECURITIES

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

	September 30, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. Treasury notes and bonds	$	40,499	$	—	$	162	$	40,337
Mortgage-backed securities, residential	588,555		5,397		7,826		586,126
Obligations of states and political subdivisions	40,331		2,021		—		42,352
Corporate bonds and notes	17,000		116		55		17,061
SBA loan pools	75,612		398		355		75,655
Total	$	761,997	$	7,932	$	8,398	$	761,531

	December 31, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Mortgage-backed securities, residential	$	458,245	$	9,822	$	201	$	467,866
Obligations of states and political subdivisions	40,662		2,743		—		43,405
Corporate bonds and notes	9,000		47		12		9,035
SBA loan pools	34,455		42		192		34,305
Total	$	542,362	$	12,654	$	405	$	554,611

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

	September 30, 2021
	Amortized Cost		Unrecognized Gains		Unrecognized Losses		Estimated Fair Value
Obligations of states and political subdivisions	$	1,300	$	—	$	—	$	1,300
Time deposits with other financial institutions	1,883		11		—		1,894
Total	$	3,183	$	11	$	—	$	3,194

	December 31, 2020
	Amortized Cost		Unrecognized Gains		Unrecognized Losses		Estimated Fair Value
Obligations of states and political subdivisions	$	326	$	—	$	—	$	326
Time deposits with other financial institutions	2,143		32		—		2,175
Total	$	2,469	$	32	$	—	$	2,501

16

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

	September 30, 2021
	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	686	$	689	$	1,523	$	1,532
After one, but within five years	75,962		77,278		860		862
After five, but within ten years	20,712		21,285		800		800
After ten years	470		498		—		—
	97,830		99,750		3,183		3,194
Mortgage-backed securities, residential	588,555		586,126		—		—
SBA loan pools	75,612		75,655		—		—
Total	$	761,997	$	761,531	$	3,183	$	3,194

There were no proceeds from sales and calls of securities resulting in gains or losses for the three and nine month periods ended September 30, 2021 and 2020.

The following tables summarize the investment securities available for sale with unrealized losses at September 30, 2021 and December 31, 2020 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, 2021	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury notes and bonds	$	24,819	$	162	$	—	$	—	$	24,819	$	162
Mortgage-backed securities, residential	383,380		7,707		4,146		119		387,526		7,826
Corporate bonds and notes	2,979		21		2,966		34		5,945		55
SBA loan pools	39,140		283		6,273		72		45,413		355
Total temporarily impaired securities	$	450,318	$	8,173	$	13,385	$	225	$	463,703	$	8,398

	Less than 12 months				12 months or longer				Total
December 31, 2020	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-backed securities, residential	$	70,037	$	200	$	970	$	1	$	71,007	$	201
Corporate bonds and notes	2,988		12		—		—		2,988		12
SBA loan pools	15,245		156		3,636		36		18,881		192
Total temporarily impaired securities	$	88,270	$	368	$	4,606	$	37	$	92,876	$	405

Other-Than-Temporary Impairment

As of September 30, 2021, the majority of the Corporation's unrealized losses in the investment securities portfolio related to mortgage-backed securities. At September 30, 2021, all of the unrealized losses related to mortgage-backed securities were issued by U.S. government sponsored entities, Fannie Mae and Freddie Mac. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Corporation does not have the intent to sell these securities and it is not likely that it will be required to sell these securities before their anticipated recovery, the Corporation does not consider these securities to be other-than-temporarily impaired at September 30, 2021.

17

NOTE 4        LOANS AND ALLOWANCE FOR LOAN LOSSES

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

	September 30, 2021		December 31, 2020
Commercial and agricultural:
Commercial and industrial	$	270,656	$	368,663
Agricultural	419		283
Commercial mortgages:
Construction	67,445		61,945
Commercial mortgages, other	721,709		654,663
Residential mortgages	253,991		239,401
Consumer loans:
Home equity lines and loans	72,471		78,547
Indirect consumer loans	119,772		120,538
Direct consumer loans	10,205		12,423
Total loans, net of deferred loan fees and costs	1,516,668		1,536,463
Interest receivable on loans	4,261		5,035
Total recorded investment in loans	$	1,520,929	$	1,541,498

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. As of September 30, 2021 and December 31, 2020, the Corporation had outstanding PPP loan balances of $68.1 million and $150.9 million, respectively, which were included in commercial and industrial loans in the table above. These loans require no allowance for loan losses as of September 30, 2021 since they are government guaranteed loans.

The following tables present the activity in the allowance for loan losses by portfolio segment for the three month periods ended September 30, 2021 and 2020 (in thousands):

	Three Months Ended September 30, 2021
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	3,628	$	12,963	$	1,791	$	2,294	$	20,676
Charge-offs	—		(44)		—		(190)		(234)
Recoveries	8		1		—		133		142
Net recoveries (charge-offs)	8		(43)		—		(57)		(92)
Provision	(15)		361		80		(70)		356
Ending balance	$	3,621	$	13,281	$	1,871	$	2,167	$	20,940

	Three Months Ended September 30, 2020
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	8,327	$	10,549	$	1,891	$	3,363	$	24,130
Charge-offs	(68)		—		(42)		(216)		(326)
Recoveries	18		2		—		87		107
Net recoveries (charge-offs)	(50)		2		(42)		(129)		(219)
Provision	180		361		232		(94)		679
Ending balance	$	8,457	$	10,912	$	2,081	$	3,140	$	24,590

18

The following tables present the activity in the allowance for loan losses by portfolio segment for the nine month periods ended September 30, 2021 and 2020 (in thousands):

	Nine Months Ended September 30, 2021
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	4,493	$	11,496	$	2,079	$	2,856	$	20,924
Charge-offs	(25)		(44)		(71)		(510)		(650)
Recoveries	283		2		10		424		719
Net recoveries (charge-offs)	258		(42)		(61)		(86)		69
Provision	(1,130)		1,827		(147)		(603)		(53)
Ending balance	$	3,621	$	13,281	$	1,871	$	2,167	$	20,940

	Nine Months Ended September 30, 2020
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	10,227	$	8,869	$	1,252	$	3,130	$	23,478
Charge-offs	(134)		(2,143)		(56)		(915)		(3,248)
Recoveries	27		2		49		293		371
Net recoveries (charge-offs)	(107)		(2,141)		(7)		(622)		(2,877)
Provision	(1,663)		4,184		836		632		3,989
Ending balance	$	8,457	$	10,912	$	2,081	$	3,140	$	24,590

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021
Allowance for loan losses:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,525	$	1,800	$	—	$	73	$	3,398
Collectively evaluated for impairment	2,096		11,481		1,871		2,094		17,542
Total ending allowance balance	$	3,621	$	13,281	$	1,871	$	2,167	$	20,940

	December 31, 2020
Allowance for loan losses:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,401	$	74	$	—	$	52	$	1,527
Collectively evaluated for impairment	3,092		11,422		2,079		2,804		19,397
Total ending allowance balance	$	4,493	$	11,496	$	2,079	$	2,856	$	20,924

19

	September 30, 2021
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually evaluated for impairment	$	2,582	$	8,356	$	946	$	333	$	12,217
Loans collectively evaluated for  impairment	269,290		783,120		253,695		202,607		1,508,712
Total ending loans balance	$	271,872	$	791,476	$	254,641	$	202,940	$	1,520,929

	December 31, 2020
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually evaluated for impairment	$	3,400	$	5,117	$	1,271	$	801	$	10,589
Loans collectively evaluated for  impairment	366,852		714,028		238,742		211,287		1,530,909
Total ending loans balance	$	370,252	$	719,145	$	240,013	$	212,088	$	1,541,498

The following table presents loans individually evaluated for impairment recognized by class of loans as of September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021						December 31, 2020
With no related allowance recorded:	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
Commercial and agricultural:
Commercial and industrial	$	995	$	970	$	—	$	1,960	$	1,963	$	—
Commercial mortgages:
Construction	143		143		—		188		189		—
Commercial mortgages, other	7,312		4,651		—		6,814		4,760		—
Residential mortgages	960		946		—		1,283		1,271		—
Consumer loans:
Home equity lines and loans	195		179		—		645		631		—
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	5,487		1,612		1,525		5,228		1,437		1,401
Commercial mortgages:
Commercial mortgages, other	3,554		3,562		1,800		258		168		74
Consumer loans:
Home equity lines and loans	154		154		73		170		170		52
Total	$	18,800	$	12,217	$	3,398	$	16,546	$	10,589	$	1,527

20

The following table presents the average recorded investment and interest income of loans individually evaluated for impairment recognized by class of loans for the three and nine month periods ended September 30, 2021 and 2020 (in thousands):

	Three Months Ended   September 30, 2021				Three Months Ended   September 30, 2020				Nine Months Ended   September 30, 2021				Nine Months Ended   September 30, 2020
With no related allowance recorded:	Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)
Commercial and agricultural:
Commercial and industrial	$	1,378	$	3	$	1,239	$	2	$	1,645	$	3	$	679	$	2
Commercial mortgages:
Construction	151		1		213		2		167		5		226		6
Commercial mortgages, other	4,665		8		4,515		—		4,743		23		3,938		—
Residential mortgages	950		12		1,224		7		1,034		29		873		17
Consumer loans:
Home equity lines & loans	184		2		650		2		299		5		399		5
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,545		4		5,804		2		1,511		6		5,867		4
Commercial mortgages:
Commercial mortgages, other	3,644		25		2,229		8		1,905		25		3,645		16
Consumer loans:
Home equity lines and loans	155		—		175		—		160		—		88		—
Total	$	12,672	$	55	$	16,049	$	23	$	11,464	$	96	$	15,715	$	50

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

The following table presents the recorded investment in non-accrual and loans past due 90 days or more and still accruing by class of loans as of September 30, 2021 and December 31, 2020 (in thousands):

	Non-accrual				Loans Past Due 90 Days or More and Still Accruing
	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Commercial and agricultural:
Commercial and industrial	$	2,080	$	2,167	$	4	$	2
Commercial mortgages:
Construction	36		55		—		—
Commercial mortgages, other	4,212		4,415		—		—
Residential mortgages	845		1,632		—		—
Consumer loans:
Home equity lines and loans	819		1,159		—		—
Indirect consumer loans	367		519		—		—
Direct consumer loans	14		5		—		—
Total	$	8,373	$	9,952	$	4	$	2

21

The following tables present the aging of the recorded investment in loans as of September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021
	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	$	1,110	$	1,375	$	45	$	2,530	$	268,921	$	271,451
Agricultural	—		—		—		—		421		421
Commercial mortgages:
Construction	—		—		—		—		67,644		67,644
Commercial mortgages, other	2,056		2,615		217		4,888		718,944		723,832
Residential mortgages	1,226		131		436		1,793		252,848		254,641
Consumer loans:
Home equity lines and loans	115		161		542		818		71,835		72,653
Indirect consumer loans	764		83		161		1,008		119,037		120,045
Direct consumer loans	13		7		8		28		10,214		10,242
Total	$	5,284	$	4,372	$	1,409	$	11,065	$	1,509,864	$	1,520,929

	December 31, 2020
	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	$	520	$	14	$	30	$	564	$	369,404	$	369,968
Agricultural	—		—		—		—		284		284
Commercial mortgages:
Construction	—		—		—		—		62,164		62,164
Commercial mortgages, other	1,438		3,696		308		5,442		651,539		656,981
Residential mortgages	817		406		461		1,684		238,329		240,013
Consumer loans:
Home equity lines and loans	521		41		474		1,036		77,725		78,761
Indirect consumer loans	1,268		198		252		1,718		119,135		120,853
Direct consumer loans	34		2		—		36		12,438		12,474
Total	$	4,598	$	4,357	$	1,525	$	10,480	$	1,531,018	$	1,541,498

Troubled Debt Restructurings:

A modification of a loan may result in classification as a TDR when a borrower is experiencing financial difficulty and the modification constitutes a concession.  The Corporation offers various types of modifications which may involve a change in the schedule of payments, a reduction in the interest rate, an extension of the maturity date, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, requesting additional collateral, releasing collateral for consideration, substituting or adding a new borrower or guarantor, a permanent reduction of the recorded investment in the loan or a permanent reduction of the interest on the loan. Under Section 4013 of the CARES Act, loans less than 30 days past due as of December 31, 2019 will be considered current for COVID-19 related modifications and therefore will not be treated as TDRs. At its highest point as of May 31, 2020, in conformance with Section 4013 of the CARES Act, total loan forbearances represented 15.77% of the Corporation's total loan portfolio, or $242.5 million. As of September 30, 2021, 11 loans totaling $3.0 million remained in modified status, representing 0.20% of the Corporation's total loan portfolio, of which 5 loans totaling $2.9 million had been modified more than once.

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As of September 30, 2021 and December 31, 2020, the Corporation has a recorded investment in TDRs of $10.8 million and $6.7 million, respectively. There were specific reserves of $2.2 million and $0.4 million allocated for TDRs at September 30, 2021 and December 31, 2020, respectively. As of September 30, 2021, TDRs totaling $5.7 million were accruing interest under the modified terms and $5.1 million were on non-accrual status. As of December 31, 2020, TDRs totaling $2.8 million were accruing interest under the modified terms and $3.9 million were on non-accrual status. The Corporation has committed no additional amounts as of both September 30, 2021 and December 31, 2020, to customers with outstanding loans that are classified as TDRs.

During the three months ended September 30, 2021, the terms and conditions of two commercial and industrial loans were modified as TDRs. The modification of the terms of both of these loans included a postponement or reduction of the scheduled amortized payments for greater than a three month period. During the three month period ended September 30, 2020, the terms of certain loans were modified as TDRs. During the three months ended September 30, 2020, the modification of terms of one residential mortgage loan included the postponement of scheduled amortized payments for a period greater than three-months. Additionally, two commercial and industrial loans were modified with the maturity date extended on both loans and one with an extension at a stated rate lower than the current market rate for new debt with similar risk.

In addition to the modifications noted above, during the nine months ended September 30, 2021 the terms and conditions of two commercial and industrial loans and two commercial mortgage loans were modified as TDRs. The modification of the terms of all of these loans included a postponement or reduction of the scheduled amortized payments for greater than a three month period.

In addition to the modifications noted above, during the nine month period ended September 30, 2020 modifications included two commercial and industrial loans where deferral of payments were granted and both loans were risk rated Substandard while one loan was in non-accrual status prior to the modification. The modifications of four commercial mortgage loans included the deferral of payments with three of the the loans risk rated Substandard and in non-accrual status, three of the borrowers were over one year past due in real estate taxes and two of the loans were over 30 days past due in payments. The modifications of three residential mortgages included the deferral of payments while all three were in non-accrual status prior to the modifications, two were risk rated Substandard and one was over thirty days past due in payments. The modifications of three home equity lines and loans included the deferral of payments while all three loans were risk rated Substandard and in non-accrual status prior to the modifications.

The following table presents loans by class modified as TDRs that occurred during the three month period ended September 30, 2021 and September 30, 2020 (dollars in thousands):

September 30, 2021	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial and agricultural:
Commercial and industrial	2	$	502	$	502
Total	2	$	502	$	502

September 30, 2020	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial and industrial	2	$	1,138	$	1,138
Residential mortgages	1	320		320
Total	3	$	1,458	$	1,458

The TDRs described above increased the allowance for loan losses by $0.2 million and resulted in no charge-offs during the three month period ended September 30, 2021. The TDRs described above did not increase the allowance for loan losses and resulted in no charge-offs during the three month period ended September 30, 2020.

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The following table presents loans by class modified as TDRs that occurred during the nine month period ended September 30, 2021 and September 30, 2020 (dollars in thousands):

September 30, 2021	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial and agricultural:
Commercial and industrial	2	$	502	$	502
Agricultural
Commercial mortgages:
Commercial mortgages, other	4	$	6,094	$	6,094
Total	6	$	6,596	$	6,596

September 30, 2020	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial and agricultural:
Commercial and industrial	4	$	2,068	$	2,068
Agricultural
Commercial mortgages:
Commercial mortgages, other	4	1,297		1,297
Residential mortgages	4	997		997
Consumer loans:
Home equity lines and loans	3	738		738
Total	15	$	5,100	$	5,100

The TDRs described above increased the allowance for loan losses by $1.9 million and resulted in no charge-offs during the nine month period ended September 30, 2021. The TDRs described above increased the allowance for loan losses by $0.1 million and resulted in no charge-offs during the nine month period ended September 30, 2020.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. There were no payment defaults on any loans previously modified as TDRs within twelve months following the modification during the three and nine month periods ended September 30, 2021 and 2020.

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 the retail loans, which include residential mortgages, indirect and direct consumer loans, home equity lines and loans, and credit cards, once a loan is properly approved and closed, the Corporation evaluates credit quality based upon loan repayment.

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.

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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, 2021 and December 31, 2020, the risk category of the recorded investment of loans by class of loans is as follows (in thousands):

	September 30, 2021
	Not Rated		Pass		Special Mention		Substandard		Doubtful		Total
Commercial and agricultural:
Commercial and industrial	$	—	$	264,526	$	2,565	$	3,166	$	1,194	$	271,451
Agricultural	—		421		—		—		—		421
Commercial mortgages:
Construction	—		67,607		—		37		—		67,644
Commercial mortgages	—		670,350		33,937		18,422		1,123		723,832
Residential mortgages	253,796		—		—		845		—		254,641
Consumer loans:
Home equity lines and loans	71,834		—		—		819		—		72,653
Indirect consumer loans	119,678		—		—		367		—		120,045
Direct consumer loans	10,228		—		—		14		—		10,242
Total	$	455,536	$	1,002,904	$	36,502	$	23,670	$	2,317	$	1,520,929

	December 31, 2020
	Not Rated		Pass		Special Mention		Substandard		Doubtful		Total
Commercial and agricultural:
Commercial and industrial	$	—	$	360,500	$	2,999	$	5,092	$	1,377	$	369,968
Agricultural	—		284		—		—		—		284
Commercial mortgages:
Construction	—		59,885		—		2,279		—		62,164
Commercial mortgages	—		616,090		23,631		16,128		1,132		656,981
Residential mortgages	238,381		—		—		1,632		—		240,013
Consumer loans:
Home equity lines and loans	77,602		—		—		1,159		—		78,761
Indirect consumer loans	120,334		—		—		519		—		120,853
Direct consumer loans	12,470		—		—		4		—		12,474
Total	$	448,787	$	1,036,759	$	26,630	$	26,813	$	2,509	$	1,541,498

The Corporation considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential and consumer loan classes, the Corporation also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following tables present the recorded investment in residential and consumer loans based on payment activity as of September 30, 2021 and December 31, 2020 (in thousands):

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	September 30, 2021
			Consumer Loans
	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	253,796	$	71,834	$	119,678	$	10,228
Non-Performing	845		819		367		14
	$	254,641	$	72,653	$	120,045	$	10,242

	December 31, 2020
			Consumer Loans
	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	238,381	$	77,602	$	120,334	$	12,470
Non-Performing	1,632		1,159		519		4
	$	240,013	$	78,761	$	120,853	$	12,474

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).

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Impaired Loans:  At the time a loan is considered impaired, it is valued at the lower of cost or fair value.  Impaired loans carried at fair value have been partially charged-off or receive specific allocations as part of the allowance for loan 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 evaluated on a quarterly basis for additional impairment and adjusted accordingly.

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

Appraisals for both collateral dependent impaired 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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Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

			Fair Value Measurement at September 30, 2021 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	$	40,337	$	40,337	$	—	$	—
Mortgage-backed securities, residential	586,126		—		586,126		—
Obligations of states and political subdivisions	42,352		—		42,352		—
Corporate bonds and notes	17,061		—		17,061		—
SBA loan pools	75,655		—		75,655		—
Total available for sale securities	$	761,531	$	40,337	$	721,194	$	—
Equity investments, at fair value	$	2,290	$	2,290	$	—	$	—
Derivative assets	9,948		—		9,948		—
Financial Liabilities:
Derivative liabilities	$	10,310	$	—	$	10,310	$	—

There were no transfers between Level 1 and Level 2 during the three and nine month periods ended September 30, 2021.

			Fair Value Measurement at December 31, 2020 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)
Mortgage-backed securities, residential	$	467,866	$	—	$	467,866	$	—
Obligations of states and political subdivisions	43,405		—		43,405		—
Corporate bonds and notes	9,035		—		9,035		—
SBA loan pools	34,305		—		34,305		—
Total available for sale securities	$	554,611	$	—	$	554,611	$	—
Equity investments, at fair value	$	1,880	$	1,880	$	—	$	—
Derivative assets	14,345		—		14,345		—
Financial Liabilities:
Derivative liabilities	$	14,702	$	—	$	14,702	$	—

There were no transfers between Level 1 and Level 2 during the three and nine month periods ended September 30, 2020.

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

			Fair Value Measurement at September 30, 2021 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)
Other real estate owned:
Residential mortgages	$	124	$	—	$	—	$	124
Consumer loans:
Home equity lines and loans	47		—		—		47
Total other real estate owned, net	$	171	$	—	$	—	$	171

			Fair Value Measurement at December 31, 2020 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)
Other real estate owned:
Commercial mortgages:
Commercial mortgages	$	111	$	—	$	—	$	111
Residential mortgages	126		—		—		126
Total other real estate owned, net	$	237	$	—	$	—	$	237

The following tables present information related to Level 3 non-recurring fair value measurement at September 30, 2021 and December 31, 2020 (in thousands):

Description	Fair Value at September 30, 2021		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at September 30, 2021
Impaired loans:
OREO:
Commercial mortgages:
Residential mortgages	$	124	Sales comparison	Discount to appraised value	20.80% - 20.80% [20.80%]
Consumer loans:
Home equity lines and loans	47		Sales comparison	Discount to appraised value	10.00% - 10.00% [10.00%]
	$	171

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Description	Fair Value at December 31, 2020		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at December 31, 2020
Impaired loans:
OREO:
Commercial mortgages:
Commercial mortgages	$	111	Sales comparison	Discount to appraised value	20.80% - 20.80% [20.80%]
Residential mortgages	126		Sales comparison	Discount to appraised value	20.80% - 20.80% [20.80%]
	$	237

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values of other financial instruments, at September 30, 2021 and December 31, 2020, are as follows (in thousands):

	September 30, 2021
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	$	28,859	$	28,859	$	—	$	—	$	28,859
Interest-earning deposits in other financial institutions	32,838		32,838		—		—		32,838
Equity investments	2,933		2,933		—		—		2,933
Securities available for sale	761,531		40,337		721,194		—		761,531
Securities held to maturity	3,183		—		1,894		1,300		3,194
FHLBNY and FRBNY stock	3,562		—		—		—		N/A
Loans, net and loans held for sale	1,495,952		—		—		1,483,417		1,483,417
Accrued interest receivable	6,040		73		1,706		4,261		6,040
Derivative Assets	9,948		—		9,948		—		9,948
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,943,403	$	1,943,403	$	—	$	—	$	1,943,403
Time deposits	230,419		—		232,107		—		232,107
Accrued interest payable	289		10		279		—		289
Derivative Liabilities	10,310		—		10,310		—		10,310

(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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	December 31, 2020
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	$	29,467	$	29,467	$	—	$	—	$	29,467
Interest-earning deposits in other financial institutions	79,071		79,071		—		—		79,071
Equity investments	2,542		2,542		—		—		2,542
Securities available for sale	554,611		—		554,611		—		554,611
Securities held to maturity	2,469		—		2,175		326		2,501
FHLBNY and FRBNY stock	3,150		—		—		—		N/A
Loans, net and loans held for sale	1,515,709		—		—		1,514,318		1,514,318
Accrued interest receivable	6,271		—		1,356		4,915		6,271
Derivative Asset	14,345		—		14,345		—		14,345
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,752,043	$	1,752,043	$	—	$	—	$	1,752,043
Time deposits	285,731		—		288,398		—		288,398
Accrued interest payable	262		11		251		—		262
Derivative Liabilities	14,702		—		14,702		—		14,702

(1) Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.

NOTE 6        LEASES

Operating Leases

The Corporation leases certain branch properties under long-term, operating lease agreements. The leases expire at various dates through 2033 and generally include renewal options. As of September 30, 2021, the weighted average remaining lease term was 9.40 years with a weighted average discount rate of 3.33%. Rent expense was $0.2 million for the three months ended September 30, 2021. Rent expense was $0.7 million for the nine months ended September 30, 2021. 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, 2021 and December 31, 2020 consist of the following (in thousands):

	September 30, 2021		December 31, 2020
Operating lease right-of-use asset	$	7,145	$	8,001
Less: accumulated amortization	(559)		(705)
Change in lease agreements	498		(151)
Operating lease right-of-use-assets, net	$	7,084	$	7,145

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The following is a schedule by year of the undiscounted cash flows of the operating lease liabilities, excluding CAM charges, as of September 30, 2021 (in thousands):

Year	Amount
2021	$	241
2022	970
2023	990
2024	923
2025	841
2026 and thereafter	4,501
Total minimum lease payments	8,466
Less: amount representing interest	(1,239)
Present value of net minimum lease payments	$	7,227

As of September 30, 2021, the Corporation had one operating lease that was signed, but had not yet commenced. The expected commencement date is October, 2021.

Finance Leases

The Corporation leases certain buildings under finance leases. The lease arrangements require monthly payments through 2036. As of September 30, 2021, the weighted average remaining lease term was 11.36 years with a weighted average discount rate of 3.37%. The Corporation has included these leases in premises and equipment as of September 30, 2021 and December 31, 2020 as follows (in thousands):

	September 30, 2021		December 31, 2020
Buildings	$	5,572	$	5,572
Less: accumulated depreciation	(2,125)		(1,875)
Net book value	$	3,447	$	3,697

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, 2021 (in thousands):

Year	Amount
2021	$	98
2022	391
2023	391
2024	391
2025	409
2026 and thereafter	2,840
Total minimum lease payments	4,520
Less: amount representing interest	(861)
Present value of net minimum lease payments	$	3,659

As of September 30, 2021, the Corporation had no finance leases that were signed, but had not yet commenced.

Related Party Transactions

The Bank leases its branch located at 1365 New Scotland Road, Slingerlands, New York, under a lease agreement through July, 2024 from a member of the Corporation's Board of Directors with monthly rent and CAM related expenses totaling $4 thousand per month. Rent paid to this Board member totaled $13 thousand for each of the three month periods ended September 30, 2021 and 2020, respectively. Rent and CAM related expenses paid to this Board of Directors member totaled $37 thousand and $40 thousand for the nine month periods ended September 30, 2021 and 2020, respectively.

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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 $8 thousand per month. Rent and CAM related expenses paid to this Board member totaled $25 thousand and $26 thousand for the three month periods ended September 30, 2021 and 2020, respectively. Rent and CAM related expenses paid to this Board of Directors member totaled $76 thousand and $80 thousand for the nine month periods ended September 30, 2021 and 2020, 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, 2021 and 2020 were as follows (in thousands):

	2021		2020
Beginning of year	$	21,824	$	21,824
Acquired goodwill	—		—
Ending balance September 30,	$	21,824	$	21,824

Acquired intangible assets were as follows at September 30, 2021 and December 31, 2020 (in thousands):

	At September 30, 2021				At December 31, 2020
	Balance Acquired		Accumulated Amortization		Balance Acquired		Accumulated Amortization
Core deposit intangibles	$	5,975	$	5,975	$	5,975	$	5,962
Other customer relationship intangibles	5,633		5,607		5,633		5,388
Total	$	11,608	$	11,582	$	11,608	$	11,350

Aggregate amortization expense was $42 thousand and $120 thousand for the three month periods ended September 30, 2021 and 2020, respectively. Aggregate amortization expense was $0.2 million and $0.4 millions for the nine month periods ended September 30, 2021 and 2020, respectively.

The remaining estimated aggregate amortization expense at September 30, 2021 is listed below (in thousands):

Year	Estimated Expense
2021	$	26
Total	$	26

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. The test for impairment of goodwill on the identified reporting unit is considered a critical accounting estimate because it requires judgement on the part of management and the use of estimates relate to the growth assumptions and market multiples used in the valuation model. 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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The following table lists the contractual amounts of financial instruments with off-balance sheet risk at September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021				December 31, 2020
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	21,334	$	49,839	$	28,459	$	39,056
Unused lines of credit	2,137		274,554		1,300		268,075
Standby letters of credit	—		14,878		—		16,094

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, 2021, 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, 2021	$	2,867	$	(6,725)	$	(3,858)
Other comprehensive income before reclassification	(3,209)		—		(3,209)
Amounts reclassified from accumulated other comprehensive income	—		1		1
Net current period other comprehensive income (loss)	(3,209)		1		(3,208)
Balance at September 30, 2021	$	(342)	$	(6,724)	$	(7,066)

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at July 1, 2020	$	9,273	$	(7,131)	2,142
Other comprehensive income before reclassification	(516)		—		(516)
Amounts reclassified from accumulated other comprehensive income	—		16		16
Net current period other comprehensive income (loss)	(516)		16		(500)
Balance at September 30, 2020	$	8,757	$	(7,115)	$	1,642

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	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at January 1, 2021	$	9,127	$	(6,726)	$	2,401
Other comprehensive income before reclassification	(9,469)		—		(9,469)
Amounts reclassified from accumulated other comprehensive income	—		2		2
Net current period other comprehensive income	(9,469)		2		(9,467)
Balance at September 30, 2021	$	(342)	$	(6,724)	$	(7,066)

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at January 1, 2020	$	1,368	$	(7,167)	(5,799)
Other comprehensive income before reclassification	7,389		—		7,389
Amounts reclassified from accumulated other comprehensive income	—		52		52
Net current period other comprehensive income	7,389		52		7,441
Balance at September 30, 2020	$	8,757	$	(7,115)	$	1,642

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
	2021		2020
Amortization of defined pension plan and other benefit plan items:
Prior service costs (a)	$	(55)	$	(55)	Other components of net periodic pension and postretirement benefits
Actuarial losses (a)	57		77		Other components of net periodic pension and postretirement benefits
Tax effect	(1)		(6)		Income tax expense
Net of tax	1		16
Total reclassification for the period, net of tax	$	1	$	16

(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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Details about Accumulated Other Comprehensive Income (Loss) Components	Nine Months Ended September 30,				Affected Line Item in the Statement Where Net Income is Presented
	2021		2020
Amortization of defined pension plan and other benefit plan items:
Prior service costs (a)	$	(165)	$	(165)	Other components of net periodic pension and postretirement benefits
Actuarial losses (a)	169		231		Other components of net periodic pension and postretirement benefits
Tax effect	(2)		(14)		Income tax expense
Net of tax	2		52
Total reclassification for the period, net of tax	$	2	$	52

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

NOTE 10    REVENUE FROM CONTRACTS WITH CUSTOMERS

All of the Corporation's revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income. The following tables present the Corporation's non-interest income by revenue stream and reportable segment for the three and nine months ended September 30, 2021 and 2020 (in thousands). Items outside the scope of ASC 606 are noted as such.

	Three Months Ended September 30, 2021
Revenue by Operating Segment:	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Non-interest income
Service charges on deposit accounts
Overdraft fees	$	623	$	—	$	—	$	623
Other	233		—		—		233
Interchange revenue from debit card transactions	1,237		—		—		1,237
WMG fee income	—		2,765		—		2,765
CFS fee and commission income	—		—		346		346
Net gains (losses) on sales of OREO	—		—		—		—
Net gains on sales of loans(a)	242		—		—		242
Loan servicing fees(a)	38		—		—		38
Changes in fair value of equity investments(a)	(13)		—		28		15
Income from bank-owned life insurance(a)	13		—		—		13
Other(a)	464		—		(6)		458
Total non-interest income (loss)	$	2,837	$	2,765	$	368	$	5,970

(a) Not within scope of ASC 606.

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

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	Three Months Ended September 30, 2020
Revenue by Operating Segment:	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Non-interest income
Service charges on deposit accounts
Overdraft fees	$	668	$	—	$	—	$	668
Other	72		—		—		72
Interchange revenue from debit card transactions	1,082		—		—		1,082
WMG fee income	—		2,416		—		2,416
CFS fee and commission income	—		—		172		172
Net gains (losses) on sales of OREO	6		—		—		6
Net gains on sales of loans(a)	553		—		—		553
Loan servicing fees(a)	32		—		—		32
Changes in fair value of equity investments(a)	71		—		(14)		57
Income from bank-owned life insurance(a)	14		—		—		14
Other(a)	320		—		(53)		267
Total non-interest income	$	2,818	$	2,416	$	105	$	5,339

(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, 2021
Revenue by Operating Segment:	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Non-interest income
Service charges on deposit accounts
Overdraft fees	$	1,561	$	—	$	—	$	1,561
Other	744		—		—		744
Interchange revenue from debit card transactions	3,622		—		—		3,622
WMG fee income	—		8,246		—		8,246
CFS fee and commission income	—		—		796		796
Net gains (losses) on sales of OREO	(18)		—		—		(18)
Net gains on sales of loans(a)	884		—		—		884
Loan servicing fees(a)	108		—		—		108
Changes in fair value of equity investments(a)	117		—		86		203
Income from bank-owned life insurance(a)	39		—		—		39
Other(a)	1,930		—		(32)		1,898
Total non-interest income	$	8,987	$	8,246	$	850	$	18,083

(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, 2020
Revenue by Operating Segment:	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Non-interest income
Service charges on deposit accounts
Overdraft fees	$	1,894	$	—	$	—	$	1,894
Other	400		—		—		400
Interchange revenue from debit card transactions	2,989		—		—		2,989
WMG fee income	—		6,968		—		6,968
CFS fee and commission income	—		—		502		502
Net gains on sales of OREO	(71)		—		—		(71)
Net gains on sales of loans(a)	916		—		—		916
Loan servicing fees(a)	88		—		—		88
Change in fair value of equity securities(a)	49		—		(82)		(33)
Income from bank-owned life insurance(a)	147		—		—		147
Other(a)	1,383		—		(33)		1,350
Total non-interest income	$	7,795	$	6,968	$	387	$	15,150

(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 the transaction processing services provided to cardholder.

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

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

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

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

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

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2021		2020		2021		2020
Qualified Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	271		322		813		966
Expected return on plan assets	(673)		(610)		(2,019)		(1,830)
Amortization of unrecognized transition obligation	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	38		49		113		147
Net periodic pension benefit	$	(364)	$	(239)	$	(1,093)	$	(717)
Supplemental Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	8		10		24		30
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	5		3		15		9
Net periodic supplemental pension cost	$	13	$	13	$	39	$	39
Postretirement Plan, Medical and Life
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	1		2		5		6
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	(55)		(55)		(165)		(165)
Amortization of unrecognized net loss	14		25		41		75
Net periodic postretirement, medical and life benefit	$	(40)	$	(28)	$	(119)	$	(84)

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 2020 Annual Report on Form 10-K, which was filed with the SEC on March 24, 2021. 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 column below includes amounts to eliminate transactions between segments (in thousands).

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	Three months ended September 30, 2021
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	17,627	$	—	$	6	$	17,633
Interest expense	801		—		—		801
Net interest income	16,826		—		6		16,832
Provision for loan losses	356		—		—		356
Net interest income after provision for loan losses	16,470		—		6		16,476
Other non-interest income	2,837		2,765		368		5,970
Other non-interest expenses	12,124		1,651		325		14,100
Income (loss) before income tax expense (benefit)	7,183		1,114		49		8,346
Income tax expense (benefit)	1,534		156		10		1,700
Segment net income (loss)	$	5,649	$	958	$	39	$	6,646

	Three months ended September 30, 2020
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	16,701	$	—	$	13	$	16,714
Interest expense	845		—		—		845
Net interest income	15,856		—		13		15,869
Provision for loan losses	679		—		—		679
Net interest income after provision for loan losses	15,177		—		13		15,190
Other non-interest income	2,818		2,416		105		5,339
Other non-interest expenses	11,528		1,565		269		13,362
Income (loss) before income tax expense (benefit)	6,467		851		(151)		7,167
Income tax expense (benefit)	1,271		218		(33)		1,456
Segment net income (loss)	$	5,196	$	633	$	(118)	$	5,711

	Nine months ended September 30, 2021
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	51,298	$	—	$	20	$	51,318
Interest expense	2,621		—		—		2,621
Net interest income	48,677		—		20		48,697
Provision for loan losses	(53)		—		—		(53)
Net interest income after provision for loan losses	48,730		—		20		48,750
Other non-interest income	8,987		8,246		850		18,083
Other non-interest expenses	35,401		4,921		982		41,304
Income (loss) before income tax expense (benefit)	22,316		3,325		(112)		25,529
Income tax expense (benefit)	4,865		735		(42)		5,558
Segment net income (loss)	$	17,451	$	2,590	$	(70)	$	19,971
Segment assets	$	2,408,318	$	3,216	$	6,122	$	2,417,656

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	Nine months ended September 30, 2020
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	49,527	$	—	$	43	$	49,570
Interest expense	3,048		—		—		$	3,048
Net interest income	46,479		—		43		46,522
Provision for loan losses	3,989		—		—		3,989
Net interest income after provision for loan losses	42,490		—		43		42,533
Other non-interest income	7,795		6,968		387		15,150
Other non-interest expenses	34,690		4,814		835		40,339
Income (loss) before income tax expense (benefit)	15,595		2,154		(405)		17,344
Income tax expense (benefit)	2,884		552		(121)		3,315
Segment net income (loss)	$	12,711	$	1,602	$	(284)	$	14,029
Segment assets	$	2,156,025	$	3,153	$	5,836	$	2,165,014

NOTE 13    STOCK COMPENSATION

On June 8, 2021, the Corporation's shareholders approved the Corporation's 2021 Equity Incentive Plan (the "2021 Plan") which provides for the grant of stock-based awards to officers, employees and directors of the Corporation and the Bank. A Form S-8 Registration Statement was filed with the SEC on June 18, 2021 registering shares to be awarded under the 2021 Plan. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at issue date. No grants have been issued under the 2021 Plan during the nine months ended September 30, 2021. The Prior Plan shall remain in existence solely for the purpose of administering outstanding grants.

Board of Directors' Stock Compensation

During January 2021 and 2020, 9,291 and 7,923 shares, respectively, were re-issued from treasury to fund the stock component of directors' compensation for the respective prior year. An expense of $101 thousand and $67 thousand related to this compensation was recognized during the three month periods ended September 30, 2021 and 2020, respectively. An expense of $295 thousand and $232 thousand related to this compensation was recognized during the nine month periods ended September 30, 2021 and 2020, respectively. This expense is accrued as shares are earned.

Officers' and Employees' Restricted Stock

A summary of restricted stock activity for officers and employees for the three month period ended September 30, 2021 is presented below:

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at July 1, 2021	27,448	$	40.18
Granted	—
Vested	(261)	39.85
Forfeited or cancelled	—
Nonvested at September 30, 2021	27,187	$	40.23

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A summary of restricted stock activity for officers and employees for the nine month period ended September 30, 2021 is presented below:

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at January 1, 2021	31,830	$	40.32
Granted	—
Vested	(4,643)	41.15
Forfeited or cancelled	—
Nonvested at September 30, 2021	27,187	$	40.23

As of September 30, 2021, there was $0.8 million of total unrecognized compensation cost related to nonvested shares granted under the Plan. The cost is expected to be recognized over a weighted-average period of 3.27 years. The total fair value of shares vested was $167 thousand and $159 thousand for the nine month periods ended September 30, 2021 and 2020, respectively.

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, 2021 and 2020. Reference should be made to the accompanying unaudited consolidated financial statements and footnotes, and the Corporation’s 2020 Annual Report on Form 10-K, which was filed with the SEC on March 24, 2021, 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 21–32 of the Corporation’s 2020 Form 10-K. For a discussion of the use of non-GAAP financial measures, see pages 75–78 of the Corporation's 2020 Form 10-K, and pages 73-76 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

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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, difficulties in managing the Corporation’s growth, competition, changes in law or the regulatory environment, and changes in general business and economic trends.

As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, the Corporation could be subject to any of the following additional risks, any of which could have a material, adverse effect on its business, financial condition, liquidity, and results of operations:

•government action in response to the COVID-19 pandemic and its effects on our business and operations, including vaccination mandates and their effects on our workforce, human capital resources and infrastructure;

•demand for our products and services may decline, making it difficult to grow assets and income;

•if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

•collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

•our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;

•the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

•as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income;

•a material decrease in net income over several quarters could result in a decrease in the rate of our quarterly cash dividend;

•our wealth management revenues may decline with continuing market turmoil;

•our cyber security risks are increased as the result of an increase in the number of employees working remotely;

•we rely on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us; and

•FDIC premiums may increase if the agency experiences additional resolution costs.

Information concerning these and other 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 2020 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.

Critical Accounting Policies and Estimates

Critical accounting policies 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.

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Allowance for Loan Losses

Management considers the accounting policy relating to the allowance for loan losses to be a critical accounting policy given the uncertainty in evaluating the level of the allowance required to cover probable incurred credit losses inherent in the loan portfolio, and the material effect that such judgments can have on the Corporation's results of operations. While management's current evaluation of the allowance for loan losses indicates that the allowance is adequate, under adversely different conditions or assumptions the allowance would need to be increased. For example, if historical loan loss experience significantly worsened or if current economic conditions significantly deteriorated, additional provisions for loan losses would be required to increase the allowance. In addition, the assumptions and estimates used in the internal reviews of the Corporation's non-performing loans and potential problem loans, and the associated evaluation of the related collateral coverage for these loans, has a significant impact on the overall analysis of the adequacy of the allowance for loan losses. Real estate values in the Corporation’s market area did not increase dramatically in the prior several years, and, as a result, any declines in real estate values have been modest. While management has concluded that the current evaluation of collateral values is reasonable under the circumstances, if collateral evaluations were significantly lowered, the Corporation's allowance for loan losses policy would also require additional provisions for loan losses. The determination of the allowance also includes an evaluation of non-impaired loans and is based on historical loss experience adjusted for current factors.

Goodwill

Goodwill represents the excess of the purchase price over the net fair value of the acquired businesses. Goodwill is not amortized, but is tested for impairment at the reporting unit level, defined as the segment level, at least annually in the fourth quarter or more frequently whenever events or circumstances occur that indicate that it is more-likely-than-not that an impairment loss has occurred. In assessing impairment, the Corporation has the option to perform a qualitative analysis to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount. If, after assessing the totality of such events or circumstances, we determine it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then we would not be required to perform an impairment test.

The quantitative impairment analysis requires a comparison of each reporting unit’s fair value to its carrying value to identify potential impairment. Goodwill impairment exists when a reporting unit’s carrying value of goodwill exceeds its implied fair value. Significant judgment is applied when goodwill is assessed for impairment. This judgment includes, but may not be limited to, the selection of appropriate discount rates, the identification of relevant market comparables and the development of cash flow projections. The selection and weighting of the various fair value techniques may result in a higher or lower fair value. Judgment is applied in determining the weightings that are most representative of fair value.

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. The test for impairment of goodwill on the identified reporting unit is considered a critical accounting estimate because it requires judgement on the part of management and the use of estimates relate to the growth assumptions and market multiples used in the valuation model. Goodwill impairment testing is performed annually as of December 31 and no impairment charges were incurred.

For additional information on critical accounting policies and to gain a greater understanding of how the Corporation's financial performance is reported, refer to Note 1 - "Summary of Significant Accounting Policies" in Notes to Unaudited Consolidated Financial Statements included in Part I of this Quarterly Report on Form 10-Q for a discussion of recent accounting updates, and the section captioned "Critical Accounting Policies" in Management's Discussion and Analysis of Financial Condition and Results of Operations, contained in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2020.

Risks and Uncertainties

COVID-19

The COVID-19 pandemic has caused significant economic dislocation in the United States as many state and local governments have ordered non-essential businesses to close and residents to shelter in place at home. As of September 30, 2021, many restrictions have been removed or lessened and many non-essential businesses have been allowed to re-open in limited capacity adhering to social distancing and disinfection guidelines. However, these restrictions and other consequences have resulted in an unprecedented slow-down in economic activity, disruption in the supply chain and a related increase in unemployment. Since the COVID-19 pandemic began, millions of people have filed claims for unemployment and stock markets have remained volatile. Certain industries have been particularly hard-hit, including the travel and hospitality industry, the restaurant industry and the retail industry. Finally, the spread of the coronavirus has caused us to modify our business practices, including

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employee travel, employee work locations, and cancellation of physical participation in certain meetings, events and conferences. We have many employees working remotely and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 pandemic on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be fully reopened.

The Corporation's consolidated financial statements reflect estimates and assumptions that affect the reported amounts of assets and liabilities, including the amount of the allowance for loan losses established. Management evaluated the potential impact of the COVID-19 pandemic as it related to the loan portfolio and as part of this analysis, management identified what it believes to be higher risk loans through a detailed analysis of industry codes. Certain allowance qualitative factors were increased based on an assessment of the impact of the current pandemic on local, national and global economic conditions as well as the perceived risks inherent in specific industries and credit characteristics.

Management has taken actions to identify and assess additional possible credit exposure due to the COVID-19 pandemic based upon the industry types within the current loan portfolio. While most industries have and will continue to experience adverse impacts as a result of the COVID-19 pandemic, Management has designated certain industries as most impacted by COVID-19. For a discussion of the effect of COVID-19 on our business, see pages 60-62 of this Form 10-Q.

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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)	2021			2021			2021			2020			2020			2021			2020
RESULTS OF OPERATIONS
Interest income	$	17,633		$	16,945		$	16,740		$	17,337		$	16,714		$	51,318		$	49,570
Interest expense	801			866			954			940			845			2,621			3,048
Net interest income	16,832			16,079			15,786			16,397			15,869			48,697			46,522
Provision for loan losses	356			(150)			(259)			250			679			(53)			3,989
Net interest income after provision for loan losses	16,476			16,229			16,045			16,147			15,190			48,750			42,533
Non-interest income	5,970			6,492			5,621			5,975			5,339			18,083			15,150
Non-interest expense	14,100			13,851			13,353			15,597			13,362			41,304			40,339
Income before income tax expense	8,346			8,870			8,313			6,525			7,167			25,529			17,344
Income tax expense	1,700			2,075			1,783			1,292			1,456			5,558			3,315
Net income	$	6,646		$	6,795		$	6,530		$	5,233		$	5,711		$	19,971		$	14,029
Basic and diluted earnings per share	$	1.42		$	1.45		$	1.39		$	1.11		$	1.19		$	4.26		$	2.90
Average basic and diluted shares outstanding	4,684			4,683			4,691			4,702			4,773			4,687			4,836
PERFORMANCE RATIOS - Annualized
Return on average assets	1.09		%	1.11		%	1.12		%	0.93		%	1.08		%	1.11		%	0.95		%
Return on average equity	12.68		%	13.58		%	13.24		%	10.51		%	11.56		%	13.16		%	9.74		%
Return on average tangible equity (a)	14.16		%	15.25		%	14.88		%	11.84		%	13.03		%	14.75		%	11.03		%
Efficiency ratio (unadjusted) (f)	61.84		%	61.37		%	62.38		%	69.72		%	63.00		%	61.85		%	65.41		%
Efficiency ratio (adjusted) (a) (b)	61.40		%	60.72		%	61.64		%	68.94		%	62.19		%	61.25		%	64.54		%
Non-interest expense to average assets	2.30		%	2.27		%	2.30		%	2.76		%	2.54		%	2.29		%	2.72		%
Loans to deposits	69.77		%	72.87		%	71.52		%	75.40		%	79.96		%	69.77		%	79.96		%
YIELDS / RATES - Fully Taxable Equivalent
Yield on loans	3.84		%	3.72		%	3.81		%	3.96		%	3.91		%	3.79		%	4.10		%
Yield on investments	1.49		%	1.21		%	1.28		%	1.37		%	1.61		%	1.33		%	1.78		%
Yield on interest-earning assets	3.02		%	2.90		%	3.03		%	3.23		%	3.37		%	2.98		%	3.54		%
Cost of interest-bearing deposits	0.21		%	0.22		%	0.25		%	0.26		%	0.26		%	0.23		%	0.33		%
Cost of borrowings	3.56		%	3.64		%	3.51		%	3.52		%	3.54		%	3.57		%	1.44		%
Cost of interest-bearing liabilities	0.22		%	0.23		%	0.26		%	0.27		%	0.27		%	0.24		%	0.34		%
Interest rate spread	2.80		%	2.67		%	2.77		%	2.96		%	3.10		%	2.74		%	3.20		%
Net interest margin, fully taxable equivalent (a)	2.88		%	2.76		%	2.86		%	3.06		%	3.20		%	2.83		%	3.33		%
CAPITAL
Total equity to total assets at end of period	8.53		%	8.57		%	7.97		%	8.76		%	9.10		%	8.53		%	9.10		%
Tangible equity to tangible assets at end of period (a)	7.69		%	7.72		%	7.14		%	7.87		%	8.16		%	7.69		%	8.16		%
Book value per share	$	44.00		$	43.57		$	41.60		$	42.53		$	41.51		$	44.00		$	41.51
Tangible book value per share (a)	39.34			38.90			36.91			37.83			36.83			39.34			36.83
Period-end market value per share	45.30			44.31			41.82			33.95			28.87			45.30			28.87
Dividends declared per share	0.31			0.31			0.26			0.26			0.26			0.88			0.78
AVERAGE BALANCES
Loans and loans held for sale (c)	$1,519,264			$	1,585,902		$	1,557,368		$	1,540,618		$	1,515,762		$	1,554,039		$	1,427,716
Earning assets	2,327,817			2,352,908			2,251,334			2,144,891			1,986,043			2,310,968			1,877,966
Total assets	2,427,107			2,447,587			2,357,646			2,249,949			2,094,114			2,411,007			1,978,570
Deposits	2,181,517			2,210,413			2,117,963			2,009,211			1,853,557			2,170,198			1,739,744
Total equity	208,023			200,627			200,035			198,036			196,569			202,923			192,299
Tangible equity (a)	186,155			178,681			177,992			175,894			174,302			180,971			169,909

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																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,
	2021			2021			2021			2020			2020			2021			2020
ASSET QUALITY
Net charge-offs	$	92		$	83		$	(244)		$	3,915		$	219		$	(69)		$	2,877
Non-performing loans (d)	8,373			8,583			9,327			9,952			15,726			8,373			15,726
Non-performing assets (e)	8,544			8,707			9,418			10,189			16,311			8,544			16,311
Allowance for loan losses	20,940			20,676			20,909			20,924			24,590			20,940			24,590
Annualized net charge-offs to average loans	0.02		%	0.02		%	(0.06)		%	1.01		%	0.06		%	(0.01)		%	0.27		%
Non-performing loans to total loans	0.56		%	0.55		%	0.59		%	0.65		%	1.02		%	0.56		%	1.02		%
Non-performing assets to total assets	0.35		%	0.37		%	0.39		%	0.45		%	0.75		%	0.35		%	0.75		%
Allowance for loan losses to total loans	1.38		%	1.33		%	1.32		%	1.36		%	1.60		%	1.38		%	1.60		%
Allowance for loan losses to total loans, net of PPP	1.45		%	1.46		%	1.50		%	1.51		%	1.82		%	1.45		%	1.82		%
Allowance for loan losses to non-performing loans	250.08		%	240.89		%	224.19		%	210.25		%	156.36		%	250.08		%	156.36		%
(a) See the GAAP to Non-GAAP reconciliations.
(b) Efficiency ratio (adjusted) is non-interest expense less amortization of intangible assets less legal reserve divided by the total of fully taxable equivalent net interest income plus non-interest income less changes in fair value of equity investments less net gains on securities transactions.
(c) Loans and loans held for sale do not reflect the allowance for loan 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.

In addition to analyzing the Corporation’s results on a reported basis, management uses certain non-GAAP financial measures because it believes these non-GAAP financial measures provide information to investors about the underlying operational performance and trends of the Corporation and, therefore, facilitate a comparison of the Corporation with the performance of its competitors. Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by other companies. Refer to pages 73-76 for further explanation and reconciliation of the Corporation’s use of non-GAAP measures.

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Executive Summary

This executive summary of the MD&A includes selected information and may not contain all of the information that is important to readers of this Form 10-Q. For a complete description of the trends and uncertainties, as well as the risks and critical accounting estimates affecting the Corporation, this Form 10-Q should be read in its entirety.

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,
	2021			2020			Change		Percentage Change
Net interest income	$	16,832		$	15,869		$	963	6.1	%
Non-interest income	5,970			5,339			631		11.8	%
Non-interest expense	14,100			13,362			738		5.5	%
Pre-provision income	8,702			7,846			856		10.9	%
Provision for loan losses	356			679			(323)		(47.6)	%
Income tax expense	1,700			1,456			244		16.8	%
Net income	$	6,646		$	5,711		$	935	16.4	%
Basic and diluted earnings per share	$	1.42		$	1.19		$	0.23	19.3	%
Selected financial ratios:
Return on average assets	1.09		%	1.08		%
Return on average equity	12.68		%	11.56		%
Net interest margin, fully taxable equivalent (a)	2.88		%	3.20		%
Efficiency ratio (adjusted) (b)	61.40		%	62.19		%
Non-interest expenses to average assets	2.30		%	2.54		%
(a) See the GAAP to Non-GAAP reconciliations.
(b) Efficiency ratio (adjusted) is non-interest expense less amortization of intangible assets less legal reserve divided by the total of fully taxable equivalent net interest income plus non-interest income less changes in fair value of equity investments less net gains on securities transactions.

Net income for the third quarter of 2021 was $6.6 million, or $1.42 per share, compared to $5.7 million, or $1.19 per share, for the same period in the prior year. Return on average equity for the current quarter was 12.68%, compared to 11.56% for the same period in the prior year. The increase in net income was due primarily to increases in net interest income and non-interest income, and a decrease in the provision for loan losses, partially offset by increases in income tax expense and non-interest expense.

Net interest income

Net interest income increased $1.0 million, or 6.1%, compared to the same period in the prior year. The increase was due primarily to an increase in interest and dividend income on taxable securities, offset by decreases in interest income on loans, including fees, and interest income on interest-earning deposits.

Non-interest income

Total non-interest income increased $0.6 million, or 11.8%, compared to the same period in the prior year. The increase can be mostly attributed to increases in WMG fee income, interchange revenue from debit card transactions, service charges on deposit accounts and other non-interest income, offset by a decrease in net gains on sales of loans held for sale, as compared to the same period in the prior year.

Non-interest expense

Non-interest expense increased $0.7 million, or 5.5%, compared to the same period in the prior year. The increase was due primarily to decreased spending in the prior year period due to the worldwide pandemic, resulting in increases in most non-interest expense categories in the current period. These increases were in part offset by a decrease in other components of net periodic pension cost (benefits), and decreases in furniture and equipment and loan expenses. For the three months ended

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September 30, 2021, non-interest expense to average assets was 2.30%, compared to 2.54% for the same period in the prior year.

Provision for loan losses

The provision for loan losses decreased $0.3 million, compared to the same period in the prior year. The decrease in the provision for loan losses was primarily due to a decrease of $0.5 million related to a decline in volume, and a $0.1 million decrease in net charge-offs, partially offset by a $0.3 million increased allocation for impaired loans and loan downgrades. Net charge-offs for the third quarter of 2021 were $0.1 million, compared to $0.2 million for the third quarter of 2020.

Income tax expense

Income tax expense was $1.7 million in the third quarter of 2021, an increase of $0.2 million when compared to the same period in the prior year. The increase was due primarily to an increase of $1.2 million in income before income tax expense for the third quarter of 2021 as compared to the same period in the prior year. The effective tax rate increased from 20.3% for the third quarter of 2020 to 20.4% for the third quarter of 2021.

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):

	Nine Months Ended   September 30,
	2021			2020			Change		Percentage Change
Net interest income	$	48,697		$	46,522		$	2,175	4.7	%
Non-interest income	18,083			15,150			2,933		19.4	%
Non-interest expense	41,304			40,339			965		2.4	%
Pre-provision income	25,476			21,333			4,143		19.4	%
Provision for loan losses	(53)			3,989			(4,042)		(101.3)	%
Income tax expense	5,558			3,315			2,243		67.7	%
Net income	$	19,971		$	14,029		$	5,942	42.4	%
Basic and diluted earnings per share	$	4.26		$	2.90		$	1.36	46.9	%
Selected financial ratios:
Return on average assets	1.11		%	0.95		%
Return on average equity	13.16		%	9.74		%
Net interest margin, fully taxable equivalent (a)	2.83		%	3.33		%
Efficiency ratio (adjusted) (b)	61.25		%	64.54		%
Non-interest expense to average assets	2.29		%	2.72		%
(a) See the GAAP to Non-GAAP reconciliations.
(b) Efficiency ratio is non-interest expense less amortization of intangible assets less legal reserve divided by the total of fully taxable equivalent net interest income plus non-interest income less changes in fair value of equity investments less net gains on securities transactions.

Net income for the nine months ended September 30, 2021 was $20.0 million, or $4.26 per share, compared to $14.0 million, or $2.90 per share, for the same period in the prior year.  Return on average equity for the nine months ended September 30, 2021 was 13.16%, compared to 9.74% for the same period in the prior year. The increase in net income from the prior year period was attributable to increases in total net interest income and total non-interest income, and a decrease in provision for loan losses, partially offset by increases in income tax expense and non-interest expense.

Net interest income

Net interest income increased $2.2 million, or 4.7%, compared to the same period in the prior year. The increase can be mostly attributed to increases in interest income on taxable securities, interest income on loans, including fees, and a decrease in total interest expense on deposits, partially offset by a decrease in interest income on interest-earning deposits.

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Non-interest income

Non-interest income increased $2.9 million, or 19.4%, compared to the same period in the prior year. The increase was due primarily to increases in WMG fee income, interchange revenue from debit card transactions, other non-interest income, and changes in fair value of equity investments. These increases were partially offset by a decrease in income from bank owned life insurance.

Non-interest expense

Non-interest expense increased $1.0 million, or 2.4%, compared to the same period in the prior year. The increase was due primarily to decreased spending in the prior year due to the worldwide pandemic, resulting in increases in most non-interest expense categories in the current year period. These increases were partially offset by decreases in other components of net periodic pension benefits, and furniture and equipment expenses. For the nine months ended September 30, 2021, non-interest expense to average assets was 2.29%, compared to 2.72% for the same period in the prior year.

Provision for loan losses

The provision for loan losses decreased $4.0 million, or 101.3%, compared to the same period in the prior year, primarily due to a $4.5 million pandemic related provision, offset by recoveries, decreases in specific allocations, and a net decrease in the historical loss factors due to a large 2018 loan charge-off which no longer impacted the calculation, recorded in the prior year period. During the nine months ended September 30, 2021, $1.9 million was released and $0.5 million was utilized of the pandemic related provision, partially offset by the $1.9 million impairment of a commercial real estate loan. Net charge-offs decreased $2.9 million for the nine months ended September 30, 2021, compared to the same period in the prior year, mostly due to the partial charge-off of a commercial loan in the same period in the prior year.

Income tax expense

Income tax expense increased $2.2 million, or 67.7%, compared to the same period in the prior year. The increase was due primarily to an increase in income before income tax expense. The effective income tax rate increased from 19.1% for the nine months ended September 30, 2020 to 21.8% for the nine months ended September 30, 2021.

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, 2021 and 2020. For a discussion of the Critical Accounting Policies and Estimates and Risks and Uncertainties that affect the Consolidated Results of Operations, see pages 43-45 of this Form 10-Q and pages 42-43 of the Corporation’s 2020 Form 10-K.

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,
	2021		2020		Change		Percentage Change
Interest and dividend income	$	17,633	$	16,714	$	919	5.5	%
Interest expense	801		845		(44)		(5.2)	%
Net interest income	$	16,832	$	15,869	$	963	6.1	%

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.

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Net interest income for the three months ended September 30, 2021 increased $1.0 million, or 6.1%, to $16.8 million compared to the same period in the prior year, due primarily to an increase of $1.2 million in interest and dividend income on taxable securities, offset by decreases of $0.2 million in interest income on loans, including fees, and $0.1 million in interest income on interest-earning deposits. The increase in interest and dividend income on taxable securities was due primarily to an increase in average invested balances of $379.8 million, primarily attributable to purchases of new securities at lower rates, and the one-time recognition of $0.5 million related to a prepayment penalty on a mortgage-backed security investment. The decrease in interest income on loans, including fees was due primarily to a decrease in average balances on consumer and commercial loans and decreases in the consumer and mortgage portfolios average yield due to a decrease in interest rates. The decrease in interest income on interest-earning deposits was due primarily to the drop in interest rates on overnight deposits with the average yield on interest-earning deposits declining from 0.31% in the third quarter of 2020 to 0.17% in the third quarter of 2021, and a decrease of $41.9 million in the average balance of interest-earning deposits in the third quarter of 2021 when compared to the same period in the prior year.

Fully taxable equivalent net interest margin was 2.88% in the third quarter of 2021, compared to 3.20% for the same period in the prior year. Average interest-earning assets increased $341.8 million for the three months ended September 30, 2021 compared to the same period in the prior year. The average yield on interest-earning assets decreased 35 basis points, and the average cost of interest-bearing liabilities decreased five basis points in the third quarter of 2021, compared to the same period in the prior year.

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

	Nine Months Ended   September 30,
	2021		2020		Change		Percentage Change
Interest and dividend income	$	51,318	$	49,570	$	1,748	3.5	%
Interest expense	2,621		3,048		(427)		(14.0)	%
Net interest income	$	48,697	$	46,522	$	2,175	4.7	%

Net interest income for the nine months ended September 30, 2021 totaled $48.7 million compared to $46.5 million for the same period in the prior year, an increase of $2.2 million, or 4.7% due primarily to an increase of $1.7 million in total interest and dividend income and a decrease of $0.4 million in total interest expense.

The increase in interest and dividend income for the first nine months of 2021 was primarily attributed to increases of $2.1 million in interest and dividend income on taxable securities, and $0.2 million in interest income on loans, including fees, offset by a decrease of $0.5 million in interest income on interest-earning deposits.

The increase in interest income on taxable securities was mostly attributable to a $346.5 million increase in average balances of taxable securities, primarily attributable to purchases of new securities at lower rates and the one-time recognition of $0.5 million related to a prepayment penalty on a mortgage-backed security investment, when compared to the same period in the prior year. The increase in interest income on loans, including fees, was mostly attributable to an increase of $126.3 million in average loan balances, early payoff penalties, a $0.1 million recovery of non-accrued interest received, and the recognition of $3.3 million of PPP loan fees year to date, $1.8 million of which represents accelerated fees earned related to the SBA loan forgiveness program. The decrease in interest income on interest-earning deposits was mostly attributed to a decline in interest rates. The decrease in interest expense was primarily attributed to a decrease of $0.4 million in interest expense on deposits, primarily due to a decrease in interest rates.

The average yield on interest-earning assets decreased 56 basis points, and the average cost of interest-bearing liabilities decreased ten basis points for the nine months ended September 30, 2021, as compared to the same period in the prior year. Average interest-earning assets increased $433.0 million compared to the same period in the prior year. Fully taxable equivalent net interest margin was 2.83% for the nine months ended September 30, 2021 compared to 3.33% for the same period in the prior year.

51

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, 2021 and 2020. 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.

AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
(in thousands)	Three Months Ended   September 30, 2021						Three Months Ended   September 30, 2020
	Average Balance		Interest		Yield/Rate (3)		Average Balance		Interest		Yield/Rate (3)
Interest-earning assets:
Commercial loans	$	1,065,476	$	10,656	3.97	%	$	1,075,029	$	10,575	3.91	%
Mortgage loans	249,651		2,086		3.32	%	220,345		2,067		3.73	%
Consumer loans	204,137		1,944		3.78	%	220,388		2,256		4.07	%
Taxable securities	681,160		2,678		1.56	%	301,315		1,476		1.95	%
Tax-exempt securities	41,654		327		3.11	%	41,372		325		3.13	%
Interest-earning deposits	85,739		36		0.17	%	127,594		100		0.31	%
Total interest-earning assets	2,327,817		17,727		3.02	%	1,986,043		16,799		3.37	%
Non-earning assets:
Cash and due from banks	27,421						25,534
Other assets	92,719						106,907
Allowance for loan losses	(20,850)						(24,370)
Total assets	$	2,427,107					$	2,094,114
Interest-bearing liabilities:
Interest-bearing demand deposits	$	272,236	$	52	0.08	%	$	253,278	$	55	0.09	%
Savings and insured money market deposits	943,996		205		0.09	%	791,004		231		0.12	%
Time deposits	236,062		511		0.86	%	188,889		524		1.10	%
Long-term advances and other debt	3,681		33		3.56	%	3,930		35		3.54	%
Total interest-bearing liabilities	1,455,975		801		0.22	%	1,237,101		845		0.27	%
Non-interest-bearing liabilities:
Demand deposits	729,223						620,386
Other liabilities	33,886						40,058
Total liabilities	2,219,084						1,897,545
Shareholders' equity	208,023						196,569
Total liabilities and shareholders’ equity	$	2,427,107					$	2,094,114
Fully taxable equivalent net interest income			16,926						15,954
Net interest rate spread (1)					2.80	%					3.10	%
Net interest margin, fully taxable equivalent (2)					2.88	%					3.20	%
Taxable equivalent adjustment			(94)						(85)
Net interest income			$	16,832					$	15,869

(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.

52

AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
(in thousands)	Nine Months Ended   September 30, 2021						Nine Months Ended   September 30, 2020
	Average Balance		Interest		Yield/ Rate (3)		Average Balance		Interest		Yield/ Rate (3)
Interest-earning assets:
Commercial loans	$	1,100,503	$	31,741	3.86	%	$	996,136	$	30,926	4.15	%
Mortgage loans	246,179		6,342		3.44	%	203,692		5,762		3.78	%
Consumer loans	207,357		5,970		3.85	%	227,888		7,150		4.19	%
Taxable securities	616,862		6,435		1.39	%	270,348		4,361		2.15	%
Tax-exempt securities	41,401		976		3.15	%	41,753		983		3.14	%
Interest-earning deposits	98,666		131		0.18	%	138,149		643		0.62	%
Total interest-earning assets	2,310,968		51,595		2.98	%	1,877,966		49,825		3.54	%
Non-earning assets:
Cash and due from banks	26,789						25,111
Other assets	94,323						100,276
Allowance for loan losses	(21,073)						(24,783)
Total assets	$	2,411,007					$	1,978,570
Interest-bearing liabilities:
Interest-bearing demand deposits	$	282,970	$	174	0.08	%	$	231,085	$	262	0.15	%
Savings and insured money market deposits	928,137		714		0.10	%	774,706		1,000		0.17	%
Time deposits	267,475		1,633		0.82	%	173,556		1,660		1.28	%
Long-term advances, securities sold under agreements to repurchase, and other debt	3,745		100		3.57	%	11,661		126		1.44	%
Total interest-bearing liabilities	1,482,327		2,621		0.24	%	1,191,008		3,048		0.34	%
Non-interest-bearing liabilities:
Demand deposits	691,616						560,397
Other liabilities	34,141						34,866
Total liabilities	2,208,084						1,786,271
Shareholders' equity	202,923						192,299
Total liabilities and shareholders’ equity	$	2,411,007					$	1,978,570
Fully taxable equivalent net interest income			48,974						46,777
Net interest rate spread (1)					2.74	%					3.20	%
Net interest margin, fully taxable equivalent (2)					2.83	%					3.33	%
Taxable equivalent adjustment			(277)						(255)
Net interest income			$	48,697					$	46,522

(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.

53

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 illustrate 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, 2021 and 2020. 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 September 30, 2021 vs. 2020
	Increase/(Decrease)
	Total Change		Due to Volume		Due to Rate
(in thousands)
Interest and dividend income on:
Commercial loans	$	81	$	(87)	$	168
Mortgage loans	19		260		(241)
Consumer loans	(312)		(159)		(153)
Taxable investment securities	1,202		1,549		(347)
Tax-exempt investment securities	2		3		(1)
Interest-earning deposits	(64)		(27)		(37)
Total interest and dividend income, fully taxable equivalent	928		1,539		(611)
Interest expense on:
Interest-bearing demand deposits	(3)		4		(7)
Savings and insured money market deposits	(26)		41		(67)
Time deposits	(13)		115		(128)
Long-term advances and other debt	(2)		(2)		—
Total interest expense	(44)		158		(202)
Net interest income, fully taxable equivalent	$	972	$	1,381	$	(409)

54

	Nine Months Ended September 30, 2021 vs. 2020
	Increase/(Decrease)
	Total Change		Due to Volume		Due to Rate
(in thousands)
Interest and dividend income on:
Commercial loans	$	815	$	3,081	$	(2,266)
Mortgage loans	580		1,129		(549)
Consumer loans	(1,180)		(621)		(559)
Taxable investment securities	2,074		4,035		(1,961)
Tax-exempt investment securities	(7)		(10)		3
Interest-earning deposits	(512)		(147)		(365)
Total interest and dividend income, fully taxable equivalent	1,770		7,467		(5,697)
Interest expense on:
Interest-bearing demand deposits	(88)		50		(138)
Savings and insured money market deposits	(286)		171		(457)
Time deposits	(27)		701		(728)
Long-term advances and other debt	(26)		(125)		99
Total interest expense	(427)		797		(1,224)
Net interest income, fully taxable equivalent	$	2,197	$	6,670	$	(4,473)

Provision for loan losses

Management performs an ongoing assessment of the adequacy of the allowance for loan losses based upon a number of factors including an analysis of historical loss factors, collateral evaluations, recent charge-off experience, credit quality of the loan portfolio, current economic conditions and loan growth. Management continues to evaluate the potential impact of the COVID-19 pandemic as it relates to the loan portfolio. As part of this analysis, management identified what it believes to be higher risk loans through a detailed analysis of industry codes. During 2020, management increased certain allowance qualitative factors based on its assessment of the impact of the current pandemic on local, national, and global economic conditions as well as the perceived risks inherent in specific industries and credit characteristics.

Based upon management review of these factors, the pandemic related portion of the allowance decreased $0.2 million during the third quarter of 2021 to $2.4 million as of September 30, 2021. To date the Corporation has released $1.9 million and utilized $0.5 million of the pandemic related provision.

The provision for loan losses decreased $0.3 million, for the three months ended September 30, 2021 when compared to the same period in the prior year. The decrease in the provision for loan losses was primarily due to a decrease of $0.5 million related to a decline in volume, and a $0.1 million decrease in net charge-offs, partially offset by a $0.3 million increased allocation for impaired loans and loan downgrades. Net charge-offs for the third quarter of 2021 were $0.1 million, compared to $0.2 million for the third quarter of 2020.

The provision for loan losses for the nine months ended September 30, 2021 and 2020 was a credit of $53 thousand and a provision of $4.0 million, respectively. The $4.0 million decrease in the provision for loan losses when compared to the same period in the prior year was primarily due to the $4.5 million pandemic related provision, offset by recoveries, decreases in specific allocations, and a net decrease in the historical loss factors due to a large 2018 loan charge-off which no longer impacted the calculation, recorded in the prior year period. During the nine months ended September 30, 2021, $1.9 million was released and $0.5 million was utilized of the pandemic related provision, partially offset by the $1.9 million impairment of a commercial real estate loan.

Net charge-offs for the nine months ended September 30, 2021 and 2020 were a $0.1 million recovery and a $2.9 million charge-off, respectively. The $2.9 million charge-off for the nine months ended September 30, 2020, was mostly attributed to the partial charge-off of a commercial loan in the second quarter of 2020.

55

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,
	2021		2020		Change		Percentage Change
WMG fee income	$	2,765	$	2,416	$	349	14.4	%
Service charges on deposit accounts	856		740		116		15.7	%
Interchange revenue from debit card transactions	1,237		1,082		155		14.3	%
Changes in fair value of equity investments	15		57		(42)		(73.7)	%
Net gains on sales of loans held for sale	242		553		(311)		(56.2)	%
Net gains (losses) on sales of other real estate owned	—		6		(6)		N/M
Income from bank owned life insurance	13		14		(1)		(7.1)	%
CFS fee and commission income	346		172		174		101.2	%
Other	496		299		197		65.9	%
Total non-interest income	$	5,970	$	5,339	$	631	11.8	%

Total non-interest income for the third quarter of 2021 increased $0.6 million compared to the same period in the prior year primarily due to increases in WMG fee income, other non-interest income, CFS fee and commission income, interchange revenue from debit card transactions, and service charges on deposit accounts, primarily offset by a decrease in net gains on sales of loans held for sale.

Change in WMG Fee Income

The increase in WMG fee income was primarily due to new business relationships and a general increase in the equity markets when compared to the same period in the prior year.

Change in Other Non-Interest Income

The increase in other non-interest income was primarily due to a gain on the sale of real estate property associated with a branch closure in 2019 when compared to the same period in the prior year.

Change in CFS Fee and Commission Income

The increase in CFS fee and commission income was primarily due to new business relationships when compared to the same period in the prior year.

Change in Interchange Revenue from Debit Card Transactions

The increase in interchange revenue from debit card transactions was primarily due to an increase in debit card usage when compared to the same period in the prior year.

Change in Service Charges on Deposit Accounts

The increase in service charges on deposit accounts was primarily due to the recovery of non-sufficient fund and overdraft fees which declined due to the pandemic in the same period during the prior year.

Change in Net Gains on Sales of Loans Held for Sale

The decrease in net gains on sales of loans held for sale was primarily attributable to a decrease in residential mortgage loans originated and sold in the secondary market when compared to the same period in the prior year, primarily due to decreased home purchases and refinancings.

56

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

	Nine Months Ended   September 30,
	2021		2020		Change		Percentage Change
WMG fee income	$	8,246	$	6,968	$	1,278	18.3	%
Service charges on deposit accounts	2,305		2,294		11		0.5	%
Interchange revenue from debit card transactions	3,622		2,989		633		21.2	%
Changes in fair value of equity investments	203		(33)		236		715.2	%
Net gains on sales of loans held for sale	884		916		(32)		(3.5)	%
Net gains (losses) on sales of other real estate owned	(18)		(71)		53		74.6	%
Income from bank owned life insurance	39		147		(108)		(73.5)	%
CFS fee and commission income	796		502		294		58.6	%
Other	2,006		1,438		568		39.5	%
Total non-interest income	$	18,083	$	15,150	$	2,933	19.4	%

Total non-interest income for the nine months ended September 30, 2021 increased $2.9 million compared to the same period in the prior year. The increase was primarily due to increases in WMG fee income, interchange revenue from debit card transactions, other non-interest income, CFS fee and commission income, and changes in fair value of equity investments, primarily offset by a decrease in income from bank owned life insurance.

Change in WMG Fee Income

The increase in WMG fee income was primarily due to new business relationships and a general increase in the equity markets when compared to the same period in the prior year.

Change in Interchange Revenue from Debit Card Transactions

The increase in interchange revenue from debit card transactions was primarily due to an increase in debit card usage when compared to the same period in the prior year.

Change in Other Non-Interest Income

The increase in other non-interest income was primarily due to a one-time refund of real estate, sales tax and Mastercard incentives and a gain on the sale of real estate property associated with a branch closure in 2019 as compared to the same period in the prior year.

Change in CFS Fee and Commission Income

The increase in CFS fee and commission income was primarily due to new business relationships when compared to the same period in the prior year.

Change in Fair Value of Equity Investments

The increase in changes in fair value of equity investments was primarily due to a general increase in the equity markets when compared to the prior year period.

Change in Income from Bank Owned Life Insurance

The decrease in income from bank owned life insurance was due to proceeds received in the same period of the prior year related to a death benefit.

57

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,
	2021		2020		Change		Percentage Change
Compensation expense:
Salaries and wages	$	6,259	$	6,088	$	171	2.8	%
Pension and other employee benefits	1,511		1,245		266		21.4	%
Other components of net periodic pension and postretirement benefits	(391)		(254)		(137)		53.9	%
Total compensation expense	7,379		7,079		300		4.2	%
Non-compensation expense:
Net occupancy	1,432		1,454		(22)		(1.5)	%
Furniture and equipment	409		538		(129)		(24.0)	%
Data processing	2,210		1,777		433		24.4	%
Professional services	542		453		89		19.6	%
Amortization of intangible assets	42		120		(78)		(65.0)	%
Marketing and advertising	162		140		22		15.7	%
Other real estate owned expenses	7		53		(46)		(86.8)	%
FDIC insurance	356		247		109		44.1	%
Loan expenses	196		301		(105)		(34.9)	%
Other	1,365		1,200		165		13.8	%
Total non-compensation expense	6,721		6,283		438		7.0	%
Total non-interest expense	$	14,100	$	13,362	$	738	5.5	%

Total non-interest expense for the third quarter of 2021 increased $0.7 million compared to the same period in the prior year. The increase was due to increases in total compensation expense and total non-compensation expense.

Compensation expense

The increase in compensation expense, compared to the same period in the prior year, can be primarily attributed to increases in pension and other employee benefits and salaries and wages, partially offset by a decrease in other components of net periodic pension cost (benefits). The increase in pension and other employee benefits was mostly attributable to an increase in healthcare expenses as compared to the same period in the prior year. The increase in salaries and wages was primarily due to the hiring of seasonal employees as well as a decrease in deferred salaries related to PPP. The reduced credit in other components of net period pension cost (benefits) was due to revised actuarial estimates for the third quarter of 2021 related to the employee pension plan.

Non-compensation expense

The increase in non-compensation expense, compared to the same period in the prior year, can be primarily attributed to increases in data processing expense, FDIC insurance and other non-interest expense. Data processing expenses increased primarily due to investment in new initiatives and a credit received in the same quarter of the prior year. FDIC insurance increased primarily due to an increase in the assessment base due to increased average asset balances. Other non-interest expense increased primarily due to decreased spending in the prior year period due to the worldwide pandemic, resulting in increases in most other non-interest expense categories in the current year period.

58

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

	Nine Months Ended   September 30,
	2021		2020		Change		Percentage Change
Compensation expense:
Salaries and wages	$	18,058	$	17,678	$	380	2.1	%
Pension and other employee benefits	4,450		4,095		355		8.7	%
Other components of net periodic pension and postretirement benefits	(1,173)		(762)		(411)		53.9	%
Total compensation expense	21,335		21,011		324		1.5	%
Non-compensation expense:
Net occupancy	4,446		4,406		40		0.9	%
Furniture and equipment	1,185		1,573		(388)		(24.7)	%
Data processing	6,261		5,630		631		11.2	%
Professional services	1,531		1,313		218		16.6	%
Amortization of intangible assets	232		371		(139)		(37.5)	%
Marketing and advertising	572		546		26		4.8	%
Other real estate owned expenses	24		87		(63)		(72.4)	%
FDIC insurance	1,075		726		349		48.1	%
Loan expenses	720		798		(78)		(9.8)	%
Other	3,923		3,878		45		1.2	%
Total non-compensation expense	19,969		19,328		641		3.3	%
Total non-interest expense	$	41,304	$	40,339	$	965	2.4	%

Total non-interest expense for the nine months ended September 30, 2021 increased $1.0 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.

Compensation expense

The increase in compensation expense, compared to the same period in the prior year, can be mostly attributable to increases in salaries and wages and pension and other employee benefits, offset by a decrease in other components of net periodic pension and postretirement benefits. The increase in salaries and wages was primarily due to an increase in commission and reward payments and an increase in award accruals, offset by a decrease in deferred salaries related to PPP, when compared to the same period in the prior year. The increase in pension and other employee benefits was primarily due to an increase in healthcare expenses as compared to the same period in the prior year. The reduced credit in other components of net periodic pension and postretirement benefits was due to a change in assumptions used to prepare annual actuarial expense estimates.

Non-compensation expense

The increase in non-compensation expense, compared to the same period in the prior year, can be mostly attributed to increases in data processing expense and FDIC insurance, offset primarily by a decrease in furniture and equipment expense. The increase in data processing expense was primarily due to investment in new initiatives and a credit received in the prior year. The increase in FDIC insurance expense was primarily due to an increase in the assessment base due to increased average asset balances. The decrease in furniture and equipment expense can be mostly attributed to the timing of initiatives and projects.

59

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,
	2021			2020			Change		Percentage Change
Income before income tax expense	$	8,346		$	7,167		$	1,179	16.5	%
Income tax expense	1,700			1,456			244		16.8	%
Effective tax rate	20.4		%	20.3		%

Income tax expense for the current quarter was $1.7 million compared to $1.5 million for the same period in the prior year. The increase in income tax expense was due primarily to an increase of $1.2 million in income before income tax expense. The effective income tax rate increased from 20.3% for the third quarter of 2020 to 20.4% for the third quarter of 2021.

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,
	2021			2020			Change		Percentage Change
Income before income tax expense	$	25,529		$	17,344		$	8,185	47.2	%
Income tax expense	5,558			3,315			2,243		67.7	%
Effective tax rate	21.8		%	19.1		%

Income tax expense for the nine months ended September 30, 2021 and 2020 were $5.6 million and $3.3 million, respectively. The increase in income tax expense was due primarily to an increase of $8.2 million in income before income tax expense. The effective income tax rate increased from 19.1% for the nine months ended September 30, 2020 to 21.8% for the nine months ended September 30, 2021.

COVID-19

The Effect of COVID-19 on Our Business

The Corporation continues to monitor the COVID-19 pandemic while following guidance from the Centers for Disease Control (CDC) and the New York Department of Health. With the increase in positivity rates due to the Delta variant during the last quarter, the Corporation quickly reinstituted several safety measures for our employees and customers, including mask-wearing, social distancing and sanitizing requirements. At this time, while all of our offices are open for business, two are operating through drive-up windows only, due to high positivity rates in the market (Bradford, PA). Additionally, we continue our efforts to assist our customer base through the Forgiveness phase of the Small Business Administration's (SBA's) Paycheck Protection Program (PPP).

Management did not experience any negative effects on our ability to maintain operations and financial reporting systems, and has not identified any impact on business continuity plans. Management does not anticipate additional risk with respect to its ability to maintain internal control over financial reporting and disclosure controls and procedures, nor does it expect any changes in such controls and procedures.

On June 17, 2020 the New York legislature passed, and Governor Cuomo signed, legislation which allows certain borrowers to extend the period of forbearance on a primary residence if financial hardship is demonstrated as a result of COVID-19. At its highest point as of May 31, 2020, total loan forbearances represented 15.77% of the Corporation's total loan portfolio. As of September 30, 2021, total loan forbearances represented 0.20% of the total loan portfolio.

60

COVID-19 Loan Modifications Outstanding As Of
	December 31, 2020		March 31, 2021		June 30, 2021		September 30, 2021
	# Clients	Total Loan Balance	# Clients	Total Loan Balance	# Clients	Total Loan Balance	# Clients	Total Loan Balance
Commercial	13	$19.8 million	22	$25.2 million	19	$20.3 million	5	$2.9 million
Retail and Residential	18	$1.0 million	16	$1.1 million	5	$0.2 million	6	$0.1 million

The above reflects the uncertain economic situation whereby the initial response by customers prompted a quick reaction to the unknown potential impact of COVID-19 on their business. Subsequently, customers may have reassessed their financial position prior to finalization of a modification, either modifying deferral requests or withdrawing the request altogether. In some cases, customers continued to make payments on modified loans.

Paycheck Protection Program Initiative

As part of the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), Congress established the Paycheck Protection Program (PPP) under the direction of the United States Small Business Administration (SBA). Included in the legislation, and additional legislation approved by Congress on April 23, 2020 and June 5, 2020, was a total of $659 billion to assist small businesses by providing SBA guaranteed loans to help pay for payroll, in addition to other expenses such as interest expense on mortgages, rent or utility payments. PPP loans have an interest rate of 1.0% and two-year or five-year loan terms to maturity. The funds are an effort to encourage retention of employees and up to the entire loan balance and interest may be forgiven, if the borrower meets certain predetermined SBA criteria. Businesses with less than 500 employees are eligible, although certain corporate organizational structures were not included in the legislation. As a qualified SBA lender, the Corporation was automatically authorized to originate PPP loans. The PPP ended new loans in May, 2021.

The Corporation successfully navigated the processes set forth by the SBA and assisted customers and non-customers through Phase 1 of the PPP, originating a total of 1,260 loans. As of September 30, 2021, 173 loans totaling $5.9 million were outstanding related to Phase 1 of the PPP, a portion of which may not be forgiven. The Corporation then assisted the businesses who received PPP loans with the forgiveness application phase of the program. As of September 30, 2021, 1,105 loans totaling $184.6 million were forgiven by the SBA related to Phase 1 of the PPP.

A second phase of COVID-19 Relief totaling $248 billion to provide PPP loans to certain eligible small businesses was included in the Consolidated Appropriation Act of 2021, signed into law by the President on December 27, 2020. As of September 30, 2021, 695 loans totaling $62.2 million were outstanding related to Phase 2 of the PPP, a portion of which may not be forgiven. As of September 30, 2021, 185 loans totaling $16.3 million, were forgiven by the SBA.

Outlook

Management believes that the Corporation's liquidity position is strong. The Corporation uses a variety of resources to meet its liquidity needs. These include short term investments, cash flow from lending and investing activities, core-deposit growth and non-core funding sources, such as time deposits of $100,000 or more, FHLB borrowings, securities sold under agreements to repurchase and other borrowings. At September 30, 2021, the Corporation's cash and cash equivalents balance was $61.7 million. The Corporation also maintains an investment portfolio of securities available for sale, comprised primarily of mortgage-backed securities and municipal bonds. Although this portfolio generates interest income for the Corporation, it also serves as an available source of liquidity and capital if the need should arise. As of September 30, 2021, the Corporation's investment in securities available for sale was $761.5 million, $553.1 million of which was not pledged as collateral. Additionally, the Bank's unused borrowing capacity at the Federal Home Loan Bank of New York was $187.3 million as of September 30, 2021. The Corporation did not experience excessive draws on available working capital lines of credit and home equity lines of credit during the first nine months of 2021 due to the COVID-19 pandemic, nor has the Corporation experienced any significant or unusual activity related to customer reaction to the COVID-19 pandemic that would create stress on the Corporation's liquidity position.

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

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The COVID-19 pandemic is expected to continue to impact the Corporation's financial results, as well as demand for its services and products. The short and long-term implications of the COVID-19 pandemic, and related monetary and fiscal stimulus measures, on the Corporation's future revenues, earnings results, allowance for loan losses, capital reserves, and liquidity are uncertain at this time.

Financial Condition

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

	September 30, 2021		December 31, 2020		Change		Percentage Change
ASSETS
Total cash and cash equivalents	$	61,697	$	108,538	$	(46,841)	(43.2)	%
Total investment securities, FHLB, and FRB stock	771,209		562,772		208,437		37.0	%
Loans, net of deferred loan fees	1,516,668		1,536,463		(19,795)		(1.3)	%
Allowance for loan losses	(20,940)		(20,924)		(16)		0.1	%
Loans, net	1,495,728		1,515,539		(19,811)		(1.3)	%
Goodwill and other intangible assets, net	21,850		22,082		(232)		(1.1)	%
Other assets	67,172		70,520		(3,348)		(4.7)	%
Total assets	$	2,417,656	$	2,279,451	$	138,205	6.1	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits	$	2,173,822	$	2,037,774	$	136,048	6.7	%
Long-term advances and other debt	3,659		3,849		(190)		(4.9)	%
Other liabilities	34,036		38,129		(4,093)		(10.7)	%
Total liabilities	2,211,517		2,079,752		131,765		6.3	%
Total shareholders’ equity	206,139		199,699		6,440		3.2	%
Total liabilities and shareholders’ equity	$	2,417,656	$	2,279,451	$	138,205	6.1	%

Cash and Cash Equivalents

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

Investment securities

The increase in investment securities can be mostly attributed to purchases in the amount of $335.3 million, offset by a decrease of $110.3 million in paydowns and a decrease in the fair value of the portfolio of $16.5 million, due to increases in interest rates.

Loans, net

The decrease in loans, net of deferred loan fees, can be primarily attributed to decreases of $97.9 million in commercial and agricultural loans, $8.3 million in other consumer loans and $0.8 million in indirect consumer loans, offset by growth of $72.5 million in commercial mortgages, and $14.6 million in residential mortgages. The Paycheck Protection Program (PPP) accounted for a net decrease of $82.8 million in loan balances. The net decrease in PPP loans outstanding was comprised of $77.7 million of phase two loan originations and $160.5 million of loans forgiven.

Goodwill and other intangible assets, net

The decrease in goodwill and other intangible assets, net, can be attributed to the amortization of intangible assets.

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Deposits

The increase in deposits can be attributed to increases of $104.8 million in non-interest-bearing demand deposits, $57.5 million in money market accounts, and $29.3 million in savings deposits, partially offset by decreases of $55.3 million in time deposits, and $0.1 million in interest-bearing demand deposit accounts.

Other liabilities

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

Shareholders’ equity

Shareholders’ equity was $206.1 million at September 30, 2021 compared to $199.7 million at December 31, 2020. The increase can be mostly attributed to earnings of $20.0 million, during the nine months ended September 30, 2021, partially offset by a decrease in accumulated other comprehensive income (loss) of $9.5 million and $4.1 million in dividends declared during the nine months ended September 30, 2021. The decrease in accumulated other comprehensive income (loss) can be mostly attributed to a decrease in the fair market value of the securities portfolio. Treasury stock increased $0.4 million, primarily due to the repurchase of the Corporation's common stock, offset by the impact of the issuance of shares related to the Corporation's employee benefit plans and directors' stock plans. As of September 30, 2021, 26,456 shares have been repurchased at an average cost of $36.52 per share, pursuant to the Corporation's stock repurchase plan.

Assets under management or administration

The market value of total assets under management or administration in WMG was $2.229 billion at September 30, 2021, including $322.5 million of assets held under management or administration for the Corporation, compared to $2.091 billion at December 31, 2020, including $305.5 million of assets held under management or administration for the Corporation, an increase of $138.0 million, or 6.60%.

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 composition of the available for sale segment of the securities portfolio is summarized in the table as follows (in thousands):

SECURITIES AVAILABLE FOR SALE
	September 30, 2021						December 31, 2020
	Amortized Cost		Estimated Fair Value		Percent of Total Estimated Fair Value		Amortized Cost		Estimated Fair Value		Percent of Total Estimated Fair Value
Obligations of U.S. Government	40,499		40,337		5.3	%	$	—	$	—	—	%
Mortgage-backed securities, residential and collateralized mortgage obligations	588,555		586,126		77.0	%	458,245		467,866		84.4	%
Obligations of states and political subdivisions	40,331		42,352		5.6	%	40,662		43,405		7.8	%
Other securities	92,612		92,716		12.1	%	43,455		43,340		7.8	%
Total	$	761,997	$	761,531	100.0	%	$	542,362	$	554,611	100.0	%

The available for sale segment of the securities portfolio totaled $761.5 million at September 30, 2021, an increase of $206.9 million, or 37.3%, from $554.6 million at December 31, 2020. The increase can be mostly attributed to purchases in the amount of $333.4 million, offset by a decrease of $109.7 million in paydowns, and a decrease in the fair value of the portfolio of $16.7 million due to increases in interest rates.

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The held to maturity segment of the securities portfolio consists of obligations of political subdivisions in the Corporation’s market areas and certificates of deposit. These securities totaled $3.2 million at September 30, 2021 and $2.5 million at December 31, 2020.

Loans

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

The table below presents the Corporation’s loan composition by segment at the dates indicated, and the dollar and percent change from December 31, 2020 to September 30, 2021 (in thousands):

LOANS
	September 30, 2021		December 31, 2020		Dollar Change		Percentage Change
Commercial and agricultural	$	271,075	$	368,946	$	(97,871)	(26.5)	%
Commercial mortgages	789,154		716,608		72,546		10.1	%
Residential mortgages	253,991		239,401		14,590		6.1	%
Indirect consumer loans	119,772		120,538		(766)		(0.6)	%
Other consumer loans	82,676		90,970		(8,294)		(9.1)	%
Total loans, net of deferred loan fees	$	1,516,668	$	1,536,463	$	(19,795)	(1.3)	%

Portfolio loans totaled $1.517 billion at September 30, 2021, a decrease of $19.8 million, or 1.3%, from $1.536 billion at December 31, 2020. The decrease in loans can be attributed to decreases of $97.9 million in commercial and agricultural loans, $8.3 million in other consumer loans and $0.8 million in indirect consumer loans, offset by increases of $72.5 million in commercial mortgages and $14.6 million in residential mortgages.

The decrease in commercial and agricultural loans can be primarily attributed to a net decrease of $82.8 million of PPP loans due to a total of $160.5 million of paydowns received from the SBA as part of the forgiveness phase of the Paycheck Protection Program (PPP). The Corporation originated $77.7 million in commercial loans related to Phase 2 of the PPP. Residential mortgage loans totaled $254.0 million at September 30, 2021, an increase of $14.6 million, or 6.1%, from December 31, 2020. During the nine months ended September 30, 2021, $75.6 million of residential mortgages were originated, of which $29.0 million were sold in the secondary market to Freddie Mac.

The Corporation anticipates that future growth in portfolio loans will continue to be in commercial mortgages and commercial and industrial loans, particularly within the Corporation's new Western New York market. Recent growth in residential mortgages was driven by both home purchases and refinancings due to the low interest rate environment. The table below presents the Corporation’s outstanding loan balance by bank division (in thousands):

LOANS BY DIVISION
	September 30, 2021		December 31, 2020		December 31, 2019		December 31, 2018		December 31, 2017
Chemung Canal Trust Company*^	$	642,176	$	658,468	$	576,399	$	603,133	$	630,732
Capital Bank Division	874,492		877,995		732,820		708,773		681,092
Total loans	$	1,516,668	$	1,536,463	$	1,309,219	$	1,311,906	$	1,311,824

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

^ Includes $40.0 million in the Western New York market

Loan concentrations are considered to exist when there are amounts loaned to a multiple number of borrowers engaged in similar activities which would cause them to be similarly impacted by economic or other conditions. Specific industries are identified using NAICS codes. The Corporation monitors specific NAICS industry classifications of commercial loans to identify concentrations greater than 10.0% of total loans. At September 30, 2021 and December 31, 2020, commercial loans to borrowers involved in the real estate, and real estate rental and lending businesses were 45.5% and 40.9% 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, 2021 and December 31, 2020.

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Non-Performing Assets

Non-performing assets consist of non-accrual loans, non-accrual troubled debt restructurings and other real estate owned that has been acquired in partial or full satisfaction of loan obligations or upon foreclosure.

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

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

NON-PERFORMING ASSETS
	September 30, 2021			December 31, 2020
Non-accrual loans	$	3,225		$	6,011
Non-accrual troubled debt restructurings	5,148			3,941
Total non-performing loans	8,373			9,952
Other real estate owned	171			237
Total non-performing assets	$	8,544		$	10,189
Ratio of non-performing loans to total loans	0.56		%	0.65		%
Ratio of non-performing assets to total assets	0.35		%	0.45		%
Ratio of allowance for loan losses to non-performing loans	250.08		%	210.25		%
Accruing loans past due 90 days or more (1)	$	4		$	2
Accruing troubled debt restructurings (1)	$	5,679		$	2,790
(1) These loans are not included in non-performing assets above.

Non-Performing Loans

Non-performing loans totaled $8.4 million at September 30, 2021, or 0.56% of total loans, compared to $10.0 million at December 31, 2020, or 0.65% of total loans. Non-performing assets, which are comprised of non-performing loans and other real estate owned, was $8.5 million, or 0.35% of total assets, at September 30, 2021, compared to $10.2 million, or 0.45% of total assets, at December 31, 2020. The decrease in non-performing loans can mostly be attributed to payments received on non-performing residential mortgages and home equity lines and loans. The decrease in non-performing assets can be attributed to the decrease in non-performing loans.

Accruing Loans Past due 90 Days or More

The recorded investment in accruing loans past due 90 days or more increased from $2 thousand at December 31, 2020 to $4 thousand at September 30, 2021.

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Troubled Debt Restructurings

The Corporation works closely with borrowers that have financial difficulties to identify viable solutions that minimize the potential for loss. In that regard, the Corporation has modified the terms of select loans to maximize their collectability. The modified loans are considered TDRs under current accounting guidance. Modifications generally involve short-term deferrals of principal and/or interest payments, reductions of scheduled payment amounts, interest rates or principal of the loan, and forgiveness of accrued interest. Under Section 4013 of the CARES Act, loans less than 30 days past due as of December 31, 2019 will be considered current for COVID-19 related modifications and therefore will not be treated as TDRs. As of September 30, 2021, the Corporation had $5.1 million of non-accrual TDRs compared to $3.9 million as of December 31, 2020. As of September 30, 2021 and December 31, 2020, the Corporation had $5.7 million and $2.8 million respectively, of accruing TDRs.

Impaired Loans

A loan is classified as impaired when, based on current information and events, it is probable that the Corporation will be unable to collect both the principal and interest due under the contractual terms of the loan agreement. The unpaid principal balance of impaired loans at September 30, 2021 totaled $18.8 million, including TDRs of $10.8 million, compared to $16.5 million, including TDRs of $6.7 million, at December 31, 2020. Included in the recorded investment of impaired loans at September 30, 2021, were loans totaling $5.3 million for which impairment allowances of $3.4 million have been specifically allocated to the allowance for loan losses. As of December 31, 2020, the impaired loan total included $1.8 million of loans for which specific impairment allowances of $1.5 million were allocated to the allowance for loan losses.

The majority of the Corporation's impaired loans are secured and measured for impairment based on collateral evaluations.  It is the Corporation's policy to obtain updated appraisals, by independent third parties, on loans secured by real estate at the time a loan is determined to be impaired. An impairment measurement is performed based upon the most recent appraisal on file to determine the amount of any specific allocation or charge-off. In determining the amount of any specific allocation or charge-off, the Corporation will make adjustments to reflect the estimated costs to sell the property. Upon receipt and review of the updated appraisal, an additional measurement is performed to determine if any adjustments are necessary to reflect the proper provisioning or charge-off. Impaired loans are reviewed on a quarterly basis to determine if any changes in credit quality or market conditions would require any additional allocation or recognition of additional charge-offs. Real estate values in the Corporation's market area have been holding steady. 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 Loan Losses

The allowance is an amount that management believes will be adequate to absorb probable incurred losses on existing loans.  The allowance is established based on management’s evaluation of the probable incurred losses inherent in our portfolio in accordance with GAAP, and is comprised of both specific valuation allowances and general valuation allowances.

Specific valuation allowances are established based on management’s analysis of individually impaired loans. Factors considered by management in determining impairment include payment status, evaluations of the underlying collateral, expected cash flows, delinquent or unpaid property taxes, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. If a loan is determined to be impaired and is placed on non-accrual status, all future payments received are applied to principal and a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral.

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The general component covers non-impaired loans and is based on historical loss experience adjusted for current qualitative factors. Loans not impaired but classified as substandard and special mention use a historical loss factor on a rolling five-year history of net losses. For all other unclassified loans, the historical loss experience is determined by portfolio class and is based on the actual loss history experienced by the Corporation over the most recent two years. This actual loss experience is supplemented with other qualitative factors based on the risks present for each portfolio class. These qualitative factors include consideration of the following: (1) lending policies and procedures, including underwriting standards and collection, charge-off and recovery policies, (2) national and local economic and business conditions and developments, including the condition of various market segments, and more recently the expected impact of COVID-19 on the various portfolios, (3) loan profiles and volume of the portfolio, (4) the experience, ability, and depth of lending management and staff, (5) the volume and severity of past due, classified and watch-list loans, non-accrual loans, troubled debt restructurings, and other modifications (6) the quality of the Bank’s loan review system and the degree of oversight by the Bank’s Board of Directors, (7) collateral related issues: secured vs. unsecured, type, declining valuation environment and trend of other related factors, (8) the existence and effect of any concentrations of credit, and changes in the level of such concentrations, (9) the effect of external factors, such as competition and legal and regulatory requirements, on the level of estimated credit losses in the Bank’s current portfolio and (10) the impact of the global economy, including the impact of COVID-19.

The allowance for loan losses is increased through a provision for loan losses charged to operations. Loans are charged against the allowance for loan 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 loan losses is performed on a periodic basis and takes into consideration such factors as the credit risk grade assigned to the loan, historical loan loss experience and review of specific impaired loans. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation's allowance for loan 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 loan losses was $20.9 million at September 30, 2021, and December 31, 2020. The ratio of allowance for loan losses to total loans was 1.38% at September 30, 2021, compared to 1.36% at December 31, 2020. Net recoveries for the nine months ended September 30, 2021 were $0.1 million, compared to net charge-offs for the nine months ended September 30, 2020 of $2.9 million.

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The table below summarizes the Corporation’s loan loss experience for the nine months ended September 30, 2021 and 2020 (in thousands, except ratio data):

SUMMARY OF LOAN LOSS EXPERIENCE
	Nine Months Ended   September 30,
	2021			2020
Balance of allowance for loan losses at beginning of period	$	20,924		$	23,478
Charge-offs:
Commercial and agricultural	25			134
Commercial mortgages	44			2,143
Residential mortgages	71			56
Consumer loans	510			915
Total charge-offs	650			3,248
Recoveries:
Commercial and agricultural	283			27
Commercial mortgages	2			2
Residential mortgages	10			49
Consumer loans	424			293
Total recoveries	719			371
Net charge-offs (recoveries)	(69)			2,877
Provision (credit) for loan losses	(53)			3,989
Balance of allowance for loan losses at end of period	$	20,940		$	24,590
Ratio of annualized net charge-offs (recoveries) to average loans outstanding	(0.01)		%	0.27		%
Ratio of allowance for loan losses to total loans outstanding	1.38		%	1.60		%

Deposits

The table below summarizes the Corporation’s deposit composition by segment at the dates indicated, and the dollar and percent change from December 31, 2020 to September 30, 2021 (in thousands):

DEPOSITS
	September 30, 2021		December 31, 2020		Dollar Change		Percentage Change
Non-interest-bearing demand deposits	$	725,181	$	620,423	$	104,758	16.9	%
Interest-bearing demand deposits	282,036		282,172		(136)		—	%
Insured money market accounts	661,049		603,583		57,466		9.5	%
Savings deposits	275,137		245,865		29,272		11.9	%
Time deposits	230,419		285,731		(55,312)		(19.4)	%
Total	$	2,173,822	$	2,037,774	$	136,048	6.7	%

Deposits totaled $2.174 billion at September 30, 2021 compared to $2.038 billion at December 31, 2020, an increase of $136.0 million, or 6.7%. The increase was attributable to increases of $104.8 million in non-interest-bearing demand deposits, $57.5 million in money market accounts, and $29.3 million in savings deposits, partially offset by decreases of $55.3 million in time deposits and $0.1 million in interest-bearing demand deposits. The growth in deposits was due primarily to increases of $54.7 million in consumer funds, $48.5 million in commercial deposits, and $32.8 million in public deposits. The increase in deposits was partially due to the collection of stimulus funds and PPP loan disbursements. At September 30, 2021, demand deposit and money market accounts comprised 76.7% of total deposits compared to 73.9% at December 31, 2020.

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

DEPOSITS BY DIVISION
	September 30, 2021		December 31, 2020		December 31, 2019		December 31, 2018		December 31, 2017
Chemung Canal Trust Company*	$	1,782,737	$	1,686,370	$	1,317,225	$	1,328,658	$	1,264,883
Capital Bank Division	391,085		351,404		254,913		240,579		202,563
Total	$	2,173,822	$	2,037,774	$	1,572,138	$	1,569,237	$	1,467,446

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

In addition to consumer, commercial and public deposits, other sources of funds include brokered deposits. The Regulatory Relief Act changed the definition of brokered deposits, such that subject to certain conditions, reciprocal deposits of another depository institution obtained through a deposit placement network for purposes of obtaining maximum deposit insurance would not be considered brokered deposits subject to the FDIC’s brokered-deposit regulations. This will apply to the Corporation's participation in the CDARS and ICS programs. Brokered deposits include funds obtained through brokers. There were no deposits obtained through brokers as of September 30, 2021 and December 31, 2020. Deposits obtained through the CDARS and ICS programs were $335.7 million and $318.3 million as of September 30, 2021 and December 31, 2020, respectively. The increase in CDARS and ICS deposits was due to the seasonal inflow of municipal client balances.

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

The Corporation also considers brokered deposits to be an element of its deposit strategy and anticipates that it may use brokered deposits as a secondary source of funding to support growth.

Borrowings

Borrowings decreased $0.2 million to $3.7 million at September 30, 2021 from December 31, 2020, attributable to normal recurring finance lease payments.

Shareholders’ Equity

Total shareholders' equity increased $6.4 million from $199.7 million at December 31, 2020 to $206.1 million at September 30, 2021, due primarily to an increase in retained earnings, offset by a decrease in accumulated other comprehensive (loss) income. The increase in retained earnings of $15.9 million was due primarily to earnings of $20.0 million, offset by $4.1 million in dividends declared during the nine months ended September 30, 2021. The decrease in accumulated other comprehensive income (loss) of $9.5 million can be mostly attributed to the decrease in the fair market value of the securities portfolio.

Treasury stock increased $0.4 million, primarily due to the Corporation's common stock repurchase program, offset by the impact of the issuance of shares related to the Corporation's employee benefit plans and directors' stock plans. No shares were repurchased in the three month period ended September 30, 2021. For the nine month period ended September 30, 2021, the Corporation repurchased a total of 26,456 shares of common stock at a total cost of $1.0 million under the repurchase program at the weighted average cost of $36.52 per share. Remaining buyback authority under the share repurchase program was 223,544 shares at September 30, 2021.

The total shareholders’ equity to total assets ratio was 8.53% at September 30, 2021 compared to 8.76% at December 31, 2020.  The tangible equity to tangible assets ratio was 7.69% at September 30, 2021 compared to 7.87% at December 31, 2020. Book value per share increased to $44.00 at September 30, 2021 from $42.53 at December 31, 2020.

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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 and Exchange Commission.

On April 27, 2020, the Corporation filed with the SEC a Form S-3 Registration Statement under the Securities Act of 1933. The Corporation's Board of Directors approved the filing with the SEC of a Shelf Registration Statement to register for sale from time to time up to $50 million of the following securities: (i) shares of common stock; (ii) unsecured debt securities, which may consist of notes, debentures or other evidences of indebtedness; (iii) warrants; (iv) purchase contracts; (v) units consisting of any combination of the foregoing; and (vi) subscription rights to purchase shares of common stock or debt securities. The SEC declared the registration statement effective on May 7, 2020.

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, 2021, the Bank’s capital ratios were in excess of those required to be considered well-capitalized under regulatory capital guidelines.

Pursuant to the Economic Growth, Regulatory Relief, and Consumer Protection Act (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. Pursuant to the CARES Act, the federal banking regulators issued final rules to set the community bank leverage ratio at 8.5% for 2021. Community banks will have until January 1, 2022, before the community bank leverage ratio requirement will return to 9%. The Bank has not elected to use the community bank leverage ratio.

Off-balance Sheet Arrangements

See Note 8 – Commitments and Contingencies in the Notes to Unaudited Consolidated Financial Statements for a discussion of off-balance sheet arrangements.

Liquidity

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

The Corporation is a member of the FHLBNY which allows it to access borrowings which enhance management's ability to satisfy future liquidity needs. Based on available collateral and current advances outstanding, the Corporation was eligible to borrow up to a total of $187.3 million and $86.3 million at September 30, 2021 and December 31, 2020, respectively. The Corporation also had a total of $68.0 million of unsecured lines of credit with six different financial institutions, all of which was available at September 30, 2021 and December 31, 2020, respectively. No funds were drawn with respect to any of these arrangements as of September 30, 2021 and December 31, 2020.

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Consolidated Cash Flows Analysis

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

CONSOLIDATED SUMMARY OF CASH FLOWS
(in thousands)	Nine Months Ended   September 30,
	2021		2020
Net cash provided by operating activities	$	26,578	$	19,987
Net cash used in investing activities	(204,669)		(336,089)
Net cash provided in financing activities	131,250		344,100
Net increase (decrease) in cash and cash equivalents	$	(46,841)	$	27,998

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 2021 and 2020 predominantly resulted from net income after non-cash operating adjustments.

Investing activities

Cash used in investing activities during the first nine months of 2021 predominantly resulted from purchases of securities available for sale offset by a net decrease in loans and principal paydowns on securities available for sale. Cash used in investing activities during the first nine months of 2020 predominantly resulted from purchases of securities available for sale, and a net increase in loans, offset by maturities and principal paydowns on securities available for sale.

Financing activities

Cash provided by financing activities during the first nine months of 2021 predominantly resulted from a net increase in deposits. Cash provided by financing activities during the first nine months of 2020 predominantly resulted from a net increase in deposits.

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. Pursuant to the CARES Act, the federal banking regulators issued final rules to set the community bank leverage ratio at 8.5% for 2021. Community banks will have until January 1, 2022, before the community bank leverage ratio requirement will return to 9%. The Bank has not elected to use the community bank leverage ratio.

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Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. Management believes that, as of September 30, 2021 and December 31, 2020, 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, 2021, 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, 2021 and December 31, 2020 were calculated under Basel III rules. There is no threshold for well-capitalized status for bank holding companies.

The Corporation and the Bank’s capital ratios as of September 30, 2021 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, 2021	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk Weighted Assets):
Consolidated	$	210,023	14.08	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	201,814	13.55	%	$	119,176	8.00	%	$	156,418	10.50	%	$	148,970	10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated	$	191,355	12.83	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	183,164	12.30	%	$	89,382	6.00	%	$	126,624	8.50	%	$	119,176	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets):
Consolidated	$	191,355	12.83	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	183,164	12.30	%	$	67,036	4.50	%	$	104,279	7.00	%	$	96,830	6.50	%
Tier 1 Capital (to Average Assets):
Consolidated	$	191,355	7.97	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	183,164	7.65	%	$	95,745	4.00	%	N/A		N/A		$	119,682	5.00	%

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The Corporation and the Bank’s capital ratios as of December 31, 2020 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, 2020	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk Weighted Assets):
Consolidated	$	192,960	13.62	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	185,606	13.12	%	$	113,182	8.00	%	$	148,551	10.50	%	$	141,478	10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated	$	175,216	12.37	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	167,881	11.87	%	$	84,887	6.00	%	$	120,256	8.50	%	$	113,182	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets):
Consolidated	$	175,216	12.37	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	167,881	11.87	%	$	63,665	4.50	%	$	99,034	7.00	%	$	91,960	6.50	%
Tier 1 Capital (to Average Assets):
Consolidated	$	175,216	7.90	%	N/A		N/A		N/A		N/A		N/A		N/A
Bank	$	167,881	7.59	%	$	88,474	4.00	%	N/A		N/A		$	110,592	5.00	%

Dividend Restrictions

The Corporation’s principal source of funds for dividend payments is dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to current year’s net income, combined with the retained net income of the preceding two years, subject to the capital requirements in the table above. At September 30, 2021, the Bank could, without prior approval, declare dividends of approximately $34.3 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 its competitors. Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by other companies.

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

Fully Taxable Equivalent Net Interest Income and Net Interest Margin

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

																As of the
	As of the Three Months Ended															Nine Months Ended
(in thousands, except ratio data)	Sept. 30,			June 30,			March 31,			Dec. 31,			Sept. 30,			Sept. 30,			Sept. 30,
	2021			2021			2021			2020			2020			2021			2020
NET INTEREST MARGIN - FULLY TAXABLE EQUIVALENT
Net interest income (GAAP)	$	16,832		$	16,079		$	15,786		$	16,397		$	15,869		$	48,697		$	46,522
Fully taxable equivalent adjustment	94			92			91			89			85			277			255
Fully taxable equivalent net interest income (non-GAAP)	$	16,926		$	16,171		$	15,877		$	16,486		$	15,954		$	48,974		$	46,777
Average interest-earning assets (GAAP)	$	2,327,817		$	2,352,908		$	2,251,334		$	2,144,891		$	1,986,043		$	2,310,968		$	1,877,966
Net interest margin - fully taxable equivalent (non-GAAP)	2.88		%	2.76		%	2.86		%	3.06		%	3.20		%	2.83		%	3.33		%

Efficiency Ratio

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

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																As of the
	As of the Three Months Ended															Nine Months Ended
(in thousands, except ratio data)	Sept. 30,			June 30,			March 31,			Dec. 31,			Sept. 30,			Sept. 30,			Sept. 30,
	2021			2021			2021			2020			2020			2021			2020
EFFICIENCY RATIO
Net interest income (GAAP)	$	16,832		$	16,079		$	15,786		$	16,397		$	15,869		$	48,697		$	46,522
Fully taxable equivalent adjustment	94			92			91			89			85			277			255
Fully taxable equivalent net interest income (non-GAAP)	$	16,926		$	16,171		$	15,877		$	16,486		$	15,954		$	48,974		$	46,777
Non-interest income (GAAP)	$	5,970		$	6,492		$	5,621		$	5,975		$	5,339		$	18,083		$	15,150
Less:  net (gains) losses on security transactions	—			—			—			—			—			—			—
Adjusted non-interest income (non-GAAP)	$	5,970		$	6,492		$	5,621		$	5,975		$	5,339		$	18,083		$	15,150
Non-interest expense (GAAP)	$	14,100		$	13,851		$	13,353		$	15,597		$	13,362		$	41,304		$	40,339
Less:  amortization of intangible assets	(42)			(89)			(101)			(113)			(120)			(232)			(371)
Adjusted non-interest expense (non-GAAP)	$	14,058		$	13,762		$	13,252		$	15,484		$	13,242		$	41,072		$	39,968
Efficiency ratio (unadjusted)	61.84		%	61.37		%	62.38		%	69.72		%	63.00		%	61.85		%	65.41		%
Efficiency ratio (adjusted)	61.40		%	60.72		%	61.64		%	68.94		%	62.19		%	61.25		%	64.54		%

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
	As of or for the Three Months Ended															Nine Months Ended
(in thousands, except per share and ratio data)	Sept. 30,			June 30,			March 31,			Dec. 31,			Sept. 30,			Sept. 30,			Sept. 30,
	2021			2021			2021			2020			2020			2021			2020
TANGIBLE EQUITY AND TANGIBLE ASSETS
(PERIOD END)
Total shareholders' equity (GAAP)	$	206,139		$	203,977		$	194,784		$	199,699		$	197,005		$	206,139		$	197,005
Less: intangible assets	(21,850)			(21,892)			(21,981)			(22,082)			(22,195)			(21,850)			(22,195)
Tangible equity (non-GAAP)	$	184,289		$	182,085		$	172,803		$	177,617		$	174,810		$	184,289		$	174,810
Total assets (GAAP)	$	2,417,656		$	2,380,712		$	2,442,495		$	2,279,451		$	2,165,014		$	2,417,656		$	2,165,014
Less: intangible assets	(21,850)			(21,892)			(21,981)			(22,082)			(22,195)			(21,850)			(22,195)
Tangible assets (non-GAAP)	$	2,395,806		$	2,358,820		$	2,420,514		$	2,257,369		$	2,142,819		$	2,395,806		$	2,142,819
Total equity to total assets at end of period (GAAP)	8.53		%	8.57		%	7.97		%	8.76		%	9.10		%	8.53		%	9.10		%
Book value per share (GAAP)	$	44.00		$	43.57		$	41.60		$	42.53		$	41.51		$	44.00		$	41.51
Tangible equity to tangible assets at end of period (non-GAAP)	7.69		%	7.72		%	7.14		%	7.87		%	8.16		%	7.69		%	8.16		%
Tangible book value per share (non-GAAP)	$	39.34		$	38.90		$	36.91		$	37.83		$	36.83		$	39.34		$	36.83

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Tangible Equity (Average)

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

																As of or for the
	As of or for the Three Months Ended															Nine Months Ended
	Sept. 30,			June 30,			March 31,			Dec. 31,			Sept. 30,			Sept. 30,			Sept. 30,
(in thousands, except ratio data)	2021			2021			2021			2020			2020			2021			2020
TANGIBLE EQUITY (AVERAGE)
Total average shareholders' equity (GAAP)	$	208,023		$	200,627		$	200,035		$	198,036		$	196,569		$	202,923		$	192,299
Less: average intangible assets	(21,868)			(21,946)			(22,043)			(22,142)			(22,267)			(21,952)			(22,390)
Average tangible equity (non-GAAP)	$	186,155		$	178,681		$	177,992		$	175,894		$	174,302		$	180,971		$	169,909
Return on average equity (GAAP)	12.68		%	13.58		%	13.24		%	10.51		%	11.56		%	13.16		%	9.74		%
Return on average tangible equity (non-GAAP)	14.16		%	15.25		%	14.88		%	11.84		%	13.03		%	14.75		%	11.03		%

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
	As of or for the Three Months Ended															Nine Months Ended
(in thousands, except per share and ratio data)	Sept. 30,			June 30,			March 31,			Dec. 31,			Sept. 30,			Sept. 30,			Sept. 30,
	2021			2021			2021			2020			2020			2021			2020
NON-GAAP NET INCOME
Reported net income (GAAP)	$	6,646		$	6,795		$	6,530		$	5,233		$	5,711		$	19,971		$	14,029
Net (gains) losses on security transactions (net of tax)	—			—			—			—			—			—			—
Non- GAAP net income	$	6,646		$	6,795		$	6,530		$	5,233		$	5,711		$	19,971		$	14,029
Average basic and diluted shares outstanding	4,684			4,683			4,691			4,702			4,773			4,687			4,836
Reported basic and diluted earnings per share (GAAP)	$	1.42		$	1.45		$	1.39		$	1.11		$	1.19		$	4.26		$	2.90
Reported return on average assets (GAAP)	1.09		%	1.11		%	1.12		%	0.93		%	1.08		%	1.11		%	0.95		%
Reported return on average equity (GAAP)	12.68		%	13.58		%	13.24		%	10.51		%	11.56		%	13.16		%	9.74		%
Non-GAAP basic and diluted earnings per share	$	1.42		$	1.45		$	1.39		$	1.11		$	1.19		$	4.26		$	2.90
Non-GAAP return on average assets	1.09		%	1.11		%	1.12		%	0.93		%	1.08		%	1.11		%	0.95		%
Non-GAAP return on average equity	12.68		%	13.58		%	13.24		%	10.51		%	11.56		%	13.16		%	9.74		%

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ITEM 3:    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

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

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

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

Interest rate risk is the risk that net interest income will fluctuate as a result of a change in interest rates. It is the assumption of interest rate risk, along with credit risk, that drives the net interest margin of a financial institution. For that reason, the ALCO has established tolerance limits based upon various basis point changes in interest rates, with appropriate floors set for interest-bearing liabilities. At September 30, 2021, it is estimated that an immediate 100-basis point decrease in interest rates would negatively impact the next 12 months net interest income by 7.33% and an immediate 200-basis point increase would positively impact the next 12 months net interest income by 7.52%. Both are within the Corporation's policy guidelines.

A related component of interest rate risk is the expectation that the market value of the Corporation’s equity account will fluctuate with changes in interest rates. This component is a direct corollary to the earnings-impact component: an institution exposed to earnings erosion is also exposed to a decline in market value. At September 30, 2021, it is estimated that an immediate 100-basis point decrease in interest rates would negatively impact the market value of the Corporation’s capital account by 2.78%. An immediate 200-basis point increase in interest rates would negatively impact the market value by 4.18%. Both are within the Corporation's policy guidelines.

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

Credit Risk

The Corporation manages credit risk consistent with state and federal laws governing the making of loans through written policies and procedures; loan review to identify loan problems at the earliest possible time; collection procedures (continued even after a loan is charged off); an adequate allowance for loan 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.

77

ITEM 4:    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Corporation's management, with the participation of its Chief Executive Officer, who is the Corporation's principal executive officer, and its Chief Financial Officer and Treasurer, who is the Corporation's principal financial officer, have evaluated the effectiveness of the Corporation's disclosure controls and procedures as of September 30, 2021 pursuant to Rule 13a-15 of the Exchange Act, as amended. Based upon that evaluation, the principal executive officer and principal financial officer have concluded that the Corporation's disclosure controls and procedures are effective as of September 30, 2021. 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.

78

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, 2021.

ITEM 1A.    RISK FACTORS

There have been no material changes in the risk factors set forth in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on March 23, 2021.

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

    (c)    Issuer Purchases of Equity Securities (1)

Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
July 1 - July 31, 2021	—	$	—	—	223,544
August 1 - August 31, 2021	—	—		—	223,544
September 1 - September 30, 2021	—	—		—	223,544
Quarter ended September 30, 2021	—	$	—	—	223,544
(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. For the three months ended September 30, 2021, no shares had been purchased under this plan. Since the inception of the plan, a total of 26,456 shares have been purchased under the plan.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

        Not applicable.

ITEM 4.    MINE SAFETY DISCLOSURES

        Not applicable.

ITEM 5.    OTHER INFORMATION

        Not applicable.

79

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 to June 16, 2021 (as incorporated by reference to Exhibit 3.2 to Registrant’s Form 8-K filed with the Commission on June 16, 2021).
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.

80

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 10, 2021	By:  /s/ Anders M. Tomson
	Anders M. Tomson President and Chief Executive Officer (Principal Executive Officer)

DATED: November 10, 2021	By:  /s/ Karl F. Krebs
	Karl F. Krebs Chief Financial Officer and Treasurer (Principal Financial Officer)

81

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 to June 16, 2021 (as incorporated by reference to Exhibit 3.1 to Registrant’s Form 8-K filed with the Commission on June 16, 2021).
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 10, 2021

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 10, 2021

By: /s/ Karl F. Krebs___________________

Karl F. Krebs

Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

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

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

(a)the Quarterly Report on Form 10-Q of the Corporation for the period ended September 30, 2021, 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 10, 2021

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, 2021, filed on the date hereof with the Securities and Exchange Commission (the "Report"), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

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

/s/ Karl F. Krebs

Karl F. Krebs

Chief Financial Officer and Treasurer

November 10, 2021

XML

COVER - shares	9 Months Ended
	Sep. 30, 2021	Nov. 05, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2021
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		4,664,078
Entity Central Index Key	0000763563
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
ASSETS
Cash and due from financial institutions	$ 28,859	$ 29,467
Interest-earning deposits in other financial institutions	32,838	79,071
Total cash and cash equivalents	61,697	108,538
Equity investments, at estimated fair value	2,933	2,542
Securities available for sale, at estimated fair value	761,531	554,611
Securities held to maturity, estimated fair value of $3,194 at September 30, 2021   and $2,501 at December 31, 2020	3,183	2,469
FHLBNY and FRBNY Stock, at cost	3,562	3,150
Loans, net of deferred loan fees	1,516,668	1,536,463
Allowance for loan losses	(20,940)	(20,924)
Loans, net	1,495,728	1,515,539
Loans held for sale	224	170
Premises and equipment, net	18,370	20,119
Operating lease right-of-use assets	7,084	7,145
Goodwill	21,824	21,824
Other intangible assets, net	26	258
Bank-owned life insurance	2,812	3,059
Accrued interest receivable and other assets	38,682	40,027
Total assets	2,417,656	2,279,451
Deposits:
Non-interest-bearing	725,181	620,423
Interest-bearing	1,448,641	1,417,351
Total deposits	2,173,822	2,037,774
Long term finance lease obligation	3,659	3,849
Operating lease liabilities	7,227	7,264
Dividends payable	1,445	1,214
Accrued interest payable and other liabilities	25,364	29,651
Total liabilities	2,211,517	2,079,752
Shareholders' equity:
Common stock, $0.01 par value per share, 10,000,000 shares authorized;   5,310,076 issued at September 30, 2021 and December 31, 2020	53	53
Additional paid-in capital	47,203	46,764
Retained earnings	183,873	168,006
Treasury stock, at cost; 647,273 shares at September 30, 2021 and 642,239   shares at December 31, 2020	(17,924)	(17,525)
Accumulated other comprehensive income (loss)	(7,066)	2,401
Total shareholders' equity	206,139	199,699
Total liabilities and shareholders' equity	$ 2,417,656	$ 2,279,451

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Interest and dividend income:
Loans, including fees	$ 14,655	$ 14,876	$ 43,964	$ 43,770
Taxable securities	2,678	1,474	6,431	4,358
Tax exempt securities	265	263	792	799
Interest-earning deposits	35	101	131	643
Total interest and dividend income	17,633	16,714	51,318	49,570
Interest expense:
Deposits	768	809	2,521	2,922
Borrowed funds	33	36	100	126
Total interest expense	801	845	2,621	3,048
Net interest income	16,832	15,869	48,697	46,522
Provision (credit) for loan losses	356	679	(53)	3,989
Net interest income after provision for loan losses	16,476	15,190	48,750	42,533
Non-interest income:
Changes in fair value of equity investments	15	57	203	(33)
Net gains on sales of loans held for sale	242	553	884	916
Net gains (losses) on sales of other real estate owned	0	6	(18)	(71)
Income from bank-owned life insurance	13	14	39	147
Other	842	471	2,802	1,940
Total non-interest income	5,970	5,339	18,083	15,150
Non-interest expenses:
Salaries and wages	6,259	6,088	18,058	17,678
Pension and other employee benefits	1,511	1,245	4,450	4,095
Other components of net periodic pension and postretirement benefits	(391)	(254)	(1,173)	(762)
Net occupancy	1,432	1,454	4,446	4,406
Furniture and equipment	409	538	1,185	1,573
Data processing	2,210	1,777	6,261	5,630
Professional services	542	453	1,531	1,313
Amortization of intangible assets	42	120	232	371
Marketing and advertising	162	140	572	546
Other real estate owned	7	53	24	87
FDIC insurance	356	247	1,075	726
Loan expense	196	301	720	798
Other	1,365	1,200	3,923	3,878
Total non-interest expenses	14,100	13,362	41,304	40,339
Income before income tax expense	8,346	7,167	25,529	17,344
Income tax expense	1,700	1,456	5,558	3,315
Net income	$ 6,646	$ 5,711	$ 19,971	$ 14,029
Weighted average shares outstanding, basic (in shares)	4,684	4,773	4,687	4,836
Weighted average shares outstanding, diluted (in shares)	4,684	4,773	4,687	4,836
Basic earnings per share (in dollars per share)	$ 1.42	$ 1.19	$ 4.26	$ 2.90
Diluted earnings per share (in dollars per share)	$ 1.42	$ 1.19	$ 4.26	$ 2.90
WMG fee income
Non-interest income:
Revenue from contract with customer, excluding assessed tax	$ 2,765	$ 2,416	$ 8,246	$ 6,968
Service charges on deposit accounts
Non-interest income:
Revenue from contract with customer, excluding assessed tax	856	740	2,305	2,294
Interchange revenue from debit card transactions
Non-interest income:
Revenue from contract with customer, excluding assessed tax	$ 1,237	$ 1,082	$ 3,622	$ 2,989

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Statement of Comprehensive Income [Abstract]
Net income	$ 6,646	$ 5,711	$ 19,971	$ 14,029
Other comprehensive income (loss):
Net unrealized gains (losses)	(4,348)	(692)	(12,715)	9,919
Tax effect	(1,139)	(176)	(3,246)	2,530
Net of tax amount	(3,209)	(516)	(9,469)	7,389
Change in funded status of defined benefit pension plan and other benefit plans:
Reclassification adjustment for amortization of prior service costs	(55)	(55)	(165)	(165)
Reclassification adjustment for amortization of net actuarial loss	57	77	169	231
Total before tax effect	2	22	4	66
Tax effect	1	6	2	14
Net of tax amount	1	16	2	52
Total other comprehensive income (loss)	(3,208)	(500)	(9,467)	7,441
Comprehensive income	$ 3,438	$ 5,211	$ 10,504	$ 21,470

XML

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands		Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Income (Loss)
Beginning balances at Dec. 31, 2019		$ 182,627	$ 53	$ 46,382	$ 153,701	$ (11,710)	$ (5,799)
Increase (Decrease) in Shareholders' Equity [Roll Forward]
Net income		14,029			14,029
Other comprehensive (loss) income		7,441					7,441
Restricted stock awards		431		431
Restricted stock units for directors' deferred compensation plan		25		25
Distribution of treasury stock grants for employee restricted stock awards		0		(7)		7
Cash dividends declared		(3,743)			(3,743)
Distribution of treasury stock for directors' compensation		350		144		206
Distribution of shares of treasury stock for employee stock compensation		100		41		59
Distribution of shares of treasury stock for deferred directors' compensation		(12)		(180)		168
Repurchase of common stock		(5,137)				(5,137)
Sale of treasury stock	[1]	894		51		843
Forfeiture of shares of restricted stock awards		0		5		(5)
Ending balances at Sep. 30, 2020		197,005	53	46,892	163,987	(15,569)	1,642
Beginning balances at Jun. 30, 2020		194,589	53	46,758	159,505	(13,869)	2,142
Increase (Decrease) in Shareholders' Equity [Roll Forward]
Net income		5,711			5,711
Other comprehensive (loss) income		(500)					(500)
Restricted stock awards		125		125
Restricted stock units for directors' deferred compensation plan		5		5
Cash dividends declared		(1,229)			(1,229)
Repurchase of common stock		(1,816)				(1,816)
Sale of treasury stock	[1]	120		4		116
Ending balances at Sep. 30, 2020		197,005	53	46,892	163,987	(15,569)	1,642
Beginning balances at Dec. 31, 2020		199,699	53	46,764	168,006	(17,525)	2,401
Increase (Decrease) in Shareholders' Equity [Roll Forward]
Net income		19,971			19,971
Other comprehensive (loss) income		(9,467)					(9,467)
Restricted stock awards		307		307
Restricted stock units for directors' deferred compensation plan		14		14
Cash dividends declared		(4,104)			(4,104)
Distribution of treasury stock for directors' compensation		317		64		253
Distribution of shares of treasury stock for employee stock compensation		132		27		105
Distribution of shares of treasury stock for deferred directors' compensation		3		(72)		75
Repurchase of common stock		(1,050)				(1,050)
Sale of treasury stock	[1]	317		99		218
Ending balances at Sep. 30, 2021		206,139	53	47,203	183,873	(17,924)	(7,066)
Beginning balances at Jun. 30, 2021		203,977	53	47,081	178,673	(17,972)	(3,858)
Increase (Decrease) in Shareholders' Equity [Roll Forward]
Net income		6,646			6,646
Other comprehensive (loss) income		(3,208)					(3,208)
Restricted stock awards		84		84
Restricted stock units for directors' deferred compensation plan		5		5
Cash dividends declared		(1,446)			(1,446)
Repurchase of common stock		(4)				(4)
Sale of treasury stock	[1]	85		33		52
Ending balances at Sep. 30, 2021		$ 206,139	$ 53	$ 47,203	$ 183,873	$ (17,924)	$ (7,066)

[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.

XML

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Jun. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Statement of Stockholders' Equity [Abstract]
Distribution of shares of treasury stock for employee restricted stock awards (in shares)				255
Cash dividends declared (in dollars per share)	$ 0.31	$ 0.26	$ 0.88	$ 0.78
Distribution of shares of treasury stock for directors' compensation (in shares)			9,291	7,923
Distribution of shares of treasury stock for employee stock compensation (in shares)			3,860	2,274
Distribution of shares of treasury stock for deferred directors’ compensation (in shares)			2,707	6,426
Purchase of shares of treasury stock (in shares)	97	64,185	28,803	186,206
Sale of shares of treasury stock (in shares)	1,887	18,202	7,911	32,387
Forfeitures of shares of restricted stock awards (in shares)				112

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 19,971	$ 14,029
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of right-of-use assets	559	527
Amortization of intangible assets	232	371
Provision (credit) for loan losses	(53)	3,989
(Gains) Loss on disposal of fixed assets	(61)	7
Depreciation and amortization of fixed assets	1,896	2,215
Amortization of premiums on securities, net	4,020	1,003
Gain on sales of loans held for sale, net	(884)	(916)
Proceeds from sales of loans held for sale	29,840	17,216
Loans originated and held for sale	(29,010)	(17,174)
Net losses on sale of other real estate owned	18	71
Write-downs on other real estate owned	0	38
Net change in fair value of equity investments	(203)	33
Proceeds from sales of trading assets	41	24
Purchase of equity investments	(229)	(174)
Decrease (Increase) in other assets and accrued interest receivable	1,279	(10,264)
Increase (decrease) in accrued interest payable	27	(38)
Expense related to restricted stock units for directors' deferred compensation plan	14	25
Expense related to employee stock compensation	132	102
Expense related to employee restricted stock awards	307	431
Payments on operating leases	(37)	(500)
(Decrease) increase in other liabilities	(1,242)	9,119
Income from bank owned life insurance	(39)	(147)
Net cash provided by operating activities	26,578	19,987
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities, calls, and principal paydowns on securities available for sale	109,736	39,508
Proceeds from maturities and principal collected on securities held to maturity	558	1,349
Purchases of securities available for sale	(333,376)	(142,797)
Purchases of securities held to maturity	(1,287)	(1,286)
Purchase of FHLBNY and FRBNY stock	(412)	(51)
Proceeds from sales of fixed assets	451	0
Purchases of premises and equipment	(537)	(696)
Proceeds from sale of other real estate owned	128	253
Proceeds from bank owned life insurance	286	213
Net (increase) decrease in loans	19,784	(232,582)
Net cash used in investing activities	(204,669)	(336,089)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, interest-bearing demand accounts, savings accounts, and insured money market accounts	191,360	307,723
(Decrease) increase in time deposits	(55,312)	44,327
Payments made on finance leases	(190)	(175)
Purchase of treasury stock	(1,050)	(5,137)
Sale of treasury stock	315	894
Cash dividends paid	(3,873)	(3,777)
Net cash provided by financing activities	131,250	344,100
Net (decrease) increase in cash and cash equivalents	(46,841)	27,998
Cash and cash equivalents, beginning of period	108,538	121,904
Cash and cash equivalents, end of period	61,697	149,902
Cash paid for:
Interest	2,594	3,086
Income taxes	4,375	3,785
Supplemental disclosure of non-cash activity:
Transfer of loans to other real estate owned	80	431
Dividends declared, not yet paid	1,445	1,229
Repurchase of common stock in lieu of employee payroll taxes	80	54
Operating lease right-of-use assets	(498)	0
Distribution of treasury stock for directors' compensation	317	350
Distribution of treasury stock for deferred directors' compensation	4	(12)
Forfeiture of shares of restricted stock awards	$ 0	$ (5)

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Securities held to maturity, estimated fair value	$ 3,194	$ 2,501
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)	647,273	642,239

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2021

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 2020 Annual Report on Form 10-K for the year ended December 31, 2020. 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

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 by replacing the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to form credit loss estimates. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2019, though entities may adopt the amendments earlier for fiscal years beginning after December 15, 2018. In November 2019, the FASB adopted changes to delay the effective date of ASU 2016-13 to January 2023 for certain entities, including certain Securities and Exchange Commission filers, public business entities, and private companies. As a smaller reporting company, the Corporation is eligible for the delay. The Corporation has established a committee to oversee the implementation of CECL and has selected a vendor to assist in the implementation process. The model chosen utilizes a loss driver analysis which includes reasonable and supportable forecasts to estimate future losses. This analysis includes different methods such as discounted cash flows, remaining life and vintage analysis, which are used depending on the nature of the portfolio segment. The Corporation is running its current incurred loss model and a CECL model concurrently. The Corporation is in the process of updating its policies and internal controls accordingly. The corporation expects to recognize a one-time cumulative-effect adjustment to our allowance for loan losses upon adoption of CECL, effective of January 1, 2023, consistent with regulatory expectations set forth in interagency guidance.

Section 4013 of the CARES Act gives entities temporary relief from the accounting and disclosure requirements for troubled debt restructurings (TDRs) under ASC 310-40, Receivables: Troubled Debt Restructurings by Creditors, in certain situations. Section 4013 of the CARES Act permits the suspension of ASC 310-40 for loan modifications that are made by financial institutions in response to the COVID-19 pandemic if (1) the borrower was not more than 30 days past due as of December 31, 2019, and (2) the modifications are related to arrangements that defer or delay the payment of principal or interest, or change the interest rate on the loan. All loan modifications made by the Corporation in response to the COVID-19 pandemic have been in accordance with Section 4013 of the CARES Act.

Adoption of New Accounting Standards

On January 1, 2020, the Corporation adopted ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The objective of the ASU is to simplify the manner in which an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Additionally, the ASU removes the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails such qualitative test, to perform Step 2 of the goodwill impairment test. The adoption of the ASU did not have a significant impact on the Corporation's consolidated financial statements.

Risks and Uncertainties - COVID-19

The COVID-19 pandemic has caused significant economic dislocation in the United States as many state and local governments have ordered non-essential businesses to close and residents to shelter in place at home. As of September 30, 2021 many restrictions have been removed or lessened and many non-essential businesses have been allowed to re-open in limited capacity adhering to social distancing and disinfection guidelines. However, these restrictions and other consequences have resulted in an unprecedented slow-down in economic activity and a related increase in unemployment. Since the COVID-19 pandemic began, millions of people have filed claims for unemployment and stock markets have remained volatile. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 pandemic on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be fully reopened.

The Corporation's unaudited consolidated financial statements reflect estimates and assumptions that affect the reported amounts of assets and liabilities, including the amount of the allowance for loan losses established. Management evaluated the potential impact of the COVID-19 pandemic as it related to the loan portfolio and as part of this analysis, management identified what it believes to be higher risk loans through a detailed analysis of industry codes. Certain allowance qualitative factors were increased based on an assessment of the impact of the current pandemic on local, national and global economic conditions as well as the perceived risks inherent in specific industries and credit characteristics.

Management has taken actions to identify and assess additional possible credit exposure due to the COVID-19 pandemic based upon the industry types within the current loan portfolio. While most industries have and will continue to experience adverse impacts as a result of the COVID-19 pandemic, Management has designated certain industries as most impacted by COVID-19. For a discussion of the effect of COVID-19 on our business, see pages 60-62 of this Form 10-Q.

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EARNINGS PER COMMON SHARE	9 Months Ended
	Sep. 30, 2021
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 units and directors’ stock compensation, 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 non-forfeitable 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 4,684 and 4,773 weighted average shares outstanding for the three month periods ended September 30, 2021 and 2020, respectively. Earnings per share were computed by dividing net income by 4,687 and 4,836 weighted average shares outstanding for the nine month periods ended September 30, 2021 and 2020, respectively. There were no common stock equivalents during the three and nine month periods ended September 30, 2021 or 2020.

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SECURITIES

9 Months Ended

Sep. 30, 2021

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, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. Treasury notes and bonds	$	40,499	$	—	$	162	$	40,337
Mortgage-backed securities, residential	588,555		5,397		7,826		586,126
Obligations of states and political subdivisions	40,331		2,021		—		42,352
Corporate bonds and notes	17,000		116		55		17,061
SBA loan pools	75,612		398		355		75,655
Total	$	761,997	$	7,932	$	8,398	$	761,531

	December 31, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Mortgage-backed securities, residential	$	458,245	$	9,822	$	201	$	467,866
Obligations of states and political subdivisions	40,662		2,743		—		43,405
Corporate bonds and notes	9,000		47		12		9,035
SBA loan pools	34,455		42		192		34,305
Total	$	542,362	$	12,654	$	405	$	554,611

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

	September 30, 2021
	Amortized Cost		Unrecognized Gains		Unrecognized Losses		Estimated Fair Value
Obligations of states and political subdivisions	$	1,300	$	—	$	—	$	1,300
Time deposits with other financial institutions	1,883		11		—		1,894
Total	$	3,183	$	11	$	—	$	3,194

	December 31, 2020
	Amortized Cost		Unrecognized Gains		Unrecognized Losses		Estimated Fair Value
Obligations of states and political subdivisions	$	326	$	—	$	—	$	326
Time deposits with other financial institutions	2,143		32		—		2,175
Total	$	2,469	$	32	$	—	$	2,501

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, 2021
	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	686	$	689	$	1,523	$	1,532
After one, but within five years	75,962		77,278		860		862
After five, but within ten years	20,712		21,285		800		800
After ten years	470		498		—		—
	97,830		99,750		3,183		3,194
Mortgage-backed securities, residential	588,555		586,126		—		—
SBA loan pools	75,612		75,655		—		—
Total	$	761,997	$	761,531	$	3,183	$	3,194

There were no proceeds from sales and calls of securities resulting in gains or losses for the three and nine month periods ended September 30, 2021 and 2020.

The following tables summarize the investment securities available for sale with unrealized losses at September 30, 2021 and December 31, 2020 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, 2021	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury notes and bonds	$	24,819	$	162	$	—	$	—	$	24,819	$	162
Mortgage-backed securities, residential	383,380		7,707		4,146		119		387,526		7,826
Corporate bonds and notes	2,979		21		2,966		34		5,945		55
SBA loan pools	39,140		283		6,273		72		45,413		355
Total temporarily impaired securities	$	450,318	$	8,173	$	13,385	$	225	$	463,703	$	8,398

	Less than 12 months				12 months or longer				Total
December 31, 2020	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-backed securities, residential	$	70,037	$	200	$	970	$	1	$	71,007	$	201
Corporate bonds and notes	2,988		12		—		—		2,988		12
SBA loan pools	15,245		156		3,636		36		18,881		192
Total temporarily impaired securities	$	88,270	$	368	$	4,606	$	37	$	92,876	$	405

Other-Than-Temporary Impairment

As of September 30, 2021, the majority of the Corporation's unrealized losses in the investment securities portfolio related to mortgage-backed securities. At September 30, 2021, all of the unrealized losses related to mortgage-backed securities were issued by U.S. government sponsored entities, Fannie Mae and Freddie Mac. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Corporation does not have the intent to sell these securities and it is not likely that it will be required to sell these securities before their anticipated recovery, the Corporation does not consider these securities to be other-than-temporarily impaired at September 30, 2021.

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LOANS AND ALLOWANCE FOR LOAN LOSSES

9 Months Ended

Sep. 30, 2021

Loans and Leases Receivable Disclosure [Abstract]

LOANS AND ALLOWANCE FOR LOAN LOSSES

LOANS AND ALLOWANCE FOR LOAN LOSSES

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

	September 30, 2021		December 31, 2020
Commercial and agricultural:
Commercial and industrial	$	270,656	$	368,663
Agricultural	419		283
Commercial mortgages:
Construction	67,445		61,945
Commercial mortgages, other	721,709		654,663
Residential mortgages	253,991		239,401
Consumer loans:
Home equity lines and loans	72,471		78,547
Indirect consumer loans	119,772		120,538
Direct consumer loans	10,205		12,423
Total loans, net of deferred loan fees and costs	1,516,668		1,536,463
Interest receivable on loans	4,261		5,035
Total recorded investment in loans	$	1,520,929	$	1,541,498

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. As of September 30, 2021 and December 31, 2020, the Corporation had outstanding PPP loan balances of $68.1 million and $150.9 million, respectively, which were included in commercial and industrial loans in the table above. These loans require no allowance for loan losses as of September 30, 2021 since they are government guaranteed loans.

The following tables present the activity in the allowance for loan losses by portfolio segment for the three month periods ended September 30, 2021 and 2020 (in thousands):

	Three Months Ended September 30, 2021
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	3,628	$	12,963	$	1,791	$	2,294	$	20,676
Charge-offs	—		(44)		—		(190)		(234)
Recoveries	8		1		—		133		142
Net recoveries (charge-offs)	8		(43)		—		(57)		(92)
Provision	(15)		361		80		(70)		356
Ending balance	$	3,621	$	13,281	$	1,871	$	2,167	$	20,940

	Three Months Ended September 30, 2020
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	8,327	$	10,549	$	1,891	$	3,363	$	24,130
Charge-offs	(68)		—		(42)		(216)		(326)
Recoveries	18		2		—		87		107
Net recoveries (charge-offs)	(50)		2		(42)		(129)		(219)
Provision	180		361		232		(94)		679
Ending balance	$	8,457	$	10,912	$	2,081	$	3,140	$	24,590

The following tables present the activity in the allowance for loan losses by portfolio segment for the nine month periods ended September 30, 2021 and 2020 (in thousands):

	Nine Months Ended September 30, 2021
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	4,493	$	11,496	$	2,079	$	2,856	$	20,924
Charge-offs	(25)		(44)		(71)		(510)		(650)
Recoveries	283		2		10		424		719
Net recoveries (charge-offs)	258		(42)		(61)		(86)		69
Provision	(1,130)		1,827		(147)		(603)		(53)
Ending balance	$	3,621	$	13,281	$	1,871	$	2,167	$	20,940

	Nine Months Ended September 30, 2020
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	10,227	$	8,869	$	1,252	$	3,130	$	23,478
Charge-offs	(134)		(2,143)		(56)		(915)		(3,248)
Recoveries	27		2		49		293		371
Net recoveries (charge-offs)	(107)		(2,141)		(7)		(622)		(2,877)
Provision	(1,663)		4,184		836		632		3,989
Ending balance	$	8,457	$	10,912	$	2,081	$	3,140	$	24,590

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021
Allowance for loan losses:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,525	$	1,800	$	—	$	73	$	3,398
Collectively evaluated for impairment	2,096		11,481		1,871		2,094		17,542
Total ending allowance balance	$	3,621	$	13,281	$	1,871	$	2,167	$	20,940

	December 31, 2020
Allowance for loan losses:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,401	$	74	$	—	$	52	$	1,527
Collectively evaluated for impairment	3,092		11,422		2,079		2,804		19,397
Total ending allowance balance	$	4,493	$	11,496	$	2,079	$	2,856	$	20,924

	September 30, 2021
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually evaluated for impairment	$	2,582	$	8,356	$	946	$	333	$	12,217
Loans collectively evaluated for  impairment	269,290		783,120		253,695		202,607		1,508,712
Total ending loans balance	$	271,872	$	791,476	$	254,641	$	202,940	$	1,520,929

	December 31, 2020
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually evaluated for impairment	$	3,400	$	5,117	$	1,271	$	801	$	10,589
Loans collectively evaluated for  impairment	366,852		714,028		238,742		211,287		1,530,909
Total ending loans balance	$	370,252	$	719,145	$	240,013	$	212,088	$	1,541,498

The following table presents loans individually evaluated for impairment recognized by class of loans as of September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021						December 31, 2020
With no related allowance recorded:	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
Commercial and agricultural:
Commercial and industrial	$	995	$	970	$	—	$	1,960	$	1,963	$	—
Commercial mortgages:
Construction	143		143		—		188		189		—
Commercial mortgages, other	7,312		4,651		—		6,814		4,760		—
Residential mortgages	960		946		—		1,283		1,271		—
Consumer loans:
Home equity lines and loans	195		179		—		645		631		—
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	5,487		1,612		1,525		5,228		1,437		1,401
Commercial mortgages:
Commercial mortgages, other	3,554		3,562		1,800		258		168		74
Consumer loans:
Home equity lines and loans	154		154		73		170		170		52
Total	$	18,800	$	12,217	$	3,398	$	16,546	$	10,589	$	1,527

The following table presents the average recorded investment and interest income of loans individually evaluated for impairment recognized by class of loans for the three and nine month periods ended September 30, 2021 and 2020 (in thousands):

	Three Months Ended   September 30, 2021				Three Months Ended   September 30, 2020				Nine Months Ended   September 30, 2021				Nine Months Ended   September 30, 2020
With no related allowance recorded:	Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)
Commercial and agricultural:
Commercial and industrial	$	1,378	$	3	$	1,239	$	2	$	1,645	$	3	$	679	$	2
Commercial mortgages:
Construction	151		1		213		2		167		5		226		6
Commercial mortgages, other	4,665		8		4,515		—		4,743		23		3,938		—
Residential mortgages	950		12		1,224		7		1,034		29		873		17
Consumer loans:
Home equity lines & loans	184		2		650		2		299		5		399		5
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,545		4		5,804		2		1,511		6		5,867		4
Commercial mortgages:
Commercial mortgages, other	3,644		25		2,229		8		1,905		25		3,645		16
Consumer loans:
Home equity lines and loans	155		—		175		—		160		—		88		—
Total	$	12,672	$	55	$	16,049	$	23	$	11,464	$	96	$	15,715	$	50

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

The following table presents the recorded investment in non-accrual and loans past due 90 days or more and still accruing by class of loans as of September 30, 2021 and December 31, 2020 (in thousands):

	Non-accrual				Loans Past Due 90 Days or More and Still Accruing
	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Commercial and agricultural:
Commercial and industrial	$	2,080	$	2,167	$	4	$	2
Commercial mortgages:
Construction	36		55		—		—
Commercial mortgages, other	4,212		4,415		—		—
Residential mortgages	845		1,632		—		—
Consumer loans:
Home equity lines and loans	819		1,159		—		—
Indirect consumer loans	367		519		—		—
Direct consumer loans	14		5		—		—
Total	$	8,373	$	9,952	$	4	$	2

The following tables present the aging of the recorded investment in loans as of September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021
	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	$	1,110	$	1,375	$	45	$	2,530	$	268,921	$	271,451
Agricultural	—		—		—		—		421		421
Commercial mortgages:
Construction	—		—		—		—		67,644		67,644
Commercial mortgages, other	2,056		2,615		217		4,888		718,944		723,832
Residential mortgages	1,226		131		436		1,793		252,848		254,641
Consumer loans:
Home equity lines and loans	115		161		542		818		71,835		72,653
Indirect consumer loans	764		83		161		1,008		119,037		120,045
Direct consumer loans	13		7		8		28		10,214		10,242
Total	$	5,284	$	4,372	$	1,409	$	11,065	$	1,509,864	$	1,520,929

	December 31, 2020
	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	$	520	$	14	$	30	$	564	$	369,404	$	369,968
Agricultural	—		—		—		—		284		284
Commercial mortgages:
Construction	—		—		—		—		62,164		62,164
Commercial mortgages, other	1,438		3,696		308		5,442		651,539		656,981
Residential mortgages	817		406		461		1,684		238,329		240,013
Consumer loans:
Home equity lines and loans	521		41		474		1,036		77,725		78,761
Indirect consumer loans	1,268		198		252		1,718		119,135		120,853
Direct consumer loans	34		2		—		36		12,438		12,474
Total	$	4,598	$	4,357	$	1,525	$	10,480	$	1,531,018	$	1,541,498

Troubled Debt Restructurings:

A modification of a loan may result in classification as a TDR when a borrower is experiencing financial difficulty and the modification constitutes a concession.  The Corporation offers various types of modifications which may involve a change in the schedule of payments, a reduction in the interest rate, an extension of the maturity date, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, requesting additional collateral, releasing collateral for consideration, substituting or adding a new borrower or guarantor, a permanent reduction of the recorded investment in the loan or a permanent reduction of the interest on the loan. Under Section 4013 of the CARES Act, loans less than 30 days past due as of December 31, 2019 will be considered current for COVID-19 related modifications and therefore will not be treated as TDRs. At its highest point as of May 31, 2020, in conformance with Section 4013 of the CARES Act, total loan forbearances represented 15.77% of the Corporation's total loan portfolio, or $242.5 million. As of September 30, 2021, 11 loans totaling $3.0 million remained in modified status, representing 0.20% of the Corporation's total loan portfolio, of which 5 loans totaling $2.9 million had been modified more than once.

As of September 30, 2021 and December 31, 2020, the Corporation has a recorded investment in TDRs of $10.8 million and $6.7 million, respectively. There were specific reserves of $2.2 million and $0.4 million allocated for TDRs at September 30, 2021 and December 31, 2020, respectively. As of September 30, 2021, TDRs totaling $5.7 million were accruing interest under the modified terms and $5.1 million were on non-accrual status. As of December 31, 2020, TDRs totaling $2.8 million were accruing interest under the modified terms and $3.9 million were on non-accrual status. The Corporation has committed no additional amounts as of both September 30, 2021 and December 31, 2020, to customers with outstanding loans that are classified as TDRs.

During the three months ended September 30, 2021, the terms and conditions of two commercial and industrial loans were modified as TDRs. The modification of the terms of both of these loans included a postponement or reduction of the scheduled amortized payments for greater than a three month period. During the three month period ended September 30, 2020, the terms of certain loans were modified as TDRs. During the three months ended September 30, 2020, the modification of terms of one residential mortgage loan included the postponement of scheduled amortized payments for a period greater than three-months. Additionally, two commercial and industrial loans were modified with the maturity date extended on both loans and one with an extension at a stated rate lower than the current market rate for new debt with similar risk.

In addition to the modifications noted above, during the nine months ended September 30, 2021 the terms and conditions of two commercial and industrial loans and two commercial mortgage loans were modified as TDRs. The modification of the terms of all of these loans included a postponement or reduction of the scheduled amortized payments for greater than a three month period.

In addition to the modifications noted above, during the nine month period ended September 30, 2020 modifications included two commercial and industrial loans where deferral of payments were granted and both loans were risk rated Substandard while one loan was in non-accrual status prior to the modification. The modifications of four commercial mortgage loans included the deferral of payments with three of the the loans risk rated Substandard and in non-accrual status, three of the borrowers were over one year past due in real estate taxes and two of the loans were over 30 days past due in payments. The modifications of three residential mortgages included the deferral of payments while all three were in non-accrual status prior to the modifications, two were risk rated Substandard and one was over thirty days past due in payments. The modifications of three home equity lines and loans included the deferral of payments while all three loans were risk rated Substandard and in non-accrual status prior to the modifications.

The following table presents loans by class modified as TDRs that occurred during the three month period ended September 30, 2021 and September 30, 2020 (dollars in thousands):

September 30, 2021	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial and agricultural:
Commercial and industrial	2	$	502	$	502
Total	2	$	502	$	502

September 30, 2020	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial and industrial	2	$	1,138	$	1,138
Residential mortgages	1	320		320
Total	3	$	1,458	$	1,458

The TDRs described above increased the allowance for loan losses by $0.2 million and resulted in no charge-offs during the three month period ended September 30, 2021. The TDRs described above did not increase the allowance for loan losses and resulted in no charge-offs during the three month period ended September 30, 2020.

The following table presents loans by class modified as TDRs that occurred during the nine month period ended September 30, 2021 and September 30, 2020 (dollars in thousands):

September 30, 2021	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial and agricultural:
Commercial and industrial	2	$	502	$	502
Agricultural
Commercial mortgages:
Commercial mortgages, other	4	$	6,094	$	6,094
Total	6	$	6,596	$	6,596

September 30, 2020	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial and agricultural:
Commercial and industrial	4	$	2,068	$	2,068
Agricultural
Commercial mortgages:
Commercial mortgages, other	4	1,297		1,297
Residential mortgages	4	997		997
Consumer loans:
Home equity lines and loans	3	738		738
Total	15	$	5,100	$	5,100

The TDRs described above increased the allowance for loan losses by $1.9 million and resulted in no charge-offs during the nine month period ended September 30, 2021. The TDRs described above increased the allowance for loan losses by $0.1 million and resulted in no charge-offs during the nine month period ended September 30, 2020.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. There were no payment defaults on any loans previously modified as TDRs within twelve months following the modification during the three and nine month periods ended September 30, 2021 and 2020.

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 the retail loans, which include residential mortgages, indirect and direct consumer loans, home equity lines and loans, and credit cards, once a loan is properly approved and closed, the Corporation evaluates credit quality based upon loan repayment.

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, 2021 and December 31, 2020, the risk category of the recorded investment of loans by class of loans is as follows (in thousands):

	September 30, 2021
	Not Rated		Pass		Special Mention		Substandard		Doubtful		Total
Commercial and agricultural:
Commercial and industrial	$	—	$	264,526	$	2,565	$	3,166	$	1,194	$	271,451
Agricultural	—		421		—		—		—		421
Commercial mortgages:
Construction	—		67,607		—		37		—		67,644
Commercial mortgages	—		670,350		33,937		18,422		1,123		723,832
Residential mortgages	253,796		—		—		845		—		254,641
Consumer loans:
Home equity lines and loans	71,834		—		—		819		—		72,653
Indirect consumer loans	119,678		—		—		367		—		120,045
Direct consumer loans	10,228		—		—		14		—		10,242
Total	$	455,536	$	1,002,904	$	36,502	$	23,670	$	2,317	$	1,520,929

	December 31, 2020
	Not Rated		Pass		Special Mention		Substandard		Doubtful		Total
Commercial and agricultural:
Commercial and industrial	$	—	$	360,500	$	2,999	$	5,092	$	1,377	$	369,968
Agricultural	—		284		—		—		—		284
Commercial mortgages:
Construction	—		59,885		—		2,279		—		62,164
Commercial mortgages	—		616,090		23,631		16,128		1,132		656,981
Residential mortgages	238,381		—		—		1,632		—		240,013
Consumer loans:
Home equity lines and loans	77,602		—		—		1,159		—		78,761
Indirect consumer loans	120,334		—		—		519		—		120,853
Direct consumer loans	12,470		—		—		4		—		12,474
Total	$	448,787	$	1,036,759	$	26,630	$	26,813	$	2,509	$	1,541,498

The Corporation considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential and consumer loan classes, the Corporation also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following tables present the recorded investment in residential and consumer loans based on payment activity as of September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021
			Consumer Loans
	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	253,796	$	71,834	$	119,678	$	10,228
Non-Performing	845		819		367		14
	$	254,641	$	72,653	$	120,045	$	10,242

	December 31, 2020
			Consumer Loans
	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	238,381	$	77,602	$	120,334	$	12,470
Non-Performing	1,632		1,159		519		4
	$	240,013	$	78,761	$	120,853	$	12,474

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FAIR VALUE

9 Months Ended

Sep. 30, 2021

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).

Impaired Loans:  At the time a loan is considered impaired, it is valued at the lower of cost or fair value.  Impaired loans carried at fair value have been partially charged-off or receive specific allocations as part of the allowance for loan 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 evaluated on a quarterly basis for additional impairment and adjusted accordingly.

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

Appraisals for both collateral dependent impaired 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, 2021 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	$	40,337	$	40,337	$	—	$	—
Mortgage-backed securities, residential	586,126		—		586,126		—
Obligations of states and political subdivisions	42,352		—		42,352		—
Corporate bonds and notes	17,061		—		17,061		—
SBA loan pools	75,655		—		75,655		—
Total available for sale securities	$	761,531	$	40,337	$	721,194	$	—
Equity investments, at fair value	$	2,290	$	2,290	$	—	$	—
Derivative assets	9,948		—		9,948		—
Financial Liabilities:
Derivative liabilities	$	10,310	$	—	$	10,310	$	—

There were no transfers between Level 1 and Level 2 during the three and nine month periods ended September 30, 2021.

			Fair Value Measurement at December 31, 2020 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)
Mortgage-backed securities, residential	$	467,866	$	—	$	467,866	$	—
Obligations of states and political subdivisions	43,405		—		43,405		—
Corporate bonds and notes	9,035		—		9,035		—
SBA loan pools	34,305		—		34,305		—
Total available for sale securities	$	554,611	$	—	$	554,611	$	—
Equity investments, at fair value	$	1,880	$	1,880	$	—	$	—
Derivative assets	14,345		—		14,345		—
Financial Liabilities:
Derivative liabilities	$	14,702	$	—	$	14,702	$	—

There were no transfers between Level 1 and Level 2 during the three and nine month periods ended September 30, 2020.

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

			Fair Value Measurement at September 30, 2021 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)
Other real estate owned:
Residential mortgages	$	124	$	—	$	—	$	124
Consumer loans:
Home equity lines and loans	47		—		—		47
Total other real estate owned, net	$	171	$	—	$	—	$	171

			Fair Value Measurement at December 31, 2020 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)
Other real estate owned:
Commercial mortgages:
Commercial mortgages	$	111	$	—	$	—	$	111
Residential mortgages	126		—		—		126
Total other real estate owned, net	$	237	$	—	$	—	$	237

The following tables present information related to Level 3 non-recurring fair value measurement at September 30, 2021 and December 31, 2020 (in thousands):

Description	Fair Value at September 30, 2021		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at September 30, 2021
Impaired loans:
OREO:
Commercial mortgages:
Residential mortgages	$	124	Sales comparison	Discount to appraised value	20.80% - 20.80% [20.80%]
Consumer loans:
Home equity lines and loans	47		Sales comparison	Discount to appraised value	10.00% - 10.00% [10.00%]
	$	171

Description	Fair Value at December 31, 2020		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at December 31, 2020
Impaired loans:
OREO:
Commercial mortgages:
Commercial mortgages	$	111	Sales comparison	Discount to appraised value	20.80% - 20.80% [20.80%]
Residential mortgages	126		Sales comparison	Discount to appraised value	20.80% - 20.80% [20.80%]
	$	237

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values of other financial instruments, at September 30, 2021 and December 31, 2020, are as follows (in thousands):

	September 30, 2021
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	$	28,859	$	28,859	$	—	$	—	$	28,859
Interest-earning deposits in other financial institutions	32,838		32,838		—		—		32,838
Equity investments	2,933		2,933		—		—		2,933
Securities available for sale	761,531		40,337		721,194		—		761,531
Securities held to maturity	3,183		—		1,894		1,300		3,194
FHLBNY and FRBNY stock	3,562		—		—		—		N/A
Loans, net and loans held for sale	1,495,952		—		—		1,483,417		1,483,417
Accrued interest receivable	6,040		73		1,706		4,261		6,040
Derivative Assets	9,948		—		9,948		—		9,948
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,943,403	$	1,943,403	$	—	$	—	$	1,943,403
Time deposits	230,419		—		232,107		—		232,107
Accrued interest payable	289		10		279		—		289
Derivative Liabilities	10,310		—		10,310		—		10,310

(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, 2020
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	$	29,467	$	29,467	$	—	$	—	$	29,467
Interest-earning deposits in other financial institutions	79,071		79,071		—		—		79,071
Equity investments	2,542		2,542		—		—		2,542
Securities available for sale	554,611		—		554,611		—		554,611
Securities held to maturity	2,469		—		2,175		326		2,501
FHLBNY and FRBNY stock	3,150		—		—		—		N/A
Loans, net and loans held for sale	1,515,709		—		—		1,514,318		1,514,318
Accrued interest receivable	6,271		—		1,356		4,915		6,271
Derivative Asset	14,345		—		14,345		—		14,345
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,752,043	$	1,752,043	$	—	$	—	$	1,752,043
Time deposits	285,731		—		288,398		—		288,398
Accrued interest payable	262		11		251		—		262
Derivative Liabilities	14,702		—		14,702		—		14,702

(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, 2021

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, 2021, the weighted average remaining lease term was 9.40 years with a weighted average discount rate of 3.33%. Rent expense was $0.2 million for the three months ended September 30, 2021. Rent expense was $0.7 million for the nine months ended September 30, 2021. 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, 2021 and December 31, 2020 consist of the following (in thousands):

	September 30, 2021		December 31, 2020
Operating lease right-of-use asset	$	7,145	$	8,001
Less: accumulated amortization	(559)		(705)
Change in lease agreements	498		(151)
Operating lease right-of-use-assets, net	$	7,084	$	7,145

The following is a schedule by year of the undiscounted cash flows of the operating lease liabilities, excluding CAM charges, as of September 30, 2021 (in thousands):

Year	Amount
2021	$	241
2022	970
2023	990
2024	923
2025	841
2026 and thereafter	4,501
Total minimum lease payments	8,466
Less: amount representing interest	(1,239)
Present value of net minimum lease payments	$	7,227

As of September 30, 2021, the Corporation had one operating lease that was signed, but had not yet commenced. The expected commencement date is October, 2021.

Finance Leases

The Corporation leases certain buildings under finance leases. The lease arrangements require monthly payments through 2036. As of September 30, 2021, the weighted average remaining lease term was 11.36 years with a weighted average discount rate of 3.37%. The Corporation has included these leases in premises and equipment as of September 30, 2021 and December 31, 2020 as follows (in thousands):

	September 30, 2021		December 31, 2020
Buildings	$	5,572	$	5,572
Less: accumulated depreciation	(2,125)		(1,875)
Net book value	$	3,447	$	3,697

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, 2021 (in thousands):

Year	Amount
2021	$	98
2022	391
2023	391
2024	391
2025	409
2026 and thereafter	2,840
Total minimum lease payments	4,520
Less: amount representing interest	(861)
Present value of net minimum lease payments	$	3,659

As of September 30, 2021, the Corporation had no finance leases that were signed, but had not yet commenced.

Related Party Transactions

The Bank leases its branch located at 1365 New Scotland Road, Slingerlands, New York, under a lease agreement through July, 2024 from a member of the Corporation's Board of Directors with monthly rent and CAM related expenses totaling $4 thousand per month. Rent paid to this Board member totaled $13 thousand for each of the three month periods ended September 30, 2021 and 2020, respectively. Rent and CAM related expenses paid to this Board of Directors member totaled $37 thousand and $40 thousand for the nine month periods ended September 30, 2021 and 2020, respectively.

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 $8 thousand per month. Rent and CAM related expenses paid to this Board member totaled $25 thousand and $26 thousand for the three month periods ended September 30, 2021 and 2020, respectively. Rent and CAM related expenses paid to this Board of Directors member totaled $76 thousand and $80 thousand for the nine month periods ended September 30, 2021 and 2020, 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, 2021, the weighted average remaining lease term was 9.40 years with a weighted average discount rate of 3.33%. Rent expense was $0.2 million for the three months ended September 30, 2021. Rent expense was $0.7 million for the nine months ended September 30, 2021. 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, 2021 and December 31, 2020 consist of the following (in thousands):

	September 30, 2021		December 31, 2020
Operating lease right-of-use asset	$	7,145	$	8,001
Less: accumulated amortization	(559)		(705)
Change in lease agreements	498		(151)
Operating lease right-of-use-assets, net	$	7,084	$	7,145

The following is a schedule by year of the undiscounted cash flows of the operating lease liabilities, excluding CAM charges, as of September 30, 2021 (in thousands):

Year	Amount
2021	$	241
2022	970
2023	990
2024	923
2025	841
2026 and thereafter	4,501
Total minimum lease payments	8,466
Less: amount representing interest	(1,239)
Present value of net minimum lease payments	$	7,227

As of September 30, 2021, the Corporation had one operating lease that was signed, but had not yet commenced. The expected commencement date is October, 2021.

Finance Leases

The Corporation leases certain buildings under finance leases. The lease arrangements require monthly payments through 2036. As of September 30, 2021, the weighted average remaining lease term was 11.36 years with a weighted average discount rate of 3.37%. The Corporation has included these leases in premises and equipment as of September 30, 2021 and December 31, 2020 as follows (in thousands):

	September 30, 2021		December 31, 2020
Buildings	$	5,572	$	5,572
Less: accumulated depreciation	(2,125)		(1,875)
Net book value	$	3,447	$	3,697

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, 2021 (in thousands):

Year	Amount
2021	$	98
2022	391
2023	391
2024	391
2025	409
2026 and thereafter	2,840
Total minimum lease payments	4,520
Less: amount representing interest	(861)
Present value of net minimum lease payments	$	3,659

As of September 30, 2021, the Corporation had no finance leases that were signed, but had not yet commenced.

Related Party Transactions

The Bank leases its branch located at 1365 New Scotland Road, Slingerlands, New York, under a lease agreement through July, 2024 from a member of the Corporation's Board of Directors with monthly rent and CAM related expenses totaling $4 thousand per month. Rent paid to this Board member totaled $13 thousand for each of the three month periods ended September 30, 2021 and 2020, respectively. Rent and CAM related expenses paid to this Board of Directors member totaled $37 thousand and $40 thousand for the nine month periods ended September 30, 2021 and 2020, respectively.

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 $8 thousand per month. Rent and CAM related expenses paid to this Board member totaled $25 thousand and $26 thousand for the three month periods ended September 30, 2021 and 2020, respectively. Rent and CAM related expenses paid to this Board of Directors member totaled $76 thousand and $80 thousand for the nine month periods ended September 30, 2021 and 2020, respectively.

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GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2021

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, 2021 and 2020 were as follows (in thousands):

	2021		2020
Beginning of year	$	21,824	$	21,824
Acquired goodwill	—		—
Ending balance September 30,	$	21,824	$	21,824

Acquired intangible assets were as follows at September 30, 2021 and December 31, 2020 (in thousands):

	At September 30, 2021				At December 31, 2020
	Balance Acquired		Accumulated Amortization		Balance Acquired		Accumulated Amortization
Core deposit intangibles	$	5,975	$	5,975	$	5,975	$	5,962
Other customer relationship intangibles	5,633		5,607		5,633		5,388
Total	$	11,608	$	11,582	$	11,608	$	11,350

Aggregate amortization expense was $42 thousand and $120 thousand for the three month periods ended September 30, 2021 and 2020, respectively. Aggregate amortization expense was $0.2 million and $0.4 millions for the nine month periods ended September 30, 2021 and 2020, respectively.

The remaining estimated aggregate amortization expense at September 30, 2021 is listed below (in thousands):

Year	Estimated Expense
2021	$	26
Total	$	26

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. The test for impairment of goodwill on the identified reporting unit is considered a critical accounting estimate because it requires judgement on the part of management and the use of estimates relate to the growth assumptions and market multiples used in the valuation model. 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, 2021

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.

The following table lists the contractual amounts of financial instruments with off-balance sheet risk at September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021				December 31, 2020
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	21,334	$	49,839	$	28,459	$	39,056
Unused lines of credit	2,137		274,554		1,300		268,075
Standby letters of credit	—		14,878		—		16,094

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, 2021, 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, 2021

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, 2021	$	2,867	$	(6,725)	$	(3,858)
Other comprehensive income before reclassification	(3,209)		—		(3,209)
Amounts reclassified from accumulated other comprehensive income	—		1		1
Net current period other comprehensive income (loss)	(3,209)		1		(3,208)
Balance at September 30, 2021	$	(342)	$	(6,724)	$	(7,066)

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at July 1, 2020	$	9,273	$	(7,131)	2,142
Other comprehensive income before reclassification	(516)		—		(516)
Amounts reclassified from accumulated other comprehensive income	—		16		16
Net current period other comprehensive income (loss)	(516)		16		(500)
Balance at September 30, 2020	$	8,757	$	(7,115)	$	1,642

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at January 1, 2021	$	9,127	$	(6,726)	$	2,401
Other comprehensive income before reclassification	(9,469)		—		(9,469)
Amounts reclassified from accumulated other comprehensive income	—		2		2
Net current period other comprehensive income	(9,469)		2		(9,467)
Balance at September 30, 2021	$	(342)	$	(6,724)	$	(7,066)

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at January 1, 2020	$	1,368	$	(7,167)	(5,799)
Other comprehensive income before reclassification	7,389		—		7,389
Amounts reclassified from accumulated other comprehensive income	—		52		52
Net current period other comprehensive income	7,389		52		7,441
Balance at September 30, 2020	$	8,757	$	(7,115)	$	1,642

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
	2021		2020
Amortization of defined pension plan and other benefit plan items:
Prior service costs (a)	$	(55)	$	(55)	Other components of net periodic pension and postretirement benefits
Actuarial losses (a)	57		77		Other components of net periodic pension and postretirement benefits
Tax effect	(1)		(6)		Income tax expense
Net of tax	1		16
Total reclassification for the period, net of tax	$	1	$	16

(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
	2021		2020
Amortization of defined pension plan and other benefit plan items:
Prior service costs (a)	$	(165)	$	(165)	Other components of net periodic pension and postretirement benefits
Actuarial losses (a)	169		231		Other components of net periodic pension and postretirement benefits
Tax effect	(2)		(14)		Income tax expense
Net of tax	2		52
Total reclassification for the period, net of tax	$	2	$	52

(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, 2021

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, 2021 and 2020 (in thousands). Items outside the scope of ASC 606 are noted as such.

	Three Months Ended September 30, 2021
Revenue by Operating Segment:	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Non-interest income
Service charges on deposit accounts
Overdraft fees	$	623	$	—	$	—	$	623
Other	233		—		—		233
Interchange revenue from debit card transactions	1,237		—		—		1,237
WMG fee income	—		2,765		—		2,765
CFS fee and commission income	—		—		346		346
Net gains (losses) on sales of OREO	—		—		—		—
Net gains on sales of loans(a)	242		—		—		242
Loan servicing fees(a)	38		—		—		38
Changes in fair value of equity investments(a)	(13)		—		28		15
Income from bank-owned life insurance(a)	13		—		—		13
Other(a)	464		—		(6)		458
Total non-interest income (loss)	$	2,837	$	2,765	$	368	$	5,970

(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, 2020
Revenue by Operating Segment:	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Non-interest income
Service charges on deposit accounts
Overdraft fees	$	668	$	—	$	—	$	668
Other	72		—		—		72
Interchange revenue from debit card transactions	1,082		—		—		1,082
WMG fee income	—		2,416		—		2,416
CFS fee and commission income	—		—		172		172
Net gains (losses) on sales of OREO	6		—		—		6
Net gains on sales of loans(a)	553		—		—		553
Loan servicing fees(a)	32		—		—		32
Changes in fair value of equity investments(a)	71		—		(14)		57
Income from bank-owned life insurance(a)	14		—		—		14
Other(a)	320		—		(53)		267
Total non-interest income	$	2,818	$	2,416	$	105	$	5,339

(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, 2021
Revenue by Operating Segment:	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Non-interest income
Service charges on deposit accounts
Overdraft fees	$	1,561	$	—	$	—	$	1,561
Other	744		—		—		744
Interchange revenue from debit card transactions	3,622		—		—		3,622
WMG fee income	—		8,246		—		8,246
CFS fee and commission income	—		—		796		796
Net gains (losses) on sales of OREO	(18)		—		—		(18)
Net gains on sales of loans(a)	884		—		—		884
Loan servicing fees(a)	108		—		—		108
Changes in fair value of equity investments(a)	117		—		86		203
Income from bank-owned life insurance(a)	39		—		—		39
Other(a)	1,930		—		(32)		1,898
Total non-interest income	$	8,987	$	8,246	$	850	$	18,083

(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, 2020
Revenue by Operating Segment:	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Non-interest income
Service charges on deposit accounts
Overdraft fees	$	1,894	$	—	$	—	$	1,894
Other	400		—		—		400
Interchange revenue from debit card transactions	2,989		—		—		2,989
WMG fee income	—		6,968		—		6,968
CFS fee and commission income	—		—		502		502
Net gains on sales of OREO	(71)		—		—		(71)
Net gains on sales of loans(a)	916		—		—		916
Loan servicing fees(a)	88		—		—		88
Change in fair value of equity securities(a)	49		—		(82)		(33)
Income from bank-owned life insurance(a)	147		—		—		147
Other(a)	1,383		—		(33)		1,350
Total non-interest income	$	7,795	$	6,968	$	387	$	15,150

(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 the transaction processing services provided to 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, 2021

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,
	2021		2020		2021		2020
Qualified Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	271		322		813		966
Expected return on plan assets	(673)		(610)		(2,019)		(1,830)
Amortization of unrecognized transition obligation	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	38		49		113		147
Net periodic pension benefit	$	(364)	$	(239)	$	(1,093)	$	(717)
Supplemental Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	8		10		24		30
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	5		3		15		9
Net periodic supplemental pension cost	$	13	$	13	$	39	$	39
Postretirement Plan, Medical and Life
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	1		2		5		6
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	(55)		(55)		(165)		(165)
Amortization of unrecognized net loss	14		25		41		75
Net periodic postretirement, medical and life benefit	$	(40)	$	(28)	$	(119)	$	(84)

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SEGMENT REPORTING

9 Months Ended

Sep. 30, 2021

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 2020 Annual Report on Form 10-K, which was filed with the SEC on March 24, 2021. 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 column below includes amounts to eliminate transactions between segments (in thousands).

	Three months ended September 30, 2021
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	17,627	$	—	$	6	$	17,633
Interest expense	801		—		—		801
Net interest income	16,826		—		6		16,832
Provision for loan losses	356		—		—		356
Net interest income after provision for loan losses	16,470		—		6		16,476
Other non-interest income	2,837		2,765		368		5,970
Other non-interest expenses	12,124		1,651		325		14,100
Income (loss) before income tax expense (benefit)	7,183		1,114		49		8,346
Income tax expense (benefit)	1,534		156		10		1,700
Segment net income (loss)	$	5,649	$	958	$	39	$	6,646

	Three months ended September 30, 2020
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	16,701	$	—	$	13	$	16,714
Interest expense	845		—		—		845
Net interest income	15,856		—		13		15,869
Provision for loan losses	679		—		—		679
Net interest income after provision for loan losses	15,177		—		13		15,190
Other non-interest income	2,818		2,416		105		5,339
Other non-interest expenses	11,528		1,565		269		13,362
Income (loss) before income tax expense (benefit)	6,467		851		(151)		7,167
Income tax expense (benefit)	1,271		218		(33)		1,456
Segment net income (loss)	$	5,196	$	633	$	(118)	$	5,711

	Nine months ended September 30, 2021
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	51,298	$	—	$	20	$	51,318
Interest expense	2,621		—		—		2,621
Net interest income	48,677		—		20		48,697
Provision for loan losses	(53)		—		—		(53)
Net interest income after provision for loan losses	48,730		—		20		48,750
Other non-interest income	8,987		8,246		850		18,083
Other non-interest expenses	35,401		4,921		982		41,304
Income (loss) before income tax expense (benefit)	22,316		3,325		(112)		25,529
Income tax expense (benefit)	4,865		735		(42)		5,558
Segment net income (loss)	$	17,451	$	2,590	$	(70)	$	19,971
Segment assets	$	2,408,318	$	3,216	$	6,122	$	2,417,656

	Nine months ended September 30, 2020
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	49,527	$	—	$	43	$	49,570
Interest expense	3,048		—		—		$	3,048
Net interest income	46,479		—		43		46,522
Provision for loan losses	3,989		—		—		3,989
Net interest income after provision for loan losses	42,490		—		43		42,533
Other non-interest income	7,795		6,968		387		15,150
Other non-interest expenses	34,690		4,814		835		40,339
Income (loss) before income tax expense (benefit)	15,595		2,154		(405)		17,344
Income tax expense (benefit)	2,884		552		(121)		3,315
Segment net income (loss)	$	12,711	$	1,602	$	(284)	$	14,029
Segment assets	$	2,156,025	$	3,153	$	5,836	$	2,165,014

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STOCK COMPENSATION

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

STOCK COMPENSATION

STOCK COMPENSATION

On June 8, 2021, the Corporation's shareholders approved the Corporation's 2021 Equity Incentive Plan (the "2021 Plan") which provides for the grant of stock-based awards to officers, employees and directors of the Corporation and the Bank. A Form S-8 Registration Statement was filed with the SEC on June 18, 2021 registering shares to be awarded under the 2021 Plan. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at issue date. No grants have been issued under the 2021 Plan during the nine months ended September 30, 2021. The Prior Plan shall remain in existence solely for the purpose of administering outstanding grants.

Board of Directors' Stock Compensation

During January 2021 and 2020, 9,291 and 7,923 shares, respectively, were re-issued from treasury to fund the stock component of directors' compensation for the respective prior year. An expense of $101 thousand and $67 thousand related to this compensation was recognized during the three month periods ended September 30, 2021 and 2020, respectively. An expense of $295 thousand and $232 thousand related to this compensation was recognized during the nine month periods ended September 30, 2021 and 2020, respectively. This expense is accrued as shares are earned.

Officers' and Employees' Restricted Stock

A summary of restricted stock activity for officers and employees for the three month period ended September 30, 2021 is presented below:

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at July 1, 2021	27,448	$	40.18
Granted	—
Vested	(261)	39.85
Forfeited or cancelled	—
Nonvested at September 30, 2021	27,187	$	40.23

A summary of restricted stock activity for officers and employees for the nine month period ended September 30, 2021 is presented below:

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at January 1, 2021	31,830	$	40.32
Granted	—
Vested	(4,643)	41.15
Forfeited or cancelled	—
Nonvested at September 30, 2021	27,187	$	40.23

As of September 30, 2021, there was $0.8 million of total unrecognized compensation cost related to nonvested shares granted under the Plan. The cost is expected to be recognized over a weighted-average period of 3.27 years. The total fair value of shares vested was $167 thousand and $159 thousand for the nine month periods ended September 30, 2021 and 2020, respectively.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2021

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 2020 Annual Report on Form 10-K for the year ended December 31, 2020. 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 and Adoption of New Accounting Standards

Recent Accounting Pronouncements

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 by replacing the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to form credit loss estimates. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2019, though entities may adopt the amendments earlier for fiscal years beginning after December 15, 2018. In November 2019, the FASB adopted changes to delay the effective date of ASU 2016-13 to January 2023 for certain entities, including certain Securities and Exchange Commission filers, public business entities, and private companies. As a smaller reporting company, the Corporation is eligible for the delay. The Corporation has established a committee to oversee the implementation of CECL and has selected a vendor to assist in the implementation process. The model chosen utilizes a loss driver analysis which includes reasonable and supportable forecasts to estimate future losses. This analysis includes different methods such as discounted cash flows, remaining life and vintage analysis, which are used depending on the nature of the portfolio segment. The Corporation is running its current incurred loss model and a CECL model concurrently. The Corporation is in the process of updating its policies and internal controls accordingly. The corporation expects to recognize a one-time cumulative-effect adjustment to our allowance for loan losses upon adoption of CECL, effective of January 1, 2023, consistent with regulatory expectations set forth in interagency guidance.

Section 4013 of the CARES Act gives entities temporary relief from the accounting and disclosure requirements for troubled debt restructurings (TDRs) under ASC 310-40, Receivables: Troubled Debt Restructurings by Creditors, in certain situations. Section 4013 of the CARES Act permits the suspension of ASC 310-40 for loan modifications that are made by financial institutions in response to the COVID-19 pandemic if (1) the borrower was not more than 30 days past due as of December 31, 2019, and (2) the modifications are related to arrangements that defer or delay the payment of principal or interest, or change the interest rate on the loan. All loan modifications made by the Corporation in response to the COVID-19 pandemic have been in accordance with Section 4013 of the CARES Act.

Adoption of New Accounting Standards

On January 1, 2020, the Corporation adopted ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The objective of the ASU is to simplify the manner in which an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Additionally, the ASU removes the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails such qualitative test, to perform Step 2 of the goodwill impairment test. The adoption of the ASU did not have a significant impact on the Corporation's consolidated financial statements.

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 units and directors’ stock compensation, 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 non-forfeitable 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).

Impaired Loans:  At the time a loan is considered impaired, it is valued at the lower of cost or fair value.  Impaired loans carried at fair value have been partially charged-off or receive specific allocations as part of the allowance for loan 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 evaluated on a quarterly basis for additional impairment and adjusted accordingly.

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

Appraisals for both collateral dependent impaired 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, 2021

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, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. Treasury notes and bonds	$	40,499	$	—	$	162	$	40,337
Mortgage-backed securities, residential	588,555		5,397		7,826		586,126
Obligations of states and political subdivisions	40,331		2,021		—		42,352
Corporate bonds and notes	17,000		116		55		17,061
SBA loan pools	75,612		398		355		75,655
Total	$	761,997	$	7,932	$	8,398	$	761,531

	December 31, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Mortgage-backed securities, residential	$	458,245	$	9,822	$	201	$	467,866
Obligations of states and political subdivisions	40,662		2,743		—		43,405
Corporate bonds and notes	9,000		47		12		9,035
SBA loan pools	34,455		42		192		34,305
Total	$	542,362	$	12,654	$	405	$	554,611

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, 2021
	Amortized Cost		Unrecognized Gains		Unrecognized Losses		Estimated Fair Value
Obligations of states and political subdivisions	$	1,300	$	—	$	—	$	1,300
Time deposits with other financial institutions	1,883		11		—		1,894
Total	$	3,183	$	11	$	—	$	3,194

	December 31, 2020
	Amortized Cost		Unrecognized Gains		Unrecognized Losses		Estimated Fair Value
Obligations of states and political subdivisions	$	326	$	—	$	—	$	326
Time deposits with other financial institutions	2,143		32		—		2,175
Total	$	2,469	$	32	$	—	$	2,501

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

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, 2021
	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	686	$	689	$	1,523	$	1,532
After one, but within five years	75,962		77,278		860		862
After five, but within ten years	20,712		21,285		800		800
After ten years	470		498		—		—
	97,830		99,750		3,183		3,194
Mortgage-backed securities, residential	588,555		586,126		—		—
SBA loan pools	75,612		75,655		—		—
Total	$	761,997	$	761,531	$	3,183	$	3,194

Schedule of Investment Securities Available for Sale in an Unrealized Loss Position

The following tables summarize the investment securities available for sale with unrealized losses at September 30, 2021 and December 31, 2020 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, 2021	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury notes and bonds	$	24,819	$	162	$	—	$	—	$	24,819	$	162
Mortgage-backed securities, residential	383,380		7,707		4,146		119		387,526		7,826
Corporate bonds and notes	2,979		21		2,966		34		5,945		55
SBA loan pools	39,140		283		6,273		72		45,413		355
Total temporarily impaired securities	$	450,318	$	8,173	$	13,385	$	225	$	463,703	$	8,398

	Less than 12 months				12 months or longer				Total
December 31, 2020	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-backed securities, residential	$	70,037	$	200	$	970	$	1	$	71,007	$	201
Corporate bonds and notes	2,988		12		—		—		2,988		12
SBA loan pools	15,245		156		3,636		36		18,881		192
Total temporarily impaired securities	$	88,270	$	368	$	4,606	$	37	$	92,876	$	405

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Tables)

9 Months Ended

Sep. 30, 2021

Loans and Leases Receivable Disclosure [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, 2021		December 31, 2020
Commercial and agricultural:
Commercial and industrial	$	270,656	$	368,663
Agricultural	419		283
Commercial mortgages:
Construction	67,445		61,945
Commercial mortgages, other	721,709		654,663
Residential mortgages	253,991		239,401
Consumer loans:
Home equity lines and loans	72,471		78,547
Indirect consumer loans	119,772		120,538
Direct consumer loans	10,205		12,423
Total loans, net of deferred loan fees and costs	1,516,668		1,536,463
Interest receivable on loans	4,261		5,035
Total recorded investment in loans	$	1,520,929	$	1,541,498

Schedule of Allowance for Loan Losses by Portfolio Segment

The following tables present the activity in the allowance for loan losses by portfolio segment for the three month periods ended September 30, 2021 and 2020 (in thousands):

	Three Months Ended September 30, 2021
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	3,628	$	12,963	$	1,791	$	2,294	$	20,676
Charge-offs	—		(44)		—		(190)		(234)
Recoveries	8		1		—		133		142
Net recoveries (charge-offs)	8		(43)		—		(57)		(92)
Provision	(15)		361		80		(70)		356
Ending balance	$	3,621	$	13,281	$	1,871	$	2,167	$	20,940

	Three Months Ended September 30, 2020
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	8,327	$	10,549	$	1,891	$	3,363	$	24,130
Charge-offs	(68)		—		(42)		(216)		(326)
Recoveries	18		2		—		87		107
Net recoveries (charge-offs)	(50)		2		(42)		(129)		(219)
Provision	180		361		232		(94)		679
Ending balance	$	8,457	$	10,912	$	2,081	$	3,140	$	24,590

The following tables present the activity in the allowance for loan losses by portfolio segment for the nine month periods ended September 30, 2021 and 2020 (in thousands):

	Nine Months Ended September 30, 2021
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	4,493	$	11,496	$	2,079	$	2,856	$	20,924
Charge-offs	(25)		(44)		(71)		(510)		(650)
Recoveries	283		2		10		424		719
Net recoveries (charge-offs)	258		(42)		(61)		(86)		69
Provision	(1,130)		1,827		(147)		(603)		(53)
Ending balance	$	3,621	$	13,281	$	1,871	$	2,167	$	20,940

	Nine Months Ended September 30, 2020
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Beginning balance	$	10,227	$	8,869	$	1,252	$	3,130	$	23,478
Charge-offs	(134)		(2,143)		(56)		(915)		(3,248)
Recoveries	27		2		49		293		371
Net recoveries (charge-offs)	(107)		(2,141)		(7)		(622)		(2,877)
Provision	(1,663)		4,184		836		632		3,989
Ending balance	$	8,457	$	10,912	$	2,081	$	3,140	$	24,590

Schedule of Allowance for Loan Losses and the Recorded Investment in Loans Based on Impairment Method

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021
Allowance for loan losses:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,525	$	1,800	$	—	$	73	$	3,398
Collectively evaluated for impairment	2,096		11,481		1,871		2,094		17,542
Total ending allowance balance	$	3,621	$	13,281	$	1,871	$	2,167	$	20,940

	December 31, 2020
Allowance for loan losses:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,401	$	74	$	—	$	52	$	1,527
Collectively evaluated for impairment	3,092		11,422		2,079		2,804		19,397
Total ending allowance balance	$	4,493	$	11,496	$	2,079	$	2,856	$	20,924

	September 30, 2021
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually evaluated for impairment	$	2,582	$	8,356	$	946	$	333	$	12,217
Loans collectively evaluated for  impairment	269,290		783,120		253,695		202,607		1,508,712
Total ending loans balance	$	271,872	$	791,476	$	254,641	$	202,940	$	1,520,929

	December 31, 2020
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually evaluated for impairment	$	3,400	$	5,117	$	1,271	$	801	$	10,589
Loans collectively evaluated for  impairment	366,852		714,028		238,742		211,287		1,530,909
Total ending loans balance	$	370,252	$	719,145	$	240,013	$	212,088	$	1,541,498

Schedule of Impaired Financing Receivables

The following table presents loans individually evaluated for impairment recognized by class of loans as of September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021						December 31, 2020
With no related allowance recorded:	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
Commercial and agricultural:
Commercial and industrial	$	995	$	970	$	—	$	1,960	$	1,963	$	—
Commercial mortgages:
Construction	143		143		—		188		189		—
Commercial mortgages, other	7,312		4,651		—		6,814		4,760		—
Residential mortgages	960		946		—		1,283		1,271		—
Consumer loans:
Home equity lines and loans	195		179		—		645		631		—
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	5,487		1,612		1,525		5,228		1,437		1,401
Commercial mortgages:
Commercial mortgages, other	3,554		3,562		1,800		258		168		74
Consumer loans:
Home equity lines and loans	154		154		73		170		170		52
Total	$	18,800	$	12,217	$	3,398	$	16,546	$	10,589	$	1,527

The following table presents the average recorded investment and interest income of loans individually evaluated for impairment recognized by class of loans for the three and nine month periods ended September 30, 2021 and 2020 (in thousands):

	Three Months Ended   September 30, 2021				Three Months Ended   September 30, 2020				Nine Months Ended   September 30, 2021				Nine Months Ended   September 30, 2020
With no related allowance recorded:	Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)
Commercial and agricultural:
Commercial and industrial	$	1,378	$	3	$	1,239	$	2	$	1,645	$	3	$	679	$	2
Commercial mortgages:
Construction	151		1		213		2		167		5		226		6
Commercial mortgages, other	4,665		8		4,515		—		4,743		23		3,938		—
Residential mortgages	950		12		1,224		7		1,034		29		873		17
Consumer loans:
Home equity lines & loans	184		2		650		2		299		5		399		5
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	1,545		4		5,804		2		1,511		6		5,867		4
Commercial mortgages:
Commercial mortgages, other	3,644		25		2,229		8		1,905		25		3,645		16
Consumer loans:
Home equity lines and loans	155		—		175		—		160		—		88		—
Total	$	12,672	$	55	$	16,049	$	23	$	11,464	$	96	$	15,715	$	50

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

The following table presents the recorded investment in non-accrual and loans past due 90 days or more and still accruing by class of loans as of September 30, 2021 and December 31, 2020 (in thousands):

	Non-accrual				Loans Past Due 90 Days or More and Still Accruing
	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Commercial and agricultural:
Commercial and industrial	$	2,080	$	2,167	$	4	$	2
Commercial mortgages:
Construction	36		55		—		—
Commercial mortgages, other	4,212		4,415		—		—
Residential mortgages	845		1,632		—		—
Consumer loans:
Home equity lines and loans	819		1,159		—		—
Indirect consumer loans	367		519		—		—
Direct consumer loans	14		5		—		—
Total	$	8,373	$	9,952	$	4	$	2

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

The following tables present the aging of the recorded investment in loans as of September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021
	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	$	1,110	$	1,375	$	45	$	2,530	$	268,921	$	271,451
Agricultural	—		—		—		—		421		421
Commercial mortgages:
Construction	—		—		—		—		67,644		67,644
Commercial mortgages, other	2,056		2,615		217		4,888		718,944		723,832
Residential mortgages	1,226		131		436		1,793		252,848		254,641
Consumer loans:
Home equity lines and loans	115		161		542		818		71,835		72,653
Indirect consumer loans	764		83		161		1,008		119,037		120,045
Direct consumer loans	13		7		8		28		10,214		10,242
Total	$	5,284	$	4,372	$	1,409	$	11,065	$	1,509,864	$	1,520,929

	December 31, 2020
	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	$	520	$	14	$	30	$	564	$	369,404	$	369,968
Agricultural	—		—		—		—		284		284
Commercial mortgages:
Construction	—		—		—		—		62,164		62,164
Commercial mortgages, other	1,438		3,696		308		5,442		651,539		656,981
Residential mortgages	817		406		461		1,684		238,329		240,013
Consumer loans:
Home equity lines and loans	521		41		474		1,036		77,725		78,761
Indirect consumer loans	1,268		198		252		1,718		119,135		120,853
Direct consumer loans	34		2		—		36		12,438		12,474
Total	$	4,598	$	4,357	$	1,525	$	10,480	$	1,531,018	$	1,541,498

Schedule of Loans by Class Modified as Troubled Debt Restructurings

The following table presents loans by class modified as TDRs that occurred during the three month period ended September 30, 2021 and September 30, 2020 (dollars in thousands):

September 30, 2021	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial and agricultural:
Commercial and industrial	2	$	502	$	502
Total	2	$	502	$	502

September 30, 2020	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial and industrial	2	$	1,138	$	1,138
Residential mortgages	1	320		320
Total	3	$	1,458	$	1,458

The following table presents loans by class modified as TDRs that occurred during the nine month period ended September 30, 2021 and September 30, 2020 (dollars in thousands):

September 30, 2021	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial and agricultural:
Commercial and industrial	2	$	502	$	502
Agricultural
Commercial mortgages:
Commercial mortgages, other	4	$	6,094	$	6,094
Total	6	$	6,596	$	6,596

September 30, 2020	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial and agricultural:
Commercial and industrial	4	$	2,068	$	2,068
Agricultural
Commercial mortgages:
Commercial mortgages, other	4	1,297		1,297
Residential mortgages	4	997		997
Consumer loans:
Home equity lines and loans	3	738		738
Total	15	$	5,100	$	5,100

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

Based on the analyses performed as of September 30, 2021 and December 31, 2020, the risk category of the recorded investment of loans by class of loans is as follows (in thousands):

	September 30, 2021
	Not Rated		Pass		Special Mention		Substandard		Doubtful		Total
Commercial and agricultural:
Commercial and industrial	$	—	$	264,526	$	2,565	$	3,166	$	1,194	$	271,451
Agricultural	—		421		—		—		—		421
Commercial mortgages:
Construction	—		67,607		—		37		—		67,644
Commercial mortgages	—		670,350		33,937		18,422		1,123		723,832
Residential mortgages	253,796		—		—		845		—		254,641
Consumer loans:
Home equity lines and loans	71,834		—		—		819		—		72,653
Indirect consumer loans	119,678		—		—		367		—		120,045
Direct consumer loans	10,228		—		—		14		—		10,242
Total	$	455,536	$	1,002,904	$	36,502	$	23,670	$	2,317	$	1,520,929

	December 31, 2020
	Not Rated		Pass		Special Mention		Substandard		Doubtful		Total
Commercial and agricultural:
Commercial and industrial	$	—	$	360,500	$	2,999	$	5,092	$	1,377	$	369,968
Agricultural	—		284		—		—		—		284
Commercial mortgages:
Construction	—		59,885		—		2,279		—		62,164
Commercial mortgages	—		616,090		23,631		16,128		1,132		656,981
Residential mortgages	238,381		—		—		1,632		—		240,013
Consumer loans:
Home equity lines and loans	77,602		—		—		1,159		—		78,761
Indirect consumer loans	120,334		—		—		519		—		120,853
Direct consumer loans	12,470		—		—		4		—		12,474
Total	$	448,787	$	1,036,759	$	26,630	$	26,813	$	2,509	$	1,541,498

Schedule of Recorded Investment in Residential and Consumer Loans Based on Payment Activity

The following tables present the recorded investment in residential and consumer loans based on payment activity as of September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021
			Consumer Loans
	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	253,796	$	71,834	$	119,678	$	10,228
Non-Performing	845		819		367		14
	$	254,641	$	72,653	$	120,045	$	10,242

	December 31, 2020
			Consumer Loans
	Residential Mortgages		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	238,381	$	77,602	$	120,334	$	12,470
Non-Performing	1,632		1,159		519		4
	$	240,013	$	78,761	$	120,853	$	12,474

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FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2021

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, 2021 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	$	40,337	$	40,337	$	—	$	—
Mortgage-backed securities, residential	586,126		—		586,126		—
Obligations of states and political subdivisions	42,352		—		42,352		—
Corporate bonds and notes	17,061		—		17,061		—
SBA loan pools	75,655		—		75,655		—
Total available for sale securities	$	761,531	$	40,337	$	721,194	$	—
Equity investments, at fair value	$	2,290	$	2,290	$	—	$	—
Derivative assets	9,948		—		9,948		—
Financial Liabilities:
Derivative liabilities	$	10,310	$	—	$	10,310	$	—

There were no transfers between Level 1 and Level 2 during the three and nine month periods ended September 30, 2021.

			Fair Value Measurement at December 31, 2020 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)
Mortgage-backed securities, residential	$	467,866	$	—	$	467,866	$	—
Obligations of states and political subdivisions	43,405		—		43,405		—
Corporate bonds and notes	9,035		—		9,035		—
SBA loan pools	34,305		—		34,305		—
Total available for sale securities	$	554,611	$	—	$	554,611	$	—
Equity investments, at fair value	$	1,880	$	1,880	$	—	$	—
Derivative assets	14,345		—		14,345		—
Financial Liabilities:
Derivative liabilities	$	14,702	$	—	$	14,702	$	—

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

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

			Fair Value Measurement at September 30, 2021 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)
Other real estate owned:
Residential mortgages	$	124	$	—	$	—	$	124
Consumer loans:
Home equity lines and loans	47		—		—		47
Total other real estate owned, net	$	171	$	—	$	—	$	171

			Fair Value Measurement at December 31, 2020 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)
Other real estate owned:
Commercial mortgages:
Commercial mortgages	$	111	$	—	$	—	$	111
Residential mortgages	126		—		—		126
Total other real estate owned, net	$	237	$	—	$	—	$	237

Schedule of Nonrecurring Fair Value Measurement, Valuation Techniques

The following tables present information related to Level 3 non-recurring fair value measurement at September 30, 2021 and December 31, 2020 (in thousands):

Description	Fair Value at September 30, 2021		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at September 30, 2021
Impaired loans:
OREO:
Commercial mortgages:
Residential mortgages	$	124	Sales comparison	Discount to appraised value	20.80% - 20.80% [20.80%]
Consumer loans:
Home equity lines and loans	47		Sales comparison	Discount to appraised value	10.00% - 10.00% [10.00%]
	$	171

Description	Fair Value at December 31, 2020		Valuation Technique	Unobservable Inputs	Range [Weighted Average] at December 31, 2020
Impaired loans:
OREO:
Commercial mortgages:
Commercial mortgages	$	111	Sales comparison	Discount to appraised value	20.80% - 20.80% [20.80%]
Residential mortgages	126		Sales comparison	Discount to appraised value	20.80% - 20.80% [20.80%]
	$	237

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, 2021 and December 31, 2020, are as follows (in thousands):

	September 30, 2021
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	$	28,859	$	28,859	$	—	$	—	$	28,859
Interest-earning deposits in other financial institutions	32,838		32,838		—		—		32,838
Equity investments	2,933		2,933		—		—		2,933
Securities available for sale	761,531		40,337		721,194		—		761,531
Securities held to maturity	3,183		—		1,894		1,300		3,194
FHLBNY and FRBNY stock	3,562		—		—		—		N/A
Loans, net and loans held for sale	1,495,952		—		—		1,483,417		1,483,417
Accrued interest receivable	6,040		73		1,706		4,261		6,040
Derivative Assets	9,948		—		9,948		—		9,948
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,943,403	$	1,943,403	$	—	$	—	$	1,943,403
Time deposits	230,419		—		232,107		—		232,107
Accrued interest payable	289		10		279		—		289
Derivative Liabilities	10,310		—		10,310		—		10,310

(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, 2020
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	$	29,467	$	29,467	$	—	$	—	$	29,467
Interest-earning deposits in other financial institutions	79,071		79,071		—		—		79,071
Equity investments	2,542		2,542		—		—		2,542
Securities available for sale	554,611		—		554,611		—		554,611
Securities held to maturity	2,469		—		2,175		326		2,501
FHLBNY and FRBNY stock	3,150		—		—		—		N/A
Loans, net and loans held for sale	1,515,709		—		—		1,514,318		1,514,318
Accrued interest receivable	6,271		—		1,356		4,915		6,271
Derivative Asset	14,345		—		14,345		—		14,345
Financial liabilities:
Deposits:
Demand, savings, and insured money market accounts	$	1,752,043	$	1,752,043	$	—	$	—	$	1,752,043
Time deposits	285,731		—		288,398		—		288,398
Accrued interest payable	262		11		251		—		262
Derivative Liabilities	14,702		—		14,702		—		14,702

(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, 2021

Leases [Abstract]

Schedule of Leased Branch Properties

Leased branch properties at September 30, 2021 and December 31, 2020 consist of the following (in thousands):

	September 30, 2021		December 31, 2020
Operating lease right-of-use asset	$	7,145	$	8,001
Less: accumulated amortization	(559)		(705)
Change in lease agreements	498		(151)
Operating lease right-of-use-assets, net	$	7,084	$	7,145

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, 2021 (in thousands):

Year	Amount
2021	$	241
2022	970
2023	990
2024	923
2025	841
2026 and thereafter	4,501
Total minimum lease payments	8,466
Less: amount representing interest	(1,239)
Present value of net minimum lease payments	$	7,227

Schedule of Leases in Premises and Equipment

The Corporation has included these leases in premises and equipment as of September 30, 2021 and December 31, 2020 as follows (in thousands):

	September 30, 2021		December 31, 2020
Buildings	$	5,572	$	5,572
Less: accumulated depreciation	(2,125)		(1,875)
Net book value	$	3,447	$	3,697

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, 2021 (in thousands):

Year	Amount
2021	$	98
2022	391
2023	391
2024	391
2025	409
2026 and thereafter	2,840
Total minimum lease payments	4,520
Less: amount representing interest	(861)
Present value of net minimum lease payments	$	3,659

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GOODWILL AND INTANGIBLE ASSETS (Tables)

9 Months Ended

Sep. 30, 2021

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, 2021 and 2020 were as follows (in thousands):

	2021		2020
Beginning of year	$	21,824	$	21,824
Acquired goodwill	—		—
Ending balance September 30,	$	21,824	$	21,824

Schedule of Acquired Finite-Lived Intangible Assets by Major Class

Acquired intangible assets were as follows at September 30, 2021 and December 31, 2020 (in thousands):

	At September 30, 2021				At December 31, 2020
	Balance Acquired		Accumulated Amortization		Balance Acquired		Accumulated Amortization
Core deposit intangibles	$	5,975	$	5,975	$	5,975	$	5,962
Other customer relationship intangibles	5,633		5,607		5,633		5,388
Total	$	11,608	$	11,582	$	11,608	$	11,350

Schedule of Expected Amortization Expense

The remaining estimated aggregate amortization expense at September 30, 2021 is listed below (in thousands):

Year	Estimated Expense
2021	$	26
Total	$	26

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COMMITMENTS AND CONTINGENCIES (Tables)

9 Months Ended

Sep. 30, 2021

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, 2021 and December 31, 2020 (in thousands):

	September 30, 2021				December 31, 2020
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	21,334	$	49,839	$	28,459	$	39,056
Unused lines of credit	2,137		274,554		1,300		268,075
Standby letters of credit	—		14,878		—		16,094

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)

9 Months Ended

Sep. 30, 2021

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, 2021	$	2,867	$	(6,725)	$	(3,858)
Other comprehensive income before reclassification	(3,209)		—		(3,209)
Amounts reclassified from accumulated other comprehensive income	—		1		1
Net current period other comprehensive income (loss)	(3,209)		1		(3,208)
Balance at September 30, 2021	$	(342)	$	(6,724)	$	(7,066)

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at July 1, 2020	$	9,273	$	(7,131)	2,142
Other comprehensive income before reclassification	(516)		—		(516)
Amounts reclassified from accumulated other comprehensive income	—		16		16
Net current period other comprehensive income (loss)	(516)		16		(500)
Balance at September 30, 2020	$	8,757	$	(7,115)	$	1,642

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at January 1, 2021	$	9,127	$	(6,726)	$	2,401
Other comprehensive income before reclassification	(9,469)		—		(9,469)
Amounts reclassified from accumulated other comprehensive income	—		2		2
Net current period other comprehensive income	(9,469)		2		(9,467)
Balance at September 30, 2021	$	(342)	$	(6,724)	$	(7,066)

	Unrealized Gains and Losses on Securities Available for Sale		Defined Benefit and Other Benefit Plans		Total
Balance at January 1, 2020	$	1,368	$	(7,167)	(5,799)
Other comprehensive income before reclassification	7,389		—		7,389
Amounts reclassified from accumulated other comprehensive income	—		52		52
Net current period other comprehensive income	7,389		52		7,441
Balance at September 30, 2020	$	8,757	$	(7,115)	$	1,642

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
	2021		2020
Amortization of defined pension plan and other benefit plan items:
Prior service costs (a)	$	(55)	$	(55)	Other components of net periodic pension and postretirement benefits
Actuarial losses (a)	57		77		Other components of net periodic pension and postretirement benefits
Tax effect	(1)		(6)		Income tax expense
Net of tax	1		16
Total reclassification for the period, net of tax	$	1	$	16

(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
	2021		2020
Amortization of defined pension plan and other benefit plan items:
Prior service costs (a)	$	(165)	$	(165)	Other components of net periodic pension and postretirement benefits
Actuarial losses (a)	169		231		Other components of net periodic pension and postretirement benefits
Tax effect	(2)		(14)		Income tax expense
Net of tax	2		52
Total reclassification for the period, net of tax	$	2	$	52

(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, 2021

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, 2021 and 2020 (in thousands). Items outside the scope of ASC 606 are noted as such.

	Three Months Ended September 30, 2021
Revenue by Operating Segment:	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Non-interest income
Service charges on deposit accounts
Overdraft fees	$	623	$	—	$	—	$	623
Other	233		—		—		233
Interchange revenue from debit card transactions	1,237		—		—		1,237
WMG fee income	—		2,765		—		2,765
CFS fee and commission income	—		—		346		346
Net gains (losses) on sales of OREO	—		—		—		—
Net gains on sales of loans(a)	242		—		—		242
Loan servicing fees(a)	38		—		—		38
Changes in fair value of equity investments(a)	(13)		—		28		15
Income from bank-owned life insurance(a)	13		—		—		13
Other(a)	464		—		(6)		458
Total non-interest income (loss)	$	2,837	$	2,765	$	368	$	5,970

(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, 2020
Revenue by Operating Segment:	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Non-interest income
Service charges on deposit accounts
Overdraft fees	$	668	$	—	$	—	$	668
Other	72		—		—		72
Interchange revenue from debit card transactions	1,082		—		—		1,082
WMG fee income	—		2,416		—		2,416
CFS fee and commission income	—		—		172		172
Net gains (losses) on sales of OREO	6		—		—		6
Net gains on sales of loans(a)	553		—		—		553
Loan servicing fees(a)	32		—		—		32
Changes in fair value of equity investments(a)	71		—		(14)		57
Income from bank-owned life insurance(a)	14		—		—		14
Other(a)	320		—		(53)		267
Total non-interest income	$	2,818	$	2,416	$	105	$	5,339

(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, 2021
Revenue by Operating Segment:	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Non-interest income
Service charges on deposit accounts
Overdraft fees	$	1,561	$	—	$	—	$	1,561
Other	744		—		—		744
Interchange revenue from debit card transactions	3,622		—		—		3,622
WMG fee income	—		8,246		—		8,246
CFS fee and commission income	—		—		796		796
Net gains (losses) on sales of OREO	(18)		—		—		(18)
Net gains on sales of loans(a)	884		—		—		884
Loan servicing fees(a)	108		—		—		108
Changes in fair value of equity investments(a)	117		—		86		203
Income from bank-owned life insurance(a)	39		—		—		39
Other(a)	1,930		—		(32)		1,898
Total non-interest income	$	8,987	$	8,246	$	850	$	18,083

(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, 2020
Revenue by Operating Segment:	Core Banking		WMG		Holding Company, CFS, and CRM(b)		Total
Non-interest income
Service charges on deposit accounts
Overdraft fees	$	1,894	$	—	$	—	$	1,894
Other	400		—		—		400
Interchange revenue from debit card transactions	2,989		—		—		2,989
WMG fee income	—		6,968		—		6,968
CFS fee and commission income	—		—		502		502
Net gains on sales of OREO	(71)		—		—		(71)
Net gains on sales of loans(a)	916		—		—		916
Loan servicing fees(a)	88		—		—		88
Change in fair value of equity securities(a)	49		—		(82)		(33)
Income from bank-owned life insurance(a)	147		—		—		147
Other(a)	1,383		—		(33)		1,350
Total non-interest income	$	7,795	$	6,968	$	387	$	15,150

(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, 2021

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,
	2021		2020		2021		2020
Qualified Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	271		322		813		966
Expected return on plan assets	(673)		(610)		(2,019)		(1,830)
Amortization of unrecognized transition obligation	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	38		49		113		147
Net periodic pension benefit	$	(364)	$	(239)	$	(1,093)	$	(717)
Supplemental Pension Plan
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	8		10		24		30
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	—		—		—		—
Amortization of unrecognized net loss	5		3		15		9
Net periodic supplemental pension cost	$	13	$	13	$	39	$	39
Postretirement Plan, Medical and Life
Service cost, benefits earned during the period	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	1		2		5		6
Expected return on plan assets	—		—		—		—
Amortization of unrecognized prior service cost	(55)		(55)		(165)		(165)
Amortization of unrecognized net loss	14		25		41		75
Net periodic postretirement, medical and life benefit	$	(40)	$	(28)	$	(119)	$	(84)

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SEGMENT REPORTING (Tables)

9 Months Ended

Sep. 30, 2021

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 column below includes amounts to eliminate transactions between segments (in thousands).

	Three months ended September 30, 2021
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	17,627	$	—	$	6	$	17,633
Interest expense	801		—		—		801
Net interest income	16,826		—		6		16,832
Provision for loan losses	356		—		—		356
Net interest income after provision for loan losses	16,470		—		6		16,476
Other non-interest income	2,837		2,765		368		5,970
Other non-interest expenses	12,124		1,651		325		14,100
Income (loss) before income tax expense (benefit)	7,183		1,114		49		8,346
Income tax expense (benefit)	1,534		156		10		1,700
Segment net income (loss)	$	5,649	$	958	$	39	$	6,646

	Three months ended September 30, 2020
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	16,701	$	—	$	13	$	16,714
Interest expense	845		—		—		845
Net interest income	15,856		—		13		15,869
Provision for loan losses	679		—		—		679
Net interest income after provision for loan losses	15,177		—		13		15,190
Other non-interest income	2,818		2,416		105		5,339
Other non-interest expenses	11,528		1,565		269		13,362
Income (loss) before income tax expense (benefit)	6,467		851		(151)		7,167
Income tax expense (benefit)	1,271		218		(33)		1,456
Segment net income (loss)	$	5,196	$	633	$	(118)	$	5,711

	Nine months ended September 30, 2021
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	51,298	$	—	$	20	$	51,318
Interest expense	2,621		—		—		2,621
Net interest income	48,677		—		20		48,697
Provision for loan losses	(53)		—		—		(53)
Net interest income after provision for loan losses	48,730		—		20		48,750
Other non-interest income	8,987		8,246		850		18,083
Other non-interest expenses	35,401		4,921		982		41,304
Income (loss) before income tax expense (benefit)	22,316		3,325		(112)		25,529
Income tax expense (benefit)	4,865		735		(42)		5,558
Segment net income (loss)	$	17,451	$	2,590	$	(70)	$	19,971
Segment assets	$	2,408,318	$	3,216	$	6,122	$	2,417,656

	Nine months ended September 30, 2020
	Core Banking		WMG		Holding Company, CFS, and CRM		Consolidated Totals
Interest and dividend income	$	49,527	$	—	$	43	$	49,570
Interest expense	3,048		—		—		$	3,048
Net interest income	46,479		—		43		46,522
Provision for loan losses	3,989		—		—		3,989
Net interest income after provision for loan losses	42,490		—		43		42,533
Other non-interest income	7,795		6,968		387		15,150
Other non-interest expenses	34,690		4,814		835		40,339
Income (loss) before income tax expense (benefit)	15,595		2,154		(405)		17,344
Income tax expense (benefit)	2,884		552		(121)		3,315
Segment net income (loss)	$	12,711	$	1,602	$	(284)	$	14,029
Segment assets	$	2,156,025	$	3,153	$	5,836	$	2,165,014

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STOCK COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

Schedule of Restricted Stock Activity

A summary of restricted stock activity for officers and employees for the three month period ended September 30, 2021 is presented below:

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at July 1, 2021	27,448	$	40.18
Granted	—
Vested	(261)	39.85
Forfeited or cancelled	—
Nonvested at September 30, 2021	27,187	$	40.23

A summary of restricted stock activity for officers and employees for the nine month period ended September 30, 2021 is presented below:

	Shares	Weighted–Average Grant Date Fair Value
Nonvested at January 1, 2021	31,830	$	40.32
Granted	—
Vested	(4,643)	41.15
Forfeited or cancelled	—
Nonvested at September 30, 2021	27,187	$	40.23

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EARNINGS PER COMMON SHARE (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Earnings Per Share [Abstract]
Weighted average shares outstanding, basic (in shares)	4,684,000	4,773,000	4,687,000	4,836,000
Weighted average shares outstanding, diluted (in shares)	4,684,000	4,773,000	4,687,000	4,836,000
Dilutive common stock equivalents (in shares)	0	0	0	0

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SECURITIES - Securities Available for Sale (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Amortized cost and estimated fair value of securities available for sale [Abstract]
Amortized Cost	$ 761,997,000		$ 761,997,000		$ 542,362,000
Unrealized Gains	7,932,000		7,932,000		12,654,000
Unrealized Losses	8,398,000		8,398,000		405,000
Estimated Fair Value	761,531,000		761,531,000		554,611,000
Amortized Cost
Within one year	686,000		686,000
After one, but within five years	75,962,000		75,962,000
After five, but within ten years	20,712,000		20,712,000
After ten years	470,000		470,000
Total	97,830,000		97,830,000
Amortized Cost	761,997,000		761,997,000		542,362,000
Fair Value
Within one year	689,000		689,000
After one, but within five years	77,278,000		77,278,000
After five, but within ten years	21,285,000		21,285,000
After ten years	498,000		498,000
Total	99,750,000		99,750,000
Fair value	761,531,000		761,531,000		554,611,000
Debt Securities, Available-for-sale, Realized Gain (Loss) [Abstract]
Proceeds form sale of securities resulting in gain (loss)	0	$ 0	0	$ 0
U.S. Treasury notes and bonds
Amortized cost and estimated fair value of securities available for sale [Abstract]
Amortized Cost	40,499,000		40,499,000
Unrealized Gains	0		0
Unrealized Losses	162,000		162,000
Estimated Fair Value	40,337,000		40,337,000
Amortized Cost
Amortized Cost	40,499,000		40,499,000
Fair Value
Fair value	40,337,000		40,337,000
Mortgage-backed securities, residential
Amortized cost and estimated fair value of securities available for sale [Abstract]
Amortized Cost	588,555,000		588,555,000		458,245,000
Unrealized Gains	5,397,000		5,397,000		9,822,000
Unrealized Losses	7,826,000		7,826,000		201,000
Estimated Fair Value	586,126,000		586,126,000		467,866,000
Amortized Cost
Without single maturity date	588,555,000		588,555,000
Amortized Cost	588,555,000		588,555,000		458,245,000
Fair Value
Without single maturity date	586,126,000		586,126,000
Fair value	586,126,000		586,126,000		467,866,000
Obligations of states and political subdivisions
Amortized cost and estimated fair value of securities available for sale [Abstract]
Amortized Cost	40,331,000		40,331,000		40,662,000
Unrealized Gains	2,021,000		2,021,000		2,743,000
Unrealized Losses	0		0		0
Estimated Fair Value	42,352,000		42,352,000		43,405,000
Amortized Cost
Amortized Cost	40,331,000		40,331,000		40,662,000
Fair Value
Fair value	42,352,000		42,352,000		43,405,000
Corporate bonds and notes
Amortized cost and estimated fair value of securities available for sale [Abstract]
Amortized Cost	17,000,000		17,000,000		9,000,000
Unrealized Gains	116,000		116,000		47,000
Unrealized Losses	55,000		55,000		12,000
Estimated Fair Value	17,061,000		17,061,000		9,035,000
Amortized Cost
Amortized Cost	17,000,000		17,000,000		9,000,000
Fair Value
Fair value	17,061,000		17,061,000		9,035,000
SBA loan pools
Amortized cost and estimated fair value of securities available for sale [Abstract]
Amortized Cost	75,612,000		75,612,000		34,455,000
Unrealized Gains	398,000		398,000		42,000
Unrealized Losses	355,000		355,000		192,000
Estimated Fair Value	75,655,000		75,655,000		34,305,000
Amortized Cost
Without single maturity date	75,612,000		75,612,000
Amortized Cost	75,612,000		75,612,000		34,455,000
Fair Value
Without single maturity date	75,655,000		75,655,000
Fair value	$ 75,655,000		$ 75,655,000		$ 34,305,000

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SECURITIES - Securities Held to Maturity (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Amortized cost and estimated fair value of securities held to maturity [Abstract]
Amortized Cost	$ 3,183	$ 2,469
Unrecognized Gains	11	32
Unrecognized Losses	0	0
Estimated Fair Value	3,194	2,501
Amortized Cost
Within one year	1,523
After one, but within five years	860
After five, but within ten years	800
After ten years	0
Total	3,183
Securities held to maturity	3,183	2,469
Fair Value
Within one year	1,532
After one, but within five years	862
After five, but within ten years	800
After ten years	0
Total	3,194
Securities held to maturity	3,194	2,501
Obligations of states and political subdivisions
Amortized cost and estimated fair value of securities held to maturity [Abstract]
Amortized Cost	1,300	326
Unrecognized Gains	0	0
Unrecognized Losses	0	0
Estimated Fair Value	1,300	326
Amortized Cost
Securities held to maturity	1,300	326
Fair Value
Securities held to maturity	1,300	326
Time deposits with other financial institutions
Amortized cost and estimated fair value of securities held to maturity [Abstract]
Amortized Cost	1,883	2,143
Unrecognized Gains	11	32
Unrecognized Losses	0	0
Estimated Fair Value	1,894	2,175
Amortized Cost
Securities held to maturity	1,883	2,143
Fair Value
Securities held to maturity	1,894	$ 2,175
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, 2021	Dec. 31, 2020
Fair Value
Less than 12 months	$ 450,318	$ 88,270
12 months or longer	13,385	4,606
Total	463,703	92,876
Unrealized Losses
Less than 12 months	8,173	368
12 months or longer	225	37
Total	8,398	405
U.S. Treasury notes and bonds
Fair Value
Less than 12 months	24,819
12 months or longer	0
Total	24,819
Unrealized Losses
Less than 12 months	162
12 months or longer	0
Total	162
Mortgage-backed securities, residential
Fair Value
Less than 12 months	383,380	70,037
12 months or longer	4,146	970
Total	387,526	71,007
Unrealized Losses
Less than 12 months	7,707	200
12 months or longer	119	1
Total	7,826	201
Corporate bonds and notes
Fair Value
Less than 12 months	2,979	2,988
12 months or longer	2,966	0
Total	5,945	2,988
Unrealized Losses
Less than 12 months	21	12
12 months or longer	34	0
Total	55	12
SBA loan pools
Fair Value
Less than 12 months	39,140	15,245
12 months or longer	6,273	3,636
Total	45,413	18,881
Unrealized Losses
Less than 12 months	283	156
12 months or longer	72	36
Total	$ 355	$ 192

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LOANS AND ALLOWANCE FOR LOAN LOSSES - Loan Portfolio (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	$ 1,516,668	$ 1,536,463
Interest receivable on loans	4,261	5,035
Total ending loans balance	1,520,929	1,541,498
Commercial and industrial
Composition of loan portfolio [Abstract]
Payroll protection program loans	68,100	150,900
Commercial and agricultural:
Composition of loan portfolio [Abstract]
Total ending loans balance	271,872	370,252
Commercial and agricultural: | Commercial and industrial
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	270,656	368,663
Total ending loans balance	271,451	369,968
Commercial and agricultural: | Agricultural
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	419	283
Total ending loans balance	421	284
Commercial mortgages:
Composition of loan portfolio [Abstract]
Total ending loans balance	791,476	719,145
Commercial mortgages: | Construction
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	67,445	61,945
Total ending loans balance	67,644	62,164
Commercial mortgages: | Commercial mortgages
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	721,709	654,663
Total ending loans balance	723,832	656,981
Residential mortgages
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	253,991	239,401
Total ending loans balance	254,641	240,013
Consumer loans:
Composition of loan portfolio [Abstract]
Total ending loans balance	202,940	212,088
Consumer loans: | Home equity lines and loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	72,471	78,547
Total ending loans balance	72,653	78,761
Consumer loans: | Indirect consumer loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	119,772	120,538
Total ending loans balance	120,045	120,853
Consumer loans: | Direct consumer loans
Composition of loan portfolio [Abstract]
Total loans, net of deferred loan fees and costs	10,205	12,423
Total ending loans balance	$ 10,242	$ 12,474

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LOANS AND ALLOWANCE FOR LOAN LOSSES - Allowances (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Allowance for loan losses, by portfolio segment [Roll Forward]
Beginning balance	$ 20,676	$ 24,130	$ 20,924	$ 23,478
Charge-offs	(234)	(326)	(650)	(3,248)
Recoveries	142	107	719	371
Net recoveries (charge-offs)	(92)	(219)	69	(2,877)
Provision	356	679	(53)	3,989
Ending balance	20,940	24,590	20,940	24,590
Ending allowance balance attributable to loans:
Individually evaluated for impairment	3,398		3,398		$ 1,527
Collectively evaluated for impairment	17,542		17,542		19,397
Total ending allowance balance	20,940	24,590	20,940	24,590	20,924
Loans:
Loans individually evaluated for impairment	12,217		12,217		10,589
Loans collectively evaluated for  impairment	1,508,712		1,508,712		1,530,909
Total ending loans balance	1,520,929		1,520,929		1,541,498
Commercial and agricultural:
Allowance for loan losses, by portfolio segment [Roll Forward]
Beginning balance	3,628	8,327	4,493	10,227
Charge-offs	0	(68)	(25)	(134)
Recoveries	8	18	283	27
Net recoveries (charge-offs)	8	(50)	258	(107)
Provision	(15)	180	(1,130)	(1,663)
Ending balance	3,621	8,457	3,621	8,457
Ending allowance balance attributable to loans:
Individually evaluated for impairment	1,525		1,525		1,401
Collectively evaluated for impairment	2,096		2,096		3,092
Total ending allowance balance	3,621	8,457	3,621	8,457	4,493
Loans:
Loans individually evaluated for impairment	2,582		2,582		3,400
Loans collectively evaluated for  impairment	269,290		269,290		366,852
Total ending loans balance	271,872		271,872		370,252
Commercial mortgages:
Allowance for loan losses, by portfolio segment [Roll Forward]
Beginning balance	12,963	10,549	11,496	8,869
Charge-offs	(44)	0	(44)	(2,143)
Recoveries	1	2	2	2
Net recoveries (charge-offs)	(43)	2	(42)	(2,141)
Provision	361	361	1,827	4,184
Ending balance	13,281	10,912	13,281	10,912
Ending allowance balance attributable to loans:
Individually evaluated for impairment	1,800		1,800		74
Collectively evaluated for impairment	11,481		11,481		11,422
Total ending allowance balance	13,281	10,912	13,281	10,912	11,496
Loans:
Loans individually evaluated for impairment	8,356		8,356		5,117
Loans collectively evaluated for  impairment	783,120		783,120		714,028
Total ending loans balance	791,476		791,476		719,145
Residential mortgages
Allowance for loan losses, by portfolio segment [Roll Forward]
Beginning balance	1,791	1,891	2,079	1,252
Charge-offs	0	(42)	(71)	(56)
Recoveries	0	0	10	49
Net recoveries (charge-offs)	0	(42)	(61)	(7)
Provision	80	232	(147)	836
Ending balance	1,871	2,081	1,871	2,081
Ending allowance balance attributable to loans:
Individually evaluated for impairment	0		0		0
Collectively evaluated for impairment	1,871		1,871		2,079
Total ending allowance balance	1,871	2,081	1,871	2,081	2,079
Loans:
Loans individually evaluated for impairment	946		946		1,271
Loans collectively evaluated for  impairment	253,695		253,695		238,742
Total ending loans balance	254,641		254,641		240,013
Consumer loans:
Allowance for loan losses, by portfolio segment [Roll Forward]
Beginning balance	2,294	3,363	2,856	3,130
Charge-offs	(190)	(216)	(510)	(915)
Recoveries	133	87	424	293
Net recoveries (charge-offs)	(57)	(129)	(86)	(622)
Provision	(70)	(94)	(603)	632
Ending balance	2,167	3,140	2,167	3,140
Ending allowance balance attributable to loans:
Individually evaluated for impairment	73		73		52
Collectively evaluated for impairment	2,094		2,094		2,804
Total ending allowance balance	2,167	$ 3,140	2,167	$ 3,140	2,856
Loans:
Loans individually evaluated for impairment	333		333		801
Loans collectively evaluated for  impairment	202,607		202,607		211,287
Total ending loans balance	$ 202,940		$ 202,940		$ 212,088

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LOANS AND ALLOWANCE FOR LOAN LOSSES - Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Unpaid Principal Balance
Unpaid principal balance, total	$ 18,800		$ 18,800		$ 16,546
Recorded Investment
Recorded investment, total	12,217		12,217		10,589
Allowance for Loan Losses Allocated	3,398		3,398		1,527
Average Recorded Investment
Average recorded investment, total	12,672	$ 16,049	11,464	$ 15,715
Interest Income Recognized
Interest income, accrual method, total	55	23	96	50
Commercial and agricultural: | Commercial and industrial
Unpaid Principal Balance
With no related allowance, unpaid principal balance	995		995		1,960
With related allowance, unpaid principal balance	5,487		5,487		5,228
Recorded Investment
With no related allowance, recorded investment	970		970		1,963
With related allowance, recorded investment	1,612		1,612		1,437
Allowance for Loan Losses Allocated	1,525		1,525		1,401
Average Recorded Investment
With no related allowance, average recorded investment	1,378	1,239	1,645	679
With related allowance, average recorded investment	1,545	5,804	1,511	5,867
Interest Income Recognized
With no related allowance, interest income, accrual method	3	2	3	2
With related allowance, interest income, accrual method	4	2	6	4
Commercial mortgages: | Construction
Unpaid Principal Balance
With no related allowance, unpaid principal balance	143		143		188
Recorded Investment
With no related allowance, recorded investment	143		143		189
Average Recorded Investment
With no related allowance, average recorded investment	151	213	167	226
Interest Income Recognized
With no related allowance, interest income, accrual method	1	2	5	6
Commercial mortgages: | Commercial mortgages, other
Unpaid Principal Balance
With no related allowance, unpaid principal balance	7,312		7,312		6,814
With related allowance, unpaid principal balance	3,554		3,554		258
Recorded Investment
With no related allowance, recorded investment	4,651		4,651		4,760
With related allowance, recorded investment	3,562		3,562		168
Allowance for Loan Losses Allocated	1,800		1,800		74
Average Recorded Investment
With no related allowance, average recorded investment	4,665	4,515	4,743	3,938
With related allowance, average recorded investment	3,644	2,229	1,905	3,645
Interest Income Recognized
With no related allowance, interest income, accrual method	8	0	23	0
With related allowance, interest income, accrual method	25	8	25	16
Residential mortgages
Unpaid Principal Balance
With no related allowance, unpaid principal balance	960		960		1,283
Recorded Investment
With no related allowance, recorded investment	946		946		1,271
Average Recorded Investment
With no related allowance, average recorded investment	950	1,224	1,034	873
Interest Income Recognized
With no related allowance, interest income, accrual method	12	7	29	17
Consumer loans: | Home equity lines and loans
Unpaid Principal Balance
With no related allowance, unpaid principal balance	195		195		645
With related allowance, unpaid principal balance	154		154		170
Recorded Investment
With no related allowance, recorded investment	179		179		631
With related allowance, recorded investment	154		154		170
Allowance for Loan Losses Allocated	73		73		$ 52
Average Recorded Investment
With no related allowance, average recorded investment	184	650	299	399
With related allowance, average recorded investment	155	175	160	88
Interest Income Recognized
With no related allowance, interest income, accrual method	2	2	5	5
With related allowance, interest income, accrual method	$ 0	$ 0	$ 0	$ 0

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES - Receivables Past Due (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Financing Receivable, Past Due [Line Items]
Non-accrual	$ 8,373	$ 9,952
Loans Past Due 90 Days or More and Still Accruing	4	2
Total ending loans balance	1,520,929	1,541,498
Total Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	11,065	10,480
30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	5,284	4,598
60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	4,372	4,357
90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	1,409	1,525
Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	1,509,864	1,531,018
Commercial and agricultural:
Financing Receivable, Past Due [Line Items]
Total ending loans balance	271,872	370,252
Commercial and agricultural: | Commercial and industrial
Financing Receivable, Past Due [Line Items]
Non-accrual	2,080	2,167
Loans Past Due 90 Days or More and Still Accruing	4	2
Total ending loans balance	271,451	369,968
Commercial and agricultural: | Commercial and industrial | Total Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	2,530	564
Commercial and agricultural: | Commercial and industrial | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	1,110	520
Commercial and agricultural: | Commercial and industrial | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	1,375	14
Commercial and agricultural: | Commercial and industrial | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	45	30
Commercial and agricultural: | Commercial and industrial | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	268,921	369,404
Commercial and agricultural: | Agricultural
Financing Receivable, Past Due [Line Items]
Total ending loans balance	421	284
Commercial and agricultural: | Agricultural | Total Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	0	0
Commercial and agricultural: | Agricultural | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	0	0
Commercial and agricultural: | Agricultural | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	0	0
Commercial and agricultural: | Agricultural | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	0	0
Commercial and agricultural: | Agricultural | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	421	284
Commercial mortgages:
Financing Receivable, Past Due [Line Items]
Total ending loans balance	791,476	719,145
Commercial mortgages: | Construction
Financing Receivable, Past Due [Line Items]
Non-accrual	36	55
Loans Past Due 90 Days or More and Still Accruing	0	0
Total ending loans balance	67,644	62,164
Commercial mortgages: | Construction | Total Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	0	0
Commercial mortgages: | Construction | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	0	0
Commercial mortgages: | Construction | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	0	0
Commercial mortgages: | Construction | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	0	0
Commercial mortgages: | Construction | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	67,644	62,164
Commercial mortgages: | Commercial mortgages
Financing Receivable, Past Due [Line Items]
Non-accrual	4,212	4,415
Loans Past Due 90 Days or More and Still Accruing	0	0
Total ending loans balance	723,832	656,981
Commercial mortgages: | Commercial mortgages | Total Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	4,888	5,442
Commercial mortgages: | Commercial mortgages | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	2,056	1,438
Commercial mortgages: | Commercial mortgages | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	2,615	3,696
Commercial mortgages: | Commercial mortgages | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	217	308
Commercial mortgages: | Commercial mortgages | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	718,944	651,539
Residential mortgages
Financing Receivable, Past Due [Line Items]
Non-accrual	845	1,632
Loans Past Due 90 Days or More and Still Accruing	0	0
Total ending loans balance	254,641	240,013
Residential mortgages | Total Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	1,793	1,684
Residential mortgages | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	1,226	817
Residential mortgages | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	131	406
Residential mortgages | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	436	461
Residential mortgages | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	252,848	238,329
Consumer loans:
Financing Receivable, Past Due [Line Items]
Total ending loans balance	202,940	212,088
Consumer loans: | Home equity lines and loans
Financing Receivable, Past Due [Line Items]
Non-accrual	819	1,159
Loans Past Due 90 Days or More and Still Accruing	0	0
Total ending loans balance	72,653	78,761
Consumer loans: | Home equity lines and loans | Total Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	818	1,036
Consumer loans: | Home equity lines and loans | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	115	521
Consumer loans: | Home equity lines and loans | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	161	41
Consumer loans: | Home equity lines and loans | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	542	474
Consumer loans: | Home equity lines and loans | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	71,835	77,725
Consumer loans: | Indirect consumer loans
Financing Receivable, Past Due [Line Items]
Non-accrual	367	519
Loans Past Due 90 Days or More and Still Accruing	0	0
Total ending loans balance	120,045	120,853
Consumer loans: | Indirect consumer loans | Total Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	1,008	1,718
Consumer loans: | Indirect consumer loans | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	764	1,268
Consumer loans: | Indirect consumer loans | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	83	198
Consumer loans: | Indirect consumer loans | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	161	252
Consumer loans: | Indirect consumer loans | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	119,037	119,135
Consumer loans: | Direct consumer loans
Financing Receivable, Past Due [Line Items]
Non-accrual	14	5
Loans Past Due 90 Days or More and Still Accruing	0	0
Total ending loans balance	10,242	12,474
Consumer loans: | Direct consumer loans | Total Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	28	36
Consumer loans: | Direct consumer loans | 30 - 59 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	13	34
Consumer loans: | Direct consumer loans | 60 - 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	7	2
Consumer loans: | Direct consumer loans | 90 Days or More Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	8	0
Consumer loans: | Direct consumer loans | Loans Not Past Due
Financing Receivable, Past Due [Line Items]
Non-accrual	$ 10,214	$ 12,438

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES - Troubled Debt Restructuring Narrative (Details)		3 Months Ended		9 Months Ended
	May 31, 2020 USD ($)	Sep. 30, 2021 USD ($) borrower contract loan	Sep. 30, 2020 loan contract borrower	Sep. 30, 2021 USD ($) borrower loan contract	Sep. 30, 2020 borrower contract	Dec. 31, 2020 USD ($)
Financing Receivable, Troubled Debt Restructuring [Line Items]
Loan forebearances, loan balance | $	$ 242,500,000
Financing receivable, troubled debt restructuring | $		$ 10,800,000		$ 10,800,000		$ 6,700,000
Financing receivable, troubled debt restructuring, purchased with credit deterioration, increase | $		2,200,000		2,200,000		400,000
Financing receivable, modifications, recorded investment, still accruing | $		5,700,000		5,700,000		2,800,000
Financing receivable, modifications, recorded investment, nonaccrual status | $		5,100,000		5,100,000		3,900,000
Additional amounts committed to customers with loans classified as troubled debt restructurings | $		$ 0		$ 0		$ 0
Number of loans		2	3	6	15
Financing receivable, troubled debt restructuring, subsequent default, number of contracts | contract		0	0	0	0
Payment deferral
Financing Receivable, Troubled Debt Restructuring [Line Items]
Financing receivable, modifications, number of days past due			30 days
Commercial and industrial | Extended maturity
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of loans			2
Commercial and industrial | Interest rate below market reduction
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of loans			1
Residential mortgages
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of loans			1
Commercial mortgages | Payment deferral
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of loans			4
Financing receivable, modifications, number of borrowers | borrower			3
Residential mortgages | Payment deferral
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of loans			3
Residential mortgages | Non-accrual Status | Payment deferral
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of loans			3
Home equity lines and loans | Payment deferral
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of loans			3
Non-accrual Status | Commercial and industrial | Interest rate below market reduction
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of loans | borrower			1
Substandard | Commercial and industrial | Interest rate below market reduction
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of loans			2
Substandard | Commercial mortgages | Non-accrual Status | Payment deferral
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of loans			3
Substandard | Commercial mortgages | Non-accrual Status | Payment deferral | 30 - 59 Days Past Due
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of loans			2
Substandard | Residential mortgages | Non-accrual Status | Payment deferral
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of loans			2
Substandard | Residential mortgages | Non-accrual Status | Payment deferral | 30 - 59 Days Past Due
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of loans			1
Substandard | Home equity lines and loans | Non-accrual Status | Payment deferral
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of loans			3
Commercial and consumer portfolio segment
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of loans remaining in modified status | borrower		11		11
Loan balance remaining in modified status | $		$ 3,000,000		$ 3,000,000
Number of loans remaining in modified status, modified more than once | borrower		5		5
Loan balance remaining in modified status, modified more than once | $		$ 2,900,000		$ 2,900,000
Commercial and agricultural: | Commercial and industrial
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of loans		2		2
Commercial and agricultural: | Commercial mortgages
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of loans | borrower				2
Financing Receivable | Chemung | Customer Concentration Risk
Financing Receivable, Troubled Debt Restructuring [Line Items]
Concentration risk percentage (in percentage)	15.77%			0.20%

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES - Troubled Debt Restructuring (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2021 USD ($) loan	Sep. 30, 2020 USD ($) borrower	Sep. 30, 2021 USD ($) loan borrower	Sep. 30, 2020 USD ($) borrower
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Loans	2	3	6	15
Pre-Modification Outstanding Recorded Investment	$ 502,000	$ 1,458,000	$ 6,596,000	$ 5,100,000
Post-Modification Outstanding Recorded Investment	502,000	1,458,000	6,596,000	5,100,000
Allowance for loan and lease losses, period increase (decrease)	200,000		1,900,000	100,000
Financing receivables, impaired, troubled debt restructuring, write-down	$ 0	$ 0	$ 0	$ 0
Commercial and agricultural: | Commercial and industrial
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Loans	2	2	2	4
Pre-Modification Outstanding Recorded Investment	$ 502,000	$ 1,138,000	$ 502,000	$ 2,068,000
Post-Modification Outstanding Recorded Investment	$ 502,000	$ 1,138,000	$ 502,000	$ 2,068,000
Commercial and agricultural: | Commercial mortgages
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Loans | borrower			2
Residential mortgages
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Loans | borrower		1		4
Pre-Modification Outstanding Recorded Investment		$ 320,000		$ 997,000
Post-Modification Outstanding Recorded Investment		$ 320,000		$ 997,000
Commercial mortgages: | Commercial mortgages
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Loans			4	4
Pre-Modification Outstanding Recorded Investment			$ 6,094,000	$ 1,297,000
Post-Modification Outstanding Recorded Investment			$ 6,094,000	$ 1,297,000
Consumer loans: | Home equity lines and loans
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Loans | borrower				3
Pre-Modification Outstanding Recorded Investment				$ 738,000
Post-Modification Outstanding Recorded Investment				$ 738,000

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES - Credit Quality Indicator (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	$ 1,520,929	$ 1,541,498
Not Rated
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	455,536	448,787
Pass
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	1,002,904	1,036,759
Special Mention
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	36,502	26,630
Substandard
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	23,670	26,813
Doubtful
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	2,317	2,509
Commercial and agricultural:
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	271,872	370,252
Commercial and agricultural: | Commercial and industrial
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	271,451	369,968
Commercial and agricultural: | Commercial and industrial | Not Rated
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Commercial and agricultural: | Commercial and industrial | Pass
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	264,526	360,500
Commercial and agricultural: | Commercial and industrial | Special Mention
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	2,565	2,999
Commercial and agricultural: | Commercial and industrial | Substandard
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	3,166	5,092
Commercial and agricultural: | Commercial and industrial | Doubtful
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	1,194	1,377
Commercial and agricultural: | Agricultural
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	421	284
Commercial and agricultural: | Agricultural | Not Rated
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Commercial and agricultural: | Agricultural | Pass
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	421	284
Commercial and agricultural: | Agricultural | Special Mention
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Commercial and agricultural: | Agricultural | Substandard
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Commercial and agricultural: | Agricultural | Doubtful
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Commercial mortgages:
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	791,476	719,145
Commercial mortgages: | Construction
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	67,644	62,164
Commercial mortgages: | Construction | Not Rated
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Commercial mortgages: | Construction | Pass
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	67,607	59,885
Commercial mortgages: | Construction | Special Mention
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Commercial mortgages: | Construction | Substandard
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	37	2,279
Commercial mortgages: | Construction | Doubtful
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Commercial mortgages: | Commercial mortgages
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	723,832	656,981
Commercial mortgages: | Commercial mortgages | Not Rated
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Commercial mortgages: | Commercial mortgages | Pass
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	670,350	616,090
Commercial mortgages: | Commercial mortgages | Special Mention
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	33,937	23,631
Commercial mortgages: | Commercial mortgages | Substandard
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	18,422	16,128
Commercial mortgages: | Commercial mortgages | Doubtful
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	1,123	1,132
Residential mortgages
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	254,641	240,013
Residential and consumer finance receivable [Abstract]
Residential and consumer loans receivable	254,641	240,013
Residential mortgages | Performing
Residential and consumer finance receivable [Abstract]
Residential and consumer loans receivable	253,796	238,381
Residential mortgages | Non-Performing
Residential and consumer finance receivable [Abstract]
Residential and consumer loans receivable	845	1,632
Residential mortgages | Not Rated
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	253,796	238,381
Residential mortgages | Pass
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Residential mortgages | Special Mention
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Residential mortgages | Substandard
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	845	1,632
Residential mortgages | Doubtful
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Consumer loans:
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	202,940	212,088
Consumer loans: | Home equity lines and loans
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	72,653	78,761
Residential and consumer finance receivable [Abstract]
Residential and consumer loans receivable	72,653	78,761
Consumer loans: | Home equity lines and loans | Performing
Residential and consumer finance receivable [Abstract]
Residential and consumer loans receivable	71,834	77,602
Consumer loans: | Home equity lines and loans | Non-Performing
Residential and consumer finance receivable [Abstract]
Residential and consumer loans receivable	819	1,159
Consumer loans: | Home equity lines and loans | Not Rated
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	71,834	77,602
Consumer loans: | Home equity lines and loans | Pass
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Consumer loans: | Home equity lines and loans | Special Mention
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Consumer loans: | Home equity lines and loans | Substandard
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	819	1,159
Consumer loans: | Home equity lines and loans | Doubtful
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Consumer loans: | Indirect consumer loans
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	120,045	120,853
Residential and consumer finance receivable [Abstract]
Residential and consumer loans receivable	120,045	120,853
Consumer loans: | Indirect consumer loans | Performing
Residential and consumer finance receivable [Abstract]
Residential and consumer loans receivable	119,678	120,334
Consumer loans: | Indirect consumer loans | Non-Performing
Residential and consumer finance receivable [Abstract]
Residential and consumer loans receivable	367	519
Consumer loans: | Indirect consumer loans | Not Rated
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	119,678	120,334
Consumer loans: | Indirect consumer loans | Pass
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Consumer loans: | Indirect consumer loans | Special Mention
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Consumer loans: | Indirect consumer loans | Substandard
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	367	519
Consumer loans: | Indirect consumer loans | Doubtful
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Consumer loans: | Direct consumer loans
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	10,242	12,474
Consumer loans: | Direct consumer loans | Not Rated
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	10,228	12,470
Consumer loans: | Direct consumer loans | Pass
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Consumer loans: | Direct consumer loans | Special Mention
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Consumer loans: | Direct consumer loans | Substandard
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	14	4
Consumer loans: | Direct consumer loans | Doubtful
Finance receivable by credit quality indicator [Abstract]
Total financing receivables	0	0
Consumer loans: | Other Direct Consumer Loans
Residential and consumer finance receivable [Abstract]
Residential and consumer loans receivable	10,242	12,474
Consumer loans: | Other Direct Consumer Loans | Performing
Residential and consumer finance receivable [Abstract]
Residential and consumer loans receivable	10,228	12,470
Consumer loans: | Other Direct Consumer Loans | Non-Performing
Residential and consumer finance receivable [Abstract]
Residential and consumer loans receivable	$ 14	$ 4

XML

FAIR VALUE - Assets and Liabilities Measured at Fair Value (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Financial Assets:
Securities available for sale	$ 761,531	$ 554,611
Recurring
Financial Assets:
Securities available for sale	761,531	554,611
Equity investments, at fair value	2,290	1,880
Derivative Asset	9,948	14,345
Financial Liabilities:
Derivative Liabilities	10,310	14,702
Non-recurring | Other real estate owned:
Other real estate owned:
Total other real estate owned, net	171	237
Non-recurring | Other real estate owned: | Commercial mortgages, other
Other real estate owned:
Total other real estate owned, net		111
Non-recurring | Residential mortgages | Other real estate owned:
Other real estate owned:
Total other real estate owned, net	124	126
Non-recurring | Consumer loans: | Other real estate owned: | Home equity lines and loans
Other real estate owned:
Total other real estate owned, net	47
Quoted Prices in Active Markets for Identical Assets (Level 1) | Recurring
Financial Assets:
Securities available for sale	40,337	0
Equity investments, at fair value	2,290	1,880
Derivative Asset	0	0
Financial Liabilities:
Derivative Liabilities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Non-recurring | Other real estate owned:
Other real estate owned:
Total other real estate owned, net	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Non-recurring | Other real estate owned: | Commercial mortgages, other
Other real estate owned:
Total other real estate owned, net		0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Non-recurring | Residential mortgages | Other real estate owned:
Other real estate owned:
Total other real estate owned, net	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Non-recurring | Consumer loans: | Other real estate owned: | Home equity lines and loans
Other real estate owned:
Total other real estate owned, net	0
Significant Other Observable Inputs (Level 2) | Recurring
Financial Assets:
Securities available for sale	721,194	554,611
Equity investments, at fair value	0	0
Derivative Asset	9,948	14,345
Financial Liabilities:
Derivative Liabilities	10,310	14,702
Significant Other Observable Inputs (Level 2) | Non-recurring | Other real estate owned:
Other real estate owned:
Total other real estate owned, net	0	0
Significant Other Observable Inputs (Level 2) | Non-recurring | Other real estate owned: | Commercial mortgages, other
Other real estate owned:
Total other real estate owned, net		0
Significant Other Observable Inputs (Level 2) | Non-recurring | Residential mortgages | Other real estate owned:
Other real estate owned:
Total other real estate owned, net	0	0
Significant Other Observable Inputs (Level 2) | Non-recurring | Consumer loans: | Other real estate owned: | Home equity lines and loans
Other real estate owned:
Total other real estate owned, net	0
Significant Unobservable Inputs (Level 3) | Recurring
Financial Assets:
Securities available for sale	0	0
Equity investments, at fair value	0	0
Derivative Asset	0	0
Financial Liabilities:
Derivative Liabilities	0	0
Significant Unobservable Inputs (Level 3) | Non-recurring | Other real estate owned:
Other real estate owned:
Total other real estate owned, net	171	237
Significant Unobservable Inputs (Level 3) | Non-recurring | Other real estate owned: | Commercial mortgages, other
Other real estate owned:
Total other real estate owned, net		111
Significant Unobservable Inputs (Level 3) | Non-recurring | Residential mortgages | Other real estate owned:
Other real estate owned:
Total other real estate owned, net	124	126
Significant Unobservable Inputs (Level 3) | Non-recurring | Consumer loans: | Other real estate owned: | Home equity lines and loans
Other real estate owned:
Total other real estate owned, net	47
U.S. Treasury notes and bonds | Recurring
Financial Assets:
Securities available for sale	40,337
U.S. Treasury notes and bonds | Quoted Prices in Active Markets for Identical Assets (Level 1) | Recurring
Financial Assets:
Securities available for sale	40,337
U.S. Treasury notes and bonds | Significant Other Observable Inputs (Level 2) | Recurring
Financial Assets:
Securities available for sale	0
U.S. Treasury notes and bonds | Significant Unobservable Inputs (Level 3) | Recurring
Financial Assets:
Securities available for sale	0
Mortgage-backed securities, residential
Financial Assets:
Securities available for sale	586,126	467,866
Mortgage-backed securities, residential | Recurring
Financial Assets:
Securities available for sale	586,126	467,866
Mortgage-backed securities, residential | Quoted Prices in Active Markets for Identical Assets (Level 1) | Recurring
Financial Assets:
Securities available for sale	0	0
Mortgage-backed securities, residential | Significant Other Observable Inputs (Level 2) | Recurring
Financial Assets:
Securities available for sale	586,126	467,866
Mortgage-backed securities, residential | Significant Unobservable Inputs (Level 3) | Recurring
Financial Assets:
Securities available for sale	0	0
Obligations of states and political subdivisions
Financial Assets:
Securities available for sale	42,352	43,405
Obligations of states and political subdivisions | Recurring
Financial Assets:
Securities available for sale	42,352	43,405
Obligations of states and political subdivisions | Quoted Prices in Active Markets for Identical Assets (Level 1) | Recurring
Financial Assets:
Securities available for sale	0	0
Obligations of states and political subdivisions | Significant Other Observable Inputs (Level 2) | Recurring
Financial Assets:
Securities available for sale	42,352	43,405
Obligations of states and political subdivisions | Significant Unobservable Inputs (Level 3) | Recurring
Financial Assets:
Securities available for sale	0	0
Corporate bonds and notes
Financial Assets:
Securities available for sale	17,061	9,035
Corporate bonds and notes | Recurring
Financial Assets:
Securities available for sale	17,061	9,035
Corporate bonds and notes | Quoted Prices in Active Markets for Identical Assets (Level 1) | Recurring
Financial Assets:
Securities available for sale	0	0
Corporate bonds and notes | Significant Other Observable Inputs (Level 2) | Recurring
Financial Assets:
Securities available for sale	17,061	9,035
Corporate bonds and notes | Significant Unobservable Inputs (Level 3) | Recurring
Financial Assets:
Securities available for sale	0	0
SBA loan pools
Financial Assets:
Securities available for sale	75,655	34,305
SBA loan pools | Recurring
Financial Assets:
Securities available for sale	75,655	34,305
SBA loan pools | Quoted Prices in Active Markets for Identical Assets (Level 1) | Recurring
Financial Assets:
Securities available for sale	0	0
SBA loan pools | Significant Other Observable Inputs (Level 2) | Recurring
Financial Assets:
Securities available for sale	75,655	34,305
SBA loan pools | Significant Unobservable Inputs (Level 3) | Recurring
Financial Assets:
Securities available for sale	$ 0	$ 0

XML

FAIR VALUE - Quantitative Information (Details) - Significant Unobservable Inputs (Level 3) - Other real estate owned: - Non-recurring - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Information related to Level 3 non-recurring fair value measurement [Abstract]
Assets, fair value disclosure	$ 171	$ 237
Residential mortgages | Sales comparison
Information related to Level 3 non-recurring fair value measurement [Abstract]
Assets, fair value disclosure	$ 124	$ 126
Residential mortgages | Sales comparison | Minimum
Information related to Level 3 non-recurring fair value measurement [Abstract]
Discount to appraised value (in percentage)	20.80%	20.80%
Residential mortgages | Sales comparison | Maximum
Information related to Level 3 non-recurring fair value measurement [Abstract]
Discount to appraised value (in percentage)	20.80%	20.80%
Residential mortgages | Sales comparison | Weighted Average
Information related to Level 3 non-recurring fair value measurement [Abstract]
Discount to appraised value (in percentage)	20.80%	20.80%
Home equity lines and loans | Sales comparison
Information related to Level 3 non-recurring fair value measurement [Abstract]
Assets, fair value disclosure	$ 47
Home equity lines and loans | Sales comparison | Minimum
Information related to Level 3 non-recurring fair value measurement [Abstract]
Discount to appraised value (in percentage)	10.00%
Home equity lines and loans | Sales comparison | Maximum
Information related to Level 3 non-recurring fair value measurement [Abstract]
Discount to appraised value (in percentage)	10.00%
Home equity lines and loans | Sales comparison | Weighted Average
Information related to Level 3 non-recurring fair value measurement [Abstract]
Discount to appraised value (in percentage)	10.00%
Commercial mortgages, other | Sales comparison
Information related to Level 3 non-recurring fair value measurement [Abstract]
Assets, fair value disclosure		$ 111
Commercial mortgages, other | Sales comparison | Minimum
Information related to Level 3 non-recurring fair value measurement [Abstract]
Discount to appraised value (in percentage)		20.80%
Commercial mortgages, other | Sales comparison | Maximum
Information related to Level 3 non-recurring fair value measurement [Abstract]
Discount to appraised value (in percentage)		20.80%
Commercial mortgages, other | Sales comparison | Weighted Average
Information related to Level 3 non-recurring fair value measurement [Abstract]
Discount to appraised value (in percentage)		20.80%

XML

FAIR VALUE - Carrying Amounts and Estimated Fair Values of Other Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Financial assets:
Cash and due from financial institutions	$ 28,859	$ 29,467
Interest-earning deposits in other financial institutions	32,838	79,071
Securities available for sale	761,531	554,611
Securities held to maturity	3,194	2,501
Accrued interest receivable	4,261	5,035
Recurring
Financial assets:
Securities available for sale	761,531	554,611
Derivative Asset	9,948	14,345
Financial liabilities:
Derivative Liabilities	10,310	14,702
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets:
Cash and due from financial institutions	28,859	29,467
Interest-earning deposits in other financial institutions	32,838	79,071
Equity investments	2,933	2,542
Securities available for sale	40,337	0
Securities held to maturity	0	0
FHLBNY and FRBNY stock	0	0
Loans, net and loans held for sale	0	0
Accrued interest receivable	73	0
Derivative Asset	0	0
Financial liabilities:
Demand, savings, and insured money market accounts	1,943,403	1,752,043
Time deposits	0	0
Accrued interest payable	10	11
Derivative Liabilities	0	0
Recurring | 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	721,194	554,611
Securities held to maturity	1,894	2,175
FHLBNY and FRBNY stock	0	0
Loans, net and loans held for sale	0	0
Accrued interest receivable	1,706	1,356
Derivative Asset	9,948	14,345
Financial liabilities:
Demand, savings, and insured money market accounts	0	0
Time deposits	232,107	288,398
Accrued interest payable	279	251
Derivative Liabilities	10,310	14,702
Recurring | 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	0	0
Securities held to maturity	1,300	326
FHLBNY and FRBNY stock	0	0
Loans, net and loans held for sale	1,483,417	1,514,318
Accrued interest receivable	4,261	4,915
Derivative Asset	0	0
Financial liabilities:
Demand, savings, and insured money market accounts	0	0
Time deposits	0	0
Accrued interest payable	0	0
Derivative Liabilities	0	0
Recurring | Carrying Amount
Financial assets:
Cash and due from financial institutions	28,859	29,467
Interest-earning deposits in other financial institutions	32,838	79,071
Equity investments	2,933	2,542
Securities available for sale	761,531	554,611
Securities held to maturity	3,183	2,469
FHLBNY and FRBNY stock	3,562	3,150
Loans, net and loans held for sale	1,495,952	1,515,709
Accrued interest receivable	6,040	6,271
Derivative Asset	9,948	14,345
Financial liabilities:
Demand, savings, and insured money market accounts	1,943,403	1,752,043
Time deposits	230,419	285,731
Accrued interest payable	289	262
Derivative Liabilities	10,310	14,702
Recurring | Estimated Fair Value
Financial assets:
Cash and due from financial institutions	28,859	29,467
Interest-earning deposits in other financial institutions	32,838	79,071
Equity investments	2,933	2,542
Securities available for sale	761,531	554,611
Securities held to maturity	3,194	2,501
Loans, net and loans held for sale	1,483,417	1,514,318
Accrued interest receivable	6,040	6,271
Derivative Asset	9,948	14,345
Financial liabilities:
Demand, savings, and insured money market accounts	1,943,403	1,752,043
Time deposits	232,107	288,398
Accrued interest payable	289	262
Derivative Liabilities	$ 10,310	$ 14,702

XML

LEASES - Narrative (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021 USD ($) lease	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) lease	Sep. 30, 2020 USD ($)
Lessee, Lease, Description [Line Items]
Operating lease, weighted average remaining lease term	9 years 4 months 24 days		9 years 4 months 24 days
Operating lease, weighted average discount rate	3.33%		3.33%
Operating lease, rent expense	$ 200		$ 700
Number of operating lease agreements signed, but had not yet commenced. | lease	1		1
Finance lease, weighted average remaining lease term	11 years 4 months 9 days		11 years 4 months 9 days
Finance lease, weighted average discount rate	3.37%		3.37%
Financial lease not yet commenced | lease	0		0
1365 New Scotland Road, Slingerlands, New York | Director
Lessee, Lease, Description [Line Items]
Operating lease, rent expense	$ 13	$ 13
Monthly rent and common area maintenance expense			$ 4
Rent and common area maintenance expense			37	$ 40
2 Rush Street, Schenectady, New York | Director
Lessee, Lease, Description [Line Items]
Operating lease, rent expense	$ 25	$ 26
Monthly rent and common area maintenance expense			8
Rent and common area maintenance expense			$ 76	$ 80

XML

LEASES - Leased Branch Properties (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Leases [Abstract]
Operating lease right-of-use asset	$ 7,145	$ 8,001
Less: accumulated amortization	(559)	(705)
Change in lease agreements	498	(151)
Operating lease right-of-use-assets, net	$ 7,084	$ 7,145

XML

LEASES - Maturities of Operating Lease Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Leases [Abstract]
2021	$ 241
2022	970
2023	990
2024	923
2025	841
2026 and thereafter	4,501
Total minimum lease payments	8,466
Less: amount representing interest	(1,239)
Present value of net minimum lease payments	$ 7,227	$ 7,264

XML

LEASES - Premises and Equipment (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Leases [Abstract]
Finance Lease, Liability, Statement of Financial Position [Extensible Enumeration]	Net book value
Buildings	$ 5,572	$ 5,572
Less: accumulated depreciation	(2,125)	(1,875)
Net book value	$ 3,447	$ 3,697

XML

LEASES - Future Minimum Lease Payment Obligations Under Finance Leases (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Leases [Abstract]
2021	$ 98
2022	391
2023	391
2024	391
2025	409
2026 and thereafter	2,840
Total minimum lease payments	4,520
Less: amount representing interest	(861)
Present value of net minimum lease payments	$ 3,659	$ 3,849

XML

GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Goodwill [Roll Forward]
Beginning of year			$ 21,824	$ 21,824	$ 21,824
Acquired goodwill			0	0
Ending balance	$ 21,824	$ 21,824	21,824	21,824	21,824
Finite-lived intangible assets, net [Abstract]
Balance Acquired			11,608		11,608
Accumulated Amortization	11,582		11,582		11,350
Aggregate amortization expense	42	$ 120	232	$ 371
Finite-lived intangible assets, future amortization expense [Abstract]
2021	26		26
Total	26		26
Core deposit intangibles
Finite-lived intangible assets, net [Abstract]
Balance Acquired			5,975		5,975
Accumulated Amortization	5,975		5,975		5,962
Other customer relationship intangibles
Finite-lived intangible assets, net [Abstract]
Balance Acquired			5,633		5,633
Accumulated Amortization	$ 5,607		$ 5,607		$ 5,388

XML

COMMITMENTS AND CONTINGENCIES - Contractual Amounts of Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Commitments to make loans | Fixed Rate
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet contractual amounts of financial instruments	$ 21,334	$ 28,459
Commitments to make loans | Variable Rate
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet contractual amounts of financial instruments	49,839	39,056
Unused lines of credit | Fixed Rate
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet contractual amounts of financial instruments	2,137	1,300
Unused lines of credit | Variable Rate
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet contractual amounts of financial instruments	274,554	268,075
Standby letters of credit | Fixed Rate
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet contractual amounts of financial instruments	0	0
Standby letters of credit | Variable Rate
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet contractual amounts of financial instruments	$ 14,878	$ 16,094

XML

COMMITMENTS AND CONTINGENCIES - Narrative (Details) - USD ($) $ in Millions	1 Months Ended	9 Months Ended
	Apr. 30, 2020	Sep. 30, 2021	Feb. 04, 2020
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Participating credit facility receivable, ownership interest, amount			$ 4.2
Participating credit facility receivable, amount			$ 36.0
Pioneer Bank Litigation
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Litigation settlement, recovery received	$ 0.5
Loss contingency, damages sought		$ 3.7

XML

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Summary of Changes in Accumulated Other Comprehensive Income or Loss by Component (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Changes in accumulated other comprehensive income or loss by component, net of tax [Roll Forward]
Beginning balances	$ 203,977	$ 194,589	$ 199,699	$ 182,627
Other comprehensive income before reclassification	(3,209)	(516)	(9,469)	7,389
Amounts reclassified from accumulated other comprehensive income	1	16	2	52
Total other comprehensive income (loss)	(3,208)	(500)	(9,467)	7,441
Ending balances	206,139	197,005	206,139	197,005
Total
Changes in accumulated other comprehensive income or loss by component, net of tax [Roll Forward]
Beginning balances	(3,858)	2,142	2,401	(5,799)
Total other comprehensive income (loss)	(3,208)	(500)	(9,467)	7,441
Ending balances	(7,066)	1,642	(7,066)	1,642
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 balances	2,867	9,273	9,127	1,368
Other comprehensive income before reclassification	(3,209)	(516)	(9,469)	7,389
Amounts reclassified from accumulated other comprehensive income	0	0	0	0
Total other comprehensive income (loss)	(3,209)	(516)	(9,469)	7,389
Ending balances	(342)	8,757	(342)	8,757
Defined Benefit and Other Benefit Plans
Changes in accumulated other comprehensive income or loss by component, net of tax [Roll Forward]
Beginning balances	(6,725)	(7,131)	(6,726)	(7,167)
Other comprehensive income before reclassification	0	0	0	0
Amounts reclassified from accumulated other comprehensive income	1	16	2	52
Total other comprehensive income (loss)	1	16	2	52
Ending balances	$ (6,724)	$ (7,115)	$ (6,724)	$ (7,115)

XML

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Details about Accumulated Other Comprehensive Income Components (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax effect	$ (1,700)	$ (1,456)	$ (5,558)	$ (3,315)
Net income	6,646	5,711	19,971	14,029
Reclassification out of Accumulated Other Comprehensive Income
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net income	1	16	2	52
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	(55)	(55)	(165)	(165)
Actuarial losses | Reclassification out of Accumulated Other Comprehensive Income
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Pension and other employee benefits	57	77	169	231
Accumulated Defined Benefit Plans Adjustment Attributable to Parent | Reclassification out of Accumulated Other Comprehensive Income
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax effect	(1)	(6)	(2)	(14)
Net income	$ 1	$ 16	$ 2	$ 52

XML

REVENUE FROM CONTRACTS WITH CUSTOMERS - Revenue By Operating Segment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Disaggregation of Revenue [Line Items]
Net gains (losses) on sales of OREO	$ 0	$ 6	$ (18)	$ (71)
Changes in fair value of equity investments	15	57	203	(33)
Income from bank owned life insurance	13	14	39	147
Total non-interest income	5,970	5,339	18,083	15,150
Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Changes in fair value of equity investments	28	(14)	86	(82)
Total non-interest income	368	105	850	387
Overdraft fees
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	623	668	1,561	1,894
Overdraft fees | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	0	0	0	0
Other
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	233	72	744	400
Other | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	0	0	0	0
Interchange revenue from debit card transactions
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	1,237	1,082	3,622	2,989
Interchange revenue from debit card transactions | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	0	0	0	0
WMG fee income
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	2,765	2,416	8,246	6,968
WMG fee income | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	0	0	0	0
CFS fee and commission income
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	346	172	796	502
CFS fee and commission income | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	346	172	796	502
Net gains (losses) on sales of OREO
Disaggregation of Revenue [Line Items]
Net gains (losses) on sales of OREO	0	6	(18)	(71)
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
Net gains on sales of loans
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	242	553	884	916
Net gains on sales of loans | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	0	0	0	0
Loan servicing fees
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	38	32	108	88
Loan servicing fees | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	0	0	0	0
Income from bank-owned life insurance
Disaggregation of Revenue [Line Items]
Income from bank owned life insurance	13	14	39	147
Income from bank-owned life insurance | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Income from bank owned life insurance	0	0	0	0
Other
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	458	267	1,898	1,350
Other | Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	(6)	(53)	(32)	(33)
Core Banking | Operating Segments
Disaggregation of Revenue [Line Items]
Changes in fair value of equity investments	(13)	71	117	49
Total non-interest income	2,837	2,818	8,987	7,795
Core Banking | Overdraft fees | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	623	668	1,561	1,894
Core Banking | Other | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	233	72	744	400
Core Banking | Interchange revenue from debit card transactions | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	1,237	1,082	3,622	2,989
Core Banking | WMG fee income | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	0	0	0	0
Core Banking | CFS fee and commission income | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	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	6	(18)	(71)
Core Banking | Net gains on sales of loans | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	242	553	884	916
Core Banking | Loan servicing fees | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	38	32	108	88
Core Banking | Income from bank-owned life insurance | Operating Segments
Disaggregation of Revenue [Line Items]
Income from bank owned life insurance	13	14	39	147
Core Banking | Other | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue not from contact with customer	464	320	1,930	1,383
WMG | Operating Segments
Disaggregation of Revenue [Line Items]
Changes in fair value of equity investments	0	0	0	0
Total non-interest income	2,765	2,416	8,246	6,968
WMG | Overdraft fees | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	0	0	0	0
WMG | Other | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	0	0	0	0
WMG | Interchange revenue from debit card transactions | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	0	0	0	0
WMG | WMG fee income | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	2,765	2,416	8,246	6,968
WMG | CFS fee and commission income | Operating Segments
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, excluding assessed tax	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

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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, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
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	271	322	813	966
Expected return on plan assets	(673)	(610)	(2,019)	(1,830)
Amortization of unrecognized transition obligation	0	0	0	0
Amortization of unrecognized prior service cost	0	0	0	0
Amortization of unrecognized net loss	38	49	113	147
Net periodic pension benefit	(364)	(239)	(1,093)	(717)
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	8	10	24	30
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	3	15	9
Net periodic pension benefit	13	13	39	39
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	2	5	6
Expected return on plan assets	0	0	0	0
Amortization of unrecognized prior service cost	(55)	(55)	(165)	(165)
Amortization of unrecognized net loss	14	25	41	75
Net periodic pension benefit	$ (40)	$ (28)	$ (119)	$ (84)

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SEGMENT REPORTING (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) segment	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Segment Reporting Information [Line Items]
Number of primary business segments | segment			2
Reportable segments and reconciliation to consolidated results [Abstract]
Interest and dividend income	$ 17,633	$ 16,714	$ 51,318	$ 49,570
Interest expense	801	845	2,621	3,048
Net interest income	16,832	15,869	48,697	46,522
Provision (credit) for loan losses	356	679	(53)	3,989
Net interest income after provision for loan losses	16,476	15,190	48,750	42,533
Other non-interest income	5,970	5,339	18,083	15,150
Other non-interest expenses	14,100	13,362	41,304	40,339
Income (loss) before income tax expense (benefit)	8,346	7,167	25,529	17,344
Income tax expense (benefit)	1,700	1,456	5,558	3,315
Segment net income (loss)	6,646	5,711	19,971	14,029
Segment assets	2,417,656	2,165,014	2,417,656	2,165,014	$ 2,279,451
Operating Segments | Core Banking
Reportable segments and reconciliation to consolidated results [Abstract]
Interest and dividend income	17,627	16,701	51,298	49,527
Interest expense	801	845	2,621	3,048
Net interest income	16,826	15,856	48,677	46,479
Provision (credit) for loan losses	356	679	(53)	3,989
Net interest income after provision for loan losses	16,470	15,177	48,730	42,490
Other non-interest income	2,837	2,818	8,987	7,795
Other non-interest expenses	12,124	11,528	35,401	34,690
Income (loss) before income tax expense (benefit)	7,183	6,467	22,316	15,595
Income tax expense (benefit)	1,534	1,271	4,865	2,884
Segment net income (loss)	5,649	5,196	17,451	12,711
Segment assets	2,408,318	2,156,025	2,408,318	2,156,025
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 (credit) for loan losses	0	0	0	0
Net interest income after provision for loan losses	0	0	0	0
Other non-interest income	2,765	2,416	8,246	6,968
Other non-interest expenses	1,651	1,565	4,921	4,814
Income (loss) before income tax expense (benefit)	1,114	851	3,325	2,154
Income tax expense (benefit)	156	218	735	552
Segment net income (loss)	958	633	2,590	1,602
Segment assets	3,216	3,153	3,216	3,153
Intersegment Eliminations
Reportable segments and reconciliation to consolidated results [Abstract]
Interest and dividend income	6	13	20	43
Interest expense	0	0	0	0
Net interest income	6	13	20	43
Provision (credit) for loan losses	0	0	0	0
Net interest income after provision for loan losses	6	13	20	43
Other non-interest income	368	105	850	387
Other non-interest expenses	325	269	982	835
Income (loss) before income tax expense (benefit)	49	(151)	(112)	(405)
Income tax expense (benefit)	10	(33)	(42)	(121)
Segment net income (loss)	39	(118)	(70)	(284)
Segment assets	$ 6,122	$ 5,836	$ 6,122	$ 5,836

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STOCK COMPENSATION - Narrative (Details) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended		9 Months Ended
	Jan. 31, 2021	Jan. 31, 2020	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
2021 Plan
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Shares granted (in share)					0
Restricted Stock
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Total unrecognized compensation cost related to nonvested shares granted under the Plan			$ 800		$ 800
Weighted-average period for recognition (in years)					3 years 3 months 7 days
Total fair value of shares vested					$ 167	$ 159
Directors and President and Chief Executive Officer
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Number of treasury shares reissued to fund stock compensation (in shares)	9,291	7,923
Expenses related to stock based compensation recognized			$ 101	$ 67	$ 295	$ 232

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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, 2021	Sep. 30, 2021
Shares
Nonvested, Beginning Balance (in shares)	27,448	31,830
Granted (in shares)	0	0
Vested (in shares)	(261)	(4,643)
Forfeited or cancelled (in shares)	0	0
Nonvested, Ending Balance (in shares)	27,187	27,187
Weighted–Average Grant Date Fair Value
Nonvested, Beginning Balance (in dollars per share)	$ 40.18	$ 40.32
Vested (in dollars per share)	39.85	41.15
Nonvested, Ending Balance (in dollars per share)	$ 40.23	$ 40.23