What changed in this filing

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Item 1. Financial Statements

2021-11-09 compared with 2021-08-09 · 231 added, 165 removed, 876 unchanged (31% of the section changed)

3 unchanged sentences

(In Thousands, Except Share Data)

September 30,

Cash and cash equivalents

26 unchanged sentences

Accumulated other comprehensive (loss) income

Treasury stock, at cost ( 145,172 shares, including 145,157 shares held by deferred compensation arrangements at June 30, 2021 and 161,472 shares including 161,457 shares held by deferred compensation arrangements at December 31, 2020, respectively)

Treasury stock, at cost ( 146,002 shares, including 145,987 shares held by deferred compensation arrangements at September 30, 2021 and 161,472 shares including 161,457 shares held by deferred compensation arrangements at December 31, 2020, respectively)

Deferred compensation arrangements ( 145,987 and 161,457 shares, respectively)

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Interest income:

19 unchanged sentences

Wealth management services

Unrealized gain (loss) on equity securities

Unrealized (loss) gain on equity securities

Total noninterest revenues

6 unchanged sentences

Business development and marketing

Litigation accrual

Acquisition expenses

9 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Pension and other post retirement obligations:

4 unchanged sentences

Other comprehensive income related to pension and other post-retirement obligations, net of taxes

Unrealized gains (losses) on available-for-sale securities:

Net unrealized holding gains (losses) arising during period, gross

Net unrealized holding gains (losses) arising during period, net

Other comprehensive income (loss) related to unrealized gains (losses) on available-for-sale securities, net of taxes

Other comprehensive income (loss), net of tax

Comprehensive income (loss)

Unrealized (losses) gains on available-for-sale securities:

Net unrealized holding (losses) gains arising during period, gross

Net unrealized holding (losses) gains arising during period, net

Other comprehensive (loss) income related to unrealized gains (losses) on available-for-sale securities, net of taxes

Other comprehensive (loss) income, net of tax

Comprehensive income

September 30,

Accumulated Other Comprehensive (Loss) Income By Component:

7 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

Three months ended June 30, 2021 and 2020

Three months ended September 30, 2021 and 2020

(In Thousands, Except Share Data)

1 unchanged sentence

(Loss) Income

Balance at March 31, 2021

Other comprehensive income, net of tax

Balance at June 30, 2021

Other comprehensive loss, net of tax

Dividends declared:

3 unchanged sentences

Treasury stock issued to benefit plans, net

Balance at September 30, 2021

Balance at June 30, 2020

Balance at March 31, 2020

Other comprehensive income, net of tax

Dividends declared:

Other comprehensive loss, net of tax

Cash dividends declared:

Common, $ 0.42 per share

1 unchanged sentence

Stock-based compensation

Stock issued for acquisition

Treasury stock issued to benefit plans, net

Balance at June 30, 2020

Balance at September 30, 2020

The accompanying notes are an integral part of the consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

Six months ended June 30, 2021 and 2020

Nine months ended September 30, 2021 and 2020

(In Thousands, Except Share Data)

5 unchanged sentences

Common, $ 1.27 per share

Common stock activity under

employee stock plans

Common stock activity under employee stock plans

Stock-based compensation

Distribution of stock under deferred

compensation arrangements

Distribution of stock under deferred compensation arrangements

Treasury stock issued to benefit plans, net

Balance at June 30, 2021

Balance at September 30, 2021

Balance at December 31, 2019

3 unchanged sentences

Common, $ 1.24 per share

Common stock activity under

employee stock plans

Common stock activity under employee stock ownership plans

Stock-based compensation

Stock issued for acquisition

Distribution of stock under deferred

compensation arrangements

Distribution of stock under deferred compensation arrangements

Treasury stock issued to benefit plans, net

Balance at June 30, 2020

Balance at September 30, 2020

The accompanying notes are an integral part of the consolidated financial statements

COMMUNITY BANK SYSTEM, INC.

1 unchanged sentence

(In Thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating activities:

14 unchanged sentences

Purchases of available-for-sale investment securities

( 1,284,544 )

Purchases of equity and other securities

31 unchanged sentences

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

JUNE 30, 2021

SEPTEMBER 30, 2021

BASIS OF PRESENTATION

The interim financial data as of and for the three and six months ended June 30, 2021 is unaudited;

The interim financial data as of and for the three and nine months ended September 30, 2021 is unaudited;

however, in the opinion of Community Bank System, Inc.

2 unchanged sentences

The Company’s unaudited interim consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on March 1, 2021.

Subsequent Events

On July 1, 2021, the Company, through its subsidiary Benefit Plans Administrative Services, Inc., completed its acquisition of Fringe Benefits Design of Minnesota, Inc.

(“FBD”) for $ 15.3 million in cash, excluding contingent consideration valued up to $ 2.7 million.

The Company expects to incur certain one-time, transaction-related costs in the third quarter of 2021 in connection with the FBD acquisition, and the effects of the acquisition will be reflected in the third quarter consolidated financial statements.

Subsequent Event

On October 4, 2021, the Company announced that it had entered into an agreement to acquire Elmira Savings Bank ("Elmira"), a twelve branch banking franchise headquartered in Elmira, New York, for $ 82.8 million in cash.

The acquisition will enhance the Company’s presence in five counties in New York’s Southern Tier and Finger Lakes regions.

Elmira had total assets of $ 648.7 million, total deposits of $ 551.2 million, and net loans of $ 465.3 million at June 30, 2021.

The Company expects to complete the acquisition in the first quarter of 2022, subject to customary closing conditions, including approval by the shareholders of Elmira and required regulatory approval.

Current and Prior Period Acquisitions

On August 2, 2021, the Company, through its subsidiary OneGroup NY, Inc.

(“OneGroup”), completed its acquisition of certain assets of the Thomas Gregory Associates Insurance Brokers, Inc.

(“TGA”), a specialty-lines insurance broker based in the Boston, Massachusetts marketplace, for $ 11.6 million in cash, excluding contingent consideration valued up to $ 3.4 million.

The Company expects to incur certain one-time, transaction-related costs in the third quarter of 2021 in connection with the TGA acquisition, and the effects of the acquisition will be reflected in the third quarter consolidated financial statements.

Current and Prior Period Acquisitions

(“TGA”), a specialty-lines insurance broker based in the Boston, Massachusetts area, for $ 11.6 million in cash plus contingent consideration with a fair value at acquisition date of $ 1.5 million.

The Company recorded a $ 10.9 million customer list intangible asset and $ 2.2 million of goodwill in conjunction with the acquisition.

The effects of the acquired assets have been included in the consolidated financial statements since that date.

Revenues of approximately $ 0.3 million and direct expenses of approximately $ 0.2 million from TGA were included in the consolidated income statement for the three and nine months ended September 30, 2021.

The acquisition of TGA includes a contingent consideration arrangement that requires additional consideration to be paid by the Company based on the future retained revenue of TGA over a three-year period.

Amounts are payable in two payments, the first of which is two years after the acquisition date, and the second three years after the acquisition date.

The range of the undiscounted amounts the Company could pay under the contingent consideration agreement is between zero and $ 3.4 million.

The fair value of the contingent consideration recognized on the acquisition date of $ 1.5 million was estimated by applying the income approach.

That measure is based on significant Level 3 inputs not readily observable in the market.

Key assumptions include (1) a discount range of 0.82 % to 1.09 %, and (2) probability adjusted level of retained revenue between $ 2.3 million and $ 3.8 million.

On July 1, 2021, the Company, through its subsidiary Benefit Plans Administrative Services, Inc., completed its acquisition of Fringe Benefits Design of Minnesota, Inc.

("FBD") for $ 15.4 million in cash plus contingent consideration with a fair value at acquisition date of $ 1.4 million.

The Company recorded a $ 14.0 million customer list intangible asset and $ 2.1 million of goodwill in conjunction with the acquisition.

The effects of the acquired assets have been included in the consolidated financial statements since that date.

Revenues of approximately $ 1.4 million and direct expenses of approximately $ 1.1 million from FBD were included in the consolidated income statement for the three and nine months ended September 30, 2021.

The acquisition of FBD includes a contingent consideration arrangement that requires additional consideration to be paid by the Company based on the future retained revenue of FBD over a two-year period.

Amounts are payable three years after the acquisition date.

The range of the undiscounted amounts the Company could pay under the contingent consideration agreement is between zero and $ 2.7 million.

The fair value of the contingent consideration recognized on the acquisition date of $ 1.4 million was estimated by applying the income approach.

That measure is based on significant Level 3 inputs not readily observable in the market.

Key assumptions include (1) a discount rate of 1.05 %, and (2) probability adjusted level of retained revenue between $ 5.6 million and $ 5.8 million.

On June 1, 2021, the Company, through its subsidiary OneGroup, completed its acquisition of certain assets of NuVantage Insurance Corp.

2 unchanged sentences

The effects of the acquired assets have been included in the consolidated financial statements since that date.

Revenues of approximately $ 0.3 million and $ 0.4 million and direct expenses of approximately $ 0.3 million from NuVantage were included in the consolidated income statement for the three and nine months ended September 30, 2021, respectively.

On June 12, 2020, the Company completed its merger with Steuben Trust Corporation (“Steuben”), parent company of Steuben Trust Company, a New York State chartered bank headquartered in Hornell, New York, for $ 98.6 million in Company stock and cash, comprised of $ 21.6 million in cash and the issuance of 1.36 million shares of common stock.

3 unchanged sentences

The effects of the acquired assets and liabilities have been included in the consolidated financial statements since that date.

Revenues, excluding interest income on acquired investments, interest income on acquired consumer indirect loans, and revenues associated with acquired loans and deposits consolidated into the legacy branch network, of approximately $ 3.3 million and $ 6.5 million, and direct expenses, which may not include certain shared expenses, of approximately $ 1.2 million and $ 2.5 million from Steuben were included in the consolidated income statement for the three and six months ended June 30, 2021.

Revenues, excluding interest income on acquired investments, interest income on acquired consumer indirect loans, and revenues associated with acquired loans and deposits consolidated into the legacy branch network, of approximately $ 3.3 million and $ 9.8 million, and direct expenses, which may not include certain shared expenses, of approximately $ 1.4 million and $ 3.9 million from Steuben were included in the consolidated income statement for the three and nine months ended September 30, 2021.

The Company incurred certain one-time, transaction-related costs in 2020 in connection with the Steuben acquisition.

The assets and liabilities assumed in the acquisitions were recorded at their estimated fair values based on management’s best estimates using information available at the dates of the acquisitions, and were subject to adjustment based on updated information not available at the time of the acquisitions.

Through the second quarter of 2021, the carrying amount of other liabilities associated with the Steuben acquisition decreased by $ 0.3 million as a result of an adjustment to accrued income taxes and deferred income taxes.

The assets and liabilities assumed in the acquisitions were recorded at their estimated fair values based on management’s best estimates using information available at the dates of the acquisitions, and are subject to adjustment based on updated information not available at the time of the acquisitions.

Through the third quarter of 2021, the carrying amount of other liabilities associated with the Steuben acquisition decreased by $ 0.3 million as a result of an adjustment to accrued income taxes and deferred income taxes.

Goodwill associated with the Steuben acquisition decreased $ 0.3 million as a result of this adjustment.

The acquisitions expanded the Company’s geographical presence in New York and Florida and management expects that the Company will benefit from greater geographic diversity and the advantages of other synergistic business development opportunities.

The acquisitions expanded the Company’s geographical presence in New York, Florida, Massachusetts, and Minnesota, and management expects that the Company will benefit from greater geographic diversity and the advantages of other synergistic business development opportunities.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed after considering the measurement period adjustments described above:

(000s omitted)

Consideration paid :

Consideration:

Community Bank System, Inc.

Total net consideration paid

Contingent consideration

Total net consideration

Recognized amounts of identifiable assets acquired and liabilities assumed:

10 unchanged sentences

Total identifiable assets, net

The Company has acquired loans from Steuben for which there was evidence of a more-than-insignificant deterioration in credit quality since origination (purchased credit deteriorated (“PCD”) loans).

The Company acquired loans from Steuben for which there was evidence of a more-than-insignificant deterioration in credit quality since origination (purchased credit deteriorated (“PCD”) loans).

PCD loans are initially recorded at the amount paid.

13 unchanged sentences

At the acquisition date, a fair value adjustment is recorded that includes both credit and interest rate considerations.

Fair value adjustments may be discounts (or premiums) to a loan’s cost basis and are accreted (or amortized) to net interest income (or expense) over the loan’s remaining life.

Fair value adjustments may be discounts (or premiums) to a loan’s cost basis and are accreted (or amortized) to interest income over the loan’s remaining life.

Fair value adjustments for revolving loans are accreted (or amortized) using a straight line method.

13 unchanged sentences

Certificate of deposit accounts were valued at the present value of the certificates’ expected contractual payments discounted at market rates for similar certificates.

The core deposit intangibles and other intangibles related to the Steuben acquisition and the NuVantage acquisition are being amortized using an accelerated method over their estimated useful life of eight years .

The goodwill, which is not amortized for book purposes, was assigned to the Banking segment for the Steuben acquisition and the All Other segment for the NuVantage acquisition.

Goodwill arising from the Steuben acquisition is not deductible for tax purposes.

Goodwill arising from the NuVantage acquisition is deductible for tax purposes.

The core deposit intangibles and other intangibles related to the Steuben and NuVantage acquisitions are being amortized using an accelerated method over their estimated useful life of eight years .

The other intangibles related to the TGA and FBD acquisitions are being amortized using an accelerated method over their estimated useful life of 13 years and 15 years , respectively.

The goodwill, which is not amortized for book purposes, was assigned to the Banking segment for the Steuben acquisition, the All Other segment for the NuVantage and TGA acquisitions, and the Employee Benefit Services segment for the FBD acquisition.

Goodwill arising from the Steuben and FBD acquisitions is not deductible for tax purposes.

Goodwill arising from the NuVantage and TGA acquisitions is deductible for tax purposes.

Direct costs related to the acquisitions were expensed as incurred.

Merger and acquisition integration-related expenses were immaterial during the three and six months ended June 30, 2021 and amounted to $ 3.4 million and $ 3.7 million during the three and six months ended June 30, 2020, respectively, and have been separately stated in the consolidated statements of income.

Merger and acquisition integration-related expenses were $ 0.1 million during the three and nine months ended September 30, 2021 and amounted to $ 0.8 million and $ 4.5 million during the three and nine months ended September 30, 2020, respectively, and have been separately stated in the consolidated statements of income.

Supplemental Pro Forma Financial Information

The following unaudited condensed pro forma information assumes the Steuben acquisition had been completed as of January 1, 2019 for the three and six months ended June 30, 2020 and June 30, 2019.

The following unaudited condensed pro forma information assumes the Steuben acquisition had been completed as of January 1, 2019 for the three and nine months ended September 30, 2020 and September 30, 2019.

The table below has been prepared for comparative purposes only and is not necessarily indicative of the actual results that would have been attained had the acquisition occurred as of the beginning of the year presented, nor is it indicative of the Company’s future results.

1 unchanged sentence

The pro forma information set forth below reflects the historical results of Steuben combined with the Company’s consolidated statements of income with adjustments related to (a) certain purchase accounting fair value adjustments and (b) amortization of customer lists and core deposit intangibles.

Acquisition-related expenses totaling $ 3.3 million and $ 3.6 million for the three and six months ended June 30, 2020 related to Steuben were included in the pro forma information as if they were incurred in the first quarter of 2019.

Acquisition-related expenses totaling $ 0.8 million and $ 4.4 million for the three and nine months ended September 30, 2020 related to Steuben were included in the pro forma information as if they were incurred in the first quarter of 2019.

Pro Forma (Unaudited)

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

(000’s omitted)

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Total revenue, net of interest expense

3 unchanged sentences

the magnitude and duration of COVID-19, the extent to which it will impact national and international macroeconomic conditions including interest rates, unemployment rates, the speed of the anticipated recovery, and governmental and business reactions to the pandemic.

The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of June 30, 2021 and through the date of this Quarterly Report on Form 10-Q.

The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of September 30, 2021 and through the date of this Quarterly Report on Form 10-Q.

The accounting matters assessed included, but were not limited to, the Company’s allowance for credit losses, decrease in fee and interest income, and the carrying value of the goodwill and other long-lived assets.

While there was not a material impact to the Company’s consolidated financial statements as of and for the three and six months ended June 30, 2021, the Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the Company’s consolidated financial statements in future reporting periods.

While there was not a material impact to the Company’s consolidated financial statements as of and for the three and nine months ended September 30, 2021, the Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the Company’s consolidated financial statements in future reporting periods.

Contract Balances

4 unchanged sentences

The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances.

As of June 30, 2021, $ 27.4 million of accounts receivable, including $ 8.3 million of unbilled fee revenue, and $ 2.7 million of unearned revenue was recorded in the consolidated statements of condition.

As of September 30, 2021, $ 33.9 million of accounts receivable, including $ 8.5 million of unbilled fee revenue, and $ 3.1 million of unearned revenue was recorded in the consolidated statements of condition.

As of December 31, 2020, $ 30.3 million of accounts receivable, including $ 7.7 million of unbilled fee revenue, and $ 1.4 million of unearned revenue was recorded in the consolidated statements of condition.

20 unchanged sentences

While not expected to be material to the Company due to its insignificant exposure to LIBOR-based loans and financial instruments, the Company is currently evaluating the impact the adoption of this guidance will have on the Company’s consolidated financial statements.

In August 2021, the FASB issued ASU 2021-06, Presentation of Financial Statements (Topic 205) , Financial Services-Depository and Lending (Topic 942) , and Financial Services-Investment Companies (Topic 946):

Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No.

33-10786 , Amendments to Financial Disclosures about Acquired and Disposed Businesses , and No.

33- 10835 , Update of Statistical Disclosures for Bank and Savings and Loan Registrants .

This ASU incorporates recent SEC rule changes into the FASB Codification, including SEC Final Rule Releases No.

33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses , and No.

33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants .

The amendments in this update are effective upon addition to the FASB Codification and the Company determined that this guidance does not have a material impact on the Company’s consolidated financial statements.

INVESTMENT SECURITIES

The amortized cost and estimated fair value of investment securities as of June 30, 2021 and December 31, 2020 are as follows:

June 30, 2021

The amortized cost and estimated fair value of investment securities as of September 30, 2021 and December 31, 2020 are as follows:

September 30, 2021

December 31, 2020

14 unchanged sentences

A summary of investment securities that have been in a continuous unrealized loss position is as follows:

As of June 30, 2021

As of September 30, 2021

Less than 12 Months

5 unchanged sentences

Government agency mortgage-backed securities

Corporate debt securities

Government agency collateralized mortgage obligations

14 unchanged sentences

The majority of the obligations of state and political subdivisions and corporations carry a credit rating of A or better.

Additionally, a majority of the obligations of state and political subdivisions carry a secondary level of credit enhancement.

Additionally, a portion of the obligations of state and political subdivisions carry a secondary level of credit enhancement.

The Company does not intend to sell these securities, nor is it more likely than not that the Company will be required to sell these securities prior to recovery of the amortized cost.

1 unchanged sentence

The unrealized losses in the portfolios are primarily attributable to changes in interest rates.

As such, management does not believe any individual unrealized loss as of June 30, 2021 represents credit losses and no unrealized losses have been recognized into credit loss expense.

Accordingly, there is no allowance for credit losses on the Company’s available-for-sale portfolio as of June 30, 2021.

Accrued interest receivable on available-for-sale debt securities, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $ 14.5 million at June 30, 2021 and is excluded from the estimate of credit losses.

The amortized cost and estimated fair value of debt securities at June 30, 2021, by contractual maturity, are shown below.

As such, management does not believe any individual unrealized loss as of September 30, 2021 represents credit losses and no unrealized losses have been recognized into credit loss expense.

Accordingly, there is no allowance for credit losses on the Company’s available-for-sale portfolio as of September 30, 2021.

Accrued interest receivable on available-for-sale debt securities, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $ 12.5 million at September 30, 2021 and is excluded from the estimate of credit losses.

The amortized cost and estimated fair value of debt securities at September 30, 2021, by contractual maturity, are shown below.

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

8 unchanged sentences

Government agency collateralized mortgage obligations

Investment securities with a carrying value of $ 2.43 billion and $ 2.03 billion at June 30, 2021 and December 31, 2020, respectively, were pledged to collateralize certain deposits and borrowings.

Investment securities with a carrying value of $ 2.48 billion and $ 2.03 billion at September 30, 2021 and December 31, 2020, respectively, were pledged to collateralize certain deposits and borrowings.

Securities pledged to collateralize certain deposits and borrowings included $ 475.0 million and $ 473.4 million of U.S.

Treasury securities that were pledged as collateral for securities sold under agreement to repurchase at June 30, 2021 and December 31, 2020, respectively.

All securities sold under agreement to repurchase as of June 30, 2021 and December 31, 2020 have an overnight and continuous maturity.

Treasury securities that were pledged as collateral for securities sold under agreement to repurchase at September 30, 2021 and December 31, 2020, respectively.

All securities sold under agreement to repurchase as of September 30, 2021 and December 31, 2020 have an overnight and continuous maturity.

The segments of the Company’s loan portfolio are summarized as follows:

September 30,

(000’s omitted)

6 unchanged sentences

Loans, net of allowance for credit losses

The following table presents the aging of the amortized cost basis of the Company’s past due loans, including PCD loans, by segment as of June 30, 2021:

The following table presents the aging of the amortized cost basis of the Company’s past due loans, including PCD loans, by segment as of September 30, 2021:

90+ Days Past

13 unchanged sentences

Consumer direct

The delinquency status for loans on payment deferment due to COVID-19 financial hardship were reported at June 30, 2021 based on their delinquency status at the execution date of the payment deferment, unless subsequent to the execution date of the payment deferment, the borrower made all required past due payments to bring the loan to current status.

The delinquency status for loans on payment deferment due to COVID-19 financial hardship were reported at September 30, 2021 based on their delinquency status at the execution date of the payment deferment, unless subsequent to the execution date of the payment deferment, the borrower made all required past due payments to bring the loan to current status.

Certain loans under extended pandemic-related forbearance were reclassified to nonaccrual status.

No interest income on nonaccrual loans was recognized during the three and six months ended June 30, 2021.

An immaterial amount of accrued interest was written off on nonaccrual loans by reversing interest income.

No interest income on nonaccrual loans was recognized during the three and nine months ended September 30, 2021 and 2020.

An immaterial amount of accrued interest was written off on nonaccrual loans by reversing interest income in both periods.

The Company uses several credit quality indicators to assess credit risk in an ongoing manner.

10 unchanged sentences

The condition of the borrower has deteriorated to the point that collection of the balance is improbable based on current facts and conditions and loss is likely.

The following tables show the amount of business lending loans by credit quality category at June 30, 2021 and December 31, 2020:

The following tables show the amount of business lending loans by credit quality category at September 30, 2021 and December 31, 2020:

(000’s omitted)

Term Loans Amortized Cost Basis by Origination Year

June 30, 2021

September 30, 2021

Business lending:

11 unchanged sentences

Nonperforming loans include 90+ days past due and still accruing and nonaccrual loans.

The following table details the balances in all other loan categories at June 30, 2021:

The following table details the balances in all other loan categories at September 30, 2021:

(000’s omitted)

Term Loans Amortized Cost Basis by Origination Year

June 30, 2021

September 30, 2021

Consumer mortgage:

12 unchanged sentences

Total home equity

(1) FICO AB refers to higher tiered loans with FICO scores greater than or equal to 720.

(2) FICO CDE refers to loans with FICO scores less than 720 and potentially higher risk.

The following table details the balances in all other loan categories at December 31, 2020:

16 unchanged sentences

Total home equity

All loan classes are collectively evaluated for impairment except business lending.

A summary of individually evaluated impaired business loans as of June 30, 2021 and December 31, 2020 follows:

(1) FICO AB refers to higher tiered loans with FICO scores greater than or equal to 720.

(2) FICO CDE refers to loans with FICO scores less than 720 and potentially higher risk.

All loan classes are collectively evaluated for credit losses except business lending.

A summary of individually assessed business loans as of September 30, 2021 and December 31, 2020 follows:

September 30,

(000’s omitted)

4 unchanged sentences

Specifically allocated allowance

The average carrying balance of individually evaluated impaired loans was $ 32.9 million and $ 1.4 million for the three months ended June 30, 2021 and June 30, 2020, respectively.

The average carrying balance of individually evaluated impaired loans was $ 34.6 million and $ 1.8 million for the six months ended June 30, 2021 and June 30, 2020, respectively.

No interest income was recognized on individually evaluated impaired loans for the three or six months ended June 30, 2021 and June 30, 2020.

The average carrying balance of individually assessed loans was $ 31.5 million and $ 8.8 million for the three months ended September 30, 2021 and September 30, 2020, respectively.

The average carrying balance of individually assessed loans was $ 34.1 million and $ 4.2 million for the nine months ended September 30, 2021 and September 30, 2020, respectively.

No interest income was recognized on individually assessed loans for the three or nine months ended September 30, 2021 and September 30, 2020.

In the course of working with borrowers, the Company may choose to restructure the contractual terms of certain loans.

5 unchanged sentences

Pursuant to that guidance, the Company records a charge-off equal to any portion of the carrying value that exceeds the net realizable value of the collateral.

The amount of loss incurred in the three and six months ended June 31, 2021 and 2020 was immaterial.

The amount of loss incurred in the three and nine months ended September 30, 2021 and 2020 was immaterial.

TDRs less than $ 0.5 million are collectively included in the allowance for credit loss estimate.

Commercial loans greater than $ 0.5 million are individually evaluated for impairment, and if necessary, a specific allocation of the allowance for credit losses is provided.

Commercial loans greater than $ 0.5 million are individually assessed, and if necessary, a specific allocation of the allowance for credit losses is provided.

With regard to determination of the amount of the allowance for credit losses, TDR loans are considered to be impaired.

5 unchanged sentences

Borrowers that were delinquent in their payments to the Company prior to requesting a COVID-19 related financial hardship payment deferral were reviewed on a case-by-case basis for TDR classification and non-performing loan status.

As of June 30, 2021, the Company had 12 borrowers in forbearance due to COVID-19 related financial hardship, representing $ 2.4 million in outstanding loan balances, or 0.03 % of total loans outstanding.

These forbearances were comprised of 8 business borrowers representing $ 2.0 million in outstanding loan balances and 4 consumer borrowers representing approximately $ 0.4 million in outstanding loan balances.

As of September 30, 2021, the Company had 4 borrowers in forbearance due to COVID-19 related financial hardship, representing $ 3.9 million in outstanding loan balances, or 0.1 % of total loans outstanding.

These forbearances were comprised of 3 business borrowers representing $ 3.8 million in outstanding loan balances and 1 consumer borrower representing approximately $ 0.1 million in outstanding loan balances.

As of December 31, 2020, the Company had 74 borrowers in forbearance due to COVID-19 related financial hardship, representing $ 66.5 million in outstanding loan balances, or 0.9 % of total loans outstanding.

These forbearances were comprised of 63 business borrowers representing $ 65.7 million in outstanding loan balances and 11 consumer borrowers representing approximately $ 0.8 million in outstanding loan balances.

Information regarding TDRs as of June 30, 2021 and December 31, 2020 is as follows:

June 30, 2021

Information regarding TDRs as of September 30, 2021 and December 31, 2020 is as follows:

September 30, 2021

December 31, 2020

4 unchanged sentences

Consumer direct

The following table presents information related to loans modified in a TDR during the three months and six months ended June 30, 2021 and 2020.

Of the loans noted in the table below, all consumer mortgage loans for the three months and six months ended June 30, 2021 and 2020 were modified due to a Chapter 7 bankruptcy as described previously.

The following table presents information related to loans modified in a TDR during the three months and nine months ended September 30, 2021 and 2020.

Of the loans noted in the table below, all consumer mortgage loans for the three months and nine months ended September 30, 2021 and 2020 were modified due to a Chapter 7 bankruptcy as described previously.

The financial effects of these restructurings were immaterial.

1 unchanged sentence

Three Months Ended

June 30, 2021

June 30, 2020

September 30, 2021

September 30, 2020

(000’s omitted)

5 unchanged sentences

Consumer direct

Six Months Ended

June 30, 2021

June 30, 2020

Nine Months Ended

September 30, 2021

September 30, 2020

(000’s omitted)

6 unchanged sentences

Allowance for Credit Losses

The following presents by segment the activity in the allowance for credit losses during the three months and six months ended June 30, 2021 and 2020:

Three Months Ended June 30, 2021

The following presents by segment the activity in the allowance for credit losses during the three months and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30, 2021

(000’s omitted)

7 unchanged sentences

Total allowance for credit losses

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

(000’s omitted)

7 unchanged sentences

Total allowance for credit losses

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

(000’s omitted)

7 unchanged sentences

Total allowance for credit losses

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

(000’s omitted)

8 unchanged sentences

Total allowance for credit losses

Improvements in economic forecasts have resulted in an allowance for credit losses to total loans ratio of 0.71 % at June 30, 2021, 15 basis points lower than the level at June 30, 2020 and 11 basis points lower than the level at December 31, 2020.

Accrued interest receivable on loans, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $ 19.0 million at June 30, 2021 and is excluded from the estimate of credit losses and amortized cost basis of loans.

Improvements in economic forecasts have resulted in an allowance for credit losses to total loans ratio of 0.68 % at September 30, 2021, 19 basis points lower than the level at September 30, 2020 and 14 basis points lower than the level at December 31, 2020.

Accrued interest receivable on loans, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $ 18.2 million at September 30, 2021 and is excluded from the estimate of credit losses and amortized cost basis of loans.

Under ASU No.

5 unchanged sentences

Management determined that these qualitative adjustments were needed to adjust historical information for expected losses and to reflect changes as a result of current conditions.

For qualitative macroeconomic adjustments, the Company uses third party forecasted economic data scenarios utilizing a base scenario and two alternative scenarios that were weighted based on guidance from the third party provider, with forecasts available as of June 30, 2021.

These forecasts were factored into the qualitative portion of the calculation of the estimated credit losses and included the impact of COVID-19, including forecasted vaccine distribution progress and current and future Federal stimulus packages.

The scenarios utilized outline a significant improvement in economic conditions with peak unemployment ranging from 3 % to 9 % in the third quarter of 2022 and a general improvement in unemployment levels over the subsequent three quarters.

The scenarios utilized outline a significant improvement in economic conditions with peak unemployment ranging from 2.9 % to 9.1 % in the third quarter of 2022, a general improvement in unemployment levels over the subsequent three quarters, and an improvement in real estate and vehicle collateral values.

In addition to the economic forecast, the Company also considered additional qualitative adjustments as a result of COVID-19 and the impact on all industries, loan deferrals, delinquencies and downgrades, and the risk that Paycheck Protection Program (“PPP”) loans will not be forgiven.

15 unchanged sentences

In addition, current delinquencies, the level of loan deferrals, charge-offs and acquired loans were considered.

The following table presents the carrying amounts of loans purchased and sold during the six months ended June 30, 2021 by portfolio segment:

The following table presents the carrying amounts of loans purchased and sold during the nine months ended September 30, 2021 by portfolio segment:

(000’s omitted)

All the sales of consumer mortgages during the six months ended June 30, 2021 were sales of secondary market eligible residential mortgage loans.

The sales of business loans during the six months ended June 30, 2021 includes two business lending loans under one relationship.

All the sales of consumer mortgages during the nine months ended September 30, 2021 were sales of secondary market eligible residential mortgage loans.

The sales of business loans during the nine months ended September 30, 2021 includes two business lending loans under one relationship.

GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

The gross carrying amount and accumulated amortization for each type of identifiable intangible asset are as follows:

June 30, 2021

September 30, 2021

December 31, 2020

6 unchanged sentences

(000’s omitted)

Jul - Dec 2021

Shown below are the components of the Company’s goodwill at December 31, 2020 and June 30, 2021:

Oct - Dec 2021

Shown below are the components of the Company’s goodwill at December 31, 2020 and September 30, 2021:

(000’s omitted)

December 31, 2020

June 30, 2021

September 30, 2021

Goodwill, net

MANDATORILY REDEEMABLE PREFERRED SECURITIES

As of June 30, 2021, the Company does not sponsor any business trusts.

As of September 30, 2021, the Company does not sponsor any business trusts.

The Company previously sponsored Community Capital Trust IV (“CCT IV”) until March 15, 2021 when the Company exercised its right to redeem all of the CCT IV debentures and associated preferred securities for a total of $ 77.3 million.

The Company previously sponsored Steuben Statutory Trust (“SST II”) until September 15, 2020 when the Company exercised its right to redeem all of the SST II debentures and associated preferred securities for a total of $ 2.1 million.

The Company previously sponsored Steuben Statutory Trust II (“SST II”) until September 15, 2020 when the Company exercised its right to redeem all of the SST II debentures and associated preferred securities for a total of $ 2.1 million.

The common stock of SST II was acquired in the Steuben acquisition.

5 unchanged sentences

The Company made a $ 2.9 million contribution to its defined benefit pension plan in the first quarter of 2021.

The Company made a $ 3.9 million contribution to its defined benefit pension plan in the second quarter of 2020.

The net periodic benefit cost for the three and six months ended June 30, 2021 and 2020 is as follows:

The Company made a $ 3.9 million contribution to its defined benefit pension plan in the third quarter of 2020.

The net periodic benefit cost for the three and nine months ended September 30, 2021 and 2020 is as follows:

Pension Benefits

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(000’s omitted)

7 unchanged sentences

Under the two class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared and participation rights in undistributed earnings.

The Company has determined that all of its outstanding non-vested stock awards are participating securities as of June 30, 2021.

The Company has determined that all of its outstanding non-vested stock awards are participating securities as of September 30, 2021.

Basic earnings per share are computed based on the weighted-average of the common shares outstanding for the period.

2 unchanged sentences

The treasury stock method determines the number of common shares that would be outstanding if all the dilutive options were exercised and the proceeds were used to repurchase common shares in the open market at the average market price for the applicable time period.

There were approximately 0.2 million and 0.1 million weighted-average anti-dilutive stock options outstanding for the three months and six months ended June 30, 2021, respectively, compared to 0.6 million weighted-average anti-dilutive stock options outstanding for the three months and six months ended June 30, 2020 that were not included in the computation below.

The following is a reconciliation of basic to diluted earnings per share for the three and six months ended June 30, 2021 and 2020:

There were approximately 0.2 million and 0.1 million weighted-average anti-dilutive stock options outstanding for the three months and nine months ended September 30, 2021, respectively, compared to 0.5 million and 0.7 million weighted-average anti-dilutive stock options outstanding for the three months and nine months ended September 30, 2020, respectively, that were not included in the computation below.

The following is a reconciliation of basic to diluted earnings per share for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(000’s omitted, except per share data)

14 unchanged sentences

The timing and extent of repurchases will depend on market conditions and other corporate considerations as determined at the Company’s discretion.

The Company did no t repurchase any shares under the authorized plan during the first six months of 2021 or 2020.

The Company did no t repurchase any shares under the authorized plan during the first nine months of 2021 or 2020.

COMMITMENTS, CONTINGENT LIABILITIES AND RESTRICTIONS

8 unchanged sentences

The contract amounts of commitments and contingencies are as follows:

September 30,

(000’s omitted)

2 unchanged sentences

The Company and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings in which claims for monetary damages are asserted.

As of June 30, 2021, management, after consultation with legal counsel, does not anticipate that the aggregate ultimate liability arising out of litigation pending or threatened against the Company or its subsidiaries will be material to the Company’s consolidated financial position.

As of September 30, 2021, management, after consultation with legal counsel, does not anticipate that the aggregate ultimate liability arising out of litigation pending or threatened against the Company or its subsidiaries will be material to the Company’s consolidated financial position.

On at least a quarterly basis, the Company assesses its liabilities and contingencies in connection with such legal proceedings.

4 unchanged sentences

The Company recorded $ 3.0 million in litigation accrual in 2020 related to a settlement of a purported class action lawsuit regarding the Bank’s deposit account terms and overdraft disclosures.

The Company executed a settlement agreement with respect to the lawsuit in the fourth quarter 2020 providing for a release of all claims asserted by class members in the action, and the Company does not anticipate that additional amounts will be accrued for this matter in future periods.

The Company executed a settlement agreement with respect to the lawsuit in the fourth quarter of 2020 providing for a release of all claims asserted by class members in the action, and the Company does not anticipate that additional amounts will be accrued for this matter in future periods.

Notice of the settlement terms was provided to all class members and no objections to the settlement were received prior to expiration of the notice period.

The hearing for final Court approval of the settlement is scheduled on August 25, 2021.

The hearing for final Court approval of the settlement took place on August 25, 2021 and the settlement was approved for $ 2.9 million which was paid in the third quarter of 2021, resulting in a $ 0.1 million adjustment to the Company’s litigation accrual.

Accounting standards establish a framework for measuring fair value and require certain disclosures about such fair value instruments.

1 unchanged sentence

Inputs used to measure fair value are classified into the following hierarchy:

Quoted prices in active markets for identical assets or liabilities.

Quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

Significant valuation assumptions not readily observable in a market.

● Level 1 - Quoted prices in active markets for identical assets or liabilities.

● Level 2 - Quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

● Level 3 - Significant valuation assumptions not readily observable in a market.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

1 unchanged sentence

There were no transfers between any of the levels for the periods presented.

June 30, 2021

September 30, 2021

(000’s omitted)

39 unchanged sentences

The fair value of mortgage loans held for sale is determined using quoted secondary-market prices of loans with similar characteristics and, as such, has been classified as a Level 2 valuation.

The unpaid principal value of mortgage loans held for sale was approximately $ 1.3 million at June 30, 2021.

The unpaid principal value of mortgage loans held for sale was approximately $ 0.1 million at September 30, 2021.

The unpaid principal value of mortgage loans held for sale was approximately $ 1.6 million at December 31, 2020.

1 unchanged sentence

● Forward sales commitments – The Company enters into forward sales commitments to sell certain residential real estate loans.

Such commitments are considered to be derivative financial instruments and, therefore, are carried at estimated fair value in the other asset or other liability section of the consolidated statement of condition.

The fair value of these forward sales commitments is primarily measured by obtaining pricing from certain government-sponsored entities and reflects the underlying price the entity would pay the Company for an immediate sale on these mortgages.

1 unchanged sentence

● Commitments to originate real estate loans for sale – The Company enters into various commitments to originate residential real estate loans for sale.

The estimated fair value of these commitments is determined using quoted secondary market prices obtained from certain government-sponsored entities.

10 unchanged sentences

The fair value information of assets and liabilities measured on a non-recurring basis presented below is not as of the period-end, but rather as of the date the fair value adjustment was recorded closest to the date presented.

June 30, 2021

September 30, 2021

December 31, 2020

(000's omitted)

Impaired loans

Individually assessed loans

Other real estate owned

Mortgage servicing rights

Contingent consideration

Loans are generally not recorded at fair value on a recurring basis.

Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans.

Nonrecurring adjustments also include certain impairment amounts for collateral-dependent loans calculated when establishing the allowance for credit losses.

Nonrecurring adjustments also include certain adjustments for collateral-dependent loans calculated when establishing the allowance for credit losses.

Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan.

5 unchanged sentences

The appraisals are sometimes further discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the customer and customer’s business.

Such discounts are significant, ranging from 9.0 % to 51.1 % at June 30, 2021 and result in a Level 3 classification of the inputs for determining fair value.

Such discounts are significant, ranging from 9.0 % to 46.7 % at September 30, 2021 and result in a Level 3 classification of the inputs for determining fair value.

OREO is reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors identified above.

6 unchanged sentences

Impairment is recognized through a valuation allowance.

There is a valuation allowance of approximately $ 0.1 million and $ 0.2 million at June 30, 2021 and December 31, 2020, respectively.

There was no valuation allowance at September 30, 2021.

There was a valuation allowance of approximately $ 0.2 million at December 31, 2020.

The Company has recorded contingent consideration liabilities that arise from acquisition activity.

The contingent consideration is recorded at fair value at the date of acquisition.

The valuation of contingent consideration is calculated using an income approach method, which provides an estimation of the fair value of an asset or liability based on future cash flows over a discrete projection period, discounted to present value using an appropriate rate of return.

The assumptions used in the valuation calculation are based on significant unobservable inputs, therefore such valuations classify as Level 3.

The Company determines fair values based on quoted market values, where available, estimates of present values, or other valuation techniques.

5 unchanged sentences

(000's omitted, except per loan data)

June 30, 2021

September 30, 2021

Valuation Technique

1 unchanged sentence

(Weighted Average)

Impaired loans

Individually assessed loans

Fair value of collateral

15 unchanged sentences

Adequate compensation

Contingent consideration

Discounted cash flow

Discount rate

0.8 % - 1.1 % ( 1.0 %)

Probability adjusted level of retained

$ 2.3 million - $ 5.8

Unobservable Input

5 unchanged sentences

(Weighted Average)

Impaired loans

Individually assessed loans

Fair value of collateral

16 unchanged sentences

The significant unobservable inputs used in the determination of the fair value of assets classified as Level 3 have an inherent measurement uncertainty that if changed could result in higher or lower fair value measurements of these assets as of the reporting date.

The weighted average of the estimated cost of disposal/market adjustment for impaired loans was calculated by dividing the total of the book value of the collateral of the impaired loans classified as Level 3 by the total of the fair value of the collateral of the impaired loans classified as Level 3.

The weighted average of the estimated cost of disposal/market adjustment for individually assessed loans was calculated by dividing the total of the book value of the collateral of the individually assessed loans classified as Level 3 by the total of the fair value of the collateral of the individually assessed loans classified as Level 3.

The weighted average of the estimated cost of disposal/market adjustment for OREO was calculated by dividing the total of the differences between the appraisal values of the real estate and the book values of the real estate divided by the totals of the appraisal values of the real estate.

1 unchanged sentence

The weighted average of the discount rate for mortgage servicing rights was calculated by adding the discount rates used in each loan pool weighted by the balance in each loan pool.

The weighted average of the discount rate for the contingent consideration was calculated by adding the discount rates used for the calculation of the fair value of each payment of contingent consideration, weighted by the amount of the payment as part of the total fair value of contingent consideration.

Certain financial instruments and all nonfinancial instruments are excluded from fair value disclosure requirements.

Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

The carrying amounts and estimated fair values of the Company’s other financial instruments that are not accounted for at fair value at June 30, 2021 and December 31, 2020 are as follows:

June 30, 2021

The carrying amounts and estimated fair values of the Company’s other financial instruments that are not accounted for at fair value at September 30, 2021 and December 31, 2020 are as follows:

September 30, 2021

December 31, 2020

26 unchanged sentences

At inception and during the life of the interest rate lock commitment, the Company includes the expected net future cash flows related to the associated servicing of the loan as part of the fair value measurement of the interest rate lock commitments.

These derivatives are recorded at fair value, which were immaterial at June 30, 2021 and December 31, 2020.

The effect of the changes to these derivatives for the three and six months then ended was also immaterial.

The Company acquired interest rate swaps in 2017 with notional amounts with certain commercial customers which totaled $ 0.7 million at June 30, 2021 and $ 14.4 million at December 31, 2020.

In order to minimize the Company’s risk, these customer derivatives (pay floating/receive fixed swaps) have been offset with essentially matching interest rate swaps (pay fixed/receive floating swaps) with the Company’s counterparty totaling $ 0.7 million at June 30, 2021 and $ 14.4 million at December 31, 2020.

At June 30, 2021, the weighted average receive rate of these interest rate swaps was 2.34 %, the weighted average pay rate was 3.54 % and the weighted average maturity was 1.8 years.

These derivatives are recorded at fair value, which were immaterial at September 30, 2021 and December 31, 2020.

The effect of the changes to these derivatives for the three and nine months then ended was also immaterial.

The Company acquired interest rate swaps in 2017 with notional amounts with certain commercial customers which totaled $ 0.6 million at September 30, 2021 and $ 14.4 million at December 31, 2020.

In order to minimize the Company’s risk, these customer derivatives (pay floating/receive fixed swaps) have been offset with essentially matching interest rate swaps (pay fixed/receive floating swaps) with the Company’s counterparty totaling $ 0.6 million at September 30, 2021 and $ 14.4 million at December 31, 2020.

At September 30, 2021, the weighted average receive rate of these interest rate swaps was 2.33 %, the weighted average pay rate was 3.54 % and the weighted average maturity was 1.5 years.

At December 31, 2020, the weighted average receive rate of these interest rate swaps was 2.10 %, the weighted average pay rate was 4.44 % and the weighted average maturity was 5.2 years.

1 unchanged sentence

Since the terms of the swaps with the Company’s customer and the other financial institution offset each other, with the only difference being counterparty credit risk, changes in the fair value of the underlying derivative contracts are not materially different and do not significantly impact the Company’s results of operations.

The Company also acquired interest rate swaps in 2017 with notional amounts totaling $ 5.4 million at June 30, 2021, and $ 5.7 million at December 31, 2020, that were designated as fair value hedges of certain fixed rate loans with municipalities which are recorded in loans in the consolidated statements of financial condition.

At June 30, 2021, the weighted average receive rate of these interest rate swaps was 1.38 %, the weighted average pay rate was 3.11 % and the weighted average maturity was 12.0 years.

The Company also acquired interest rate swaps in 2017 with notional amounts totaling $ 5.3 million at September 30, 2021, and $ 5.7 million at December 31, 2020, that were designated as fair value hedges of certain fixed rate loans with municipalities which are recorded in loans in the consolidated statements of condition.

At September 30, 2021, the weighted average receive rate of these interest rate swaps was 1.38 %, the weighted average pay rate was 3.11 % and the weighted average maturity was 11.8 years.

At December 31, 2020, the weighted average receive rate of these interest rate swaps was 1.42 %, the weighted average pay rate was 3.11 % and the weighted average maturity was 12.5 years.

The Company includes the gain or loss on the hedged items in interest and fees on loans, the same line item as the offsetting gain or loss on the related interest rate swaps.

The effects of fair value accounting in the consolidated statements of income for the three and six months ended June 30, 2021 are immaterial.

As of June 30, 2021 and December 31, 2020, the following amounts were recorded in the consolidated statement of condition related to cumulative basis adjustments for fair value hedges:

The effects of fair value accounting in the consolidated statements of income for the three and nine months ended September 30, 2021 are immaterial.

As of September 30, 2021 and December 31, 2020, the following amounts were recorded in the consolidated statement of condition related to cumulative basis adjustments for fair value hedges:

(000’s omitted)

5 unchanged sentences

Statement of Condition in Which

September 30,

the Hedged Item Is Included

Fair values of derivative instruments as of June 30, 2021 and December 31, 2020 are as follows:

Fair values of derivative instruments as of September 30, 2021 and December 31, 2020 are as follows:

(000’s omitted)

June 30, 2021

September 30, 2021

Derivative Assets

28 unchanged sentences

Total derivatives

The Company assessed its counterparty risk at June 30, 2021 and December 31, 2020 and determined any credit risk inherent in our derivative contracts was not material.

The Company assessed its counterparty risk at September 30, 2021 and December 31, 2020 and determined any credit risk inherent in our derivative contracts was not material.

Further information about the fair value of derivative financial instruments can be found in Note K to these consolidated financial statements.

5 unchanged sentences

(the “Bank” or “CBNA”) operates the Banking segment that provides full-service banking to consumers, businesses, and governmental units in Upstate New York as well as Northeastern Pennsylvania, Vermont and Western Massachusetts.

Employee Benefit Services, which includes the operating subsidiaries Benefit Plans Administrative Services, LLC, BPAS Actuarial and Pension Services, LLC, BPAS Trust Company of Puerto Rico, Northeast Retirement Services, LLC (“NRS”), Global Trust Company, Inc.

(“FBD”), Northeast Retirement Services, LLC (“NRS”), Global Trust Company, Inc.

(“GTC”), and Hand Benefits & Trust Company, provides employee benefit trust, collective investment fund, retirement plan administration, fund administration, transfer agency, actuarial, VEBA/HRA, and health and welfare consulting services.

7 unchanged sentences

Benefit Services

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Net interest income

6 unchanged sentences

Core deposit intangibles & Other intangibles

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Net interest income

8 unchanged sentences

Benefit Services

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Net interest income

5 unchanged sentences

Income before income taxes

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Net interest income

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements