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What changed in CHEMUNG FINANCIAL CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CHEMUNG FINANCIAL CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+420 added−420 removedSource: 10-K (2025-03-14) vs 10-K (2024-03-13)

Top changes in CHEMUNG FINANCIAL CORP's 2024 10-K

420 paragraphs added · 420 removed · 330 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

75 edited+19 added−12 removed112 unchanged
Biggest changeThe credit risk related to commercial loans is largely influenced by general economic conditions and the resulting impact on a borrower’s operations or on the value of underlying collateral, if any. 7 Commercial mortgage loans generally have larger balances and involve a greater degree of risk than residential mortgage loans, and they, therefore, pose higher potential losses on an individual customer basis.
Biggest changeCommercial mortgage loans generally have larger balances and involve a greater degree of risk than residential mortgage loans, and they, therefore, pose higher potential losses on an individual customer basis. Loan repayment is often dependent on the successful operation and management of the properties and/or the businesses occupying the properties, as well as on the collateral securing the loan.
The Corporation’s Board of Directors has concluded that the expansion of the franchise’s geographic footprint, an increase in the Bank’s interest earning assets, and the generation of new sources of non-interest income are important components of its strategic plan.
The Corporation’s Board of Directors has concluded that expansion of the franchise’s geographic footprint, an increase in the Bank’s interest-earning assets, and the generation of new sources of non-interest income are important components of its strategic plan.
The Interstate MOU established the regulatory responsibilities of the respective state banking regulators regarding bank regulatory examinations and is intended to reduce the regulatory burden on state-chartered banks branching within the region by elimination duplicative host state compliance exams.
The Interstate MOU established the regulatory responsibilities of the respective state banking regulators regarding bank regulatory examinations and is intended to reduce the regulatory burden on state-chartered banks branching within the region by elimination of duplicative host state compliance exams.
The Corporation generally may engage in the activities permissible for a bank holding company, which includes banking, managing or controlling banks, performing certain servicing activities for subsidiaries, and engaging in other activities that the FRB has determined to be so closely related to banking as to be a proper incident thereto, as set forth in the FRB's Regulation Y.
The Corporation generally may engage in the activities permissible for a bank holding company, which includes banking, managing or controlling banks, performing certain servicing activities for subsidiaries, and engaging in other activities that the FRB has determined to be so closely related to banking as to be a proper incident thereto, as set forth in FRB Regulation Y.
Under the CBLR framework, a qualifying community banking organization would satisfy the regulatory capital requirements by calculating and reporting a single leverage ratio, i.e., the CBLR, which would require significantly less data than needed to calculate the capital ratios, under the Basel III capital framework and eliminate the time consuming need to risk-weight assets.
Under the CBLR framework, a qualifying community banking organization would satisfy the regulatory capital requirements by 15 calculating and reporting a single leverage ratio, i.e., the CBLR, which would require significantly less data than needed to calculate the capital ratios, under the Basel III capital framework and eliminate the time consuming need to risk-weight assets.
The FRB also possesses authority to bring enforcement actions against bank holding companies, their nonbanking subsidiaries and their “institution-affiliated parties.” Federal Home Loan Bank The Bank is also a member of the FHLBNY, which provides a central credit facility primarily for member institutions for home mortgage and neighborhood lending.
The FRB also possesses authority to bring enforcement actions against bank holding companies, their nonbanking subsidiaries and their “institution-affiliated parties.” 16 Federal Home Loan Bank The Bank is a member of the FHLBNY, which provides a central credit facility primarily for member institutions for home mortgage and neighborhood lending.
The Security Guidelines establish standards relating to administrative, technical, and physical safeguards to ensure the security, confidentiality, integrity and the proper disposal of customer information. The Corporation has developed policies and procedures for itself and its subsidiaries to maintain compliance with all privacy, information sharing and notification provisions of the GLB Act and the FCRA. 19
The Security Guidelines establish standards relating to administrative, technical, and physical safeguards to ensure the security, confidentiality, integrity, and the proper disposal of customer information. The Corporation has developed policies and procedures for itself and its subsidiaries to maintain compliance with all privacy, information sharing and notification provisions of the GLB Act and the FCRA.
This regulatory structure gives the regulatory authorities extensive discretion in the enforcement of laws and regulations and the supervision of the Bank. 13 Loans to One Borrower The Bank generally may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of its unimpaired capital and surplus.
This structure gives the regulatory authorities extensive discretion in the enforcement of laws and regulations and the supervision of the Bank. Loans to One Borrower The Bank generally may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of its unimpaired capital and surplus.
Credit risk for these types of loans is generally influenced by general economic conditions, the characteristics of individual borrowers, and the nature of the loan collateral. The consumer loan segment includes home equity lines of credit and home equity loans, which exhibit many of the same risk characteristics as residential mortgages.
Credit risk for these types of loans is generally influenced by general economic conditions, the characteristics of individual borrowers, and the nature of the loan collateral. 7 The consumer loan segment includes home equity lines of credit and home equity loans, which exhibit many of the same risk characteristics as residential mortgages.
Nasdaq amended its proposed listing standards relating to clawbacks to provide that listed companies had until December 1, 2023 to adopt a compliant clawback policy. The Corporation met such requirement. 12 Sarbanes-Oxley The Corporation is also subject to Sarbanes-Oxley.
Nasdaq amended its proposed listing standards relating to clawbacks to provide that listed companies had until December 1, 2023 to adopt a compliant clawback policy. The Corporation met such requirement. Sarbanes-Oxley The Corporation is also subject to Sarbanes-Oxley.
These officers exercise substantial authority over credit and pricing decisions, subject to loan committee approval for larger credits. The Bank recognizes that exceptions to the lending policies may occasionally occur and has established procedures for approving exceptions to these policies.
These officers exercise substantial authority over credit and pricing decisions, subject to Corporate loan committee approval for larger credits. The Bank recognizes that exceptions to the lending policies may occasionally occur and has established procedures for approving exceptions to these policies.
Management of the Bank does not know of any practice, condition, or violation that may lead to termination of the Bank’s deposit insurance. Regulatory Capital Requirements Federal regulations require banks to meet certain minimum capital standards.
Management of the Bank does not know of any practice, condition, or violation that may lead to termination of the Bank’s deposit insurance. 14 Regulatory Capital Requirements Federal regulations require banks to meet certain minimum capital standards.
ITEM 1. BUSINESS General The Corporation was incorporated on January 2, 1985 under the laws of the State of New York and is headquartered in Elmira, NY. The Corporation was organized for the purpose of acquiring the Bank.
ITEM 1. BUSINESS General The Corporation was incorporated on January 2, 1985 under the laws of the State of New York and is headquartered in Elmira, New York. The Corporation was organized for the purpose of acquiring the Bank.
Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions like the Bank that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions like the Bank that have exercised an opt-out election regarding the treatment of accumulated other comprehensive income (AOCI), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
The Bank also is a member bank of the FRB and, therefore, the FRB serves as its primary federal regulator. The FDIC insures the Bank’s deposit accounts up to applicable limits.
The Bank also is a member bank of the FRB and, therefore, the FRBNY serves as its primary federal regulator. The FDIC insures the Bank’s deposit accounts up to applicable limits.
These swaps are considered free standing derivatives and are carried at fair value on the consolidated balance sheets, with gains and losses recorded through other non-interest income. The swaps are not designated as hedging derivatives. Additionally, the Bank participates in risk participation agreements with dealer banks on commercial loans in which it participates.
These swaps are considered free standing derivatives and are carried at fair value on the Consolidated Balance Sheets, with gains and losses recorded through other non-interest income. The swaps are not designated as hedging derivatives. Additionally, the Bank participates in risk participation agreements with lead banks on commercial loans in which it participates.
The Corporation became a financial holding company in June 2000. Financial holding company status provided the Corporation with the flexibility to offer an array of financial services, such as insurance products, mutual funds, and brokerage services, which provide additional sources of fee-based income and allow the Corporation to better serve its customers.
The Corporation became a financial holding company in June 2000. Financial holding company status provided the Corporation with the flexibility to offer an array of financial services, such as insurance products, mutual funds, and brokerage services, which provide additional sources of fee-based income and allows the Corporation to better serve its customers.
The Final Rule took effect on January 1, 2020. As of December 31, 2023, the Bank has not elected to use the community bank leverage ratio. Prompt Corrective Action The FDIA requires the federal banking agencies to resolve the problems of insured banks at the least possible loss to the DIF.
The Final Rule took effect on January 1, 2020. As of December 31, 2024, the Bank has not elected to use the community bank leverage ratio. Prompt Corrective Action The FDIA requires the federal banking agencies to resolve the problems of insured banks at the least possible loss to the DIF.
Economic events or conditions in the real estate market could have an adverse impact on the cash flows generated by properties securing the Bank’s commercial real estate loans and on the value of such properties. The Bank offers interest rate swaps to certain larger commercial mortgage borrowers.
Economic events or conditions in real estate markets could have an adverse impact on the cash flows generated by properties securing the Bank’s commercial real estate loans and on the value of such properties. The Bank offers interest rate swaps to certain larger commercial mortgage borrowers.
Other than as described above, there were no material changes in the manner of doing business by the Corporation or its subsidiaries during the fiscal year ended December 31, 2023. Lendin g Activities Lending Strategy The Corporation’s objective is to channel deposits gathered locally into high-quality, market-yielding loans without taking unacceptable credit and/or interest rate risk.
Other than as described above, there were no material changes in the manner of doing business by the Corporation or its subsidiaries during the fiscal year ended December 31, 2024. 6 Lendin g Activities Lending Strategy The Corporation’s objective is to channel deposits gathered locally into high-quality, market-yielding loans without taking unacceptable credit and/or interest rate risk.
Commercial and industrial loans primarily consist of loans to small to mid-sized businesses in the Bank's market area in a diverse range of industries. These loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business.
Commercial and industrial loans primarily consist of loans to small and mid-sized businesses in the Bank's market areas in a diverse range of industries. These loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business.
These include the Bank Secrecy Act, the Truth in Lending Act, the Home Ownership and Equity Protection Act, the Truth in Savings Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Electronic Funds Transfers Act, the FCRA, the Right to Financial Privacy Act, the Expedited Funds Availability Act, the Flood Disaster Protection Act, the Fair Debt Collection Practices Act, Helping Families Save Their Homes Act, and the Consumer Protection for Depository Institutions Sales of Insurance regulation.
These include the Bank Secrecy Act, the Truth in Lending Act, the Home Ownership and Equity Protection Act, the Truth in Savings Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Electronic Funds Transfers Act, the Fair Credit Reporting Act, the Right to Financial Privacy Act, the Expedited Funds Availability Act, the Flood Disaster Protection Act, the Fair Debt Collection Practices Act, Helping Families Save Their Homes Act, and the Consumer Protection for Depository Institutions Sales of Insurance regulation.
Community Reinvestment Act Under the federal CRA, the Bank, consistent with its safe and sound operation, must help meet the credit needs of its entire community, including low and moderate income neighborhoods. The FRB and NYSDFS periodically assess the Bank's compliance with CRA requirements.
Community Reinvestment Act Under the federal CRA, the Bank, consistent with its safe and sound operation, must help meet the credit needs of its entire community, including low and moderate income neighborhoods. The FRBNY and NYSDFS periodically assess the Bank's compliance with CRA requirements.
The Corporation’s growth strategy also includes the acquisition of trust businesses to generate new sources of fee income. 9 Market Area and Competition The Bank operates 31 branch offices located in 13 counties in New York and Bradford County in Pennsylvania.
The Corporation’s growth strategy also includes the acquisition of trust businesses to generate new sources of fee income. Market Area and Competition The Bank operates 30 branch offices located in 13 counties in New York and Bradford County in Pennsylvania.
We offer an inclusive, safe and healthy work environment, maintain the highest standards of business ethics and provide opportunities for career development and advancement, along with a competitive benefits package. Employee Profile As of December 31, 2023 we employed 339 full time equivalent employees in 31 locations in New York and Pennsylvania.
We offer an inclusive, safe and healthy work environment, maintain the highest standards of business ethics and provide opportunities for career development and advancement, along with a competitive benefits package. Employee Profile As of December 31, 2024 we employed 343 full-time equivalent employees in 30 locations in New York and Pennsylvania.
As of December 31, 2023, the Bank exceeded all regulatory capital ratios necessary to be considered well capitalized.
As of December 31, 2024, the Bank exceeded all regulatory capital ratios necessary to be considered well capitalized.
The minimum capital standards consist of a common equity Tier 1 (“CET1”) capital ratio of 4.5% of risk-weighted assets, a uniform leverage ratio of 4%, a Tier 1 capital to risk-weighted assets ratio of 6% of risk-weighted assets and a total capital ratio of at least 8% of risk-weighted assets.
The minimum capital standards consist of a common equity Tier 1 (“CET1”) capital ratio of 4.5% of risk-weighted assets, a uniform leverage ratio of 4%, a Tier 1 capital ratio of 6% of risk-weighted assets, and a total capital ratio of 8% of risk-weighted assets.
At December 31, 2023, the Bank did not have any loans or agreements to extend credit to a single or related group of borrowers in excess of its legal lending limit.
As of December 31, 2024, the Bank did not have any loans or agreements to extend credit to a single or related group of borrowers in excess of its legal lending limit.
The Regulatory Relief Act’s provisions include, among other things: (i) exempting banks with less than $10 billion in assets from the ability-to-repay requirements for certain qualified residential mortgage loans held in portfolio; (ii) allows usage of Uniform Standards of Professional Appraisal Practice (USPAP) compliant evaluations for certain transactions valued at less than $400,000 in rural areas instead of appraisals, providing specific criteria are met; (iii) exempting banks that originate fewer than 500 open-end and 500 closed-end mortgages from HMDA’s expanded data disclosures; (iv) clarifying that, subject to various conditions, reciprocal deposits of another depository institution obtained using a deposit broker 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; (v) raising eligibility for the 18-month exam cycle from $1 billion to banks with $3 billion in assets; (vi) allowing qualifying federal savings banks to elect to operate with National Bank powers; and (vii) simplifying capital calculations by requiring regulators to establish for institutions under $10 billion in assets a community bank leverage ratio at a percentage not less than 8% and not greater than 10% that such institutions may elect to replace the general applicable risk-based capital requirements for determining well-capitalized status. 18 The Dodd-Frank Act The Dodd-Frank Act, enacted on July 21, 2010, 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 Regulatory Relief Act’s provisions include, among other things: (i) exempting banks with less than $10 billion in assets from the ability-to-repay requirements for certain qualified residential mortgage loans held in portfolio; (ii) allows usage of Uniform Standards of Professional Appraisal Practice (USPAP) compliant evaluations for certain transactions valued at less than $400,000 in rural areas instead of appraisals, providing specific criteria are met; (iii) exempting banks that originate fewer than 500 open-end and 500 closed-end mortgages from HMDA’s expanded data disclosures; (iv) clarifying that, subject to various conditions, reciprocal deposits of another depository institution obtained using a deposit broker 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; (v) raising eligibility for the 18-month exam cycle from $1 billion to banks with $3 billion in assets; (vi) allowing qualifying federal savings banks to elect to operate with National Bank powers; and (vii) simplifying capital calculations by requiring regulators to establish for institutions under $10 billion in assets a community bank leverage ratio at a percentage not less than 8% and not greater than 10% that such institutions may elect to replace the general applicable risk-based capital requirements for determining well-capitalized status.
We continue to focus on diversity and inclusion among our workforce. 10 Total Rewards We offer a competitive total rewards package for all employees, including competitive base pay, incentive plans for all employees, a 401(k) match, a non-discretionary company 401(k) contribution, health, dental, and vision insurance, life insurance, company contributions to a health savings account, paid time off, family leave, flexible work schedules, tuition reimbursement, and the opportunity to volunteer in the community during work hours.
Total Rewards We offer a competitive total rewards package for all employees, including competitive base pay, incentive plans for all employees, a 401(k) match, a non-discretionary company 401(k) contribution, health, dental, and vision insurance, life insurance, company contributions to a health savings account, paid time off, family leave, flexible work schedules, tuition reimbursement, and the opportunity to volunteer in the community during work hours.
The Corporation seeks to have a diversified loan portfolio consisting of commercial and industrial loans, commercial mortgages, residential mortgages, home equity lines of credit and home equity term loans, direct consumer loans, and indirect automobile loans. The Bank operates with a traditional community bank model where the relationship manager possesses credit skills and has significant influence over credit decisions.
The Corporation seeks to have a diversified loan portfolio consisting of commercial and industrial loans, commercial mortgages, residential mortgages, home equity lines of credit and home equity term loans, direct consumer loans, and indirect automobile loans. The Bank operates with a traditional community bank model where the relationship manager possesses credit skills and is significantly involved in the credit decisions.
The Bank is subject to the rules and requirements of the FHLBNY, including the requirement to acquire and hold shares of capital stock in the FHLBNY. The Bank was in compliance with the rules and requirements of the FHLBNY at December 31, 2023.
The Bank is subject to the rules and requirements of the FHLBNY, including the requirement for the Bank to acquire and hold shares of capital stock in the FHLBNY. The Bank was in compliance with the rules and requirements of the FHLBNY as of December 31, 2024.
NYSDFS Cybersecurity Rule Effective March 1, 2017, the NYSDFS requires New York chartered banks to establish and maintain a cybersecurity program designed to protect consumers and ensure the safety and soundness of the bank.
Cybersecurity The NYSDFS requires New York chartered banks to establish and maintain a cybersecurity program designed to protect consumers and ensure the safety and soundness of the bank.
None of our employees are represented by any collective bargaining unit or is a party to a collective bargaining agreement. We believe our relationship with our employees to be good. As of December 31, 2023 our workforce was 72% female and 28% male, and our average tenure was 8.2 years.
None of our employees are represented by any collective bargaining unit or is a party to a collective bargaining agreement. We believe our relationship with our employees to be good. As of December 31, 2024 our workforce was 71% female and 29% male, and our average tenure was 8.0 years.
The Bank received a “satisfactory” rating for CRA on its last performance evaluations which were conducted by the NYSDFS as of June 30, 2019, and the FRB as of October 7, 2019. On October 24, 2023, the FRB issued a final rule to strengthen and modernize the federal CRA regulations.
The Bank received a “satisfactory” rating for CRA on its last performance evaluations which were conducted by the NYSDFS as of March 31, 2023, and the FRB as of September 25, 2023. On October 24, 2023, the FRB issued a final rule to strengthen and modernize the federal CRA regulations.
As of December 31, 2023, approximately $59.4 million was available for the payment of dividends by the Bank to the Corporation without prior approval. The Bank's ability to pay dividends also is subject to the Bank being in compliance with regulatory capital requirements. At December 31, 2023, the Bank was in compliance with these requirements.
As of December 31, 2024, approximately $62.2 million was available for the payment of dividends by the Bank to the Corporation without prior approval. The Bank's ability to pay dividends also is subject to the Bank being in compliance with regulatory capital requirements.
The FRB must consider the Bank’s effectiveness in combating money laundering when ruling on merger and other applications. CFS CFS is subject to supervision by other regulatory authorities as determined by the activities in which it is engaged. Insurance activities are supervised by the NYSDFS, and brokerage activities are subject to supervision by the SEC and FINRA.
The FRB must consider the Bank’s effectiveness in combating money laundering when ruling on merger and other applications. 17 CFS CFS is subject to supervision by other regulatory authorities as determined by the activities in which it is engaged.
The success of our company depends on the success of our employees. Available Information The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding the Corporation. In addition, the Corporation maintains a corporate website at www.chemungcanal.com.
Available Information The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding the Corporation. In addition, the Corporation maintains a corporate website at www.chemungcanal.com.
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.
In the current environment, the Corporation supplemented this strategy with certificate of deposit campaigns. 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.
Wealth Mana g ement Strate g y With $2.242 billion of assets under management or administration at December 31, 2023, including $381.3 million of assets held under management or administration for the Corporation, WMG is responsible for the largest component of the Corporation's non-interest income.
Wealth Mana g ement Strate g y With $2.212 billion of assets under management or administration as of December 31, 2024, including $301.9 million of assets held under management or administration for the Corporation, WMG is responsible for the largest component of the Corporation's non-interest income.
These items are available as soon as reasonably practicable after we electronically file or furnish such material with the SEC. The contents of the Bank's website are not a part of this report. These materials are also available free of charge by written request to: Kathleen S. McKillip, Corporate Secretary, Chemung Financial Corporation, One Chemung Canal Plaza, Elmira, NY 14901.
These items are available as soon as reasonably practicable after we electronically file or furnish such material with the SEC. The contents of the Bank's website are not a part of this report. These materials are also available free of charge by written request to: Kathleen S.
Within all these market areas, the Bank encounters intense competition in the lending and deposit gathering aspects of its business from local, regional and national commercial banks and thrift institutions, credit unions, and other providers of financial services such as brokerage firms, investment companies, insurance companies, fintech, and internet banking entities.
The region's largest employers are affiliated with the healthcare industry, primarily located in the medical corridor, as well as financial institutions. 9 Within all these market areas, the Bank encounters intense competition in the lending and deposit gathering aspects of its business from local, regional and national commercial banks and thrift institutions, credit unions, and other providers of financial services such as brokerage firms, investment companies, insurance companies, fintech, and internet banking entities.
At December 31, 2023, the Bank’s legal lending limit on loans to one borrower was $37.7 million for loans not fully secured by readily marketable collateral and $41.4 million for loans secured by readily marketable collateral. The Bank’s internal limit on loans is set at $15.0 million.
As of December 31, 2024, the Bank’s legal lending limit on loans to one borrower was $41.2 million for loans not fully secured by readily marketable collateral and $45.3 million for loans secured by readily marketable collateral. The Bank’s internal limit on loans is set at $15.0 million.
Talent We believe investing in our employees not only helps with retention, but also keeps employees engaged and focused. We encourage all employees to join career circles, find a mentor, apply for our leadership program, job shadow, attend diversity, equity and inclusion, and supervisor discussions, and other trainings offered.
Talent We believe investing in our employees not only helps with retention, but also keeps employees engaged and focused. We encourage all employees to join career circles, find a mentor, apply for our leadership program, job shadow, participate in moderated employee discussions, and attend other trainings offered. The success of our company depends on the success of our employees.
Capital Distributions A bank holding company is generally required to give the FRB prior written notice of any purchase or redemption of then outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company’s consolidated net worth.
Accordingly, the Corporation is expected to commit resources to support its banking subsidiaries, including at times when it may not be advantageous for the Corporation to do so. 12 Capital Distributions A bank holding company is generally required to give the FRB prior written notice of any purchase or redemption of then outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company’s consolidated net worth.
The Bank regularly evaluates the internal cost of funds, surveys rates offered by competitors, reviews cash flow requirements for lending and liquidity, and executes rate changes when necessary as part of its asset/liability management, profitability and growth strategies. 8 The flow of deposits is influenced significantly by general economic conditions, changes in prevailing interest rates and competition.
The Bank believes it is competitive in the types of accounts and interest rates it has offered on its deposit products. The Bank regularly evaluates the internal cost of funds, surveys rates offered by competitors, reviews cash flow requirements for lending and liquidity, and executes rate changes when necessary as part of its asset/liability management, profitability and growth strategies.
The prompt corrective action regulations place state member banks in one of the following five categories based on the bank’s capital: • well-capitalized (at least 5% leverage capital, 6.5% common equity Tier 1 risk-based capital, 8% Tier 1 risk-based capital and 10% total risk-based capital); • adequately capitalized (at least 4% leverage capital, 4.5% common equity Tier 1 risk-based capital, 6% Tier 1 risk-based capital and 8% total risk-based capital); • undercapitalized (less than 4% leverage capital, 4.5% common equity Tier 1 risk-based capital, 6% Tier 1 risk-based capital or 8% total risk-based capital); • significantly undercapitalized (less than 3% leverage capital, 3% common equity Tier 1 risk-based capital, 4% Tier 1 risk-based capital or 6% total risk-based capital); and • critically undercapitalized (less than 2% tangible capital). 16 As an institution’s capital decreases within the three undercapitalized categories listed above, the severity of the action that is authorized or required to be taken by the FRB for state member banks under the prompt corrective action regulations increases.
The prompt corrective action regulations place state member banks in one of the following five categories based on the bank’s capital: • well-capitalized (at least 5% leverage capital, 6.5% common equity Tier 1 risk-based capital, 8% Tier 1 risk-based capital and 10% total risk-based capital); • adequately capitalized (at least 4% leverage capital, 4.5% common equity Tier 1 risk-based capital, 6% Tier 1 risk-based capital and 8% total risk-based capital); • undercapitalized (less than 4% leverage capital, 4.5% common equity Tier 1 risk-based capital, 6% Tier 1 risk-based capital or 8% total risk-based capital); • significantly undercapitalized (less than 3% leverage capital, 3% common equity Tier 1 risk-based capital, 4% Tier 1 risk-based capital or 6% total risk-based capital); and • critically undercapitalized (less than 2% tangible capital).
In evaluating these safety and soundness standards, the FRB considers internal controls and information systems, internal audit systems, loan documentation, credit underwriting, exposure to changes in interest rates, asset growth, compensation, fees, and benefits. In general, the guidelines require appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines.
In evaluating these safety and soundness standards, the FRB considers internal controls and information systems, internal audit systems, loan documentation, credit underwriting, exposure to changes in interest rates, asset growth, compensation, fees, and benefits, cybersecurity practices and compliance with applicable rules and regulations.
The applicability date for the majority of the provisions in the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027. 17 Fair Lending and Consumer Protection Laws The Bank must also comply with the federal Equal Credit Opportunity Act and the New York Executive Law 296-a, which prohibit creditors from discrimination in their lending practices on bases specified in these statutes.
Fair Lending and Consumer Protection Laws The Bank must also comply with the federal Equal Credit Opportunity Act and the New York Executive Law 296-a, which prohibit creditors from discrimination in their lending practices on bases specified in these statutes.
Derivative Financial Instruments The Bank offers interest rate swaps to commercial loan customers who wish to fix the interest rates on their loans, and the Bank matches these swaps using offsetting swaps with Domestic Systemically Important Banks (D-SIBs).
The Bank utilizes its investment portfolio as the main source of collateral for its municipal depositors, allowing for excess liquidity to fund loans. 8 Derivative Financial Instruments The Bank offers interest rate swaps to commercial loan customers who wish to fix the interest rates on their loans, and the Bank matches these swaps using offsetting swaps with Domestic Systemically Important Banks (D-SIBs).
For institutions of the Bank’s asset size, the FDIC operates a risk-based premium system that determines assessment rates from financial modeling designed to estimate the probability of the bank’s failure over a three-year period. Assessment rates for institutions of the Bank’s size ranged from 1.5 to 30 basis points effective through December 31, 2022.
For institutions of the Bank’s asset size, the FDIC operates a risk-based premium system that determines assessment rates from financial modeling designed to estimate the probability of the bank’s failure over a three-year period. The FDIC has authority to increase insurance assessments.
As a result of these transactions and organic growth, the Corporation had $2.711 billion in consolidated assets, $1.973 billion in loans, $2.429 billion in deposits, and $195.2 million in shareholders’ equity at December 31, 2023.
As a result of these transactions and organic growth, the Corporation had $2.776 billion in consolidated assets, $2.071 billion in loans, $2.397 billion in deposits, and $215.3 million in shareholders’ equity as of December 31, 2024.
Federal Securities Law The Corporation is subject to the information, reporting, proxy solicitation, insider trading, and other rules contained in the Exchange Act, the disclosure requirements of the Securities Act and the regulations of the SEC thereunder.
Generally, this means that the NYSDFS must approve the Corporation’s acquisition of control of other banking institutions and similar transactions. 11 Federal Securities Law The Corporation is subject to the information, reporting, proxy solicitation, insider trading, and other rules contained in the Exchange Act, the disclosure requirements of the Securities Act and the regulations of the SEC thereunder.
The Corporation is also a bank holding company as defined in the New York Banking Law by virtue of its ownership and control of the Bank. Generally, this means that the NYSDFS must approve the Corporation’s acquisition of control of other banking institutions and similar transactions.
The Corporation is also a bank holding company as defined in the New York Banking Law by virtue of its ownership and control of the Bank.
Standards for Safety and Soundness The FRB has adopted guidelines prescribing safety and soundness standards. These guidelines establish general standards relating to capital adequacy, asset quality, management, earnings performance, liquidity and sensitivity to market risk.
As of December 31, 2024, the Bank was in compliance with these requirements. 13 Standards for Safety and Soundness The FRB has adopted guidelines prescribing safety and soundness standards. These guidelines establish general standards relating to capital adequacy, asset quality, management, earnings performance, liquidity levels and funds management practices, sensitivity to market risk, and overall risk management practices.
Erie County has a diverse mix of industrial, light manufacturing, high technology and service-oriented private sector companies. The region also has reliance on higher education with the University at Buffalo, SUNY Buffalo as well as several private colleges. The region's largest employers are affiliated with the healthcare industry, primarily located in the medical corridor.
After New York City, this region is the second largest population center in New York State. Erie County has a diverse mix of industrial, light manufacturing, high technology and service-oriented private sector companies. The region also has reliance on higher education with the University at Buffalo, Buffalo State University, as well as several private colleges.
The Corporation Bank Holding Company Act The Corporation is a bank holding company registered with, and subject to regulation and examination by, the FRB pursuant to the BHCA, as amended. The FRB regulates and requires the filing of reports describing the activities of bank holding companies, and conducts periodic examinations to test compliance with applicable regulatory requirements.
The FRB regulates and requires the filing of reports describing the activities of bank holding companies, and conducts periodic examinations to test compliance with applicable regulatory requirements.
Bradford County's largest employers are a combination of service and small manufacturing businesses, along with the natural gas industry. During 2021, the Corporation entered a new market in the Buffalo Metropolitan Area. After New York City, this region is the second largest population center in New York State.
The remaining New York counties have a combination of service, small manufacturing and tourism-related businesses, with colleges located in Broome, Chemung, and Cortland counties. Bradford County's largest employers are a combination of service and small manufacturing businesses, along with the natural gas industry. During 2021, the Corporation entered a new market in the Buffalo Metropolitan Area.
The Corporation evaluates potential acquisition targets based on the economic viability of their markets, the degree to which they can be effectively integrated into the Corporation’s current operations, and the degree to which they are accretive to capital and earnings. 6 Description of Business The Corporation, through the Bank and CFS, 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.
Description of Business The Corporation, through the Bank and CFS, 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 BHCA prohibits a bank holding company from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any bank, or increasing such ownership or control of any bank, without the prior approval of the FRB. 11 Interstate Banking and Branching Under the Riegle-Neal Act, subject to certain concentration limits and other requirements, adequately capitalized bank holding companies, such as the Corporation, are permitted to acquire banks and bank holding companies located in any state.
Interstate Banking and Branching Under the Riegle-Neal Act, subject to certain concentration limits and other requirements, adequately capitalized bank holding companies, such as the Corporation, are permitted to acquire banks and bank holding companies located in any state.
Bank branch offices are located in the following New York counties: Chemung, where the Bank is headquartered, Broome, Cayuga, Cortland, Erie, Schuyler, Seneca, Steuben, Tioga and Tompkins. The Bank also operates under the name “Capital Bank, a division of Chemung Canal Trust Company,” with branch offices located in Albany, Saratoga, and Schenectady counties in New York.
The Bank also operates under the names “Capital Bank, a division of Chemung Canal Trust Company,” with branch offices in Albany, Saratoga, and Schenectady counties in New York, and “Canal Bank, a division of Chemung Canal Trust Company,” with a branch office in Erie County, New York.
The Bank only invests in high-quality investment-grade securities such as mortgage-backed securities and obligations of states and political subdivisions. Investment decisions are made in accordance with the Bank's investment policy and include consideration of risk, return, duration, and portfolio concentrations.
Investment decisions are made in accordance with the Bank's investment policy and include consideration of risk, return, duration, and portfolio concentrations.
The amendments generally fall within the following five categories: (i) increased mandatory controls associated with common attack vectors, (ii) enhanced requirements for privileged accounts, (iii) enhanced notification obligations, (iv) expansion of cyber governance practices, and (v) additional cybersecurity requirements for larger companies.
The amendments generally fall within the following five categories: (i) increased mandatory controls associated with common attack vectors, (ii) enhanced requirements for privileged accounts, (iii) enhanced notification obligations, (iv) expansion of cyber governance practices, and (v) additional cybersecurity requirements for larger companies. 18 Banking organizations are required to notify their primary federal regulator as soon as possible and no later than 36 hours of determining that a “computer-security incident” that arises to the level of a “notification incident” has occurred.
Supervision and Re g ulation The Corporation and the Bank are subject to comprehensive regulation, supervision and examination by regulatory authorities. Numerous statutes and regulations apply to the Corporation’s and, to a greater extent, the Bank’s operations, including required reserves, investments, loans, deposits, issuances of securities, payments of dividends, and establishment of branches.
Numerous statutes and regulations apply to the Corporation’s and, to a greater extent, the Bank’s operations, including required reserves, investments, loans, deposits, issuances of securities, payments of dividends, and establishment of branches. Set forth below is a brief description of some of these laws and regulations.
In assessing an institution’s capital adequacy, the federal regulators take into consideration not only these numeric factors but also qualitative factors as well and has the authority to establish higher capital requirements for individual associations where necessary. 15 In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor assigned by federal regulations based on the risks believed inherent in the type of asset.
In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor assigned by federal regulations based on the risks believed inherent in the type of asset. The capital requirements assign a higher risk weight to asset categories believed to present a great risk.
Set forth below is a brief description of some of these laws and regulations. The description does not purport to be complete, and is qualified in its entirety by reference to the text of the applicable laws and regulations.
The description does not purport to be complete, and is qualified in its entirety by reference to the text of the applicable laws and regulations. The Corporation Bank Holding Company Act The Corporation is a bank holding company registered with, and subject to regulation and evaluation by, the FRB pursuant to the BHCA, as amended.
Loans to Insiders (and their related entities) may not exceed, together with all other outstanding loans to such persons and affiliated entities, the Bank's total capital and surplus. Loans to Insiders above specified amounts must receive the prior approval of the Bank's Board of Directors.
Section 22(h) of the Federal Reserve Act and its implementing Regulation O restricts a bank's loans to its directors, executive officers, and principal stockholders ("Insiders"). Loans to Insiders (and their related entities) may not exceed, together with all other outstanding loans to such persons and affiliated entities, the Bank's total capital and surplus.
Covered transactions include loans, asset purchases, the issuance of guarantees, and similar transactions. Certain transactions must be collateralized according to the requirements of the statute.
Covered transactions include loans, asset purchases, the issuance of guarantees, and similar transactions. Certain transactions must be collateralized according to the requirements of the statute. In addition, all covered transactions and other transactions between the Bank and its affiliates must be on terms and conditions that are substantially the same as, or at least as favorable to, the Bank.
The Bank’s deposits are obtained predominantly from the areas in which its retail offices are located. The Bank relies primarily on customer service, long-standing relationships and other banking services, including loans and wealth management services, to attract and retain these deposits.
The Bank relies primarily on customer service, digital product offerings, long-standing relationships and other banking services, including loans and wealth management services, to attract and retain these deposits. However, market interest rates and rates offered by competing financial institutions affect the Bank’s ability to attract and retain deposits.
Investment Activities The general objective of the Bank's investment portfolio is to provide liquidity when loan demand is high, and to absorb excess funds when demand is low. The securities portfolio also provides a medium for certain interest risk measures intended to maintain an appropriate balance between interest income from loans and total interest income.
The securities portfolio also provides a medium for certain interest rate risk measures intended to maintain an appropriate balance between interest income from loans and total interest income. The Bank only invests in high-quality investment-grade securities such as mortgage-backed securities and obligations of states and political subdivisions.
These swaps allow the Bank to originate a mortgage based on short-term SOFR rates and allow the borrower to swap into a longer term fixed rate. The Bank simultaneously sells an offsetting back-to-back swap to an investment grade national bank so that it does not retain this fixed-rate risk.
These swaps allow the Bank to originate a mortgage based on short-term SOFR rates and allow the borrower to swap into a longer term fixed rate. The Bank enters into mirroring swaps with a Domestic Systemically Important Bank (D-SIBs) to manage it's interest rate risk.
Tompkins County is dominated by the presence of Cornell University and Ithaca College. The world headquarters of Corning Incorporated, the region’s largest employer, is located in Steuben County. The remaining New York counties have a combination of service, small manufacturing and tourism-related businesses, with colleges located in Broome, Chemung, and Cortland counties.
Regeneron announced the purchase of a 1.1 million square foot site in Saratoga Springs, New York for its warehouse and production support activities with the potential for other operations. Tompkins County is dominated by the presence of Cornell University and Ithaca College. The world headquarters of Corning Incorporated, the region’s largest employer, is located in Steuben County.
Further, the collateral securing the loans may depreciate over time, may be difficult to appraise, and may fluctuate in value.
Further, the collateral securing the loans may depreciate over time, may be difficult to appraise, and may fluctuate in value. The credit risk related to commercial loans is largely influenced by general economic conditions and the resulting impact on a borrower’s operations or on the value of underlying collateral, if any.
However, market interest rates and rates offered by competing financial institutions affect the Bank’s ability to attract and retain deposits. The Bank utilizes a combination of traditional media, including print, television, and radio, as well as digital when advertising its deposit products.
The Bank utilizes a combination of digital and traditional media, including print, television, and radio, when advertising its deposit and lending products. Investment Activities The general objective of the Bank's investment portfolio is to provide liquidity when loan demand is high, and to absorb excess funds when demand is low.
The FDIC has authority to increase insurance assessments and adopted a final rule in October 2022 to increase initial base deposit insurance assessment rates by 2 basis points beginning in the first quarterly assessment period of 2023. As a result, effective January 1, 2023, assessment rates for institutions of the Bank’s size ranged from 3.5 to 32 basis points.
As of December 31, 2024, assessment rates for institutions of the Bank’s size ranged from 3.5 to 32 basis points. The FDIC may also issue special assessments.
Removed
Over the last 15 years, the Corporation and the Bank have completed the following transactions to grow the franchise: • On March 14, 2008, the Bank acquired three branches from Manufacturers and Traders Trust Company in Broome and Tioga counties in New York.
Added
Over the past two decades, the Corporation has completed two whole bank acquisitions, including of Canton, Pennsylvania based Canton Bancorp, Inc. in 2009 and Albany, New York based Fort Orange Financial Corp., in 2011, as well as branch acquisitions involving offices in Broome, Cayuga, Cortland, Seneca, Tioga, and Tompkins counties of New York.
Removed
At the time of the acquisition, the Bank assumed $64.4 million in deposits and acquired $12.6 million in loans. • On May 29, 2009, the Corporation acquired Canton Bancorp, Inc., the holding company of Bank of Canton based in Canton, Pennsylvania.
Added
Additionally, in 2021 the Corporation expanded its geographic footprint into Western New York with the opening of a de novo branch office in Erie County, and established the “Canal Bank, a division of Chemung Canal Trust Company” brand in 2024, concurrent with the opening of a new regional banking center in Erie County, located in Williamsville, New York.
Removed
At the time of the merger, Canton Bancorp, Inc. had $81.1 million in assets, $58.8 million in loans and $72.9 million in deposits. • On April 8, 2011, the Corporation acquired FOFC, the holding company of Capital Bank & Trust Company based in Albany, New York.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeCompetition for the best people in most activities in which the Corporation engages can be intense and it may not be able to hire people or to retain them. A key component of employee retention is providing a fair compensation base combined with the opportunity for additional compensation for above average performance.
Biggest changeThe Corporation may not be able to attract and retain skilled people. The Corporation's success depends, in large part, on its ability to attract and retain key people. Competition for the best people in most activities in which the Corporation engages can be intense and it may not be able to hire people or retain them.
The Corporation has established detailed policies and control procedures that are intended to ensure that these critical accounting estimates and judgments are well controlled and applied consistently. In addition, these policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner.
The Corporation has established detailed policies and control procedures that are intended to ensure these critical accounting estimates and judgments are well controlled and applied consistently. In addition, these policies and procedures are intended to ensure the process for changing methodologies occurs in an appropriate manner.
Changes in occupancy trends resulting from shifts in macroeconomic conditions could adversely impact our commercial borrowers, particularly in relation to borrowers with substantial office or retail-specific exposures. Loan participations may have a higher risk of loss than loans the Bank originates because the Bank is not the lead lender and has limited control over credit monitoring.
Changes in occupancy trends resulting from shifts in macroeconomic conditions could adversely impact our commercial borrowers, particularly in relation to borrowers with substantial office or retail-specific exposures. Loan participations may have a higher risk of loss than loans the Bank originates because the Bank is not the lead bank and has limited control over credit monitoring.
Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on the Corporation's business and, in turn, its financial condition and results of operations. Systems failures or breaches of our network security could subject us to increased operating costs as well as litigation and other liabilities.
Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on the Corporation's business and, in turn, its financial condition and results of operations. 26 Systems failures or breaches of our network security could subject us to increased operating costs as well as litigation and other liabilities.
Key economic factors affecting the Corporation include the level and volatility of short-term and long-term interest rates, inflation, home prices, unemployment and under-employment levels, bankruptcies, household income, consumer spending, fluctuations in both debt and equity capital markets and currencies, liquidity of the financial markets, the availability and the cost of capital and credit, investor sentiment, confidence in the financial markets, and the sustainability of economic growth.
Key economic factors affecting the Corporation include the level and volatility of short-term and long-term interest rates, inflation, tariffs, home prices, unemployment and under-employment levels, bankruptcies, household income, consumer spending, fluctuations in both debt and equity capital markets and currencies, liquidity of the financial markets, the availability and the cost of capital and credit, investor sentiment, confidence in the financial markets, and the sustainability of economic growth.
Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits. This risk of loss also includes the potential legal actions that could arise as a result of operational deficiencies or as a result of non-compliance with applicable regulatory standards or customer attrition due to potential negative publicity.
Insurance coverage may not be available for certain operational losses, or where available, such losses may exceed insurance limits. This risk of loss also includes the potential legal actions that could arise as a result of operational deficiencies or as a result of non-compliance with applicable regulatory standards or customer attrition due to potential negative publicity.
Also, any sudden or prolonged market downturn in the U.S. or abroad, as a result of the above factors or otherwise could result in a decline in revenue and adversely affect our results of operations and financial condition, including capital and liquidity levels. Inflation can have an adverse impact on our business and on our customers.
Also, any sudden or prolonged market downturn in the U.S. or abroad, as a result of the above factors or otherwise could result in a decline in revenue and adversely affect our results of operations and financial condition, including capital and liquidity levels. 28 Inflation can have an adverse impact on our business and on our customers.
While the Corporation maintains adequate insurance against property and casualty losses arising from most natural disasters, and it has successfully overcome the challenges caused by past flooding in Central New York, there can be no assurance that it will be as successful if and when disasters occur.
While the Corporation maintains adequate insurance against property and casualty losses arising from most natural disasters, and it has successfully overcome the challenges caused by past flooding in Central New York, there can be no assurance that it will be as successful if and when future disasters occur.
In some cases, the Corporation could be required to apply a new or revised standard retroactively, resulting in its restating prior period financial statements or otherwise adversely affecting its financial condition or results of operations. The Corporation holds certain intangible assets that could be classified as impaired in the future.
In some cases, the Corporation could be required to apply a new or revised standard retroactively, resulting in its restating prior period financial statements or otherwise adversely affecting its financial condition or results of operations. 27 The Corporation holds certain intangible assets that could be classified as impaired in the future.
Such sources include proceeds from Federal Home Loan Bank and Federal Reserve advances, sales of investment securities and loans, and federal funds lines of credit from correspondent banks, as well as out-of-market time deposits which could cause the Corporation’s overall cost of funding to increase.
Such sources include advances from the Federal Home Loan Bank and the Federal Reserve, sales of investment securities and loans, and federal funds lines of credit from correspondent banks, as well as out-of-market time deposits which could cause the Corporation’s overall cost of funding to increase.
A significant decline in fees and commissions or trading losses suffered in the investment portfolio could adversely affect our income and potentially require the contribution of additional capital to support our operations. 28 There may be claims and litigation pertaining to fiduciary responsibility.
A significant decline in fees and commissions or trading losses suffered in the investment portfolio could adversely affect our income and potentially require the contribution of additional capital to support our operations. There may be claims and litigation pertaining to fiduciary responsibility.
If these assumptions prove to be incorrect, the allowance for credit losses may not be sufficient to cover future losses in the Corporation’s loan portfolio, resulting in additions to the allowance. Material additions to the allowance would materially decrease earnings.
If these assumptions prove to be incorrect, the allowance for credit losses may not be sufficient to cover future losses in the Corporation’s loan portfolio, resulting in required additions to the allowance for credit losses. Material additions to the allowance would materially decrease earnings.
Loan participations may have a higher risk of loss than loans the Bank originates because we rely on the lead lender to monitor the performance of the loan. Moreover, our decisions regarding the classification of a loan participation and credit loss provisions associated with a loan participation are made in part based upon information provided by the lead lender.
Loan participations may have a higher risk of loss than loans the Bank originates because we rely on the lead bank to monitor the performance of the loan. Moreover, our decisions regarding the classification of a loan participation and 20 credit loss provisions associated with a loan participation are made in part based upon information provided by the lead bank.
These risks may include, among other things: its ability to realize anticipated cost savings, the difficulty of integrating operations and personnel, the loss of key employees, the potential disruption of its or the acquired company’s ongoing business in such a way that could result in decreased revenues, the inability of its management to maximize its financial and strategic position, the inability to maintain uniform standards, controls, procedures and policies, and the impairment of relationships with the acquired company’s employees and customers as a result of changes in ownership and management.
These risks may include, among other things: its ability to realize anticipated cost savings, the difficulty of integrating operations and personnel, conversion of core systems, the loss of key employees, the potential disruption of its or the acquired company’s ongoing business in such a way that could result in decreased revenues, the inability of its management to maximize its financial and strategic position, the inability to maintain uniform standards, controls, procedures and policies, and the impairment of relationships with the acquired company’s employees and customers as a result of changes in ownership and management.
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. On April 23, 2020 the Corporation received payment of $461,309 from the lead bank related to its obligation under the participation agreements.
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. On April 23, 2020 the Corporation received payment of $0.5 million from the lead bank related to its obligation under the participation agreements.
The Corporation occasionally purchases commercial real estate and commercial and industrial loan participations secured by properties outside its market area in which the Bank is not the lead lender. The Corporation has purchased loan participations secured by various types of collateral such as real estate, equipment and other business assets located primarily in New York and Pennsylvania.
The Corporation occasionally purchases commercial real estate and commercial and industrial loan participations secured by properties outside its market areas in which the Bank is not the lead bank. The Corporation has purchased loan participations secured by various types of collateral such as real estate, equipment, and other business assets located primarily in New York and Pennsylvania.
A deterioration in local economic conditions or in the residential or commercial real estate markets within our footprint could have an adverse effect on the quality of our loan portfolios, demand for our products and services, the ability of borrowers to timely repay loans, and the value of the collateral securing loans.
A deterioration in local economic conditions or in the residential or commercial real estate markets within our footprint could have an adverse effect on the quality of our loan portfolios, demand for our products and services, the ability of borrowers to make timely loan repayments, and the value of the collateral securing loans.
A departure or decoupling in correlation may increase the risk that the allowance for credit losses is inadequate to absorb anticipated lifetime credit losses, and may require changes in the Corporation's methodology, which may result in increased provision requirements, materially adversely impacting the results of operations and financial condition.
A departure or decoupling in correlation may increase the risk of allowance for credit losses being inadequate to absorb anticipated lifetime credit losses, and may require changes in the Corporation's methodology, which may result in increased provision requirements, materially adversely impacting the results of operations and financial condition.
Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure could receive increased supervisory scrutiny where total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months.
Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure could receive increased supervisory scrutiny where total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and outstanding balances of such loans has increased by 50% or more during the preceding 36 months.
These "digital banks" may be able to achieve economies of scale and offer better pricing for banking products and services than the Corporation can.
These "non-banks" may be able to achieve economies of scale and offer better pricing for banking products and services than the Corporation can.
The Corporation's future success will depend, in part, on the ability to address the needs of customers by using technology to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in operations. Many competitors have substantially greater resources to invest in technological improvements.
The Corporation's future success will depend, in part, on the ability to address the needs of customers by using technology to provide products and services that will satisfy customer demands for convenience, as well as to create additional efficiencies in operations. Many competitors may have substantially greater resources to invest in technological improvements, including those related to artificial intelligence.
Additionally, appraisals are relied upon to establish the fair value of other real estate owned, and to determine specific allocations to the allowance for credit losses on loans that are individually analyzed using the collateral method.
Additionally, appraisals are relied upon to establish the fair value of other real estate owned, and to determine specific allocations to the allowance for credit losses on collateral-dependent individually analyzed loans.
Market conditions may impact the competitive landscape for deposits in the banking industry. The rising interest rate environment and future actions the FRB may impact pricing and demand for deposits in the banking industry.
Market conditions may impact the competitive landscape for deposits in the banking industry. The elevated interest rate environment and future actions of the FRB may impact pricing and demand for deposits in the banking industry.
We are subject to environmental liability risk associated with lending activities. A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties. During the ordinary course of business, we may foreclose on and take title to properties securing defaulted loans.
A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties. During the ordinary course of business, we may foreclose on and take title to properties securing defaulted loans.
The Corporation has increased its use of derivative financial instruments, primarily interest rate swaps, which exposes it to financial and contractual risks with counterparty banks. The Corporation maintains correspondent bank relationships, manages certain loan participations, engages in securities transactions, and engages in other activities with financial counterparties that are customary to its industry.
The Corporation's use of derivative financial instruments, primarily interest rate swaps, exposes it to financial and contractual risks with counterparty banks. The Corporation maintains correspondent bank relationships, manages certain loan participations, engages in securities transactions, and engages in other activities with financial counterparties that are customary to its industry. Financial risks are inherent in these counterparty relationships.
At December 31, 2023, the Bank had $1.8 billion of deposit liabilities, representing 74.8% of total deposits, that had no maturity and, therefore, may be withdrawn by the depositor at any time without penalty.
As 22 of December 31, 2024, the Bank had $1.8 billion of deposit liabilities, representing 74.0% of total deposits, that had no maturity and, therefore, may be withdrawn by the depositor at any time without penalty.
Financial risks are inherent in these counterparty relationships. Risks Related to Wealth Management Involvement in wealth management creates risks associated with the industry. The Corporation’s wealth management operations present special risks not borne by institutions that focus exclusively on other traditional retail and commercial banking products.
Risks Related to Wealth Management Involvement in wealth management creates risks associated with the industry. The Corporation’s wealth management operations present special risks not borne by institutions that focus exclusively on other traditional retail and commercial banking products.
If the Bank’s regulators were to impose restrictions on the amount of such loans it can hold in its portfolio or require it to implement additional compliance measures, for reasons noted above or otherwise, the Corporation’s earnings would be adversely affected as would earnings per share. 20 Commercial real estate and commercial and industrial loans increase the Corporation’s exposure to credit risks.
If the Bank’s regulators were to impose restrictions on the amount of such loans it can hold in its portfolio or require it to implement additional compliance measures, for reasons noted above or otherwise, the Corporation’s earnings would be adversely affected as would earnings per share.
Additionally, global markets may be adversely affected by natural disasters, the emergence of widespread health emergencies or pandemics, such as COVID-19, cyber-attacks or campaigns, military conflict such as the current conflict between Russia and Ukraine, terrorism, or other geopolitical events. Global market disruptions may affect our business liquidity.
Additionally, global markets may be adversely affected by natural disasters, the emergence of widespread health emergencies or pandemics, cyber-attacks or campaigns, military conflict, terrorism, or other geopolitical events. Global market disruptions may affect our business liquidity.
A decline or prolonged weakness in business and economic conditions generally or specifically in the principal markets in which the Corporation does business could have one or more of the following adverse effects on the Corporation’s business: i. a decrease in the demand for loans and other products and services; ii. a decrease in the value of the Corporation’s loans or other assets secured by consumer or commercial real estate; iii. an impairment of certain of the Corporation’s intangible assets, such as goodwill; and iv. an increase in the number of borrowers and counter-parties who become delinquent, file for protection under bankruptcy laws or default on their loans or other obligations to the Corporation.
The deterioration of any of these conditions could adversely affect the Corporation's consumer and commercial businesses, its securities and derivatives portfolios, its level of charge-offs and provision for credit losses, the carrying value of the Corporation's deferred tax assets, its capital levels and liquidity, and the Corporation's results of operations. 19 A decline or prolonged weakness in business and economic conditions generally or specifically in the principal markets in which the Corporation does business could have one or more of the following adverse effects on the Corporation’s business: i. a decrease in the demand for loans and other products and services; ii. a decrease in the value of the Corporation’s loans or other assets secured by consumer or commercial real estate; iii. an impairment of certain of the Corporation’s intangible assets, such as goodwill; and iv. an increase in the number of borrowers and counter-parties who become delinquent, file for protection under bankruptcy laws or default on their loans or other obligations to the Corporation.
A lead lender also may not monitor a participation loan in the same manner as we would for loans that the Bank originates. At December 31, 2023, loan participation balances where the Bank is not the lead lender totaled $177.6 million, or 9.00% of our loan portfolio.
A lead bank also may not monitor a participation loan in the same manner as we would for loans that the Bank originates. As of December 31, 2024, loan participation balances where the Bank is not the lead bank totaled $168.2 million, or 8.1% of our loan portfolio.
The banking industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. Technology has lowered barriers to entry and made it possible for "non-banks" to offer traditional bank products and services using innovative technological platforms such as fintech and blockchain.
The banking industry continues to undergo rapid technological changes with frequent introductions of new technology-driven products and services, most recently including the proliferation of artificial intelligence based solutions. Technology has lowered barriers to entry and made it possible for "non-banks" to offer traditional bank products and services using innovative technological platforms such as those developed by fintech and blockchain companies.
Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial condition and results of operations. 25 Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.
Such actions could have a material adverse effect on our business, financial condition, and results of operations. Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.
The Corporation’s common stock is traded on the NASDAQ under the symbol “CHMG.” Certain brokers currently make a market in the common stock, but such transactions are infrequent and the volume of shares traded is relatively small. Management cannot predict whether these or other brokers will continue to make a market in our common stock.
Risks Relating to Ownership of Our Common Stock The Corporation’s common stock is not heavily traded, and the stock price may fluctuate significantly. The Corporation’s common stock is traded on the NASDAQ under the symbol “CHMG.” Certain brokers currently make a market in the common stock, but such transactions are infrequent and the volume of shares traded is relatively small.
Risks Related to Business Strategy The Corporation’s growth strategy may not prove to be successful and its market value and profitability may suffer. As part of the Corporation's strategy for continued growth, it may open additional branches.
These technological advances may diminish the importance of depository institutions and other financial intermediaries in the transfer of funds between parties. 23 Risks Related to Business Strategy The Corporation’s growth strategy may not prove to be successful and its market value and profitability may suffer. As part of the Corporation's strategy for continued growth, it may open additional branches.
Automobile loans are inherently risky as they are often secured by assets that may be difficult to locate and can depreciate rapidly. In some cases, repossessed collateral for a defaulted automobile loan may not provide an adequate source of repayment for the outstanding loan and the remaining deficiency may not warrant further substantial collection efforts against the borrower.
In some cases, repossessed collateral for a defaulted automobile loan may not provide an adequate source of repayment for the outstanding loan and the remaining deficiency may not warrant further substantial collection efforts against the borrower.
Effective January 1, 2023, the Corporation adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the Corporation to estimate the lifetime expected credit losses in the loan portfolio as of the measurement date.
As the Corporation continues to increase the amount of these loans, additional or increased provisions for credit losses may be necessary, which may result in a decrease in earnings. 21 Effective January 1, 2023, the Corporation adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which requires the Corporation to estimate the lifetime expected credit losses in the loan portfolio as of the measurement date.
The Corporation's vendors, service providers, and other third parties may expose the Corporation to risk as a result of human error, misconduct, malfeasance, or a failure or breach of systems, networks, and infrastructure.
The Corporation's vendors, service providers, and other third parties may expose the Corporation to risk as a result of human error, misconduct, malfeasance, or a failure or breach of systems, networks, and infrastructure. We expect third-party vendors, or a subcontractor thereof, to increasingly incorporate artificial intelligence embedded solutions into their product offerings and operational workflows.
To the extent that the Corporation grows through acquisitions, it cannot provide assurance that such strategic decisions will be accretive to earnings. 24 The risks presented by acquisitions could adversely affect the Corporation's financial condition and results of operations. The business strategy of the Corporation has included and may continue to include growth through acquisition from time to time.
In addition, the Corporation may acquire banks and related businesses that it believes provide a strategic fit with its business. To the extent that the Corporation grows through acquisitions, it cannot provide assurance that such strategic decisions will be accretive to earnings. The risks presented by acquisitions could adversely affect the Corporation's financial condition and results of operations.
In this regard, the Corporation uses a stock-based compensation program that aligns the interest of the Corporation's executives and senior managers with the interests of the Corporation, and its shareholders.
A key component of employee retention is providing a fair compensation base combined with the opportunity for additional compensation for above average performance. In this regard, the Corporation uses a stock-based compensation program that aligns the interest of the Corporation's executives and senior managers with the interests of the Corporation, and its shareholders.
If our internal controls fail to prevent or detect any such occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, financial condition and results of operations. 22 Use of appraisals when underwriting loans secured by real property may not accurately represent the net value of collateral the Bank can realize at a future date.
If our internal controls fail to prevent or detect any such occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, financial condition, and results of operations.
In establishing a provision for income tax expense, the Corporation must make judgments and interpretations about the application of these inherently complex tax laws to its business activities, as well as the timing of when certain items may affect taxable income. The provision for income taxes is composed of current and deferred taxes.
In establishing a provision for income tax expense, the Corporation must make judgments and interpretations about the application of these inherently complex tax laws to its business activities, as well as the timing of when certain items may affect taxable income. 25 Risks Related to Operational Matters The Corporation's controls and procedures may fail or be circumvented, which may result in a material adverse effect on its business.
These reasons, historical issues at the largest mortgage loan servicers, and the legal and regulatory responses have impacted the foreclosure process and completion time of foreclosures for residential mortgage lenders.
These reasons, historical issues at the largest mortgage loan servicers, and the legal and regulatory responses have impacted the foreclosure process and completion time of foreclosures for residential mortgage lenders. This may result in a material adverse effect on collateral values and the Corporation’s ability to minimize its losses.
In 2021, the Corporation opened a full-service branch in Clarence, New York, and plans to open a second full-service branch in Williamsville, New York in 2024. New branches do not initially contribute to operating profits due to the impact of overhead expenses and the start-up phase of generating loans and deposits.
New branches do not initially contribute to operating profits due to the impact of overhead expenses and the start-up phase of generating loans and deposits.
Commercial real estate loans represent 403.6% of Bank risk-based capital at December 31, 2023 and the outstanding balance of our commercial real estate loan portfolio has increased by greater than 50% during the 36 months preceding December 31, 2023. In December 2015, the Agencies released a new statement on prudent risk management for commercial real estate lending (the “2015 Statement”).
Non-owner occupied commercial real estate loans represented 399.4% of Bank risk-based capital as of December 31, 2024 and outstanding balances of non-owner occupied commercial real estate loans increased by 53.2% during the 36 months preceding December 31, 2024. In December 2015, the Agencies released a new statement on prudent risk management for commercial real estate lending (the “2015 Statement”).
There can be no assurance that the Corporation will be able to effectively implement new technology-driven products and services or be successful in marketing such products and services to customers.
Although the Corporation has made investments related to automated processing, as described above, other emerging technologies, there can be no assurance that the Corporation will be able to effectively implement new technology-driven products and services, be successful in marketing such products and services to customers, or realize operational efficiencies from such efforts.
The recent increase in interest rates in response to elevated levels of inflation has decreased the fair value of our securities portfolio, resulting in an increase in unrealized losses recorded in accumulated other comprehensive income on the shareholders’ equity section of our balance sheet.
Increases in interest rates in response to elevated levels of inflation has decreased the fair value of our available for sale securities portfolio, resulting in an increase in unrealized losses recorded in accumulated other comprehensive income. In addition, inflation-driven increases in our levels of non-interest expense could negatively impact our results of operations.
Among the instruments used by the FRB to implement these objectives are open market purchases and sales of U.S. government securities, adjustments of the discount rate and changes in banks’ reserve requirements against bank deposits. Throughout 2022 and 2023, the FRB increased the upper bound of the federal funds rate by 525 basis points, which increased market rates dramatically.
Among the instruments used by the FRB to implement these objectives are open market purchases and sales of U.S. government securities, adjustments of the discount rate and changes in banks’ reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits.
Provisions of the Corporation's certificate of incorporation, bylaws, as well as New York law and certain banking laws, could delay or prevent a takeover of the Corporation by a third party.
If the Bank is unable to make dividend payments to the Corporation and sufficient capital is not otherwise available, the Corporation may not be able to make dividend payments to its common shareholders. 29 Provisions of the Corporation's certificate of incorporation, bylaws, as well as New York law and certain banking laws, could delay or prevent a takeover of the Corporation by a third party.
When evaluating decisions to extend credit that is to be secured by real property, it is generally the requirement of the Bank to require an appraisal on the property being collateralized.
Use of appraisals when underwriting loans secured by real property may not accurately represent the net value of collateral the Bank can realize at a future date. When evaluating decisions to extend credit that is to be secured by real property, it is generally the requirement of the Bank to obtain an appraisal on the property being collateralized.
As a result, the Corporation’s ability to conduct business may be adversely affected by any significant disruptions to third parties with whom the Corporation interacts or relies upon. 27 Risks Related to Accounting Matters The Corporation's accounting policies and estimates are critical to how the Corporation reports its financial condition and results of operations, and any changes to such accounting policies and estimates could materially affect how the Corporation reports its financial condition and results of operations.
Risks Related to Accounting Matters The Corporation's accounting policies and estimates are critical to how the Corporation reports its financial condition and results of operations, and any changes to such accounting policies and estimates could materially affect how the Corporation reports its financial condition and results of operations.
These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits, as well as the value of the Corporation's investment securities.
Their use also affects interest rates charged on loans or paid on deposits, as well as the value of the Corporation's investment securities.
The geographic concentration of the Corporation's market in upstate New York makes it more sensitive to adverse changes in regional conditions than larger or more geographically diversified competitors. The Corporation's physical branch network, and by extension its lending footprint, is significantly concentrated in the upstate region of New York State.
The Corporation's physical branch network, and by extension its lending footprint, is significantly concentrated in the upstate region of New York State.
At December 31, 2023, the Corporation’s portfolio of commercial real estate and commercial and industrial loans totaled $1.387 billion or 70.3% of total loans.
Commercial real estate and commercial and industrial loans increase the Corporation’s exposure to credit risks. As of December 31, 2024, the Corporation’s portfolio of commercial real estate and commercial and industrial loans totaled $1.517 billion or 73.2% of total loans.
Prices on stock that is not heavily traded, such as our common stock, can be more volatile than heavily traded stock.
Management cannot predict whether these or other brokers will continue to make a market in our common stock. Prices on stock that is not heavily traded, such as our common stock, can be more volatile than heavily traded stock.
We operate in diverse markets and rely on the ability of our employees and systems to process a high number of transactions.
We face significant operational risks because the financial services business involves a high volume of transactions, and these operational risks may be magnified through the use of automated processing. We operate in diverse markets and rely on the ability of our employees and systems to process a high number of transactions.
The Corporation’s emphasis on the origination of commercial loans is one of the more significant factors in determining its allowance for credit losses. As the Corporation continues to increase the amount of these loans, additional or increased provisions for credit losses may be necessary, which may result in a decrease in earnings.
The Corporation’s emphasis on the origination of commercial loans is one of the more significant factors in determining its allowance for credit losses.
The national economy continues to experience elevated levels of inflation. As of December 31, 2023, the year over year consumer price index (“CPI”) increase was 3.4%, primarily driven by increases in food and energy prices. The FOMC of the FRB's preferred measure of inflation, the year over year personal consumption expenditures index ("PCE"), excluding food end energy, increased 2.9%.
The national economy continues to experience elevated levels of inflation. As of December 31, 2024, the year over year consumer price index (CPI) increase was 2.9%, primarily driven by housing and transportation costs.
In addition in March 2023, the failures of Silicon Valley Bank, Signature Bank and First Republic Bank resulted in decreased confidence in banks among depositors and other investors.
In addition, the spring 2023 failures of Silicon Valley Bank, Signature Bank, and First Republic Bank resulted in decreased confidence in banks among depositors and other investors. Accordingly, if we are unable to fully anticipate or manage these risks, we could incur losses, impacting our results of operations and financial condition.
If demographic, employment, or other growth in our market is negative for an extended period, subsequent income levels, deposits, and real estate development could be adversely impacted.
If demographic, employment, or other growth factors in our market areas deteriorate for an extended period, subsequent income levels, deposits, and real estate development could be adversely impacted. Some of our larger competitors that are more geographically diverse may be better able to manage and mitigate risks posed by adverse conditions impacting only local or regional markets.
During 2022 and 2023, in response to accelerated inflation, the FRB implemented monetary tightening policies, resulting in significantly increased interest rates. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, net interest income, and therefore earnings, could be adversely affected.
If interest rates paid on deposits and other borrowings change at a faster rate than interest rates received on loans and other investments, net interest income, and therefore earnings, could be adversely impacted. Risks Related to Competition Strong competition within the Corporation's industry and market areas could limit its growth and profitability.
Any future acquisitions will be accompanied by the risks commonly encountered in acquisitions.
The business strategy of the Corporation has included and may continue to include growth through acquisition from time to time. Any future acquisitions will be accompanied by the risks commonly encountered in acquisitions.
The Bank agreed to pay restitution to impacted borrowers of $53,000 and a civil monetary penalty of $350,000 to the New York State Department of Financial Services. The Bank has been informed by the NYSDFS that the Bank has satisfied all of its obligations under the 2021 Consent Order related to the Bank's indirect automobile lending program.
The Bank has been informed by the NYSDFS that the Bank has satisfied all of its obligations under the 2021 Consent Order related to the Bank's indirect automobile lending program. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation.
At December 31, 2023, commercial and industrial loan participations outside our market area totaled $11.6 million, or 4.38% of the commercial and industrial loan portfolio. There were no commercial real estate loan participations outside our market area. If the Bank’s underwriting of these participation loans is not sufficient, our non-performing loans may increase and our earnings may decrease.
As of December 31, 2024, commercial and industrial loan participations outside our market areas totaled $11.3 million, or 3.8% of the commercial and industrial loan portfolio, and commercial real estate loan participations outside our market areas totaled $2.1 million, or 0.2% of the commercial real estate portfolio.
At December 31, 2023, $210.4 million, or 10.7% of our total loan portfolio, consisted of automobile loans, primarily originated through automobile dealers for the purchase of new or used automobiles. The Corporation serves customers that cover a range of creditworthiness and the required terms and rates are reflective of those risk profiles.
The Corporation's portfolio of indirect automobile lending exposes it to increased credit risks. As of December 31, 2024, $178.1 million, or 8.5% of our total loan portfolio, consisted of automobile loans, primarily originated through automobile dealers for the purchase of new or used automobiles.
Removed
The deterioration of any of these conditions could adversely affect the Corporation's consumer and commercial businesses, its securities and derivatives portfolios, its level of charge-offs and provision for credit losses, the carrying value of the Corporation's deferred tax assets, its capital levels and liquidity, and the Corporation's results of operations.
Added
If the Bank’s underwriting of these participation loans is not sufficient, our non-performing loans may increase, negatively effecting our results of operations. We are subject to environmental liability risk associated with lending activities.
Removed
This may result in a material adverse effect on collateral values and the Corporation’s ability to minimize its losses. 21 The Corporation's portfolio of indirect automobile lending exposes it to increased credit risks.
Added
The Corporation serves customers that cover a range of creditworthiness and the required terms and rates are reflective of those risk profiles. Automobile loans are inherently risky as they are often secured by assets that may be difficult to locate and can depreciate rapidly.
Removed
In addition, the Corporation’s net interest margin may contract in a rising rate environment because its funding costs may increase faster than the yield earned on its interest-earning assets. In a rising rate environment, demand for loans may decrease and loans with adjustable interest rates are more likely to experience a higher rate of default.
Added
In recent years, the FRB implemented significant monetary tightening policies, increasing the federal funds rate by 525 basis points during 2022 and 2023, resulting in the upper bound of the federal funds rate peaking at 5.50% as of the end of 2023. These increases also represented the fastest pace of tightening by the FRB since the 1970s.
Removed
Additionally, changes in interest rates also affect the fair value of the securities portfolio. Generally, the value of securities moves inversely with changes in interest rates.
Added
In 2024 the FRB decreased the federal funds rate by 100 basis points, based on its perceived progress towards a dual mandate to maximize employment and maintain stable price levels. Should the FRB determine in the future that insufficient progress has been made towards this dual mandate, they may choose to further increase interest rates.
Removed
The combination of these events may adversely affect the Corporation’s financial condition and results of operations. 23 Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.
Added
In 2021, the Corporation entered the Buffalo Metropolitan Area, opening a then full service branch in Clarence, New York. In 2024, the Corporation opened a full-service branch and regional banking center in Williamsville, New York and converted its Clarence branch into administrative offices. The Corporation anticipates it will open additional branches in Western New York.
Removed
In addition, in a falling rate environment or the recent pandemic-related environment where the FRB held the targeted federal funds rate near 0.00%, loans and certain investments may be prepaid sooner than the Corporation expects, which could result in a delay between when the Corporation receives the prepayment and when it is able to redeploy the funds into new interest-earning assets and in a decrease in the amount of interest income the Corporation is able to earn on those assets.
Added
The monetary policies of the FRB may be affected by certain policy initiatives of the new Administration, which has announced tariffs on certain U.S. trading partners (and has indicated additional tariffs and retaliatory tariffs against U.S. trading partners may be announced in the future) and has implemented stricter immigration policies.
Removed
If the Corporation is unable to manage these risks effectively, its financial condition and results of operations could be materially adversely affected. Any substantial, unexpected or prolonged change in market interest rates could have a material adverse effect on the Corporation’s financial condition and results of operations.
Added
Although forecasts have varied, many economists are projecting that such policy initiatives may halt productivity growth and reduce available labor, creating inflationary pressures. Under such a scenario, the FRB may decide to maintain the federal funds rate at a relatively elevated 24 level for a prolonged period of time.
Removed
Also, the Corporation’s interest rate risk modeling techniques and assumptions likely may not fully predict or capture the impact of actual interest rate changes on its balance sheet. Risks Related to Competition Strong competition within the Corporation's industry and market area could limit its growth and profitability.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeRisk oversight, including cybersecurity is a key risk which has been delegated to the Enterprise Risk Committee of the Board (“ERC”). Cybersecurity is integrated into the Corporation's Enterprise Risk Management Policy, Enterprise Risk Management Committee Charter, Escalation Policy, Risk Appetite Statement, Information Technology Steering Meetings, and Division Risk Meetings.
Biggest changeCybersecurity is integrated into the Corporation's Enterprise Risk Management Policy, Enterprise Risk Management Committee Charter, Escalation Policy, Risk Appetite Statement, Information Technology Steering Meetings, and Division Risk Meetings. Employees are trained on their first day of employment with regards to cybersecurity and additional training is rolled out for all employees throughout the year.
However, with our system of internal controls, cyber defense mechanisms in place and the tenure and experience of our Chief Information Security Officer (“CISO”) and Information Security Analysts, we have sought to reduce the residual risk that is inherent of cybersecurity. The CISO reports to ERC on a quarterly basis regarding the cybersecurity program and material cybersecurity risks.
However, with our system of internal controls, cyber defense mechanisms in place and the tenure and experience of our Chief Information Security Officer (“CISO”) and Information Security Analysts, we have sought to reduce the residual risk that is inherent of cybersecurity. 30 The CISO reports to ERC on a quarterly basis regarding the cybersecurity program and material cybersecurity risks.
The CISO and Information Security Analysts are active members of the following management level committees at the Bank: Information Technology Steering Committee and the Change Control Committee. The Program is led by our CISO, who reports directly to the Senior Risk Officer.
The CISO and Information Security Analysts are active members of the following management level committees at the Bank: Information Technology Steering Committee and the Change Control Committee. The Program is led by our CISO, who reports directly to the Chief Risk Officer.
The CISO has over 26 years of experience with information technology management, information security, compliance, audit, and process improvement. Our Information Security Analysts have a combined 22 years of experience with information security, information technology servers and information technology networks.
The CISO has over 27 years of experience with information technology management, information security, compliance, audit, and process improvement. Our Information Security Analysts have a combined 23 years of experience with information security, information technology servers and information technology networks.
The Corporation has established an Information and Cyber Security Program (“Program”) that includes standards and procedures to ensure that all information belonging to or held by the Corporation will be appropriately evaluated, classified, and protected against likely forms of unauthorized or inappropriate access, use, disclosure, modification, destruction, and denial. 30 Enterprise Risk Management embeds risk management into the oversight of cybersecurity as an integral part of the business with comprehensive internal control and assurance processes linked to key risks which are then reported to the Board of Directors (“Board”).
The Corporation has established an Information and Cyber Security Program (“Program”) that includes standards and procedures to ensure that all information belonging to or held by the Corporation will be appropriately evaluated, classified, and protected against likely forms of unauthorized or inappropriate access, use, disclosure, modification, destruction, and denial.
Cybersecurity is an evolving threat that does have the potential to materially affect the Corporation, including our business strategy, operations, or financial condition.
Cybersecurity is an evolving threat, and the increasing sophistication of threat actors is supported by new technologies, including artificial intelligence and machine learning, which does have the potential to materially affect the Corporation, including our business strategy, operations, or financial condition.
If there are any incidents that require information to be presented to the Executive Management Team or the Board, the Senior Risk Officer presents that information. The CISO reports to ERC on a quarterly basis regarding the cybersecurity program and material cybersecurity risks.
If there are any incidents that require information to be presented to the Executive Management Team or the Board, the Chief Risk Officer presents that information.
Employees are trained on their first day of employment with regards to cybersecurity and additional training is rolled out for all employees throughout the year. The Corporation engages with a multitude of third-party assessors, consultants, auditors and other third parties to support and maintain a robust information security practice.
The Corporation engages with a multitude of third-party assessors, consultants, auditors and other third parties to support and maintain a robust information security practice.
Added
Enterprise Risk Management embeds risk management into the oversight of cybersecurity as an integral part of the business with comprehensive internal control and assurance processes linked to key risks which are then reported to the Board of Directors (“Board”). Risk oversight, including cybersecurity is a key risk which has been delegated to the Enterprise Risk Committee of the Board (“ERC”).

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−1 removed5 unchanged
Biggest changeBuffalo St., Ithaca, NY 14850 304 Elmira Rd., Ithaca, NY 14850 Erie County *909 Hanshaw Rd., Ithaca, NY 14850 *9159 Main Street, Clarence, NY 14031 *^5529 Main Street, Williamsville, NY 14221 Full-Service Branches - Pennsylvania (Bradford County) 5 West Main St., Canton, PA 17724 159 Canton St., Troy, PA 16947 CFS Group One Chemung Canal Plaza, Elmira, NY 14901 Available by appointment at all bank locations * Leased facilities and/or property ^ Leased, pending opening as full-service branch in 2024 32 Leased Off-Site ATM Locations Albany Capital Center Albany, NY E-Z Food Mart Elmira, NY Ithaca College Ithaca, NY
Biggest changeMain St., Horseheads, NY 14845 405 Chemung St., Waverly, NY 14892 Cortland County Tompkins County *1094 State Rte. 222, Cortland, NY 13045 304 Elmira Rd., Ithaca, NY 14850 *909 Hanshaw Rd., Ithaca, NY 14850 Erie County *5529 Main Street, Williamsville, NY 14221 Full-Service Branches - Pennsylvania (Bradford County) 5 West Main St., Canton, PA 17724 159 Canton St., Troy, PA 16947 CFS Group One Chemung Canal Plaza, Elmira, NY 14901 Available by appointment at all bank locations Western New York Administrative Office *9159 Main Street, Clarence, NY 14031 1 Leased Off-Site ATM Location Albany Capital Center Albany, NY * Leased facilities and/or property 1 Office to be closed effective March 31, 2025. 32
Removed
Main St., Horseheads, NY 14845 405 Chemung St., Waverly, NY 14892 Cortland County Tompkins County *1094 State Rte. 222, Cortland, NY 13045 806 W.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed3 unchanged
Biggest changeOther 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 its financial results or liquidity as of December 31, 2023. ITEM 4. MINE SAFETY DISCLOSURES None. 33 PART II
Biggest changeOther 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 its financial results or liquidity as of December 31, 2024. ITEM 4. MINE SAFETY DISCLOSURES None. 33 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSmallCap Banks Index for the period of five years commencing December 31, 2018. Period Ending Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Chemung Financial Corporation 100.00 105.27 87.26 122.65 124.57 139.17 NASDAQ Composite Index 100.00 136.69 198.10 242.03 163.28 236.17 KBW NASDAQ Bank Index 100.00 136.13 122.09 168.88 132.75 131.57 S&P U.S.
Biggest changeSmallCap Banks Index for the period of five years commencing December 31, 2019. Period Ending Index 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Chemung Financial Corporation 100.00 82.89 116.51 118.34 132.20 133.17 NASDAQ Composite Index 100.00 144.92 177.06 119.45 172.77 223.87 KBW NASDAQ Bank Index 100.00 89.69 124.06 97.52 96.65 132.60 S&P U.S.
As of March 1, 2024, a total of 49,184 shares were repurchased at an average cost of $40.42 per share. 34 STOCK PERFORMANCE GRAPH The following graph compares the yearly change in the cumulative total shareholder return on the Corporation’s common stock against the cumulative total return of the NASDAQ Composite Index, KBW NASDAQ Bank Index, and S&P U.S.
As of March 1, 2025, a total of 49,184 shares were repurchased at an average cost of $40.42 per share. 34 STOCK PERFORMANCE GRAPH The following graph compares the yearly change in the cumulative total shareholder return on the Corporation’s common stock against the cumulative total return of the NASDAQ Composite Index, KBW NASDAQ Bank Index, and S&P U.S.
The table below sets forth the information with respect to purchases made by the Corporation of our common stock during the quarter ended December 31, 2023: 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 10/01/23 - 10/31/23 — $ — — 200,816 11/01/23 - 11/30/23 — $ — — 200,816 12/01/23 - 12/31/23 — $ — — 200,816 Quarter ended 12/31/2023 — $ — — 200,816 On January 8, 2021 the Corporation announced that the Board of Directors approved a new stock repurchase program whereby the Corporation may repurchase up to 250,000 shares of its common stock, or approximately 5% of its outstanding shares.
The table below sets forth the information with respect to purchases made by the Corporation of our common stock during the quarter ended December 31, 2024: 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 10/01/24 - 10/31/24 — $ — — 200,816 11/01/24 - 11/30/24 — $ — — 200,816 12/01/24 - 12/31/24 — $ — — 200,816 Quarter ended 12/31/2024 — $ — — 200,816 On January 8, 2021 the Corporation announced that the Board of Directors approved a new stock repurchase program whereby the Corporation may repurchase up to 250,000 shares of its common stock, or approximately 5% of its outstanding shares.
See Item 1, “Business – Supervision and Regulation-The Bank-Payment of Dividends” for an explanation of legal limitations on the Bank’s ability to pay dividends. As of March 1, 2024, there were 437 registered holders of record of the Corporation's stock.
See Item 1, “Business – Supervision and Regulation-The Bank-Payment of Dividends” for an explanation of legal limitations on the Bank’s ability to pay dividends. As of March 1, 2025, there were 423 registered holders of record of the Corporation's stock.
SmallCap Banks Index 100.00 125.46 113.94 158.62 139.85 140.55 The cumulative total return includes (1) dividends paid and (2) changes in the share price of the Corporation’s common stock and assumes that all dividends were reinvested. The above graph assumes that the value of the investment in Chemung Financial Corporation and each index was $100 on December 31, 2018.
SmallCap Banks Index 100.00 90.82 126.43 111.47 112.03 132.44 The cumulative total return includes (1) dividends paid and (2) changes in the share price of the Corporation’s common stock and assumes that all dividends were reinvested. The above graph assumes that the value of the investment in Chemung Financial Corporation and each index was $100 on December 31, 2019.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

168 edited+55 added−60 removed54 unchanged
Biggest changeService Charges on Deposit Accounts The increase in service charges on deposit accounts was primarily due to an increase in non-sufficient fund fees when compared to the prior year. 43 Non-interest expenses The following table presents non-interest expenses for the years indicated, and the dollar and percent change (in thousands): Years Ended December 31, Percentage Change 2023 2022 Change Compensation expenses: Salaries and wages $ 26,832 $ 25,054 $ 1,778 7.1 % Pension and other employee benefits 7,368 7,668 (300) (3.9) % Other components of net periodic pension cost (benefits) (676) (1,648) 972 59.0 % Total compensation expenses 33,524 31,074 2,450 7.9 % Non-compensation expenses: Net occupancy 5,637 5,539 98 1.8 % Furniture and equipment 1,728 1,906 (178) (9.3) % Data processing 9,840 8,919 921 10.3 % Professional services 2,293 2,171 122 5.6 % Amortization of intangible assets — 15 (15) (100.0) % Marketing and advertising 923 941 (18) (1.9) % Other real estate owned expense (20) (5) (15) 300.0 % FDIC insurance 2,128 1,356 772 56.9 % Loan expense 1,047 1,001 46 4.6 % Other 7,143 6,363 780 12.3 % Total non-compensation expenses 30,719 28,206 2,513 8.9 % Total non-interest expenses $ 64,243 $ 59,280 $ 4,963 8.4 % Non-interest expense increased $5.0 million, or 8.4% in 2023.
Biggest changeWealth Management Group Fee Income The increase in wealth management group fee income was primarily due to improved equity market conditions during 2024. 43 Non-interest expenses The following table presents non-interest expenses for the years ended December 31, 2024 and 2023, and the dollar and percent change (in thousands, except percentages): NON-INTEREST EXPENSE 2024 2023 2024 v. 2023 Amount % to Total Amount % to Total $ Change % Change Compensation expenses: Salaries and wages $ 28,457 42.3 % $ 26,832 41.8 % $ 1,625 6.1 % Pension and other employee benefits 8,083 12.0 % 7,368 11.5 % 715 9.7 % Other components of net periodic pension cost (benefits) (909) (1.4) % (676) (1.1) % (233) (34.5) % Total compensation expenses 35,631 52.9 % 33,524 52.2 % 2,107 6.3 % Non-compensation expenses: Net occupancy 5,832 8.7 % 5,637 8.8 % 195 3.5 % Furniture and equipment 1,659 2.5 % 1,728 2.7 % (69) (4.0) % Data processing 10,093 15.0 % 9,840 15.3 % 253 2.6 % Professional services 2,353 3.5 % 2,293 3.6 % 60 2.6 % Marketing and advertising 1,182 1.8 % 923 1.4 % 259 28.1 % Other real estate owned expense 157 0.2 % (20) — % 177 N/M FDIC insurance 2,120 3.2 % 2,128 3.3 % (8) (0.4) % Loan expense 1,182 1.8 % 1,047 1.6 % 135 12.9 % Other 7,041 10.4 % 7,143 11.1 % (102) (1.4) % Total non-compensation expenses 31,619 47.1 % 30,719 47.8 % 900 2.9 % Total non-interest expenses $ 67,250 100.0 % $ 64,243 100.0 % $ 3,007 4.7 % Non-interest expense increased $3.0 million, or 4.7%, in 2024.
This may include single family residences, duplexes, triplexes, and quadplexes. Commercial real estate loans are primarily made within the counties comprising the geographic footprint of the Corporation's physical branch network, as well as to borrowers whose business interests include projects that may be located in counties that are geographically contiguous with the Corporation's physical footprint.
This may include single family residences, duplexes, triplexes, and quadplexes. Commercial real estate loans are primarily made within the counties comprising the geographic footprint of the Corporation's physical branch network, as well as to borrowers whose business interests include projects that may be located in counties geographically contiguous with the Corporation's physical footprint.
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 Act of 1934.
The repurchase program permits shares to be repurchased in open market or privately negotiated transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934.
The Corporation's actual results could be materially different from expectations because of various factors, including changes in economic conditions or interest rates, credit risk, inflation, cybersecurity risks, changes in FDIC assessments, bank failures, difficulties in managing the Corporation’s growth, competition, changes in law or the regulatory environment, and changes in general business and economic trends.
The Corporation's actual results could be materially different from expectations because of various factors, including changes in economic conditions or interest rates, credit risk, inflation, tariffs, cybersecurity risks, changes in FDIC assessments, bank failures, difficulties in managing the Corporation’s growth, competition, changes in law or the regulatory environment, and changes in general business and economic trends.
For more information regarding current capital regulations see Part I-“Business-Supervision and Regulation-Regulatory Capital Requirements.” 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.
For more information regarding current capital regulations see Part I-“Business-Supervision and Regulation-Regulatory Capital Requirements.” 63 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.
Factors considered as part of the qualitative adjustment analysis include economic considerations not captured by the model, changes in conditions within the Bank such as lending standards, personnel, and concentrations of credit, among others, as well as external factors such as change in the regulatory and competitive landscape.
Factors considered as part of the qualitative adjustment analysis primarily include economic considerations not captured by the model, changes in conditions within the Bank such as lending standards, personnel, and concentrations of credit, among others, as well as external factors such as change in the regulatory and competitive landscape.
Loans are charged against the allowance for credit losses when management believes that the collectability of all or a portion of the principal is unlikely.
Loans are charged against the allowance for credit losses when management believes the collectability of all or a portion of the principal is unlikely.
While management uses available information to recognize losses on credits, future additions to the allowance may be necessary based on changing economic conditions or portfolio composition. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation's allowance for credit losses.
While management uses available information to recognize estimated credit losses, future additions to the allowance may be necessary based on changing economic conditions or portfolio composition. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation's allowance for credit losses.
Allowance for Credit Losses Management considers the allowance for credit losses to be a critical accounting estimate, given the uncertainty in estimating lifetime credit losses attributable to its portfolios of assets exhibiting credit risk, particularly in its loan portfolio, and the material effect that such judgments can have on the Corporation's results of operations.
Allowance for Credit Losses Management considers the allowance for credit losses to be a critical accounting estimate, given the uncertainty in estimating lifetime credit losses attributable to its portfolios of assets exhibiting credit risk, particularly in its loan portfolio, and the material effect that such judgments may have on the Corporation's results of operations.
The underlying assumptions of the DCF are based on the relationship between a projected value of an economic indicator, and the implied historical loss experience amongst a group of curated peers. The Corporation utilized a regression analysis to determine suitable loss drivers for each pool of loans.
The underlying assumptions of the DCF are based on the relationship between a projected value of an economic indicator, and the implied historical loss experience amongst a group of curated peers. The Corporation utilizes a regression analysis to determine suitable loss drivers for each pool of loans.
As of December 31, 2023, the Corporation repurchased a total of 49,184 shares of common stock at a total cost of $2.0 million under the repurchase program at the weighted average cost of $40.42 per share. The remaining buyback authority under the share repurchase program was 200,816 shares as of December 31, 2023.
As of December 31, 2024, the Corporation repurchased a total of 49,184 shares of common stock at a total cost of $2.0 million under the repurchase program at the weighted average cost of $40.42 per share. The remaining buyback authority under the share repurchase program was 200,816 shares as of December 31, 2024.
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.
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 to be reasonable based upon the information available at that time.
Based on these results, a probability of default (PD) and loss given default (LGD), is assigned to each potential value of an economic indicator for each pool of loans, and is then applied to the portfolio to derive the statistical loss implications thereof.
Based on these results, a probability of default (PD) and loss given default (LGD), is assigned to each potential value of a chosen economic indicator for each pool of loans, and is then applied to the portfolio to derive the statistical loss implications thereof.
Management's evaluation of the adequacy of the allowance for credit losses is performed on a periodic basis and takes into consideration such factors as the outcomes of the quantitative analysis, a review of specific individually analyzed loans, and determinations for qualitative adjustments.
Management's evaluation of the adequacy of the allowance for credit losses is performed on a periodic basis and takes into consideration such factors as the outcomes of the quantitative analysis, a review of individually analyzed loans, and determinations concerning qualitative adjustments.
(3) Net interest margin is the ratio of fully taxable equivalent net interest income divided by average interest-earning assets. 41 Changes Due to Rate and Volume Net interest income can be analyzed in terms of the impact of changes in rates and volumes.
(2) Net interest margin is the ratio of fully taxable equivalent net interest income divided by average interest-earning assets. 41 Changes Due to Rate and Volume Net interest income can be analyzed in terms of the impact of changes in rates and volumes.
Such institutions that meet the community bank leverage ratio and certain other qualifying criteria will automatically be deemed to be well-capitalized. As of December 31, 2023 the Bank has not elected to use the community bank leverage ratio.
Such institutions that meet the community bank leverage ratio and certain other qualifying criteria will automatically be deemed to be well-capitalized. As of December 31, 2024 the Bank has not elected to use the community bank leverage ratio.
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.
A loan may also be designated as nonaccrual 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 into nonaccrual status, the accrual of interest is discontinued and previously accrued interest is reversed.
Other non-interest income Other non-interest income increased compared to the prior year primarily due to the $2.4 million recognition of an employee retention tax credit in the third quarter of 2023.
Other non-interest income Other non-interest income decreased compared to the prior year primarily due to the $2.4 million recognition of an employee retention tax credit in the third quarter of 2023.
Past due status on all loans is based on the contractual terms of the loan. It is generally the Corporation's policy that a loan 90 days past due be placed on non-accrual status unless factors exist that would eliminate the need to classify a loan as such.
Past due status on all loans is based on the contractual terms of the loan. It is generally the Corporation's policy that a loan 90 days past due be placed on nonaccrual status unless factors exist that would eliminate the need to classify a loan as such.
Management believes that, as of December 31, 2023 and December 31, 2022 the Corporation and Bank met all capital adequacy requirements to which they were subject.
Management believes that, as of December 31, 2024 and December 31, 2023 the Corporation and Bank met all capital adequacy requirements to which they were subject.
The forecasted values are applied over a rolling four quarter period, and revert to the historic mean of a look back period over an eight quarter period, on a straight-line basis. Qualitative adjustments represent management's expectation of certain risks not being fully captured in the quantitative portion of the model.
The forecasted values are applied over a rolling four quarter period, and revert to the historic mean of the economic variable over an eight quarter period, on a straight-line basis. Qualitative adjustments represent management's expectation of certain risks not being fully captured in the quantitative portion of the model.
A hypothetical loss for each period of the DCF, as well as implied recovery of past losses, is incorporated into the DCF. The Corporation relies on FOMC data, including its projections for U.S. civilian unemployment and U.S. GDP growth, as the source for its readily available and reasonable economic forecast.
An estimated loss for each period of the DCF, as well as implied recovery of past losses, is incorporated into the DCF. The Corporation relies on FOMC data, including its projections for U.S. civilian unemployment and U.S. GDP growth, as the source for its readily available and reasonable economic forecast.
Compensation expenses Compensation expenses increased $2.5 million, or 7.9% when compared to the prior year, primarily due to increases of $1.8 million in salaries and wages and $1.0 million in other components of net periodic pension benefits, offset by a decrease of $0.3 million in pension and other employee benefits.
Compensation expenses Compensation expenses increased $2.1 million, or 6.3%, when compared to the prior year, primarily due to increases of $1.6 million in salaries and wages and $0.7 million in pension and other employee benefits, offset by a decrease of $0.2 million in other components of net periodic pension benefits.
It also reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the years ended December 31, 2023, and 2022. For the purpose of the table 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.
It also reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the years ended December 31, 2024, and 2023. For the purpose of the table below, nonaccrual 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.
Additionally, the swap agreements are free-standing derivatives and are recorded at fair value in the Corporation's Consolidated Balance Sheets, which typically involves a day one gain.
Additionally, the agreements, as free-standing derivatives, are recorded at fair value in the Corporation's Consolidated Balance Sheets, which typically involves a day one gain.
For a discussion of the Critical Accounting Estimates that affect the Consolidated Results of Operations, see page 37.
For a discussion of the Critical Accounting Estimates that affect the Consolidated Results of Operations, see page 38.
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.
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.
Upon receipt and review of updated appraisals, an additional measurement is performed to determine if any adjustments are necessary to reflect proper provisioning or charge-offs. Individually analyzed loans are reviewed on a quarterly basis to determine if any changes in credit quality or market conditions would require any additional allocation or recognition of additional charge-offs.
Upon receipt and review of updated appraisals, an additional measurement is performed to determine if any adjustments are necessary to reflect proper provisioning or charge-offs. Individually analyzed loans are reviewed on a quarterly basis to determine if any changes in credit quality or market conditions would require additional allocations to the allowance for credit losses or recognition of additional charge-offs.
The modeled reserve requirement equals the difference between the book balance of the instrument at the measurement date and the present value of assumed cash flows for the life of the loan.
The modeled reserve requirement equals the difference between the book balance of the loan as of the measurement date and the present value of assumed cash flows for the life of the loan.
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.
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.
Qualitative adjustment rates are applied to each instrument within a pool on a consistent basis.
Qualitative adjustment rates are applied to each loan within a pool on a consistent basis.
The amortized basis of accruing loans past due 90 days or more was less than $0.1 million at December 31, 2023 and December 31, 2022. 53 Loan Modifications to Borrowers Experiencing Financial Difficulty The Corporation works closely with borrowers that have financial difficulties to identify viable solutions that minimize the potential for loss.
The amortized basis of accruing loans past due 90 days or more was less than $0.1 million as of December 31, 2024 and December 31, 2023, respectively. Loan Modifications to Borrowers Experiencing Financial Difficulty The Corporation works closely with borrowers experiencing financial difficulties to identify viable solutions that minimize the potential for loss.
The Corporation also considers brokered deposits to be an element of its deposit strategy and anticipates continued use of brokered deposits as a secondary source of funding to support asset growth. Information regarding deposits is included in Note 8 to the consolidated financial statements appearing elsewhere in this report.
The Corporation also considers brokered deposits to be an element of its deposit strategy and uses brokered deposits as a secondary source of funding to support growth. Information regarding deposits is included in Note 8 to the audited Consolidated Financial Statements appearing elsewhere in this report.
A majority of the Corporation's individually analyzed loans are secured and measured for credit loss based on collateral evaluations. It is the Corporation's policy to obtain updated appraisals, by independent third parties, on loans secured by real estate at the time a loan is determined to require individual analysis.
A majority of the Corporation's individually analyzed loans are secured and measured for credit loss based on collateral evaluations, using the collateral-dependent practical expedient prescribed by ASC 326. It is the Corporation's policy to obtain updated appraisals, by independent third parties, on loans secured by real estate at the time a loan is determined to require individual analysis.
Since the terms of the two interest rate swap agreements are identical, the income statement impact to the Corporation is limited to the day one gain and an allowance for credit loss exposure, in the event of nonperformance. The Corporation recognized $0.3 million in swap income for each of the years ended December 31, 2023 and 2022, respectively.
Since the terms of mirroring interest rate swap agreements are identical, the income statement impact to the Corporation is limited to the day one gain and a valuation allowance for potential credit loss exposure, in the event of nonperformance. The Corporation recognized $0.3 million in swap income for each of the years ended December 31, 2024 and 2023, respectively.
For more information regarding current capital regulations see Part I-“Business-Supervision and Regulation-Regulatory Capital Requirements.” Cash dividends declared during 2023 totaled $5.9 million, or $1.24 per share, compared to $5.8 million, or $1.24 per share in 2022. Dividends declared during 2023 amounted to 23.41% of net income compared to 20.15% of net income for 2022.
For more information regarding current capital regulations see Part I-“Business-Supervision and Regulation-Regulatory Capital Requirements.” Cash dividends declared during 2024 and 2023 each totaled $5.9 million, or $1.24 per share. Dividends declared during 2024 amounted to 24.91% of net income compared to 23.41% of net income for 2023.
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 years presented. Actual results could be different from these estimates.
These estimates, judgments, and assumptions affect reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the years presented. Actual results could differ from these estimates.
Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net income, combined with the retained net income of the preceding two years. At December 31, 2023, the Bank could, without prior approval, declare dividends of approximately $59.4 million.
Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net income, combined with the retained net income of the preceding two years. As of December 31, 2024, the Bank could, without prior approval, declare dividends of approximately $62.2 million.
In addition, average interest-earning assets include non-accrual loans and taxable equivalent adjustments were made.
In addition, average interest-earning assets include nonaccrual loans and taxable equivalent adjustments were made.
A measurement is performed based upon the most recent appraisal on file to determine the amount of any specific allocation or charge-off. In determining the amount of any specific allocation or charge-off, the Corporation will make adjustments to reflect the estimated costs to sell the property.
A measurement is performed based upon the most recent appraisal on file to determine the amount of any specific allocation to the allowance for credit losses or charge-off. In determining the amount of any specific allocation or charge-off, the Corporation makes adjustments to reflect the estimated costs to sell the property.
(in thousands, except per share and ratio data) As of or for the Years Ended December 31, NON-GAAP NET INCOME 2023 2022 Reported net income (loss) (GAAP) $ 25,000 $ 28,783 Net (gains) losses on security transactions (net of tax) 29 — Recognition of employee retention tax credit (1,873) — Net income (non-GAAP) $ 23,156 $ 28,783 Average basic and diluted shares outstanding 4,732 4,693 Reported basic and diluted earnings per share (GAAP) $ 5.28 $ 6.13 Reported return on average assets (GAAP) 0.94 % 1.15 % Reported return on average equity (GAAP) 14.11 % 15.93 % Basic and diluted earnings per share (non-GAAP) $ 4.89 $ 6.13 Return on average assets (non-GAAP) 0.87 % 1.15 % Return on average equity (non-GAAP) 13.07 % 15.93 % 66
(in thousands, except per share and ratio data) As of or for the Years Ended December 31, Non-GAAP Net Income 2024 2023 Reported net income (GAAP) $ 23,671 $ 25,000 Net (gains) losses on security transactions (net of tax) — 29 Recognition of employee retention tax credit — (1,873) Net income (non-GAAP) $ 23,671 $ 23,156 Average basic and diluted shares outstanding 4,770 4,732 Reported basic and diluted earnings per share (GAAP) $ 4.96 $ 5.28 Reported return on average assets (GAAP) 0.86 % 0.94 % Reported return on average equity (GAAP) 11.53 % 14.11 % Basic and diluted earnings per share (non-GAAP) $ 4.96 $ 4.89 Return on average assets (non-GAAP) 0.86 % 0.87 % Return on average equity (non-GAAP) 11.53 % 13.07 % 67
The increase was due primarily to increases of $2.5 million in total compensation expenses and $2.5 million in total non-compensation expenses.
The increase was due primarily to increases of $2.1 million in total compensation expenses and $0.9 million in total non-compensation expenses.
The SEC declared the registration statement effective on July 13, 2023. 1 See the GAAP to Non-GAAP reconciliation on pages 63-65. 60 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.
The SEC declared the registration statement effective on July 13, 2023. Liquidity Liquidity management involves the ability to meet the cash flow requirements of deposit clients, borrowers, and the operating, investing, and financing activities of the Corporation. The Corporation uses a variety of resources to meet its liquidity needs.
Such agencies may require the Corporation to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. The allowance for credit losses was $22.5 million as of December 31, 2023, compared to an allowance for loan losses of $19.7 million as December 31, 2022.
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. 54 The allowance for credit losses was $21.4 million as of December 31, 2024, compared to $22.5 million as of December 31, 2023.
The increase in net interest income was primarily due to increases of $29.2 million in interest income on loans, including fees, $2.2 million in interest and dividend income on taxable securities, and $0.3 million in interest income on interest-earning deposits, offset by increases of $29.3 million in interest expense on deposits, and $2.1 million in interest expense on borrowed funds.
The decrease in net interest income was primarily due to increases of $14.1 million in interest expense on deposits and $0.8 million in interest expense on borrowed funds, and a decrease of $1.3 million in interest and dividend income on taxable securities, offset by increases of $14.9 million in interest income on loans including fees, and $0.9 million in interest income on interest-earning deposits.
The Corporation is exposed to its share of the credit loss equal to the fair value of the derivatives in the event of nonperformance by the counter-party of the interest rate swap. The Corporation determines the fair value of the credit loss exposure using historical losses of the loan category associated with the credit exposure.
The Corporation is exposed to its share of the credit loss equal to the fair value of the derivatives in the event of nonperformance by the counterparty to the lead bank's interest rate swap. The Corporation determines the fair value of the credit loss exposure using historical loss experience for the loan category associated with the exposure.
Fully taxable equivalent net interest margin was 2.85% for the year ended December 31, 2023 compared with 3.05% for the prior year.
Fully taxable equivalent net interest margin was 2.76% for the year ended December 31, 2024 compared with 2.85% for the prior year.
Marketable securities are generally classified as Available for Sale, while certain investments in local municipal obligations are classified as Held to Maturity. The available for sale segment of the securities portfolio totaled $584.0 million at December 31, 2023, a decrease of $48.6 million, or 7.7%, from $632.6 million at December 31, 2022.
Marketable securities are generally classified as Available for Sale, while certain investments in local municipal obligations are classified as Held to Maturity. The available for sale segment of the securities portfolio totaled $531.4 million as of December 31, 2024, a decrease of $52.6 million, or 9.0%, from $584.0 million as of December 31, 2023.
(c) Non-interest expense divided by total of net interest income plus (f) Includes non-performing loans plus other real estate owned. non-interest income. 38 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 years ended December 31, 2023 and 2022.
(b) Non-interest expense divided by total of net interest income plus (e) Includes non-performing loans plus other real estate owned and non-interest income. repossessions (c) Does not reflect allowance for credit losses. 38 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 years ended December 31, 2024 and 2023.
(in thousands, except ratio data) As of or for the Years Ended December 31, TANGIBLE EQUITY (AVERAGE) 2023 2022 Total average shareholders' equity (GAAP) $ 177,187 $ 180,684 Less: average intangible assets (21,824) (21,827) Average tangible equity (non-GAAP) $ 155,363 $ 158,857 Return on average equity (GAAP) 14.11 % 15.93 % Return on average tangible equity (non-GAAP) 16.09 % 18.12 % 65 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 year by removing from the calculation thereof the impact of certain transactions or other material items of income or expense occurring during the year, including certain nonrecurring items.
(in thousands, except ratio data) As of or for the Years Ended December 31, Tangible Equity (Average) 2024 2023 Total average shareholders' equity (GAAP) $ 205,280 $ 177,187 Less: average intangible assets (21,824) (21,824) Average tangible equity (non-GAAP) $ 183,456 $ 155,363 Return on average equity (GAAP) 11.53 % 14.11 % Return on average tangible equity (non-GAAP) 12.90 % 16.09 % 66 Adjustments for Certain Items of Income or Expense In addition to disclosures of certain GAAP financial measures, including net income, EPS, ROAA, and ROAE, we may also provide comparative disclosures that adjust these GAAP financial measures for a particular year by removing from the calculation thereof the impact of certain transactions or other material items of income or expense occurring during the year, including certain nonrecurring items.
Consolidated Cash Flows Analysis The table below summarizes the Corporation's cash flows on a direct basis, for the years indicated (in thousands): CONSOLIDATED SUMMARY OF CASH FLOWS Years Ended December 31, (in thousands) 2023 2022 Net cash provided by operating activities $ 30,881 $ 35,047 Net cash provided (used) by investing activities (82,381) (252,620) Net cash provided (used) by financing activities 32,478 246,461 Net increase (decrease) in cash and cash equivalents $ (19,022) $ 28,888 Operating activities The Corporation believes cash flows from operations, available cash balances and its ability to generate cash through borrowings are sufficient to fund the Corporation’s operating liquidity needs.
Consolidated Cash Flows Analysis The table below summarizes the Corporation's cash flows on a direct basis, for the years indicated (in thousands): CONSOLIDATED SUMMARY OF CASH FLOWS Years Ended December 31, (in thousands) 2024 2023 Net cash provided by operating activities $ 29,815 $ 30,881 Net cash used by investing activities (57,723) (82,381) Net cash provided by financing activities 38,096 32,478 Net increase (decrease) in cash and cash equivalents $ 10,188 $ (19,022) Operating activities The Corporation believes cash flows from operations, available cash balances and its ability to generate cash through borrowings are sufficient to fund the Corporation’s operating liquidity needs.
(2) Loans and loans held for sale, net of deferred loan fees. (3) Investments include securities available for sale at estimated fair value, securities held to maturity, at amortized cost, equity investments, FHLBNY stock, FRBNY stock, federal funds sold and interest-earning deposits. (4) Borrowings include overnight advances and capitalized lease obligations. (5) The Corporation adopted CECL on January 1, 2023.
(2) Loans and loans held for sale, net of deferred loan fees. (3) Investments include securities available for sale at estimated fair value, securities held to maturity, at amortized cost, equity investments, FHLBNY stock, FRBNY stock, federal funds sold and interest-earning deposits. (4) Borrowings include overnight advances, term advances, and finance lease obligations.
The Corporation also participates in the credit exposure of certain interest rate swaps in which it participates in the related commercial loan. The Corporation receives an upfront fee for participating in the credit exposure of the interest rate swap and recognizes the fee to other non-interest income immediately.
The Corporation also participates in the credit exposure of certain interest rate swaps of lead banks in which it is a participant in the related commercial loan. The Corporation receives an upfront fee for participating in the credit exposure of these interest rate swaps and immediately recognizes the fee as other non-interest income.
Investment securities The decrease in investment securities was primarily due to a decrease of $48.6 million in securities available for sale.
Investment securities The decrease in investment securities was primarily due to a decrease of $52.6 million in securities available for sale, compared to the prior year.
As of December 31, 2023, the aggregate amount of the Corporation's outstanding certificates of deposit in amounts greater than $250,000 was $76.8 million.
As of December 31, 2024, the aggregate amount of the Corporation's outstanding certificates of deposit in amounts greater than $250,000 was $101.1 million.
The decrease in net income for the year ended December 31, 2023, compared to the prior year, was due to increases in the provision for credit losses and non-interest expenses, offset by increases in non-interest income and net interest income, and a decrease in income tax expense.
The decrease in net income for the year ended December 31, 2024, compared to the prior year, was due to an increase in non-interest expense, decreases in non-interest income and net interest income, offset by decreases in the provision for credit losses and income tax expense.
There were no FHLBNY or FRB term advances as of and for the years ended December 31, 2023, and 2022. Information regarding FHLBNY advances is included in Note 9 of the audited Consolidated Financial Statements appearing elsewhere in this report.
Information regarding FHLBNY advances is included in Note 9 of the audited Consolidated Financial Statements appearing elsewhere in this report. There were no securities sold under agreements to repurchase as of and for the years ended December 31, 2024, or 2023.
In estimating the allowance for credit losses, management considers the sensitivity of the model and significant judgments and assumptions that could result in an amount that is materially different from management’s estimate, including as it relates to qualitative considerations.
Deteriorating conditions may lead to further required increases to the allowance; conversely, improvements to conditions may warrant reductions to the allowance. In estimating the allowance for credit losses, management considers the sensitivity of the model to significant judgments and assumptions that could result in an amount that is materially different from management’s estimate, including as it relates to qualitative considerations.
Strategies that have been developed and implemented to generate these deposits include: (i) acquire deposits by entering new markets through denovo branching, (ii) training branch employees to identify and meet client financial needs with Bank products and services, (iii) link business and consumer loans to a primary checking account at the Bank, (iv) aggressively promote direct deposit of client’s payroll checks or benefit checks and (v) constantly monitor the Corporation’s pricing strategies to ensure competitive products and services.
Strategies that have been developed and implemented to generate these deposits include: (i) acquiring deposits by entering new markets through branch acquisitions or de novo branching, (ii) an annual checking account marketing campaign, (iii) training branch employees to identify and meet client financial needs with Bank products and services, (iv) linking business and consumer loans to the customer's primary checking account at the Bank, (v) aggressively promoting direct deposit of client’s payroll checks or benefit checks and (vi) constantly monitoring the Corporation’s pricing strategies to ensure competitive products and services.
The 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. 63 Fully Taxable Equivalent Net Interest Income and Net Interest Margin Net interest income is commonly presented on a tax-equivalent basis.
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.
As of December 31, 2023, the allowance for credit losses totaled $22.5 million, compared to an allowance for loan losses of $19.7 million as of December 31, 2022. A significant portion of the allowance for credit losses is allocated to the commercial portfolio, both commercial real estate and commercial and industrial.
As of December 31, 2024, the allowance for credit losses on loans totaled $21.4 million, compared to $22.5 million as of December 31, 2023. A significant portion of the allowance for credit losses is allocated to the commercial portfolio, both commercial real estate and commercial and industrial loans.
The ratio of allowance for credit losses to total loans was 1.14% as of December 31, 2023 and the ratio of allowance for loan losses to total loans was 1.07% as of December 31, 2022, respectively. Including the allowance allocated to unfunded commitments, the ratio of the allowances for credit losses was 1.19% as of December 31, 2023.
Including the allowance for credit losses allocated to unfunded commitments, the ratio of the allowance for credit losses to total loans was 1.07% as of December 31, 2024, compared to 1.19% as of December 31, 2023.
Refer to Note 19 of the audited Consolidated Financial Statements appearing elsewhere in this report for a table summarizing the Corporation's and the Bank's actual and required regulatory capital ratios.
There is no threshold for well-capitalized status for bank holding companies. Refer to Note 19 of the audited Consolidated Financial Statements appearing elsewhere in this report for a table summarizing the Corporation's and the Bank's actual and required regulatory capital ratios.
(in thousands, except ratio data) As of or for the Years Ended December 31, Efficiency Ratio 2023 2022 Net interest income (GAAP) $ 74,457 $ 74,179 Fully taxable equivalent adjustment 366 425 Fully taxable equivalent net interest income (non-GAAP) $ 74,823 $ 74,604 Non-interest income (GAAP) $ 24,549 $ 21,436 Less: net (gains) losses on security transactions 39 — Less: recognition of employee retention tax credit (2,370) — Adjusted non-interest income (non-GAAP) $ 22,218 $ 21,436 Non-interest expense (GAAP) $ 64,243 $ 59,280 Less: amortization of intangible assets — (15) Adjusted non-interest expense (non-GAAP) $ 64,243 $ 59,265 Efficiency ratio (unadjusted) 64.89 % 62.00 % Efficiency ratio (adjusted) 66.20 % 61.71 % 64 Tangible Equity and Tangible Assets (Year-End) Tangible equity, tangible assets, and tangible book value per share are each non-GAAP financial measures.
(in thousands, except ratio data) As of or for the Years Ended December 31, Efficiency Ratio 2024 2023 Net interest income (GAAP) $ 74,059 $ 74,457 Fully taxable equivalent adjustment 336 366 Fully taxable equivalent net interest income (non-GAAP) $ 74,395 $ 74,823 Non-interest income (GAAP) $ 23,230 $ 24,549 Less: net (gains) losses on security transactions — 39 Less: recognition of employee retention tax credit — (2,370) Adjusted non-interest income (non-GAAP) $ 23,230 $ 22,218 Non-interest expense (GAAP) $ 67,250 $ 64,243 Efficiency ratio (unadjusted) 69.12 % 64.89 % Efficiency ratio (adjusted) 68.89 % 66.20 % 65 Tangible Equity and Tangible Assets (Year-End) Tangible equity, tangible assets, and tangible book value per share are each non-GAAP financial measures.
Commercial real estate lending represented the largest portion of the Corporation's loan portfolio as of December 31, 2023 and 2022. Commercial real estate lending is comprised of the Construction and Commercial mortgage, other segments of the loan portfolio, as presented in Note 4-Loans and Allowance for Credit Losses.
Commercial real estate lending represented the largest portion of the Corporation's loan portfolio as of December 31, 2024 and 2023. Commercial real estate lending is comprised of the Construction and Commercial mortgage, other segments of the loan portfolio, as presented in Note 4 to the Corporation's Consolidated Financial Statements.
(in thousands, except ratio data) As of or for the Years Ended December 31, Net Interest Mar g in - Fully Taxable Equivalent 2023 2022 Net interest income (GAAP) $ 74,457 $ 74,179 Fully taxable equivalent adjustment 366 425 Fully taxable equivalent net interest income (non-GAAP) $ 74,823 $ 74,604 Average interest-earning assets (GAAP) $ 2,621,251 $ 2,444,287 Net interest margin - fully taxable equivalent (non-GAAP) 2.85 % 3.05 % Efficiency Ratio The unadjusted efficiency ratio is calculated as non-interest expense divided by total revenue (net interest income and non-interest income).
The Corporation follows these practices. 64 (in thousands, except ratio data) As of or for the Years Ended December 31, Net Interest Mar g in - Fully Taxable Equivalent 2024 2023 Net interest income (GAAP) $ 74,059 $ 74,457 Fully taxable equivalent adjustment 336 366 Fully taxable equivalent net interest income (non-GAAP) $ 74,395 $ 74,823 Average interest-earning assets (GAAP) $ 2,698,148 $ 2,621,251 Net interest margin - fully taxable equivalent (non-GAAP) 2.76 % 2.85 % Efficiency Ratio The unadjusted efficiency ratio is calculated as non-interest expense divided by total revenue (net interest income and non-interest income).
Changes in the FOMC's median forecasted year over year U.S. civilian unemployment rate and year over year change in U.S GDP could have a material impact on the model's estimation of the allowance. FOMC projections are sourced from a quarterly Summary of Projections, which accompanies select FOMC meetings.
Changes in the FOMC's median forecasted year over year U.S. civilian unemployment rate and year over year change in U.S GDP could have a material impact on the model's estimation of the allowance.
As of December 31, 2023, the Bank’s capital ratios were in excess of those required to be considered well-capitalized under regulatory capital guidelines. A comparison of the Bank’s actual capital ratios to the ratios required to be adequately or well-capitalized at December 31, 2023 and 2022, is included in Footnote 20 of the audited Consolidated Financial Statements.
A comparison of the Bank’s actual capital ratios to the ratios required to be adequately or well-capitalized as of December 31, 2024 and 2023, is included in Footnote 19 of the audited Consolidated Financial Statements.
Information regarding derivatives is included in Note 11 to the consolidated financial statements appearing elsewhere in this report. 59 Shareholders’ Equity Total shareholders’ equity was $195.2 million at December 31, 2023, compared with $166.4 million at December 31, 2022, an increase of $28.9 million, or 17.3%.
Information regarding derivatives is included in Note 11 to the audited Consolidated Financial Statements appearing elsewhere in this report. Shareholders’ Equity Total shareholders’ equity was $215.3 million as of December 31, 2024, compared with $195.2 million as of December 31, 2023, an increase of $20.1 million, or 10.3%.
Net Interest Income The following table presents net interest income for the years indicated, and the dollar and percent change (in thousands): Years Ended December 31, Percentage Change 2023 2022 Change Interest and dividend income $ 113,074 $ 81,475 $ 31,599 38.8 % Interest expense 38,617 7,296 31,321 429.3 % Net interest income $ 74,457 $ 74,179 $ 278 0.4 % Net interest income, which is the difference between the interest income earned on interest-earning assets such as loans and securities, and the interest expense recognized on interest-bearing liabilities such as deposits and borrowings, is the largest contributor to the Corporation’s earnings. 39 Net interest income for the year ended December 31, 2023 totaled $74.5 million, an increase of $0.3 million, or 0.4%, compared with $74.2 million for the prior year.
Net Interest Income The following table presents net interest income for the years indicated, and the dollar and percent change (in thousands): Years Ended December 31, Percentage Change 2024 2023 Change Interest and dividend income $ 127,564 $ 113,074 $ 14,490 12.8 % Interest expense 53,505 38,617 14,888 38.6 % Net interest income $ 74,059 $ 74,457 $ (398) (0.5) % 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 recognized on interest-bearing liabilities such as deposits and borrowings, is the largest contributor to the Corporation’s earnings. 39 Net interest income for the year ended December 31, 2024 totaled $74.1 million, a decrease of $0.4 million, or 0.5%, compared with $74.5 million for the prior year.
GDP growth would increase the model's total calculated allowance by $1.5 million, or 6.8%, to $24.0 million, assuming qualitative adjustment are kept at current levels.
GDP growth, would increase the model's total calculated allowance by $1.3 million, or 6.2%, to $22.7 million, assuming qualitative adjustments are kept at current levels.
Non-performing assets, which are comprised of non-performing loans and other real estate owned, was $10.7 million, or 0.40% of total assets, at December 31, 2023, compared with $8.4 million, or 0.32% of total assets, at December 31, 2022.
Non-performing assets, which are comprised of non-performing loans, other real estate owned, and repossessed vehicles, was $9.6 million, or 0.35% of total assets, as of December 31, 2024, compared with $10.7 million, or 0.40% of total assets, as of December 31, 2023.
Net charge-offs for the year ended December 31, 2022 were primarily attributable to a $0.7 million charge off on a commercial real estate loan. 55 The table below summarizes the Corporation’s allowance for credit losses, non-accrual loans, and ratio of net charge-offs and recoveries to average loans outstanding by loan category at or for the year ended December 31, 2023, and the allowance for loan losses, non-accrual loans, and ratio of net charge-offs and recoveries to average loans outstanding by loan category at or for the year ended December 31, 2022, by category (in thousands): ALLOWANCE AND LOAN CREDIT RATIOS BY LOAN CATEGORY Balance at December 31, 2023 Allowance for credit losses Allowance to loans 1 Non-performing loans Non-performing loans to loans 1 Allowance to non-performing loans Net charge-offs (recoveries) to average loans Commercial and agricultural $ 5,055 1.91 % $ 1,930 0.73 % 261.92 % 0.10 % Commercial mortgages 12,026 1.07 % 5,969 0.53 % 201.47 % — % Residential mortgages 2,194 0.79 % 1,315 0.47 % 166.84 % 0.01 % Consumer loans 3,242 1.05 % 1,197 0.39 % 270.84 % 0.21 % Total $ 22,517 1.14 % $ 10,411 0.53 % 216.28 % 0.05 % (1) Ratio represents a percentage of loan category.
Balance as of December 31, 2023 Allowance for credit losses Allowance to loans 1 Non-performing loans Non-performing loans to loans 1 Allowance to non-performing loans Net charge-offs (recoveries) to average loans Commercial and industrial $ 5,055 1.91 % $ 1,930 0.73 % 261.92 % 0.10 % Commercial mortgages 12,026 1.07 % 5,969 0.53 % 201.47 % — % Residential mortgages 2,194 0.79 % 1,315 0.47 % 166.84 % 0.01 % Consumer loans 3,242 1.05 % 1,197 0.39 % 270.84 % 0.21 % Total $ 22,517 1.14 % $ 10,411 0.53 % 216.28 % 0.05 % (1) Ratio represents a percentage of year end loan balances.
The average yield on average interest-earning assets increased 98 basis points, and the average cost of interest-bearing liabilities increased 173 basis points, when compared to the prior year, both due to the rising interest rate environment over the past two years. 40 Average Consolidated Balance Sheet and Interest Analysis The following table presents certain information related to the Corporation’s average consolidated balance sheets and its consolidated statements of income for the years ended December 31, 2023, and 2022.
The average yield on interest-earning assets increased 41 basis points to 4.74%, while the average cost of interest-bearing liabilities increased 67 basis points to 2.87% during 2024, compared to the prior year, both primarily due to the lagging effects of interest rate increases during 2022 and 2023. 40 Average Consolidated Balance Sheet and Interest Analysis The following table presents certain information related to the Corporation’s average Consolidated Balance Sheets and its Consolidated Statements of Income for the years ended December 31, 2024, and 2023.
Other Liabilities The decrease in other liabilities can be mostly attributed to a $2.6 million decrease in interest rate swap liabilities, primarily due to changes in interest rates. 46 Shareholders’ equity The increase in shareholders' equity was due primarily to an increase of $18.1 million in retained earnings and a decrease of $9.2 million in accumulated other comprehensive loss.
Other Liabilities The increase in other liabilities can be mostly attributed to an increase in interest payable on deposits of $0.6 million. Shareholders’ equity The increase in shareholders' equity was due primarily to an increase of $17.8 million in retained earnings and a decrease of $0.9 million in accumulated other comprehensive loss.
(in thousands, except per share and ratio data) As of or for the Years Ended December 31, TANGIBLE EQUITY AND TANGIBLE ASSETS (YEAR END) 2023 2022 Total shareholders' equity (GAAP) $ 195,241 $ 166,388 Less: intangible assets (21,824) (21,824) Tangible equity (non-GAAP) $ 173,417 $ 144,564 Total assets (GAAP) $ 2,710,529 $ 2,645,553 Less: intangible assets (21,824) (21,824) Tangible assets (non-GAAP) $ 2,688,705 $ 2,623,729 Total equity to total assets at end of year (GAAP) 7.20 % 6.29 % Book value per share (GAAP) $ 41.07 $ 35.32 Tangible equity to tangible assets at end of year (non-GAAP) 6.45 % 5.51 % Tangible book value per share (non-GAAP) $ 36.48 $ 30.69 Tangible Equity (Average) Average tangible equity and return on average tangible equity are each non-GAAP financial measures.
(in thousands, except per share and ratio data) As of or for the Years Ended December 31, Tangible Equity and Tangible Assets (Year End) 2024 2023 Total shareholders' equity (GAAP) $ 215,309 $ 195,241 Less: intangible assets (21,824) (21,824) Tangible equity (non-GAAP) $ 193,485 $ 173,417 Total assets (GAAP) $ 2,776,147 $ 2,710,529 Less: intangible assets (21,824) (21,824) Tangible assets (non-GAAP) $ 2,754,323 $ 2,688,705 Total equity to total assets at end of year (GAAP) 7.76 % 7.20 % Book value per share (GAAP) $ 45.13 $ 41.07 Tangible equity to tangible assets at end of year (non-GAAP) 7.02 % 6.45 % Tangible book value per share (non-GAAP) $ 40.55 $ 36.48 Tangible Equity (Average) Average tangible equity and return on average tangible equity are each non-GAAP financial measures.
Net charge-offs for the year ended December 31, 2023 were $0.9 million compared with net charge-offs of $0.8 million for the year ended December 31, 2022. The ratio of net charge-offs (recoveries) to average loans outstanding was 0.05% for 2023 and 2022.
Modeled economic conditions were relatively consistent between December 31, 2023 and December 31, 2024. Net charge-offs for the year ended December 31, 2024 were $1.2 million compared with net charge-offs of $0.9 million for the year ended December 31, 2023. The ratio of net charge-offs to average loans outstanding was 0.06% for 2024 and 0.05% for 2023.
Assets under management or administration The market value of total assets under management or administration in WMG was $2.242 billion, including $381.3 million of assets held under management or administration for the Corporation, at December 31, 2023 compared to $2.053 billion, including $346.5 million of assets held under management or administration for the Corporation at December 31, 2022, an increase of $189.4 million, or 9.2%.
Assets under management or administration The market value of total assets under management or administration in WMG was $2.212 billion, including $301.9 million of assets held under management or administration for the Corporation, as of December 31, 2024 compared to $2.242 billion, including $381.3 million of assets held under management or administration for the Corporation as of December 31, 2023, a decrease of $30.4 million, or 1.4%.
Investing activities Cash used in investing activities during the years ended December 31, 2023 and 2022 predominantly resulted from a net increase in loans, offset by maturities, and principal collected on securities available for sale. 61 Financing activities Cash provided by financing activities during the years ended December 31, 2023 and 2022 resulted primarily from an increase in certificate of deposits, brokered deposits, and FHLBNY overnight advances, offset by the payment of dividends to shareholders.
Financing activities Cash provided by financing activities during the years ended December 31, 2024 and 2023 resulted primarily from an increase in certificate of deposits, brokered deposits, and FHLBNY overnight advances, offset by the payment of dividends to shareholders.
The activity in the allowance for credit losses is depicted in supporting tables in Note 4 to the Consolidated Financial Statements included Part IV, Item 15 of this Annual Report on Form 10-K. 37 Consolidated Financial Highlights (in thousands, except per share data) As of or for the Years Ended December 31, December 31, RESULTS OF OPERATIONS 2023 2022 Interest and dividend income $ 113,074 $ 81,475 Interest expense 38,617 7,296 Net interest income 74,457 74,179 Provision for credit losses (a) 3,262 (554) Net interest income after provision for credit losses (a) 71,195 74,733 Non-interest income 24,549 21,436 Non-interest expenses 64,243 59,280 Income before income tax expense 31,501 36,889 Income tax expense 6,501 8,106 Net income $ 25,000 $ 28,783 Basic and diluted earnings per share $ 5.28 $ 6.13 Average basic and diluted shares outstanding 4,732 4,693 PERFORMANCE RATIOS Return on average assets 0.94 % 1.15 % Return on average equity 14.11 % 15.93 % Return on average tangible equity (b) 16.09 % 18.12 % Efficiency ratio (unadjusted) (c) 64.89 % 62.00 % Efficiency ratio (adjusted) (b) 66.20 % 61.71 % Non-interest expense to average assets 2.41 % 2.37 % Loans to deposits 81.20 % 78.61 % AVERAGE YIELDS / RATES - Fully Taxable Equivalent Yield on loans 5.13 % 4.14 % Yield on investments 2.21 % 1.71 % Yield on interest-earning assets 4.33 % 3.35 % Cost of interest-bearing deposits 2.11 % 0.44 % Cost of borrowings 5.17 % 2.76 % Cost of interest-bearing liabilities 2.20 % 0.47 % Interest rate spread 2.13 % 2.88 % Net interest margin, fully taxable equivalent 2.85 % 3.05 % CAPITAL Total equity to total assets at end of year 7.20 % 6.29 % Tangible equity to tangible assets at end of year (b) 6.45 % 5.51 % Book value per share $ 41.07 $ 35.32 Tangible book value per share (b) 36.48 30.69 Year-end market value per share 49.80 45.87 Dividends declared per share 1.24 1.24 AVERAGE BALANCES Loans (d) $ 1,898,986 $ 1,646,576 Interest-earning assets 2,621,251 2,444,287 Total assets 2,660,329 2,496,099 Deposits 2,377,736 2,255,326 Total equity 177,187 180,684 Tangible equity (b) 155,363 158,857 ASSET QUALITY Net charge-offs (recoveries) $ 941 $ 812 Non-performing loans (e) 10,411 8,178 Non-performing assets (f) 10,737 8,373 Allowance for credit losses (a) 22,517 19,659 Annualized net charge-offs (recoveries) to average loans 0.05 % 0.05 % Non-performing loans to total loans 0.53 % 0.45 % Non-performing assets to total assets 0.40 % 0.32 % Allowance for credit losses to total loans (a) 1.14 % 1.07 % Allowance for credit losses to non-performing loans (a) 216.28 % 240.39 % (a) Corporation adopted CECL January 1, 2023.
The activity in the allowance for credit losses can be found in supporting tables in Note 4 to the Consolidated Financial Statements included Part IV, Item 15 of this Annual Report on Form 10-K. 37 Consolidated Financial Highlights (in thousands, except per share data) As of or for the Years Ended December 31, December 31, RESULTS OF OPERATIONS 2024 2023 Interest and dividend income $ 127,564 $ 113,074 Interest expense 53,505 38,617 Net interest income 74,059 74,457 Provision (credit) for credit losses (46) 3,262 Net interest income after provision for credit losses 74,105 71,195 Non-interest income 23,230 24,549 Non-interest expenses 67,250 64,243 Income before income tax expense 30,085 31,501 Income tax expense 6,414 6,501 Net income $ 23,671 $ 25,000 Basic and diluted earnings per share $ 4.96 $ 5.28 Average basic and diluted shares outstanding 4,770 4,732 PERFORMANCE RATIOS Return on average assets 0.86 % 0.94 % Return on average equity 11.53 % 14.11 % Return on average tangible equity (a) 12.90 % 16.09 % Efficiency ratio (unadjusted) (b) 69.12 % 64.89 % Efficiency ratio (adjusted) (a) 68.89 % 66.20 % Non-interest expense to average assets 2.45 % 2.41 % Loans to deposits 86.42 % 81.20 % AVERAGE YIELDS / RATES - Fully Taxable Equivalent Yield on loans 5.57 % 5.13 % Yield on investments 2.28 % 2.21 % Yield on interest-earning assets 4.74 % 4.33 % Cost of interest-bearing deposits 2.79 % 2.11 % Cost of borrowings 5.03 % 5.17 % Cost of interest-bearing liabilities 2.87 % 2.20 % Interest rate spread 1.87 % 2.13 % Net interest margin, fully taxable equivalent (a) 2.76 % 2.85 % CAPITAL Total equity to total assets at end of year 7.76 % 7.20 % Tangible equity to tangible assets at end of year (a) 7.02 % 6.45 % Book value per share $ 45.13 $ 41.07 Tangible book value per share (a) 40.55 36.48 Year-end market value per share 48.81 49.80 Dividends declared per share 1.24 1.24 AVERAGE BALANCES Loans and loans held for sale (c) $ 2,016,481 $ 1,898,986 Interest-earning assets 2,698,148 2,621,251 Total assets 2,744,721 2,660,329 Deposits 2,419,744 2,377,736 Total equity 205,280 177,187 Tangible equity (a) 183,456 155,363 ASSET QUALITY Net charge-offs (recoveries) $ 1,160 $ 941 Non-performing loans (d) 8,954 10,411 Non-performing assets (e) 9,606 10,737 Allowance for credit losses 21,388 22,517 Annualized net charge-offs (recoveries) to average loans 0.06 % 0.05 % Non-performing loans to total loans 0.43 % 0.53 % Non-performing assets to total assets 0.35 % 0.40 % Allowance for credit losses to total loans 1.03 % 1.14 % Allowance for credit losses to non-performing loans 238.87 % 216.28 % (a) See the GAAP to Non-GAAP reconciliations on pages 65-68.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−0 removed8 unchanged
Biggest changeThis component is a direct corollary to the earnings-impact component: an institution exposed to earnings erosion is also exposed to shrinkage in market value. At December 31, 2023, it is estimated that immediate decreases of 100-basis points and 200-basis points in interest rates would positively impact the market value of the Corporation’s capital account by 4.99% and 8.32%, respectively.
Biggest changeAs of December 31, 2024, it is estimated that immediate decreases of 100 basis points and 200 basis points in interest rates would positively impact the market value of the Corporation’s capital account by 3.72% and 4.95%, respectively.
The ALCO is made up of the President and Chief Executive Officer, the Chief Financial Officer, 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.
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.
The Senior Loan Committee, consisting of the President and Chief Executive Officer, Chief Financial Officer and Treasurer (non-voting member), Chief Credit and Risk Officer, Business Client Division Manager, Divisional President, and Commercial Loan Manager, implements the Board-approved loan policy.
The Senior Loan Committee, consisting of the President and Chief Executive Officer, Chief Financial Officer and Treasurer (non-voting member), Chief Credit Officer, Chief Risk Officer, Business Client Division Manager, Divisional Presidents, and Commercial Loan Manager, implements the Board-approved loan policy.
Chan g e in interest rates Percentage Increase (Decrease) in Present Value of Corporation's Equity 200 basis points decrease 8.32% 100 basis points decrease 4.99% 100 basis points increase 0.09% 200 basis points increase 0.36% 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. 67 Credit Risk The Corporation manages credit risk consistent with state and federal laws governing the making of loans through written policies and procedures; loan review to identify loan problems at the earliest possible time; collection procedures (continued even after a loan is charged off); an adequate allowance for credit losses; and continuing education and training to ensure lending expertise.
Chan g e in interest rates Percentage Increase (Decrease) in Present Value of Corporation's Equity 200 basis points decrease 4.95% 100 basis points decrease 3.72% 100 basis points increase 0.38% 200 basis points increase 1.02% 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. 68 Credit Risk The Corporation manages credit risk consistent with state and federal laws governing the making of loans through written policies and procedures; loan review to identify loan problems at the earliest possible time; collection procedures (continued even after a loan is charged off); an adequate allowance for credit losses; and continuing education and training to ensure lending expertise.
Immediate increases of 100-basis points and 200-basis points in interest rates would positively impact the market value by 0.09% and 0.36%, respectively, which are within the Corporation’s policy guidelines.
Immediate increases of 100 basis points and 200 basis points in interest rates would positively impact the market value by 0.38% and 1.02%, respectively. All scenarios are within the Corporation's policy guidelines.
Chan g e in interest rates Percentage Increase (Decrease) in Net Interest Income over 12 Months 200 basis points decrease 7.27% 100 basis points decrease 4.07% 100 basis points increase 1.28% 200 basis points increase 2.53% A related component of interest rate risk is the expectation that the market value of the Corporation’s capital account will fluctuate with changes in interest rates.
Chan g e in interest rates Percentage Increase (Decrease) in Net Interest Income over 12 Months 200 basis points decrease 6.23% 100 basis points decrease 3.68% 100 basis points increase 1.23% 200 basis points increase 2.40% 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.
At December 31, 2023, it is estimated that immediate decreases of 100-basis points and 200-basis points in interest rates would positively impact the next 12 months net interest income by 4.07% and 7.27%, respectively, while immediate increases of 100-basis points and 200-basis points would positively impact the next 12 months net interest income by 1.28% and 2.53%, respectively.
As of December 31, 2024, it is estimated that immediate decreases of 100 basis points and 200 basis points in interest rates would positively impact the next 12 months net interest income by 3.68% and 6.23%, respectively, while immediate increases of 100 basis points and 200 basis points would positively impact the next 12 months net interest income by 1.23% and 2.40%, respectively.
Added
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.

Other CHMG 10-K year-over-year comparisons