株探米国株
英語
エドガーで原本を確認する
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
 
FORM 10-Q
☒
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly period ended March 31, 2024
Or
☐
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File No. 001-35741
chemungfinanciallogoa05.jpg
CHEMUNG FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
 
New York 16-1237038
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
 
One Chemung Canal Plaza, Elmira, NY
 14901
(Address of principal executive offices) (Zip Code)
 
(607) 737-3711 or (800) 836-3711
(Registrant's telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Trading Symbol Name of exchange on which registered
Common stock, par value $.01 per share CHMG The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
 Non-accelerated filer
☐
Accelerated filer
☒
 Smaller reporting company
☒
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ☒
As of May 3, 2024, there were 4,752,375 shares of Common Stock, $0.01 par value, outstanding.



CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES

INDEX

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2


GLOSSARY OF ABBREVIATIONS AND TERMS

To assist the reader the Corporation has provided the following list of commonly used abbreviations and terms included in the Notes to the Unaudited Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Abbreviations
ACL Allowance for Credit Losses
AFS Available for sale securities
ALCO Asset-Liability Committee
AOCI Accumulated Other Comprehensive Income
ASC Accounting Standards Codification
ASU Accounting Standards Update
Bank Chemung Canal Trust Company
Basel III The Third Basel Accord of the Basel Committee on Banking Supervision
Board of Directors Board of Directors of Chemung Financial Corporation
BOLI Bank Owned Life Insurance
BTFP Bank Term Funding Program
CAM Common Area Maintenance Charges
CDARS Certificate of Deposit Account Registry Service
CDO Collateralized Debt Obligation
CECL Current expected credit loss
CFS CFS Group, Inc.
Corporation Chemung Financial Corporation
CRM Chemung Risk Management, Inc.
Dodd-Frank Act The Dodd-Frank Wall Street Reform and Consumer Protection Act
EPS Earnings per share
Exchange Act Securities Exchange Act of 1934
FASB Financial Accounting Standards Board
FDIC Federal Deposit Insurance Corporation
FHLBNY Federal Home Loan Bank of New York
FOMC Federal Open Market Committee
FRB Board of Governors of the Federal Reserve System
FRBNY Federal Reserve Bank of New York
Freddie Mac Federal Home Loan Mortgage Corporation
GAAP U.S. Generally Accepted Accounting Principles
HTM Held to maturity securities
ICS Insured Cash Sweep Service
IFRS International Financial Reporting Standards
LGD Loss given default
MD&A Management’s Discussion and Analysis of Financial Condition and Results of Operations
NAICS North American Industry Classification System
N/M Not meaningful
OPEB Other postemployment benefits
OREO Other real estate owned
3


PD Probability of default
Regulatory Relief Act Economic Growth, Regulatory Relief, and Consumer Protection Act
ROA Return on average assets
ROE Return on average equity
RWA Risk-weighted assets
SBA Small Business Administration
SEC Securities and Exchange Commission
Securities Act Securities Act of 1933
Tax Act Tax Cuts and Jobs Act of 2017
WMG Wealth Management Group

Terms
Allowance for Credit Losses Replaces the Allowance for Loan and Lease Losses as the contra asset account used to represent the lifetime amount the Corporation anticipates will be unrecoverable from its assets. The ACL conforms to the CECL requirements as outlined in ASU 2016-13, and was implemented by the Corporation on January 1, 2023.
Allowance for credit losses to total loans Represents period-end allowance for credit losses divided by retained loans.
Assets under administration Represents assets that are beneficially owned by clients and all investment decisions pertaining to these assets are also made by clients.
Assets under management Represents assets that are managed on behalf of clients.
Basel I A set of international banking regulations, which set out the minimum capital requirements of financial institutions with the goal of minimizing credit risk. The primary focus was on credit risk by creating a bank asset classification system.
Basel III
A comprehensive set of reform measures designed to improve the regulation, supervision, and risk management within the banking sector. The reforms require banks to maintain proper leverage ratios and meet certain capital requirements.
Benefit obligation Refers to the projected benefit obligation for pension plans and the accumulated postretirement benefit obligation for OPEB plans.
Brokered deposits Refers to deposits obtained from or through the mediation or assistance of a deposit broker.
CAM Expenses associated with shared-space maintenance of leased premises.
Capital Bank Division of Chemung Canal Trust Company located in the “Capital Region” of New York State and includes the counties of Albany, Saratoga, and Schenectady.
Captive insurance company A company that provides risk-mitigation services for its parent company.
CDARS Product involving a network of financial institutions that exchange certificates of deposits among members in order to ensure FDIC insurance coverage on customer deposits above the single institution limit. Using a sophisticated matching system, funds are exchanged on a dollar-for-dollar basis, so that the equivalent of an original deposit comes back to the originating institution.
Collateralized debt obligation A structured financial product that pools together cash flow-generating assets, such as mortgages, bonds, and loans.
Collateralized mortgage obligations A type of mortgage-backed security with principal repayments organized according to their maturities and into different classes based on risk.  The mortgages serve as collateral and are organized into classes based on their risk profile.
Dodd-Frank Act The Dodd-Frank Act was enacted on July 21, 2010 and significantly changed the bank regulatory landscape and has impacted and will continue to impact the lending, deposit, investment, trading, and operating activities of financial institutions and their holding companies. The Dodd-Frank Act requires various federal agencies to adopt a broad range of new rules and regulations, and to prepare various studies and reports for Congress.
Employee Retention Tax Credit The Employee Retention Tax Credit is a refundable payroll tax credit available to eligible employers as defined by the CARES Act of 2020, and amended by the Consolidated Appropriations Act of 2021 and American Rescue Plan Act of 2021.
4


Fully taxable equivalent basis Income from tax-exempt loans and investment securities that have been increased by an amount equivalent to the taxes that would have been paid if this income were taxable at statutory rates; the corresponding income tax impact related to tax-exempt items is recorded within income tax expense.
GAAP Accounting principles generally accepted in the United States of America.
Holding company Consists of the operations for Chemung Financial Corporation (parent only).
ICS Product involving a network of financial institutions that exchange interest-bearing money market deposits among members in order to ensure FDIC insurance coverage on customer deposits above the single institution limit.  Using a sophisticated matching system, funds are exchanged on a dollar-for-dollar basis, so that the equivalent of an original deposit comes back to the originating institution.
Loans held for sale Residential real estate loans originated for sale on the secondary market with maturities from 15-30 years.
Long term lease obligation An obligation extending beyond the current year, which is related to a long term finance lease that is considered to have the economic characteristics of asset ownership.
Mortgage-backed securities A type of asset-backed security that is secured by a collection of mortgages.
Municipal clients A political unit, such as a city, town, or village, incorporated for local self-government.
N/A Data is not applicable or available for the period presented.
N/M Not meaningful.
Non-GAAP A calculation not made according to GAAP.
Obligations of state and political subdivisions An obligation that is guaranteed by the full faith and credit of a state or political subdivision that has the power to tax.
Obligations of U.S. Government A federally guaranteed obligation backed by the full power of the U.S. government, including Treasury bills, Treasury notes and Treasury bonds.
Obligations of U.S. Government sponsored enterprises Obligations of agencies originally established or chartered by the U.S. government to serve public purposes as specified by the U.S. Congress; these obligations are not explicitly guaranteed as to the timely payment of principal and interest by the full faith and credit of the U.S. government.
OREO Represents real property owned by the Corporation, which is not directly related to its business and is most frequently the result of a foreclosure on real property.
Political subdivision A county, city, town, or other municipal corporation, a public authority, or a publicly-owned entity that is an instrumentality of a state or a municipal corporation.
Pre-provision profit/(loss) Represents total net revenue less non-interest expense, before income tax expense (benefit). The Corporation believes that this financial measure is useful in assessing the ability of a bank to generate income in excess of its provision for credit losses.
Regulatory Relief Act The Economic Growth, Regulatory Relief and Consumer Protection Act was enacted on May 24, 2018 provides certain limited amendments to the Dodd-Frank Act, as well as certain targeted modifications to other post-financial crisis regulatory requirements. In addition, the legislation establishes new consumer protections and amends various securities- and investment company-related requirements.
RWA Risk-weighted assets consist of on- and off-balance sheet assets that are assigned to one of several broad risk categories and weighted by factors representing their risk and potential for default. On-balance sheet assets are risk-weighted based on the perceived credit risk associated with the obligor or counterparty, the nature of any collateral, and the guarantor, if any. Off-balance sheet assets such as lending-related commitments, guarantees, derivatives and other applicable off-balance sheet positions are risk-weighted by multiplying the contractual amount by the appropriate credit conversion factor to determine the on-balance sheet credit equivalent amount, which is then risk-weighted based on the same factors used for on-balance sheet assets. Risk-weighted assets also incorporate a measure for market risk related to applicable trading assets-debt and equity instruments. The resulting risk-weighted values for each of the risk categories are then aggregated to determine total risk-weighted assets.
SBA loan pools Business loans partially guaranteed by the SBA.
Securities sold under agreements to repurchase Sale of securities together with an agreement for the seller to buy back the securities at a later date.
5


Tax Act The Tax Act was enacted on December 22, 2017 and amended the Internal Revenue Code of 1986. The legislation reduced the U.S. federal corporate income tax rate from 35 percent to 21 percent, with some related business deductions and credits being either reduced or eliminated.
Trust preferred securities A hybrid security with characteristics of both subordinated debt and preferred stock which allows for early redemption by the issuer, makes fixed or variable payments, and matures at face value.
Unaudited Financial statements and information that have not been subjected to auditing procedures sufficient to permit an independent certified public accountant to express an opinion.
WMG Provides services as executor and trustee under wills and agreements, and guardian, custodian, trustee and agent for pension, profit-sharing and other employee benefit trusts, as well as various investment, financial planning, pension, estate planning and employee benefit administration services.

6


CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share data) March 31,
2024		 December 31,
2023
ASSETS
Cash and due from financial institutions $ 22,984  $ 22,247 
Interest-earning deposits in other financial institutions 71,878  14,600 
Total cash and cash equivalents 94,862  36,847 
Equity investments, at estimated fair value 3,093  3,046 
Securities available for sale, at estimated fair value (amortized cost of $656,640, at March 31, 2024 and $669,092 at December 31, 2023, net of allowance for credit losses on securities of $0 at March 31, 2024 and December 31, 2023, respectively)
 566,028  583,993 
Securities held to maturity, (estimated fair value of $785 at March 31, 2024 and December 31, 2023, respectively, net of allowance for credit losses of $0 at March 31, 2024 and December 31, 2023, respectively)
 785  785 
FHLBNY and FRBNY Stock, at cost 4,071  5,498 
Loans, net of deferred loan fees 2,003,610  1,972,664 
Allowance for credit losses (20,471) (22,517)
Loans, net 1,983,139  1,950,147 
Loans held for sale 96  — 
Premises and equipment, net 14,183  14,571 
Operating lease right-of-use assets 6,018  5,648 
Goodwill 21,824  21,824 
Bank-owned life insurance 2,923  2,914 
Interest rate swap assets 25,806  23,942 
Accrued interest receivable and other assets 62,062  61,314 
Total assets $ 2,784,890  $ 2,710,529 
LIABILITIES AND SHAREHOLDERS' EQUITY  
Deposits:  
Non-interest-bearing $ 656,330  $ 653,166 
Interest-bearing 1,824,442  1,776,261 
Total deposits 2,480,772  2,429,427 
FHLBNY overnight advances —  31,920 
FRB term advance 50,000  — 
Long term finance lease obligation 2,979  3,050 
Operating lease liabilities 6,197  5,827 
Dividends payable 1,473  1,469 
Interest rate swap liabilities 25,811  23,981 
Accrued interest payable and other liabilities 20,530  19,614 
Total liabilities 2,587,762  2,515,288 
Shareholders' equity:  
Common stock, $0.01 par value per share, 10,000,000 shares authorized;
5,310,076 issued at March 31, 2024 and December 31, 2023
 53  53 
Additional paid-in capital 47,794  47,773 
Retained earnings 235,506  229,930 
Treasury stock, at cost; 559,226 shares at March 31, 2024 and 572,663 shares at December 31, 2023
 (16,147) (16,502)
Accumulated other comprehensive loss (70,078) (66,013)
Total shareholders' equity 197,128  195,241 
Total liabilities and shareholders' equity $ 2,784,890  $ 2,710,529 

See accompanying notes to unaudited consolidated financial statements.
7


CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
  Three Months Ended 
 March 31,
(in thousands, except per share data) 2024 2023
Interest and dividend income:
Loans, including fees $ 27,198  $ 22,289 
Taxable securities 3,557  3,583 
Tax exempt securities 258  261 
Interest-earning deposits 206  97 
Total interest and dividend income 31,219  26,230 
Interest expense:    
Deposits 12,145  5,387 
Borrowed funds 985  896 
Total interest expense 13,130  6,283 
Net interest income 18,089  19,947 
Provision (credit) for credit losses (2,040) 277 
Net interest income after provision for credit losses 20,129  19,670 
Non-interest income:    
WMG fee income 2,703  2,580 
Service charges on deposit accounts 949  941 
Interchange revenue from debit card transactions 1,063  1,133 
Changes in fair value of equity investments 101  72 
Net gains (losses) on sales of loans held for sale 32  5 
Income from bank-owned life insurance 9  10 
Other 800  682 
Total non-interest income 5,657  5,423 
Non-interest expenses:    
Salaries and wages 7,016  6,783 
Pension and other employee benefits 2,082  1,680 
Other components of net periodic pension and postretirement benefits (232) (174)
Net occupancy 1,493  1,465 
Furniture and equipment 398  418 
Data processing 2,573  2,381 
Professional services 559  440 
Marketing and advertising 345  332 
Other real estate owned 49  38 
FDIC insurance 577  497 
Loan expense 255  232 
Other 1,583  1,744 
Total non-interest expenses 16,698  15,836 
Income before income tax expense 9,088  9,257 
Income tax expense 2,038  1,987 
Net income $ 7,050  $ 7,270 
Weighted average shares outstanding 4,764  4,721 
Basic and diluted earnings per share $ 1.48  $ 1.54 
See accompanying notes to unaudited consolidated financial statements.
8


CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
  Three Months Ended 
 March 31,
(in thousands) 2024 2023
Net income $ 7,050  $ 7,270 
Other comprehensive income (loss):    
Unrealized holding gains (losses) on securities available for sale (5,513) 7,825 
Tax effect (1,443) 2,050 
Net of tax amount (4,070) 5,775 
Change in funded status of defined benefit pension plan and other benefit plans:  
Reclassification adjustment for amortization of net actuarial loss 7  12 
Total before tax effect 7  12 
Tax effect 2  3 
Net of tax amount 5  9 
Total other comprehensive income (loss) (4,065) 5,784 
Comprehensive income $ 2,985  $ 13,054 
See accompanying notes to unaudited consolidated financial statements.
9



CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)

(in thousands, except share and per share data) Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total
Balances at January 1, 2023 $ 53  $ 47,331  $ 211,859  $ (17,598) $ (75,257) $ 166,388 
Cumulative effect of accounting change (b) —  —  (1,076) —  —  (1,076)
Balances at January 1, 2023, as adjusted 53  47,331  210,783  (17,598) (75,257) 165,312 
Net income —  —  7,270  —  —  7,270 
Other comprehensive loss —  —  —  —  5,784  5,784 
Restricted stock awards —  263  —  —  —  263 
Restricted stock units for directors' deferred compensation plan —  5  —  —  —  5 
Distribution of 4,577 shares of treasury stock grants for employee restricted stock awards
 —  (131) —  131  —  — 
Cash dividends declared ($0.31 per share)
 —  —  (1,460) —  —  (1,460)
Distribution of 8,492 shares of treasury stock for directors' compensation
 —  (147) —  243  —  96 
Repurchase of 2,148 shares of common stock
 —  —  —  (98) —  (98)
Sale of 3,554 shares of treasury stock (a)
 —  66  —  103  —  169 
Balances at March 31, 2023 $ 53  $ 47,387  $ 216,593  $ (17,219) $ (69,473) $ 177,341 
Balances at January 1, 2024 $ 53  $ 47,773  $ 229,930  $ (16,502) $ (66,013) $ 195,241 
Net income —  —  7,050  —  —  7,050 
Other comprehensive loss —  —  —  —  (4,065) (4,065)
Restricted stock awards —  308  —  —  —  308 
Restricted stock units for directors' deferred compensation plan —  5  —  —  —  5 
Distribution of 4,573 shares of treasury stock grants for employee restricted stock awards
 —  (132) —  132  —  — 
Cash dividends declared ($0.31 per share)
 —  —  (1,474) —  —  (1,474)
Distribution of 7,515 shares of treasury stock for directors' compensation
 —  (217) —  217  —  — 
Repurchase of 1,707 shares of common stock
 —  —  —  (82) —  (82)
Sale of 3,056 shares of treasury stock (a)
 —  57  —  88  —  145 
Balances at March 31, 2024 $ 53  $ 47,794  $ 235,506  $ (16,147) $ (70,078) $ 197,128 
(a) All treasury stock sales were completed at the prevailing market price with the Chemung Canal Trust Company Profit Sharing, Savings, and Investment Plan which is a defined contribution plan sponsored by the Bank.
(b) Implementation of ASC 326.

See accompanying notes to unaudited consolidated financial statements.
10


CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands) Three Months Ended 
 March 31,
CASH FLOWS FROM OPERATING ACTIVITIES: 2024 2023
Net income $ 7,050  $ 7,270 
Adjustments to reconcile net income to net cash provided by operating activities:
(Increases in) Amortization of right-of-use assets (370) 199 
Provision (credit) for credit losses (2,040) 277 
(Gains) on disposal of fixed assets (27) — 
Depreciation and amortization of fixed assets 465  533 
Amortization of premiums on securities, net 510  656 
Gain on sales of loans held for sale, net (32) (5)
Proceeds from sales of loans held for sale 1,677  210 
Loans originated and held for sale (1,741) (205)
Net change in fair value of equity investments (101) (72)
Proceeds from sales of trading assets 89  — 
Purchase of equity investments (35) (47)
Decrease (Increase) in other assets and accrued interest receivable 926  (132)
Increase in accrued interest payable 1,920  636 
Expense related to restricted stock units for directors' deferred compensation plan 5  5 
Expense related to employee restricted stock awards 308  394 
Increases in (payments on) operating lease liabilities 370  (193)
Net (gain) loss on interest rate swaps (34) 11 
(Decrease) increase in other liabilities (997) 1,159 
Income from bank owned life insurance (9) (10)
  Net cash provided by operating activities 7,934  10,686 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities, calls, and principal paydowns on securities available for sale 11,942  15,901 
Proceeds from maturities and principal collected on securities held to maturity —  492 
Purchases of securities available for sale —  (2,199)
Purchase of FHLBNY and FRBNY stock (10,894) (16,853)
Redemption of FHLBNY and FRBNY stock 12,321  17,137 
Proceeds from sales of fixed assets 31  — 
Purchases of premises and equipment (81) (287)
Net increase in loans (31,185) (44,114)
Net cash used in investing activities (17,866) (29,923)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand, interest-bearing demand, savings, and insured money market deposits 34,250  (44,507)
Net increase in time deposits 17,095  49,709 
Net change in FHLB overnight advances (31,920) (5,740)
Payments made on finance leases (71) (69)
Proceeds from FRB advances 50,000  — 
Purchase of treasury stock (82) (98)
Sale of treasury stock 145  169 
Cash dividends paid (1,470) (1,455)
Net cash provided by (used in) financing activities 67,947  (1,991)
Net increase (decrease) in cash and cash equivalents 58,015  (21,228)
Cash and cash equivalents, beginning of period 36,847  55,869 
Cash and cash equivalents, end of period $ 94,862  $ 34,641 
See accompanying notes to unaudited consolidated financial statements.
11


CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(UNAUDITED)
(in thousands) Three Months Ended 
 March 31,
Supplemental disclosure of cash flow information: 2024 2023
Cash paid for:
Interest $ 11,210  $ 5,647 
Income taxes 459  431 
Supplemental disclosure of non-cash activity:
Transfer of loans to other real estate owned 233  — 
Dividends declared, not yet paid 1,473  1,460 
See accompanying notes to unaudited consolidated financial statements.
12


CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization
The Corporation, through its wholly-owned subsidiaries, the Bank and CFS, provides a wide range of banking, financing, fiduciary, and other financial services to its clients.  The Corporation and the Bank are subject to the regulations of certain federal and state agencies and undergo periodic examinations by those regulatory authorities.
Chemung Risk Management, Inc., (CRM), a wholly-owned subsidiary of the Corporation, was a Nevada-based captive insurance company which insured against certain risks unique to the operations of the Corporation and its subsidiaries and for which insurance may not have been currently available or economically feasible in today's insurance marketplace. CRM was dissolved by the Corporation, effective December 6, 2023.

Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in conformity with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 8 of Regulation S-X of the Exchange Act. These financial statements include the accounts of the Corporation and its subsidiaries, and all significant intercompany balances and transactions are eliminated in consolidation.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and disclosures provided, and actual results could differ. In the opinion of management, all adjustments (consisting of normal recurring adjustments) and disclosures necessary for the fair presentation of the accompanying consolidated financial statements have been included. The unaudited consolidated financial statements should be read in conjunction with the Corporation's 2023 Annual Report on Form 10-K for the year ended December 31, 2023. The results of operations for any interim periods are not necessarily indicative of the results which may be expected for the entire year or any other period.

Reclassifications
Amounts in the prior year financial statements are reclassified whenever necessary to conform to the current year's presentation.

Recent Accounting Pronouncements
In March 2024, the U.S. Securities and Exchange Commission ("SEC") issued SEC Release No. 33-11275, adopting its final rule“The Enhancement and Standardization of Climate-Related Disclosures for Investors.” This rule will require registrants to disclose limited climate-related information in registration statements and annual reports. In April 2024, the SEC voluntarily stayed the implementation of its final rule, pending judicial review. As a smaller reporting company, these disclosure requirements, once issued in the final rule, would apply to the Corporation's filings for the fiscal year beginning January 1, 2027.

Accounting Standards Pending Adoption
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements, which modifies the disclosure or presentation requirements of a variety of Topics in the Accounting Standards Codification, in response to SEC Release No. 33-10532, Disclosure Update and Simplifications, issued on August 17, 2018. The SEC identified several disclosure requirements that overlap with U.S. GAAP, but require incremental information to comply with disclosure standards in Regulations S-X and Regulation S-K. ASU 2023-06 codifies specific amendments to align the codification with SEC regulations. The effective date for each amendment is that date on which each disclosure requirement is removed from Regulation S-K or Regulation S-X. The Corporation anticipates that certain amendments will pertain to the Corporation's financial disclosures or presentation, but cannot determine with certainty which amendments are applicable until removal from Regulation S-K or Regulation S-X.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, enhancing disclosure requirements for reportable segments, focusing on significant segment expenses, the identification of a segment's chief decision making officer, and the metrics used by the chief decision making officer in evaluating segment-level operating performance. The ASU is effective for fiscal years beginning after December 15, 2023. The Corporation will begin providing enhanced segment reporting disclosures in accordance with ASU 2023-07 for the fiscal year ending December 31, 2024, and for interim periods thereafter.
13


In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which will require public business entities to disclose annually a tabular rate reconciliation, including specific items such as state and local income tax, tax credits, nontaxable or nondeductible items, among others, and a separate disclosure requiring disaggregation of reconciling items as described above which equal or exceed 5% percent of the product of multiplying income from continuing operations by the applicable statutory income tax rate. The ASU is effective for all public business entities for annual periods beginning after December 31, 2024.

Use of Analogous Accounting Standards
Under U.S. GAAP, there is no specific guidance related to government assistance received by a for-profit entity that is not in the form of a loan, income tax credit, or revenue from a contract with a customer. Therefore, the Corporation must rely upon analogous accounting standards to determine appropriate treatment when such circumstances arise. During 2023, the Corporation accounted for the recognition of the Employee Retention Tax Credit (ERTC) using ASC 958-605, Revenue Recognition for Not-for-Profit entities. ASC 958-10-15-1 specifies that certain Subtopics within ASC 958-605 also apply to business entities.
The Corporation considers the recognition of the ERTC to be analogous to the stipulations for "conditional contributions" under ASC 958-605-20. Conditional contributions have at least one barrier needing to be overcome before the recipient is entitled to the assets transferred or promised; there must be a right-of-return to the contributor; and barriers to the condition should be measurable. The Corporation recognized the gross amount of the ERTC through non-interest income during the period in which the barrier was overcome, identified as the period during which amended tax returns were filed. The Corporation incurred and recognized additional income tax expense during 2023 in relation to its amended tax returns.

NOTE 2        EARNINGS PER COMMON SHARE (shares in thousands)

Basic earnings per share is net income divided by the weighted average number of common shares outstanding during the period. Issuable shares, including those related to directors’ restricted stock shares, are considered outstanding and are included in the computation of basic earnings per share. All outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends are considered participating securities for this calculation. Restricted stock awards are grants of participating securities and are considered outstanding at grant date. Earnings per share information is adjusted to present comparative results for stock splits and stock dividends that occur.

Earnings per share were computed by dividing net income by 4,764 and 4,721 weighted average shares outstanding for the three month periods ended March 31, 2024 and 2023, respectively. There were no common stock equivalents during the three month periods ended March 31, 2024 or 2023.


NOTE 3        SECURITIES

Amortized cost and estimated fair value of securities available for sale are as follows (in thousands):
  March 31, 2024
  Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Estimated Fair Value
U.S. Treasury notes and bonds $ 59,828  $ —  $ 4,666  $ —  $ 55,162 
Mortgage-backed securities, residential 467,125  7  77,425  —  389,707 
Obligations of states and political subdivisions 39,415  —  1,270  —  38,145 
Corporate bonds and notes 25,750  —  4,818  —  20,932 
SBA loan pools 64,522  57  2,497  —  62,082 
Total $ 656,640  $ 64  $ 90,676  $ —  $ 566,028 

14


  December 31, 2023
  Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Estimated Fair Value
U.S. Treasury notes and bonds $ 59,812  $ —  $ 4,480  $ —  $ 55,332 
Mortgage-backed securities, residential 476,240  6  72,422  —  403,824 
Obligations of states and political subdivisions 39,503  —  817  —  38,686 
Corporate bonds and notes 25,750  —  5,081  —  20,669 
SBA loan pools 67,787  75  2,380  —  65,482 
Total $ 669,092  $ 81  $ 85,180  $ —  $ 583,993 


Amortized cost and estimated fair value of securities held to maturity are as follows (in thousands):
  March 31, 2024
  Amortized Cost Unrecognized Gains Unrecognized Losses Estimated Fair Value Allowance for Credit Losses
Obligations of states and political subdivisions $ 785  $ —  $ —  $ 785  $ — 

  December 31, 2023
  Amortized Cost Unrecognized Gains Unrecognized Losses Estimated Fair Value Allowance for Credit Losses
Obligations of states and political subdivisions $ 785  $ —  $ —  $ 785  $ — 

The amortized cost and estimated fair value of debt securities are shown below by expected maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately (in thousands):
March 31, 2024
Available for Sale Held to Maturity
Amortized
Cost		 Fair
Value		 Amortized
Cost		 Fair
Value
Within one year $ 8,499  $ 8,297  $ —  $ — 
After one, but within five years 97,948  90,687  145  145 
After five, but within ten years 18,076  14,838  640  640 
After ten years 470  417  —  — 
124,993  114,239  785  785 
Mortgage-backed securities, residential 467,125  389,707  —  — 
Collateralized mortgage obligations —  —  —  — 
SBA loan pools 64,522  62,082  —  — 
Total $ 656,640  $ 566,028  $ 785  $ 785 

There were no proceeds from sales and calls of securities resulting in gains or losses for the three month periods ended March 31, 2024 and 2023.


15


The following tables summarize the investment securities available for sale with unrealized losses at March 31, 2024 and December 31, 2023 by aggregated major security type and length of time in a continuous unrealized loss position (in thousands):
  Less than 12 months 12 months or longer Total
March 31, 2024 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
U.S. Treasury notes and bonds $ —  $ —  $ 55,162  $ 4,666  $ 55,162  $ 4,666 
Mortgage-backed securities, residential —  —  388,878  77,425  388,878  77,425 
Obligations of states and political subdivisions 1,154  24  36,991  1,246  38,145  1,270 
Corporate bonds and notes —  —  20,932  4,818  20,932  4,818 
SBA loan pools 1,067  2  54,894  2,495  55,961  2,497 
Total temporarily impaired securities $ 2,221  $ 26  $ 556,857  $ 90,650  $ 559,078  $ 90,676 

  Less than 12 months 12 months or longer Total
December 31, 2023 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
U.S. Treasury notes and bonds $ —  $ —  $ 55,332  $ 4,480  $ 55,332  $ 4,480 
Mortgage-backed securities, residential —  —  402,986  72,422  402,986  72,422 
Obligations of states and political subdivisions 17,891  241  20,686  576  38,577  817 
Corporate bonds and notes 7,492  2,508  13,177  2,573  20,669  5,081 
SBA loan pools 3,914  13  54,468  2,367  58,382  2,380 
Total temporarily impaired securities $ 29,297  $ 2,762  $ 546,649  $ 82,418  $ 575,946  $ 85,180 

Assessment of Available for Sale Debt Securities for Credit Risk
Management assesses the decline in fair value of investment securities on a regular basis. Unrealized losses on debt securities may occur from current market conditions, increases in interest rates since the time of purchase, a structural change in an investment, volatility of earnings of a specific issuer, or deterioration in credit quality of the issuer. Management evaluates both qualitative and quantitative factors to assess whether an impairment exists. The following is a discussion of the credit quality characteristics of portfolio segments carrying material unrealized losses as of March 31, 2024.

Obligations of U.S. Governmental agencies and sponsored enterprises:
As of March 31, 2024, the majority of the Corporation’s unrealized losses in available for sale investment securities related to mortgage-backed securities, issued by government-sponsored entities and agencies. Declines in fair value are attributable to changes in interest rates and illiquidity, not credit quality. The Corporation does not have the intent, and it is not likely to be required to, sell these securities prior to their anticipated recovery. Because the Corporation considers these obligations to carry zero loss estimates, no allowance for credit losses has been recorded as of March 31, 2024.

Corporate bonds and notes:
The Corporation's corporate bonds and notes portfolio is comprised of subordinated debt issues of community and regional banks. Management considers the credit quality of these investments on an individual basis. Management reviewed the collectability of these securities, taking into consideration such factors as the financial condition of the issuers, reported regulatory capital ratios of the issuers, and credit ratings when available, among other pertinent factors. All corporate bond debt securities continue to accrue interest and make payments as expected with no defaults or deferrals on the part of the issuers. Therefore, the Corporation considers the potential credit risk of these issuers to be immaterial, and has not recorded an allowance for credit losses on its corporate bonds and notes portfolio as of March 31, 2024.

Equity Method Investments
The Corporation holds a non-qualified deferred compensation plan to allow a select group of management and employees the opportunity to defer all or a portion of their annual compensation, and treats assets held under this plan as equity method investments. As of March 31, 2024 and December 31, 2023, the fair value of investments held in relation to the deferred compensation plan was $2.5 million and $2.4 million, respectively. The Corporation also held $0.6 million of marketable securities as equity method investments as of March 31, 2024 and December 31, 2023.

16


NOTE 4        LOANS AND ALLOWANCE FOR CREDIT LOSSES

The composition of the loan portfolio, net of deferred origination fees and costs, is summarized as follows (in thousands):
March 31, 2024 December 31, 2023
Commercial and agricultural:
Commercial and industrial $ 279,414  $ 264,140 
Agricultural 221  256 
Commercial mortgages:
Construction 141,604  138,887 
Commercial mortgages, other 1,004,198  984,038 
Residential mortgages 277,246  277,992 
Consumer loans:
Home equity lines and loans 87,608  87,056 
Indirect consumer loans 204,081  210,423 
Direct consumer loans 9,238  9,872 
Total loans, net of deferred loan fees and costs 2,003,610  1,972,664 
Allowance for credit losses (20,471) (22,517)
Loans, net $ 1,983,139  $ 1,950,147 

The Corporation's concentrations of credit risk by loan type are reflected in the preceding table. The concentrations of credit risk with standby letters of credit, committed lines of credit and commitments to originate new loans generally follow the loan classifications in the table above.

Accrued interest receivable on loans totaled $8.1 million as of March 31, 2024 and $7.8 million as of December 31, 2023. Accrued interest receivable on loans is included in the Accrued interest receivable and other assets line item on the Corporation's Consolidated Balance Sheets, and is excluded from the amortized cost basis of loans and estimate of the allowance for credit losses, as presented in this Note.

The following tables present the activity in the allowance for credit losses by portfolio segment for the three month periods ended March 31, 2024 and March 31, 2023 (in thousands):
Three Months Ended March 31, 2024
Allowance for credit losses Commercial and Agricultural Commercial Mortgages Residential Mortgages Consumer Loans Total
Beginning balance, January 1, 2024 $ 5,055  $ 12,026  $ 2,194  $ 3,242  $ 22,517 
Charge-offs —  —  (16) (351) (367)
Recoveries 37  1  22  125  185 
Net recoveries (charge-offs) 37  1  6  (226) (182)
Provision (credit) (1)
 (576) (1,660) (138) 510  (1,864)
Ending balance, March 31, 2024 $ 4,516  $ 10,367  $ 2,062  $ 3,526  $ 20,471 
(1)Additional provision related to off-balance sheet exposure was a credit of $176 thousand for the three months ended March 31, 2024.
The Corporation performs an annual update to the loss drivers used in modeling its estimate of the allowance for credit losses. Annual updates for the model in 2024 were completed during the three month period ended March 31, 2024.
17


Three Months Ended March 31, 2023
Allowance for credit losses Commercial and Agricultural Commercial Mortgages Residential Mortgages Consumer Loans Total
Beginning balance, January 1, 2023 $ 3,373  $ 11,576  $ 1,845  $ 2,865  $ 19,659 
Cumulative effect adjustment for the adoption of ASC 326 909  (695) (16) 176  374 
Beginning balance after cumulative effect adjustment 4,282  10,881  1,829  3,041  20,033 
Charge-offs (190) —  —  (193) (383)
Recoveries 6  —  —  108  114 
Net recoveries (charge-offs) (184) —  —  (85) (269)
Provision (credit) (1)
 (45) 102  63  191  311 
Ending balance, March 31, 2023 $ 4,053  $ 10,983  $ 1,892  $ 3,147  $ 20,075 
(1)Additional provision related to off-balance sheet exposure was a credit of $34 thousand for the three months ended March 31, 2023.


Unfunded Commitments
The allowance for credit losses on unfunded commitments is recognized as a liability, and included in the Accrued interest payable and other liabilities line item on the Corporation's Consolidated Balance Sheets, with adjustments to the allowance recognized in the Provision for credit losses on the Consolidated Statements of Income. The Corporation established an allowance for credit losses on unfunded commitments in conjunction with its adoption of ASC 326-Financial Instruments-Credit Losses.
The following table presents the activity in the allowance for credit losses on unfunded commitments for the three month periods ended March 31, 2024 and 2023 (in thousands):
For the Three Months Ended
Allowance for credit losses on unfunded commitments March 31, 2024 March 31, 2023
Beginning balance $ 919  $ — 
Impact of ASC 326 adoption —  1,082 
Provision (credit) for credit losses on unfunded commitments (176) (34)
Ending balance $ 743  $ 1,048 

The following table presents the provision for credit losses on loans and unfunded commitments for the three month periods ended March 31, 2024 and March 31, 2023 (in thousands):
For the Three Months Ended
Provision (credit) for credit losses March 31, 2024 March 31, 2023
Provision (credit) for credit losses on loans $ (1,864) $ 311 
Provision (credit) for credit losses on unfunded commitments (176) (34)
Total provision (credit) for credit losses $ (2,040) $ 277 
18


The following tables present the balance in the allowance for credit losses by portfolio segment, as of March 31, 2024 and December 31, 2023 (in thousands):

  March 31, 2024
Allowance for credit losses Commercial and Commercial Residential Consumer
Ending allowance balance attributable to loans: Agricultural Mortgages Mortgages Loans Total
Individually analyzed $ 1,663  $ 24  $ —  $ —  $ 1,687 
Collectively analyzed 2,853  10,343  2,062  3,526  18,784 
   Total ending allowance balance $ 4,516  $ 10,367  $ 2,062  $ 3,526  $ 20,471 

  December 31, 2023
Allowance for credit losses Commercial and Commercial Residential Consumer
Ending allowance balance attributable to loans: Agricultural Mortgages Mortgages Loans Total
Individually analyzed $ 1,928  $ 27  $ —  $ —  $ 1,955 
Collectively analyzed 3,127  11,999  2,194  3,242  20,562 
Total ending allowance balance $ 5,055  $ 12,026  $ 2,194  $ 3,242  $ 22,517 


The following tables present the amortized cost basis of loans by portfolio segment, as of March 31, 2024 and December 31, 2023 (in thousands):

  March 31, 2024
Amortized cost basis of loans: Commercial and Agricultural Commercial Mortgages Residential Mortgages Consumer Loans Total
Individually analyzed $ 1,746  $ 3,965  $ —  $ —  $ 5,711 
Collectively analyzed 277,889  1,141,837  277,246  300,927  1,997,899 
   Total ending loans balance $ 279,635  $ 1,145,802  $ 277,246  $ 300,927  $ 2,003,610 


  December 31, 2023
Amortized cost basis of loans: Commercial and Agricultural Commercial Mortgages Residential Mortgages Consumer Loans Total
Individually analyzed $ 2,067  $ 5,968  $ —  $ —  $ 8,035 
Collectively analyzed 262,329  1,116,957  277,992  307,351  1,964,629 
Total ending loans balance $ 264,396  $ 1,122,925  $ 277,992  $ 307,351  $ 1,972,664 


Modifications to Loans Made to Borrowers Experiencing Financial Difficulty
Effective January 1, 2023, the Corporation adopted ASU 2022-02, Financial Instruments-Credit Losses (Topic 326)-Troubled Debt Restructurings and Vintage Disclosures. The Corporation may occasionally make modifications to loans where the borrower is considered to be experiencing financial difficulty. Types of modifications considered under ASU 2022-02 include principal reductions, interest rate reductions, term extensions, significant payment delays, or a combination thereof.

There were no loan modifications to borrowers experiencing financial difficulty, as considered under the requirements of ASU 2022-02, made during the three month period ended March 31, 2024.



19


The following tables summarize the amortized cost basis of loans modified during the three month period ended March 31, 2023 (in thousands):
Three Months Ended March 31, 2023
Loans modified under ASU 2022-02: Principal Reduction Interest Rate Reduction Term Extension Payment Delay Combination Total
(%) of Loan Class (1)
Commercial mortgages:
Commercial mortgages, other $ —  $ —  $ 277  $ —  $ —  $ 277  0.03  %
(1) Represents the amortized cost basis of loans modified during the period as a percentage of the period-end loan balances by class.

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the three month period ended March 31, 2023 (in thousands):
Three Months Ended March 31, 2023
Effect of loan modifications under ASU 2022-02: Principal Reduction
(in thousands)		 Weighted-average interest rate reduction (%) Weighted-average term extension
(in months)		 Weighted-average payment delay
(in months)
Commercial mortgages:
Commercial mortgages, other $— —% 60 months 0

The Corporation had no outstanding commitments to lend additional amounts to borrowers for which modifications subject to ASU 2022-02 were made during the three months ended March 31, 2024 and the year-ended December 31, 2023.

During the three month period ended March 31, 2024, the Corporation had one loan, a commercial and industrial loan which was given a six month term extension during the three month period ended September 30, 2023, which experienced a payment default within twelve months of modification. There were no loans that defaulted during the three month period ended March 31, 2023 for which modifications were made subsequent to the adoption of ASU 2022-02 on January 1, 2023.

The Corporation monitors the performance of loans that have previously been modified under the guidance of ASU 2022-02 in order to gauge the effectiveness of modifications, and to determine the degree to which borrowers continue to demonstrate financial weakness following modification. The following tables present the performance of such loans that have been modified in the twelve month period preceding March 31, 2024 and the three month period preceding March 31, 2023 (in thousands):
Twelve Months Ended March 31, 2024
Past Due Status of Modifications under ASU 2022-02: 30-59 Days Past Due 60-89 Days Past Due Greater Than 89 Days Past Due Loans Not Past Due Total
Commercial and agricultural:
Commercial and industrial $ —  $ —  $ 675  $ 129  $ 804 
Consumer loans:
Home equity lines and loans —  —  —  116  116 
Total $ —  $ —  $ 675  $ 245  $ 920 

During the three months ended March 31, 2024, a commercial mortgage that was was granted a payment delay during the three months ended June 30, 2023 executed an early payoff. The amortized basis of the loan prior to the payoff was $1.9 million.
Three Months Ended March 31, 2023 (1)
Past Due Status of Modifications under ASU 2022-02: 30-59 Days Past Due 60-89 Days Past Due Greater Than 89 Days Past Due Loans Not Past Due Total
Commercial mortgages, other $ —  $ —  $ —  $ 277  $ 277 
(1) Represents loans which were modified during the three month period subsequent to the adoption of ASU 2022-02 on January 1, 2023.

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Collateral Dependent Individually Analyzed Loans
As of March 31, 2024, the amortized cost basis of individually analyzed loans totaled $5.7 million, of which $4.2 million were considered collateral dependent. As of December 31, 2023 the amortized basis of individually analyzed loans totaled $8.0 million, of which $6.3 million were considered collateral dependent. For collateral dependent loans where the borrower is experiencing financial difficulty and repayment is likely to be substantially provided through the sale or operation of the collateral, the allowance for credit losses is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date.
Certain assets held as collateral may be exposed to future deterioration in fair value, particularly due to changes in real estate markets or usage. The Corporation closely monitors trends in real estate values throughout its market area to determine whether collateral values, after appropriate discounting, are likely to be sufficient to extinguish existing borrower indebtedness.
The following table presents the amortized cost basis and related allowance for credit loss of individually analyzed loans considered to be collateral dependent as of March 31, 2024 and December 31, 2023 (in thousands):
March 31, 2024 December 31, 2023
Amortized Cost Basis Related Allowance Amortized Cost Basis Related Allowance
Commercial and agricultural:
Commercial and industrial (3)
 $ 282  $ 200  $ 353  $ 214 
Agricultural (3)
 2  1  26  26 
Commercial mortgages:
Construction (1)
 2,207  —  2,209  — 
Commercial mortgages, other (1) (2) (3)
 1,757  24  3,759  27 
Total $ 4,248  $ 225  $ 6,347  $ 267 
(1) Secured by commercial real estate
(2) Secured by residential real estate
(3) Secured by business assets

The following tables present the average amortized cost basis and interest income recognized on loans individually analyzed, by class of loans, for the three month periods ended March 31, 2024 and 2023 (in thousands):

  Three Months Ended 
 March 31, 2024		 Three Months Ended 
 March 31, 2023
With no related allowance recorded: Average Amortized Cost Basis
Interest Income Recognized (1)
 Average Amortized Cost Basis
Interest Income Recognized (1)
Commercial and agricultural:
   Commercial and industrial $ 49  $ 1  $ 729  $ — 
Agricultural —  —  —  — 
Commercial mortgages:
Construction 2,208  —  —  — 
Commercial mortgages, other 2,733  —  4,053  7 
Residential mortgages —  —  715  9 
Consumer loans:
Home equity lines & loans —  —  254  — 
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial 1,844  3  1,049  2 
Agricultural 14  —  —  — 
Commercial mortgages:
Commercial mortgages, other 25  —  36  — 
Total $ 6,873  $ 4  $ 6,836  $ 18 
(1) Cash basis interest income approximates interest income recognized.
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The following table presents the amortized cost basis in nonaccrual loans without an associated allocation in the allowance for credit losses, total nonaccrual loans, and loans past due greater than 90 days and still accruing, by class of loan as of March 31, 2024 and December 31, 2023 (in thousands):


Nonaccrual with No Allowance for Credit Losses Nonaccrual Loans Past Due 90 Days or More and Still Accruing
March 31, 2024 December 31, 2023 March 31, 2024 December 31, 2023 March 31, 2024 December 31, 2023
Commercial and agricultural:
Commercial and industrial $ 23  $ 76  $ 1,615  $ 1,904  $ 8  $ 10 
Agricultural —  —  2  26  —  — 
Commercial mortgages:
Construction 2,207  2,209  2,207  2,209  —  — 
Commercial mortgages, other 1,734  3,732  1,758  3,760  —  — 
Residential mortgages 1,118  1,315  1,118  1,315  —  — 
Consumer loans:
Home equity lines and loans 496  508  496  508  —  — 
Indirect consumer loans 631  687  631  687  —  — 
Direct consumer loans 8  2  8  2  —  — 
Total $ 6,217  $ 8,529  $ 7,835  $ 10,411  $ 8  $ 10 



The following tables present the aging of the amortized cost basis of loans as of March 31, 2024 and December 31, 2023 (in thousands):
March 31, 2024
  30 - 59 Days Past Due 60 - 89 Days Past Due 90 Days or More Past Due Total Past Due Loans Not Past Due Total
Commercial and agricultural:
Commercial and industrial $ 181  $ 238  $ 683  $ 1,102  $ 278,312  $ 279,414 
Agricultural —  —  —  —  221  221 
Commercial mortgages:  
Construction —  —  2,207  2,207  139,397  141,604 
Commercial mortgages, other 1,012  2,238  175  3,425  1,000,773  1,004,198 
Residential mortgages 1,529  594  589  2,712  274,534  277,246 
Consumer loans:  
Home equity lines and loans 612  100  282  994  86,614  87,608 
Indirect consumer loans 1,063  379  379  1,821  202,260  204,081 
Direct consumer loans 18  20  6  44  9,194  9,238 
Total $ 4,415  $ 3,569  $ 4,321  $ 12,305  $ 1,991,305  $ 2,003,610 

22


December 31, 2023
  30 - 59 Days Past Due 60 - 89 Days Past Due 90 Days or More Past Due Total Past Due Loans Not Past Due Total
Commercial and agricultural:
Commercial and industrial $ 1,196  $ 31  $ 10  $ 1,237  $ 262,903  $ 264,140 
Agricultural —  —  —  —  256  256 
Commercial mortgages:  
Construction 2,164  —  2,207  4,371  134,516  138,887 
Commercial mortgages, other 1,022  103  261  1,386  982,652  984,038 
Residential mortgages 2,244  201  585  3,030  274,962  277,992 
Consumer loans:  
Home equity lines and loans 461  87  366  914  86,142  87,056 
Indirect consumer loans 2,473  501  426  3,400  207,023  210,423 
Direct consumer loans 2  20  —  22  9,850  9,872 
Total $ 9,562  $ 943  $ 3,855  $ 14,360  $ 1,958,304  $ 1,972,664 


Credit Quality Indicators

The Corporation establishes a risk rating at origination for all commercial loans. The primary factors considered in assigning risk ratings include, but are not limited to: historic and future debt service coverage, collateral position, operating performance, liquidity, leverage, payment history, management ability, and the customer’s industry. Commercial relationship managers monitor all loans in their respective portfolios for any changes in the borrower’s ability to service its debt and affirm the risk ratings for the loans at least annually.

For retail loans, which include residential mortgages, indirect and direct consumer loans, and home equity lines and loans, once a loan is properly approved and closed, the Corporation evaluates credit quality based upon loan repayment. Retail loans that have been modified subject to ASU 2022-02, but are otherwise performing, are assigned a risk rating of Special Mention, as defined below. Retail loans are not rated until they become 90 days past due, or are modified under ASU 2022-02.

The Corporation uses the risk rating system to identify criticized and classified loans. Commercial relationships within the criticized and classified risk ratings are analyzed quarterly.  The Corporation uses the following definitions for criticized and classified loans (which are consistent with regulatory guidelines):

Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capability of the obligor or of the collateral pledged, if any.  Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Commercial loans not meeting the criteria above to be considered criticized or classified, are considered to be pass rated loans. Loans listed as not rated, are included in groups of homogeneous loans performing under terms of the loan notes.






23


Based on the analyses performed as of March 31, 2024, the risk category of the amortized cost basis of loans by class and vintage, as well as gross charge-offs by class and vintage for the period, were as follows (in thousands):

Term Loans Amortized Cost by Origination Year Revolving Loans Amortized Cost Revolving Loans Converted to Term Total
2024 2023 2022 2021 2020 Prior
Commercial & industrial
Pass $ 10,885  $ 39,011  $ 34,108  $ 21,370  $ 12,349  $ 39,698  $ 92,497  $ 1,643  $ 251,561 
Special mention —  —  9,159  —  4,060  4,586  7,223  453  25,481 
Substandard —  89  221  788  83  205  —  176  1,562 
Doubtful 24  —  —  —  —  764  22  —  810 
Total 10,909  39,100  43,488  22,158  16,492  45,253  99,742  2,272  279,414 
Gross charge-offs —  —  —  —  —  —  —  —  — 
Agricultural
Pass —  —  14  143  —  —  62  —  219 
Special mention —  —  —  —  —  —  —  —  — 
Substandard —  2  —  —  —  —  —  —  2 
Doubtful —  —  —  —  —  —  —  —  — 
Total —  2  14  143  —  —  62  —  221 
Gross charge-offs —  —  —  —  —  —  —  —  — 
Construction
Pass 1,076  48,500  77,995  9,686  —  1,658  482  —  139,397 
Special mention —  —  —  —  —  —  —  —  — 
Substandard —  —  —  —  —  2,207  —  —  2,207 
Doubtful —  —  —  —  —  —  —  —  — 
Total 1,076  48,500  77,995  9,686  —  3,865  482  —  141,604 
Gross charge-offs —  —  —  —  —  —  —  —  — 
Commercial mortgages
Pass 13,784  117,235  258,049  171,090  111,407  296,080  5,127  742  973,514 
Special mention —  —  2,522  8,092  2,590  8,082  2,001  —  23,287 
Substandard —  2,412  1,081  339  1,012  2,432  97  —  7,373 
Doubtful —  —  —  —  —  24  —  —  24 
Total 13,784  119,647  261,652  179,521  115,009  306,618  7,225  742  1,004,198 
Gross charge-offs —  —  —  —  —  —  —  —  — 
Residential mortgages
Not rated 4,014  20,000  57,204  59,311  70,050  65,549  —  —  276,128 
Substandard —  —  75  342  247  454  —  —  1,118 
Total 4,014  20,000  57,279  59,653  70,297  66,003  —  —  277,246 
Gross charge-offs —  —  —  —  —  16  —  —  16 
Home equity lines and loans
Not rated 3,298  12,904  15,846  5,577  3,009  12,494  32,773  1,095  86,996 
Special mention —  —  116  —  —  —  —  —  116 
Substandard —  —  76  —  —  291  86  43  496 
Total 3,298  12,904  16,038  5,577  3,009  12,785  32,859  1,138  87,608 
Gross charge-offs —  —  —  —  —  11  —  —  11 
Indirect consumer
Not rated 11,861  67,401  90,413  20,411  7,652  5,712  —  —  203,450 
Substandard —  139  208  141  49  94  —  —  631 
Total 11,861  67,540  90,621  20,552  7,701  5,806  —  —  204,081 
Gross charge-offs —  104  127  29  24  54  —  —  338 
Direct consumer
Not rated 700  2,622  2,391  607  174  332  2,401  3  9,230 
Substandard —  —  —  5  2  —  1  —  8 
Total 700  2,622  2,391  612  176  332  2,402  3  9,238 
Gross charge-offs —  —  —  —  —  —  2  —  2 
Total loans $ 45,642  $ 310,315  $ 549,478  $ 297,902  $ 212,684  $ 440,662  $ 142,772  $ 4,155  $ 2,003,610 
Total gross charge-offs $ —  $ 104  $ 127  $ 29  $ 24  $ 81  $ 2  $ —  $ 367 


24


Based on the analyses performed as of December 31, 2023, the risk category of the amortized cost basis of loans by class and vintage, as well as gross charge-offs by class and vintage for the period, were as follows (in thousands):
Term Loans Amortized Cost by Origination Year Revolving Loans Amortized Cost Revolving Loans Converted to Term Total
2023 2022 2021 2020 2019 Prior
Commercial & industrial
Pass $ 41,925  $ 40,564  $ 21,742  $ 13,541  $ 31,233  $ 10,523  $ 77,176  $ 1,662  $ 238,366 
Special mention 185  4,608  —  4,020  —  4,690  9,137  482  23,122 
Substandard —  24  991  109  23  456  —  161  1,764 
Doubtful —  —  —  —  —  790  75  23  888 
Total 42,110  45,196  22,733  17,670  31,256  16,459  86,388  2,328  264,140 
Gross charge-offs —  —  —  —  9  272  —  —  281 
Agricultural
Pass —  15  150  —  —  —  65  —  230 
Special mention —  —  —  —  —  —  —  —  — 
Substandard —  —  —  —  —  —  —  26  26 
Doubtful —  —  —  —  —  —  —  —  — 
Total —  15  150  —  —  —  65  26  256 
Gross charge-offs —  —  —  —  —  —  —  —  — 
Construction
Pass 46,951  68,483  19,066  —  28  1,669  481  —  136,678 
Special mention —  —  —  —  —  —  —  —  — 
Substandard —  —  —  —  2,207  2  —  —  2,209 
Doubtful —  —  —  —  —  —  —  —  — 
Total 46,951  68,483  19,066  —  2,235  1,671  481  —  138,887 
Gross charge-offs —  —  —  —  —  —  —  —  — 
Commercial mortgages
Pass 110,864  260,763  161,858  113,198  57,782  244,211  5,197  767  954,640 
Special mention —  2,533  8,189  2,609  —  8,642  —  —  21,973 
Substandard 272  1,107  345  1,022  —  4,555  97  —  7,398 
Doubtful —  —  —  —  —  27  —  —  27 
Total 111,136  264,403  170,392  116,829  57,782  257,435  5,294  767  984,038 
Gross charge-offs —  —  —  —  —  —  —  —  — 
Residential mortgages
Not rated 18,653  58,098  60,024  71,369  15,948  52,585  —  —  276,677 
Substandard —  75  346  —  169  725  —  —  1,315 
Total 18,653  58,173  60,370  71,369  16,117  53,310  —  —  277,992 
Gross charge-offs —  32  —  —  —  —  —  —  32 
Home equity lines and loans
Not rated 13,552  16,384  5,821  3,134  2,867  10,400  33,275  1,115  86,548 
Substandard —  77  —  —  —  293  25  113  508 
Total 13,552  16,461  5,821  3,134  2,867  10,693  33,300  1,228  87,056 
Gross charge-offs —  —  —  —  —  —  6  —  6 
Indirect consumer
Not rated 72,264  98,008  23,015  9,192  3,870  3,387  —  —  209,736 
Substandard 119  246  135  48  36  103  —  —  687 
Total 72,383  98,254  23,150  9,240  3,906  3,490  —  —  210,423 
Gross charge-offs 184  375  215  121  21  55  —  —  971 
Direct consumer
Not rated 3,005  2,745  785  256  53  324  2,697  5  9,870 
Substandard —  —  —  2  —  —  —  —  2 
Total 3,005  2,745  785  258  53  324  2,697  5  9,872 
Gross charge-offs 4  15  8  6  —  54  6  —  93 
Total loans $ 307,790  $ 553,730  $ 302,467  $ 218,500  $ 114,216  $ 343,382  $ 128,225  $ 4,354  $ 1,972,664 
Total gross charge-offs $ 188  $ 422  $ 223  $ 127  $ 30  $ 381  $ 12  $ —  $ 1,383 


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NOTE 5        FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  There are three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Corporation used the following methods and significant assumptions to estimate fair value on a recurring basis:

Available for Sale Securities:  The fair values of securities available for sale are usually determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs), or matrix pricing, which is a mathematical technique widely used to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3 inputs).

Equity Investments: Securities that are held to fund a deferred compensation plan and securities that have a readily determinable fair market value, are recorded at fair value with changes in fair value included in earnings. The fair values of equity investments are determined by quoted market prices (Level 1 inputs).

Individually Analyzed Loans: At the time a loan is considered individually analyzed, it is valued at the lower of cost or fair value. Individually analyzed loans carried at fair value have been partially charged-off or receive specific allocations as part of the allowance for credit loss accounting. For collateral dependent loans, fair value is commonly based on real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, typically resulting in a Level 3 fair value classification. Individually analyzed loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

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

Appraisals for both collateral dependent loans and OREO are performed by certified general appraisers (commercial properties) or certified residential appraisers (residential properties) whose qualifications and licenses have been reviewed and verified by the Corporation. Once received, appraisals are reviewed for reasonableness of assumptions, approaches utilized, Uniform Standards of Professional Appraisal Practice and other regulatory compliance, as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Appraisals are generally completed within the twelve month period prior to a property being placed into OREO. On individually analyzed loans, appraisal values are adjusted based on the age of the appraisal, the position of the lien, the type of the property and its condition.

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Derivatives: The fair values of interest rate swaps are based on valuation models using observable market data as of the measurement date (Level 2 inputs). Derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices, and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The Corporation also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counter-party's nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Corporation has considered the impact of any applicable credit enhancements, such as collateral postings. Although the Corporation has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize credit default rate assumptions (Level 3 inputs).

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):
Fair Value Measurement at March 31, 2024 Using
Financial Assets: Fair Value Quoted Prices in Active Markets for Identical Assets
(Level 1)		 Significant Other Observable Inputs
(Level 2)		 Significant Unobservable Inputs
(Level 3)
  U.S. Treasury notes and bonds $ 55,162  $ 55,162  $ —  $ — 
  Mortgage-backed securities, residential 389,707  —  389,707  — 
  Obligations of states and political subdivisions 38,145  —  38,145  — 
  Corporate bonds and notes 20,932  —  13,211  7,721 
  SBA loan pools 62,082  —  62,082  — 
  Total available for sale securities $ 566,028  $ 55,162  $ 503,145  $ 7,721 
  Equity investments, at fair value $ 2,600  $ 2,600  $ —  $ — 
  Derivative assets $ 25,806  $ —  $ 25,806  $ — 
Financial Liabilities:
  Derivative liabilities $ 25,811  $ —  $ 25,811  $ — 

There were no transfers between Level 1 and Level 2 during the three month period ended March 31, 2024.
Fair Value Measurement at December 31, 2023 Using
Financial Assets: Fair Value Quoted Prices in Active Markets for Identical Assets
(Level 1)		 Significant Other Observable Inputs
(Level 2)		 Significant Unobservable Inputs
(Level 3)
  U.S. Treasury notes and bonds $ 55,332  $ 55,332  $ —  $ — 
  Mortgage-backed securities, residential 403,824  —  403,824  — 
  Obligations of states and political subdivisions 38,686  —  38,686  — 
  Corporate bonds and notes 20,669  —  13,139  7,530 
  SBA loan pools 65,482  —  65,482  — 
  Total available for sale securities $ 583,993  $ 55,332  $ 521,131  $ 7,530 
  Equity investments, at fair value $ 2,552  $ 2,552  $ —  $ — 
  Derivative assets $ 23,942  $ —  $ 23,942  $ — 
Financial Liabilities:
  Derivative liabilities $ 23,981  $ —  $ 23,981  $ — 
There were no transfers between Level 1 and Level 2 during the three month period ended March 31, 2023.
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The Corporation transfers assets and liabilities between Level 2 and Level 3 of the fair value hierarchy when the methodology to obtain fair value changes such that there are either more or fewer unobservable inputs as of the end of the reporting period, compared to the prior reporting period. Illiquidity in new issuances of comparable bonds and the size of issuances may lead to pricing difficulties, particularly for smaller corporate bond issuances and warrant transfer into Level 3 of assets previously measured using Level 2 inputs. The Corporation utilizes a "beginning of reporting period" timing assumption when recognizing transfers between hierarchy levels, consistent with ASC 820-10-50-2.

There were no transfers between Level 2 and Level 3 during the three month period ended March 31, 2024. The Corporation transferred its investment in eight corporate subordinated debt issuances from Level 2 to Level 3 during the three month period ended March 31, 2023.

The following table presents a reconciliation of assets and liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3) for the three months ended March 31, 2024 and March 31, 2023 (in thousands):

Corporate bonds and notes: For the Three Months Ended
Level 3 Financial Assets March 31, 2024 March 31, 2023
Balance of recurring Level 3 assets as of January 1, $ 7,530  $ — 
Total gains or losses for the period: —  — 
     Included in Other Comprehensive Income 191  (1,289)
Transfers into Level 3 —  9,955 
Transfers out of Level 3 — 
     Balance of recurring Level 3 assets as of March 31, $ 7,721  $ 8,666 


The following table presents quantitative information about recurring Level 3 fair value measurements as of March 31, 2024 and December 31, 2023 (in thousands):
March 31, 2024 Fair Value Valuation Techniques Unobservable Input Range [Weighted Average] at March 31, 2024
Corporate bonds and notes $ 7,721  Discounted cash flow Market discount rate
12.50% -12.50% [12.50%]

December 31, 2023 Fair Value Valuation Techniques Unobservable Input Range [Weighted Average] at December 31, 2023
Corporate bonds and notes $ 7,530  Discounted cash flow Market discount rate
12.50% -12.50% [12.50%]




















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FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of other financial instruments, as of March 31, 2024 and December 31, 2023, are as follows (in thousands):
March 31, 2024
Financial assets: Carrying Amount Quoted Prices in Active Markets for Identical Assets
(Level 1)		 Significant Other Observable Inputs
(Level 2)		 Significant Unobservable Inputs
(Level 3)
Estimated Fair Value (1)
   Cash and due from financial institutions $ 22,984  $ 22,984  $ —  $ —  $ 22,984 
   Interest-earning deposits in other financial institutions 71,878  71,878  —  —  71,878 
   Equity investments 3,093  3,093  —  —  3,093 
   Securities available for sale 566,028  55,162  503,145  7,721  566,028 
   Securities held to maturity 785  —  —  785  785 
   FHLBNY and FRBNY stock 4,071  —  —  —  N/A
   Loans, net and loans held for sale 2,003,706  —  —  1,896,266  1,896,266 
   Derivative assets 25,806  —  25,806  —  25,806 
Financial liabilities:          
   Deposits:          
      Demand, savings, and insured money market deposits $ 1,851,412  $ 1,851,412  $ —  $ —  $ 1,851,412 
      Time deposits 629,360  —  626,423  —  626,423 
   FHLBNY overnight advances —  —  —  —  — 
   FRB term advances 50,000  —  49,828  —  49,828 
   Derivative liabilities 25,811  —  25,811  —  25,811 
(1) Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
  December 31, 2023
Financial assets: Carrying Amount Quoted Prices in Active Markets for Identical Assets
(Level 1)		 Significant Other Observable Inputs
(Level 2)		 Significant Unobservable Inputs
(Level 3)
Estimated Fair Value (1)
   Cash and due from financial institutions $ 22,247  $ 22,247  $ —  $ —  $ 22,247 
   Interest-earning deposits in other financial institutions 14,600  14,600  —  —  14,600 
   Equity investments 3,046  3,046  —  —  3,046 
   Securities available for sale 583,993  55,332  521,131  7,530  583,993 
   Securities held to maturity 785  —  —  785  785 
   FHLBNY and FRBNY stock 5,498  —  —  —  N/A
   Loans, net and loans held for sale 1,972,664  —  —  1,875,390  1,875,390 
   Derivative assets 23,942  —  23,942  —  23,942 
Financial liabilities:          
   Deposits:          
      Demand, savings, and insured money market deposits $ 1,817,162  $ 1,817,162  $ —  $ —  $ 1,817,162 
      Time deposits 612,265  —  609,863  —  609,863 
   FHLBNY overnight advances 31,920  —  31,925  —  31,925 
   Derivative liabilities 23,981  —  23,981  —  23,981 
(1) Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
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NOTE 6        LEASES

Operating Leases

The Corporation leases certain branch properties under long-term, operating lease agreements. The leases expire at various dates through 2033 and generally include renewal options. As of March 31, 2024, the weighted average remaining lease term was 7.56 years with a weighted average discount rate of 3.51%. Rent expense was $0.3 million for the three months ended March 31, 2024. Certain leases provide for increases in future minimum annual rent payments as defined in the lease agreements. The Corporation’s operating lease agreements contain both lease and non-lease components, which are generally accounted for separately. The Corporation’s lease agreements do not contain any residual value guarantees.

Leased branch properties at March 31, 2024 and December 31, 2023 consist of the following (in thousands):
March 31, 2024 December 31, 2023
Operating lease right-of-use asset $ 5,648  $ 6,449 
Less: accumulated amortization (200) (801)
Less: lease termination —  — 
Add: new lease agreement and modifications 570  — 
Operating lease right-of-use-assets, net $ 6,018  $ 5,648 

The following is a schedule by year of the undiscounted cash flows of the operating lease liabilities, excluding CAM charges, as of March 31, 2024 (in thousands):
Year Amount
2024 $ 717 
2025 959 
2026 965 
2027 977 
2028 845 
2029 and thereafter 2,590 
Total minimum lease payments 7,053 
Less: amount representing interest (856)
Present value of net minimum lease payments $ 6,197 

The Corporation had one operating lease that was signed on October 19, 2023, but had not yet commenced.

Finance Leases

The Corporation leases certain buildings under finance leases. The lease arrangements require monthly payments through 2036. As of March 31, 2024, the weighted average remaining lease term was 9.10 years with a weighted average discount rate of 3.42%. The Corporation has included these leases in premises and equipment as of March 31, 2024 and December 31, 2023 as follows (in thousands):
March 31, 2024 December 31, 2023
Buildings $ 5,572  $ 5,572 
Less: accumulated depreciation (2,955) (2,872)
Net book value $ 2,617  $ 2,700 

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The following is a schedule by year of future minimum lease payments under the capitalized lease, together with the present value of net minimum lease payments as of March 31, 2024 (in thousands):
Year Amount
2024 $ 293 
2025 409 
2026 425 
2027 428 
2028 428 
2029 and thereafter 1,560 
Total minimum lease payments 3,543 
Less: amount representing interest (564)
Present value of net minimum lease payments $ 2,979 

As of March 31, 2024, the Corporation had no finance leases that were signed, but had not yet commenced.

Related Party Transactions
The Bank leases its branch located at 2 Rush Street, Schenectady, New York, under a lease agreement through February, 2033 from a member of the Corporation's Board of Directors with monthly rent and CAM related expenses totaling $9 thousand per month. Rent and CAM related expenses paid to this Board member totaled $27 thousand and $26 thousand for the three month periods ended March 31, 2024 and 2023, respectively.


NOTE 7        GOODWILL AND INTANGIBLE ASSETS

The changes in goodwill included in the core banking segment during the three month periods ended March 31, 2024 and 2023 were as follows (in thousands):
  2024 2023
Beginning of year $ 21,824  $ 21,824 
Acquired goodwill —  — 
Ending balance March 31, $ 21,824  $ 21,824 

The Corporation had no aggregate amortization expense for the three month periods ended March 31, 2024 and 2023.

The amount of goodwill reflected in the Corporation's Unaudited Consolidated Financial statements is required to be tested by management for impairment on at least an annual basis. Goodwill impairment testing is performed annually as of December 31 and no impairment charges were incurred.


NOTE 8        COMMITMENTS AND CONTINGENCIES

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

The following table lists the contractual amounts of financial instruments with off-balance sheet risk as of March 31, 2024 and December 31, 2023 (in thousands):
  March 31, 2024 December 31, 2023
  Fixed Rate Variable Rate Fixed Rate Variable Rate
Commitments to make loans $ 14,387  $ 61,128  $ 23,809  $ 78,790 
Unused lines of credit $ 2,249  $ 327,681  $ 3,387  $ 332,439 
Standby letters of credit $ —  $ 18,201  $ —  $ 11,317 
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Commitments to make real estate and home equity loans are generally made for periods of sixty days or less. As of March 31, 2024, the fixed rate real estate and home equity commitments to make loans have interest rates ranging from 5.63% to 7.38% and maturities ranging from four years to thirty years. Commitments to fund commercial draw notes are generally made for periods of three months to twenty-four months. As of March 31, 2024, the fixed rate commercial draw commitments have interest rates ranging from 2.79% to 8.17%.
Because many commitments and almost all standby letters of credit expire without being funded in whole or in part, the contract amounts are not estimates of future cash flows. Loan commitments and unused lines of credit have off-balance sheet credit risk because only origination fees are recognized on the consolidated balance sheet until commitments are fulfilled or expire. The credit risk amounts are equal to the contractual amounts, assuming the amounts are fully advanced and collateral or other security is of no value. The Corporation does not anticipate losses as a result of these transactions. These commitments also have off-balance sheet interest rate risk in that the interest rate at which these commitments were made may not be at market rates on the date the commitments are fulfilled.
In conjunction with the Corporation's adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), an allowance for credit losses on unfunded commitments was established as of January 1, 2023. As of March 31, 2024 and December 31, 2023, the allowance for credit losses on unfunded commitments was $0.7 million and $0.9 million, respectively.

In the normal course of business, there are various outstanding claims and legal proceedings involving the Corporation or its subsidiaries. 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.



NOTE 9        ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) represents the net unrealized holding gains or losses on securities available for sale and the funded status of the Corporation's defined benefit pension plan and other benefit plans, as of the consolidated balance sheet dates, net of the related tax effect.

The following is a summary of the changes in accumulated other comprehensive income (loss) by component, net of tax, for the periods indicated (in thousands):
  Unrealized Gains and Losses on Securities Available for Sale Defined Benefit and Other Benefit Plans Total
Balance at January 1, 2024 $ (62,800) $ (3,213) $ (66,013)
Other comprehensive income before reclassification (4,070) —  (4,070)
Amounts reclassified from accumulated other comprehensive income —  5  5 
Net current period other comprehensive income (loss) (4,070) 5  (4,065)
Balance at March 31, 2024 $ (66,870) $ (3,208) $ (70,078)

  Unrealized Gains and Losses on Securities Available for Sale Defined Benefit and Other Benefit Plans Total
Balance at January 1, 2023 $ (71,296) $ (3,961) $ (75,257)
Other comprehensive income before reclassification 5,775  —  5,775 
Amounts reclassified from accumulated other comprehensive income —  9  9 
Net current period other comprehensive income 5,775  9  5,784 
Balance at March 31, 2023 $ (65,521) $ (3,952) $ (69,473)





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The following is the reclassification out of accumulated other comprehensive income for the periods indicated (in thousands):
Details about Accumulated Other Comprehensive Income (Loss) Components Three Months Ended 
 March 31,		 Affected Line Item
in the Statement Where
Net Income is Presented
2024 2023
Amortization of defined pension plan and other benefit plan items:          
Prior service costs (a) $ —  $ —  Other components of net periodic pension and postretirement benefits
Actuarial losses (a) 7  12  Other components of net periodic pension and postretirement benefits
Tax effect (2) (3) Income tax expense
Net of tax 5  9   
Total reclassification for the period, net of tax $ 5  $ 9   
(a) These accumulated other comprehensive income components are included in the computation of net periodic pension and other benefit plan costs (see Note 11 for additional information).

NOTE 10    REVENUE FROM CONTRACTS WITH CUSTOMERS

All of the Corporation's revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income. The following tables present the Corporation's non-interest income by revenue stream and reportable segment for the three months ended March 31, 2024 and 2023 (in thousands). Items outside the scope of ASC 606 are noted as such.

Three Months Ended March 31, 2024
Revenue by Operating Segment: Non-interest income Core Banking WMG
Holding Company and CFS(b)
 Total
Service charges on deposit accounts
         Overdraft fees $ 710  $ —  $ —  $ 710 
         Other 239  —  —  239 
Interchange revenue from debit card transactions 1,063  —  —  1,063 
WMG fee income —  2,703  —  2,703 
CFS fee and commission income —  —  228  228 
Net gains on sales of loans(a)
 32  —  —  32 
Loan servicing fees(a)
 36  —  —  36 
Changes in fair value of equity investments(a)
 117  —  (16) 101 
Income from bank-owned life insurance(a)
 9  —  —  9 
Other(a)
 536  —  —  536 
Total non-interest income (loss) $ 2,742  $ 2,703  $ 212  $ 5,657 
(a) Not within scope of ASC 606.
(b) The Holding Company, and CFS column above includes amounts to eliminate transactions between segments.

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Three Months Ended March 31, 2023
Revenue by Operating Segment: Non-interest income Core Banking WMG
Holding Company, CFS, and CRM(b)(c)
 Total
Service charges on deposit accounts
         Overdraft fees $ 714  $ —  $ —  $ 714 
         Other 227  —  —  227 
Interchange revenue from debit card transactions 1,133  —  —  1,133 
WMG fee income —  2,580  —  2,580 
CFS fee and commission income —  —  241  241 
Net gains on sales of loans(a)
 5  —  —  5 
Loan servicing fees(a)
 36  —  —  36 
Changes in fair value of equity investments(a)
 78  —  (6) 72 
Income from bank-owned life insurance(a)
 10  —  —  10 
Other(a)
 448  —  (43) 405 
Total non-interest income $ 2,651  $ 2,580  $ 192  $ 5,423 
(a) Not within scope of ASC 606.
(b) The Holding Company, CFS, and CRM column above includes amounts to eliminate transactions between segments.
(c) Chemung Risk Management, Inc. (CRM) was dissolved December 6, 2023.


A description of the Corporation's revenue streams accounted for under ASC 606 follows:

Service Charges on Deposit Accounts: The Corporation earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which included services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Corporation fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are recognized at the time the maintenance occurs. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance.

Interchange Income from Debit Card Transactions: The Corporation earns interchange fees from debit cardholder transactions conducted through the MasterCard payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with transaction processing services provided to the cardholder.

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

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

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

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

The components of net periodic expense for the Corporation’s pension and other benefit plans for the periods indicated are as follows (in thousands):
  Three Months Ended 
 March 31,
  2024 2023
Qualified Pension Plan
Service cost, benefits earned during the period $ —  $ — 
Interest cost on projected benefit obligation 378  396 
Expected return on plan assets (629) (596)
Amortization of unrecognized transition obligation —  — 
Amortization of unrecognized prior service cost —  — 
Amortization of unrecognized net loss —  6 
Net periodic pension benefit $ (251) $ (194)
Supplemental Pension Plan    
Service cost, benefits earned during the period $ —  $ — 
Interest cost on projected benefit obligation 11  12 
Expected return on plan assets —  — 
Amortization of unrecognized prior service cost —  — 
Amortization of unrecognized net loss 3  2 
Net periodic supplemental pension cost $ 14  $ 14 
Postretirement Plan, Medical and Life    
Service cost, benefits earned during the period $ —  $ — 
Interest cost on projected benefit obligation 1  1 
Expected return on plan assets —  — 
Amortization of unrecognized prior service cost —  — 
Amortization of unrecognized net loss 4  5 
Net periodic postretirement, medical and life benefit $ 5  $ 6 


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NOTE 12    SEGMENT REPORTING

The Corporation manages its operations through two primary business segments: core banking and WMG. The core banking segment provides revenues by attracting deposits from the general public and using such funds to originate consumer, commercial, commercial real estate, and residential mortgage loans, primarily in the Corporation’s local markets, and to invest in securities. The WMG services segment provides revenues by providing trust and investment advisory services to clients.

Accounting policies for the segments are the same as those described in Note 1 of the Corporation’s 2023 Annual Report on Form 10-K, which was filed with the SEC on March 13, 2024. Summarized financial information concerning the Corporation’s reportable segments and the reconciliation to the Corporation’s consolidated results are shown in the following table. Income taxes are allocated based on the separate taxable income of each entity and indirect overhead expenses are allocated based on reasonable and equitable allocations applicable to the reportable segment.

The Holding Company and CFS columns below include amounts to eliminate transactions between segments (in thousands).
  Three months ended March 31, 2024
  Core Banking WMG Holding Company, and CFS Consolidated Totals
Interest and dividend income $ 31,211  $ —  $ 8  $ 31,219 
Interest expense 13,130  —  —  13,130 
Net interest income 18,081  —  8  18,089 
Provision for credit losses (2,040) —  —  (2,040)
Net interest income after provision for credit losses 20,121  —  8  20,129 
Other non-interest income 2,742  2,703  212  5,657 
Other non-interest expenses 14,539  1,895  264  16,698 
Income (loss) before income tax expense (benefit) 8,324  808  (44) 9,088 
Income tax expense (benefit) 1,870  182  (14) 2,038 
Segment net income (loss) $ 6,454  $ 626  $ (30) $ 7,050 
Segment assets $ 2,778,785  $ 2,898  $ 3,207  $ 2,784,890 


  Three months ended March 31, 2023
  Core Banking WMG
Holding Company, CFS, and CRM(1)
 Consolidated Totals
Interest and dividend income $ 26,203  $ —  $ 27  $ 26,230 
Interest expense 6,283  —  6,283 
Net interest income 19,920  —  27  19,947 
Provision for credit losses 277  —  —  277 
Net interest income after provision for credit losses 19,643  —  27  19,670 
Other non-interest income 2,651  2,580  192  5,423 
Other non-interest expenses 13,696  1,798  342  15,836 
Income (loss) before income tax expense (benefit) 8,598  782  (123) 9,257 
Income tax expense (benefit) 1,831  177  (21) 1,987 
Segment net income (loss) $ 6,767  $ 605  $ (102) $ 7,270 
Segment assets $ 2,644,158  $ 2,538  $ 1,714  $ 2,654,183 
(1)Chemung Risk Management, Inc. (CRM) was dissolved December 6, 2023.

36


NOTE 13    STOCK COMPENSATION

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

During the three months ended March 31, 2024 and 2023, 12,088 and 13,069 shares, respectively, were re-issued from treasury to fund stock compensation. The expense related to these grants is recognized over a one year or a five year vesting period. Total expense related to the 2021 Plan of $0.3 million and $0.4 million was recognized during each of the three month periods ended March 31, 2024 and 2023, respectively.

A summary of restricted stock activity for the three months ended March 31, 2024 is presented below:

  Shares Weighted–Average Grant Date Fair Value
Nonvested at January 1, 2024 62,984  $45.87
Granted 12,088  $48.11
Vested (13,208) $45.86
Forfeited or cancelled —  —
Nonvested at March 31, 2024 61,864  $46.31

As of March 31, 2024, there was $2.1 million of total unrecognized compensation cost related to nonvested shares granted under the 2021 Plan. The cost is expected to be recognized over a weighted-average period of 3.81 years. The total fair value of shares vested was $0.6 million for each of the three month periods ended March 31, 2024 and 2023, respectively. Due to the adoption of the 2021 Plan, certain grants were transitioned to a one-year vesting period.


Item 2:        Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction

The following is the MD&A of the Corporation in this Quarterly Report on Form 10-Q for the three months ended March 31, 2024. Reference should be made to the accompanying unaudited consolidated financial statements and footnotes, and the Corporation’s 2023 Annual Report on Form 10-K, which was filed with the SEC on March 13, 2024, for an understanding of the following discussion and analysis. See the list of commonly used abbreviations and terms on pages 3–6.

The MD&A included in this Form 10-Q contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of the Corporation's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. For a discussion of those risks and uncertainties and the factors that could cause the Corporation’s actual results to differ materially from those risks and uncertainties, see Forward-looking Statements below, in Part I, Item 1A, Risk Factors and on pages 20–31 of the Corporation’s 2023 Form 10-K. For a discussion of the use of non-GAAP financial measures, see pages 63-66 of the Corporation's 2023 Form 10-K, and pages 63-66 in this Form 10-Q.

The Corporation has been a financial holding company since 2000, the Bank was established in 1833 and CFS in 2001. Through the Bank and CFS, the Corporation provides a wide range of financial services, including demand, savings and time deposits, commercial, residential and consumer loans, interest rate swaps, letters of credit, wealth management services, employee benefit plans, insurance products, mutual funds and brokerage services. The Bank relies substantially on a foundation of locally generated deposits. The Corporation, on a stand-alone basis, has minimal results of operations. The Bank derives its income primarily from interest and fees on loans, interest income on investment securities, WMG fee income, and fees received in connection with deposit and other services. The Bank’s operating expenses are interest expense paid on deposits and borrowings, salaries and employee benefit plans, and general operating expenses.
37



Forward-looking Statements

This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The Corporation intends its forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding the Corporation's expected financial position and operating results, the Corporation's business strategy, the Corporation's financial plans, forecasted demographic and economic trends relating to the Corporation's industry and similar matters are forward-looking statements. These statements can sometimes be identified by the Corporation's use of forward-looking words such as "may," "will," "anticipate," "estimate," "expect," or "intend." The Corporation cannot guarantee that its expectations in such forward-looking statements will turn out to be correct. The Corporation's actual results could be materially different from expectations because of various factors, including changes in economic conditions or interest rates, credit risk, inflation, cybersecurity risks, difficulties in managing the Corporation’s growth, recent bank failures, changes in FDIC assessments, public health issues, geopolitical conflicts, competition, changes in law or the regulatory environment, and changes in general business and economic trends.

Information concerning these and other factors, including Risk Factors, can be found in the Corporation’s periodic filings with the SEC, including the discussion under the heading “Item 1A. Risk Factors” in the Corporation’s 2023 Annual Report on Form 10-K. These filings are available publicly on the SEC’s web site at http://www.sec.gov, on the Corporation's web site at http://www.chemungcanal.com or upon request from the Corporate Secretary at (607) 737-3746. Except as otherwise required by law, the Corporation undertakes no obligation to publicly update or revise its forward-looking statements, whether as a result of new information, future events, or otherwise.

Critical Accounting Estimates
Critical accounting estimates include the areas where the Corporation has made what it considers to be particularly difficult, subjective, or complex judgments concerning estimates, and where these estimates can significantly affect the Corporation's financial results under different assumptions and conditions. The Corporation prepares its financial statements in conformity with GAAP. As a result, the Corporation is required to make certain estimates, judgments, and assumptions that it believes are reasonable based upon the information available at that time. These estimates, judgments, and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. Actual results could be different from these estimates. Significant accounting policies followed by the Corporation are presented in Note 1–Summary of Significant Accounting Policies, to the Audited Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2023, and in Note 1-Summary of Significant Accounting Policies of this Form 10-Q.

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. Determining the amount requires significant judgement on the part of management, is multi-faceted, and can be imprecise. The level of the allowance for credit losses on loans is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past events, current conditions, and expectations of the future based on reasonable and supportable forecasts.

The allowance is established through a provision for credit losses in the Consolidated Statements of Income, and evaluation of the adequacy of the allowance for credit losses is performed by management on a quarterly basis. While management uses available information to anticipate credit losses, future additions to the allowance may be necessary based on changes in economic conditions or the composition of its portfolios. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation's allowance for credit losses.

Because the Corporation's methodology for maintaining its allowance for credit losses is based on historical experience and trends, current economic information, forecasted data, and management's judgement, a range of estimates for the estimate of the allowance for credit losses may be supportable. Deteriorating conditions may lead to further required increases to the allowance; conversely, improvements to conditions may warrant further reductions to the allowance. 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.

38


As of March 31, 2024 and December 31, 2023, the allowance for credit losses totaled $20.5 million and $22.5 million, respectively. Due to the nature and composition of the Bank's lending activities, a significant portion of the allowance for credit losses is allocated to the commercial portfolio, both commercial real estate and commercial and industrial loans. As of March 31, 2024 and December 31, 2023, the allowance for credit losses allocated to the total commercial portfolio was $14.9 million and $17.1 million respectively, or 72.8% and 75.9%, respectively.

Changes in the FOMC's median forecasted year over year U.S. civilian unemployment rate and the 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. Each participant's projections represent the value to which selected variables would be expected to converge over time under appropriate monetary policy, and considers all currently available information. An immediate "shock" or increase of 100 bps in the FOMC's projected rate of U.S. civilian unemployment, and a decrease of 50 bps in the FOMC's projected rate of U.S. GDP growth would increase the model's total calculated allowance by $1.3 million, or 6.20%, to $21.7 million, assuming qualitative adjustment are kept at current levels, as of March 31, 2024.

While management has concluded that its current evaluation is reasonable under the circumstances, and that sensitivity analysis is based on a series of hypothetical scenarios not intended to represent management’s assumptions or judgement of factors as of March 31, 2024, it has also concluded that differing assumptions could materially impact allowance calculations, either positively or adversely.

39


Consolidated Financial Highlights (in thousands, except per share data)
 As of or for the Three Months Ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31
RESULTS OF OPERATIONS 2024 2023 2023 2023 2023
Interest and divided income $ 31,219  $ 30,033  $ 29,015  $ 27,796  $ 26,230 
Interest expense 13,130  12,135  10,998  9,201  6,283 
Net interest income 18,089  17,898  18,017  18,595  19,947 
Provision (credit) for credit losses (a) (2,040) 2,300  449  236  277 
Net interest income after provision for credit losses 20,129  15,598  17,568  18,359  19,670 
Non-interest income 5,657  5,871  7,808  5,447  5,423 
Non-interest expense 16,698  16,826  15,668  15,913  15,836 
Income before income tax expense 9,088  4,643  9,708  7,893  9,257 
Income tax expense 2,038  841  2,060  1,613  1,987 
Net income $ 7,050  $ 3,802  $ 7,648  $ 6,280  $ 7,270 
Basic and diluted earnings per share $ 1.48  $ 0.80  $ 1.61  $ 1.33  $ 1.54 
Average basic and diluted shares outstanding 4,764  4,743  4,736  4,729  4,721 
PERFORMANCE RATIOS - Annualized
Return on average assets 1.04  % 0.56  % 1.14  % 0.95  % 1.12  %
Return on average equity 14.48  % 8.63  % 16.89  % 13.97  % 16.97  %
Return on average tangible equity (b) 16.29  % 9.86  % 19.22  % 15.89  % 19.40  %
Efficiency ratio (unadjusted) (c) 70.32  % 70.79  % 60.67  % 66.19  % 62.42  %
Efficiency ratio (adjusted) (b) 70.07  % 70.42  % 66.55  % 65.94  % 62.18  %
Non-interest expense to average assets 2.47  % 2.48  % 2.33  % 2.41  % 2.44  %
Loans to deposits 80.77  % 81.20  % 78.05  % 79.24  % 80.33  %
AVERAGE YIELDS / RATES - Fully Taxable Equivalent
Yield on loans 5.51  % 5.31  % 5.21  % 5.09  % 4.90  %
Yield on investments 2.35  % 2.24  % 2.22  % 2.22  % 2.18  %
Yield on interest-earning assets 4.70  % 4.50  % 4.40  % 4.29  % 4.12  %
Cost of interest-bearing deposits 2.75  % 2.59  % 2.44  % 2.01  % 1.34  %
Cost of borrowings 5.15  % 5.52  % 5.25  % 5.13  % 4.91  %
Cost of interest-bearing liabilities 2.85  % 2.68  % 2.47  % 2.11  % 1.49  %
Interest rate spread 1.85  % 1.82  % 1.93  % 2.18  % 2.63  %
Net interest margin, fully taxable equivalent (b) 2.73  % 2.69  % 2.73  % 2.87  % 3.14  %
CAPITAL
Total equity to total assets at end of period 7.08  % 7.20  % 6.28  % 6.63  % 6.68  %
Tangible equity to tangible assets at end of period (b) 6.34  % 6.45  % 5.52  % 5.87  % 5.91  %
Book value per share $ 41.34  $ 41.07  $ 35.90  $ 37.49  $ 37.53 
Tangible book value per share (b) 36.77  36.48  31.29  32.88  32.91 
Period-end market value per share 42.48  49.80  39.61  38.41  41.50 
Dividends declared per share 0.31  0.31  0.31  0.31  0.31 
AVERAGE BALANCES
Loans and loans held for sale (d) $ 1,989,185  $ 1,956,022  $ 1,909,100  $ 1,880,224  $ 1,849,310 
Earning assets 2,681,059  2,654,638  2,627,012  2,609,893  2,592,709 
Total assets 2,724,391  2,688,536  2,664,570  2,649,399  2,627,088 
Deposits 2,402,215  2,397,663  2,410,931  2,363,847  2,337,476 
Total equity 195,860  174,868  179,700  180,357  173,786 
Tangible equity (b) 174,036  153,044  157,876  158,533  151,962 
ASSET QUALITY
Net charge-offs $ 182  $ 171  $ 356  $ 146  $ 269 
Non-performing loans (e) 7,835  10,411  6,826  7,304  7,731 
Non-performing assets (f) 8,394  10,738  7,055  7,471  7,927 
Allowance for credit losses (a) 20,471  22,517  20,252  20,172  20,075 
Annualized net charge-offs to average loans 0.04  % 0.03  % 0.07  % 0.03  % 0.06  %
Non-performing loans to total loans 0.39  % 0.53  % 0.35  % 0.39  % 0.41  %
Non-performing assets to total assets 0.30  % 0.40  % 0.26  % 0.28  % 0.30  %
Allowance for credit losses to total loans (a) 1.02  % 1.14  % 1.05  % 1.07  % 1.07  %
Allowance for credit losses to non-performing loans (a) 261.28  % 216.28  % 296.69  % 276.17  % 259.66  %
(a) Corporation adopted CECL as of January 1, 2023. (d) Does not reflect Allowance for Credit Losses.
(b) See the GAAP to Non-GAAP reconciliations. (e) Includes nonaccrual loans only.
(e) Non-interest expense divided by total net interest income plus non-interest income. (f) Includes non-performing loans plus other real estate owned.
40


In addition to analyzing the Corporation’s results on a reported basis, management uses certain non-GAAP financial measures because it believes these non-GAAP financial measures provide information to investors about the underlying operational performance and trends of the Corporation and, therefore, facilitate a comparison of the Corporation with the performance of other companies. Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by other companies. Refer to pages 63-66 for further explanation and reconciliation of the Corporation’s use of non-GAAP measures.

Consolidated Results of Operations

The following section of the MD&A provides a comparative discussion of the Corporation’s Consolidated Results of Operations on a reported basis for the three months ended March 31, 2024 and 2023. For a discussion of the Critical Accounting Estimates that affect the Consolidated Results of Operations, see pages 38-39 of this Form 10-Q and page 37 of the Corporation’s 2023 Form 10-K.

Net Income

The following table presents selected financial information for the periods indicated, and the dollar and percent change (in thousands, except per share and ratio data):
  Three Months Ended 
 March 31,
  2024 2023 Change % Change
Net interest income $ 18,089  $ 19,947  $ (1,858) (9.3) %
Non-interest income 5,657  5,423  234  4.3  %
Non-interest expense 16,698  15,836  862  5.4  %
Pre-provision income 7,048  9,534  (2,486) (26.1) %
Provision (credit) for credit losses(1)
 (2,040) 277  (2,317) (836.5) %
Income tax expense 2,038  1,987  51  2.6  %
Net income $ 7,050  $ 7,270  $ (220) (3.0) %
Basic and diluted earnings per share $ 1.48  $ 1.54  $ (0.06) (3.9) %
(1) Effective January 1, 2023, the allowance calculation is based upon the Current Expected Credit loss methodology.

  Three Months Ended 
 March 31,
Selected financial ratios: 2024 2023
Return on average assets 1.04  % 1.12  %
Return on average equity 14.48  % 16.97  %
Net interest margin, fully taxable equivalent (a) 2.73  % 3.14  %
Efficiency ratio (adjusted) (a) 70.07  % 62.18  %
Non-interest expenses to average assets 2.47  % 2.44  %
(a) See the GAAP to Non-GAAP reconciliations.

Net income for the first quarter of 2024 was $7.1 million, or $1.48 per share, compared to $7.3 million, or $1.54 per share, for the same period in the prior year. Return on average equity for the current quarter was 14.48%, compared to 16.97% for the same period in the prior year. The decrease in net income was due primarily to a decrease in net interest income and an increase in non-interest expense, offset by a decrease in the provision for credit losses, and an increase in non-interest income.

41


Net Interest Income

The following table presents net interest income for the periods indicated, and the dollar and percent change (in thousands):
  Three Months Ended 
 March 31,		 Percentage
  2024 2023 Change Change
Interest and dividend income $ 31,219  $ 26,230  $ 4,989  19.0  %
Interest expense 13,130  6,283  6,847  109.0  %
Net interest income $ 18,089  $ 19,947  $ (1,858) (9.3) %

Net interest income, which is the difference between the interest income earned on interest-earning assets such as loans and securities, and the interest expense paid on interest-bearing liabilities such as deposits and borrowings, is the largest contributor to the Corporation’s earnings.

Net interest income for the first quarter ended March 31, 2024 decreased $1.9 million, or 9.3%, to $18.1 million compared to the same period in the prior year, due primarily to increases of $6.8 million in interest expense on deposits, and $0.1 million in interest expense on borrowed funds, offset by increases of $4.9 million in interest income on loans, including fees, and $0.1 million in interest-earning deposits. Interest income on taxable securities was comparable between the first quarters of 2023 and 2024.

The increase in interest expense on deposits was due primarily to a 141 basis points increase in the average rates paid on interest-bearing deposits which included brokered deposits, due to the higher interest rate environment and increased competition, and an increase of $134.2 million in the average balance of customer interest-bearing deposits as a result of the increase in average time deposits. The average balance of brokered deposits increased $8.3 million, and the average interest rate paid on brokered deposits increased 50 basis points, compared to the same period in the prior year.

The increase in interest expense on borrowed funds was primarily due to a 24 basis points increase in the average interest rate paid on borrowed funds, and a $2.4 million increase in the average balances of borrowed funds, compared to the same period in the prior year. The composition of borrowed funds reflected the Corporation's shift to the lower cost funding source of the Federal Reserve Bank Term Funding Program (BTFP), related to a $50.0 million advance in the first quarter of 2024, partially replacing relatively higher cost FHLBNY overnight advances. The average balance of FHLBNY overnight advances decreased $35.8 million compared to the same period in the prior year, and the average interest rate paid on FHLBNY overnight advances increased 55 basis points.

Interest income on loans, including fees, increased primarily due to a $145.9 million increase in average commercial loan balances, compared to the same period in the prior year, and an increase of 57 basis points in the average yield on commercial loans between these periods, due to the rising interest rate environment. Average consumer loan balances, supported by growth in the indirect auto portfolio, increased $1.9 million, and the average yield on consumer loans increased 90 basis points, primarily due to originations of higher rate indirect auto loans and interest rate increases on variable rate home equity loans. Average balances of residential mortgage loans decreased $7.9 million compared to the same period in the prior year, due to adverse conditions for borrowers in the residential real estate market, while the average yield on residential mortgage loans increased 23 basis points compared to the same period in the prior year.

Interest and dividend income on taxable securities was comparable between the first quarters of 2023 and 2024. The average yield on taxable securities increased 17 basis points, due to an increase in interest rates on variable rate securities. This increase was offset by $61.8 million decrease in the average balance of securities held in the portfolio between the first quarters of 2023 and 2024, primarily due to paydowns and maturities.

Fully taxable equivalent net interest margin was 2.73% in the first quarter of 2024, compared to 3.14% for the same period in the prior year. Average interest-earning assets increased $88.4 million for the three months ended March 31, 2024 compared to the same period in the prior year. The average yield on interest-earning assets increased 58 basis points to 4.70%, and the average cost of interest-bearing liabilities increased 136 basis points to 2.85%, for the three months ended March 31, 2024, compared to the same period in the prior year, due to the rising rate environment as well as a shift in the overall deposit mix to higher cost deposits.

42


Average Consolidated Balance Sheets 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 three months ended March 31, 2024 and 2023. For the purpose of the table below, nonaccruing loans are included in the daily average loan amounts outstanding. Daily balances were used for average balance computations. Investment securities are stated at amortized cost. Tax equivalent adjustments have been made in calculating yields on obligations of states and political subdivisions, tax-free commercial loans, and dividends on equity investments.
AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
Three Months Ended 
 March 31, 2024		 Three Months Ended 
 March 31, 2023
($ in thousands) Average Balance Interest
Yield/Rate (3)
 Average Balance Interest
Yield/Rate (3)
Interest-earning assets:
Commercial loans $ 1,406,950  $ 20,642  5.90  % $ 1,261,054  $ 16,584  5.33  %
Mortgage loans 277,661  2,597  3.74  % 285,588  2,472  3.51  %
Consumer loans 304,574  4,016  5.30  % 302,668  3,285  4.40  %
Taxable securities 633,294  3,560  2.26  % 695,079  3,585  2.09  %
Tax-exempt securities 40,266  282  2.82  % 40,769  305  3.03  %
Interest-earning deposits 18,314  206  4.52  % 7,551  97  5.21  %
Total interest-earning assets 2,681,059  31,303  4.70  % 2,592,709  26,328  4.12  %
Non-earning assets:            
Cash and due from banks 25,255  25,084     
Other assets 40,665  29,393     
Allowance for credit losses (4)
 (22,588) (20,098)    
Total assets $ 2,724,391      $ 2,627,088     
Interest-bearing liabilities:            
Interest-bearing demand deposits $ 307,895  $ 1,335  1.74  % $ 291,090  $ 274  0.38  %
Savings and insured money market deposits 865,113  4,266  1.98  % 906,947  1,648  0.74  %
Time deposits 481,965  4,904  4.09  % 322,710  2,092  2.63  %
Brokered deposits 121,405  1,640  5.43  % 113,074  1,374  4.93  %
FHLBNY overnight advances 34,875  487  5.52  % 70,699  866  4.97  %
FRB advances and other debt 41,465  498  4.83  % 3,281  29  3.58  %
Total interest-bearing liabilities 1,852,718  13,130  2.85  % 1,707,801  6,283  1.49  %
Non-interest-bearing liabilities:            
Demand deposits 625,837  703,655     
Other liabilities 49,976  41,846     
Total liabilities 2,528,531      2,453,302     
Shareholders' equity 195,860  173,786     
Total liabilities and shareholders’ equity $ 2,724,391      $ 2,627,088     
Fully taxable equivalent net interest income   18,173      20,045   
Net interest rate spread (1)
     1.85  %     2.63  %
Net interest margin, fully taxable equivalent (2)
     2.73  %     3.14  %
Taxable equivalent adjustment   (84) (98)  
Net interest income   $ 18,089      $ 19,947   
(1)  Net interest rate spread is the difference in the average yield on interest-earning assets less the average rate on interest-bearing liabilities.
(2)  Net interest margin is the ratio of fully taxable equivalent net interest income divided by average interest-earning assets.
(3) Annualized.
(4) Corporation adopted CECL as of January 1, 2023.
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Changes Due to Rate and Volume

Net interest income can be analyzed in terms of the impact of changes in rates and volumes. The table below illustrates the extent to which changes in interest rates and the volume of average interest-earning assets and interest-bearing liabilities have affected the Corporation’s interest income and interest expense during the three months ended March 31, 2024 and 2023. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate); (ii) changes attributable to changes in rates (changes in rates multiplied by prior volume); and (iii) the net changes. For purpose of this table, changes that are not due solely to volume or rate changes have been allocated to these categories based on the respective percentage changes in average volume and rate. Due to the numerous simultaneous volume and rate changes during the periods analyzed, it is not possible to precisely allocate changes between volume and rates. In addition, average interest-earning assets include nonaccrual loans and taxable equivalent adjustments were made.
RATE/VOLUME ANALYSIS OF NET INTEREST INCOME
Quarter to date: Three Months Ended
Mar. 31, 2024 vs. 2023
(in thousands) Increase/(Decrease)
  Total Change Due to Volume Due to Rate
Interest and dividend income on:
Commercial loans $ 4,058  $ 2,109  $ 1,949 
Mortgage loans 125  (60) 185 
Consumer loans 731  22  709 
Taxable investment securities (25) (321) 296 
Tax-exempt investment securities (23) (3) (20)
Interest-earning deposits 109  123  (14)
Total interest and dividend income, fully taxable equivalent 4,975  1,870  3,105 
Interest expense on:      
Interest-bearing demand deposits 1,061  17  1,044 
Savings and insured money market deposits 2,618  (80) 2,698 
Time deposits 2,812  1,323  1,489 
Brokered deposits 266  112  154 
FHLBNY overnight advances (379) (470) 91 
Long-term capital leases 469  455  14 
Total interest expense 6,847  1,357  5,490 
Net interest income, fully taxable equivalent $ (1,872) $ 513  $ (2,385)


44


Provision for credit losses

Management has established and maintains a methodology for determining and adjusting its allowance for credit losses in conformity with ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, adopted by the Corporation on January 1, 2023. The allowance is based on a combination of quantitative and qualitative analysis and changes in the required allowance are recorded through income as a provision (credit). The quantitative portion of the model is significantly influenced by changes in projected economic conditions, as well as changes in the composition of the numerous loan portfolio segments. Qualitative adjustments reflect the degree to which management anticipates future outcomes could differ from those projected by the quantitative model.

The provision for credit losses decreased $2.3 million for the first quarter of 2024, compared to the first quarter of 2023. The decrease in provision was primarily attributable to the annual review and update of the loss drivers used in the Bank's CECL model, favorable changes in economic forecasts, and a comparatively smaller increase in loan volume during the current period. The Bank's updated loss drivers resulted in lower loss experience over the historical look back period, however the economic factors used did not change as a result of these updates. FOMC forecasts improved substantially between the first quarters of 2023 and 2024. Forecasted year-end 2023 U.S. unemployment was projected at 4.5% as of March 2023, and year-end 2024 unemployment was projected at 4.0% as of March 2024. U.S annual GDP growth was projected at 0.4% for year-end 2023 as of March 2023, and year-end 2024 U.S. annual GDP growth was projected at 2.1% as of March 2024. 2023 FOMC projections reflected uncertainty concerning the impact of interest rate increases in the wake of multiple regional banks being placed into receivership prior to the FOMC's March 2023 meeting. Loan growth in the first quarter of 2024 totaled $30.9 million, compared to $44.3 million in the first quarter of 2023, resulting in lower volume-related provisioning in the current period.


Non-interest income

The following table presents non-interest income for the periods indicated, and the dollar and percent change (dollars in thousands):
  Three Months Ended 
 March 31,		 Percentage
  2024 2023 Change Change
WMG fee income $ 2,703  $ 2,580  $ 123  4.8  %
Service charges on deposit accounts 949  941  8  0.9  %
Interchange revenue from debit card transactions 1,063  1,133  (70) (6.2) %
Changes in fair value of equity investments 101  72  29  40.3  %
Net gains on sales of loans held for sale 32  5  27  N/M
Income from bank owned life insurance 9  10  (1) (10.0) %
CFS fee and commission income 228  241  (13) (5.4) %
Other 572  441  131  29.7  %
Total non-interest income $ 5,657  $ 5,423  $ 234  4.3  %


Total non-interest income for the first quarter of 2024 increased $0.2 million compared to the same period in the prior year primarily due to increases in WMG fee income and other non-interest income. The remaining components of non-interest income in the first quarter of 2024 were relatively consistent compared to the same period in the prior year.

WMG Fee Income
The increase in WMG fee income can primarily be attributed to an increase in assets under management when compared to the same period in the prior year.

Other Non-Interest Income
The increase in other non-interest income was primarily due to gains on the transfer of two properties to OREO in the current period.


45


Non-interest expense

The following table presents non-interest expense for the periods indicated, and the dollar and percent change (dollars in thousands):
  Three Months Ended 
 March 31,		 Percentage
  2024 2023 Change Change
Compensation expense:
Salaries and wages $ 7,016  $ 6,783  $ 233  3.4  %
Pension and other employee benefits 2,082  1,680  402  23.9  %
Other components of net periodic pension and postretirement benefits (232) (174) (58) (33.3) %
Total compensation expense 8,866  8,289  577  7.0  %
Non-compensation expense:        
Net occupancy 1,493  1,465  28  1.9  %
Furniture and equipment 398  418  (20) (4.8) %
Data processing 2,573  2,381  192  8.1  %
Professional services 559  440  119  27.0  %
Marketing and advertising 345  332  13  3.9  %
Other real estate owned expenses 49  38  11  28.9  %
FDIC insurance 577  497  80  16.1  %
Loan expenses 255  232  23  9.9  %
Other 1,583  1,744  (161) (9.2) %
Total non-compensation expense 7,832  7,547  285  3.8  %
Total non-interest expense $ 16,698  $ 15,836  $ 862  5.4  %

Total non-interest expense for the first quarter of 2024 increased $0.9 million compared to the same period in the prior year. The increase was due to increases in total compensation expense and total non-compensation expense. For the three months ended March 31, 2024, non-interest expense to average assets was 2.47%, compared to 2.44% for the same period in the prior year.

Compensation expense
The increase in compensation expense for the current period, compared to the same period in the prior year, can be primarily attributed to increases in pension and other employee benefits, and salaries and wages. The increase in pension and other employee benefits for the current quarter was primarily attributable to an increase in employee healthcare expense, compared to the same period in the prior year. Salaries and wages increased in the current quarter, compared to the same period in the prior year, primarily due to increases in base wages, severance expense, and an increase in the market value of the Corporation's deferred compensation plan.

Non-compensation expense
The increase in non-compensation expense for the current period, compared to the same period in the prior year, can be primarily attributed to increases in data processing expense, and professional services, offset by a decrease in other non-interest expense. The increase in data processing expense in the current quarter was primarily attributable to increases in software related expenses, compared to the same period in the prior year. Professional services increased in the current quarter, compared to the same period in the prior year, primarily due to outsourced services related to the realignment of certain back office functions, new strategic consulting arrangements, and fee increases. The decrease in other non-interest expense was primarily attributable to decreases across a majority of other expense categories in the current quarter, compared to the same period in the prior year.

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Income tax expense

The following table presents income tax expense and the effective tax rate for the periods indicated, and the dollar and percent change (dollars in thousands):
  Three Months Ended 
 March 31,		 Percentage
  2024 2023 Change Change
Income before income tax expense $ 9,088  $ 9,257  $ (169) (1.8) %
Income tax expense $ 2,038  $ 1,987  $ 51  2.6  %
Effective tax rate 22.4  % 21.5  %

Income tax expense was $2.0 million for each of the three month periods ended March 31, 2024 and 2023. The effective income tax rate for the periods ended March 31, 2024 and 2023 was 22.4% and 21.5%, respectively.


Financial Condition

The following table presents selected financial information at the dates indicated, and the dollar and percent change (dollars in thousands):
ASSETS March 31, 2024 December 31, 2023 Change Percentage Change
Total cash and cash equivalents $ 94,862  $ 36,847  $ 58,015  157.4  %
Total investment securities, FHLB, and FRB stock 573,977  593,322  (19,345) (3.3) %
Loans, net of deferred loan fees 2,003,610  1,972,664  30,946  1.6  %
Allowance for credit losses (20,471) (22,517) (2,046) 9.1  %
Loans, net 1,983,139  1,950,147  32,992  1.7  %
Goodwill and other intangible assets, net 21,824  21,824  —  —  %
Other assets 111,088  108,389  2,699  2.5  %
Total assets $ 2,784,890  $ 2,710,529  $ 74,361  2.7  %
LIABILITIES AND SHAREHOLDERS' EQUITY        
Total deposits $ 2,480,772  $ 2,429,427  $ 51,345  2.1  %
Advances and other debt 52,979  34,970  18,009  51.5  %
Other liabilities 54,011  50,891  3,120  6.1  %
Total liabilities 2,587,762  2,515,288  72,474  2.9  %
Total shareholders’ equity 197,128  195,241  1,887  1.0  %
Total liabilities and shareholders’ equity $ 2,784,890  $ 2,710,529  $ 74,361  2.7  %

Cash and Cash Equivalents
The increase in cash and cash equivalents can be attributed to changes in loans, deposits, borrowings, and securities.

Investment securities
The decrease in investment securities can mostly be attributed to $11.9 million in paydowns and maturities in the securities available for sale portfolio, and a decrease in the fair value of the available for sale portfolio of $5.5 million. FHLB stock decreased $1.4 million due to lower FHLBNY overnight advance borrowing activity.

Loans, net
The increase in loans, net of deferred loan fees, can primarily be attributed to increases of $22.9 million in commercial mortgages, and $15.2 million in commercial and industrial loans, offset by decreases of $6.3 million in indirect consumer loans, and $0.7 million in residential mortgages.
47


Allowance for Credit Losses
The decrease in the allowance for credit losses can primarily be attributed to the annual review and update of loss drivers used in the Bank's CECL model, paydown activity on individually analyzed loans for which specific reserve allocations had previously been made, and favorable changes in forecasted economic variables. The annual update to the loss drivers used in the Bank's CECL model resulted in baseline loss rates that were lower than previous iterations of the model, however the economic variables used to derive loss rates were unchanged. FOMC forecasted U.S. unemployment for year-end 2024 improved from 4.1% in December 2023 to 4.0% in March 2024, while the forecasted U.S. GDP growth rate for year-end 2024 improved from 1.4% in December 2023 to 2.1% in March 2024. Paydown activity on loans individually analyzed resulted in a decrease of $0.3 million in specific reserve allocations.

Other Assets
The increase in other assets can primarily be attributed to increases of $1.3 million in interest rate swap assets, due to an increase in the market value of swaps, and $1.2 million in accrued interest receivable, primarily on loans.

Deposits
The increase in deposits can primarily be attributed to increases of $24.0 million in interest-bearing demand deposit accounts, and $17.1 million in total time deposits, which include customer time deposits and brokered deposits. Customer time deposits increased $33.9 million, while brokered deposits decreased $16.8 million. Insured money market accounts increased $7.6 million, and and non-interest bearing demand deposits increased $3.2 million, respectively. Savings deposits decreased $0.6 million.

Advances and Other Debt
The increase in advances and other debt can primarily be attributed to a $50.0 million advance from the Federal Reserve, as the Corporation took advantage of lower interest rates offered by the Bank Term Funding Program (BTFP), offset by a decrease of $31.9 million in FHLBNY overnight borrowings.

Other liabilities
The increase in other liabilities can primarily be attributed to an increase of $1.2 million in interest rate swap liabilities, primarily due to an increase in the market value of swaps. and accrued interest payable of $1.9 million, primarily on deposits.

Shareholders’ equity
Shareholders’ equity was $197.1 million at March 31, 2024 compared to $195.2 million at December 31, 2023. The increase can primarily be attributed to an increase of $5.6 million in retained earnings, partially offset by an increase in accumulated other comprehensive loss of $4.1 million. The increase in retained earnings can primarily be attributed to net income of $7.1 million, offset by $1.5 million in dividends declared. The increase in accumulated other comprehensive loss can primarily be attributed to a decrease in the fair market value of the available for sale securities portfolio.

Assets under management or administration
The market value of total assets under management or administration in WMG was $2.350 billion at March 31, 2024, including $390.2 million of assets held under management or administration for the Corporation, compared to $2.242 billion at December 31, 2023, including $381.3 million of assets held under management or administration for the Corporation, an increase of $108.0 million, or 4.8%, due to an increase in assets under management, due primarily to improvements in financial markets.

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Securities

The Corporation’s Funds Management Policy includes an investment policy that in general, requires debt securities purchased for the bond portfolio to carry a minimum agency rating of "Baa." After an independent credit analysis is performed, the policy also allows the Corporation to purchase local municipal obligations that are not rated. The Corporation intends to maintain a reasonable level of securities to provide adequate liquidity and in order to have securities available to pledge to secure public deposits, repurchase agreements, and other types of transactions. Fluctuations in the fair value of the Corporation’s securities relate primarily to changes in interest rates. Marketable securities are classified as Available for Sale, while investments in local municipal obligations are generally classified as Held to Maturity. 
The available for sale segment of the securities portfolio totaled $566.0 million at March 31, 2024, a decrease of $18.0 million, or 3.1%, from $584.0 million at December 31, 2023. The decrease can mostly be attributed to $11.9 million in paydowns and maturities, and a decrease in the fair value of the portfolio of $5.5 million. The held to maturity securities portfolio consists of obligations of political subdivisions in the Corporation’s market areas. These securities totaled $0.8 million each at March 31, 2024 and December 31, 2023, respectively.
Non-marketable equity securities at March 31, 2024 include shares of FRBNY stock and FHLBNY stock, carried at their cost of $1.9 million and $2.2 million, respectively. At December 31, 2023, non-marketable equity securities include shares of FRBNY stock and FHLBNY stock, carried at their cost of $1.9 million and $3.6 million, respectively. The fair value of these securities is assumed to approximate their cost. The investment in these stocks is regulated by regulatory policies of the respective institutions.


Loans

The Corporation has reporting systems to monitor: (i) loan origination and concentrations, (ii) delinquent loans, (iii) non-performing assets, including non-performing loans, certain loans made with modifications to borrowers experiencing financial difficulty, and other real estate owned, (iv) loans analyzed on an individual basis for credit risk, and (v) potential problem loans. Management reviews these systems on a regular basis.

The table below presents the Corporation’s loan composition by segment as of the dates indicated, and the dollar and percent change from December 31, 2023 to March 31, 2024 (in thousands, except percentages):
LOAN COMPOSITION
  March 31, 2024 % of Total Loans December 31, 2023 % of Total Loans Dollar Change % Change
Commercial and agricultural:
    Commercial and industrial $ 279,414  13.9  % $ 264,140  13.4  % $ 15,274  5.8  %
    Agricultural 221  —  % 256  —  % (35) (13.7) %
Commercial mortgages:
    Construction 141,604  7.1  % 138,887  7.0  % 2,717  2.0  %
    Commercial mortgages, other 1,004,198  50.1  % 984,038  49.9  % 20,160  2.0  %
Residential mortgages 277,246  13.8  % 277,992  14.1  % (746) (0.3) %
Consumer loans:
    Home equity lines and loans 87,608  4.4  % 87,056  4.4  % 552  0.6  %
    Indirect consumer loans 204,081  10.2  % 210,423  10.7  % (6,342) (3.0) %
    Direct consumer loans 9,238  0.5  % 9,872  0.5  % (634) (6.4) %
Total $ 2,003,610  100.0  % $ 1,972,664  100.0  % $ 30,946  1.6  %

Portfolio loans totaled $2.004 billion as of March 31, 2024, an increase of $30.9 million, or 1.6%, from $1.973 billion as of December 31, 2023. The increase in loans can primarily be attributed to increases of $22.9 million in commercial mortgage loans and $15.2 million in commercial and industrial loans, and offset by a decrease of $6.3 million in indirect consumer loans.

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Commercial real estate lending continues to be a primary driver of asset growth for the Corporation, as demand for project financing remains robust across the Corporation's footprint, particularly in the Albany and Buffalo regions. As of March 31, 2024, total commercial real estate loans, inclusive of construction loans, in the Albany and Buffalo regions have grown $20.9 million and $1.1 million from December 31, 2023, respectively. Growth in commercial and industrial loans between March 31, 2024 and December 31, 2023 was also concentrated in the Albany and Buffalo regions, which grew $8.5 million and $6.8 million, respectively.

Residential mortgage loans totaled $277.2 million as of March 31, 2024, a decrease of $0.7 million, or 0.3%, when compared to December 31, 2023. During the three months ended March 31, 2024, $7.1 million of residential mortgages were originated, of which $1.6 million were sold in the secondary market to Freddie Mac. Demand for residential mortgage originations continues to be weak as a result of the higher interest rate environment and low market mobility due to many borrowers securing lower interest rates in prior years. Indirect consumer loans totaled $204.1 million as of March 31, 2024, a decrease of $6.3 million, or 3.0%, from December 31, 2023 as consumer demand for automobiles weakened during the current period, as well as a shift in the composition of auto originations towards lower-cost used vehicles.

The table below presents the Corporation’s outstanding loan balance by bank division (in thousands):
LOANS BY DIVISION
  March 31, 2024 December 31, 2023 December 31, 2022 December 31, 2021 December 31, 2020
Chemung Canal Trust Company*^ $ 764,932  $ 766,103  $ 731,344  $ 658,468  $ 576,399 
Capital Bank Division 1,238,678  1,206,561  1,098,104  877,995  732,820 
Total loans $ 2,003,610  $ 1,972,664  $ 1,829,448  $ 1,536,463  $ 1,309,219 
* All loans, excluding those originated by the Capital Bank division.
^ Includes $108.2 million, $100.4 million, $79.8 million and $47.0 million as of March 31, 2024, December 31, 2023, December 31, 2022, and December 31, 2021, respectively, in the Western New York market.

Loan concentrations are considered to exist when there are amounts loaned to a multiple number of borrowers engaged in similar activities, which may cause them to be similarly impacted by economic or other conditions. Industries are identified using NAICS codes, and the Corporation monitors specific NAICS industry classifications of commercial loans to identify concentrations of greater than 10.0% of total loans. As of March 31, 2024 and December 31, 2023, commercial loans to borrowers involved in the real estate, and real estate rental and leasing businesses were 50.4% and 49.5% of total loans, respectively. No other concentration of loans existed in the commercial loan portfolio in excess of 10.0% of total loans as of March 31, 2024 and December 31, 2023.

Commercial real estate lending represented the largest portion of the Corporation's loan portfolio as of March 31, 2024 and December 31, 2023. 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 to the Consolidated Financial Statements. As of March 31, 2024 and December 31, 2023, total commercial real estate loans totaled $1.146 billion and $1.123 billion, respectively. Management evaluates the risk inherent in its portfolio of commercial real estate loans using a variety of metrics, including but not limited to type, geography, collateral, and borrower or sponsor industry.

The table below presents commercial real estate loans by type and percentage as of March 31, 2024 and December 31, 2023 (in thousands, except percentages):
Commercial real estate loans by type:
 March 31, 2024 % of Total December 31, 2023 % of Total % Change
  Construction $ 141,604  12.4  % $ 138,887  12.4  % 2.0  %
  1-4 Family Residential(1)
 44,899  3.9  % 45,792  4.1  % (1.9) %
  Multifamily 359,857  31.4  % 349,327  31.1  % 3.0  %
  Owner-Occupied 127,917  11.2  % 123,989  11.0  % 3.2  %
  Non-Owner Occupied 471,525  41.1  % 464,930  41.4  % 1.4  %
  Total $ 1,145,802  100.0  % $ 1,122,925  100.0  %
(1) 1-4 Family residential loans included in the commercial real estate portfolio segment are comprised of properties whose primary purpose is to generate rental income for the borrower, but are not considered multifamily properties within the confines of the FFIEC's Call Report definition of a multifamily property. This may include single family residences, duplexes, triplexes, and quadplexes.
50


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. The location of collateral securing commercial real estate loans typically mirrors the location of the properties being financed. However, certain commercial real estate loans are secured by property other than the property being financed, and therefore the geographic location of collateral may differ from that of the financed property.

The table below presents commercial real estate loans by regional location of collateral and percentage as of March 31, 2024 and December 31, 2023 (dollars in thousands):
Commercial real estate loans by regional location of collateral:
March 31, 2024 % of Total December 31, 2023 % of Total % Change
  Capital & Adirondacks $ 752,014  65.6  % $ 736,971  65.6  % 2.0  %
  Southern Tier & Finger Lakes 216,663  18.9  % 213,970  19.1  % 1.3  %
  Western New York 126,880  11.1  % 123,202  11.0  % 3.0  %
  Other 50,245  4.4  % 48,782  4.3  % 3.0  %
  Total $ 1,145,802  100.0  % $ 1,122,925  100.0  %


The Corporation closely monitors economic and credit trends for the industries in which its commercial real estate borrowers are involved. Property types are designated based on the purpose of the collateral securing commercial real estate loans. The table below presents commercial real estate loans by borrower industry and percentage as of March 31, 2024 and December 31, 2023 (in thousands, except percentages):
Commercial real estate loans by borrower industry:
 March 31, 2024 % of Total December 31, 2023 % of Total % Change
  Construction & Land Development $ 136,393  11.9  % $ 141,551  12.6  % (3.6) %
  Industrial 51,079  4.5  % 41,784  3.8  % 22.2  %
  Warehouse & Storage 72,760  6.4  % 65,379  5.8  % 11.3  %
  Retail 199,380  17.4  % 195,561  17.4  % 2.0  %
  Office 118,978  10.4  % 118,344  10.5  % 0.5  %
  Hotel 49,915  4.4  % 55,533  4.9  % (10.1) %
  1-4 Family Residential Rental 44,899  3.9  % 45,792  4.1  % (2.0) %
  Multifamily (5+) 387,541  33.7  % 372,569  33.2  % 4.0  %
  Medical 32,248  2.8  % 32,859  2.9  % (1.9) %
  Educational 25,423  2.2  % 25,738  2.3  % (1.2) %
  Other 27,186  2.4  % 27,815  2.5  % (2.3) %
  Total $ 1,145,802  100.0  % $ 1,122,925  100.0  %
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The table below presents the maturity of loans outstanding as of March 31, 2024 (in thousands):
Within One Year After One But Within Five Years After Five But Within 15 Years After 15 Years Total
Commercial and agricultural:
Commercial and industrial $ 93,993  $ 102,421  $ 79,273  $ 3,727  $ 279,414 
Agricultural —  221  —  —  221 
Commercial mortgages:
Construction 31,382  41,206  68,693  323  141,604 
Commercial mortgages 59,876  254,103  662,798  27,421  1,004,198 
Residential mortgages 3,839  10,307  108,725  154,375  277,246 
Consumer loans:
Home equity lines and loans 73  6,286  58,264  22,985  87,608 
Indirect consumer loans 1,539  122,085  80,452  5  204,081 
Direct consumer loans 316  5,957  1,874  1,091  9,238 
Total $ 191,018  $ 542,586  $ 1,060,079  $ 209,927  $ 2,003,610 

The tables below present the amounts due after one year, classified according to fixed interest rates and variable interest rates as of March 31, 2024 (in thousands):
Loans maturing with fixed interest rates:
 After One But Within Five Years After Five But Within 15 Years After 15 Years Total
Commercial and agricultural:
Commercial and industrial $ 62,853  $ 35,936  $ 419  $ 99,208 
Agricultural 160  —  —  160 
Commercial mortgages:
Construction 8,137  24,675  —  32,812 
Commercial mortgages 159,324  155,295  2,557  317,176 
Residential mortgages 9,703  104,185  107,579  221,467 
Consumer loans:
Home equity lines and loans 5,121  48,019  517  53,657 
Indirect consumer loans 122,085  80,452  5  202,542 
Direct consumer loans 5,956  859 49 6,864 
Total $ 373,339  $ 449,421  $ 111,126  $ 933,886 
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Loans maturing with variable interest rates:
 After One But Within Five Years After Five But Within 15 Years After 15 Years Total
Commercial and agricultural:
Commercial and industrial $ 39,568  $ 43,337  $ 3,308  $ 86,213 
Agricultural 61  —  —  61 
Commercial mortgages: — 
Construction 33,069  44,018  323  77,410 
Commercial mortgages 94,779  507,503  24,864  627,146 
Residential mortgages 604  4,540  46,796  51,940 
Consumer loans: — 
Home equity lines and loans 1,165  10,245  22,468  33,878 
Indirect consumer loans —  —  —  — 
Direct consumer loans 1  1,015  1,042  2,058 
Total $ 169,247  $ 610,658  $ 98,801  $ 878,706 

Non-Performing Assets
Non-performing assets consist of nonaccrual loans and other real estate owned that has been acquired in partial or full satisfaction of loan obligations or upon foreclosure. Effective January 1, 2023, the Corporation adopted ASU 2022-02, which eliminated troubled debt restructuring accounting guidance. Prior to adoption, nonaccrual troubled debt restructurings were considered to be non-performing assets. The Corporation closely monitors loan modifications made to borrowers deemed to be experiencing financial difficulty, in accordance with ASU 2022-02. As of March 31, 2024, there were four loans being monitored under ASU 2022-02 guidance, three of which were accruing, and one of which was nonaccrual and therefore included in non-performing loans.
Past due status on all loans is based on the contractual terms of the loan. It is generally the Corporation's policy that a loan 90 days past due be placed on nonaccrual status unless factors exist that would eliminate the need to classify a loan as such. 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. All payments received on nonaccrual loans are applied to principal. Loans are considered for return to accrual status when they become current as to principal and interest and remain current for a period of six consecutive months or when, in the opinion of management, the Corporation expects to receive all of its original principal and interest. In the case of nonaccrual loans where a portion of the loan has been charged off, the remaining balance is kept in nonaccrual status until the entire principal balance has been recovered.

The following table summarizes the Corporation's non-performing assets (in thousands, except percentages):
NON-PERFORMING ASSETS
  March 31, 2024 December 31, 2023
Nonaccrual loans $ 7,835  $ 10,411 
Total non-performing loans 7,835  10,411 
Other real estate owned 559  326 
Total non-performing assets $ 8,394  $ 10,737 
Ratio of non-performing loans to total loans 0.39  % 0.53  %
Ratio of non-performing assets to total assets 0.30  % 0.40  %
Ratio of allowance for credit losses to non-performing loans 261.28  % 216.28  %
Accruing loans past due 90 days or more (1)
 $ 8  $ 10 
(1) Not included in non-performing assets above.
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Non-Performing Loans and Assets
Non-performing loans totaled $7.8 million, or 0.39% of total loans as of March 31, 2024, compared to $10.4 million, or 0.53% of total loans as of December 31, 2023. Non-performing assets, which are comprised of non-performing loans and other real estate owned, was $8.4 million, or 0.30% of total assets, as of March 31, 2024, compared to $10.7 million, or 0.40% of total assets, as of December 31, 2023. The decrease in non-performing loans was primarily attributable to the payoff of a nonaccrual commercial real estate loan totaling $1.9 million during the period, as well as $0.5 million in paydown activity on other nonaccrual commercial loans. The decrease in non-performing assets can be attributed to the decrease in non-performing loans.

Loan Modifications to Borrowers Experiencing Financial Difficulty
The Corporation works closely with borrowers experiencing financial difficulties to identify viable solutions that minimize the potential for loss. The Corporation monitors modifications made to borrowers experiencing financial difficulty in which contractual cash flows are directly impacted. Modifications included under this guidance include principal reductions, reductions in effective interest rates, term extensions, significant payment delays, or a combination thereof. ASU 2022-02 was implemented on a prospective basis, and as of March 31, 2024, the Corporation had four loans modified under this accounting guidance, which consisted of term extensions on two commercial and industrial loans, one commercial mortgage, and one home equity loan. As of March 31, 2024, one of the aforementioned commercial and industrial loans given an extension of six months was non-performing, while the remainder of the modified loans were considered to be performing. During the three month period ended March 31, 2024, a $1.9 million commercial mortgage previously modified under ASU 2022-02 was paid off.

Individually Analyzed Loans
The Corporation analyzes loans on an individual basis when management determined that a loan no longer exhibited risk characteristics consistent with those existing in its designated pool of loans, in accordance with the Corporation's CECL methodology. The amortized cost basis of individually analyzed loans as of March 31, 2024 totaled $5.7 million, compared to $8.0 million as of December 31, 2023. Included in the amortized cost basis of individually analyzed loans as of March 31, 2024 were loans totaling $1.7 million for which allowances of $1.7 million have been specifically allocated to the allowance for credit losses. As of December 31, 2023, the amortized cost basis of individually analyzed loans included $2.0 million of loans for which allowances of $2.0 million were allocated to the allowance for credit losses.
The majority of the Corporation's individually analyzed loans are secured and measured for credit loss based on collateral evaluations.  It is the Corporation's policy to obtain updated appraisals, by independent third parties, on loans secured by real estate at the time a loan is determined to require individual analysis. A measurement is performed based upon the most recent appraisal on file to determine the amount of any specific allocation or charge-off. In determining the amount of any specific allocation or charge-off, the Corporation will make adjustments to reflect the estimated costs to sell the property. Upon receipt and review of updated appraisals, an additional measurement is performed to determine if any adjustments are necessary to reflect proper provisioning or charge-offs. Individually analyzed loans are reviewed on a quarterly basis to determine if any changes in credit quality or market conditions would require any additional allocation or recognition of additional charge-offs. Real estate values in each of the Corporation's market areas have remained stable. Non-real estate collateral may be valued using (i) an appraisal, (ii) net book value of the collateral per the borrower’s financial statements, or (iii) accounts receivable aging reports, that may be adjusted based on management’s knowledge of the client and client’s business. If market conditions warrant, future appraisals are obtained for both real estate and non-real estate collateral.

Allowance for Credit Losses
The allowance for credit losses is an amount that management believes will be adequate to absorb the estimated lifetime credit losses inherent in assets exhibiting credit risk as of the measurement date. The allowance is in conformity with the requirements established by ASC 326-Financial Instruments-Credit Losses, and is a departure from the allowance for loan losses (ALLL) that the Corporation previously estimated using an incurred loss methodology. The allowance covers loans, unfunded commitments, and certain debt securities exhibiting credit risk potential, and incorporates both quantitative and qualitative components.
Loans are analyzed on either an individual basis or a pooled basis, determined by risk characteristics. Loans that no longer exhibit risk characteristics substantially consistent with those of loans within a given pool, may necessitate being evaluated individually, based on management discretion. It is the Corporation's policy to analyze all nonaccrual commercial loans on an individual basis, unless specific circumstances warrant that the loan should continue to be analyzed on a pooled basis. Individually analyzed loans are primarily valued based on the collateral method, however, certain loans may be valued using a cash flow analysis. Pooled loans are segmented based on groups of assigned FFIEC call codes, in order to provide enough granularity to meaningfully capture the risk profile of each instrument, yet broad enough to accurately allow for the application of certain pool-level assumptions.
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Quantitative analysis is based on an estimated discounted cash flow analysis (DCF) performed at the loan level. The modeled reserve requirement equals the difference between the book balance of the instrument at the measurement date and the present value of assumed cash flows for the life of the loan. The underlying assumptions of the DCF are based on the relationship between a projected value of an economic indicator, and the implied historical loss experience amongst a group of curated peers. The Corporation utilized a regression analysis to determine suitable loss drivers for each pool of loans. Based on these results, a probability of default (PD) and loss given default (LGD), is assigned to each potential value of an economic indicator for each pool of loans, and is then applied to the portfolio to derive the statistical loss implications thereof. A hypothetical loss for each period of the DCF, as well as implied recovery of past losses, is incorporated into the DCF. The Corporation relies on FOMC data as the source for its readily available and reasonable economic forecast. The forecasted values are applied over a four-quarter period, and revert back to the historic mean of a lookback period over an eight-quarter horizon, on a straight-line basis.
Qualitative adjustments represent management's expectation of certain risks not being captured entirely in the quantitative portion of the model. Qualitative adjustment rates are applied to each instrument within a pool on a consistent basis. Factors considered as part of the qualitative adjustment analysis include economic considerations potentially not captured by the model, changes in conditions within the Bank such as lending standards, personnel, concentrations of credit, among others, as well as other external factors such as change in the regulatory and competitive landscape.
The allowance for credit losses is adjusted though a provision (credit) for credit losses, which is charged to operations. Separate provision accounts have been established for on-balance sheet credit exposures and off-balance sheet credit exposures, and are combined in the line item "Provision (credit) for credit losses" on the Corporation's Consolidated Statements of Income. Loans are charged against the allowance for credit losses when management believes that the collectability of all or a portion of the principal is unlikely. Management's evaluation of the adequacy of the allowance for credit losses is performed on a periodic basis and takes into consideration such factors as the outcomes of the quantitative analysis, a review of specific individually analyzed loans, and considerations for qualitative adjustments. While management uses available information to recognize losses on credits, future additions to the allowance may be necessary based on changing economic conditions or portfolio composition. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation's allowance for credit losses. Such agencies may require the Corporation to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.
The allowance for credit losses was $20.5 million as of March 31, 2024, and $22.5 million as of December 31, 2023. The allowance for credit losses was 261.28% of non-performing loans as of March 31, 2024, compared to 216.28% as of December 31, 2023. The ratio of allowance for credit losses to total loans was 1.02% at March 31, 2024 and 1.14% as of December 31, 2023. Net charge-offs for the three months ended March 31, 2024 and March 31, 2023 were $0.2 million and $0.3 million, respectively. Net charge-off activity for the three months ended March 31, 2024 primarily reflected activity in the indirect auto segment of the consumer loan portfolio, while activity for the three months ended March 31, 2023 primarily reflected a partial charge off on a commercial and industrial loan, as well as charge-off activity in the indirect auto segment of the consumer loan portfolio.
The decrease in the allowance for credit losses was primarily attributable to the annual review and update performed on the loss drivers used as the basis for the Bank's CECL model. Loss drivers are the economic variables used to make forward looking credit loss projections. Recalibration of the loss drivers resulted in a decline in the baseline loss rates used in the CECL model, however, the composition of the economic variables selected as loss drivers did not change as a result of this update. In addition to the impact of the loss driver update, improvements in FOMC forecasted data and paydown activity on individually analyzed loans contributed to the decrease in the allowance for credit losses. The projected year-end 2024 U.S. unemployment rate improved from 4.1% as of December 2023 to 4.0% as of March 2024, while the projected year-end 2024 U.S. annual GDP growth improved from 1.4% as of December 2023 to 2.1% as of March 2024. Paydown activity on individually analyzed loans for which a specific allocation had been made during the three months ended March 31, 2024 was $0.3 million.


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The table below summarizes the Corporation’s allowance for credit losses and nonaccrual loans outstanding by loan category as of March 31, 2024 and December 31, 2023 (in thousands, except percentages):

ALLOWANCE BY LOAN CATEGORY
Balance at March 31, 2024
 Allowance for credit losses
Allowance to loans1
 Non-performing loans
Non-performing loans to loans(1)
 Allowance to non-performing loans
Commercial and agricultural $ 4,516  1.61  % $ 1,617  0.58  % 279.28  %
Commercial mortgages 10,367  0.90  % 3,965  0.35  % 261.46  %
Residential mortgages 2,062  0.74  % 1,118  0.40  % 184.44  %
Consumer loans 3,526  1.17  % 1,135  0.38  % 310.66  %
Total $ 20,471  1.02  % $ 7,835  0.39  % 261.28  %
Balance at December 31, 2023
Allowance for credit losses
Allowance to loans1
 Non-performing loans
Non-performing loans to loans1
 Allowance to non-performing loans
Commercial and agricultural $ 5,055  1.91  % $ 1,930  0.73  % 261.92  %
Commercial mortgages 12,026  1.07  % 5,969  0.53  % 201.47  %
Residential mortgages 2,194  0.79  % 1,315  0.47  % 166.84  %
Consumer loans 3,242  1.05  % 1,197  0.39  % 270.84  %
Total $ 22,517  1.14  % $ 10,411  0.53  % 216.28  %
(1) Ratio is a percentage of loan category.

The table below summarizes the Corporation’s consolidated credit ratios at March 31, 2024 and December 31, 2023:

Consolidated Ratios March 31, 2024 December 31, 2023
    Non-performing loans to total loans 0.39  % 0.53  %
    Allowance for credit losses to total loans 1.02  % 1.14  %
    Allowance for credit losses to non-performing loans 261.28  % 216.28  %

The table below summarizes the Corporation’s ratio of net charge-offs and recoveries to average loans outstanding by loan category for the three months ended March 31, 2024 and March 31, 2023:
Credit Ratios1
 March 31, 2024 March 31, 2023
   Commercial and agricultural (0.01) % 0.07  %
   Commercial mortgages —  % —  %
   Residential mortgages —  % —  %
   Consumer loans 0.30  % 0.04  %
Total 0.04  % 0.02  %
1 Current period annualized.
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The table below summarizes the Corporation’s credit loss experience for the three months ended March 31, 2024 and 2023 (in thousands):
SUMMARY OF CREDIT LOSS EXPERIENCE
  Three Months Ended 
 March 31,
  2024 2023
Balance of allowance for credit losses at beginning of period $ 22,517  $ 19,659 
Impact of ASC 326 Adoption —  374 
Charge-offs:
    
   Commercial and agricultural —  190 
   Commercial mortgages —  — 
   Residential mortgages 16  — 
   Consumer loans 351  193 
Total charge-offs $ 367  $ 383 
Recoveries:
    
   Commercial and agricultural $ 37  $ 6 
   Commercial mortgages 1  — 
   Residential mortgages 22  — 
   Consumer loans 125  108 
Total recoveries $ 185  $ 114 
Net charge-offs (recoveries) 182  269 
Provision (credit) for credit losses on-balance sheet exposure(1)
 (1,864) 311 
Balance of allowance for credit losses at end of period $ 20,471  $ 20,075 
(1) Additional provision related to off-balance sheet exposure was a credit of $176 thousand for the three months ended March 31, 2024 and a credit of $34 thousand for the three months ended March 31, 2023.


Other Real Estate Owned

OREO totaled $0.6 million as of March 31, 2024, and $0.3 million as of December 31, 2023, respectively. There was one residential mortgage property and two home equity loan properties added to other real estate owned in the first three months of 2024.


Deposits

The table below summarizes the Corporation’s deposit composition by segment at March 31, 2024, and December 31, 2023, and the dollar and percent change from December 31, 2023 to March 31, 2024 (in thousands):
DEPOSITS
March 31, 2024 v. December 31, 2023
March 31, 2024 December 31, 2023
  Amount % of Total Amount % of Total $ Change % Change
Non-interest-bearing demand deposits $ 656,330  26.5  % $ 653,166  26.9  % $ 3,164  0.5  %
Interest-bearing demand deposits 315,154  12.7  % 291,138  12.0  % 24,016  8.2  %
Money market accounts 631,350  25.4  % 623,714  25.7  % 7,636  1.2  %
Savings deposits 248,578  10.0  % 249,144  10.3  % (566) (0.2) %
Certificates of deposit $250,000 or less 384,722  15.5  % 365,058  15.0  % 19,664  5.4  %
Certificates of deposit greater than $250,000 90,626  3.7  % 76,804  3.1  % 13,822  18.0  %
Brokered deposits 125,988  5.1  % 142,776  5.9  % (16,788) (11.8) %
Other time deposits 28,024  1.1  % 27,627  1.1  % 397  1.4  %
Total $ 2,480,772  100.0  % $ 2,429,427  100.0  % $ 51,345  2.1  %
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Deposits totaled $2.481 billion at March 31, 2024 compared to $2.429 billion at December 31, 2023, an increase of $51.3 million, or 2.1%. The increase was primarily attributable to increases of $33.9 million in time deposits excluding brokered deposits, $24.0 million in interest-bearing demand deposits, $7.6 million in insured money market accounts, and $3.2 million in non-interest bearing demand deposits, offset by decreases of $16.8 million in brokered deposits and $0.6 million in savings deposits.

The growth in deposits was due primarily to increases of $37.5 million in public deposits, $18.2 million in ICS deposits, $10.8 million in consumer deposits, and $5.0 million in commercial deposits, offset by decreases of $16.8 million in brokered deposits, and $3.1 million in CDARS deposits. At March 31, 2024, demand deposit and money market accounts comprised 64.6% of total deposits compared to 64.5% at December 31, 2023. The aggregate amount of the Corporation's outstanding uninsured deposits, was 27.8% and 27.0% of total deposits, as of March 31, 2024 and December 31, 2023, respectively.

The table below presents the Corporation's deposits balance by bank division (in thousands):
DEPOSITS BY DIVISION
  March 31, 2024 December 31, 2023 December 31, 2022 December 31, 2021 December 31, 2020
Chemung Canal Trust Company* $ 2,109,000  $ 2,048,465  $ 1,892,020  $ 1,739,826  $ 1,686,370 
Capital Bank Division 371,772  380,962  435,207  415,607  351,404 
Total $ 2,480,772  $ 2,429,427  $ 2,327,227  $ 2,155,433  $ 2,037,774 
*All deposits, excluding those originated by the Capital Bank division.

In addition to consumer, commercial, and public deposits, other sources of funds include reciprocal deposits. The Regulatory Relief Act changed the definition of brokered deposits, such that subject to certain conditions, reciprocal deposits of another depository institution obtained through a deposit placement network for purposes of obtaining maximum deposit insurance would not be considered brokered deposits subject to the FDIC’s brokered-deposit regulations. This applies to the Corporation's participation in the CDARS and ICS programs. The CDARS and ICS programs involve a network of financial institutions that exchange funds among members in order to ensure FDIC insurance coverage on customer deposits above the single institution limit. Using a sophisticated matching system, funds are exchanged on a dollar-for-dollar basis, so that the equivalent of an original deposit comes back to the originating institution. Brokered deposits include funds obtained through brokers. Deposits obtained through the CDARS, ICS, and brokered relationship programs were $439.7 million as of March 31, 2024, including $126.0 million of brokered deposits, and $424.6 million as of December 31, 2023, which included $142.8 million of brokered deposits.

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

Borrowings

Borrowings increased $18.0 million to $53.0 million at March 31, 2024 from December 31, 2023, primarily attributable to a $50.0 million advance from the Federal Reserve, as the Corporation took advantage of lower interest rates offered by the Bank Term Funding Program (BTFP), offset by a decrease of $31.9 million in FHLBNY overnight advances when compared to December 31, 2023. There were no outstanding FHLBNY term advances as of and for the three months ended March 31, 2024, and as of and for the year ended December 31, 2023.


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Shareholders’ Equity

Total shareholders' equity increased $1.9 million from $195.2 million at December 31, 2023 to $197.1 million at March 31, 2024, primarily due to an increase in retained earnings, offset by an increase in accumulated other comprehensive loss. The increase in retained earnings of $5.6 million was due primarily to earnings of $7.1 million, offset by $1.5 million in dividends declared during the three months ended March 31, 2024. The increase in accumulated other comprehensive loss of $4.1 million can be mostly attributed to a decrease in the fair market value of the available for sale securities portfolio, due to rising interest rates. Treasury stock decreased $0.4 million, primarily due to the issuance of shares related to the Corporation's employee benefit plans and grants issued under the Corporation's stock compensation plan. The total shareholders’ equity to total assets ratio was 7.08% at March 31, 2024 compared to 7.20% at December 31, 2023. The tangible equity to tangible assets ratio was 6.34% at March 31, 2024 compared to 6.45% at December 31, 2023. Book value per share increased to $41.34 at March 31, 2024 from $41.07 at December 31, 2023.

The Bank is subject to capital adequacy guidelines of the Federal Reserve which establish a framework for the classification of financial institutions into five categories: well-capitalized, adequately capitalized, under-capitalized, significantly under-capitalized and critically under-capitalized. As of March 31, 2024, the Bank’s capital ratios were in excess of those required to be considered well-capitalized under regulatory capital guidelines.
When shares of the Corporation become available in the market, the Corporation may purchase them after careful consideration of the Corporation’s liquidity and capital positions. Purchases may be made from time to time on the open market or in privately negotiated transactions at the discretion of management. On January 8, 2021, the Corporation's Board of Directors approved a new stock repurchase program. Under the new repurchase program, the Corporation may repurchase up to 250,000 shares of its common stock, or approximately 5% of its then outstanding shares. The repurchase program permits shares to be repurchased in open market or privately negotiated transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934. No shares were repurchased in the first quarter of 2024. As of March 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. Remaining buyback authority under the share repurchase program was 200,816 shares at March 31, 2024.

Liquidity

Liquidity management involves the ability to meet the cash flow requirements of deposit clients, borrowers, and the operating, investing, and financing activities of the Corporation. The Corporation uses a variety of resources to meet its liquidity needs. These include short term investments, cash flow from lending and investing activities, core-deposit growth and non-core funding sources, such as time deposits of $250,000 or more, brokered deposits, securities sold under agreements to repurchase, and other borrowings.
The Corporation has a detailed Funds Management Policy that includes sections on liquidity measurement and management, and a Liquidity Contingency Plan that provides for the prompt and comprehensive response to unexpected demands for liquidity. This policy and plan are established and revised as needed by the management and Board ALCO committees. The ALCO is responsible for measuring liquidity, establishing liquidity targets and implementing strategies to achieve selected targets. The ALCO is responsible for coordinating activities across the Corporation to ensure that prudent levels of contingent or standby liquidity are available at all times. Based on the ongoing assessment of the liquidity considerations, management believes the Corporation’s sources of funding meet anticipated funding needs.
As of March 31, 2024, the Corporation's cash and cash equivalents balance was $94.9 million. The Corporation also maintains an investment portfolio of securities available for sale, comprised primarily of mortgage-backed securities, U.S. Gov't Treasury securities, Small Business Administration loan pools, and municipal bonds. Although this portfolio generates interest income for the Corporation, it also serves as an available source of liquidity and capital if the need should arise. As of March 31, 2024, the Corporation's investment in securities available for sale was $566.0 million, $240.3 million of which was not pledged as collateral.

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The Corporation is a member of the FHLBNY which allows it to access borrowings which enhance management's ability to satisfy future liquidity needs. The Bank has pledged $254.0 million and $254.6 million of residential mortgage loans and home equity loans under a blanket lien arrangement at March 31, 2024 and December 31, 2023, respectively, as collateral for future borrowings. Based on this available collateral, securities held and current advances outstanding, the Corporation was eligible to borrow up to a total of $231.0 million and $193.4 million at March 31, 2024 and December 31, 2023, respectively. The Corporation did not borrow with the FHLBNY as of March 31, 2024, and borrowed FHLBNY overnight advances of $31.9 million as of December 31, 2023. The Bank's unused borrowing capacity at the Federal Home Loan Bank of New York was $231.0 million as of March 31, 2024. Borrowings may be used on a short-terms basis for liquidity purposes or on a long-term basis to fund asset growth.
Uninsured deposits totaled $689.4 million as of March 31, 2024, and $655.7 million as of December 31, 2023, which included $190.7 million and $153.2 million of municipal deposits that were collateralized by pledged assets, respectively. The Corporation considers the level of uninsured deposits to be an important factor when considering liquidity management and strategic decisions due to their fluidity.
The Corporation also considers brokered deposits to be an element of its deposit strategy and anticipates that it will continue using brokered deposits as a secondary source of funding to support growth. Borrowings may be used on a short-term basis for liquidity purposes or on a long-term basis to fund asset growth. Brokered deposits were $126.0 million and $142.8 million, as of March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024, brokered deposits carried terms between two and 48 months with staggered maturities. The Corporation also had a total of $60.0 million of unsecured lines of credit with five different financial institutions, all of which was available at March 31, 2024 and December 31, 2023.
On March 12, 2023, the Treasury Department, Federal Reserve, and FDIC jointly announced a new liquidity program, the Bank Term Funding Program (BTFP), in response to the failure of two banks earlier that week. Under the BTFP, institutions could pledge certain securities (i.e., securities eligible for purchase by the Federal Reserve Banks in open market operations) for the par value of the securities at a borrowing rate of ten basis points over the one-year overnight index swap rate. Certain U.S. federally insured depository institutions were eligible to participate in the BTFP. No new borrowings may be made under the BTFP after March 11, 2024. In January 2024, the Corporation utilized the BTFP, with an advance of $50.0 million, at an interest rate of 4.91%, which matures in January 2025, and may be repaid at any time without prepayment penalty. Also available to the Corporation is the Discount Window Lending provided by the Federal Reserve Bank.

Consolidated Cash Flows Analysis

The table below summarizes the Corporation's cash flows for the periods indicated (in thousands):
CONSOLIDATED SUMMARY OF CASH FLOWS
(in thousands) Three Months Ended 
 March 31,
  2024 2023
Net cash provided by operating activities $ 7,934  $ 10,686 
Net cash used in investing activities (17,866) (29,923)
Net cash provided (used) by financing activities 67,947  (1,991)
Net increase (decrease) in cash and cash equivalents $ 58,015  $ (21,228)

Operating activities
The Corporation believes cash flows from operations, available cash balances, and its ability to generate cash through short-term and long-term borrowings are sufficient to fund the Corporation’s operating liquidity needs. Cash provided by operating activities in the first three months of 2024 and 2023 predominantly resulted from net income after non-cash operating adjustments.

Investing activities
Cash used in investing activities during the first three months of 2024 and 2023 predominantly resulted from a net increase in loans, offset by maturities and principal paydowns on securities available for sale.

Financing activities
Cash provided by financing activities during the first three months of 2024 predominantly resulted from an increase in deposits, including brokered deposits, and an advance from the Federal Reserve BTFP, offset by a net repayment of overnight advances held at the end of the prior quarter. Cash used by financing activities during the first three months of 2023 predominantly resulted from the net repayment of overnight advances held at the end of the prior quarter, offset by a net increase in deposits.

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Capital Resources

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

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

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. Management believes that, as of March 31, 2024 and December 31, 2023, the Bank met all capital adequacy requirements to which it was subject. As of December 31, 2018, the Corporation is no longer subject to FRB consolidated capital requirements applicable to bank holding companies, which are similar to those applicable to the Bank, until it reaches $3.0 billion in assets.

As of March 31, 2024, the most recent notification from the Federal Reserve Bank of New York categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based, common equity Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below. There have been no conditions or events since that notification that management believes have changed the Bank's capital category.

The regulatory capital ratios as of March 31, 2024 and December 31, 2023 were calculated under Basel III rules. There is no threshold for well-capitalized status for bank holding companies.

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The Corporation and the Bank’s capital ratios as of March 31, 2024 were as follows (in thousands, except ratio data):
  Actual Minimum Capital Adequacy Minimum Capital Adequacy with Capital Buffer To Be Well Capitalized Under Prompt Corrective Action Provisions
As of March 31, 2024 Amount Ratio Amount Ratio Amount Ratio Amount Ratio
Total Capital (to Risk Weighted Assets):
Consolidated $ 266,595  13.18  % N/A N/A N/A N/A  N/A N/A
Bank $ 257,952  12.76  % $ 161,762  8.00  % $ 212,313  10.50  % $ 202,203  10.00  %
Tier 1 Capital (to Risk Weighted Assets):          
Consolidated $ 245,382  12.13  % N/A N/A N/A N/A  N/A N/A
Bank $ 236,739  11.71  % $ 121,322  6.00  % $ 171,872  8.50  % $ 161,762  8.00  %
Common Equity Tier 1 Capital (to Risk Weighted Assets):        
Consolidated $ 245,382  12.13  % N/A N/A N/A N/A  N/A N/A
Bank $ 236,739  11.71  % $ 90,991  4.50  % $ 141,542  7.00  % $ 131,432  6.50  %
Tier 1 Capital (to Average Assets):          
Consolidated $ 245,382  8.79  % N/A N/A N/A N/A  N/A N/A
Bank $ 236,739  8.49  % $ 111,572  4.00  % N/A N/A $ 139,466  5.00  %



The Corporation and the Bank’s capital ratios as of December 31, 2023 were as follows (in thousands, except ratio data):
  Actual Minimum Capital Adequacy Minimum Capital Adequacy with Capital Buffer To Be Well Capitalized Under Prompt Corrective Action Provisions
As of December 31, 2023 Amount Ratio Amount Ratio Amount Ratio Amount Ratio
Total Capital (to Risk Weighted Assets):
Consolidated $ 262,864  13.26  % N/A N/A N/A N/A  N/A N/A
Bank $ 252,783  12.76  % $ 158,438  8.00  % $ 207,950  10.50  % $ 198,048  10.00  %
Tier 1 Capital (to Risk Weighted Assets):          
Consolidated $ 239,429  12.08  % N/A N/A N/A N/A  N/A N/A
Bank $ 229,348  11.58  % $ 118,829  6.00  % $ 168,341  8.50  % $ 158,438  8.00  %
Common Equity Tier 1 Capital (to Risk Weighted Assets):        
Consolidated $ 239,429  12.08  % N/A N/A N/A N/A  N/A N/A
Bank $ 229,348  11.58  % $ 89,122  4.50  % $ 138,634  7.00  % $ 128,731  6.50  %
Tier 1 Capital (to Average Assets):          
Consolidated $ 239,429  8.62  % N/A N/A N/A N/A  N/A N/A
Bank $ 229,348  8.26  % $ 111,034  4.00  % N/A N/A $ 138,792  5.00  %


62


Dividend Restrictions

The Corporation’s principal source of funds for dividend payments is dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to current year’s net income, combined with the retained net income of the preceding two years, subject to the capital requirements in the table above. At March 31, 2024, the Bank could, without prior approval, declare dividends of approximately $47.0 million.

Adoption of New Accounting Standards

Please refer to Note 1, Summary of Significant Accounting Policies - Recent Accounting Pronouncements for a discussion of new accounting standards.

Explanation and Reconciliation of the Corporation’s Use of Non-GAAP Measures

The Corporation prepares its Consolidated Financial Statements in accordance with GAAP; these financial statements appear on pages 7–12. That presentation provides the reader with an understanding of the Corporation’s results that can be tracked consistently from year-to-year and enables a comparison of the Corporation’s performance with other companies’ GAAP financial statements.

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

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


Fully Taxable Equivalent Net Interest Income and Net Interest Margin

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

63


NET INTEREST MARGIN - FULLY TAXABLE EQUIVALENT As of the Three Months Ended
(in thousands, except ratio data) March 31, Dec. 31, Sept. 30, June 30, March 31,
2024 2023 2023 2023 2023
Net interest income (GAAP) $ 18,089  $ 17,898  $ 18,017  $ 18,595  $ 19,947 
Fully taxable equivalent adjustment 84  87  87  92  98 
Fully taxable equivalent net interest income (non-GAAP) $ 18,173  $ 17,985  $ 18,104  $ 18,687  $ 20,045 
Average interest-earning assets (GAAP) $ 2,681,059  $ 2,654,638  $ 2,627,012  $ 2,609,893  $ 2,592,709 
Net interest margin - fully taxable equivalent (non-GAAP) 2.73  % 2.69  % 2.73  % 2.87  % 3.14  %

Efficiency Ratio

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

EFFICIENCY RATIO As of the Three Months Ended
(in thousands, except ratio data) March 31, Dec. 31, Sept. 30, June 30, March 31,
2024 2023 2023 2023 2023
Net interest income (GAAP) $ 18,089  $ 17,898  $ 18,017  $ 18,595  $ 19,947 
Fully taxable equivalent adjustment 84  87  87  92  98 
Fully taxable equivalent net interest income (non-GAAP) $ 18,173  $ 17,985  $ 18,104  $ 18,687  $ 20,045 
Non-interest income (GAAP) $ 5,657  $ 5,871  $ 7,808  $ 5,447  $ 5,423 
Less: changes in fair value of equity investments —  39  —  —  — 
Less:  recognition of employee retention tax credit —  —  (2,370) —  — 
Adjusted non-interest income (non-GAAP) $ 5,657  $ 5,910  $ 5,438  $ 5,447  $ 5,423 
Non-interest expense (GAAP) $ 16,698  $ 16,826  $ 15,668  $ 15,913  $ 15,836 
Less:  amortization of intangible assets —  —  —  —  — 
Adjusted non-interest expense (non-GAAP) $ 16,698  $ 16,826  $ 15,668  $ 15,913  $ 15,836 
Efficiency ratio (unadjusted) 70.32  % 70.79  % 60.67  % 66.19  % 62.42  %
Efficiency ratio (adjusted) 70.07  % 70.42  % 66.55  % 65.94  % 62.18  %
64


Tangible Equity and Tangible Assets (Period-End)

Tangible equity, tangible assets, and tangible book value per share are each non-GAAP financial measures. Tangible equity represents the Corporation’s stockholders’ equity, less goodwill and intangible assets. Tangible assets represents the Corporation’s total assets, less goodwill and other intangible assets. Tangible book value per share represents the Corporation’s tangible equity divided by common shares at period-end. These measures are meaningful to the Corporation, as well as investors and analysts, in assessing the Corporation’s use of equity.

TANGIBLE EQUITY AND TANGIBLE ASSETS (PERIOD END) As of or for the Three Months Ended
(in thousands, except per share and ratio data) March 31, Dec. 31, Sept. 30, June 30, March 31,
2024 2023 2023 2023 2023
Total shareholders' equity (GAAP) $ 197,128  $ 195,241  $ 170,064  $ 177,426  $ 177,341 
Less: intangible assets (21,824) (21,824) (21,824) (21,824) (21,824)
Tangible equity (non-GAAP) $ 175,304  $ 173,417  $ 148,240  $ 155,602  $ 155,517 
Total assets (GAAP) $ 2,784,890  $ 2,710,529  $ 2,707,834  $ 2,674,673  $ 2,654,183 
Less: intangible assets (21,824) (21,824) (21,824) (21,824) (21,824)
Tangible assets (non-GAAP) $ 2,763,066  $ 2,688,705  $ 2,686,010  $ 2,652,849  $ 2,632,359 
Total equity to total assets at end of period (GAAP) 7.08  % 7.20  % 6.28  % 6.63  % 6.68  %
Book value per share (GAAP) $ 41.34  $ 41.07  $ 35.90  $ 37.49  $ 37.53 
Tangible equity to tangible assets at end of period (non-GAAP) 6.34  % 6.45  % 5.52  % 5.87  % 5.91  %
Tangible book value per share (non-GAAP) $ 36.77  $ 36.48  $ 31.29  $ 32.88  $ 32.91 
 
Tangible Equity (Average)

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

TANGIBLE EQUITY (AVERAGE) As of or for the Three Months Ended
(in thousands, except ratio data) March 31, Dec. 31, Sept. 30, June 30, March 31,
2024 2023 2023 2023 2023
Total average shareholders' equity (GAAP) $ 195,860  $ 174,868  $ 179,700  $ 180,357  $ 173,786 
Less: average intangible assets (21,824) (21,824) (21,824) (21,824) (21,824)
Average tangible equity (non-GAAP) $ 174,036  $ 153,044  $ 157,876  $ 158,533  $ 151,962 
Return on average equity (GAAP) 14.48  % 8.63  % 16.89  % 13.97  % 16.97  %
Return on average tangible equity (non-GAAP) 16.29  % 9.86  % 19.22  % 15.89  % 19.40  %
















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 period by removing from the calculation thereof the impact of certain transactions or other material items of income or expense occurring during the period, including certain nonrecurring items. The Corporation believes that the resulting non-GAAP financial measures may improve an understanding of its results of operations by separating out any such transactions or items that may have had a disproportionate positive or negative impact on the Corporation’s financial results during the particular period in question. In the Corporation’s presentation of any such non-GAAP (adjusted) financial measures not specifically discussed in the preceding paragraphs, the Corporation supplies the supplemental financial information and explanations required under Regulation G.

NON-GAAP NET INCOME As of or for the Three Months Ended
(in thousands, except per share and ratio data) March 31, Dec. 31, Sept. 30, June 30, March 31,
2024 2023 2023 2023 2023
Reported net income (GAAP) $ 7,050  $ 3,802  $ 7,648  $ 6,280  $ 7,270 
Net (gains) losses on security transactions (net of tax) —  29  —  —  — 
Recognition of employee retention tax credit —  —  (1,873) —  — 
Non- GAAP net income $ 7,050  $ 3,831  $ 5,775  $ 6,280  $ 7,270 
Average basic and diluted shares outstanding 4,764  4,743  4,736  4,729  4,721 
Reported basic and diluted earnings per share (GAAP) $ 1.48  $ 0.80  $ 1.61  $ 1.33  $ 1.54 
Reported return on average assets (GAAP) 1.04  % 0.56  % 1.14  % 0.95  % 1.12  %
Reported return on average equity (GAAP) 14.48  % 8.63  % 16.89  % 13.97  % 16.97  %
Non-GAAP basic and diluted earnings per share $ 1.48  $ 0.81  $ 1.21  $ 1.33  $ 1.54 
Non-GAAP return on average assets 1.04  % 0.57  % 0.86  % 0.95  % 1.12  %
Non-GAAP return on average equity 14.48  % 8.69  % 12.75  % 13.97  % 16.97  %
 
 
66


ITEM 3:    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

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

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

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

Interest rate risk is the risk that net interest income will fluctuate as a result of a change in interest rates. It is the assumption of interest rate risk, along with credit risk, that drives the net interest margin of a financial institution. For that reason, the ALCO has established tolerance limits based upon various basis point changes in interest rates, with appropriate floors set for interest-bearing liabilities. At March 31, 2024, it is estimated that immediate decreases in interest rates of 100-basis points and 200-basis points would positively impact the next 12 months net interest income by 2.98% and 4.62%, respectively. Immediate increases in interest rates of 100-basis points and 200-basis points would positively impact the next 12 months net interest income by 2.18% and 4.34%, respectively. All scenarios are within the Corporation's policy guidelines.
Change in interest rates Percentage Increase (Decrease) in Net Interest Income over 12 Months
200 basis points decrease 4.62%
100 basis points decrease 2.98%
100 basis points increase 2.18%
200 basis points increase 4.34%

A related component of interest rate risk is the expectation that the market value of the Corporation’s equity account will fluctuate with changes in interest rates. This component is a direct corollary to the earnings-impact component: an institution exposed to earnings erosion is also exposed to a decline in market value. At March 31, 2024, it is estimated that immediate decreases in interest rates of 100-basis points and 200-basis points would positively impact the market value of the Corporation’s capital account by 4.34% and 6.41% respectively. Immediate increases in interest rates of 100-basis points and 200-basis points would positively impact the market value by 0.47% and 0.83% respectively. All scenarios are within the Corporation's policy guidelines.
Change in interest rates Percentage Increase (Decrease) in Present Value of Corporation's Equity
200 basis points decrease 6.41%
100 basis points decrease 4.34%
100 basis points increase 0.47%
200 basis points increase 0.83%

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. Diversification by loan product is maintained through offering commercial loans, 1-4 family mortgages, and a full range of consumer loans.

The Corporation monitors its loan portfolio carefully. The Loan Committee of the Corporation's Board of Directors is designated to receive required loan reports, oversee loan policy, and approve loans above authorized individual and Senior Loan Committee lending limits. The Senior Loan Committee, consisting of the President and Chief Executive Officer, Chief Financial Officer and Treasurer (non-voting), Chief Credit and Risk Officer, Business Client Division Manager, Retail Client Division Manager, Retail Loan Manager, Senior Commercial Real Estate Lender, and Commercial Loan Managers, implements the Board-approved loan policy.

68


ITEM 4:    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Corporation's management, with the participation of its Chief Executive Officer, who is the Corporation's principal executive officer, and its Chief Financial Officer and Treasurer, who is the Corporation's principal financial and accounting officer, have evaluated the effectiveness of the Corporation's disclosure controls and procedures as of March 31, 2024 pursuant to Rule 13a-15 of the Exchange Act, as amended. Based upon that evaluation, the principal executive officer and principal financial and accounting officer have concluded that the Corporation's disclosure controls and procedures are effective as of March 31, 2024. In addition, there have been no changes in the Corporation's internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Corporation's internal control over financial reporting.

Disclosure controls and procedures are designed with the objective of ensuring that information required to be disclosed in reports filed by the Corporation under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
69


PART II.    OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

On February 4, 2020, the Corporation filed a lawsuit against Pioneer Bank, Albany, New York, in the Supreme Court of the State of New York in the County of Albany. As disclosed in the Corporation’s September 12, 2019 Current Report on Form 8-K, the Bank owns a participating interest totaling $4.2 million in an approximately $36.0 million commercial credit facility on which the borrower defaulted due to fraudulent activity. The Bank’s complaint alleges that Pioneer Bank, as lead bank, breached the participation agreement and engaged in fraud and negligent misrepresentation. The Corporation received a recovery of $0.5 million in April, 2020, and continues to pursue recovery of the remaining $3.7 million and accumulated expenses as a result of purchasing the participation interest.

Other than as noted above, the Corporation believes that it is not a party to any pending legal, arbitration, or regulatory proceedings that could have a material adverse impact on our financial results or liquidity as of March 31, 2024.

ITEM 1A.    RISK FACTORS

There have been no material changes in the risk factors set forth in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on March 13, 2024. Additional risks not presently known to us, or that we currently deem immaterial, may adversely affect our business, financial condition or results of operations.


ITEM 2.    Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

    (c)    Issuer Purchases of Equity Securities (1)
Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum number of shares that may yet be purchased under the plans or programs
January 1 - January 31, 2024 —  —  —  200,816 
February 1 - February 29, 2024 —  —  —  200,816 
March 1 - March 31, 2024 —  —  —  200,816 
Quarter ended March 1, 2024 —  $ —  —  200,816 
(1) On January 8, 2021, the Corporation’s Board of Directors approved a new stock repurchase plan. Under the new repurchase program, the Corporation may repurchase up to 250,000 shares of its common stock, or approximately 5% of its outstanding shares. Purchases may be made from time to time on the open market or in private negotiated transactions and will be at the discretion of management. As of March 31, 2024 the Corporation has repurchased a total of 49,184 shares at the weighted average cost of $40.42 per share.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

        Not applicable.

ITEM 4.    MINE SAFETY DISCLOSURES

        Not applicable.

ITEM 5.    OTHER INFORMATION

During the first quarter of 2024, none of our directors or officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Corporation securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as that term is used in SEC regulations.
70


ITEM 6.    EXHIBITS

    The following exhibits are either filed with this Form 10-Q or are incorporated herein by reference. The Corporation’s Securities Exchange Act File number is 000-13888.
3.1 Certificate of Incorporation of Chemung Financial Corporation dated December 20, 1984 (as incorporated by reference to Exhibit 3.1 to Registrant's Form 10-K for the year ended December 31, 2007 filed with the Commission on March 13, 2008).
   
3.2 Certificate of Amendment to the Certificate of Incorporation of Chemung Financial Corporation, dated March 28, 1988 (as incorporated by reference to Exhibit 3.2 to Registrant's Form 10-K for the year ended December 31, 2007 filed with the Commission on March 13, 2008).
   
3.3 Certificate of Amendment to the Certificate of Incorporation of Chemung Financial Corporation, dated May 13, 1998 (as incorporated by reference to Exhibit 3.4 to Registrant’s Form 10-K for the year ended December 31, 2005 and filed with the Commission on March 15, 2006).
   
3.4 Amended and Restated Bylaws of Chemung Financial Corporation, as amended August 17, 2022 (as incorporated by reference to Exhibit 3.1 to Registrant’s Form 8-K filed with the Commission on August 19, 2022).
   
31.1 Certification of Principal Executive Officer of the Registrant pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.*
   
31.2 Certification of Principal Financial Officer of the Registrant pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.*
   
32.1 Certification of Principal Executive Officer of the Registrant pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. §1350.*
   
32.2 Certification of Principal Financial Officer of the Registrant pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. §1350.*
   
101.INS Instance Document*
   
101.SCH XBRL Taxonomy Schema*
   
101.CAL XBRL Taxonomy Calculation Linkbase*
   
101.DEF XBRL Taxonomy Definition Linkbase*
   
101.LAB XBRL Taxonomy Label Linkbase*
   
101.PRE XBRL Taxonomy Presentation Linkbase*
   
* Filed herewith.
71


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


CHEMUNG FINANCIAL CORPORATION
DATED: May 8, 2024 By:  /s/ Anders M. Tomson
  Anders M. Tomson
President and Chief Executive Officer
(Principal Executive Officer)

DATED: May 8, 2024 By:  /s/ Dale M. McKim, III
  Dale M. McKim, III
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)

72


EXHIBIT INDEX

The following exhibits are either filed with this Form 10-Q or are incorporated herein by reference. The Corporation’s Securities Exchange Act File number is 000-13888
3.1
   
3.2
   
3.3
   
3.4
   
31.1
   
31.2
   
32.1
   
32.2
   
101.INS Instance Document*
   
101.SCH XBRL Taxonomy Schema*
   
101.CAL XBRL Taxonomy Calculation Linkbase*
   
101.DEF XBRL Taxonomy Definition Linkbase*
   
101.LAB XBRL Taxonomy Label Linkbase*
   
101.PRE XBRL Taxonomy Presentation Linkbase*
   
* Filed herewith.

EX-31.1 2 chmg10q03312024exh31-1.htm EX-31.1 Document

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER OF CHEMUNG FINANCIAL CORPORATION PURSUANT TO RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934.

I, Anders M. Tomson, certify that:

1.  I have reviewed this report on Form 10-Q of Chemung Financial Corporation;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)  designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)  designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)  evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.  The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 8, 2024

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

EX-31.2 3 chmg10q03312024exh31-2.htm EX-31.2 Document

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER OF CHEMUNG FINANCIAL CORPORATION PURSUANT TO RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934.

I, Karl F. Krebs, certify that:

1.  I have reviewed this report on Form 10-Q of Chemung Financial Corporation;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)  designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)  designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)  evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)  disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.  The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting

Date: May 8, 2024

By:       /s/ Dale M. McKim, III
Dale M. McKim, III
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)

EX-32.1 4 chmg10q03312024exh32-1.htm EX-32.1 Document

EXHIBIT 32.1

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


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

(a)the Quarterly Report on Form 10-Q of the Corporation for the period ended March 31, 2024, filed on the date hereof with the Securities and Exchange Commission (the "Report"), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

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

                         /s/ Anders M. Tomson
Anders M. Tomson
President and Chief Executive Officer
May 8, 2024

EX-32.2 5 chmg10q03312024exh32-2.htm EX-32.2 Document

EXHIBIT 32.2

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


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

(a)the Quarterly Report on Form 10-Q of the Corporation for the period ended March 31, 2024, filed on the date hereof with the Securities and Exchange Commission (the "Report"), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

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

/s/ Dale M. McKim, III
Dale M. McKim, III
Chief Financial Officer and Treasurer
May 8, 2024