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CHEMUNG FINANCIAL CORP

CHMG
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Business Summary

Chemung Financial Corporation operates as a financial holding company providing a wide range of financial services through its wholly owned subsidiaries, Chemung Canal Trust Company (the Bank) and CFS Group, Inc. The Bank, established in 1833 and reorganized as a trust company in 1903, derives its income primarily from interest and fees on loans, interest on investment securities, wealth management group fee income, and fees received in connection with deposit and other services. The Corporation operates 30 branch offices located in 13 counties in New York and Bradford County in Pennsylvania, and competes intensely with local, regional, and national commercial banks, thrift institutions, credit unions, brokerage firms, investment companies, insurance companies, fintech, and internet banking entities. According to the FDIC's annual Summary of Deposits – Market Share Report as of June 30, 2025, the Bank held a majority of market deposits in Chemung County with 64.56% of total market deposits, while its legacy market comprised 13.2% of the market's $14.8 billion in total deposits, and its Capital Bank and Canal Bank divisions comprised 1.81% and 0.06% of their respective markets' total deposits of $26.9 billion and $57.5 billion .

The Corporation's competitive positioning relies upon personal relationships established with clients by its officers, employees, and directors, and it has maintained a strong community orientation by supporting active participation in local charitable, civic, school, religious, and community development activities. The Corporation believes that its emphasis on local relationship banking together with a prudent approach to lending are important factors in its success and growth. The Corporation's growth strategy is to leverage its branch and digital network in current or new markets to build client relationships and grow loans and deposits, with emphasis placed on acquiring stable, low-cost deposits such as checking account deposits and other low interest-bearing deposits to fund high-quality loans. The Corporation evaluates potential acquisition targets based on the economic viability of their markets, the degree to which they can be effectively integrated into current operations, and the degree to which they are accretive to capital and earnings.

The Corporation generates revenue primarily through net interest income from loans and investment securities, and non-interest income from wealth management group fee income, service charges on deposit accounts, interchange revenue from debit card transactions, and other fees. The Bank's operating expenses are interest expense paid on deposits and borrowings, salaries and employee benefit plans, and general operating expenses. The Corporation's primary customer segments include commercial and industrial businesses, commercial real estate borrowers, residential mortgage borrowers, and consumer loan customers, with a significant concentration in commercial real estate lending. The Wealth Management Group, with $2.338 billion of assets under management or administration as of December 31, 2025, including $301.8 million of assets held under management or administration for the Corporation, is responsible for the largest component of the Corporation's non-interest income.

The Corporation's loan portfolio is segmented into commercial and industrial loans, commercial mortgages (including construction, owner occupied, and non-owner occupied), residential mortgages, and consumer loans (including home equity lines and loans, indirect consumer loans, and direct consumer loans). As of December 31, 2025, total commercial real estate loans were $1.410 billion , representing 62.1% of total loan balances, and commercial real estate lending continues to be the primary driver of asset growth, with persistent demand across the Corporation's footprint, particularly in the Capital and Western regions of New York. The Wealth Management Group provides services as executor and trustee under wills and agreements, guardian, custodian, trustee, and agent for pension, profit-sharing and other employee benefit trusts, as well as various investment, pension, estate planning, and employee benefit administrative services. The Corporation also offers interest rate swaps to commercial loan customers who wish to fix the interest rates on their loans, and the Bank matches these swaps using offsetting swaps with Domestic Systemically Important Banks.

During the year ended December 31, 2025, the Corporation completed several significant strategic transactions. On June 10, 2025, the Corporation issued $45.0 million of ten-year 7.75% fixed-to-floating rate subordinated notes, due June 2035, with net proceeds of $44.0 million after debt issuance costs of $1.0 million . From the proceeds, the Corporation provided the Bank with a $37.0 million capital contribution. Subsequent to the issuance, the Corporation sold available for sale securities with a book value of $244.8 million , or approximately 40% of its then total available for sale securities portfolio, resulting in a realized pre-tax loss of $17.5 million and proceeds of $227.3 million . A portion of the proceeds were utilized to pay off $155.0 million in wholesale funding liabilities, including $100.0 million in brokered deposits and $55.0 million in FHLBNY term advances, in July 2025. In April 2025, the Corporation completed the sale of its previous branch property at 806 Buffalo Street, Ithaca, New York, with proceeds totaling $1.3 million , resulting in the recognition of a $0.6 million gain.

Net income for the year ended December 31, 2025 was $15.1 million , or $3.14 per share, compared with net income of $23.7 million , or $4.96 per share, for the prior year. Return on average equity for the year ended December 31, 2025 was 6.40% , compared with 11.53% for the prior year. Net interest income for the year ended December 31, 2025 totaled $87.2 million , an increase of $13.1 million , or 17.7% , compared with $74.1 million for the prior year. Fully taxable equivalent net interest margin was 3.26% for the year ended December 31, 2025 compared to 2.76% for the prior year. Excluding nonrecurring items, net income (as adjusted) for the year ended December 31, 2025 was $27.9 million , or $5.80 per share, and adjusted return on average equity was 11.81% .

Business Outlook

The Corporation's growth strategy includes the opening of additional branches in Western New York, including a branch in West Seneca, New York, as part of its expansion into the Buffalo Metropolitan Area. The Corporation entered this market in 2021 with a full service branch in Clarence, New York, and in 2024 opened a full-service branch and regional banking center in Williamsville, New York, while converting its Clarence branch into an administrative office which was closed in 2025. The Corporation anticipates that new branches do not initially contribute to operating profits due to the impact of overhead expenses and the start-up phase of generating loans and deposits, and to the extent that additional branches are opened, the Corporation may experience the effects of higher operating expenses relative to operating income from the new operations, which may have an adverse effect on the Corporation's levels of net income, return on average equity, and return on average assets.

The Corporation's growth strategy also includes the acquisition of trust businesses to generate new sources of fee income, and the Corporation may acquire banks and related businesses that it believes provide a strategic fit with its business. The Corporation's Board of Directors has concluded that expansion of the franchise's geographic footprint, an increase in the Bank's interest-earning assets and deposits, as well as the generation of new sources of non-interest income are important components of its strategic plan. The Corporation's growth strategy is to leverage its branch and digital network in current or new markets to build client relationships and grow loans and deposits, with emphasis on acquiring stable, low-cost deposits such as checking account deposits and other low interest-bearing deposits to fund high-quality loans.

The Corporation's margin trajectory is influenced by its balance sheet repositioning efforts during 2025, including the sale of available for sale securities and the payoff of wholesale funding liabilities. The average yield on interest-earning assets increased 23 basis points to 4.97% , while the average cost of interest-bearing liabilities decreased 37 basis points to 2.50% . The total cost of funds was 1.86% for the year ended December 31, 2025, compared to 2.15% in the prior year, a decrease of 29 basis points. The Corporation's efficiency ratio (unadjusted) was 74.37% for the year ended December 31, 2025, compared to 69.12% for the prior year, while the adjusted efficiency ratio was 63.00% compared to 68.89% .

As of December 31, 2025, the Corporation employed 348 full-time equivalent employees in 30 locations in New York and Pennsylvania. The Corporation offers a competitive total rewards package for all employees, including competitive base pay, incentive plans for all employees, a 401(k) match, a non-discretionary company 401(k) contribution, health, dental, and vision insurance, life insurance, company contributions to a health savings account, paid time off, family leave, flexible work schedules, tuition reimbursement and student loan repayment assistance, and the opportunity to volunteer in the community during work hours. The Corporation encourages all employees to join career circles, find a mentor, apply for its leadership program, job shadow, participate in moderated employee discussions, and attend other trainings offered.

On June 10, 2025, the Corporation issued $45.0 million of ten-year 7.75% fixed-to-floating rate subordinated notes, due June 2035, with net proceeds of $44.0 million after debt issuance costs of $1.0 million . The Corporation intends to use the net proceeds from the issuance and sale of the Notes for general corporate purposes and to support regulatory capital ratios for growth initiatives. The Corporation's stock repurchase program, approved on January 8, 2021, authorizes the repurchase of up to 250,000 shares of its common stock, and as of December 31, 2025, a total of 49,184 shares were repurchased at an average cost of $40.42 per share, with remaining buyback authority of 200,816 shares. Cash dividends declared during 2025 totaled $6.3 million , or $1.32 per share, compared to $5.9 million , or $1.24 per share in 2024.

The Corporation faces structural headwinds from the elevated interest rate environment and future actions of the FRB, which may impact pricing and demand for deposits in the banking industry. As of December 31, 2025, the Bank had $1.8 billion of deposit liabilities, representing 79.6% of total deposits, that had no maturity and may be withdrawn at any time without penalty. The Corporation's commercial real estate lending exposure could receive increased supervisory scrutiny, as non-owner occupied commercial real estate loans represented 384.9% of Bank risk-based capital as of December 31, 2025, and outstanding balances of such loans increased by 37.1% during the 36 months preceding December 31, 2025. The Corporation also faces risks from the geographic concentration of its markets in upstate New York, making it more sensitive to adverse changes in regional conditions than larger or more geographically diversified competitors.

Risk Factors

The Corporation faces material credit risk from its commercial real estate loan portfolio, which totaled $1.410 billion or 62.1% of total loans as of December 31, 2025, with non-owner occupied commercial real estate loans representing 384.9% of Bank risk-based capital, exposing the Corporation to potential regulatory scrutiny and increased credit losses if economic conditions deteriorate. The Corporation's allowance for credit losses methodology is dependent on the relationship between economic variables and historic default, and an immediate shock of 100 bps in the FOMC's projected unemployment rate and a decrease of 50 bps in projected GDP growth would increase the model's total calculated allowance by $1.0 million , or 4.0% , to $25.2 million . The Corporation's portfolio of indirect automobile loans totaled $132.7 million , or 5.8% of total loans as of December 31, 2025, and these loans are inherently risky as they are often secured by assets that may depreciate rapidly and are more likely to be affected by adverse personal circumstances. The Corporation also faces liquidity risk as $1.8 billion of deposit liabilities, representing 79.6% of total deposits, had no maturity and may be withdrawn at any time without penalty, and uninsured deposits totaled $682.5 million , or 30.1% of total deposits as of December 31, 2025.

Management Priorities

Management's message emphasizes the Corporation's strategic balance sheet repositioning during 2025, including the issuance of $45.0 million of subordinated notes, the sale of available for sale securities with a book value of $244.8 million resulting in a realized pre-tax loss of $17.5 million , and the payoff of $155.0 million in wholesale funding liabilities. Management highlights that the Corporation believes the issuance of subordinated debt strengthens its overall regulatory capital position and improves commercial real estate concentration ratios, allowing for flexibility in pursuing loan growth in its key expansion markets. The Corporation's growth strategy is to leverage its branch and digital network in current or new markets to build client relationships and grow loans and deposits, with emphasis on acquiring stable, low-cost deposits to fund high-quality loans, and the Corporation evaluates potential acquisition targets based on economic viability, integration effectiveness, and accretion to capital and earnings.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Market Area and Competition
  2. [2] Item 1, Business — Market Area and Competition
  3. [3] Item 1, Business — Market Area and Competition
  4. [4] Item 1, Business — Market Area and Competition
  5. [5] Item 1, Business — Market Area and Competition
  6. [6] Item 1, Business — Market Area and Competition
  7. [7] Item 1, Business — Market Area and Competition
  8. [8] Item 1, Business — Market Area and Competition
  9. [9] Item 7, MD&A — Financial Condition, Wealth Management
  10. [10] Item 7, MD&A — Financial Condition, Wealth Management
  11. [11] Item 7, MD&A — Financial Condition, Loans
  12. [12] Item 7, MD&A — Financial Condition, Loans
  13. [13] Item 7, MD&A — Summary of Strategic Actions
  14. [14] Item 7, MD&A — Summary of Strategic Actions
  15. [15] Item 7, MD&A — Summary of Strategic Actions
  16. [16] Item 7, MD&A — Summary of Strategic Actions
  17. [17] Item 7, MD&A — Summary of Strategic Actions
  18. [18] Item 7, MD&A — Summary of Strategic Actions
  19. [19] Item 7, MD&A — Summary of Strategic Actions
  20. [20] Item 7, MD&A — Summary of Strategic Actions
  21. [21] Item 7, MD&A — Summary of Strategic Actions
  22. [22] Item 7, MD&A — Summary of Strategic Actions
  23. [23] Item 7, MD&A — Summary of Strategic Actions
  24. [24] Item 7, MD&A — Summary of Strategic Actions
  25. [25] Item 7, MD&A — Summary of Strategic Actions
  26. [26] Item 7, MD&A — Summary of Strategic Actions
  27. [27] Item 7, MD&A — Consolidated Results of Operations
  28. [28] Item 7, MD&A — Consolidated Results of Operations
  29. [29] Item 7, MD&A — Consolidated Results of Operations
  30. [30] Item 7, MD&A — Consolidated Results of Operations
  31. [31] Item 7, MD&A — Consolidated Results of Operations
  32. [32] Item 7, MD&A — Consolidated Results of Operations
  33. [33] Item 7, MD&A — Net Interest Income
  34. [34] Item 7, MD&A — Net Interest Income
  35. [35] Item 7, MD&A — Net Interest Income
  36. [36] Item 7, MD&A — Net Interest Income
  37. [37] Item 7, MD&A — Net Interest Income
  38. [38] Item 7, MD&A — Net Interest Income
  39. [39] Item 7, MD&A — Consolidated Results of Operations
  40. [40] Item 7, MD&A — Consolidated Results of Operations
  41. [41] Item 7, MD&A — Consolidated Results of Operations
  42. [42] Item 7, MD&A — Net Interest Income
  43. [43] Item 7, MD&A — Net Interest Income
  44. [44] Item 7, MD&A — Net Interest Income
  45. [45] Item 7, MD&A — Net Interest Income
  46. [46] Item 7, MD&A — Consolidated Financial Highlights
  47. [47] Item 7, MD&A — Consolidated Financial Highlights
  48. [48] Item 7, MD&A — Consolidated Financial Highlights
  49. [49] Item 7, MD&A — Consolidated Financial Highlights
  50. [50] Item 1, Business — Human Capital Resources
  51. [51] Item 1, Business — Human Capital Resources
  52. [52] Item 7, MD&A — Summary of Strategic Actions
  53. [53] Item 7, MD&A — Summary of Strategic Actions
  54. [54] Item 7, MD&A — Summary of Strategic Actions
  55. [55] Item 7, MD&A — Summary of Strategic Actions
  56. [56] Item 5, Market for Registrant's Common Equity
  57. [57] Item 5, Market for Registrant's Common Equity
  58. [58] Item 5, Market for Registrant's Common Equity
  59. [59] Item 5, Market for Registrant's Common Equity
  60. [60] Item 7, MD&A — Shareholders' Equity
  61. [61] Item 7, MD&A — Shareholders' Equity
  62. [62] Item 7, MD&A — Shareholders' Equity
  63. [63] Item 7, MD&A — Shareholders' Equity
  64. [64] Item 1A, Risk Factors — Liquidity Risks
  65. [65] Item 1A, Risk Factors — Liquidity Risks
  66. [66] Item 1A, Risk Factors — Commercial Real Estate Lending
  67. [67] Item 1A, Risk Factors — Commercial Real Estate Lending
  68. [68] Item 7, MD&A — Loans
  69. [69] Item 7, MD&A — Loans
  70. [70] Item 1A, Risk Factors — Commercial Real Estate Lending
  71. [71] Item 7, MD&A — Critical Accounting Estimates
  72. [72] Item 7, MD&A — Critical Accounting Estimates
  73. [73] Item 7, MD&A — Critical Accounting Estimates
  74. [74] Item 1A, Risk Factors — Indirect Automobile Lending
  75. [75] Item 1A, Risk Factors — Indirect Automobile Lending
  76. [76] Item 1A, Risk Factors — Liquidity Risks
  77. [77] Item 1A, Risk Factors — Liquidity Risks
  78. [78] Item 7, MD&A — Liquidity
  79. [79] Item 7, MD&A — Liquidity
  80. [80] Item 7, MD&A — Summary of Strategic Actions
  81. [81] Item 7, MD&A — Summary of Strategic Actions
  82. [82] Item 7, MD&A — Summary of Strategic Actions
  83. [83] Item 7, MD&A — Summary of Strategic Actions
  84. [84] Item 7, MD&A — Consolidated Financial Highlights
  85. [85] Item 7, MD&A — Consolidated Financial Highlights
  86. [86] Item 7, MD&A — Consolidated Financial Highlights
  87. [87] Item 7, MD&A — Consolidated Financial Highlights
  88. [88] Item 7, MD&A — Consolidated Financial Highlights
  89. [89] Item 7, MD&A — Consolidated Financial Highlights
  90. [90] Item 7, MD&A — Consolidated Financial Highlights
  91. [91] Item 7, MD&A — Consolidated Financial Highlights
  92. [92] Item 7, MD&A — Consolidated Results of Operations
  93. [93] Item 7, MD&A — Consolidated Results of Operations
  94. [94] Item 7, MD&A — Consolidated Results of Operations
  95. [95] Item 7, MD&A — Consolidated Results of Operations
  96. [96] Item 7, MD&A — Consolidated Results of Operations
  97. [97] Item 7, MD&A — Consolidated Results of Operations
  98. [98] Item 7, MD&A — Consolidated Results of Operations
  99. [99] Item 7, MD&A — Consolidated Results of Operations
  100. [100] Item 7, MD&A — Consolidated Financial Highlights
  101. [101] Item 7, MD&A — Consolidated Financial Highlights
  102. [102] Item 7, MD&A — Consolidated Financial Highlights
  103. [103] Item 7, MD&A — Consolidated Financial Highlights
  104. [104] Item 7, MD&A — Consolidated Financial Highlights
  105. [105] Item 7, MD&A — Consolidated Financial Highlights
  106. [106] Item 7, MD&A — Financial Condition
  107. [107] Item 7, MD&A — Financial Condition
  108. [108] Item 7, MD&A — Financial Condition
  109. [109] Item 7, MD&A — Financial Condition
  110. [110] Item 7, MD&A — Financial Condition
  111. [111] Item 7, MD&A — Financial Condition
  112. [112] Item 7, MD&A — Consolidated Financial Highlights
  113. [113] Item 7, MD&A — Consolidated Financial Highlights
  114. [114] Item 7, MD&A — Consolidated Financial Highlights
  115. [115] Item 7, MD&A — Consolidated Financial Highlights
  116. [116] Item 7, MD&A — Allowance for Credit Losses
  117. [117] Item 7, MD&A — Allowance for Credit Losses
  118. [118] Item 7, MD&A — Non-Performing Loans
  119. [119] Item 7, MD&A — Non-Performing Loans
  120. [120] Item 7, MD&A — Consolidated Financial Highlights
  121. [121] Item 7, MD&A — Consolidated Financial Highlights
  122. [122] Item 7, MD&A — Summary of Strategic Actions
  123. [123] Item 7, MD&A — Summary of Strategic Actions

Analysis on 6/21/2026