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Item 9A. Controls and Procedures

2025-03-14 compared with 2024-03-13 · 620 added, 588 removed, 1684 unchanged (42% of the section changed)

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Information responsive to this Item 10 is incorporated herein by reference to the Corporation's definitive proxy statement for its 2025 Annual Meeting of Shareholders, which will be filed with the SEC within 120 days after the Corporation’s 2024 fiscal year end.

The Corporation has an Insider Trading Policy governing the purchase, sale and other disposition of the Chemung Financial Corporation's securities that applies to all personnel of the Corporation and its subsidiaries, including directors, officers, employees and other covered persons.

The Corporation believes that its Insider Trading Policy is reasonably designed to promote compliance with insider trading laws, rules and regulations, as well as applicable listing standards.

A copy of the Corporation's insider trading policy is filed as Exhibit 19 to this report.

EXECUTIVE COMPENSATION

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4.2 Description of Common Stock Registered Under Section 12 of the Securities Exchange Act of 1934, filed herewith (as incorporated by reference to Exhibit 4.2 to Registrant's Form 10-K for the year ended December 31, 2019 and filed with the Commission on March 12, 2020).

10.1 Chemung Financial Corporation 2014 Omnibus Plan and Component Plans (Chemung Financial Corporation Restricted Stock Plan, Chemung Financial Corporation Incentive Compensation Plan, Chemung Financial Corporation Directors’ Compensation Plan and Chemung Financial Corporation/Chemung Canal Trust Company Directors’ Deferred Fee Plan) (filed as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5 to Registrant’s Form S-8 filed with the Commssion on January 27, 2015 and incorporated herein by reference).

10.1 Chemung Financial Corporation 2014 Omnibus Plan and Component Plans (Chemung Financial Corporation Restricted Stock Plan, Chemung Financial Corporation Incentive Compensation Plan, Chemung Financial Corporation Directors’ Compensation Plan and Chemung Financial Corporation/Chemung Canal Trust Company Directors’ Deferred Fee Plan) (filed as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5 to Registrant’s Form S-8 filed with the Commission on January 27, 2015 and incorporated herein by reference).

10.2 Change of Control Agreement dated December 19, 2018 between Chemung Canal Trust Company and Anders M.

Tomson, President and Chief Executive Officer (filed as Exhibit 10.1 to Registrant’s Form 8-K filed with the Commission on December 19, 2018 and incorporated herein by reference).

10.3 Change of Control Agreement dated December 18, 2019 between Chemung Canal Trust Company and Karl F.

Krebs, Executive Vice President and Chief Financial Officer (filed as Exhibit 10.1 to Registrant’s Form 8-K filed with the Commission on December 23, 2019 and incorporated herein by reference).

10.3 Change of Control Agreement dated December 18, 2019 between Chemung Canal Trust Company and Peter K.

Cosgrove, Executive Vice President and Chief Credit Officer, filed herewith.*

Cosgrove, Executive Vice President and Chief Credit Officer, and incorporated herein by reference.

10.4 Change of Control Agreement dated December 18, 2019 between Chemung Canal Trust Company and Daniel D.

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McKim, III, Executive Vice President, Chief Financial Officer and Treasurer, (filed as Exhibit 10.1 to Registrant's Form 8-K filed with the Commission on June 2, 2023 and incorporated herein by reference).

10.15 Post-Employment Consulting Agreement between Chemung Canal Trust Company and Karl F.

Krebs, former Executive Vice President, Chief Financial Officer and Treasurer, (filed as Exhibit 10.1 to Registrant's Form 8-K filed with the Commission on June 29, 2023 and incorporated herein by reference).

19 Policy Related to Insider Trading, filed herewith.*

21 Subsidiaries of the Registrant.*

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32.2 Certification of Treasurer and Chief Financial Officer of the Registrant pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 19 U.S.C.

97 Policy Relating to Recovery of Erroneously Awarded Compensation, filed herewith.*

97 Policy Relating to Recovery of Erroneously Awarded Compensation, incorporated herein by reference.

101.INS Instance Document

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Consolidated Statements of Income for the two years ended December 31, 2024

Consolidated Statements of Comprehensive Income (Loss) for the two years ended December 31, 2023

Consolidated Statements of Comprehensive Income for the two years ended December 31, 2024

Consolidated Statements of Shareholders' Equity for the two years ended December 31, 2024

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Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Chemung Financial Corporation and Subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income (loss), shareholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of Chemung Financial Corporation and Subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the "financial statements").

We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by COSO.

Explanatory Paragraph – Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for credit losses effective January 1, 2023 due to the adoption of ASC 326.

Basis for Opinion

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting, as disclosed in Item 9A.

Basis for Opinions

Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

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Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses –Loans Collectively Evaluated for Impairment

As described in Notes 1 and 4 and the explanatory paragraph above, the Company adopted ASC 326 Financial Instruments – Credit Losses as of January 1, 2023, using the modified retrospective method.

In doing so, the Company recorded a decrease to retained earnings of $1.1 million, net of tax, for the cumulative effect of adopting ASC 326, as noted in the Consolidated Statements of Shareholders’ Equity.

The 2023 provision for credit losses was $3.3 million.

As of December 31, 2023, the ACL on loans was $22.5 million.

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Credit Losses – Qualitative Factors

As described in Notes 1 and 4 to the consolidated financial statements, the company accounts for credit losses under ASC 326, Financial Instruments – Credit Losses.

ASC 326 requires the measurement of expected lifetime credit losses for financial assets measured at amortized cost at the reporting date.

The measurement is based on historical experience and trends, current economic information, forecasted data, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio.

Management employs a process and methodology to estimate the ACL on loans collectively evaluated for impairment for both the quantitative and qualitative components.

As of December 31, 2024, the balance of the Allowance for Credit Losses (“ACL”) on Loans was $21.4 million.

Management employees a process and methodology to estimate the ACL on Loans collectively analyzed for impairment including both quantitative and qualitative components.

The methodology for evaluating the quantitative component includes pooling loans into portfolio segments based on the risk profile of each instrument.

The quantitative component of the estimate relies on the statistical relationship between the projected value of an economic indicator and the implied historical loss experience among a curated group of peers.

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Based on the results of this analysis, a probability of default (PD) and a loss given default (LGD) is assigned to each potential value of an economic indicator for each pool of loans, which is applied to derive the statistical loss implications thereof.

The DCF incorporates a hypothetical loss for each period of the calculation, as well as assumed recoveries of past losses, to reach a present value for each loan.

The DCF incorporates a presumed loss for each period of the calculation, as well as assumed recoveries of past losses, to reach a present value for each loan.

The reserve applied to a specific instrument is the difference between the sum of the present value of future cash flows and the book balance of the loan at the measurement date.

The ACL model incorporates qualitative loss factor adjustments in order to calibrate the model for risk in each portfolio segment that reflects management's expectation of loss conditions differing from those already captured in the quantitative component of the model.

We identified auditing the ACL on loans collectively evaluated for impairment as a critical audit matter because the methodology to determine the estimate for credit losses significantly changed upon adoption of ASC 326, including changes made to loss estimation models, the application of new accounting policies, and the use of significant judgments by management for both the quantitative and qualitative components.

Performing audit procedures to evaluate the implementation and subsequent application of ASC 326 for credit losses involved a high degree of auditor judgment and required significant effort, including the need to involve valuation specialists.

The ACL model incorporates qualitative adjustments in order to calibrate the model for risk in each portfolio segment that reflects management’s expectation of loss conditions differing from those already captured in the quantitative component of the model.

We identified auditing the qualitative component of the ACL on pooled loans as a critical audit matter because evaluating qualitative adjustments involved a high degree of auditor judgment and audit effort, including the need to involve more experienced audit personnel including the use of internal specialists.

The primary procedures we performed to address this critical audit matter included:

Testing the design and operating effectiveness of controls over the evaluation of the ACL related to loans collectively evaluated for impairment, including controls addressing:

The selection and application of new accounting policies involved in the adoption of ASC 326.

Data inputs, judgments and calculations used to determine the qualitative loss factors.

Information technology and financial applications used in the ACL process.

Problem loan identification and delinquency monitoring.

Management’s evaluation of qualitative loss factors.

Substantively testing management’s process, including evaluating their judgments and assumptions, for developing the ACL on loans collectively evaluated for impairment, which included:

Evaluating the appropriateness of the Company’s accounting policies, judgments and elections involved in the adoption of ASC 326.

Testing the mathematical accuracy of the ACL calculation.

Utilizing internal specialists to perform procedures to assist in evaluating the relevance of macroeconomic loss drivers.

Testing the relevance and reliability of the internal and external data used in the qualitative allocation.

Evaluating the reasonableness of management’s judgments related to the qualitative loss factors to determine if the loss factors are calculated in accordance with management’s policies and were consistently applied from the point of adoption to year end.

• Testing controls over the qualitative component of the ACL on pooled loans, including controls addressing:

◦ Relevance and reliability of data used to determine the qualitative adjustments.

◦ Reasonableness of management’s judgments applied in the determination of qualitative adjustments.

◦ The appropriateness of the calculation of the qualitative adjustments, including the verification that the qualitative adjustments are appropriately applied in the ACL.

◦ Management’s review of the appropriateness of qualitative adjustments framework.

• Substantively testing management’s estimate, including evaluating their judgments and assumptions, for the qualitative component of the ACL on loans collectively analyzed, which included:

◦ Evaluating the appropriateness of the qualitative adjustment framework, with the assistance of internal specialists.

◦ Evaluating the reasonableness of management’s judgments related to the qualitative adjustments to determine if the qualitative adjustments are developed in accordance with management’s policies and were consistently applied over the period.

◦ Evaluating relevance and reliability of data from internal and external sources considered in the evaluation of qualitative adjustments.

◦ Evaluating the mathematical accuracy of the calculation of qualitative adjustments, including evaluating that the qualitative adjustments are appropriately applied in the ACL.

We have served as the Company's auditor since 2006.

Grand Rapids, Michigan

Livingston, New Jersey

March 14, 2025

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Equity investments, at fair value 3,235 3,046

Securities available for sale, at estimated fair value (amortized cost of $ 669,092 , net of allowance for credit losses on securities of $ 0 at December 31, 2023;

and amortized cost of $ 729,198 , net of allowance for credit losses on securities of $ 0 at December 31, 2022)

Securities available for sale, at estimated fair value (amortized cost of $ 617,271 , net of allowance for credit losses on securities of $ 0 as of December 31, 2024;

and amortized cost of $ 669,092 , net of allowance for credit losses on securities of $ 0 as of December 31, 2023)

531,442 583,993

Securities held to maturity, (estimated fair value of $ 785 at December 31, 2023 and $ 2,402 at December 31, 2022 net allowance for credit losses of $ 0 at December 31, 2023 and December 31, 2022, respectively)

Securities held to maturity, (estimated fair value of $ 808 as of December 31, 2024 and $ 785 as of December 31, 2023 net allowance for credit losses of $ 0 as of December 31, 2024 and December 31, 2023, respectively)

FHLBNY and FRBNY Stock, at cost 9,117 5,498

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Allowance for credit losses ( 21,388 ) ( 22,517 )

( 22,517 ) ( 19,659 )

Loans, net 2,050,031 1,950,147

Loans held for sale — —

Premises and equipment, net 16,375 14,571

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Interest rate swap assets 23,829 23,942

Accrued interest and other assets 61,314 59,892

Accrued interest receivable and other assets 64,053 61,314

Total assets $ 2,776,147 $ 2,710,529

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FHLBNY overnight advances 109,110 31,920

Capital lease obligation 3,050 3,327

Long-term finance lease obligation 3,779 3,050

Operating lease liabilities 5,629 5,827

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Common stock, $ 0.01 par value per share, 10,000,000 shares authorized;

5,310,076 issued at December 31, 2023 and December 31, 2022

5,310,076 issued as of December 31, 2024 and December 31, 2023

Additional-paid-in capital 48,783 47,773

Retained earnings 247,705 229,930

Treasury stock, at cost ( 572,663 shares at December 31, 2023;

615,448 shares at December 31, 2022)

Treasury stock, at cost ( 555,881 shares as of December 31, 2024;

572,663 shares as of December 31, 2023)

( 16,167 ) ( 16,502 )

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Total liabilities and shareholders' equity $ 2,776,147 $ 2,710,529

(1) Effective January 1, 2023, the allowance calculation is based upon Current Expected Credit loss methodology.

Prior to January 1, 2023, the allowance calculation was based upon incurred loss methodology.

Refer to Note 1 for further discussion.

See accompanying notes to consolidated financial statements.

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Provision (credit) for credit losses ( 46 ) 3,262

3,262 ( 554 )

Net interest income after provision for credit losses 74,105 71,195

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Professional services 2,353 2,293

Amortization of intangible assets — 15

Marketing and advertising expense 1,182 923

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Basic and diluted earnings per share $ 4.96 $ 5.28

(1) Effective January 1, 2023, the allowance calculation is based upon Current Expected Credit loss methodology.

Prior to January 1, 2023, the allowance calculation was based upon incurred loss methodology.

Refer to Note 1 for further discussion.

See accompanying notes to consolidated financial statements.

CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31,

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Net of tax amount 1,487 748

Total other comprehensive income (loss) 9,244 ( 68,727 )

Comprehensive income (loss) $ 34,244 $ ( 39,944 )

Total other comprehensive income 948 9,244

Comprehensive income $ 24,619 $ 34,244

See accompanying notes to consolidated financial statements.

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Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive (Loss) Total

Balances at December 31, 2021 $ 53 $ 46,901 $ 188,877 $ ( 17,846 ) $ ( 6,530 ) $ 211,455

Balances as of December 31, 2022 $ 53 $ 47,331 $ 211,859 $ ( 17,598 ) $ ( 75,257 ) $ 166,388

Cumulative effect of accounting change (a) — — ( 1,076 ) — — ( 1,076 )

Balances as of January 1, 2023 53 47,331 210,783 ( 17,598 ) ( 75,257 ) 165,312

Net income — — 25,000 — — 25,000

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— ( 147 ) — 243 — 96

Sale of 9,367 shares of treasury stock (a)

Sale of 14,994 shares of treasury stock (b)

— 171 — 430 — 601

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— 11 — ( 13 ) — $ ( 2 )

Balances at December 31, 2022 $ 53 $ 47,331 $ 211,859 $ ( 17,598 ) $ ( 75,257 ) $ 166,388

Balances as of December 31, 2023 $ 53 $ 47,773 $ 229,930 $ ( 16,502 ) $ ( 66,013 ) $ 195,241

Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive (Loss) Total

Balances at December 31, 2022 $ 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 53 47,331 210,783 ( 17,598 ) ( 75,257 ) 165,312

Balances as of January 1, 2024 53 47,773 229,930 ( 16,502 ) ( 66,013 ) 195,241

Net income — — 23,671 — — 23,671

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— ( 217 ) — 217 — —

Sale of 14,994 shares of treasury stock (a)

Sale of 9,322 shares of treasury stock (b)

— 161 — 269 — 430

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— 5 — ( 5 ) — —

Balances at December 31, 2023 $ 53 $ 47,773 $ 229,930 $ ( 16,502 ) $ ( 66,013 ) $ 195,241

(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.

Balances as of December 31, 2024 $ 53 $ 48,783 $ 247,705 $ ( 16,167 ) $ ( 65,065 ) $ 215,309

(a) Implementation of ASC 326.

See Adoption of New Accounting Standards" discussion in Note 1.

(b) All treasury stock sales were completed at the prevailing market price with the Chemung Canal Trust Company Profit Sharing, Savings, and Investment Plan which is a defined contribution plan sponsored by the Bank.

See accompanying notes to consolidated financial statements.

CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOW

(in thousands) YEARS ENDED DECEMBER 31,

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Provision for credit losses ( 46 ) 3,425

Loss on disposal of fixed assets 3 56

Loss (gain) on disposal of fixed assets ( 39 ) 3

Depreciation and amortization of fixed assets 1,814 2,001

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Redemption of FHLBNY and FRBNY stock 28,037 102,625

Proceeds from sales of fixed assets 44 —

Purchases of premises and equipment ( 3,626 ) ( 462 )

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Net change in FHLBNY overnight advances 77,190 ( 63,890 )

Principal payments made on capital leases ( 277 ) ( 267 )

Increases in (payments on) finance leases 729 ( 277 )

Purchase of treasury stock ( 344 ) ( 316 )

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Dividends declared, not yet paid $ — $ 1,469

Right-of-use assets obtained through finance lease liabilities $ 935 $ —

See accompanying notes to consolidated financial statements.

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CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash and amounts due from banks, demand interest-bearing deposits, and time deposits with other financial institutions.

Cash and cash equivalents include cash and amounts due from banks and demand interest-bearing deposits with other financial institutions.

EQUITY INVESTMENTS

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Management determines the appropriate classification of securities at the time of purchase.

If management has the intent and the Corporation has the ability at the time of purchase to hold securities until maturity, they are classified as held to maturity and carried at amortized cost.

If the Corporation has the intent and the ability at the time of purchase to hold securities until maturity, they are classified as held to maturity and carried at amortized cost.

Securities to be held for indefinite periods of time or not intended to be held to maturity are classified as available for sale and carried at fair value.

Premiums and discounts are amortized or accreted over the life of the related security as an adjustment of yield using the interest method.

Dividend and interest income is recognized when collected.

Unrealized holding gains and losses on securities classified as available for sale are excluded from earnings and are reported as accumulated other comprehensive income (loss) in shareholders' equity, net of the related tax effects, until realized.

Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the interest method.

Dividend and interest income on securities is recognized on an accrual basis.

Unrealized holding gains and losses on securities classified as available for sale are excluded from earnings and reported as accumulated other comprehensive income (loss) in shareholders' equity, net of the related tax effects, until realized.

Realized gains and losses are determined using the specific identification method.

Management assesses available for sale securities in an unrealized loss position on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation, to determine whether it intends to sell, or it is more likely than not that it will be required to sell a security in an unrealized loss position before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as a write down through earnings.

Available for sale securities in a loss position that do not meet either of the aforementioned criteria, are reviewed by management to determine whether the unrealized loss is due to credit related circumstances, or other non-credit related factors.

In making this determination, management evaluates a range of factors including the extent to which fair value is less than amortized cost, existing conditions that may adversely impact the issuer, changes to the credit rating of either the issuer or the specific security, among other considerations.

An allowance for credit losses is established for securities, when upon evaluation, management has determined that the unrealized losses are due at least in part to credit conditions.

The allowance for credit losses is determined as the difference, if any, between the present value of expected cash flows and the amortized basis of the security, limited to the extent that amortized basis exceeds fair value.

The Corporation holds the majority of its available for sale securities in obligations that are issued by U.S.

Management assesses available for sale securities in an unrealized loss position on at least a quarterly basis, and more frequently if economic or market conditions warrant such an evaluation, to determine whether it intends to sell, or it is more likely than not that it will be required to sell a security in an unrealized loss position before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the security's amortized basis is written down to fair value through current period earnings.

Available for sale securities in a loss position that do not meet either of the aforementioned criteria, are reviewed by management to determine whether the unrealized loss is due to credit-related factors or other non-credit related factors.

In making this determination, management evaluates a range of variables including the extent to which fair value is less than amortized cost, existing conditions that may adversely impact the issuer, changes to the credit rating of either the issuer or the specific security, among other considerations.

An allowance for credit losses is established for securities when upon evaluation, management has determined that a portion of unrealized losses are due at least in part to credit-related factors.

The allowance for credit losses is determined as the difference between the present value of expected cash flows using the security's effective interest rate and the amortized basis of the security, limited to the extent by which amortized basis exceeds fair value.

Expected credit losses on held to maturity securities are measured on a collective basis when similar risk characteristics exist, and on an individual basis for securities that do not share risk characteristics with those analyzed on a collective basis.

Accrued interest receivable on securities is excluded from any measurement of an allowance for credit losses.

As of December 31, 2024 and 2023, accrued interest receivable on securities was $ 1.9 million and $ 2.1 million, respectively.

A majority of the Corporation's available for sale securities portfolio is held in obligations issued by U.S.

Government entities or agencies and enterprises affiliated with the U.S.

Due to the explicit or implicit guarantee of the full faith and credit of the U.S.

Government, the Corporation considers these securities to carry a near zero credit loss implication.

Government, the Corporation considers these securities to carry a zero credit loss assumption.

Securities included under this implication include U.S.

Treasury securities, mortgage backed securities issued by government-sponsored agencies, and SBA pooled loan securities.

Securities that do not fall under this categorization primarily relate to corporate subordinated debt issues.

Treasury securities, mortgage backed securities issued by government-sponsored enterprises, and SBA pooled loan securities.

Management monitors conditions that may impact these zero credit loss assumptions on a regular basis.

FEDERAL HOME LOAN BANK AND FEDERAL RESERVE BANK STOCK

The Bank is a member of both the FHLBNY and the FRBNY.

FHLBNY members are required to own a certain amount of stock based on the level of borrowings and other factors, while FRBNY members are required to own a certain amount of stock based on a percentage of the Bank’s capital stock and surplus.

FHLBNY members are required to own stock proportional to their level of borrowings and participation in the Mortgage Asset Program (MAP), among other factors, while FRBNY members are required to own stock proportionally based on a percentage of the Bank’s capital stock and surplus.

FHLBNY and FRBNY stock are carried at cost and classified as non-marketable equities and periodically evaluated for impairment based on ultimate recovery of par value.

Cash and stock dividends are reported as income.

Loans are stated at their amortized basis, which is the amount of unpaid principal balance net of deferred loan cost and fees.

Loans are stated at their amortized basis, which is the amount of unpaid principal balance net of unamortized deferred loan cost and fees.

An accounting policy election was made to exclude accrued interest receivable from the amortized cost basis of loans.

Accrued interest receivable is included in the "Accrued interest and other assets" line item in the Corporation's Consolidated Balance Sheets.

Accrued interest receivable is included in accrued interest and other assets on the Corporation's Consolidated Balance Sheets.

The Corporation has the ability and intent to hold its loans for the foreseeable future.

The Corporation’s loan portfolio is comprised of the following segments:

(i) commercial and agricultural, (ii) commercial mortgages, (iii) residential mortgages, and (iv) consumer loans.

Commercial and agricultural loans primarily consist of loans to small to mid-sized businesses in the Corporation’s market area in a diverse range of industries.

(i) commercial and industrial, (ii) commercial mortgages, (iii) residential mortgages, and (iv) consumer loans.

Commercial and industrial loans primarily consist of loans to small and mid-sized businesses in the Corporation’s market area in a diverse range of industries.

These loans are typically made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business.

Commercial mortgage loans are generally non-owner occupied commercial properties or owner occupied commercial real estate with larger balances.

Commercial mortgage loans are generally non-owner occupied commercial properties or owner occupied commercial real estate.

Repayment of these loans is often dependent upon the successful operation and management of the properties and the businesses occupying the properties, as well as on the collateral securing the loan.

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Loans may also be placed on non-accrual status if management believes such classification is otherwise warranted.

All payments received on non-accrual loans are applied to principal.

Loans are returned 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.

Payments received on nonaccrual loans are generally applied to principal using the cost recovery method, but in limited instances may be recognized as interest income on a cash basis.

Loans are generally returned 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.

Loan origination fees and certain direct loan origination costs are deferred and amortized over the life of the loan as an adjustment to yield, using the interest method.

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Under prior guidance, a TDR was deemed to have occurred when the Corporation modified a loan to a borrower experiencing financial difficulty, and where a concession was made by the Corporation.

Consistent with ASU 2022-02, the Corporation now evaluates loan modifications to borrowers experiencing financial difficulty on the basis and extent of their direct impact on contractual cash flows.

Under ASU 2022-02, the Corporation evaluates loan modifications to borrowers experiencing financial difficulty on the basis and extent of their direct impact on contractual cash flows.

Modifications under this guidance include principal forgiveness, interest rate reductions, more than insignificant payment delays, term extensions, or a combination thereof.

Payment delays are generally considered insignificant when the duration of the delay is less than or equal to three months.

Once a loan modification is determined to meet the aforementioned criteria, a determination is made as to whether the modification represents the continuation of an existing loan, or a new loan, in accordance with ASC-310-20-35-9 through 11.

Once a loan modification is determined to meet the aforementioned criteria, a determination is made by management as to whether the modification represents the continuation of an existing loan, or a new loan, in accordance with ASC-310-20-35-9 through 11.

The Corporation considers a loan modification to represent the establishment of a new loan if the resulting terms are at least as favorable to the Corporation as the terms made to other borrowers with similar risk profiles.

In the event that a modification is determined to represent a new loan, all unamortized deferred costs and fees are to be recognized through interest income at the point the modification is granted.

Modifications that do not meet this criteria shall be considered a continuation of an existing loan, and all unamortized deferred costs and fees are to be carried forward as part of the modified loan's basis.

ALLOWANCE FOR CREDIT LOSSES

The allowance is an amount that management believes will be adequate to absorb estimated lifetime credit losses inherent in its portfolios of assets exhibiting credit risk.

When a modification is determined to represent a new loan, all unamortized deferred costs and fees are immediately recognized through interest income when the modification is granted.

Modifications that do not meet this criteria are considered a continuation of the existing loan, and all unamortized deferred costs and fees are carried forward as part of the modified loan's amortized basis.

ALLOWANCE FOR CREDIT LOSSES ON LOANS

The allowance for credit losses is an amount management believes will be adequate to absorb estimated lifetime credit losses inherent in its various portfolios of loans.

The Corporation adopted ASC 326 - Financial Instruments-Credit Losses effective January 1, 2023.

The allowance for credit losses is estimated using the Corporation's CECL methodology, and replaces the incurred loss methodology used to estimate its allowance for loan and lease losses under prior guidance.

CECL methodology utilizes historical information, current conditions, and reasonable and supportable economic forecasts to estimate the allowance for credit losses.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

The ASU supersedes prior GAAP by replacing the incurred loss impairment method with a methodology that reflects lifetime expected credit losses and requires the consideration of a broader range of reasonable and supportable information to form credit loss estimates.

The allowance is estimated using the Corporation's CECL methodology, which utilizes historical information, current conditions, and reasonable and supportable economic forecasts to estimate expected lifetime credit losses as of the measurement date.

In November 2019, the FASB adopted an amendment to postpone the effective date of ASU 2016-13 to January 2023 for certain entities, including certain Securities and Exchange Commission filers, public business entities, and private companies.

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The $ 1.5 million adjustment was reflective of the establishment of an allowance for credit losses on unfunded commitments, totaling $ 1.1 million, and a $ 0.4 million addition to the allowance for credit losses on loans, reflecting the change in methodology.

Under the Corporation's CECL methodology, loans are analyzed on either a pooled basis, or an individual basis, based on an assessment of risk factors.

Loans that exhibit similar risk characteristics and are pooled based on their assigned FFIEC call codes.

When it is determined that a loan no longer exhibits risk characteristics consistent with its assigned pool, it is designated for individual analysis.

Pooled loans utilize both a quantitative and qualitative component to determine the appropriate estimate of the allowance for credit losses.

Under the Corporation's CECL methodology, loans are analyzed on either a pooled (collective) basis or an individual basis, based on an assessment of risk factors.

Loans exhibiting similar risk characteristics are pooled based on assigned FFIEC Call Report codes.

When a determination is made that a loan no longer exhibits risk characteristics consistent with its assigned pool, it is designated for individual analysis.

Pooled loans utilize both quantitative and qualitative components to determine an appropriate estimate of the allowance for credit losses.

The quantitative component is based on an estimated discounted cash flow (DCF) analysis, performed at the loan level.

The underlying assumptions on which the DCF calculation is based incorporate the relationship between a projected value of an economic indicator, and the implied historical loss experience amongst a group of peers established by management.

Underlying assumptions on which the DCF calculation is based incorporate the relationship between projected values of an economic variable, and the implied historical loss experience amongst a group of peers curated by management.

The Corporation utilizes a regression analysis to identify suitable economic variables, known as loss drivers, for each pool of loans.

The DCF incorporates a hypothetical loss for each period of the calculation, as well as assumed recoveries of past losses, to reach a present value for each loan.

The modeled allowance for credit losses for each individual loan is the book balance of the loan as of the measurement date, less the present value of cash flows.

Based on the results of this analysis, a probability of default (PD) and a loss given default (LGD) is assigned to each potential value of an economic variable for each pool of loans, which is applied to derive the statistical loss implications thereof.

The DCF incorporates a presumed loss for each period of the calculation, as well as assumed recoveries of past losses, to determine a present value for each loan.

A loan's modeled allowance for credit losses equals the book balance as of the measurement date, less the estimated present value of cash flows.

Forecasted economic variables are applied over a four quarter period, and revert to the historical mean of the economic variable over an eight quarter period, on a straight line basis.

Based on assigned FFIEC call codes, and the risk characteristics of lending activities and collateral among loans within call codes, the Corporation has disaggregated its loan portfolio into the following nine pools:

Construction - Commercial and retail loans secured by real estate and made for the purposes of on-site construction or land development.

This portfolio primarily consists of commercial construction loans, as well as a small number of residential single family construction to permanent loans.

Construction loans are commonly evaluated using an "as-stabilized" or "as completed" appraisal, and the Corporation seeks sponsors who can provide adequate equity in the project at inception, or who have a well-documented history of successfully completing similar projects.

Risks specific to construction lending include changes in market conditions prior to the completion of a construction phase, quality of work performed and cost overruns, and the realization of borrower assurances including but not limited to pre-sales, tenant contracts, and financial covenants.

Home Equity Lines of Credit and Junior Liens - Retail loans that are secured by secondary or inferior lien positions on 1-4 family residential real estate.

Repayment sources primarily rely on borrowers' primary source of income, and are determined based on a borrower's equity position in the collateralized property.

Default risk on secondary liens is greater than on primary liens, as a borrower is likely to prioritize payments on any outstanding indebtedness on the primary lien position.

Based on assigned FFIEC Call Report codes, the risk characteristics of lending activities, and collateral composition among loans within Call Report codes, the Corporation has disaggregated its loan portfolio into the following nine pools:

Construction - Commercial and retail loans secured by real estate made for the purposes of on-site construction or land development, and are actively in the construction phase.

This portfolio largely consists of commercial construction loans, as well as a limited number of residential single family construction-to-permanent loans.

Construction loans are typically evaluated using an "as-stabilized" or "as completed" appraisal valuation, and the Corporation seeks sponsors who can provide sufficient equity and project inception or who have a proven track record of successfully completing similar projects.

Specific risks associated with construction lending include fluctuations in market conditions prior to completion of the construction phase, work quality, cost overruns, and the realization of borrower assurances related to pre-sales, tenant contracts, and financial covenants, among others.

Home Equity Lines of Credit and Junior Liens - Retail loans secured by secondary or otherwise subordinate lien positions on 1-4 family residential real estate.

Repayment sources generally depend on borrowers' primary source of income and terms are assessed based on borrowers' equity position in the collateralized property.

Specific risks associated with secondary liens include a greater default risk than on associated primary liens as borrowers are likely to prioritize payments on outstanding debt secured by a primary lien position.

Secondary lien positions are additionally exposed to greater market risk in the event of foreclosure, and therefore are more sensitive to changes in underlying collateral valuations than primary lien positions.

1-4 Family Residential First Liens - Retail and commercial loans secured by primary lien positions on 1-4 family residential real estate.

For retail loans secured by primary liens on residential property, repayment is primarily dependent on borrowers' primary source of income.

For commercial loans secured by primary liens on residential property, repayment sources may be more diverse.

Significant risk factors include localized economic conditions, that may impact both the collateralized property's value, as well as employment prospects for borrowers who rely on their primary source of income as means of repayment, and regulatory risks specific to housing that may inhibit a bank's ability to pursue means of repayment.

Multifamily - Commercial real estate secured by residential properties comprising of greater than four livable units.

Multifamily properties are commonly managed by the borrower and rented to tenants for residential purposes.

Repayment sources primarily consist of rental income from the property.

Risks associated with multifamily projects include the borrower's ability to attract and maintain a base of tenants at rental rates in excess of those required to finance, manage, and maintain the property, as well as risks relating to demographic considerations in the population of prospective tenants.

Owner Occupied Commercial Real Estate - Commercial real estate loans secured by property that is occupied and or operated by the primary borrower or a related entity.

Cash flow from the operation of the borrower's businesses are generally the primary source of repayment for owner occupied commercial real estate.

Borrower industry and the competence of business operators are generally the primary risks associated with this type of lending activity.

Non Owner Occupied Commercial Real Estate - Commercial real estate loans secured by properties that are maintained and managed by the borrowers, but rely on rental income from outside commercial organizations to provide cash flow for repayment.

Successful operations of tenant businesses significantly impacts borrowers' ability to finance these obligations.

A primary risk relating to real estate of this nature is the limited influence that a borrower can have on the successful operation of tenant businesses, and the possibility of not being able to find suitable or willing replacement tenants, should vacancies arise.

The Corporation seeks to lend in this segment to sponsors who have demonstrated the capability of aligning with strong and dependable tenants, considering both the current environment that tenants operate in, as well as future prospects for their industries, including their need for comparable space in the future.

Commercial and industrial loans - Commercial purpose loans that are primarily secured by the assets of borrowers businesses.

Loans within this segment are made to an array of industry types, and may also include loans that are for commercial real estate purposes, but are secured by assets other than real estate.

Management identifies the primary similarity amongst loans in this pool to be collateral risk exposure common to these loans.

Business assets may have significant variation in collateral value, and the value that may be realized by the Corporation, should the need to liquidate arise.

Normal usage and industry specificity can have a significant impact on collateral values.

For retail loans, repayment is primarily dependent on borrowers' primary source of income, with the collateralized property providing a strong secondary source or repayment.

In contrast, repayment of commercial loans secured by primary liens on residential property may be more diverse and include rental income generated by the property.

Specific risks include localized economic conditions, which may impact both a collateralized property's value and employment prospects for borrowers reliant on their primary source of income for repayment, as well as regulatory risks specific to housing which may inhibit a bank's ability to pursue alternative means of repayment.

Multifamily - Commercial real estate secured by residential properties comprised of greater than four livable units.

Multifamily properties are commonly managed by the borrower or its affiliates and rented to tenants for residential purposes.

Repayment sources generally consist of rental income generated by the property.

Specific risks include a borrower's ability to attract and retain a base of tenants at rental rates in excess of those required to finance, manage, and maintain the property, as well as risks relating to demographic shifts in the population of prospective tenants.

Owner Occupied Commercial Real Estate - Commercial real estate loans secured by property occupied and or operated by the primary borrower or a related entity.

Repayment is generally dependent on cash flow from the operation of the borrower's businesses, which may or may not be primarily conducted through the use of the financed property.

Specific risks include borrower industry and the competence of borrowers in executing business objectives.

Additionally, certain properties may be built to suit for the borrower's industry, and therefore may have limited marketability outside of a specific industry.

Non Owner Occupied Commercial Real Estate - Commercial real estate loans secured by properties managed and maintained by the borrowers, but are reliant on rental income from unrelated lessees to provide cash flow for repayment.

The successful operations of tenant organizations may significantly impact borrowers' ability to service these obligations.

Specific risks include the limited influence a borrower can have on tenant success, as well as potential difficulty in finding suitable or willing replacement tenants should vacancies arise.

The Corporation seeks to lend to sponsors who have demonstrated a capability of aligning with strong and predictable tenants, considering both the current environment tenants operate in as well as future prospects for their industries, including their need for comparable space in the future.

Commercial and industrial - Commercial purpose loans primarily secured by the assets of borrowers businesses.

These loans are extended to a diverse range of industries and may also include loans for commercial real estate purposes, but which are secured by assets other than real estate.

The successful operation of borrower businesses provides the primary source of repayment for these loans.

Consumer - Retail loans primarily secured by vehicle or other personal collateral.

Indirect auto lending comprises the majority of lending activity in this pool.

Primarily, repayment is largely dependent on borrowers' primary income source, through employment or otherwise.

Broader economic conditions, as well as specific personal skill sets, can significantly influence a borrower's ability to maintain adequate employment necessary to finance these loans.

Relationships with auto dealer networks also impacts the quality of borrowers seeking financing for vehicles, subject to the Corporation's system of underwriting and loan review.

Collateral values in this pool typically depreciate relatively quickly, compared to other asset classes, and expose the Corporation to risk.

Other - Loans to borrowers whose organizations are primarily engaged in activities other than traditional business operations, such as non profit entities including medical groups, clubs and associations, religious organizations, museums, among others.

These loans are generally classified based on their organizational structure.

The qualitative component of the pooled allowance is supplemented by qualitative adjustments.

Qualitative adjustments represent the extent to which management determines that its expectation of risk differs from the results of the quantitative analysis, in large part capturing risk factors that may not be fully captured by the quantitative model.

Management uses the following nine qualitative factors when considering appropriate adjustment:

(1) lending policies and procedures, including underwriting standards and collection, charge-off and recovery policies, (2) national and local economic and business conditions and developments, including the condition of various market segments, (3) loan profiles and volume of the portfolio, (4) the experience, ability, and depth of lending management and staff, (5) the volume and severity of past due, classified and watch-list loans, non-accrual loans, troubled debt restructurings, and other modifications (6) the quality of the Bank’s loan review system and the degree of oversight by the Bank’s Board of Directors, (7) collateral related considerations including:

unsecured, type, and valuations, (8) the existence and effect of any concentrations of credit, and changes in the level of such concentrations, (9) the effect of external factors, such as competition and legal and regulatory requirements, on the level of estimated credit losses in the Bank’s current portfolio.

Loans deemed to require individual analysis are primarily valuated and measured for credit loss based on collateral.

A measurement is performed based on the most recently available appraisal performed on individually analyzed loans.

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 specific allocation to the allowance is made on collateral dependent loans to the extent that the value of collateral, net of adjustments made to account for estimated selling costs and management applied discounting, is less than the book value of the loan on the measurement date.

Loans not considered to be collaterally dependent are analyzed using the cash flow approach.

A cash flow analysis is performed using a loan's effective interest rate, and discounted to determine appropriate fair value.

To the extent that a loan's book balance exceeds the present value of cash flows, a specific allocation to the allowance for credit losses is made.

The Corporation established an allowance for credit losses on unfunded commitments, effective January 1, 2023.

The Corporation records an allowance for credit losses on unfunded commitments utilizing a methodology congruent with its methodology for estimating lifetime credit losses on its portfolio of loans, as presented on the Corporation's consolidated balance sheet.

The Corporation disaggregates unfunded commitments into pools consistent with its methodology for pooling loans represented on the balance sheet.

A funding rate is determined to represent the amount of currently unfunded commitments that are estimated to become funded, based on historical experience.

The loss rate applied to the estimated funded balance is consistent with the overall loss rate applied to its equivalent pool of loans on the balance sheet.

Management identifies a primary commonality amongst these loans to be inherent collateral risk exposure.

Business assets may have significant variation in collateral value, and the realized liquidation value to the Corporation may be equally variable.

Normal usage and industry specificity can have a considerable impact on collateral value.

Consumer - Retail loans primarily secured by vehicles or other personal collateral.

Indirect auto lending comprises a majority of lending activity in this pool.

Repayment is largely dependent on borrowers' primary income source, through employment or otherwise.

Broad economic condition and borrowers' specific personal skill sets can significantly influence the ability to maintain an adequate employment status to service consumer debt.

Relationships with auto dealership networks also impacts the quality of borrowers seeking financing for vehicles, subject to the Corporation's system of underwriting and loan review.

Auto collateral values typically depreciate relatively quickly, compared to other asset classes, and expose the Corporation to additional collateral risk.

Other - Loans to borrowers whose organizations' are generally engaged in activities other than traditional business operations, such as non profit entities including medical groups, clubs and associations, religious organizations, and museums.

These loans are generally classified based on their organizational structure and a common specific risk includes reliance on outside funding sources to conduct operations.

The quantitative component of the pooled allowance is supplemented by qualitative adjustments.

Qualitative adjustments represent the extent to which management determines its expectation of risk differs from the results of the quantitative analysis, in large part encompassing risk factors that may not be fully captured by the quantitative model.

Management uses the following nine qualitative factors when considering appropriate adjustments:

(1) lending policies and procedures, including underwriting standards and collection, charge-off, and recovery policies, (2) national and local economic conditions and developments, including the condition of various market segments, (3) loan terms and changes in loan terms and conditions, (4) the experience, ability, and depth of lending management and staff, (5) the volume and severity of past due, classified, criticized, and watch-list loans, nonaccrual loans, and loan modifications to borrowers experiencing financial difficulty (6) the quality of the Bank’s loan review system and the degree of oversight by the Bank’s Board of Directors, (7) collateral related considerations including:

securitization level, type, and valuations, (8) the existence and effect of any concentrations of credit, and changes in the level of such concentrations, (9) the effect of external factors, such as competition, legal, and regulatory factors.

The impact of any qualitative adjustments on management's estimates are dependent upon the relationship between the results of quantitative analysis conducted under severe and protracted recessionary conditions and the current period's quantitative analysis.

The additional loss rate available for qualitative adjustments is limited to the difference between the loss rate calculated under the severe recessionary scenario and the loss rate used in the current period's quantitative analysis.

This methodology provides a structured framework for management to apply qualitative adjustments consistently over time.

Loans determined to require individual analysis are primarily valued and measured for credit loss based on collateral, using the collateral-dependent practical expedient as prescribed in ASC 326.

Measurement is performed based on the most recently available appraisal and 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 specific allocation to the allowance for credit losses is made on collateral-dependent loans to the extent the value of collateral, net of adjustments for estimated selling costs and management discounts, is less than book value as of the measurement date.

Loans not considered to be collaterally dependent are analyzed using a cash flow analysis.

A cash flow analysis is performed using a loan's effective interest rate and is discounted to determine appropriate fair value.

To the extent a loan's book balance exceeds the present value of cash flows, a specific allocation to the allowance for credit losses is made.

The Corporation established an allowance for credit losses on unfunded commitments, effective January 1, 2023 as part of its adoption of ASC 326.

The Corporation records an allowance for credit losses on unfunded commitments utilizing a methodology consistent with its methodology for estimating lifetime credit losses on its portfolio of outstanding loans.

The Corporation disaggregates unfunded commitments into pools congruent with its methodology for pooling outstanding loans.

A funding rate is determined to represent a credit conversion factor based on historical funding experience.

The loss rate applied to the estimated funded balance is equivalent to the overall loss rate applied to on-balance sheet exposures in its designated pool.

The Corporation is not required to establish an allowance for credit losses on commitments that are deemed to be unconditionally cancellable at the sole discretion of the Corporation.

Debt securities are included under the guidance of ASC-326 - Financial Instruments-Credit Losses.

The Corporation evaluates the necessity to establish and maintain an allowance for credit losses on debt securities consistent with its policies in the aforementioned section of this Note labeled "Securities."

The allowance for credit losses is increased through a provision for credit losses charged to operations.

Instruments (loans and debt securities) are charged against their respective 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 credit risk grade assigned to the instrument, historical credit loss experience, and review of information specific and pertinent to the borrower or issuer.

While management uses available information to recognize credit losses on loans and securities, future additions to the allowance may be necessary based on changes in economic conditions, regulatory requirements, or other new information.

Loans are charged against their respective allowance for credit losses when management believes the collectability of all or a portion of the principal balance 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 credit risk grade assigned to a loan, historical credit loss experience, and review of information specific and pertinent to the borrower.

While management uses available information to recognize credit losses on loans, future additions to the allowance may be necessary based on changes in economic conditions, regulatory requirements, or other new information.

LOANS HELD FOR SALE

Certain mortgage loans are originated with the intent to sell.

The Bank typically retains the right to service the mortgages upon sale.

The Bank typically retains the right to service these mortgages upon sale.

Loans held for sale are recorded at the lower of cost or fair value in the aggregate and are regularly evaluated for changes in fair value.

Commitments to sell loans that are originated for sale are recorded at fair value.

If necessary, a valuation allowance is established with a charge to income for unrealized losses attributable to a change in market rates.

If necessary, a valuation allowance is established with a charge to income for unrealized losses attributable to a change in market conditions.

Leases are classified as operating or finance leases on the lease commencement date.

At inception, the Corporation determines the lease term by considering the minimum lease term and all optional renewal periods that the Corporation is reasonably certain to renew.

The discount rate used in determining lease liability is based upon incremental borrowing rates the Corporation could obtain for similar loans as of the date of commencement or renewal.

At inception, the Corporation determines the lease term by considering the minimum contractual term and all optional renewal periods the Corporation is reasonably certain to renew.

The implicit discount rate used to determine lease liabilities is based upon incremental borrowing rates the Corporation could access for similar terms as of the commencement or remeasurement date.

The Corporation records operating leases on the balance sheet as a lease liability equal to the present value of future minimum payments under the lease terms, and a right-of-use asset equal to the lease liability.

The lease term is also used to calculate straight-line rent expense.

The Corporation's leases do not contain residual value guarantees or material variable lease payments that may impact the Corporation's ability to pay dividends or cause the Corporation to incur additional expenses.

Rent expense and variable lease expense are included in net occupancy expenses on the Corporation's Consolidated Statements of Income.

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A corresponding long term lease obligation is recorded, which amortizes as payments are made on the lease.

Interest expense is incurred using the discount rate determined at the beginning of the lease term.

Amortization of the right-of-use assets arising from finance leases is expensed through net occupancy expense, and the interest on the related lease liability is expensed through interest expense on borrowings on the Corporation Consolidated Statements of Income.

Interest expense is incurred utilizing the discount rate used to establish the value of the long term lease obligation.

Amortization of the right-of-use assets arising from finance leases is expensed through net occupancy expense, and the interest on the related lease liability is recorded through interest expense on borrowings on the Corporation's Consolidated Statements of Income.

PREMISES AND EQUIPMENT

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BANK OWNED LIFE INSURANCE

BOLI is recorded at the amount that can be realized under the insurance contracts at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

BOLI is recorded at the realizable amount under the insurance contracts as of the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Changes in the cash surrender value are recorded in other non-interest income.

OTHER REAL ESTATE

Real estate acquired through foreclosure or deed in lieu of foreclosure is recorded at estimated fair value of the property less estimated costs to dispose at the time of acquisition to establish a new carrying value.

Write downs from the carrying value of the loan to estimated fair value, which are required at the time of foreclosure, are charged to the allowance for credit losses.

Subsequent adjustments to the carrying values of such properties resulting from declines in fair value result in the establishment of a valuation allowance and are charged to operations in the period in which the declines occur.

OTHER REAL ESTATE AND REPOSSESSED VEHICLES

Real estate acquired through foreclosure or deed in lieu of foreclosure is recorded at estimated fair value of the property less estimated costs to sell at the time of acquisition, establishing a new carrying value.

Write downs from the carrying value of the loan to estimated fair value, which are required at the time of foreclosure, are charged against the allowance for credit losses.

Subsequent adjustments to the carrying values of such properties arising from declines in fair value result in the establishment of a valuation allowance and are charged to operations in the period in which the declines occur.

Vehicles repossessed by the Corporation are derecognized as loans receivable at the earlier of of physical possession or legal title of the vehicle, and are recorded in other assets on the Corporation's Consolidated Balance Sheets at fair value.

Write downs to fair value at the time of repossession are charged against the allowance for credit losses.

Gains on the sale of repossessed vehicles are credited to the allowance for credit losses as recoveries, up to the amount of any initial charge-off, while losses on the sale of repossessions are recorded as other non-interest expense.

Gains on the sale of repossessions in excess of any initial charge-off is recorded as other non-interest income.

The Corporation files a consolidated tax return.

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Wealth Management Group income is recognized on the accrual method as earned based on contractual rates applied to the balances of individual trust accounts.

The audited market value of trust assets under administration total $ 2.242 billion, including $ 381.3 million of assets held under management or administration for the Corporation, at December 31, 2023 and $ 2.053 billion, including $ 346.5 million of assets held under management or administration for the Corporation, at December 31, 2022.

The audited market value of trust assets under administration total $ 2.212 billion, including $ 301.9 million of assets held under management or administration for the Corporation, as of December 31, 2024 and $ 2.242 billion, including $ 381.3 million of assets held under management or administration for the Corporation, as of December 31, 2023.

POSTRETIREMENT BENEFITS

Pension Plan:

The Chemung Canal Trust Company Pension Plan is a non-contributory defined benefit pension plan.

The Chemung Canal Trust Company Pension Plan is a non-contributory defined benefit pension plan ("Pension Plan").

The Pension Plan is a “qualified plan” under the IRS Code and therefore must be funded.

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The Plan was amended such that new employees hired on or after July 1, 2010 would not be eligible to participate in the Plan, however, existing participants at that time would continue to accrue benefits.

On October 20, 2016, the Corporation amended its noncontributory defined benefit pension plan (“pension plan”) to freeze future retirement benefits after December 31, 2016.

Beginning on January 1, 2017, both the pay-based and service-based component of the formula used to determine retirement benefits in the pension plan were frozen so that participants no longer earn further retirement benefits.

On October 20, 2016, the Corporation amended its non-contributory defined benefit pension plan to freeze future retirement benefits after December 31, 2016.

Beginning on January 1, 2017, both the pay-based and service-based components of the formula used to determine retirement benefits in the Pension Plan were frozen so that participants no longer earned further retirement benefits.

Under the Plan, pension benefits are based upon final average annual compensation where the annual compensation is total base earnings paid plus commissions.

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Defined Contribution Profit Sharing, Savings and Investment Plan:

The Corporation also sponsors a 401(K) defined contribution profit sharing, savings and investment plan which covers all eligible employees.

The Corporation sponsors a 401(K) defined contribution profit sharing, savings and investment plan which covers all eligible employees.

The Corporation contributes a non-discretionary 3 % of gross annual wages (as defined by the 401(k) plan) for each participant, regardless of the participant’s deferral, in addition to a 50 % match up to 6 % of gross annual wages.

All contributions made on or after January 1, 2017 will vest immediately.

The plan's assets consist of Chemung Financial Corporation common stock, as well as other common and preferred stocks, U.S.

Contributions made on behalf of employees hired prior to January 1, 2025 vest immediately.

Contributions made on behalf of employees hired on or after January 1, 2025 will vest based on years of service over a three-year period.

The plan's assets consist of Chemung Financial Corporation common stock, U.S.

Government securities, corporate bonds and notes, and mutual funds.

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The cost of the plan is based on actuarial computations of current and future benefits for employees, and is charged to non-interest expenses in the consolidated Statements of Income.

See Note 13 for further details.

On October 20, 2016, the Corporation amended its defined benefit health care plan to not allow any new retirees into the plan, effective January 1, 2017.

See Note 13 for further details.

Executive Supplemental Pension Plan:

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Defined Contribution Supplemental Executive Retirement Plan:

The Defined Contribution Supplemental Executive Retirement Plan is provided to certain executives to motivate and retain key management employees by providing a nonqualified retirement benefit that is payable at retirement, disability, death and certain other events.

The Defined Contribution Supplemental Executive Retirement Plan is provided to certain executives to motivate and retain key management employees by providing a non-qualified retirement benefit that is payable at retirement, disability, death, and certain other events.

The Supplemental Executive Retirement Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation benefits for a select group of management or highly compensated employees under Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974.

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All directors’ fees are charged to non-interest expenses in the Consolidated Statements of Income.

Please see Note 14 for further details.

See Note 14 for further details.

Non-qualified Deferred Compensation Plan:

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Goodwill resulting from business combinations prior to January 1, 2009 represents the excess of the purchase price over the fair value of the net assets of businesses acquired.

Goodwill resulting from business combinations after January 1, 2009, is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.

Goodwill resulting from business combinations after January 1, 2009, is generally determined as the excess of the fair value of consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.

Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually.

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If impairment is determined to exist, the related write-down of the intangible asset's carrying value is charged to operations.

Based on these impairment reviews, the Corporation determined that goodwill and other intangible assets were not impaired at December 31, 2023.

The Corporation's intangible assets related to the purchase of the trust business of Partners Trust Bank in May of 2007, were fully amortized as of December 31, 2022.

Based on the most recent impairment reviews performed as of December 31, 2024 and 2023, the Corporation did not identify any impairment on its outstanding goodwill for the years ended December 31, 2024 and 2023.

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

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The amount of the securities underlying the agreements continues to be carried in the Corporation's securities portfolio.

The Corporation has agreed to repurchase securities identical to those sold.

The Corporation agrees to repurchase securities identical to those sold.

The securities underlying the agreements are under the Corporation's control.

As of December 31, 2023, the Corporation had no securities sold under agreements to repurchase.

The Corporation utilizes interest rate swaps with commercial borrowers and third-party counterparties as well as agreements with lead banks in participation loan relationships wherein the Corporation guarantees a portion of the fair value of an interest rate swap entered into by the lead bank.

As of December 31, 2024 and 2023, the Corporation had no securities sold under agreements to repurchase.

The Corporation utilizes interest rate swaps with commercial borrowers and third-party counterparties as well as risk participation agreements with lead banks in participation loan relationships wherein the Corporation guarantees a portion of the fair value of an interest rate swap entered into by the lead bank.

These transactions are accounted for as derivatives.

The Company’s derivatives are entered into in connection with its asset and liability management activities and not for trading purposes.

The Company does not have any derivatives that are designated as hedges and therefore all derivatives are considered free standing and are recorded at fair value as derivative assets or liabilities on the consolidated balance sheets, with changes in fair value recognized in the consolidated statements of income as non-interest income.

Premiums received when entering into derivative contracts are recognized as part of the fair value of the derivative asset or liability and are carried at fair value with any gain/loss at inception and any changes in fair value reflected in income.

The Company’s derivatives are entered into in connection with its asset and liability management activities and are not for trading purposes.

The Company does not have any derivatives designated as hedges, therefore all derivatives are considered free standing and are recorded at fair value as derivative assets or liabilities on the Consolidated Balance Sheets, with changes in fair value recognized in the consolidated statements of income as non-interest income.

Premiums received when entering into derivative contracts are recognized as part of the fair value of the derivative asset or liability and are carried at fair value with any gain or loss at inception and any changes in fair value reflected in income.

The Corporation does not typically require its commercial customers to post cash or securities as collateral on its back-to-back interest rate swap program.

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EARNINGS PER COMMON SHARE

Basic earnings per share is net income divided by the weighted average number of common shares outstanding during the period.

Issuable shares, including those related to directors’ restricted stock 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.

COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) consists of net income and other comprehensive income (loss).

Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale and changes in the funded status of the Corporation’s defined benefit pension plan and other benefit plans, net of the related tax effect, which are also recognized as separate components of equity.

Basic earnings per share is calculated using the two-class method, which is net income available to common shareholders divided by the weighted average number of common shares outstanding during the period, excluding participating securities.

All outstanding unvested share-based payment awards, including those related to directors' and employee restricted stock awards, contain rights to non-forfeitable dividends and are considered participating securities when calculating basic earnings per share.

Basic earnings per share information is adjusted to present comparative results for stock splits and stock dividends that occur.

There were no dilutive securities issuable or outstanding for the years ending December 31, 2024 and 2023.

COMPREHENSIVE INCOME

Comprehensive income consists of net income and other comprehensive income.

Other comprehensive income includes unrealized gains and losses on securities available for sale and changes in the funded status of the Corporation’s defined benefit pension plan and other benefit plans, net of the related tax effect, which are also recognized as separate components of equity.

SEGMENT REPORTING

The Corporation has identified separate operating segments and internal financial information is primarily reported and aggregated in two lines of business, banking and wealth management services.

See Note 21 for enhanced segment reporting disclosures resulting from the adoption of ASU 2023-07.

RECLASSIFICATION

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RECENT ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

The objective of the ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

The ASU supersedes current GAAP by replacing the incurred loss impairment method with a methodology that reflects lifetime expected credit losses and requires the consideration of a broader range of reasonable and supportable information to form credit loss estimates.

As a smaller reporting company, the Corporation is eligible for and elected delayed adoption.

The Corporation adopted the standard, effective January 1, 2023, and recognized a one-time cumulative adjustment to retained earnings as of January 1, 2023 to reflect the change in methodology.

The cumulative-effect adjustment did not have an impact on prior year results.

Retained earnings was reduced by $ 1.5 million, or $ 1.1 million, net of tax, effective January 1.

Further details regarding the Corporation's adoption of ASU 2013-16 and its methodology thereof can be found in the preceding sections of this Note 1, as well as in Note 4 - Loans and Allowance for Credit Losses, as well as throughout Management's Discussion and Analysis of Financial Condition and Results of Operations.

In March 2022, the FASB issued ASU 2022-02, which eliminates creditor accounting guidance for TDRs for entities that have adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) and enhances Vintage Disclosures of Gross Writeoffs.

This ASU eliminates Subtopic 310-40 guidance for TDRs, and requires creditors to apply the loan refinancing and restructuring guidance in Subtopic 310-20 when evaluating modifications granted to borrowers experiencing financial difficulty to determine whether the modification is considered a continuation of an existing loan or a new loan.

The vintage disclosure component of the ASU requires entities to disclose current-period gross writeoffs by origination year for financing receivables and investment leases within the scope of Subtopic 326-20.

The Corporation adopted adopt ASU 2022-02 concurrently with the adoption of ASU 2016-13.

In December 2022, the FASB issued ASU No.

2022-06, Deferral of the Sunset Date of Topic 848, and defers the date for which accounting relief can be applied under Topic 848.

ASU 2022-06 applies to entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The objective of the guidance in Topic 848 is to ease the burden in accounting related to the recognition of the effects of reference rate reform on financial reporting.

A sunset provision was included within Topic 848 based on expectations of when LIBOR would cease being published.

The Corporation had adopted the accounting relief provisions of Topic 848 effective October 1, 2020.

The amendments in ASU 2022-06 defer the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be able to apply the accounting relief in Topic 848.

ASU 2022-06 was effective for all entities upon its issuance.

The adoption of the provisions of Topic 848, as amended, did not have a material impact on the Corporation’s consolidated financial statements, and the Corporation has transitioned all financial instruments that previously referenced LIBOR benchmarks.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements, which and 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 and 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, and 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.

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 was effective for fiscal years beginning after December 15, 2023.

The Corporation adopted ASU 2023-07 for its fiscal year ended December 31, 2024.

See Note 21 for enhancements to segment reporting disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvement 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.

Improvement to Income Tax Disclosures , which will require public business entities to disclose annually a tabular rate reconciliation and income taxes paid information, 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.

Additionally, disclosure of income taxes paid by jurisdiction is required for each jurisdiction in which income taxes paid represented at least 5% of total income taxes paid.

The ASU is effective for all public business entities for annual periods beginning after December 31, 2024.

The adoption of this standard is expected to impact the Corporation's income tax disclosures, as presented in Note 12.

USE OF ANALOGOUS ACCOUNTING STANDARDS

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Therefore, the Corporation must rely upon analogous accounting standards to determine appropriate treatment when such circumstances arise.

The Corporation accounted for the recognition of the Employee Retention Tax Credit (ERTC) using ASC 958-605, Revenue Recognition for Not-for-Profit entities.

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.

In November 2023, the FASB added a project relating to receipt of government grants by business entities to its technical agenda, and in November 2024 issued Proposed ASU 2024-ED700, Government Grants (Topic 832):

Accounting for Government Grants by Business Entities.

The ERTC is within the scope of this proposed ASU, however retroactive application of the standard is not required, as proposed, and the Corporation understands recognition of the ERTC through earnings during 2023 to constitute grant completion for recognition purposes.

The Corporation considers the recognition of the ERTC to be analogous to the stipulations for "conditional contributions" under ASC 958-605-20.

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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 the period in relation to its amended tax returns.

The Corporation incurred and recognized additional income tax expense during 2023 in relation to its amended tax returns.

(2) RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS

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However, as of March 15, 2020, the Federal Reserve Board reduced reserve requirement ratios to zero percent, effective March 26, 2020.

Therefore, at December 31, 2023 and 2022, there were no reserve requirements with the Federal Reserve Bank of New York.

The Corporation maintains a pre-funded settlement account with a financial institution in the amount of $ 1.6 million for electronic funds transaction settlement purposes at December 31, 2023 and 2022.

Therefore, as of December 31, 2024 and 2023, there were no reserve requirements with the Federal Reserve Bank of New York.

The Corporation maintained a pre-funded settlement account with a financial institution in the amount of $ 1.6 million for electronic funds transaction settlement purposes as of December 31, 2024 and 2023.

The Corporation also maintains a collateral restricted account with a financial institution related to the Corporation's interest rate swap program.

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(3) SECURITIES

Amortized cost and estimated fair value of securities available for sale at December 31, 2023 and 2022 are as follows (in thousands):

Amortized cost and estimated fair value of securities available for sale as of December 31, 2024 and 2023 are as follows (in thousands):

December 31, 2024

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Mortgage-backed securities, residential 441,191 14 75,271 — 365,934

Collateralized mortgage obligations — — — — —

Obligations of states and political subdivisions 37,059 — 1,554 — 35,505

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December 31, 2023

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Estimated Fair Value

treasury notes and bonds $ 59,812 $ — $ 4,480 $ — $ 55,332

Mortgage-backed securities, residential 476,240 6 72,422 — 403,824

Collateralized mortgage obligations — — — —

Obligations of states and political subdivisions 39,503 — 817 — 38,686

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Total $ 669,092 $ 81 $ 85,180 $ — $ 583,993

There were no proceeds from sales and calls of securities resulting in gains or losses during the year ended December 31, 2024.

Proceeds from the sale of available for sale securities for the year ended December 31, 2023 were $ 1.2 million, and a gross loss of $ 14 thousand was realized on these sales.

The sales were executed by Chemung Risk Management, Inc., which served as a wholly owned captive insurance company based in the State of Nevada, until dissolution by the Corporation effective December 6, 2023.

There were no proceeds from sales and calls of securities resulting in gains or losses during the year ended December 31, 2022.

The tax benefit related to these net realized losses was $ 4 thousand for the year ended December 31, 2023.

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After ten years 1,233 1,154

Mortgage-backed securities:

residential 476,240 403,824

Mortgage-backed securities, residential 441,191 365,934

SBA loan pools 53,391 51,081

Total $ 617,271 $ 531,442

Amortized cost and estimated fair value of securities held to maturity at December 31, 2023 and 2022 are as follows (in thousands):

Amortized cost and estimated fair value of securities held to maturity as of December 31, 2024 and 2023 are as follows (in thousands):

December 31, 2024

Amortized Cost Unrecognized Gains Unrecognized Losses Estimated Fair Value Allowance for Credit Losses

Amortized Cost Gross Unrecognized Gains Gross Unrecognized Losses Allowance for Credit Losses Estimated Fair Value

Obligations of states and political subdivisions $ 808 $ — $ — $ — $ 808

Time deposits with other financial institutions — — — — —

$ 785 $ — $ — $ 785 $ —

December 31, 2023

Amortized Cost Unrecognized Gains Unrecognized Losses Estimated Fair Value

Amortized Cost Gross Unrecognized Gains Gross Unrecognized Losses Allowance for Credit Losses Estimated Fair Value

Obligations of states and political subdivisions $ 785 $ — $ — $ — $ 785

Time deposits with other financial institutions 1,472 — 22 1,450

$ 2,424 $ — $ 22 $ 2,402

There were no proceeds from sales of securities held to maturity during the year ended December 31, 2024.

Proceeds from the sale of held to maturity securities for the year ended December 31, 2023 were $ 1.0 million, and a gross loss of $ 25 thousand was realized on these sales.

There were no proceeds from sales of securities held to maturity during the year ended December 31, 2022.

The contractual maturity of securities held to maturity was as follows at December 31, 2023 (in thousands):

The contractual maturity of securities held to maturity was as follows as of December 31, 2024 (in thousands):

December 31, 2024

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Total $ 808 $ 808

The following tables summarize the investment securities available for sale with unrealized losses, for which an allowance for credit losses has not been recorded as of December 31, 2023, and an other than temporary impairment (OTTI) has not been recorded as of December 31, 2022 aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

The following tables summarize the investment securities available for sale with unrealized losses, for which an allowance for credit losses has not been recorded as of December 31, 2024, and December 31, 2023 aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

Less than 12 months 12 months or longer Total

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treasury notes and bonds $ — $ — $ 56,906 $ 2,974 $ 56,906 $ 2,974

Mortgage-backed securities:

residential — — 402,986 72,422 402,986 72,422

Mortgage-backed securities, residential 5,006 111 359,722 75,160 364,728 75,271

Obligations of states and political subdivisions 107 3 35,398 1,551 35,505 1,554

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SBA loan pools 564 1 46,018 2,344 46,582 2,345

Total temporarily impaired securities $ 29,297 $ 2,762 $ 546,649 $ 82,418 $ 575,946 $ 85,180

Total $ 7,598 $ 194 $ 518,139 $ 85,684 $ 525,737 $ 85,878

Less than 12 months 12 months or longer Total

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SBA loan pools 3,914 13 54,468 2,367 58,382 2,380

Total temporarily impaired securities $ 137,597 $ 9,999 $ 468,381 $ 86,767 $ 605,978 $ 96,766

Total $ 29,297 $ 2,762 $ 546,649 $ 82,418 $ 575,946 $ 85,180

Pledged Securities

The fair value of securities pledged to secure public funds on deposit or for other purposes as required by law was $ 255.0 million at December 31, 2023 and $ 213.8 million at December 31, 2022.

The fair value of securities pledged to secure public funds on deposit or for other purposes as required by law was $ 181.5 million as of December 31, 2024 and $ 255.0 million as of December 31, 2023.

Concentrations

There are no securities of a single issuer (other than securities of U.S.

Government sponsored enterprises) that exceeded 10% of shareholders' equity at December 31, 2023 or 2022.

Government sponsored enterprises) that exceeded 10% of shareholders' equity as of December 31, 2024 or 2023.

Assessment of Available for Sale Debt Securities for Credit Risk

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Unrealized losses on debt securities may occur from current market conditions, increases in interest rates since the time of purchase, structural changes in an investment, volatility in financial results of specific issuers, or deterioration in credit quality of issuers.

Management assesses both qualitative and quantitative factors to determine whether any credit-related allowance is required.

Management assesses both qualitative and quantitative factors to determine whether an allowance for credit losses is required.

The following is a discussion of the credit quality characteristics of major portfolio segments carrying material unrealized losses as of December 31, 2024.

Obligations of U.S.

Governmental agencies and sponsored enterprises :

As of December 31, 2023, a significant portion 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 market liquidity, 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.

Obli g ations of U.S.

Governmental a g encies and sponsored enterprises :

As of December 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 were attributable to changes in interest rates and market liquidity, not credit quality.

All mortgage-backed securities in the available for sale securities portfolio as of December 31, 2024 were issued by FHLMC, FNMA, or GNMA.

Because the Corporation considers these obligations to carry zero credit loss estimates, no allowance for credit losses was recorded as of December 31, 2023.

The Corporation considers these obligations to carry zero credit loss estimates, and therefore has not recorded an allowance for credit losses as of December 31, 2024.

Corporate bonds and notes :

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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 the issuers to be immaterial, and no allowance for credit losses was recorded as of December 31, 2023.

Other-Than-Temporary-Impairment

Prior to the adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326 ), the Corporation evaluated its portfolio of available for sale securities for Other than Temporary Impairment (OTTI).

As of December 31, 2022, the majority of the Corporation’s unrealized losses in the investment securities portfolio related to mortgage-backed securities.

At December 31, 2022, the unrealized losses related to mortgage-backed were securities issued by U.S.

government sponsored entities, Fannie Mae and Freddie Mac.

Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Corporation does not have the intent to sell these securities and it is not likely that it will be required to sell these securities before their anticipated recovery, the Corporation does not consider these securities to be other-than-temporarily impaired at December 31, 2022.

The decrease in market value was attributable to changes in interest rates.

Therefore, the Corporation considers the potential credit risk of the issuers to be immaterial, and has not recorded an allowance for credit losses as of December 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 December 31, 2023 and December 31, 2022, the fair value of investments held in relation to the deferred compensation plan was $ 2.4 million and $ 2.1 million, respectively.

The Corporation also held $ 0.6 million of marketable securities as equity method investments for each of the years ended December 31, 2023 and 2022.

The fair value of investments held in relation to the deferred compensation plan was $ 2.6 million and $ 2.4 million as of December 31, 2024 and 2023, respectively.

The Corporation also held $ 0.6 million of marketable securities as equity method investments for each of the years ended December 31, 2024 and 2023, respectively.

(4) LOANS AND ALLOWANCE FOR CREDIT LOSSES

The composition of the loan portfolio, net of deferred loan fees at December 31, 2023 and 2022 is summarized as follows (in thousands):

Commercial and agricultural:

The composition of the loan portfolio, net of deferred loan fees as of December 31, 2024 and 2023 is summarized as follows (in thousands):

Commercial and industrial $ 299,521 $ 264,396

Agricultural 256 249

Commercial mortgages:

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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 amounted to $ 7.8 million at December 31, 2023 and $ 6.5 million at December 31, 2022.

Accrued interest receivable on loans was $ 8.0 million as of December 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.

Recorded investment balances of loans as of December 31, 2022 included accrued interest receivable.

Commercial and industrial loans includes agricultural loans which totaled $ 0.3 million as of December 31, 2024 and 2023.

Agricultural loans were previously presented as a standalone loan category.

Prior period information included in this Note reflects agricultural loans as a component of commercial and industrial loans.

The Corporation had no residential mortgages held for sale as of December 31, 2024 and December 31, 2023.

When the Corporation has loans classified as held for sale, they are not included in the table above.

Residential mortgage and home equity loans totaling $ 254.6 million at December 31, 2023 and $ 254.4 million at December 31, 2022 were pledged under a blanket collateral agreement for the Corporation's line of credit with the FHLBNY.

The following tables present the activity in the allowance for credit losses by portfolio segment for the year ended December 31, 2023 and the allowance for loan losses for the year ended December 31, 2022 , respectively (in thousands):

Residential mortgage and home equity loans totaling $ 244.6 million as of December 31, 2024 and $ 254.6 million as of December 31, 2023 were pledged under a blanket collateral agreement for the Corporation's line of credit with the FHLBNY.

The following tables present the activity in the allowance for credit losses by portfolio segment for the years ended December 31, 2024 and 2023 (in thousands):

December 31, 2024

Allowance for credit losses Commercial and Agricultural Commercial Mortgages Residential Mortgages Consumer Loans Total

Allowance for credit losses Commercial and Industrial Commercial Mortgages Residential Mortgages Consumer Loans Total

Beginning balance, January 1, 2024 $ 5,055 $ 12,026 $ 2,194 $ 3,242 $ 22,517

Cumulative effect adjustment for the adoption of ASC-326 909 ( 695 ) ( 16 ) 176 374

Beginning balance after cumulative effect adjustment, January 1, 2023 4,282 10,881 1,829 3,041 20,033

( 302 ) — ( 21 ) ( 1,550 ) ( 1,873 )

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December 31, 2023

Allowance for loan losses Commercial, and Agricultural Commercial Mortgages Residential Mortgages Consumer Loans Total

Beginning balance:

$ 3,591 $ 13,556 $ 1,803 $ 2,075 $ 21,025

Allowance for credit losses Commercial and Industrial 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, January 1, 2023 4,282 10,881 1,829 3,041 20,033

( 281 ) — ( 32 ) ( 1,070 ) ( 1,383 )

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Provision (1)

Ending balance $ 3,373 $ 11,576 $ 1,845 $ 2,865 $ 19,659

1,032 1,141 397 855 3,425

Ending balance, December 31, 2023 $ 5,055 $ 12,026 $ 2,194 $ 3,242 $ 22,517

(1) Additional provision related to off-balance sheet exposure was a credit of $ 163 thousand for the year ended December 31, 2023.

Unfunded Commitments

The allowance for credit losses on unfunded commitments represents the amount held against credit exposures that are not represented on the Consolidated Balance Sheets.

The allowance for credit losses on unfunded commitments represents the amount held against credit exposures which are not represented on the Consolidated Balance Sheets.

The allowance is recognized as a liability, a component of other liabilities on the Consolidated Balance Sheets, with adjustments to the allowance recognized in the provision for credit losses line item on the Consolidated Statements of Income.

The Corporation established a reserve for unfunded commitments in conjunction with its adoption of ASC 326- Financial Instruments-Credit Losses .

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 years ended December 31, 2024 and 2023:

Allowance for credit losses on unfunded commitments For the Twelve Months Ended December 31,

For the Years Ended December 31,

Allowance for credit losses on unfunded commitments 2024 2023

Beginning balance $ 919 $ —

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Ending balance $ 842 $ 919

The following table presents the provision for credit losses on loans and unfunded commitments for the year ended December 31, 2023 , based upon the current expected credit loss methodology, and the provision for loan losses on loans for the year ended December 31, 2022, based upon the incurred loss methodology:

For the Twelve Months Ended December 31,

The following table presents the provision for credit losses on loans and unfunded commitments for the years ended December 31, 2024 and 2023 (in thousands):

For the Years Ended December 31,

Provision for credit losses 2024 2023

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Total provision (credit) for credit losses $ ( 46 ) $ 3,262

The following tables present the balance in the Allowance for credit losses and the amortized cost basis in loans by portfolio segment and based on analysis status as of December 31, 2023 and the allowance for loan losses and the amortized cost basis in loans by portfolio as of December 31, 2022, respectively (in thousands):

The following tables present the balance in the allowance for credit losses and the amortized cost basis in loans by portfolio segment and based on analysis status as of December 31, 2024 and 2023 (in thousands):

December 31, 2024

Allowance for credit losses Commercial

Agricultural Commercial Mortgages Residential Mortgages Consumer Loans Total

Industrial Commercial Mortgages Residential Mortgages Consumer Loans Total

Ending allowance balance attributable to loans:

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December 31, 2023

Allowance for loan losses Commercial

Agricultural Commercial Mortgages Residential Mortgages Consumer Loans Total

Allowance for credit losses Commercial

Industrial Commercial Mortgages Residential Mortgages Consumer Loans Total

Ending allowance balance attributable to loans:

Individually evaluated for impairment $ 1,078 $ 38 $ — $ 31 $ 1,147

Collectively evaluated for impairment 2,295 11,538 1,845 2,834 18,512

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

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Loans Commercial

Agricultural Commercial Mortgages Residential Mortgages Consumer Loans Total

Industrial Commercial Mortgages Residential Mortgages Consumer Loans Total

Loans individually analyzed $ 1,512 $ 4,959 $ — $ — $ 6,471

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Loans Commercial

Agricultural Commercial Mortgages Residential Mortgages Consumer Loans Total

Loans individually evaluated for impairment $ 2,112 $ 4,383 $ 723 $ 264 $ 7,482

Loans collectively evaluated for impairment 250,181 992,530 284,949 294,306 1,821,966

Industrial Commercial Mortgages Residential Mortgages Consumer Loans Total

Loans individually analyzed $ 2,067 $ 5,968 $ — $ — $ 8,035

Loans 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

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Types of modifications considered under ASU 2022-02 include principal reductions, interest rate reductions, term extensions, significant payment delays, or a combination thereof.

T he following table summarizes the amortized cost basis of loans modified during the year ended December 31, 2023 (in thousands):

The following tables summarize the amortized cost basis of loans modified during the years ended December 31, 2024 and 2023 (in thousands):

December 31, 2024

Loans modified under ASU 2022-02 Principal Reduction Interest Rate Reduction Term Extension Payment Delay Combination Total (%) of Loan Class (1)

Commercial and agricultural:

Commercial & industrial $ — $ — $ 384 $ — $ — $ 384 0.13 %

Agricultural — — — — — — — %

Commercial mortgages:

Construction — — — — — — — %

Commercial mortgages, other — — — 376 — 376 0.03 %

Residential mortgages — — — 440 — 440 0.16 %

Total $ — $ — $ 384 $ 816 $ — $ 1,200

(1) Represents the amortized cost basis of loans modified during the period as a percentage of the period-end loan balances by class.

December 31, 2023

Loans modified under ASU 2022-02 Principal Reduction Interest Rate Reduction Term Extension Payment Delay Combination Total (%) of Loan Class (1)

Commercial & industrial $ — $ — $ 1,011 $ — $ — $ 1,011 0.38 %

Commercial mortgages:

Commercial mortgages, other — — 272 1,878 — 2,150 0.22 %

Consumer loans:

Home equity lines and loans — — 116 — — 116 0.13 %

Indirect consumer loans — — — — — — — %

Direct consumer loans — — — — — — — %

Total $ — $ — $ 1,399 $ 1,878 $ — $ 3,277

(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 year ended December 31, 2023:

The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the years ended December 31, 2024 and 2023:

December 31, 2024

Effect of loan modifications under ASU 2022-02 Principal reduction

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(in months) Weighted-average payment delay

Commercial and agricultural:

Commercial & industrial $ — — % 12 months

Agricultural $ — — %

Commercial & industrial $ — — % 60 months 0 months

Commercial mortgages:

Construction $ — — %

Commercial mortgages, other $ — — % 0 months 101 months

Residential mortgages $ — — %

Consumer loans:

Home equity lines and loans $ — — % 180 months

Indirect consumer loans $ — — %

Direct consumer loans $ — — %

The Corporation closely monitors the performance of loans that have been modified in accordance with ASU 2022-02 in order to understand the effectiveness of its modification efforts.

There was one commercial and industrial loan modified to borrowers experiencing financial difficulty during the prior twelve months that sustained a payment default on the modified terms during the year ended December 31, 2023.

An allocation totaling $ 0.9 million was included for this modified loan in the allowance for credit losses as of December 31, 2023.

Individually Analyzed Loans

Effective January 1, 2023, the Corporation began analyzing loans on an individual basis when management determined that the loan no longer exhibited risk characteristics consistent with the risk characteristics existing in its designated pool of loans, under the Corporation's CECL methodology.

Loans individually analyzed include certain non-accrual commercial, as well as certain accruing loans previously identified under prior troubled debt restructuring (TDR) guidance.

As of December 31, 2023, the amortized cost basis of individually analyzed loans was $ 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 ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan, at 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 following table presents the amortized cost basis and related allowance for credit loss of individually analyzed loans considered to be collateral dependent as of December 31, 2023 (in thousands):

Residential mortgages $ — — % 0 months 6 months

December 31, 2023

Amortized Cost Basis Related Allowance

Commercial and agricultural:

Principal Reduction (in thousands) Weighted average interest rate reduction (%) Weighted average term extension

(in months) Weighted average payment delay

Commercial & industrial — — % 12 months 0 months

Commercial mortgages:

Commercial mortgages, other — — % 60 months 4 months

Consumer loans:

Home equity lines and loans — — % 180 months 0 months

The Corporation closely monitors the performance of loans that have been modified in accordance with ASU 2022-02 in order to gauge the effectiveness of its 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 were modified in the twelve month periods preceding December 31, 2024 and 2023 (in thousands):

Twelve Months Ended December 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 industrial $ — $ — $ — $ 384 $ 384

Agricultural (2)

Commercial mortgages:

Construction (1)

Commercial mortgages, other — — — 376 376

Residential mortgages (1)

— — 440 — 440

Total $ — $ — $ 440 $ 760 $ 1,200

(1) Secured by commercial real estate

(2) Secured by business assets

(3) Secured by residential real estate

Differing from the methodology for analyzing loans on an individual basis used as of December 31, 2023, as described above, prior to January 1, 2023, the Corporation considered a loan to be impaired for credit analysis purposes when, based on currently available information, it was deemed probable that the Corporation would not be able to collect on the loan's contractually determined principal and interest payments.

Impaired loans included loans on non-accrual status and troubled debt restructurings (TDRs).

The Corporation identified loss allocations for impaired loans on an individual basis, and in conformity with its methodology under the incurred loss framework.

The following is a summary of impaired loans as of December 31, 2022 (in thousands):

December 31, 2022

With no related allowance recorded:

Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated

Commercial and agricultural:

(1) The residential mortgage included in the above table was contractually past due as of December 31, 2024, but was otherwise performing on its modified terms.

Twelve Months Ended December 31, 2023

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 industrial $ 875 $ — $ — $ 136 $ 1,011

Commercial mortgages:

Construction 5 5 —

Commercial mortgages 4,346 4,341 —

Residential mortgages 767 760 —

Commercial mortgages, other — — — 2,150 2,150

Consumer loans:

Home equity lines and loans — — — 116 116

With an allowance recorded:

Commercial and agricultural:

Total $ 875 $ — $ — $ 2,402 $ 3,277

There was one commercial and industrial loan modified to a borrower experiencing financial difficulty during 2023 which sustained a payment default on its modified terms during the year ended December 31, 2024.

Allocations totaling $ 0.7 million and $ 0.9 million were included for this loan in the allowance for credit losses as of December 31, 2024 and 2023, respectively.

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

Collateral-Dependent Individually Analyzed Loans

As of December 31, 2024 and 2023, the amortized cost basis of individually analyzed loans was $ 6.5 million and $ 8.0 million respectively, of which $ 5.1 million and $ 6.3 million respectively 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 ACL 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 following table presents the amortized cost basis and related allowance for credit loss of individually analyzed loans considered to be collateral-dependent as of December 31, 2024 and 2023 (in thousands):

December 31, 2024 December 31, 2023

Amortized Cost Basis Related Allowance Amortized Cost Basis Related Allowance

Commercial and industrial:

Commercial mortgages:

Commercial and industrial (1) (2)

$ 130 $ 65 $ 379 $ 240

Commercial mortgages:

Consumer loans:

Home equity lines and loans 126 127 31

Construction (1)

Commercial mortgages, other (1) (2) (3)

4,959 106 3,759 27

Total $ 5,089 $ 171 $ 6,347 $ 267

The following table presents the average amortized basis and interest income recognized for loans individually analyzed, by class, as of December 31, 2023 and loans individually evaluated for impairment, by class, as of December 31, 2022, (in thousands):

(1) Secured by commercial real estate

(2) Secured by business assets

(3) Secured by residential real estate

The following table presents the average amortized basis in and interest income recognized on loans individually analyzed, by class, as of December 31, 2024 and 2023 (in thousands):

December 31, 2024 December 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:

Average Amortized Cost Basis Interest Income Recognized (1)

Commercial and industrial $ 102 $ 4 $ 431 $ —

Agricultural — — — —

Commercial mortgages:

5 unchanged sentences

With an allowance recorded:

Commercial and agricultural:

Commercial and industrial 1,797 8 1,339 55

Agricultural 11 — — —

Commercial mortgages:

1 unchanged sentence

Commercial mortgages 379 — 33 —

Residential mortgages — — — —

Consumer loans:

Home equity lines and loans — — 25 —

Direct consumer loans — — — —

Total $ 6,907 $ 12 $ 6,646 $ 163

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

The following table presents the amortized cost basis of non-accrual loans with no related allowance for credit losses, total non-accrual loans, and loans pasts due for 90 days or greater which are still accruing, by class of loans, as of December 31, 2023 and December 31, 2022 (in thousands):

Non-accrual with no allowance for credit losses Non-accrual Loans Past Due 90 Days or More and Still Accruing

The following table presents the amortized cost basis of nonaccrual loans with no related specific allocation in the allowance for credit losses, total nonaccrual loans, and loans pasts due 90 days or greater which were still accruing, by class of loans, as of December 31, 2024 and 2023 (in thousands):

Nonaccrual with no allowance for credit losses Nonaccrual Loans Past Due 90 Days or More and Still Accruing

2024 2023 2024 2023 2024 2023

Commercial and agricultural:

Commercial and industrial $ 76 $ 76 $ 1,534 $ 1,930 $ 23 $ 10

Agricultural — — 26 — — —

Commercial mortgages:

3 unchanged sentences

Consumer loans:

Credit cards — — — — — —

Home equity lines and loans 613 508 613 508 — —

2 unchanged sentences

Total $ 6,518 $ 8,529 $ 8,954 $ 10,411 $ 23 $ 10

The following tables present the aging of the amortized cost basis in loans as of December 31, 2023 and December 31, 2022 (in thousands):

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

December 31, 2024

30 - 59 Days Past Due 60-89 Days Past Due Greater Than 89 Days Past Due Total Past Due Loans Not Past Due Total

Commercial and agricultural:

Commercial and industrial $ 140 $ 201 $ 702 $ 1,043 $ 298,478 $ 299,521

Agricultural — — — — 256 256

Commercial mortgages:

3 unchanged sentences

Consumer loans:

Credit cards — — — — — —

Home equity lines and loans 231 — 364 595 92,625 93,220

4 unchanged sentences

30 - 59 Days Past Due 60-89 Days Past Due Greater Than 89 Days Past Due Total Past Due Loans Not Past Due Total

Commercial and agricultural:

Commercial and industrial $ 1,196 $ 31 $ 10 $ 1,237 $ 263,159 $ 264,396

Agricultural — — — — 249 249

Commercial mortgages:

3 unchanged sentences

Consumer loans:

Credit cards — — — — — —

Home equity lines and loans 461 87 366 914 86,142 87,056

4 unchanged sentences

The Corporation establishes a risk rating at origination for all commercial loans.

The main factors considered in assigning risk ratings include, but are not limited to:

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.

1 unchanged sentence

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

Retail loans are not rated until they become 90 days past due.

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 its risk rating system to identify criticized and classified loans.

25 unchanged sentences

Gross charge offs — — — — — — — — —

Pass 11,275 1,445 — — 28 1,178 122,752 — 136,678

Special Mention — — — — — — — — —

Substandard — — — — 2,207 2 — — 2,209

Doubtful — — — — — — — — —

Total 11,275 1,445 — — 2,235 1,180 122,752 — 138,887

Gross charge offs — — — — — — — — —

Commercial mortgages

12 unchanged sentences

Not rated 13,833 10,657 14,094 4,879 2,503 10,259 35,015 1,252 92,492

Special Mention — — 115 — — — — — 115

Substandard — 24 63 — — 195 116 215 613

13 unchanged sentences

Total Gross charge-offs $ 52 $ 622 $ 746 $ 181 $ 99 $ 152 $ 21 $ — $ 1,873

Prior to the adoption of ASC 326- Financial Instruments-Credit Losses, loans not meeting the criteria above that were analyzed individually as part of the above described process were considered pass rated loans as of December 31, 2022.

Based upon the analyses performed as of December 31, 2022, the risk category of the recorded investment of loans by class of loans was as follows (in thousands):

December 31, 2022

Not Rated Pass Special Mention Substandard Doubtful Total

Commercial and agricultural:

Commercial and industrial $ — $ 235,900 $ 13,349 $ 2,899 $ 893 $ 253,041

Agricultural — 250 — — — 250

Commercial mortgages:

Construction — 108,488 178 5 — 108,671

Based on the analyses performed as of December 31, 2023, the risk category of the amortized cost basis of loans by class of loans and vintage, as well as the gross charge-offs by loan class and vintage for the period, are 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 $ 40,579 $ 21,892 $ 13,541 $ 31,233 $ 10,523 $ 77,241 $ 1,662 $ 238,596

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 49 914

Total 42,110 45,211 22,883 17,670 31,256 16,459 86,453 2,354 264,396

Gross charge offs — — — — 9 272 — — 281

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

Consumer loans

Credit cards — — — — — —

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

Indirect consumer loans 202,050 — — 540 — 202,590

Direct consumer loans 11,094 — — 13 — 11,107

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

The Corporation considers the performance of the loan portfolio and its impact on the allowance for credit losses.

For residential and consumer loan classes, the Corporation also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity.

Non-performing loans include non-accrual loans.

For residential and consumer loan classes, the Corporation evaluated credit quality based on the aging status of the loan, which was presented by payment activity.

The following table presents the amortized cost basis in residential and consumer loans based on payment activity as of December 31, 2023 (in thousands):

December 31, 2023

Consumer Loans

Residential Mortgages Home Equity Lines and Loans Indirect Consumer Loans Other Direct Consumer Loans

Performing $ 276,677 $ 86,548 $ 209,736 $ 9,870

Non-Performing 1,315 508 687 2

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

Prior to the adoption of ASC 326- Financial Instruments-Credit Losses , the Corporation also evaluated credit quality based on the aging status of the loan, which was presented, by payment activity.

The following table presents the recorded investment in residential and consumer loans based on payment activity as of December 31, 2022 (in thousands):

December 31, 2022

Consumer Loans

Residential Mortgages Home Equity Lines and Loans Indirect Consumer Loans Other Direct Consumer Loans

Performing $ 285,459 $ 80,942 $ 202,050 $ 11,094

Non-Performing 986 760 540 13

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

(5) PREMISES AND EQUIPMENT

Premises and equipment at December 31, 2023 and 2022 are as follows (in thousands):

Premises and equipment as of December 31, 2024 and 2023 are as follows (in thousands):

Land $ 4,298 $ 4,664

7 unchanged sentences

Depreciation expense was $ 1.8 million and $ 2.0 million for 2024 and 2023, respectively.

In July 2024, after receiving required approvals from the FRBNY and the NYSDFS, the Corporation announced the closure of its branch at 806 West Buffalo Street, Ithaca, New York, ("Ithaca Station") effective November 15, 2024.

Management determined to classify the property as held for sale as of December 31, 2024, pursuant to the requirements of ASC 360 - Property, Plant, and Equipment .

At the initial held for sale measurement date, the disposal group’s (held for sale property's) carrying value was $ 0.7 million, compared to an appraised value less selling costs of $ 1.3 million, therefore the held for sale property was initially measured at $ 0.7 million.

As of December 31, 2024, $ 0.7 million was included in the line item premises and equipment, net, on the Corporation’s Consolidated Balance Sheets related to this held for sale asset.

During the fourth quarter of 2024, the Corporation entered into an agreement with a third party to sell the property, with a targeted closing date in the first half of 2025.

Management determined there was no impairment of the disposal group during the year ended December 31, 2024.

Finance Leases

13 unchanged sentences

The Corporation’s lease agreements do not contain any residual value guarantees.

Leased branch properties at December 31, 2023 and December 31, 2022 consist of the following (in thousands):

Leased branch properties as of December 31, 2024 and December 31, 2023 classified as operating leases consist of the following (in thousands):

Operating lease right-of-use asset $ 5,648 $ 6,449

1 unchanged sentence

lease termination — —

new lease agreement and modifications — —

lease modifications 570 —

Operating lease right-of-use-assets, net $ 5,446 $ 5,648

4 unchanged sentences

Present value of net minimum lease payments $ 5,629

As of December 31, 2023, the Corporation had one operating lease that was signed on October 19, 2023, but had not yet commenced.

As of December 31, 2024, the Corporation had one operating lease that was signed, for which the extension had not yet commenced.

Finance Leases

The Corporation leases certain buildings under finance leases.

In May, 2024, the Corporation added $ 0.9 million in right-of-use assets and finance lease liabilities.

The lease arrangements require monthly payments through 2044.

12 unchanged sentences

End of year $ 21,824 $ 21,824

Acquired intangible assets were as follows at December 31, 2023 and 2022 (in thousands):

At December 31, 2023 At December 31, 2022

The Corporation's goodwill in the core banking segment arose from multiple acquisitions over the past three decades:

Owego National Bank (1995);

three branches of M&T Bank (2008);

Canton Bancorp, Inc.

(2009) and Fort Orange Financial Corporation (2011).

Acquired intangible assets were as follows as of December 31, 2024 and 2023 (in thousands):

As of December 31, 2024 As of December 31, 2023

Balance Acquired Accumulated Amortization Balance Acquired Accumulated Amortization

2 unchanged sentences

Total $ 11,608 $ 11,608 $ 11,608 $ 11,608

There is no aggregate amortization expense for 2023, and $ 15 thousand for 2022.

There is no remaining estimated aggregate amortization expense at December 31, 2023.

A summary of deposits at December 31, 2023 and 2022 is as follows (in thousands):

There is no aggregate amortization expense for 2024 and 2023.

There is no remaining estimated aggregate amortization expense as of December 31, 2024.

A summary of deposits as of December 31, 2024 and 2023 is as follows (in thousands):

Non interest-bearing demand deposits $ 625,762 $ 653,166

13 unchanged sentences

In general, the equivalent of the customers' original deposited funds comes back to the Corporation and are carried within the time deposits category.

Scheduled maturities of time deposits at December 31, 2023, are summarized as follows (in thousands):

Scheduled maturities of time deposits as of December 31, 2024, are summarized as follows (in thousands):

Year Maturities

2030 and thereafter —

Total $ 623,912

1 $ 80.0 million of 2025 maturities represent brokered deposits.

2 $ 9.5 million of 2027 maturities represent brokered deposits which are

callable by the Corporation on February 28, 2024 and monthly thereafter.

Time deposits that meet or exceed the FDIC Insurance limit of $250 thousand at December 31, 2023 and 2022 were $ 81.0 million and $ 36.4 million, respectively.

2 $ 9.5 million of 2027 maturities represent brokered deposits which are callable by the Corporation, monthly.

Time deposits that meet or exceed the FDIC Insurance limit of $250 thousand as of December 31, 2024 and 2023 were $ 107.6 million and $ 81.0 million, respectively.

(9) FEDERAL HOME LOAN BANK TERM ADVANCES AND OVERNIGHT ADVANCES

2 unchanged sentences

The following is a summary of FHLBNY overnight advances as of December 31, 2024 and 2023.

The carrying amount includes the advance balance plus purchase accounting adjustments that are amortized over the term of the advance (in thousands):

The carrying amount includes the advance balance (in thousands):

Amount Rate Maturity Date Amount Rate Maturity Date

$ 109,110 4.69 % January 2, 2025 $ 31,920 5.64 % January 2, 2024

The Bank has pledged $ 254.6 million and $ 254.4 million of residential mortgage and home equity loans under a blanket lien arrangement at December 31, 2023 and 2022, respectively, as collateral for future borrowings.

Based on this collateral and additional securities held, the Bank's unused borrowing capacity at the FHLBNY was $ 193.4 million at December 31, 2023.

The Bank has pledged $ 244.6 million and $ 254.6 million of residential mortgage and home equity loans under a blanket lien arrangement as of December 31, 2024 and 2023, respectively, as collateral for future borrowings.

Based on this collateral and additional securities held, the Bank's unused borrowing capacity at the FHLBNY was $ 112.0 million as of December 31, 2024.

(10) REVENUE FROM CONTRACTS WITH CUSTOMERS

3 unchanged sentences

Year ended December 31, 2024

Revenue by Operating Segment:

Core Banking WMG Holding Company, CFS, and CRM (b)(c)

Revenue by Operatin g Se g ment:

Core Banking WMG Holding Company and CFS Total

Non-interest income

8 unchanged sentences

Net gains on sales of securities (a)

( 39 ) — — ( 39 )

Loan servicing fees (a)

5 unchanged sentences

(a) Not within scope of ASC 606.

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

(CRM) was dissolved December 6, 2023.

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

Year ended December 31, 2023

Revenue by Operating Segment:

Core Banking WMG Holding Company, CFS, and CRM (b)

Revenue by Operatin g Se g ment:

Core Banking WMG Holding Company, CFS, and CRM (b)(c)

Non-interest income

7 unchanged sentences

Net gains on sales of loans (a)

Net gains on sales of securities (a)

( 39 ) — — ( 39 )

Loan servicing fees (a)

6 unchanged sentences

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

(CRM) was dissolved December 6, 2023.

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

5 unchanged sentences

Service charges on deposits are withdrawn from the customer's account balance.

Interchange Income from Debit Card Transactions:

Interchange Revenue from Debit Card Transactions:

The Corporation earns interchange fees from debit cardholder transactions conducted through the Mastercard payment network.

2 unchanged sentences

The Corporation earns wealth management fees from its contracts with trust 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):

12 unchanged sentences

The interest rate swap agreements are free-standing derivatives and are recorded at fair value in the Corporation's Consolidated Balance Sheets.

The Corporation manages its exposure to such interest rate swaps by entering into corresponding and offsetting interest rate swaps with third parties that mirror the terms of the interest rate swaps it has with the commercial borrowers.

The Corporation manages its exposure to such interest rate swaps by entering into corresponding and offsetting interest rate swaps with third parties which mirror the terms of the interest rate swaps entered into with the commercial borrowers.

These positions directly offset each other and the Corporation's exposure is the fair value of the derivatives due to potential changes in credit risk of our commercial borrowers and third parties.

The Corporation also enters into risk participation agreements with dealer banks on commercial loans in which it participates.

The Corporation also enters into risk participation agreements with lead banks on commercial loans in which it participates.

The Corporation receives an upfront fee for participating in the credit exposure of the interest rate swap associated with the commercial loan in which it is a participant and the fee received is recognized immediately in other non-interest income.

1 unchanged sentence

The Corporation determines the fair value of the credit loss exposure using an estimated credit default rate based on the historical performance of similar assets.

The notional amount of the interest rate swaps does not represent amounts exchanged by the parties.

The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

At December 31, 2023, the Corporation held derivatives not designated as hedging instruments with a total notional amount of $ 647.5 million.

Derivatives not designated as hedging instruments included back-to-back interest rate swaps of $ 631.1 million, consisting of $ 315.5 million of interest rate swaps with commercial borrowers and an additional $ 315.5 million of offsetting interest rate swaps with third-party counter-parties on substantially the same terms, and risk participation agreements with dealer banks of $ 16.4 million.

The notional amount of an interest rate swap does not represent amounts exchanged by the parties.

The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreement.

As of December 31, 2024, the Corporation held derivatives not designated as hedging instruments with a total notional amount of $ 703.2 million.

Derivatives not designated as hedging instruments included back-to-back interest rate swaps of $ 680.2 million, consisting of $ 340.1 million of interest rate swaps with commercial borrowers and an additional $ 340.1 million of offsetting interest rate swaps with third-party counterparties on substantially the same terms, and risk participation agreements with lead banks of $ 23.0 million.

Free-standing derivatives are not designated as hedges for accounting purposes and are therefore recorded at fair value with changes in fair value recorded in other non-interest income.

Accrued interest receivable and payable related to these swaps of $ 665 thousand and $ 447 thousand, as of December 31, 2023 and 2022, respectively, was included in other assets and liabilities.

The following table presents information regarding derivative financial instruments, at December 31:

Accrued interest receivable and payable related to these swaps of $ 0.5 million and $ 0.7 million, respectively, is included in other assets and liabilities in the Corporation's Consolidated Balance Sheets as of December 31, 2024 and 2023.

The following table presents information regarding derivative financial instruments, as of December 31:

Derivatives not designated as hedging instruments:

13 unchanged sentences

There was an immaterial off-balance sheet exposure for the risk participation agreements as of December 31, 2024, and December 31, 2023.

Amounts included in the Consolidated Statements of Income related to derivatives not designated as hedging were as follows:

Amounts included in the Consolidated Statements of Income related to derivatives not designated as hedging instruments were as follows:

Years Ended December 31,

32 unchanged sentences

The lower tax expense in 2024 when compared to 2023 can be attributed to a decrease in pretax income.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2023 and 2022, are presented below (in thousands):

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2024 and 2023, are presented below (in thousands):

Deferred tax assets :

18 unchanged sentences

Accrual for employee benefit plans 11 8

Other 210 219

Other items, net 241 210

Total gross deferred tax liabilities 9,949 9,146

17 unchanged sentences

The Corporation uses a December 31 measurement date for its pension plan.

The following table presents (1) changes in the plan's projected benefit obligation and plan assets, and (2) the plan's funded status at December 31, 2023 and 2022 (in thousands):

The following table presents (1) changes in the plan's projected benefit obligation and plan assets, and (2) the plan's funded status as of December 31, 2024 and 2023 (in thousands):

Change in projected benefit obligation:

15 unchanged sentences

Funded status $ 18,938 $ 15,927

Amount recognized in accumulated other comprehensive income (loss) at December 31, 2023 and 2022 consist of the following (in thousands):

Amount recognized in accumulated other comprehensive income (loss) as of December 31, 2024 and 2023 consist of the following (in thousands):

Net actuarial loss $ 1,936 $ 3,961

1 unchanged sentence

Total before tax effects $ 1,936 $ 3,961

The accumulated benefit obligation at December 31, 2023 and 2022 was $ 31.0 million and $ 30.5 million, respectively.

Actuarial losses in the Projected Benefit Obligation (PBO) in 2023 were primarily the result of the decrease in discount rate.

The decrease in discount rate caused the PBO to increase by $ 1.0 million.

The update in mortality table caused the PBO to decrease by $ 0.2 million.

Other sources of gain/loss such as plan experience, updated census data and minor adjustments to actuarial assumptions generated a combined loss of less than 1 % of expected year end obligations.

The accumulated benefit obligation as of December 31, 2024 and 2023 was $ 29.2 million and $ 31.0 million, respectively.

Actuarial gains in the Projected Benefit Obligation (PBO) in 2024 were primarily the result of the increase in discount rate.

The increase in discount rate caused the PBO to decrease by $ 1.5 million.

Other sources of gain/loss such as plan experience, updated census data and minor adjustments to actuarial assumptions generated a combined loss of approximately 1.3 % of expected year end obligations.

The principal actuarial assumptions used in determining the projected benefit obligation as of December 31, 2024 and 2023 were as follows:

27 unchanged sentences

Weighted-average interest crediting rate N/A N/A

The discount rate was determined by projecting the plan's expected future benefit payments as defined for the projected benefit obligation, discounting those expected payments using a theoretical zero-coupon spot yield curve derived from a universe of high-quality bonds as of the measurement date, and solving for he single equivalent discount rate that resulted in the same projected benefit obligation.

A 1 % increase/(decrease) in the discount rate would have increased/(decreased) the net pension cost for 2024 by $ 142,000 /$( 48,000 ) and (decreased)/increased the year-end projected benefit obligation by $( 2.4 )/$ 2.8 million.

The change in unrecognized net gain/loss is one measure of the degree to which important assumptions have coincided with actual experience.

During 2024 the unrecognized net loss decreased by 6.5 % of the December 31, 2023 projected benefit obligation.

The Corporation changes important assumptions whenever conditions warrant changes.

At December 31, 2023 the Corporation used the Society of Actuaries PRI-2012 Private Retirement Plans Mortality Table with Mortality Improvement Scale MP-2021 as a basis for the Plan's valuation.

At December 31, 2022, the Corporation used IRS Static 2023 Mortality Table with Mortality Improvement Scale MP-2021 as a basis for the Plan's valuation.

As of December 31, 2024 and December 31, 2023, the Corporation used the Society of Actuaries PRI-2012 Private Retirement Plans Mortality Table with Mortality Improvement Scale MP-2021 as a basis for the Plan's valuation.

The discount rate is evaluated at least annually and the expected long-term return on plan assets will typically be revised every three to five years , or as conditions warrant.

The Corporation's overall investment strategy is to achieve a mix of investments for long-term growth and for near-term benefit payments with a wide diversification of asset types.

The Corporation's overall investment strategy is to achieve a mix of investments that protects the value of plan assets while facilitating near-term benefit payments with a diversification of asset types.

The target allocations for plan assets are shown in the table below.

7 unchanged sentences

The expected return on plan assets was determined based on a CAPM using historical and expected future returns of the various asset classes, reflecting the target allocations described below.

Asset Class Target Allocation 2023 Percentage of Plan Assets at December 31, Expected Long-Term Rate of Return

Asset Class Target Allocation 2024 Percentage of Plan Assets as of December 31, Expected Long-Term Rate of Return

Large cap domestic equities 0 % - 30 %

1 unchanged sentence

Mid-cap domestic equities 0 % - 6 %

2 % 2 % 11.5 %

Small-cap domestic equities 0 % - 5 %

1 % 1 % 9.7 %

International equities 0 % - 6 %

3 % 3 % 6.9 %

Emerging market equities 0 % - 5 %

Intermediate fixed income 60 % - 100 %

1 unchanged sentence

Alternative assets 0 % - 15 %

— % — % 2.9 %

Cash 0 % - 25 %

1 unchanged sentence

Total 100 % 100 %

The investment policy of the plan is to provide for long-term growth of principal and income without undue exposure to risk.

The focus is on long-term capital appreciation and income generation.

The Corporation maintains an IPS that guides the investment allocation in the plan.

The investment policy of the plan is to provide for stability in the value of plan assets and current income production without undue exposure to risk.

The Corporation maintains an Investment Policy Statement (IPS) that guides the investment allocation in the plan.

The IPS describes the target asset allocation positions as shown in the table above.

13 unchanged sentences

Rating agency and industry research reports as well as defaults and deferrals on individual securities are reviewed and incorporated into the calculations.

The fair value of the plan assets at December 31, 2023 and 2022, by asset class are as follows (in thousands):

Fair Value Measurement at December 31, 2023 Using

The fair value of the plan assets as of December 31, 2024 and 2023, by asset class are as follows (in thousands):

Fair Value Measurement as of December 31, 2024 Using

Plan Assets Carrying Value Quoted Prices in Active Markets for Identical Assets

9 unchanged sentences

Total plan assets $ 48,107 $ 48,107 $ — $ —

Fair Value Measurement at December 31, 2022 Using

Fair Value Measurement as of December 31, 2023 Using

Plan Assets Carrying Value Quoted Prices in Active Markets for Identical Assets

19 unchanged sentences

Additionally, beginning January 1, 2017 the Bank began contributing a 50 % match up to 6 % of gross annual wages.

Expense related to these plans totaled $ 1.4 million for each of the years ended December 31, 2023 and 2022.

The plan's assets at December 31, 2023 and 2022 include 124,214 and 121,847 shares, respectively, of Chemung Financial Corporation common stock, as well as other common and preferred stocks, U.S.

Expense related to these plans totaled $ 1.6 million and $ 1.4 million for the years ended December 31, 2024 and 2023, respectively.

The plan's assets as of December 31, 2024 and 2023 include 112,006 and 124,214 shares, respectively, of Chemung Financial Corporation common stock, as well as other common and preferred stocks, U.S.

Government securities, corporate bonds and notes, and mutual funds.

3 unchanged sentences

The Corporation uses a December 31 measurement date for its defined benefit health care plan.

The following table presents (1) changes in the plan's accumulated postretirement benefit obligation and (2) the plan's funded status at December 31, 2023 and 2022 (in thousands):

The following table presents (1) changes in the plan's accumulated postretirement benefit obligation and (2) the plan's funded status as of December 31, 2024 and 2023 (in thousands):

Changes in accumulated postretirement benefit obligation:

14 unchanged sentences

Unfunded status $ ( 87 ) $ ( 76 )

Amount recognized in accumulated other comprehensive income (loss) at December 31, 2023 and 2022 consist of the following (in thousands):

Amount recognized in accumulated other comprehensive income (loss) as of December 31, 2024 and 2023 consist of the following (in thousands):

Net actuarial loss $ 123 $ 102

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Total recognized in net benefit cost and other comprehensive income (loss) (before tax effect) $ 45 $ 8

Actuarial loss for 2023 is primarily the net impact of a decrease in discount rate, which increased the Accumulated Postretirement Benefit Obligation (APBO) by $ 1 thousand, the updating of mortality tables, which decreased the APBO by $ 4 thousand, and the reflection of updated data, claims experience and health care trend rates (HCTR), which (combined) increased the APBO by $ 6 thousand.

Actuarial loss for 2024 is primarily the net impact of an increase in discount rate, which decreased the Accumulated Postretirement Benefit Obligation (APBO) by $ 2 thousand, and the reflection of updated data and claims experience, which increased the APBO by $ 43 thousand.

All other sources of gain or loss had a combined net impact of less than $ 1 thousand.

During 2023 the plan's total unrecognized net loss decreased by $ 16 thousand.

During 2024 the plan's total unrecognized net loss increased by $ 21 thousand.

Because the total unrecognized net gain or loss in the plan exceeds 10 % of the accumulated postretirement benefit obligation, the excess will be amortized over the average future life expectancy of all plan participants.

2 unchanged sentences

The change in unrecognized gain/loss is one measure of the degree to which important assumptions have coincided with actual experience.

During 2023, the unrecognized net loss decreased by 16 % of the December 31, 2022 accumulated postretirement benefit obligation.

During 2024, the unrecognized net loss increased by 27 % of the December 31, 2023 accumulated postretirement benefit obligation.

The Corporation changes important assumptions whenever changing conditions warrant.

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The Corporation uses a December 31 measurement date for its Executive Supplemental Pension Plan.

The following table presents Executive Supplemental Pension plan status at December 31, 2023 and 2022 (in thousands):

The following table presents Executive Supplemental Pension plan status as of December 31, 2024 and 2023 (in thousands):

Change in projected benefit obligation:

11 unchanged sentences

Unfunded status $ ( 859 ) $ ( 924 )

Amounts recognized in accumulated other comprehensive income (loss) at December 31, 2023 and 2022 consist of the following (in thousands):

Amounts recognized in accumulated other comprehensive income (loss) as of December 31, 2024 and 2023 consist of the following (in thousands):

Net actuarial loss $ 192 $ 202

1 unchanged sentence

Total before tax effects $ 192 $ 202

Accumulated benefit obligation at December 31, 2023 and 2022 was $ 0.9 million and $ 0.9 million, respectively.

Accumulated benefit obligation was $ 0.9 million as of December 31, 2024 and 2023, respectively.

Weighted-average assumption for disclosure as of December 31:

13 unchanged sentences

Total recognized in net benefit cost and other comprehensive income (loss) (before tax effect) $ 44 $ 85

During 2023, there was a $ 20 thousand increase in the projected benefit obligation as a result of the decrease in discount rate.

Offsetting this was a mortality decrease of $ 8 thousand, due to the update in the mortality assumption.

There was also a $ 25 thousand increase in PBO due to participant mortality (longevity) experience.

During 2024, there was a $ 30 thousand decrease in the projected benefit obligation as a result of the increase in discount rate.

Offsetting this was a $ 30 thousand increase in PBO due to participant mortality (longevity) experience.

There were no other significant sources of gain or loss during 2024.

During 2023, the plan's total unrecognized net loss increased by $ 30 thousand.

During 2024, the plan's total unrecognized net loss decreased by $ 10 thousand.

Because the total unrecognized net gain or loss exceeds the greater of 10 % of the projected benefit obligation or 10 % of the plan assets, the excess will be amortized over the average future life expectancy of all participants.

7 unchanged sentences

The change in unrecognized net gain or loss is one measure of the degree to which important assumptions have coincided with actual experience.

During 2023 the unrecognized net loss increased 3.2 % of the December 31, 2022 projected benefit obligation.

During 2024 the unrecognized net loss decreased 1.1 % of the December 31, 2023 projected benefit obligation.

The following table presents the estimated benefit payments for each of the next five years and the aggregate amount expected to be paid in years six through ten for the Supplemental Pension Plan (in thousands):

15 unchanged sentences

The prior plan shall remain in existence solely for the purpose of administering outstanding grants.

Under the terms of 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.

Under the terms of 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, including the Chief Executive Officer, other executive officers, 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 will be filed.

Awards under the 2021 Plan may be vested no earlier than the first anniversary of the date on which the award is granted.

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 .

Awards under the 2021 Plan may generally be vested no earlier than the first anniversary of the date on which the award is granted.

Shares fully vest on the fifth anniversary of the grant date for employees, and on the first anniversary of the grant date for the Chief Executive Officer and members of the Board of Directors.

Compensation expense for shares granted is recognized based on the fair value of the stock at the issue date.

Total compensation expense related to this plan was $ 1.2 million in both 2023 and 2022.

Compensation expense for shares granted is recognized over the vesting period of the award based on the closing price of the Corporation's stock on the grant date.

Total compensation expense related to the 2021 Plan was $ 1.2 million in both 2024 and 2023.

During 2024 and 2023, a total of 14,396 and 34,658 shares, respectively, were re-issued from treasury to fund stock compensation.

Effective for the 2024 fiscal year and thereafter, annual stock compensation is expected to be awarded the second month after the close of the fiscal year for the Corporation's employees and Chief Executive Officer.

A summary of restricted stock activity as of December 31, 2024, and changes during the year ended is presented below:

Shares Weighted–Average Grant Date Fair Value

Nonvested at December 31, 2022 55,402 $ 44.57

Nonvested as of December 31, 2023 62,984 $ 45.87

Granted 14,396 $ 47.70

1 unchanged sentence

Forfeited or Cancelled ( 115 ) $ 47.71

Nonvested at December 31, 2023 62,984 $ 45.87

Nonvested as of December 31, 2024 49,703 $ 46.67

As of December 31, 2024, there was $ 1.7 million of total unrecognized compensation cost related to nonvested shares granted under the prior plan and the 2021 Plan.

2 unchanged sentences

(15) RELATED PARTY TRANSACTIONS

Members of the Board of Directors, certain Corporation officers, and their immediate families directly, or through entities in which they are principal owners (more than 10 % interest) or board members, were customers of, and had loans and other transactions with the Corporation.

Members of the Board of Directors, certain Corporation officers, and their immediate families directly, or through entities in which they are principal owners (more than 10 % interest), were customers of, and had loans and other transactions with the Corporation.

These loans are summarized as follows for the years ended December 31, 2024 and 2023 (in thousands):

4 unchanged sentences

Balance at end of year $ 25,413 $ 26,058

Deposits from principal officers, directors, and their affiliates at December 31, 2023 and 2022 were $ 36.0 million and $ 28.4 million, respectively.

The Bank leases its branch located at 1365 New Scotland Road, Slingerlands, New York, under a lease agreement through July 2029 from a former member of the Corporation's Board of Directors who retired from the Corporation's Board of Directors as of June 7, 2022.

Rent and CAM paid to this Board member while serving on the Board totaled $ 25 thousand for the year ended December 31, 2022.

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 expense totaling $ 9 thousand and $ 8 thousand per month for the years ended December 31, 2023 and 2022, respectively.

Deposits from principal officers, directors, and their affiliates as of December 31, 2024 and 2023 were $ 43.1 million and $ 36.0 million, respectively.

The Bank leases its branch located at 2 Rush Street, Schenectady, New York, under a lease agreement through February, 2033 from a member of the Corporation's Board of Directors with monthly rent and CAM expense totaling $ 9 thousand per month for each of the years ended December 31, 2024 and 2023.

Rent and CAM paid to this Board member totaled $ 110 thousand and $ 118 thousand for the years ended December 2024 and 2023, respectively.

WMG provided trust services to members of the Board of Directors, certain Corporation officers, and their immediate families directly, or through entities in which they are principal owners or board members.

WMG fee income for the trust services provided totaled $ 0.6 million for each of the years ended December 31, 2023 and 2022, respectively.

WMG provided trust services to members of the Board of Directors, certain Corporation officers, and their immediate families directly, or through entities in which they are principal owners.

WMG fee income for the trust services provided totaled $ 0.3 million and $ 0.2 million for the years ended December 31, 2024 and 2023, respectively.

(16) COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates.

Commitments may expire without being used.

Off-balance sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated.

Commitments may expire without being used and off-balance sheet risk of credit loss exists up to the face amount of these instruments.

The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.

The contractual amounts of financial instruments with off-balance sheet risk at year-end were as follows (in thousands):

The following table presents the contractual amounts of financial instruments with off-balance sheet risk as of December 31, 2024 and 2023 (in thousands):

Fixed Rate Variable Rate Fixed Rate Variable Rate

3 unchanged sentences

Commitments to make real estate and home equity loans are generally made for periods of sixty days or less.

As of December 31, 2023, the fixed rate real estate and home equity commitments to make loans have interest rates ranging from 5.75 % to 8.13 % and maturities ranging from seven years to thirty years .

As of December 31, 2024, the fixed rate real estate and home equity commitments to make loans have interest rates ranging from 5.88 % to 7.38 % and maturities ranging from five years to thirty years .

Commitments to fund commercial draw notes are generally made for periods of three months to twenty-four months .

6 unchanged sentences

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.

The allowance is based on the same methodology as the allowance for credit losses on loans.

As of December 31, 2023, the allowance for credit losses on unfunded commitments was $ 0.9 million.

The allowance is based on the same methodology as the allowance for credit losses on loans and utilizes credit conversion factors to determine balance sheet equivalents.

As of December 31, 2024 and 2023, the allowance for credit losses on unfunded commitments was $ 0.8 million and $ 0.9 million, respectively.

The Corporation has issued conditional commitments in the form of standby letters of credit to guarantee payment on behalf of a customer and guarantee the performance of a customer to a third party.

1 unchanged sentence

The credit risk involved in issuing these instruments is essentially the same as that involved in extending loans to customers.

Contingent obligations under standby letters of credit totaled $ 11.3 million at December 31, 2023 and represent the maximum potential future payments the Corporation could be required to make.

Contingent obligations under standby letters of credit totaled $ 19.2 million as of December 31, 2024 and represent the maximum potential future payments the Corporation could be required to make.

Typically, these instruments have terms of twelve months or less and expire unused;

2 unchanged sentences

Corporation policies governing loan collateral apply to standby letters of credit at the time of credit extension.

The carrying amount and fair value of the Corporation's standby letters of credit at December 31, 2023 was not significant.

The carrying amount and fair value of the Corporation's standby letters of credit as of December 31, 2024 was not significant.

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

6 unchanged sentences

Investment in subsidiary - CFS Group, Inc.

Investment in subsidiary - Chemung Risk Management, Inc.

Dividends receivable from subsidiary bank — 1,469

9 unchanged sentences

Total liabilities and shareholders' equity $ 215,568 $ 196,735

1 Chemung Risk Management, Inc.

was dissolved effective December 6, 2023.

STATEMENTS OF INCOME - YEARS ENDED DECEMBER 31 2024 2023

24 unchanged sentences

Expense related to restricted stock units directors' deferred compensation plan 21 20

Expense to employee restricted stock awards 1,139 795

Expense related to employee restricted stock awards 1,238 1,139

Net cash provided by operating activities 2,894 6,848

13 unchanged sentences

(18) FAIR VALUES

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) 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:

10 unchanged sentences

Securities that are held to fund a non-qualified deferred compensation plan and securities that have a readily determinable fair market value, are recorded with changes in fair value included in earnings.

The fair values of equity investments are determined by quoted market prices (Level 1 inputs).

The fair value of equity investments is determined by quoted market prices (Level 1 inputs).

Individually Analyzed Loans:

At the time a loan is considered for individual analysis, 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 treatment.

At the time a loan becomes individually analyzed, it is valued at the lower of amortized 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 losses.

For collateral-dependent loans, fair value is commonly based on real estate appraisals.

1 unchanged sentence

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.

These loans are analyzed on a quarterly basis for additional valuation changes and adjusted accordingly.

Assets acquired through or instead of loan foreclosures are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.

These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell.

Such adjustments are usually significant and typically result in a Level 3 classification of inputs for determining fair value.

These loans are analyzed on a quarterly basis for additional credit loss and adjusted accordingly.

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.

2 unchanged sentences

Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and OREO are performed by certified general appraisers (commercial properties) or certified residential appraisers (residential properties) whose qualifications and licenses have been reviewed and verified by the Corporation.

Subsequent declines in fair value are recorded through the establishment of a valuation allowance, which may be reversed should fair value increase after the establishment of the valuation allowance.

Appraisals for both collateral-dependent individually analyzed loans and OREO are performed by certified general appraisers (commercial properties) or certified residential appraisers (residential properties) whose qualifications and licenses have been reviewed and verified by the Corporation.

Once received, appraisals are reviewed for reasonableness of assumptions, approaches utilized, Uniform Standards of Professional Appraisal Practice and other regulatory compliance, as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.

Appraisals are generally completed within the previous 12 month period prior to a property being placed into OREO.

On impaired loans, appraisal values are adjusted based on the age of the appraisal, the position of the lien, the type of the property and its condition.

Appraisals are generally completed within the 12 month period prior to a property being placed into OREO and updated appraisals are typically completed for collateral-dependent loans when management determines analysis on an individual basis is required.

For 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.

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).

The fair value of interest rate swaps is 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.

Therefore, the fair value of derivatives is determined using quantitative models utilizing 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 credit risk participation are based on credit default rate assumptions (Level 3 inputs).

Although the Corporation has determined the majority of inputs used to value its derivatives are considered Level 2 inputs, credit valuation adjustments are based on credit default rate assumptions, which are considered Level 3 inputs.

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

Fair Value Measurement at December 31, 2023 Using

Fair Value Measurement as of December 31, 2024 Using

Financial Assets:

14 unchanged sentences

Derivative liabilities $ 23,851 $ — $ 23,851 $ —

Fair Value Measurement at December 31, 2022 Using

Fair Value Measurement as of December 31, 2023 Using

Financial Assets:

13 unchanged sentences

Derivative liabilities $ 23,981 $ — $ 23,981 $ —

There were no transfers between Level 1 and Level 2 during the twelve month periods ending December 31, 2023 and 2022.

The Corporation transfers assets and liabilities between levels within the hierarchy when the methodology to obtain the fair value changes such that there are either more or fewer unobservable inputs as of the end of the reporting period.

The Corporation transferred its investment in six corporate sub-debt issuances from Level 2 to Level 3 in the twelve month period ended December 31, 2023.

Illiquidity in new issuances of comparable bonds and the size of issuances led to pricing difficulties, and the transfer to Level 3 within the period.

The Corporation transfers assets and liabilities between levels within the hierarchy when methodologies to obtain fair value change such that there are either more or fewer unobservable inputs as of the end of the indicated reporting period.

The Corporation utilizes a "beginning of reporting period" timing assumption when recognizing transfers between hierarchy levels, consistent with ASC 820-10-50-2.

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using unobservable inputs (Level 3) for the years ended December 31, 2023 and 2022.

Corporate Bonds:

Level 3 Financial Assets 2023 2022

Balance of recurring Level 3 assets at January 1 $ — $ —

There were no transfers between Level 1 and Level 2 of the hierarchy during the years ended December 31, 2024 and 2023.

There were six corporate subordinated debt issuances transferred into Level 3 during the year ended December 31, 2024, with a total fair value of $ 5.9 million as of the transfer date and a fair value of $ 5.9 million as of December 31, 2024 due to a lack of observable data for the specific issuances.

There was one corporate subordinated debt issuance with a fair value of $ 1.9 million as of December 31, 2024 which was transferred out of Level 3 and into Level 2 during the year ended December 31, 2024 based on the availability of observable market data for the issuance, which was subsequently transferred back into Level 3 during the fourth quarter of 2024.

There were six corporate subordinated debt issuances transferred into Level 3 during the year ended December 31, 2023.

This transfer was due to illiquidity in new issuances of comparable bonds and the size of issuances, leading to pricing difficulties during 2023, which persisted in 2024 for the majority of the effected issuances.

Two of these issuances, with a combined fair value of $ 1.3 million as of December 31, 2023, were transferred back to Level 2 during the third quarter of 2023, based on increased availability of market data relevant to these issuances.

The tables below present a reconciliation of assets measured at fair value on a recurring basis using unobservable inputs (Level 3) and qualitative information regarding Level 3 significant unobservable inputs for the years ended December 31, 2024 and 2023.

Level 3 Financial Assets - Corporate Bonds 2024 2023

Balance of recurring Level 3 assets as of January 1 $ 7,530 $ —

Total gains and losses for the period:

2 unchanged sentences

Transfers out of Level 3 ( 1,749 ) ( 1,329 )

Balance of recurring Level 3 assets at December 31 $ 7,530 $ —

December 31, 2023 Fair Value Valuation Techniques Unobservable Input Range [Weighted Average] at

Balance of recurring Level 3 assets as of December 31 $ 12,132 $ 7,530

December 31, 2024 Fair Value Valuation Techniques Unobservable Input Range [Weighted Average] as of December 31, 2024

Corporate bonds and notes $ 12,132 Discounted cash flow Market discount rate 7.25 % - 12.00 % [ 10.82 %]

There were two corporate bonds with a fair value of $ 1.3 million which were transferred out of Level 3 and into Level 2 during the year ended December 31, 2023 based on the availability of observable market data for these investments.

There were no financial assets measured on a recurring basis that were considered to be Level 3 fair value by the Corporation at December 31, 2022.

Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2023 and 2022 were

considered to be immaterial to the presentation of the consolidated financial statements.

December 31, 2023 Fair

Value Valuation Technique Unobservable Inputs Range

[Weighted Average]

as of December 31, 2023

Corporate bonds and notes $ 7,530 Discounted cash flow Market discount rate 12.50 % - 12.50 %

Assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2024 and 2023 are summarized below (in thousands):

Fair Value Measurement as of December 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

Individually analyzed loans:

Commercial and industrial $ 11 $ — $ — $ 11

Commercial mortgages:

Commercial mortgages, other 873 — — 873

Total individually analyzed loans $ 884 $ — $ — $ 884

Other real estate owned:

Residential mortgages $ 126 $ — $ — $ 126

Consumer loans:

Home equity lines and loans 285 — — 285

Total other real estate owned, net $ 411 $ — $ — $ 411

The fair value of other real estate owned is presented net of a $ 32 thousand valuation allowance as of December 31, 2024.

Fair Value Measurement as of 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

Individually analyzed loans:

Commercial and industrial $ 62 $ — $ — $ 62

Total individually analyzed loans $ 62 $ — $ — $ 62

Other real estate owned:

Residential mortgages $ 116 $ — $ — $ 116

Consumer loans:

Home equity lines and loans 210 — — 210

Total other real estate owned, net $ 326 $ — $ — $ 326

There were no valuation allowances established for other real estate owned as of December 31, 2023.

The following tables present quantitative information regarding Level 3 significant unobservable inputs for assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2024 and 2023 (in thousands):

Description Fair Value as of December 31, 2024 Valuation Technique Unobservable Inputs Range

[Weighted Average]

as of December 31, 2024

Individually analyzed loans:

Commercial and industrial $ 11 Net present value Discount rate 41.29 % - 41.29 %

Commercial mortgages:

Commercial mortgages, other 873 Income approach Adjustment to appraised value 16.86 % - 16.86 %

Total individually analyzed loans $ 884

Other real estate owned:

Residential mortgages $ 126 Sales comparison Adjustment to appraised value 20.80 % - 20.80 %

Consumer loans:

Home equity lines and loans 285 Sales comparison Adjustment to appraised value 20.80 % - 20.80 %

Total other real estate owned, net $ 411

Description Fair Value as of December 31, 2023 Valuation Technique Unobservable Inputs Range

[Weighted Average]

as of December 31, 2023

Individually analyzed loans:

Commercial and industrial $ 62 Net present value Discount rate 48.64 % - 57.33 %

Total individually analyzed loans $ 62

Other real estate owned:

Residential mortgages $ 116 Sales comparison Adjustment to appraised value 20.80 % - 20.80 %

Consumer loans:

Home equity lines and loans 210 Sales comparison Adjustment to appraised value 20.80 % - 20.80 %

Total other real estate owned, net $ 326

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values of other financial instruments, at December 31, 2023 and December 31, 2022, are as follows (in thousands):

Fair Value Measurements at December 31, 2023 Using

The carrying amounts and estimated fair values of other financial instruments, as of December 31, 2024 and December 31, 2023, are as follows (in thousands):

Fair Value Measurements as of December 31, 2024 Using

Financial assets:

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Changes in assumptions could significantly affect the estimates.

Fair Value Measurements at December 31, 2022 Using

Fair Value Measurements as of December 31, 2023 Using

Financial Assets:

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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.

Management believes as of December 31, 2023, the Bank met all capital adequacy requirements to which they are subject.

Management believes as of December 31, 2024, the Bank met all capital adequacy requirements to which it is subject.

Prompt corrective action regulations provide five classifications:

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If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.

At December 31, 2023, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.

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 December 31, 2024, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.

The Corporation is no longer subject to Federal Reserve 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 December 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 or the Corporation's capital category.

There have been no conditions or events since this notification that management believes have changed the Bank's or the Corporation's capital category.

The Corporation’s principal source of funds for dividend payments is dividends received from the Bank.

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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 )

Balance as of January 1, 2024 $ ( 62,800 ) $ ( 3,213 ) $ ( 66,013 )

Other comprehensive income (loss) before reclassification ( 539 ) 1,465 926

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Net current period other comprehensive income (loss) ( 539 ) 1,487 948

Balance at December 31, 2023 $ ( 62,800 ) $ ( 3,213 ) $ ( 66,013 )

Balance at January 1, 2022 $ ( 2,495 ) $ ( 4,035 ) $ ( 6,530 )

Balance as of December 31, 2024 $ ( 63,339 ) $ ( 1,726 ) $ ( 65,065 )

Balance as of January 1, 2023 $ ( 71,296 ) $ ( 3,961 ) $ ( 75,257 )

Other comprehensive income (loss) before reclassification 8,506 702 9,208

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Net current period other comprehensive income (loss) 8,496 748 9,244

Balance at December 31, 2022 $ ( 71,296 ) $ ( 3,961 ) $ ( 75,257 )

Balance as of December 31, 2023 $ ( 62,800 ) $ ( 3,213 ) $ ( 66,013 )

The following is the reclassification out of accumulated other comprehensive income (loss) for the periods indicated (in thousands):

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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 core banking segment provides revenues by attracting deposits from the general public and using such funds to originate consumer, commercial and industrial, 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.

The Corporation's reportable segments are determined by the Executive Management Team (EMT), who collectively are designated Chief Operating Decision Maker (CODM).

The CODM evaluates the financial performance of each business segment, which is based upon the business segment's net income.

Components of net income for the business segments that are reviewed by the CODM include net interest income, provision for credit losses, non-interest income, non-interest expense and income tax expense.

The CODM, in conjunction with management committees (such as ALCO and Corporate loan committees) evaluates financial performance to make decisions related to the products and services that are offered, pricing, and the allocation of resources for each business segment.

Accounting policies for the segments are the same as those described in Note 1.

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Income taxes are allocated based on the separate taxable income of each entity and indirect overhead expenses are allocated based on reasonable and equitable allocations applicable to the reportable segment.

The Holding Company, CFS, and CRM column below includes amounts to eliminate transactions between segments as well as income and expenses related to insurance products, mutual funds, brokerage services, and captive insurance (in thousands).

Year ended December 31, 2023 Core Banking WMG Holding Company, CFS and CRM 1

Consolidated Totals

The Holding Company, CFS, and CRM columns below includes income and expenses related to insurance products, mutual funds, brokerage services, and captive insurance (in thousands).

Year ended December 31, 2024 Core Banking WMG Holding Company and CFS Inter-Segment Eliminations Consolidated Totals

Interest and dividend income $ 127,534 $ — $ 36 $ ( 6 ) $ 127,564

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Non-interest income 10,633 11,573 1,030 ( 6 ) 23,230

Legal settlements — — — —

Non-interest expenses:

Compensation expense 29,131 5,672 828 — 35,631

Net occupancy expense 5,583 249 6 ( 6 ) 5,832

Furniture and equipment expense 1,542 94 23 — 1,659

Data processing & software expense 8,954 1,120 19 — 10,093

Other non-interest expenses 13,080 546 409 — 14,035

Total non-interest expense 58,290 7,681 1,285 ( 6 ) 67,250

Income (loss) before income tax expense 26,412 3,892 ( 219 ) — 30,085

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Segment net income (loss) $ 20,761 $ 3,059 $ ( 149 ) $ — $ 23,671

Segment assets $ 2,706,373 $ 2,627 $ 1,529 $ 2,710,529

1 Chemung Risk Management, Inc.

(CRM) was dissolved December 6, 2023.

Year ended December 31, 2022 Core Banking WMG Holding Company, CFS and CRM Consolidated Totals

Supplemental Information:

Total assets as of December 31, 2024 $ 2,746,344 $ 2,882 $ 215,366 $ ( 188,445 ) $ 2,776,147

Capital expenditures 1

$ 3,626 $ — $ — $ — $ 3,626

Depreciation expense 2

$ 1,797 $ 17 $ — $ — $ 1,814

1 Includes expenditures related to ATM fleet replacement across footprint and the addition of a new branch.

2 Included in net occupancy and furniture and equipment expense in the table above.

Year ended December 31, 2023 Core Banking WMG Holding Company, CFS,CRM 1

Inter-Segment Eliminations Consolidated Totals

Interest and dividend income $ 112,947 $ — $ 132 $ ( 5 ) $ 113,074

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Net interest income 74,325 — 132 — 74,457

Provision for loan losses ( 554 ) — — ( 554 )

Net interest income after provision for loan losses 74,683 — 50 74,733

Provision for credit losses 3,262 — — 3,262

Net interest income after provision for credit losses 71,063 — 132 — 71,195

Non-interest income 13,156 10,460 1,890 ( 957 ) 24,549

Legal settlements — — — 0 —

Non-interest expenses:

Compensation expense 27,639 5,169 716 — 33,524

Net occupancy expense 5,414 223 6 ( 6 ) 5,637

Furniture and equipment expense 1,622 86 20 — 1,728

Data processing & software expense 8,655 1,155 30 — 9,840

Other non-interest expenses 13,569 428 468 ( 951 ) 13,514

Total non-interest income 56,899 7,061 1,240 ( 957 ) 64,243

Income (loss) before income tax expense 27,320 3,399 782 — 31,501

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Segment net income (loss) $ 21,451 $ 2,669 $ 880 $ — $ 25,000

Segment assets $ 2,635,043 $ 2,559 $ 7,951 $ 2,645,553

Total assets as of December 31, 2023 $ 2,689,903 $ 2,702 $ 196,580 $ ( 178,656 ) $ 2,710,529

Capital expenditures $ 540 $ — $ — $ — $ 540

Depreciation expense 2

$ 1,983 $ 18 $ — $ — $ 2,001

1 Chemung Risk Management, Inc.

(CRM) was dissolved December 6, 2023.

2 Included in net occupancy and furniture and equipment expense in the table above.

Pursuant to the requirements of Section 13 or 15(d) 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.

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10.1 Chemung Financial Corporation 2014 Omnibus Plan and Component Plans (Chemung Financial Corporation Restricted Stock Plan, Chemung Financial Corporation Incentive Compensation Plan, Chemung Financial Corporation Directors’ Compensation Plan and Chemung Financial Corporation/Chemung Canal Trust Company Directors’ Deferred Fee Plan) (filed as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5 to Registrant’s Form S-8 filed with the Comm i ssion on January 27, 2015 and incorporated herein by reference).