chmg-20240630

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Non-accelerated filer

☐

Accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ☒

As of August 2, 2024, there were 4,756,024 shares of Common Stock, $0.01 par value, outstanding.


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


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


GAAP			Accounting principles generally accepted in the United States of America.
Holding company			Consists of the operations for Chemung Financial Corporation (parent only).
ICS			Product involving a network of financial institutions that exchange interest-bearing money market deposits among members in order to ensure FDIC insurance coverage on customer deposits above the single institution limit. Using a sophisticated matching system, funds are exchanged on a dollar-for-dollar basis, so that the equivalent of an original deposit comes back to the originating institution.
Loans held for sale			Residential real estate loans originated for sale on the secondary market with maturities from 15-30 years.
Long term lease obligation			An obligation extending beyond the current year, which is related to a long term finance lease that is considered to have the economic characteristics of asset ownership.
MasterCard			Payment card services vendor.
Mortgage-backed securities			A type of asset-backed security that is secured by a collection of mortgages.
Municipal clients			A political unit, such as a city, town, or village, incorporated for local self-government.
N/A			Data is not applicable or available for the period presented.
N/M			Not meaningful.
Non-GAAP			A calculation not made according to GAAP.
Obligations of state and political subdivisions			An obligation that is guaranteed by the full faith and credit of a state or political subdivision that has the power to tax.
Obligations of U.S. Government			A federally guaranteed obligation backed by the full power of the U.S. government, including Treasury bills, Treasury notes and Treasury bonds.
Obligations of U.S. Government sponsored enterprises			Obligations of agencies originally established or chartered by the U.S. government to serve public purposes as specified by the U.S. Congress; these obligations are not explicitly guaranteed as to the timely payment of principal and interest by the full faith and credit of the U.S. government.
OREO			Represents real property owned by the Corporation, which is not directly related to its business and is most frequently the result of a foreclosure on real property.

Political subdivision			A county, city, town, or other municipal corporation, a public authority, or a publicly-owned entity that is an instrumentality of a state or a municipal corporation.
Pre-provision profit/(loss)			Represents total net revenue less non-interest expense, before income tax expense (benefit). The Corporation believes that this financial measure is useful in assessing the ability of a bank to generate income in excess of its provision for credit losses.
Regulatory Relief Act			The Economic Growth, Regulatory Relief and Consumer Protection Act was enacted on May 24, 2018 provides certain limited amendments to the Dodd-Frank Act, as well as certain targeted modifications to other post-financial crisis regulatory requirements. In addition, the legislation establishes new consumer protections and amends various securities and investment company-related requirements.
Risk-Weighted Assets (RWA)			Risk-weighted assets consist of on and off balance sheet assets that are assigned to one of several broad risk categories and weighted by factors representing their risk and potential for default. On-balance sheet assets are risk-weighted based on the perceived credit risk associated with the obligor or counterparty, the nature of any collateral, and the guarantor, if any. Off-balance sheet assets such as lending-related commitments, guarantees, derivatives and other applicable off-balance sheet positions are risk-weighted by multiplying the contractual amount by the appropriate credit conversion factor to determine the on-balance sheet credit equivalent amount, which is then risk-weighted based on the same factors used for on-balance sheet assets. Risk-weighted assets also incorporate a measure for market risk related to applicable trading assets-debt and equity instruments. The resulting risk-weighted values for each of the risk categories are then aggregated to determine total risk-weighted assets.
SBA loan pools			Business loans partially guaranteed by the SBA.
Securities sold under agreements to repurchase			Sale of securities together with an agreement for the seller to buy back the securities at a later date.


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


(in thousands, except share and per share data)	June 30, 2024		December 31, 2023
ASSETS
Cash and due from financial institutions	$	23,184	$	22,247
Interest-earning deposits in other financial institutions	47,033		14,600
Total cash and cash equivalents	70,217		36,847

Equity investments, at estimated fair value	3,090		3,046
Securities available for sale, at estimated fair value (amortized cost of $641,320, at June 30, 2024 and $669,092 at December 31, 2023, net of allowance for credit losses on securities of $0 at June 30, 2024 and December 31, 2023, respectively)	550,927		583,993
Securities held to maturity, (estimated fair value of $657 at June 30, 2024 and $785 at December 31, 2023, net of allowance for credit losses of $0 at June 30, 2024 and December 31, 2023, respectively)	657		785
FHLBNY and FRBNY Stock, at cost	5,506		5,498

Loans, net of deferred loan fees	2,011,472		1,972,664
Allowance for credit losses	(21,031)		(22,517)
Loans, net	1,990,441		1,950,147

Loans held for sale	381		—
Premises and equipment, net	14,731		14,571
Operating lease right-of-use assets	5,827		5,648
Goodwill	21,824		21,824

Bank-owned life insurance	2,933		2,914
Interest rate swap assets	25,424		23,942
Accrued interest receivable and other assets	63,855		61,314

Total assets	$	2,755,813	$	2,710,529

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing	$	619,192	$	653,166
Interest-bearing	1,796,729		1,776,261
Total deposits	2,415,921		2,429,427

Overnight and short-term advances	80,000		31,920


Long term finance lease obligation	3,835		3,050
Operating lease liabilities	6,009		5,827
Dividends payable	1,473		1,469
Interest rate swap liabilities	25,432		23,981
Accrued interest payable and other liabilities	21,921		19,614
Total liabilities	2,554,591		2,515,288

Shareholders' equity:
Common stock, $0.01 par value per share, 10,000,000 shares authorized; 5,310,076 issued at June 30, 2024 and December 31, 2023	53		53
Additional paid-in capital	48,102		47,773
Retained earnings	239,021		229,930
Treasury stock, at cost; 555,558 shares at June 30, 2024 and 572,663 shares at December 31, 2023	(16,043)		(16,502)
Accumulated other comprehensive loss	(69,911)		(66,013)
Total shareholders' equity	201,222		195,241

Total liabilities and shareholders' equity	$	2,755,813	$	2,710,529


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2024		2023		2024		2023
Interest and dividend income:
Loans, including fees	$	27,514	$	23,791	$	54,712	$	46,080
Taxable securities	3,251		3,630		6,808		7,213
Tax exempt securities	254		259		512		520
Interest-earning deposits	367		116		573		213
Total interest and dividend income	31,386		27,796		62,605		54,026
Interest expense:
Deposits	12,711		8,469		24,856		13,856

Borrowed funds	914		732		1,899		1,628
Total interest expense	13,625		9,201		26,755		15,484
Net interest income	17,761		18,595		35,850		38,542
Provision (credit) for credit losses	879		236		(1,161)		513
Net interest income after provision for credit losses	16,882		18,359		37,011		38,029

Non-interest income:
WMG fee income	2,860		2,603		5,563		5,183
Service charges on deposit accounts	964		959		1,913		1,900
Interchange revenue from debit card transactions	1,141		1,194		2,204		2,327

Changes in fair value of equity investments	14		(103)		115		(31)
Net gains (losses) on sales of loans held for sale	39		18		71		23
Net gains on sales of other real estate owned	(3)		14		(3)		14
Income from bank-owned life insurance	10		11		19		21
Other	573		751		1,373		1,433
Total non-interest income	5,598		5,447		11,255		10,870

Non-interest expense:
Salaries and wages	6,823		6,704		13,839		13,487
Pension and other employee benefits	2,078		1,808		4,160		3,488
Other components of net periodic pension and postretirement benefits	(232)		(174)		(464)		(348)
Net occupancy	1,445		1,440		2,938		2,905
Furniture and equipment	397		461		795		879
Data processing	2,297		2,473		4,870		4,854
Professional services	558		602		1,117		1,042


Marketing and advertising	388		170		733		502
Other real estate owned	12		1		61		39
FDIC insurance	516		586		1,093		1,083
Loan expense	200		308		455		540

Other	1,737		1,534		3,320		3,278
Total non-interest expense	16,219		15,913		32,917		31,749
Income before income tax expense	6,261		7,893		15,349		17,150
Income tax expense	1,274		1,613		3,312		3,600
Net income	$	4,987	$	6,280	$	12,037	$	13,550

Weighted average shares outstanding	4,770		4,729		4,767		4,725
Basic and diluted earnings per share	$	1.05	$	1.33	$	2.53	$	2.87


(in thousands, except share and per share data)	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balances at March 31, 2023	$	53	$	47,387	$	216,594	$	(17,219)	$	(69,473)	$	177,342



Net income	—		—		6,280		—		—		6,280
Other comprehensive loss	—		—		—		—		(5,273)		(5,273)
Restricted stock awards	—		285		—		—		—		285
Restricted stock units for directors' deferred compensation plan	—		5		—		—		—		5

Cash dividends declared ($0.31 per share)	—		—		(1,462)		—		—		(1,462)




Sale of 6,955 shares of treasury stock (a)	—		52		—		198		—		250
Forfeiture of 326 shares of restricted stock awards	—		11		—		(12)		—		(1)
Balances at June 30, 2023	$	53	$	47,740	$	221,412	$	(17,033)	$	(74,746)	$	177,426


Balances at March 31, 2024	$	53	$	47,794	$	235,506	$	(16,147)	$	(70,078)	$	197,128



Net income	—		—		4,987		—		—		4,987
Other comprehensive income	—		—		—		—		167		167
Restricted stock awards	—		305		—		—		—		305
Restricted stock units for directors' deferred compensation plan	—		5		—		—		—		5
Distribution of 1,369 shares of treasury stock grants for employee restricted stock awards	—		(39)		—		39		—		—
Cash dividends declared ($0.31 per share)	—		—		(1,472)		—		—		(1,472)




Sale of 2,414 shares of treasury stock (a)	—		32		—		70		—		102
Forfeiture of 115 shares of restricted stock awards	—		5		—		(5)		—		—
Balances at June 30, 2024	$	53	$	48,102	$	239,021	$	(16,043)	$	(69,911)	$	201,222


(in thousands, except share and per share data)	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balances at January 1, 2023	$	53	$	47,331	$	211,859	$	(17,598)	$	(75,257)	$	166,388
Cumulative effect of accounting change (b)	—		—		(1,076)		—		—		(1,076)
Balances at January 1, 2023, as adjusted	53		47,331		210,783		(17,598)		(75,257)		165,312
Net income	—		—		13,550		—		—		13,550
Other comprehensive loss	—		—		—		—		511		511
Restricted stock awards	—		548		—		—		—		548
Restricted stock units for directors' deferred compensation plan	—		10		—		—		—		10
Distribution of 4,577 shares of treasury stock grants for employee restricted stock awards	—		(131)		—		131		—		—
Cash dividends declared ($0.62 per share)	—		—		(2,921)		—		—		(2,921)
Distribution of 8,492 shares of treasury stock for directors' compensation	—		(147)		—		243		—		96


Repurchase of 2,148 shares of common stock	—		—		—		(98)		—		(98)
Sale of 10,509 shares of treasury stock (a)	—		118		—		301		—		419
Forfeiture of 326 shares of restricted stock awards	—		11		—		(12)		—		(1)
Balances at June 30, 2023	$	53	$	47,740	$	221,412	$	(17,033)	$	(74,746)	$	177,426


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



Net income	—		—		12,037		—		—		12,037
Other comprehensive loss	—		—		—		—		(3,898)		(3,898)
Restricted stock awards	—		613		—		—		—		613
Restricted stock units for directors' deferred compensation plan	—		10		—		—		—		10
Distribution of 5,942 shares of treasury stock grants for employee restricted stock awards	—		(171)		—		171		—		—
Cash dividends declared ($0.62 per share)	—		—		(2,946)		—		—		(2,946)
Distribution of 7,515 shares of treasury stock for directors' compensation	—		(217)		—		217		—		—


Repurchase of 1,707 shares of common stock	—		—		—		(82)		—		(82)
Sale of 5,470 shares of treasury stock (a)	—		89		—		158		—		247
Forfeiture of 115 shares of restricted stock awards	—		5		—		(5)		—		—
Balances at June 30, 2024	$	53	$	48,102	$	239,021	$	(16,043)	$	(69,911)	$	201,222


CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)	Six Months Ended June 30,
CASH FLOWS FROM OPERATING ACTIVITIES:	2024		2023
Net income	$	12,037	$	13,550
Adjustments to reconcile net income to net cash provided by operating activities:
(Increases in) Amortization of right-of-use assets	(179)		399


Provision (credit) for credit losses	(1,161)		513
(Gains) Loss on disposal of fixed assets	(40)		3
Depreciation and amortization of fixed assets	936		1,060
Amortization of premiums on securities, net	1,114		1,270
Gain on sales of loans held for sale, net	(71)		(23)
Proceeds from sales of loans held for sale	3,866		1,318
Loans originated and held for sale	(4,176)		(2,080)
Net losses (gains) on sale of other real estate owned	3		(14)
Fair value adjustment on other real estate owned	—		(3)
Net change in fair value of equity investments	(115)		31


Proceeds from sales of equity investments	134		39
Purchase of equity investments	(63)		(81)
(Increase) Decrease in other assets and accrued interest receivable	(938)		1,317
Increase in accrued interest payable	2,718		1,964
Expense related to restricted stock units for directors' deferred compensation plan	10		10

Expense related to employee restricted stock awards	613		548
Increases in (payments on) operating lease liabilities	182		(392)
Net (gain) loss on interest rate swaps	(31)		(55)
Decrease in other liabilities	(398)		(1,488)
Income from bank owned life insurance	(19)		(21)
Net cash provided by operating activities	14,422		17,865
CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from maturities, calls, and principal paydowns on securities available for sale	26,657		30,883
Proceeds from maturities and principal collected on securities held to maturity	128		619
Purchases of securities available for sale	—		(3,207)

Purchase of FHLBNY and FRBNY stock	(18,165)		(29,969)
Redemption of FHLBNY and FRBNY stock	18,157		31,838
Proceeds from sales of fixed assets	44		—
Purchases of premises and equipment	(1,100)		(446)
Proceeds from sale of other real estate owned	185		154

Net increase in loans	(39,540)		(64,566)
Net cash used in investing activities	(13,634)		(34,694)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand, interest-bearing demand, savings, and insured money market deposits	(7,941)		(80,135)
Net (decrease) increase in time deposits	(5,565)		143,102


Net change in FHLBNY and FRBNY advances	48,080		(45,050)

Increases in (payments on) finance leases	785		(138)


Purchase of treasury stock	(82)		(98)
Sale of treasury stock	247		419
Cash dividends paid	(2,942)		(2,914)
Net cash provided by financing activities	32,582		15,186
Net increase (decrease) in cash and cash equivalents	33,370		(1,643)
Cash and cash equivalents, beginning of period	36,847		55,869
Cash and cash equivalents, end of period	$	70,217	$	54,226


		PAGES
	Glossary of Abbreviations and Terms	3

PART I.	FINANCIAL INFORMATION

Item 1:	Financial Statements – Unaudited

	Consolidated Balance Sheets	7
	Consolidated Statements of Income	8
	Consolidated Statements of Comprehensive Income	9
	Consolidated Statements of Shareholders’ Equity	10
	Consolidated Statements of Cash Flows	12

	Notes to Unaudited Consolidated Financial Statements	14

Item 2:	Management's Discussion and Analysis of Financial Condition and Results of Operations	46

Item 3:	Quantitative and Qualitative Disclosures About Market Risk	81

Item 4:	Controls and Procedures	83

PART II.	OTHER INFORMATION

Item 1:	Legal Proceedings	84

Item 1A:	Risk Factors	84

Item 2:	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchase of Equity Securities	84

Item 3:	Defaults Upon Senior Securities	84

Item 4:	Mine Safety Disclosures	84

Item 5:	Other Information	84

Item 6:	Exhibits	85

SIGNATURES		86

EXHIBIT INDEX


ROA			Return on average assets
ROE			Return on average equity
RWA			Risk-weighted assets
SBA			Small Business Administration
SEC			Securities and Exchange Commission
Securities Act			Securities Act of 1933
WMG			Wealth Management Group


(in thousands)	Six Months Ended June 30,
Supplemental disclosure of cash flow information:	2024	2023
Cash paid for: