CHEMUNG FINANCIAL CORP
For the period ended Mar 31, 2025. Filed May 7, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 7, 2025
CHMG$84.75-0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0000763563-24-000079
Item 2. : Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-07.
0000763563-25-000074
Item 2. : Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 219 previous paragraphs and 184 current paragraphs.
102 unchanged; 67 reworded; 15 added; 41 removed; 9 previous and 0 current paragraphs rearranged.
Tables are not compared: 39 previous and 35 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
Interest expense on deposits decreased to $11.2 million for the three months ended March 31, 2025 from $12.1 million for the same period in the prior year. The decrease in interest expense on deposits was due primarily to a decrease of 27 basis points in the average cost of total interest-bearing deposits, which was comprised of decreases of 21 basis points in the average cost of customer interest-bearing deposits and 82 basis points in the average cost of brokered deposits, both largely due to decreases in benchmark interest rates and the Corporation's balance sheet structure favoring shorter-term liabilities. Average balances of customer interest-bearing deposits increased $55.0 million, while average balances of brokered deposits decreased $8.6 million, compared to the same period in the prior year. The increase in average balances of customer interest-bearing deposits was primarily due to an increase of $32.9 million in average balances of customer time deposits. The average cost of customer time deposits decreased 38 basis points compared to the same period in the prior year, due to the Corporation's focus on shorter-term certificate of deposit campaigns during 2024, and a decrease in interest rates on campaign offerings in the current period. Customer time deposits comprised 21.1% of average total deposits for the first quarter of 2025, compared to 20.1% for the same period in the prior year. Additionally, an increase of $28.3 million in average balances of interest-bearing demand deposits positively benefited the average cost of interest-bearing deposits, as the 1.57% cost was lower than other types of interest-bearing deposits.
Current report
Interest expense on borrowed funds decreased to $0.7 million for the three months ended March 31, 2025 from $1.0 million for the same period in the prior year. The decrease in interest expense on borrowed funds was partially due to a decline in borrowing rates between the first quarter of 2024 and the first quarter of 2025, as well as a shift in the composition of borrowed funds between these periods. The average cost of borrowings decreased 61 basis points, compared to the same period in the prior year, comprised of decreases of 91 basis points and 32 basis points in the average cost of FHLBNY overnight advances and other advances and debt, which includes FHLBNY term advances, respectively. The composition of borrowings in the first quarter of 2025 was primarily comprised of FHLBNY term advances and FHLBNY overnight advances, while the composition of borrowings in the same period in the prior year was primarily comprised of a Federal Reserve Bank Term Funding Program (BTFP) advance and FHLBNY overnight advances.
Current report
Interest income on loans, including fees, increased to $28.1 million for the three months ended March 31, 2025, from $27.2 million for the same period in the prior year. The increase in interest income on loans, including fees, was largely due to an increase in average total loan balances of $88.6 million compared to the same period in the prior year, which was concentrated in the commercial loan portfolio. The average yield on total loans was relatively stable compared to the same period in the prior year, declining two basis points to 5.49% in the first quarter of 2025. Average balances of commercial loans increased $122.1 million in the first quarter of 2025 compared to the same period in the prior year, primarily due to growth in commercial real estate balances, while the average yield on commercial loans declined 15 basis points, largely due to repricing of benchmark indexes and $0.3 million in interest income recognized on the payoff of a nonaccrual commercial real estate loan in the same period of the prior year. Average balances of residential mortgage loans and consumer loans each decreased in the first quarter of 2025 compared to the same period in the prior year, decreasing $2.1 million and $31.4 million, respectively. The decrease in average balances of residential mortgage loans was partially due to relatively low levels of housing inventory across the Bank's footprint resulting in lower origination volume, which was comparable to the prior year, as well as a continued election to sell a significant portion of conforming mortgages into the secondary market. The decrease in average balances of consumer loans was primarily due to net runoff of indirect auto loans between the first quarters of 2024 and 2025. The average yield on residential mortgage loans and consumer loans each increased in the first quarter of 2025, compared to the same period in the prior year, increasing 24 and 27 basis points, respectively, each due to strong origination yields in recent periods, and normal runoff of older and typically lower yielding originations. Interest income on interest-earning deposits increased mainly due to a $11.2 million increase in average balances of interest-earning deposits, compared to the same period in the prior year, and despite a decrease of six basis points in the average yield on interest-earning deposits, due to a decrease in the interest rate paid on deposit balances at the Federal Reserve.
Current report
Service Charges on Deposit Accounts
Current report
The increase in service charges on deposit accounts can primarily be attributed to fee rate increases which were implemented in the second half of 2024.
Current report
The increase in other non-interest income can primarily be attributed to an increase in interest rate swap fee income in the first quarter of 2025, when compared to the same period in the prior year.
Current report
The increase in non-compensation expense for the current period, compared to the same period in the prior year, was primarily due to increases in other non-interest expense and professional services, partially offset by a decrease in FDIC insurance expense. The increase in other non-interest expense was primarily due to net recoveries of multiple large altered check charge-offs during the same period in the prior year as well as higher operational losses on the sale of repossessed vehicles during the first quarter of 2025, compared to the same period in the prior year. The increase in professional services was primarily due to additional consulting services compared to the same period in the prior year. The decrease in FDIC insurance was primarily due to a decrease in the Bank's assessment rate, due to an improvement in evaluated metrics.
Current report
The increase in the allowance for credit losses was primarily due to the annual review and update to loss drivers used in the Bank's CECL model, which is applied to the model in the first quarter of each year. The update in the current year resulted in an increase in baseline loss rates used for modeling. The increase was also impacted by changes in the FOMC's forecasts, including higher U.S. civilian unemployment and lower U.S. GDP growth compared to the prior year-end, and a decline in prepayment speeds compared to the prior year-end.
Current report
The increase in deposits can primarily be attributed to increases of $33.3 million in interest-bearing demand deposits and $30.4 million in money market deposits. These increases were partially attributable to seasonal inflows of municipal deposits. Total time deposits decreased $25.0 million, consisting of decreases of $13.6 million in customer time deposits and $11.4 million in brokered deposits. The Bank's certificate of deposit campaign in the current year primarily consisted of a continuation of six and 15 month offerings, as well as the introduction of a 36 month offering. Savings deposits increased $4.0 million while non interest-bearing demand deposits decreased $6.1 million, when compared to December 31, 2024.
Current report
The decrease in advances and other debt can primarily be attributed to an increase in total deposits, which reduced the need for advances and other debt. Advances and other debt as of March 31, 2025 largely consisted of staggered three-month term advances from the FHLBNY, whereas the composition of advances and other debt as of the prior year-end consisted primarily of FHLBNY overnight advances.
Current report
The following table presents commercial real estate loans by maturity and repricing date as of March 31, 2025 (dollars in thousands):
Current report
(1)Includes fixed rate loans
Current report
Non-Performing Loans and Non-Performing Assets
Current report
The increase in the allowance for credit losses was largely due to the annual review and update performed on the loss drivers used as the basis for the Bank's CECL model. Loss drivers are the economic variables used to make forward looking credit loss projections. The economic variable used as a loss driver used for the Bank's commercial and industrial and other loans pools were adjusted as a result of the annual update; the loss driver used in the prior year was the FOMC's projection for U.S civilian unemployment rate and the loss driver used in the current year is the FOMC's projection for U.S. GDP growth. Recalibration of loss drivers resulted in an increase in baseline loss rates used in CECL modeling, reflecting additional periods of data added to the analysis and normal maintenance of the composition of the peer groups used in modeling. Additionally, FOMC forecasts for both U.S. civilian unemployment and U.S. GDP growth deteriorated as of March 31, 2025 compared to December 31, 2024, as the FOMC incorporated elevated levels of economic uncertainty in the current environment into their forecasts. Prepayment speeds, which have an inverse relationship with modeled credit losses, also declined as of March 31, 2025 compared to December 31, 2024.
Current report
Borrowings decreased $24.2 million to $88.7 million as of March 31, 2025 from December 31, 2024, primarily due to an increase in total deposits, reducing the need for wholesale borrowing. The Corporation’s borrowed funds as of March 31, 2025 were comprised of $85.0 million staggered three-month advances from the FHLBNY. The Corporation’s borrowed funds as of December 31, 2024 were comprised of a $109.1 million FHLBNY overnight advance. There were no outstanding FHLBNY or FRBNY term advances as of December 31, 2024.
Removed paragraphs (41)
Previous report
(1)Effective January 1, 2023, the allowance calculation is based upon the Current Expected Credit Loss methodology.
Previous report
Net income for the nine months ended September 30, 2024 was $17.8 million, or $3.72 per share, compared to $21.2 million, or $4.48 per share, for the same period in the prior year. Return on average equity for the nine months ended September 30, 2024 was 11.82%, compared to 15.93% for the same period in the prior year. The decrease in net income was attributable to decreases in net interest income and non-interest income, and an increase in non-interest expense, offset by decreases in the provision for credit losses and income tax expense.
Previous report
Interest income on loans, including fees, increased to $28.6 million for the three months ended September 30, 2024 from $25.0 million for the same period in the prior year. Interest income on loans, including fees, increased primarily due to a $134.3 million increase in average commercial loan balances, compared to the same period in the prior year, and an increase of 36 basis points in the average yield on commercial loans between these periods. The increase in the average balances of commercial loans was primarily due to year over year growth in both commercial and industrial and commercial real estate loan balances, while the increase in the average yield was primarily due to higher origination yields in 2024. Average balances of residential mortgage loans decreased $9.2 million for the three months ended September 30, 2024, compared to the same period in the prior year, primarily due to an increase in sales of new originations into the secondary market, while the average yield on residential mortgage loans increased 36 basis points for the three months ended September 30, 2024, compared to the same period in the prior year due to the higher interest rate environment. Average consumer loan balances decreased $13.9 million for the three months ended September 30, 2024, compared to the same period in the prior year, primarily due to lower indirect auto loan origination activity during 2024, while the average yield on consumer loans increased 60 basis points, primarily due to runoff of older vintage indirect auto loans, replaced by higher yielding new originations. Interest income on interest-earning deposits increased primarily due to a $21.2 million increase in the average balances of interest-earning deposits for the three months ended September 30, 2024 compared to the same period in the prior year.
Previous report
Interest expense on deposits increased to $13.0 million for the three months ended September 30, 2024 from $10.7 million for the same period in the prior year. The increase in interest expense on deposits was due primarily to a 44 basis points increase in the average interest rate paid on total interest-bearing deposits, which included brokered deposits, due to the higher interest rate environment and increased competition, and an increase of $175.6 million in the average balance of customer interest-bearing deposits, primarily due to an increase in average balances of customer time deposits. Both the increase in the average interest rate paid and the average balances of customer interest-bearing deposits were primarily attributable to CD campaigns throughout 2024, as well as a general shift in the deposit mix towards higher cost accounts. The average balances of brokered deposits decreased $123.7 million, while the average interest rate paid on brokered deposits increased nine basis points, compared to the same period in the prior year. The average balances of brokered deposits decreased primarily due to the utilization of the Bank Term Funding Program (BTFP) and FHLBNY term advances in the current quarter, which were not utilized in the same period in the prior year, as well as lower loan growth during the current quarter, compared to the same period in the prior year.
Previous report
Interest expense on borrowed funds increased to $1.0 million for the three months ended September 30, 2024 from $0.3 million for the same period in the prior year. The increase in interest expense on borrowed funds was primarily due to a $54.8 million increase in the average balances of borrowed funds, partially offset by a decrease of 17 basis points in the average interest rate paid on borrowed funds for the three months ended September 30, 2024, compared to the same period in the prior year. The composition of borrowed funds reflected the Corporation's shift to the lower cost, short-term funding sources of the BTFP and FHLBNY term advances, partially replacing relatively higher cost FHLBNY overnight advances in the current period. The average balance of FHLBNY overnight advances decreased $17.3 million, and the average interest rate paid on FHLBNY overnight advances decreased 47 basis points for the three months ended September 30, 2024, compared to the same period in the prior year.
Previous report
Net interest income for the nine months ended September 30, 2024 totaled $54.2 million compared to $56.6 million for the same period in the prior year, a decrease of $2.3 million, or 4.1% due primarily to an increase of $14.2 million in interest expense, partially offset by an increase of $11.9 million in interest and dividend income. The increase in interest expense for the first nine months of 2024 was primarily attributed to increases of $13.3 million in interest expense on deposits and $1.0 million in interest expense on borrowed funds. The increase in interest and dividend income for the first nine months of 2024 was primarily attributed to increases of $12.2 million in interest income on loans, including fees, and $0.6 million in interest income on interest-earning deposits, offset by a decrease of $0.9 million in interest and dividend income on taxable securities.
Previous report
Interest expense on deposits increased to $37.9 million for the first nine months of 2024 from $24.6 million for the same period in the prior year. The increase in interest expense on deposits was primarily due to an increase in the average balances of $171.2 million in customer time deposits, and a 119 basis points increase in the average interest rates paid on customer time deposits for the first nine months of 2024, compared to the same period in the prior year. The increase in average balances of customer time deposits was primarily attributable to CD campaigns throughout 2024, as well as a shift in deposit demand towards higher cost account types. The increase in the average interest rates paid on customer time deposits was due primarily to the higher interest rate environment, as well as competitive pressures to attract and retain customer time deposits. The average balances of brokered deposits decreased $57.7 million, while the average interest rates paid on brokered deposits increased 26 basis points, for the first nine months of 2024, compared to the same period in the prior year.
Previous report
Also contributing to the increase in interest expense on deposits was an increase of $4.5 million in interest expense on savings and money market accounts, due to an increase of 77 basis points in the average interest rates paid, despite a decrease of $38.5 million in the average balances of savings and money market accounts, for the nine months ended September 30, 2024, compared to the same period in the prior year. Interest expense paid on interest-bearing demand deposits increased $2.2 million, primarily due to an 89 basis points increase in the average interest rates paid, for the nine months ended September 30, 2024, compared to the same period in the prior year. Interest expense on borrowed funds increased to $2.9 million for the first nine months of 2024 from $1.9 million for the same period in the prior year. The increase in interest expense on borrowed funds was due primarily to a five basis points increase in the average interest rate paid on borrowed funds, and a $24.4 million increase in the average balances of borrowed funds for the current nine months, when compared to the same period in the prior year, to fund loan growth.
Previous report
Interest income on loans, including fees, increased to $83.3 million for the first nine months of 2024 from $71.1 million for the same period in the prior year. The increase in interest income on loans, including fees, was mostly attributable to an increase of $143.6 million in the average balances of commercial loans, and a 42 basis points increase in the average yield of the commercial loan portfolio, primarily due to increases in average interest rates on new loan originations. Average yields on the residential mortgage and consumer loan portfolios also increased by 27 basis points and 75 basis points, respectively, for the nine months ended September 30, 2024, The increase in average yield on the residential mortgage loan portfolio was primarily due to higher origination yields during 2024, while the increase in average yield on the consumer loan portfolio was primarily attributable to rate increases on variable rate home equity products, and the relatively fast turnover rate within the indirect auto portfolio and higher originations yields during 2024. The increase in interest income on interest-earning deposits was primarily attributed to a $17.6 million increase in the average balances of interest-earning deposits.
Previous report
Interest and dividend income on taxable securities decreased to $9.9 million for the first nine months of 2024 from $10.8 million for the same period in the prior year. The decrease in interest and dividend income on taxable securities was mostly attributable to a $59.7 million decrease in the average balances of taxable securities for the nine months ended September 30, 2024, compared to the same period in the prior year. The decrease in the average balances of taxable securities was mostly attributable to paydowns on securities within the available for sale portfolio.
Previous report
Fully taxable equivalent net interest margin was 2.70% for the nine months ended September 30, 2024 compared to 2.91% for the same period in the prior year. Average interest-earning assets increased $83.5 million for the nine months ended September 30, 2024 compared to the same period in the prior year. The average yield on interest-earning assets increased 45 basis points, to 4.72%, while the average cost of interest-bearing liabilities increased 89 basis points, to 2.92% for the nine months ended September 30, 2024 compared to the same period in the prior year.
Previous report
(4) Corporation adopted CECL as of January 1, 2023.
Previous report
(3) Annualized.
Previous report
(4) Corporation adopted CECL as of January 1, 2023.
Previous report
The provision for credit losses for the nine months ended September 30, 2024 was a credit of $0.6 million, compared to a provision of $1.0 million for the same period in the prior year. The $1.6 million decrease in the provision for credit losses in the nine months ended September 30, 2024, compared to the same period in the prior year, was primarily due to the annual review and update to the loss drivers used in the Bank's CECL model, which was reflected in the Corporation's allowance for credit losses in the first quarter of 2024, partially offset by unfavorable changes in economic forecasts and declines in modeled prepayment speeds. Loss drivers are the economic variables used when making forward looking projections to determine correlations between changes in economic variables and changes in historical loss experience. Recalibration of the loss drivers resulted in a decline in baseline loss rates utilized by the model, however the economic variables used were unchanged.
Previous report
Net charge-offs for the three months ended September 30, 2024 were $0.1 million, compared to $0.4 million for the same period in the prior year. Net charge-offs for each of the three months ended September 30, 2024 and 2023 were primarily concentrated in the consumer indirect auto portfolio.
Previous report
Net charge-offs for the nine months ended September 30, 2024 were $0.6 million, compared to $0.8 million for the same period in the prior year. Net charge-offs for the nine months ended September 30, 2024 were concentrated in the consumer indirect auto portfolio. Net charge-offs for the nine months ended September 30, 2023 were primarily attributable to charge-offs in the consumer indirect auto portfolio, and a $0.2 million charge-off of a commercial and industrial loan.
Previous report
The decrease in other non-interest income can primarily be attributed to the recognition of the employee retention tax credit (ERTC) in the third quarter of 2023.
Previous report
Total non-interest income for the nine months ended September 30, 2024 decreased $1.5 million compared to the same period in the prior year. The decrease was primarily due to decreases in other non-interest income and interchange revenue from debit card transactions, partially offset by increases in WMG fee income and changes in fair value of equity investments.
Previous report
Other Non-Interest Income
Previous report
The decrease in other non-interest income can primarily be attributed to the recognition of the employee retention tax credit (ERTC) in the third quarter of 2023.
Previous report
Interchange Revenue from Debit Card Transactions
Previous report
The decrease in interchange revenue from debit card transactions was primarily due to a decrease in client transaction volume during the nine months ended September 30, 2024, compared to the same period in the prior year.
Previous report
WMG Fee Income
Previous report
The increase in WMG fee income can primarily be attributed to an increase in the market value of total assets under management or administration and fee rate increases effective in the third quarter of 2024.
Previous report
The increase in the changes in fair value of equity investments was primarily due to an increase in the market value of assets held related to the Corporation's deferred compensation plan, related to improvements in the financial markets during the nine months ended September 30, 2024, compared to the same period in the prior year. The increase was also partially due to a decline in the fair value of a particular equity investment held by the Corporation during the same period in the prior year.
Previous report
The increase in non-compensation expense for the current period, compared to the same period in the prior year, was primarily due to increases in other non-interest expense and loan expenses. The increase in other non-interest expense was primarily due to an increase in supplies and postage expenses, and losses recognized on the sale of repossessed vehicles in the current quarter. The increase in loan expenses can be primarily attributed to legal expenses related to various loan transactions.
Previous report
Compensation expense
Previous report
Non-compensation expense
Previous report
The increase in non-compensation expense was primarily due to increases in other non-interest expense, marketing and advertising, net occupancy expense, and data processing expense. The increase in other non-interest expense was due to modest increases amongst most expense categories, including supplies and postage expense, charitable donations and corporate travel, when compared to the same period in the prior year. Marketing and advertising expenses increased during the current period compared to the same period in the prior year primarily due to expenditures related to a deposit account promotion related to the Bank's 190th anniversary, CD campaigns, and an increase in advertising activity in the current period. The increase in net occupancy expense was primarily due to an increase in building maintenance and property insurance expenses, when compared to the same period in the prior year. The increase in data processing expenses was primarily due to the addition of various new contracts and an increase in cybersecurity software expense, offset by a decrease in certain software maintenance and processing expenses, when compared to the same period in the prior year.
Previous report
Income tax expense for the nine month periods ended September 30, 2024 and 2023 were $4.8 million and $5.7 million, respectively. The decrease in income tax expense was due primarily to a decrease of $4.3 million in income before income tax expense. The effective income tax rate increased from 21.1% for the nine months ended September 30, 2023 to 21.4% for the nine months ended September 30, 2024.
Previous report
The decrease in the allowance for credit losses can primarily be attributed to the annual review and update of loss drivers used in the Bank's CECL model. The annual update to the loss drivers, which were applied beginning in the first quarter of 2024, resulted in a decline in baseline loss rates. Partially offsetting these declines were comparatively weaker FOMC projections for economic variables used in the Bank's CECL model as of September 30, 2024 compared to December 31, 2023, declines in prepayment speeds between December 31, 2023 and September 30, 2024, and loan growth during 2024.
Previous report
The increase in deposits can primarily be attributed to increases of $102.8 million in customer time deposits and $58.2 million in interest-bearing demand deposits, offset by decreases of $103.3 million in brokered deposits and $37.0 million in non interest-bearing demand deposits. In addition, insured money market deposits increased $7.2 million and savings deposits decreased $6.2 million.
Previous report
The increase in advances and other debt can primarily be attributed to a $50.0 million advance from the Federal Reserve Bank Term Funding Program (BTFP), and an increase of $0.7 million in finance lease obligations, offset by a decrease of $31.9 million in FHLBNY overnight advances.
Previous report
Non-Performing Assets
Previous report
Non-performing assets consist of nonaccrual loans, other real estate owned that has been acquired in partial or full satisfaction of loan obligations or upon foreclosure, and repossessed vehicles. Effective January 1, 2023, the Corporation adopted ASU 2022-02, which eliminated troubled debt restructuring accounting guidance. Prior to adoption, nonaccrual troubled debt restructurings were considered to be non-performing assets. The Corporation closely monitors loan modifications made to borrowers deemed to be experiencing financial difficulty in accordance with ASU 2022-02. As of September 30, 2024, there were four loans being monitored under ASU 2022-02 guidance, two of which were accruing, and two of which were nonaccrual.
Previous report
Non-Performing Loans and Assets
Previous report
Individually Analyzed Loans
Previous report
Loans are analyzed on either an individual basis or a pooled basis, determined by risk characteristics. It is the Corporation's policy to analyze all nonaccrual commercial loans on an individual basis, unless specific circumstances warrant that the loan should continue to be analyzed on a pooled basis. Management may also individually analyze accruing loans based on specific risk characteristics or fact patterns. Individually analyzed loans are primarily valued based on the collateral method, however, certain loans may be valued using a cash flow analysis. Pooled loans are segmented based on groups of assigned FFIEC call codes, in order to provide enough granularity to meaningfully capture the risk profile of each instrument, yet broad enough to accurately allow for the application of certain pool-level assumptions.
Previous report
The decrease in the allowance for credit losses was primarily attributable to the annual review and update performed on the loss drivers used as the basis for the Bank's CECL model. Loss drivers are the economic variables used to make forward looking credit loss projections. Recalibration of the loss drivers resulted in a decline in the baseline loss rates used in the CECL model, however, the composition of economic variables selected as loss drivers did not change as a result of this update. Partially offsetting decreases related to the annual update were comparatively weaker FOMC economic forecasts in the current year period, a decline in modeled prepayment speeds, and loan growth during 2024.
Showing the first 40 of 41 passages. Open the source sections for the rest.
Reworded paragraphs (67)
Previous wording
The following is the MD&A of the Corporation in this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2024. Reference should be made to the accompanying unaudited consolidated financial statements and footnotes, and the Corporation’s 2023 Annual Report on Form 10-K, which was filed with the SEC on March 13, 2024, for an understanding of the following discussion and analysis. See the list of commonly used abbreviations and terms on pages 3–6.
Current wording
The following is the MD&A of the Corporation in this Quarterly Report on Form 10-Q for the three months ended March 31, 2025. Reference should be made to the accompanying unaudited consolidated financial statements and footnotes, and the Corporation’s 2024 Annual Report on Form 10-K, which was filed with the SEC on March 14, 2025, for an understanding of the following discussion and analysis. See the list of commonly used abbreviations and terms on pages 3–6.
Previous wording
The MD&A included in this Form 10-Q contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of the Corporation's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. For a discussion of those risks and uncertainties and the factors that could cause the Corporation’s actual results to differ materially from those risks and uncerta inties, see Forward-looking Statements below, in Part I, Item 1A, Risk Factors, and on pages 20–31 of the Corporation’s 2023 Form 10-K. For a discussion of the use of non-GAAP financial measures, see pages 63-66 of the Corporation's 2023 Form 10-K, and pages 78-81 in this Form 10-Q.
Current wording
The MD&A included in this Form 10-Q contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of the Corporation's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. For a discussion of those risks and uncertainties and the factors that could cause the Corporation’s actual results to differ materially from those risks and uncerta inties, see Forward-looking Statements below, in Part I, Item 1A, Risk Factors, and on pages 20–31 of the Corporation’s 2024 Form 10-K. For a discussion of the use of non-GAAP financial measures, see pages 64-67 of the Corporation's 2024 Form 10-K, and pages 67-70 in this Form 10-Q.
Previous wording
This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The Corporation intends its forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding the Corporation's expected financial position and operating results, the Corporation's business strategy, the Corporation's financial plans, forecasted demographic and economic trends relating to the Corporation's industry and similar matters are forward-looking statements. These statements can sometimes be identified by the Corporation's use of forward-looking words such as "may," "will," "anticipate," "estimate," "expect," or "intend." The Corporation cannot guarantee that its expectations in such forward-looking statements will turn out to be correct. The Corporation's actual results could be materially different from expectations because of various factors, including changes in economic conditions or interest rates, credit risk, inflation, cybersecurity risks, difficulties in managing the Corporation’s growth, recent bank failures, changes in FDIC assessments, public health issues, geopolitical conflicts, competition, changes in law or the regulatory environment, and changes in general business and economic trends.
Current wording
This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The Corporation intends its forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding the Corporation's expected financial position and operating results, the Corporation's business strategy, the Corporation's financial plans, forecasted demographic and economic trends relating to the Corporation's industry and similar matters are forward-looking statements. These statements can sometimes be identified by the Corporation's use of forward-looking words such as "may," "will," "anticipate," "estimate," "expect," or "intend." The Corporation cannot guarantee that its expectations in such forward-looking statements will turn out to be correct. The Corporation's actual results could be materially different from expectations because of various factors, including changes in economic conditions or interest rates, credit risk, inflation, tariffs, cybersecurity risks, difficulties in managing the Corporation’s growth, recent bank failures, changes in FDIC assessments, public health issues, geopolitical conflicts, competition, changes in law or the regulatory environment, and changes in general business and economic trends.
Previous wording
Management considers the allowance for credit losses to be a critical accounting estimate, given the uncertainty in estimating lifetime credit losses attributable to its portfolios of assets exhibiting credit risk, particularly in its loan portfolio, and the material effect that such judgments can have on the Corporation's results of operations. Determining the amount requires significant judgement on the part of management, is multi-faceted, and can be imprecise. The level of the allowance for credit losses on loans is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past events, current conditions, and expectations of the future based on reasonable and supportable forecasts.
Current wording
Management considers the allowance for credit losses to be a critical accounting estimate, given the uncertainty in estimating lifetime credit losses attributable to its portfolios of assets exhibiting credit risk, particularly in its loan portfolio, and the material effect that such judgments may have on the Corporation's results of operations. Determining the amount requires significant judgement on the part of management, is multi-faceted, and can be imprecise. The level of the allowance for credit losses on loans is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past events, current conditions, and expectations of the future based on reasonable and supportable forecasts.
Previous wording
Because the Corporation's methodology for maintaining its allowance for credit losses is based on historical experience and trends, current economic information, forecasted data, and management's judgement, a range of estimates for the estimate of the allowance for credit losses may be supportable. Deteriorating economic conditions may lead to further required increases to the allowance; conversely, improvements to economic conditions may warrant further reductions to the allowance. In estimating the allowance for credit losses, management considers the sensitivity of the model and significant judgments and assumptions that could result in an amount that is materially different from management’s estimate, including as it relates to qualitative considerations.
Current wording
Because the Corporation's methodology for maintaining its allowance for credit losses is based on historical experience and trends, current economic information, forecasted data, and management's judgement, a range of estimates for the estimate of the allowance for credit losses may be supportable. Deteriorating conditions may lead to further required increases to the allowance; conversely, improvements to conditions may warrant reductions to the allowance. In estimating the allowance for credit losses, management considers the sensitivity of the model to significant judgments and assumptions that could result in an amount that is materially different from management’s estimate, including as it relates to qualitative considerations.
Previous wording
As of September 30, 2024 and December 31, 2023, the allowance for credit losses totaled $21.4 million and $22.5 million, respectively. Due to the nature and composition of the Bank's lending activities, a significant portion of the allowance for credit losses is allocated to the commercial portfolio, both commercial real estate and commercial and industrial loans. As of September 30, 2024 and December 31, 2023, the allowance for credit losses allocated to the total commercial portfolio was $15.7 million and $17.1 million respectively, or 73.2% and 75.9%, respectively.
Current wording
As of March 31, 2025 and December 31, 2024, the allowance for credit losses totaled $22.5 million and $21.4 million, respectively. A significant portion of the allowance for credit losses is allocated to the commercial portfolio, both commercial real estate and commercial and industrial loans. As of March 31, 2025 and December 31, 2024, the allowance for credit losses allocated to the total commercial portfolio was $17.2 million and $15.7 million respectively, or 76.6% and 73.6% of the total allowance for credit losses on loans. For comparison, total commercial loans represented 74.2% and 73.2% of total loan balances as of March 31, 2025 and December 31, 2024, respectively. Given the concentration of the allowance for credit losses allocated to the commercial portfolio, and the significant judgments made by management to derive its estimates, management analyzes risks distinctive to commercial lending with a high degree of scrutiny.
Previous wording
Changes in the FOMC's median forecasted year over year U.S. civilian unemployment rate and the year over year change in U.S. GDP could have a material impact on the model's estimation of the allowance. FOMC projections are sourced from a quarterly Summary of Projections, which accompanies select FOMC meetings. Each participant's projections represent the value to which selected variables would be expected to converge over time under appropriate monetary policy, and considers all currently available information. An immediate "shock" or increase of 100 basis points in the FOMC's projected rate of U.S. civilian unemployment, and a decrease of 50 basis points in the FOMC's projected rate of U.S. GDP growth would increase the model's total calculated allowance by $1.3 million, or 6.2%, to $22.8 million as of September 30, 2024, assuming qualitative adjustments are kept at current levels.
Current wording
Changes in the FOMC's median forecasted year over year U.S. civilian unemployment rate and year over year change in U.S GDP could have a material impact on the model's estimation of the allowance. Currently, most pools utilize the FOMC's projections for unemployment as a loss driver, while the commercial and industrial, consumer, and other loans loan pools utilize the FOMC's projections for U.S. GDP growth. Segmentation and attributes of loan pools are defined in Note 1 – Summary of Significant Accounting Policies to the Audited Consolidated Financial Statements in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2024. FOMC projections are sourced from a quarterly Summary of Projections, which accompanies select FOMC meetings. Each participant's projections represent the value to which selected variables would be expected to converge over time under appropriate monetary policy, and considering all currently available information. An immediate "shock" or increase of 100 basis points in the FOMC's projected rate of U.S. civilian unemployment, and a decrease of 50 basis points in the FOMC's projected rate of U.S. GDP growth would increase the model's total calculated allowance by $0.8 million, or 3.8%, to $23.4 million as of March 31, 2025, assuming qualitative adjustments were kept at current levels.
Previous wording
In addition to analyzing the Corporation’s results on a reported basis, management uses certain non-GAAP financial measures because it believes these non-GAAP financial measures provide information to investors about the underlying operational performance and trends of the Corporation, and therefore facilitate a comparison of the Corporation with the performance of other companies. Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by other companies. Refer to pages 78-81 for further explanation and reconciliation of the Corporation’s use of non-GAAP measures.
Current wording
In addition to analyzing the Corporation’s results on a reported basis, management uses certain non-GAAP financial measures because it believes these non-GAAP financial measures provide information to investors about the underlying operational performance and trends of the Corporation, and therefore facilitate a comparison of the Corporation with the performance of other companies. Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by other companies. Refer to pages 67-70 for further explanation and reconciliation of the Corporation’s use of non-GAAP measures.
Previous wording
The following section of the MD&A provides a comparative discussion of the Corporation’s Consolidated Results of Operations on a reported basis for the three and nine months ended September 30, 2024 and 2023. For a discussion of the Critical Accounting Estimates that affect the Consolidated Results of Operations, see pages 47-48 of this Form 10-Q and page 37 of the Corporation’s 2023 Form 10-K.
Current wording
The following section of the MD&A provides a comparative discussion of the Corporation’s Consolidated Results of Operations on a reported basis for the three months ended March 31, 2025 and 2024. For a discussion of the Critical Accounting Estimates that affect the Consolidated Results of Operations, see pages 41-42 of this Form 10-Q and page 37 of the Corporation’s 2024 Form 10-K.
Previous wording
Net income for the third quarter of 2024 was $5.7 million, or $1.19 per share, compared to $7.6 million, or $1.61 per share, for the same period in the prior year. Return on average equity for the current quarter was 10.81%, compared to 16.89% for the same period in the prior year. The decrease in net income was attributable to a decrease in non-interest income, an increase in non-interest expense, and an increase in the provision for credit losses, offset by an increase in net interest income and a decrease in income tax expense.
Current wording
Net income for the first quarter of 2025 was $6.0 million, or $1.26 per share, compared to $7.1 million, or $1.48 per share, for the same period in the prior year. Return on average equity for the current quarter was 10.96%, compared to 14.48% for the same period in the prior year. The decrease in net income was attributable to an increase in the provision for credit losses and an increase in non-interest expense, offset by increases in net interest income and non-interest income, and a decrease in income tax expense.
Previous wording
Net interest income for the third quarter of 2024 increased $0.4 million, or 2.1%, to $18.4 million compared to the same period in the prior year, due primarily to increases of $3.6 million in interest income on loans, including fees and $0.3 million in interest income on interest-earning deposits, partially offset by increases of $2.3 million in interest expense on deposits and $0.7 million in interest expense on borrowed funds, and a decrease of $0.5 million in interest and dividend income on taxable securities.
Current wording
Net interest income for the first quarter of 2025 increased $1.7 million, or 9.6%, to $19.8 million compared to the same period in the prior year, due primarily to decreases of $1.0 million in interest expense on deposits and $0.3 million in interest expense on borrowed funds, and an increase of $0.9 million in interest income on loans, including fees, partially offset by a decrease of $0.5 million in interest and dividend income on taxable securities.
Previous wording
Interest and dividend income on taxable securities decreased to $3.1 million for the three months ended September 30, 2024 from $3.5 million for the same period in the prior year. Interest and dividend income on taxable securities decreased primarily due to a $57.6 million decrease in the average balances of taxable securities for the three months ended September 30, 2024, primarily due to paydowns and maturities, compared to the same period in the prior year.
Current wording
Interest and dividend income on taxable securities decreased to $3.0 million for the three months ended March 31, 2025 from $3.6 million for the same period in the prior year. Interest and dividend income on taxable securities decreased primarily due to paydowns and maturities of available for sale securities between the first quarter of 2024 and the first quarter of 2025, totaling $55.9 million, primarily on SBA pooled loan and mortgage-backed securities, as well as a decrease in the interest rates of variable rate SBA pooled loan securities, partially offset by purchases of available for sale securities totaling $5.0 million between these periods.
Previous wording
Fully taxable equivalent net interest margin was 2.72% for the third quarter of 2024, compared to 2.73% for the same period in the prior year. Average interest-earning assets increased $73.0 million for the three months ended September 30, 2024 compared to the same period in the prior year. The average yield on interest-earning assets increased 38 basis points to 4.78%, and the average cost of interest-bearing liabilities increased 50 basis points to 2.97%, for the three months ended September 30, 2024, compared to the same period in the prior year, due to the higher rate environment as well as a shift in the overall deposit mix to higher cost deposits.
Current wording
Fully taxable equivalent net interest margin was 2.96% for the first quarter of 2025, compared to 2.73% for the same period in the prior year. Average interest-earning assets increased $48.6 million for the three months ended March 31, 2025 compared to the same period in the prior year. The average yield on interest-earning assets increased twobasis points to 4.72%, and the average cost of interest-bearing liabilities decreased 30 basis points to 2.55%, for the three months ended March 31, 2025, compared to the same period in the prior year, due to the change in the interest rate environment. The cost of funds was 1.92%for the three months ended March 31, 2025, compared to 2.13% for the same period in the prior year, a decrease of 21 basis points.
Previous wording
The following tables present certain information related to the Corporation’s average consolidated balance sheets and its consolidated statements of income for the three and nine months ended September 30, 2024 and 2023. For the purpose of the tables below, nonaccrual loans are included in the daily average loan amounts outstanding. Daily balances were used for average balance computations. Investment securities are stated at amortized cost. Tax equivalent adjustments have been made in calculating yields on obligations of states and political subdivisions, tax-free commercial loans, and dividends on equity investments.
Current wording
The following table presents certain information related to the Corporation’s average consolidated balance sheets and its consolidated statements of income for the three months ended March 31, 2025 and 2024. For the purpose of the table below, nonaccrual loans are included in the daily average loan amounts outstanding. Daily balances were used for average balance computations. Investment securities are stated at amortized cost. Tax equivalent adjustments have been made in calculating yields on obligations of states and political subdivisions, tax-free commercial loans, and dividends on equity investments.
Previous wording
Net interest income can be analyzed in terms of the impact of changes in rates and volumes. The tables below illustrate the extent to which changes in interest rates and the volume of average interest-earning assets and interest-bearing liabilities have affected the Corporation’s interest income and interest expense during the three and nine months ended September 30, 2024 and 2023. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate); (ii) changes attributable to changes in rates (changes in rates multiplied by prior volume); and (iii) the net changes. For purpose of these tables, changes that are not due solely to volume or rate changes have been allocated to these categories based on the respective percentage changes in average volume and rate. Due to the numerous simultaneous volume and rate changes during the periods analyzed, it is not possible to precisely allocate changes between volume and rates. In addition, average interest-earning assets include nonaccrual loans and taxable equivalent adjustments were made.
Current wording
Net interest income can be analyzed in terms of the impact of changes in rates and volumes. The table below illustrates the extent to which changes in interest rates and the volume of average interest-earning assets and interest-bearing liabilities have affected the Corporation’s interest income and interest expense during the three months ended March 31, 2025 and 2024. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate); (ii) changes attributable to changes in rates (changes in rates multiplied by prior volume); and (iii) the net changes. For purpose of this table, changes that are not due solely to volume or rate changes have been allocated to these categories based on the respective percentage changes in average volume and rate. Due to the numerous simultaneous volume and rate changes during the periods analyzed, it is not possible to precisely allocate changes between volume and rates. In addition, average interest-earning assets include nonaccrual loans and taxable equivalent adjustments were made.
Previous wording
Management has established and maintains a methodology for determining and adjusting its allowance for credit losses in conformity with ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, adopted by the Corporation on January 1, 2023. The allowance is based on a combination of quantitative and qualitative analysis and changes in the required allowance are recorded through income as a provision (credit). The quantitative portion of the model is significantly influenced by changes in projected economic conditions, as well as changes in the composition of the numerous loan portfolio segments. Qualitative adjustments reflect the degree to which management anticipates future outcomes may differ from those projected by the quantitative model.
Current wording
Management has established and maintains a methodology for determining and adjusting its allowance for credit losses in conformity with ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The allowance is based on a combination of quantitative and qualitative analysis and changes in the required allowance are recorded through income as a provision (credit). The quantitative portion of the model is significantly influenced by changes in projected economic conditions, as well as changes in the composition of the numerous loan portfolio segments. Qualitative adjustments reflect the degree to which management anticipates future outcomes may differ from those projected by the quantitative model.
Previous wording
The provision for credit losses increased $0.1 million for the third quarter of 2024, compared to the same period in the prior year. The increase was primarily attributable to unfavorable changes in FOMC forecasted variables in the third quarter of 2024, compared to favorable changes to forecasts in the third quarter of 2023, as well as a decline in modeled prepayment speeds. This increase was partially offset by a decrease of $0.3 million in net charge offs in the third quarter of 2024, compared to the third quarter of 2023.
Current wording
The provision for credit losses increased $3.1 million for the first quarter of 2025, compared to the same period in the prior year. The increase was primarily due to the directionality of changes attributable to the annual update to loss drivers used in the Bank's CECL model. The update to loss drivers in the current year resulted in an increase in baseline loss rates, while the update in the prior year resulted in a decrease in baseline loss rates. This increase was also partially attributable to an increase of $0.1 million in net charge offs in the first quarter of 2025, compared to the first quarter of 2024.
Previous wording
Total non-interest income for the third quarter of 2024 decreased $1.9 million compared to the same period in the prior year, primarily due to a decrease in other non-interest income, partially offset by increases in WMG fee income and changes in fair value of equity investments.
Current wording
Total non-interest income for the first quarter of 2025 increased $0.2 million compared to the same period in the prior year, primarily due to increases in service charges on deposit accounts, WMG fee income and other non-interest income, partially offset by a decrease in the changes in fair value of equity investments.
Previous wording
The increase in WMG fee income can primarily be attributed to an increase in the market value of total assets under management or administration and fee rate increases effective in the third quarter of 2024.
Current wording
The increase in WMG fee income can primarily be attributed to fee rate increases which were implemented in the second half of 2024.
Previous wording
The increase in changes in fair value of equity investments can primarily be attributed to an increase in the market value of assets held for the Corporation's deferred compensation plan.
Current wording
The decrease in changes in fair value of equity investments can primarily be attributed to a decrease in the market value of assets held for the Corporation's deferred compensation plan.
Previous wording
Total non-interest expense for the nine months ended September 30, 2024 increased $2.0 million compared to the same period in the prior year. The increase was due to increases in total compensation expense and total non-compensation expense. For the nine months ended September 30, 2024 and 2023, non-interest expense to average assets was 2.41% and 2.39%, respectively.
Current wording
Total non-interest expense for the first quarter of 2025 increased $0.2 million compared to the same period in the prior year. The increase was due to increases in total compensation expense and non-compensation expense. For the three months ended March 31, 2025 and 2024, non-interest expense to average assets was 2.47%.
Previous wording
The increase in compensation expense for the current period, compared to the same period in the prior year, was primarily due to increases in salaries and wages and pension and other employee benefits, offset by a decrease in other components of net periodic pension and postretirement benefits. The increase in salaries and wages included additional staffing for the Corporation's newly opened Western New York regional banking center, as well as an increase in the market value of the assets held for the Corporation's deferred compensation plan, which offset savings realized due to outsourcing, compared to the same period in the prior year. The increase in pension and other employee benefits was primarily attributable to an increase in employee healthcare expenses for the current period, compared to the same period in the prior year. The decrease in other components of net periodic pension and postretirement benefits was primarily due to actuarial adjustments related to the Corporation's pension plans.
Current wording
The increase in compensation expense for the current period, compared to the same period in the prior year, was primarily due to increases in salaries and wages and other components of net periodic pension and postretirement benefits, partially offset by a decrease in pension and other employee benefits.
Previous wording
The increase in compensation expense for the current period, compared to the same period in the prior year, was primarily due to an increase in salaries and wages, partially offset by a decrease in pension and other employee benefits. The increase in salaries and wages can be primarily attributed to an increase in base salaries, including additional staffing for the Corporation's newly opened Western New York regional banking center, as well as an increase in the market value of the assets held for the Corporation's deferred compensation plan. The decrease in pension and other employee benefits can be primarily attributed to a decrease in employee healthcare expenses in the current quarter.
Current wording
The increase in salaries and wages can be primarily attributed to an increase in base salaries, including merit-based increases and additional staffing for the Corporation's newly opened Western New York regional banking center. The increase in other components of net periodic pension and postretirement benefits was primarily due to actuarial adjustments related to the Corporation's pension plans. The decrease in pension and other employee benefit expense was largely due to lower employee healthcare-related expenses compared to the same period in the prior year.
Previous wording
Income tax expense for the three month periods ended September 30, 2024 and 2023 were $1.5 million and $2.1 million, respectively. The decrease in income tax expense was due primarily to a decrease of $2.5 million in income before income tax expense. The effective income tax rate decreased from 21.2% for the three months ended September 30, 2023 to 20.9% for the three months ended September 30, 2024.
Current wording
Income tax expense for the three month periods ended March 31, 2025 and 2024 were $1.7 million and $2.0 million, respectively. The decrease in income tax expense was due primarily to a decrease of $1.4 million in income before income tax expense. The effective income tax rate decreased from 22.4% for the three months ended March 31, 2024 to 21.6% for the three months ended March 31, 2025.
Previous wording
The decrease in investment securities can mostly be attributed to $42.3 million in paydowns and maturities in the securities available for sale portfolio, primarily attributable to paydowns on mortgage-backed securities and SBA pooled-loan securities, and an increase in the fair value of the available for sale securities portfolio of $14.7 million, due to favorable changes in interest rates.
Current wording
The decrease in investment securities can mostly be attributed to $13.6 million in paydowns and maturities in the securities available for sale portfolio, primarily attributable to paydowns on mortgage-backed securities and SBA pooled-loan securities. The market value of securities available for sale increased $11.0 million, due to favorable changes in market interest rates during the current period. Also contributing to the decrease in total investment securities was a decrease of $1.1 million in FHLB and FRB stock, at cost, mainly due to a decrease in total borrowing through the FHLBNY as of March 31, 2025, compared to the prior year-end.
Previous wording
The increase in loans, net of deferred loan fees, can primarily be attributed to increases of $52.0 million in commercial mortgages and $24.9 million in commercial and industrial loans, offset by decreases of $20.9 million in indirect consumer loans and $3.9 million in residential mortgages.
Current wording
The increase in loans, net of deferred loan fees, can primarily be attributed to increases of $43.3 million in commercial mortgages and $0.5 million in residential mortgages, offset by decreases of $3.8 million in commercial and industrial loans and $13.5 million in indirect consumer loans.
Previous wording
The decrease in other assets can primarily be attributed to decreases of $4.2 million in interest rate swap assets, due to a decrease in the market value of swaps, and $3.8 million in deferred tax assets, due to improvements in the market value of the available for sale securities portfolio.
Current wording
The decrease in other assets can primarily be attributed to decreases of $3.3 million in interest rate swap assets, due to a decrease in the market value of swaps, and $2.9 million in deferred tax assets, due to improvements in the market value of the available for sale securities portfolio.
Previous wording
The decrease in other liabilities can primarily be attributed to a decrease of $4.2 million in interest rate swap liabilities, primarily due to a decrease in the market value of swaps, partially offset by increases in interest payable on borrowed funds of $1.7 million and interest payable on deposits of $1.2 million.
Current wording
The decrease in other liabilities can primarily be attributed to a decrease of $3.3 million in interest rate swap liabilities, primarily due to a decrease in the market value of swaps.
Previous wording
Shareholders’ equity was $220.7 million at September 30, 2024 compared to $195.2 million at December 31, 2023. The increase can primarily be attributed to an increase of $13.3 million in retained earnings, and a decrease of $10.9 million in accumulated other comprehensive loss. The increase in retained earnings can primarily be attributed to net income of $17.8 million, offset by $4.4 million in dividends declared, during the nine months ended September 30, 2024. The decrease in accumulated other comprehensive loss can primarily be attributed to an increase in the fair market value of the available for sale securities portfolio due to favorable changes in market interest rates.
Current wording
Shareholders’ equity was $228.3 million at March 31, 2025 compared to $215.3 million at December 31, 2024. The increase can primarily be attributed to an increase of $4.5 million in retained earnings, and a decrease of $8.1 million in accumulated other comprehensive loss. The increase in retained earnings can primarily be attributed to net income of $6.0 million, offset by $1.5 million in dividends declared, during the three months ended March 31, 2025. The decrease in accumulated other comprehensive loss can primarily be attributed to an increase in the fair market value of the available for sale securities portfolio due to favorable changes in market interest rates at quarter end.
Previous wording
The market value of total assets under management or administration in WMG was $2.316 billion as of September 30, 2024, including $367.8 million of assets held under management or administration for the Corporation, compared to $2.242 billion as of December 31, 2023, including $381.3 million of assets held under management or administration for the Corporation, an increase of $73.2 million, or 3.3%, primarily attributable to market improvements during 2024.
Current wording
The market value of total assets under management or administration in WMG was $2.203 billion as of March 31, 2025, including $305.5 million of assets held under management or administration for the Corporation, compared to $2.212 billion as of December 31, 2024, including $301.9 million of assets held under management or administration for the Corporation, a decrease of $9.5 million, or 0.4%, largely due to declines in markets during the first quarter of 2025.
Previous wording
The available for sale segment of the securities portfolio totaled $554.6 million as of September 30, 2024, a decrease of $29.4 million, or 5.0%, from $584.0 million as of December 31, 2023. The decrease can mostly be attributed to $42.3 million in paydowns and maturities. The fair value of the portfolio increased $14.7 million, due to favorable changes in interest rates during the current period. The held to maturity securities portfolio consists of obligations of political subdivisions in the Corporation’s market areas. These securities totaled $0.7 million and $0.8 million as of September 30, 2024 and December 31, 2023, respectively.
Current wording
The available for sale segment of the securities portfolio totaled $528.3 million as of March 31, 2025, a decrease of $3.1 million, or 0.6%, from $531.4 million as of December 31, 2024. The decrease can mostly be attributed to $13.6 million in paydowns and maturities, primarily attributable to paydowns on mortgage-backed securities and SBA pooled-loan securities. The fair value of the portfolio increased $11.0 million, due to favorable changes in interest rates during the current period. The held to maturity securities portfolio consists of obligations of political subdivisions in the Corporation’s market areas. These securities totaled $0.8 million as of March 31, 2025 and December 31, 2024.
Previous wording
Non-marketable equity securities as of September 30, 2024 and December 31, 2023 include shares of FRBNY stock and FHLBNY stock, carried at their cost. FRBNY stock and FHLBNY stock were $1.9 million and $2.3 million respectively as of September 30, 2024, and $1.9 million and $3.6 million respectively as of December 31, 2023. The fair value of these securities is assumed to approximate their cost. The investment in these stocks is regulated by regulatory policies of the respective institutions.
Current wording
Non-marketable equity securities as of March 31, 2025 and December 31, 2024 include shares of FRBNY stock and FHLBNY stock, carried at their cost. FRBNY stock and FHLBNY stock were $1.9 million and $6.1 million respectively as of March 31, 2025, and $1.9 million and $7.2 million respectively as of December 31, 2024. The fair value of these securities is assumed to approximate their cost. The investment in these stocks is regulated by regulatory policies of the respective institutions.
Previous wording
Portfolio loans totaled $2.029 billion as of September 30, 2024, an increase of $56.3 million, or 2.9%, from $1.973 billion as of December 31, 2023. The increase in loans can primarily be attributed to increases of $52.0 million in commercial mortgage loans and $24.9 million in commercial and industrial loans, offset by decreases of $20.9 million in indirect consumer loans and $3.9 million in residential mortgages.
Current wording
Portfolio loans totaled $2.098 billion as of March 31, 2025, an increase of $26.2 million, or 1.3%, from $2.071 billion as of December 31, 2024. The increase in loans can primarily be attributed to increases of $43.3 million in commercial mortgage loans and $0.5 million in residential mortgages, partially offset by decreases of $13.5 million in indirect consumer loans and $3.8 million in commercial and industrial loans.
Previous wording
Commercial lending continues to be a primary driver of asset growth for the Corporation, as demand for project financing remains robust, particularly in the Capital Bank division. As of September 30, 2024, total commercial real estate loans, inclusive of construction loans, in the Capital Bank division grew by $46.7 million. Commercial real estate loan growth in the Canal Bank division was $6.8 million, while commercial real estate balances contracted by $1.4 million in the Chemung Canal division. Growth in commercial and industrial loans between December 31, 2023 and September 30, 2024 was also concentrated in the Capital Bank division, increasing by $19.6 million. Commercial and industrial loan growth in the Canal Bank and Chemung Canal divisions were $5.2 million and $0.1 million, respectively.
Current wording
Commercial lending continues to be a primary driver of asset growth for the Corporation, and demand remained strong in the current economic environment, particularly in the Capital Bank division and the newer Canal Bank division in Western New York. As of March 31, 2025, total commercial real estate loans, inclusive of construction loans, in the Canal Bank division grew $24.9 million, while commercial real estate loans in the Capital Bank and Chemung Canal divisions grew $15.9 million and $2.5 million, respectively, compared to December 31, 2024. Commercial and industrial loan balances in the Canal Bank and Capital Bank divisions decreased by $4.5 million and $2.2 million, respectively, compared to December 31, 2024, partially offset by an increase in commercial and industrial loan balances in the Chemung Canal region of $2.9 million.
Previous wording
Residential mortgage loans totaled $274.1 million as of September 30, 2024, a decrease of $3.9 million, or 1.4%, compared to December 31, 2023. During the nine months ended September 30, 2024, $26.3 million in residential mortgages were originated, of which $8.5 million were sold in the secondary market to Freddie Mac and FHLBNY. Demand for residential mortgage originations continues to be weaker as a result of the higher interest rate environment and lower market mobility due to many borrowers securing lower interest rates in prior years. Indirect consumer loans totaled $189.5 million as of September 30, 2024, a decrease of $20.9 million, or 9.9%, from December 31, 2023 as portfolio turnover exceeded total origination activity.
Current wording
Residential mortgage loans totaled $275.4 million as of March 31, 2025, an increase of $0.5 million, or 0.2%, compared to December 31, 2024. During the three months ended March 31, 2025, $9.4 million in residential mortgages were originated, of which $2.3 million were sold in the secondary market to Freddie Mac and FHLBNY. Residential mortgage originations continues to be weaker as a result of lower levels of housing inventory across the Corporation's footprint and the higher interest rate environment, relative to prior years. Total consumer loans decreased primarily due to a decrease of $13.5 million, or 7.6%, in indirect consumer loans compared to December 31, 2024, due to paydowns exceeding originations during 2025, and the relatively fast turnover rate in the portfolio.
Previous wording
Commercial real estate lending represented the largest portion of the Corporation's loan portfolio as of September 30, 2024 and December 31, 2023. Commercial real estate lending is comprised of the "Construction" and "Commercial mortgage, other" segments of the loan portfolio, as presented in Note 4 - Loans and Allowance for Credit Losses to the Consolidated Financial Statements. As of September 30, 2024 and December 31, 2023, total commercial real estate loans totaled $1.175 billion and $1.123 billion, respectively. Management evaluates the risk inherent in its portfolio of commercial real estate loans using a variety of metrics, including but not limited to type, geography, collateral, and borrower or sponsor industry.
Current wording
Commercial real estate lending represented the largest portion of the Corporation's loan portfolio as of March 31, 2025 and December 31, 2024. Commercial real estate lending is comprised of the construction, owner occupied commercial real estate, and non-owner occupied commercial real estate categories of the loan portfolio, as presented in Note 4 - Loans and Allowance for Credit Losses to the Consolidated Financial Statements. As of March 31, 2025 and December 31, 2024, total commercial real estate loans were $1.260 billion and $1.217 billion, respectively. As the largest component of the Corporation's loan portfolio, quantitative and qualitative attributes of commercial real estate such as maturity and repricing schedules may have a significant impact on management's strategic initiatives, and understanding such attributes is critical in understanding the Corporation's anticipated future liquidity needs and sensitivity to changes in interest rates. Management also evaluates the risk inherent in its portfolio of commercial real estate loans using a variety of metrics, including but not limited to type, geography, collateral, and borrower or sponsor industry.
Previous wording
The Corporation closely monitors economic and credit trends for the industries in which its commercial real estate borrowers are involved. Property types are designated based on the purpose of the collateral securing commercial real estate loans. The table below presents commercial real estate loans by borrower industry and percentage as of September 30, 2024 and December 31, 2023 (dollars in thousands):
Current wording
The Corporation closely monitors economic and credit trends for the industries in which its commercial real estate borrowers are involved. Property types are designated based on the purpose of the collateral securing commercial real estate loans. The table below presents commercial real estate loans by borrower industry and percentage as of March 31, 2025 and December 31, 2024, as well as the weighted average (WA) loan to value (LTV) ratio for each industry as of March 31, 2025 (dollars in thousands):
Previous wording
Loan concentrations are considered to exist when there are amounts loaned to a multiple number of borrowers engaged in similar activities, which may cause them to be similarly impacted by economic or other conditions. Industries are identified using NAICS codes, and the Corporation monitors specific NAICS industry classificat ions of commercial loans to identify concentrations of greater than 10.0% of total loans. As of September 30, 2024 and December 31, 2023, commercial loans to borrowers involved in the real estate and real estate rental and leasing businesses were 51.0% and 49.5% of total loans, respectively. No other concentration of loans existed in the commercial loan portfolio in excess of 10.0% of total loans as of September 30, 2024 and December 31, 2023.
Current wording
Loan concentrations are considered to exist when there are amounts loaned to a multiple number of borrowers engaged in similar activities, which may cause them to be similarly impacted by economic or other conditions. Industries are identified using NAICS codes, and the Corporation monitors specific NAICS industry classificat ions of commercial loans to identify concentrations of greater than 10.0% of total loans. As of March 31, 2025 and December 31, 2024, commercial loans to borrowers involved in the real estate and real estate rental and leasing businesses were 51.3% and 50.9% of total loans, respectively. No other concentration of loans existed in the commercial loan portfolio in excess of 10.0% of total loans as of March 31, 2025 and December 31, 2024.
Previous wording
The Corporation has reporting systems to monitor: (i) loan origination and concentrations, (ii) delinquent loans, (iii) non-performing assets, including non-performing loans, certain loans made with modifications to borrowers experiencing financial difficulty, other real estate owned, and repossessed vehicles (iv) loans analyzed on an individual basis for credit risk, and (v) potential problem loans. Management reviews these systems on a regular basis.
Current wording
The Corporation has reporting systems to monitor: (i) loan origination and concentrations, (ii) delinquent loans, (iii) non-performing assets, including non-performing loans, certain loans made with modifications to borrowers experiencing financial difficulty, other real estate owned, and repossessed vehicles (iv) loans analyzed on an individual basis for credit risk, and (v) potential problem loans. Management reviews the adequacy of these systems on a regular basis.
Previous wording
Past due status on all loans is based on the contractual terms of the loan. It is generally the Corporation's policy that a loan 90 days past due be placed on nonaccrual status unless factors exist that would eliminate the need to classify a loan as such. A loan may also be designated as nonaccrual at any time if payment of principal or interest in full is not expected due to deterioration in the financial condition of the borrower. At the time loans are placed into nonaccrual status, the accrual of interest is discontinued and previously accrued interest is reversed. All payments received on nonaccrual loans are applied to principal. Loans are considered for return to accrual status when they become current as to principal and interest and remain current for a period of six consecutive months or when, in the opinion of management, the Corporation expects to receive all of its original principal and interest. In the case of nonaccrual loans where a portion of the loan has been charged off, the remaining balance is kept in nonaccrual status until the entire principal balance has been recovered.
Current wording
Non-performing assets consist of non-performing loans, other real estate owned that has been acquired in partial or full satisfaction of loan obligations or upon foreclosure, and vehicles that have been repossessed. Non-performing loans is comprised of nonaccrual loans. Past due status on all loans is based on the contractual terms of the loan. It is generally the Corporation's policy that a loan 90 days past due be placed on nonaccrual status unless factors exist that would eliminate the need to classify a loan as such. A loan may also be designated as nonaccrual at any time if payment of principal or interest in full is not expected due to deterioration in the financial condition of the borrower. At the time loans are placed into nonaccrual status, the accrual of interest is discontinued and previously accrued interest is reversed. Payments received on nonaccrual loans are generally applied to principal using the cost recovery method. Loans are considered for return to accrual status when they become current as to principal and interest and remain current for a period of six consecutive months or when, in the opinion of management, the Corporation expects to receive all of its original principal and interest. In the case of nonaccrual loans where a portion of the loan has been charged off, the remaining balance is kept in nonaccrual status until the entire principal balance has been recovered.
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The following table presents net interest income for the periods indicated, and the dollar and percent change (in thousands):
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(1) Net interest rate spread is the difference in the average yield on interest-earning assets less the average rate on interest-bearing liabilities.
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(2) Net interest margin is the ratio of fully taxable equivalent net interest income divided by average interest-earning assets.
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The following table presents non-interest income for the periods indicated, and the dollar and percent change (in thousands):
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Changes in Fair Value of Equity Investments
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Total non-interest expense for the third quarter of 2024 increased $0.8 million compared to the same period in the prior year. The increase was due to increases in total compensation expense and non-compensation expense. For the three months ended September 30, 2024, non-interest expense to average assets was 2.39%, compared to 2.33% for the same period in the prior year.
Previous report — wording carried elsewhere
The following table presents non-interest expense for the periods indicated, and the dollar and percent change (in thousands):
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The following table presents income tax expense and the effective tax rate for the periods indicated, and the dollar and percent change (in thousands):
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*All deposits, excluding those originated by the Capital Bank and Canal Bank divisions.