CHEMUNG FINANCIAL CORP (CHMG)

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

Introduction

The following is the MD&A of the Corporation in this Quarterly Report on Form 10-Q for the three months ended March 31, 2026. Reference should be made to the accompanying unaudited consolidated financial statements and footnotes, and the Corporation’s 2025 Annual Report on Form 10-K, which was filed with the SEC on March 13, 2026, for an understanding of the following discussion and analysis. See the list of commonly used abbreviations and terms on pages 3–5.

The MD&A included in this Form 10-Q contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of the Corporation's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. For a discussion of those risks and uncertainties and the factors that could cause the Corporation’s actual results to differ materially from those risks and uncertainties, see Forward-looking Statements below, in Part I, Item 1A, Risk Factors, and on pages 19–29 of the Corporation’s 2025 Form 10-K. For a discussion of the use of non-GAAP financial measures, see pages 68-70 of the Corporation's 2025 Form 10-K, and pages 67-70 of this Form 10-Q.

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

Forward-looking Statements

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

Information concerning these and other factors, including Risk Factors, can be found in the Corporation’s periodic filings with the SEC, including the discussion under the heading “Item 1A. Risk Factors” in the Corporation’s 2025 Annual Report on Form 10-K. These filings are available publicly on the SEC’s web site at http://www.sec.gov, on the Corporation's web site at http://www.chemungcanal.com or upon request from the Corporate Secretary at (607) 737-3746. Except as otherwise required by law, the Corporation undertakes no obligation to publicly update or revise its forward-looking statements, whether as a result of new information, future events, or otherwise.

Critical Accounting Estimates

Critical accounting estimates include the areas where the Corporation has made what it considers to be particularly difficult, subjective, or complex judgments concerning estimates, and where these estimates can significantly affect the Corporation's financial results under different assumptions and conditions. The Corporation prepares its financial statements in conformity with GAAP. As a result, the Corporation is required to make estimates, judgments, and assumptions that it believes are reasonable based upon the information available at that time. These estimates, judgments, and assumptions affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. Actual results could be different from these estimates. Significant accounting policies followed by the Corporation are presented in Note 1 – Summary of Significant Accounting Policies, to the Audited Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2025, and in Note 1 – Summary of Significant Accounting Policies of this Form 10-Q.

41

Allowance for Credit Losses

Management considers the allowance for credit losses to be a critical accounting estimate, given the uncertainty in estimating lifetime credit losses attributable to its portfolios of assets exhibiting credit risk, particularly in its loan portfolio, and the material effect that such judgments may have on the Corporation's results of operations. Determining the amount requires significant judgment on the part of management, is multi-faceted, and can be imprecise. The level of the allowance for credit losses on loans is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past events, current conditions, and expectations of the future based on reasonable and supportable forecasts.

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

Because the Corporation's methodology for maintaining its allowance for credit losses is based on historical experience and trends, current economic information, forecasted data, and management's judgment, 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.

As of March 31, 2026 and December 31, 2025, the allowance for credit losses totaled $24.9 million and $24.2 million, respectively. A significant portion of the allowance for credit losses is allocated to the commercial portfolio, to both commercial real estate and commercial and industrial loans. As of March 31, 2026 and December 31, 2025, the allowance for credit losses allocated to the total commercial portfolio was $20.0 million and $18.9 million, respectively, or 80.3% and 78.0% of the total allowance for credit losses on loans. For comparison, total commercial loans represented 77.3% and 76.4% of total loan balances as of March 31, 2026 and December 31, 2025, 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.

Changes in the FOMC's median forecasted 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 as a loss driver. 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, 2025. 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 $1.5 million, or 5.9%, to $26.3 million as of March 31, 2026, assuming qualitative adjustments were kept at current levels.

While management has concluded that its current evaluation is reasonable under the circumstances, and that sensitivity analysis is based on a series of hypothetical scenarios not intended to represent management’s assumptions or judgment of factors as of March 31, 2026, it has also concluded that differing assumptions could materially impact allowance calculations, either positively or adversely.

42

[[GREPCENT_TABLE]]
[["Consolidated Financial Highlights"],["(in thousands, except per share data)","As of or for the Three Months Ended"],["","Mar. 31,","","Dec. 31,","","Sept. 30,","","Jun. 30,","","Mar. 31,"],["RESULTS OF OPERATIONS","2026","","2025","","2025","","2025","","2025"],["Interest and dividend income","$","33,585","","","$","34,219","","","$","33,884","","","$","33,034","","","$","31,698"],["Interest expense","10,001","","","10,375","","","11,196","","","12,226","","","11,881"],["Net interest income","23,584","","","23,844","","","22,688","","","20,808","","","19,817"],["Provision for credit losses","601","","","1,136","","","1,064","","","1,145","","","1,092"],["Net interest income after provision for credit losses","22,983","","","22,708","","","21,624","","","19,663","","","18,725"],["Non-interest income (loss)","6,320","","","6,673","","","6,088","","","(10,705)","","","5,889"],["Non-interest expense","17,462","","","18,388","","","17,645","","","17,769","","","16,927"],["Income (loss) before income tax expense","11,841","","","10,993","","","10,067","","","(8,811)","","","7,687"],["Income tax expense (benefit)","2,642","","","3,252","","","2,275","","","(2,359)","","","1,664"],["Net income (loss)","$","9,199","","","$","7,741","","","$","7,792","","","$","(6,452)","","","$","6,023"],["Basic and diluted earnings (loss) per share","$","1.91","","","$","1.61","","","$","1.62","","","$","(1.35)","","","$","1.26"],["Average basic and diluted shares outstanding","4,825","","","4,811","","","4,811","","","4,808"

[Excerpt truncated for page length; source filing is linked above.]

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Overview

The following is the MD&A of the Corporation as of and for the years ended December 31, 2025 and 2024. The purpose of this discussion is to focus on information about the financial condition and results of operations of the Corporation. Reference should be made to the accompanying audited consolidated financial statements and footnotes for an understanding of the following discussion and analysis. See the list of commonly used abbreviations and terms on pages 2-5.

The MD&A included in this Form 10-K contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of the Corporation's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. For a discussion of those risks and uncertainties and the factors that could cause the Corporation’s actual results to differ materially from those risks and uncertainties, see Forward-looking Statements below.

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

Forward-looking Statements

This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act, and the Private Securities Litigation Reform Act of 1995. 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, changes in FDIC assessments, public health issues, geopolitical conflicts, bank failures, difficulties in managing the Corporation’s growth, competition, changes in law or the regulatory environment, and changes in general business and economic trends. Information concerning these and other factors can be found in the Corporation’s periodic filings with the SEC, including the discussion under the heading “Item 1A. Risk Factors” of this annual report on Form 10-K. The Corporation's quarterly filings are available publicly on the SEC’s website at http://www.sec.gov, on the Corporation's website at http://www.chemungcanal.com or by written request to: Kathleen S. McKillip, Corporate Secretary, Chemung Financial Corporation, One Chemung Canal Plaza, Elmira, NY 14901. Except as otherwise required by law, the Corporation undertakes no obligation to publicly update or revise its forward-looking statements, whether as a result of new information, future events, or otherwise.

36

Summary of Strategic Actions

During the year ended December 31, 2025, the Corporation completed certain strategic transactions which had a material impact on the Corporation's results of operations and the Corporation's financial condition as of December 31, 2025. These included components of management's balance sheet repositioning efforts and the completion of the sale of a previous branch property as part of management's ongoing evaluation of its physical distribution network. The following section provides a summary of these transactions.

Issuance of Subordinated Debt

On June 10, 2025, the Corporation issued $45.0 million of ten-year 7.75% fixed-to-floating rate subordinated notes, due June 2035 (the "Notes"). The Notes bear interest at a fixed rate of 7.75% per year, payable semi-annually, for the first five years. Beginning on June 15, 2030 and until the maturity date, the Notes will adjust to a floating rate equal to the then current three- month term SOFR plus 415 basis points, payable quarterly. The Notes constitute unsecured and subordinated obligations of the Corporation and rank junior in right of payment to any senior indebtedness and obligations to general and secured creditors. Proceeds, net of debt issuance costs of $1.0 million, were $44.0 million. Subject to limited exceptions, the Corporation cannot redeem the Notes before the fifth anniversary of the issuance date. The Corporation intends to use the net proceeds from the issuance and sale of the Notes for general corporate purposes and to support regulatory capital ratios for growth initiatives. The Notes qualify as Tier 2 regulatory capital at the holding company, when applicable, subject to an annual phase-out of 20% of the Notes face amount each year during the last five years of the Note's maturity. From the proceeds of the Notes, the Corporation provided the Bank with a $37.0 million capital contribution, effectively downstreaming the regulatory capital impact of the Notes to the Bank as common equity Tier 1 capital, which is not subject to regulatory phase-out. The Corporation believes the issuance of subordinated debt strengthens its overall regulatory capital position and improves commercial real estate concentration ratios, allowing for flexibility in pursuing loan growth in its key expansion markets.

Sale of Available for Sale Securities

Subsequent to the Corporation's issuance of subordinated debt in June 2025, the Corporation sold available for sale securities with a book value of $244.8 million, or approximately 40% of its then total available for sale securities portfolio. These sales resulted in a realized pre-tax loss of $17.5 million, or approximately 7% of the total book value of securities sold, resulting in proceeds of $227.3 million. Securities sold as part of these sales included the Corporation's entire U.S. Treasury and SBA-pooled loan securities portfolios, as well as portions of its mortgage-backed securities and municipal bonds portfolios. A portion of proceeds from the sales were utilized to pay off $155.0 million in wholesale funding liabilities, including $100.0 million in brokered deposits and $55.0 million in FHLBNY term advances, in July 2025. All wholesale funding liabilities were paid off at maturity and the Corporation did not incur any prepayment penalties as a result of these payoffs.

Sale of Previous Branch Property

In April 2025, the Corporation completed the sale of its previous branch property at 806 Buffalo Street, Ithaca, New York. As previously disclosed, all operations of the branch, formerly known as the "Ithaca Station" branch were consolidated into the nearby branch at 304 Elmira Road, Ithaca, New York in the fourth quarter of 2024. The property had previously been classified as held for sale at its cost of $0.7 million, with proceeds from the sale totaling $1.3 million, resulting in the recognition of a $0.6 million gain during the year ended December 31, 2025.

Tax Implications - Deferred Tax Asset

The resulting net loss of $17.5 million from the sale of available for sale securities occurred at the Bank, as well as the Corporation’s REIT entity. Under IRC Sec. 582(c)(1), in the case of banks, the sale or exchange of a bond, debenture, note or certificate or other evidence of indebtedness shall not be considered a sale or exchange of a capital asset. Therefore, the loss from the sale of securities at the Bank is considered ordinary in nature. However, the REIT is not considered a “bank” under IRC Sec. 582(c) and therefore a sale of securities at the REIT is considered capital in nature. The capital loss amounted to $11.5 million (gross) and represents a $2.7 million deferred tax asset as of December 31, 2025 subject to a five-year carryforward limitation. Pursuant to ASC 740-10-30-5(e), deferred tax assets must be reduced by a valuation allowance if it is more likely than not that all of the deferred tax assets will not be realized. The valuation allowance would serve to reduce the deferred tax assets to an amount that would be more likely than not to be realized. The more likely than not threshold is a likelihood of more than 50 percent.

37

The Corporation’s current tax planning strategies include the planned sale of appreciated investment securities and loans from the REIT entity. These transactions are intended to generate future capital gains sufficient to utilize the capital loss carryforward prior to its expiration. Management has demonstrated both the ability and intent to execute these strategies in a timely and economically feasible manner.

After detailed review, including various scenarios of changes in market interest rates, while the Corporation’s management has demonstrated the ability and intent to implement these prudent and reasonable actions, management determined that it is more likely than not that a portion of the deferred assets, including the capital loss carryforward, will not be realized. Further, management will continue to monitor all available positive and negative evidence on at least a quarterly basis, consistent with ASC 740, and will promptly adjust the valuation allowance assessment if facts and circumstances change materially.

Non-GAAP Presentation

The Corporation has identified both the sale of available for sale securities and the sale of the former Ithaca Station branch property as nonrecurring transactions and has made reference to non-GAAP figures within this MD&A where appropriate and useful to the reader of these financial statements. Please refer to the GAAP to Non-GAAP reconciliations, pages 68-70, for further information.

38

Critical Accounting Estimates

Critical accounting estimates include the areas where the Corporation has made what it considers to be particularly difficult, subjective, or complex judgments concerning estimates, and where these estimates can significantly affect the Corporation's financial results under different assumptions and conditions. The Corporation prepares its financial statements in conformity with GAAP. As a result, the Corporation is required to make certain estimates, judgments, and assumptions that it believes to be reasonable based upon the information available at that time. These estimates, judgments, and assumptions affect reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the years presented. Actual results could differ from these estimates.

Allowance for Credit Losses

Management considers the allowance for credit losses to be a critical accounting estimate, given the uncertainty in estimating lifetime credit losses attributable to its portfolios of assets exhibiting credit risk, particularly in its loan portfolio, and the material effect that such judgments may have on the Corporation's results of operations. Determining the amount requires significant judgment on the part of management, is multi-faceted, and can be imprecise. The level of the allowance for credit losses on loans is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past events, current conditions, and expectations of the future based on reasonable and supportable forecasts.

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

Because the Corporation's methodology for maintaining its allowance for credit losses is based on historical experience and trends, current economic information, forecasted data, and management's judgment, 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.

As of December 31, 2025, the allowance for credit losses on loans totaled $24.2 million, compared to $21.4 million as of December 31, 2024. 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 December 31, 2025 and 2024, the allowance for credit losses allocated to the total commercial portfolio was $18.9 million and $15.7 million, respectively, or 78.0% and 73.6% of the total allowance for credit losses on loans. For comparison, total commercial loans represented 76.4% and 73.2% of total loan balances, respectively, as of December 31, 2025 and 2024. 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.

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, a majority of loan pools, as defined in Note 1 to the Consolidated Financial Statements, utilize the FOMC's projections for unemployment as a loss driver, while the commercial and industrial, consumer, and other loans pools utilizes the FOMC's projections for GDP growth. 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 bps in the FOMC's projected rate of U.S. civilian unemployment, and a decrease of 50 bps in the FOMC's projected rate of U.S. GDP growth, would increase the model's total calculated allowance by $1.0 million, or 4.0%, to $25.2 million, assuming qualitative adjustments were kept at current levels.

While management has concluded that its current evaluation is reasonable under the circumstances, and that sensitivity analysis is based on a series of hypothetical scenarios not intended to represent management’s assumptions or judgment of factors as of December 31, 2025, it has also concluded that differing assumptions could materially impact allowance calculations, either positively or adversely.

Management’s methodology and policy in estimating the allowance for credit losses can be found in Note 1 to the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K. The activity in the allowance for credit losses can be found in supporting tables in Note 4 to the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

39

40

Consolidated Results of Operations

The following section of the MD&A provides a comparative discussion of the Corporation’s Consolidated Results of Operations on a reported basis for the years ended December 31, 2025 and 2024. For a discussion of the Critical Accounting Estimates that affect the Consolidated Results of Operations, see page 39.

Net Income

The following table presents selected financial information for the years indicated, and the dollar and percent change (in thousands, except per share and ratio data):

(a) See the GAAP to Non-GAAP reconciliations on pages 68-70.

41

Net income for the year ended December 31, 2025 was $15.1 million, or $3.14 per share, compared with net income of $23.7 million, or $4.96 per share, for the prior year. Return on average equity for the year ended December 31, 2025 was 6.40%, compared with 11.53% for the prior year. The decrease in net income for the year ended December 31, 2025, compared to the prior year, was due to a decrease in non-interest income, and increases in non-interest expense and provision for credit losses, partially offset by an increase in net interest income and a decrease in income tax expense.

During the second quarter of 2025, the Corporation sold a portion of its available for sale securities portfolio, and recognized a $17.5 million loss on the sale. In addition, the Corporation recognized a gain of $0.6 million upon completing the sale of a previously held for sale branch property. Excluding these nonrecurring items, net income (as adjusted) for the year ended December 31, 2025 was $27.9 million, or $5.80 per share. Non-GAAP net income as presented in the MD&A has been adjusted for these two items. Refer to the GAAP to Non-GAAP reconciliations, on pages 68-70, for further information. Adjusted return on average equity for the year ended December 31, 2025 was 11.81%, compared to 11.53% for the prior year.

Net Interest Income

The following table presents net interest income for the years indicated, and the dollar and percent change (in thousands):

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

Net interest income for the year ended December 31, 2025 totaled $87.2 million, an increase of $13.1 million, or 17.7%, compared with $74.1 million for the prior year. Fully taxable equivalent net interest margin was 3.26% for the year ended December 31, 2025 compared to 2.76% for the prior year. The increase in net interest income was driven by a decrease of $8.3 million in interest expense on deposits and increases of $8.2 million in interest income on loans and $1.6 million in interest income on interest-earning deposits, partially offset by a decrease of $4.2 million in interest and dividend income on taxable securities.

Interest expense on deposits decreased largely due to a decrease of 42 basis points in the average cost of total interest-bearing deposits, which included brokered deposits, and a decrease of $30.6 million in average balances of total interest-bearing deposits, each compared to the prior year. The decrease in average balances of total interest-bearing deposits was inclusive of a decrease of $38.0 million in average balances of brokered deposits, due to proceeds from the Corporation’s sales of available for sale securities in the second quarter of 2025 being used to pay off wholesale funding liabilities, including brokered deposits. The average cost of customer time deposits decreased 73 basis points and average balances of customer time deposits decreased $25.2 million, each compared to the prior year. Both the decrease in average cost and average balances were primarily due to changes in promotional CD campaign offerings in the current year, compared to the prior year. Proceeds from the Corporation’s sales of available for sale securities in 2025 also reduced reliance on customer time deposits to fund loan growth.

Interest income on loans, including fees, increased mainly due to an increase of $129.3 million in average balances of total loans and an increase of five basis points in the average yield on total loans, each compared to the prior year. The increase in average balances of total loans was largely driven by an increase of $159.3 million in average balances of commercial loans, partially offset by a decrease of $33.9 million in average balances of consumer loans, each compared to the prior year. The increase in average balances of commercial loans was largely concentrated in commercial real estate, particularly in the Corporation’s Capital Bank and Canal Bank divisions in Albany and Buffalo, respectively. The decrease in average balances of consumer loans was primarily due to lower origination activity and normal portfolio turnover of indirect auto loans, as the Corporation prioritized funding other types of lending during 2025.

42

The increase in the average yield on total loans was mainly due to increases of 35 basis points and 15 basis points in the average yields on residential mortgages and consumer loans, respectively, partially offset by a decrease of six basis points in the average yield on total commercial loans, each compared to the prior year. The increase in the average yield on residential mortgages was primarily due to an increase in origination volume during 2025, most of which was originated at yields above the portfolio's average yield due to the elevated interest rate environment. The increase in the average yield on consumer loans was largely due to fast turnover in the indirect auto portfolio as older, lower‑yielding balances were replaced by higher‑yielding balances, partially offset by lower yields on originations of promotional home equity lines of credit, and the impact of declines in benchmark interest rates, such as the Prime rate, on variable rate home equity loans and lines. The decrease in the average yield on commercial loans was largely due to a decrease in interest rates on variable rate commercial and industrial loans, including lines of credit, due to the declining market interest rate environment compared to the prior year.

Interest income on interest‑earning deposits increased largely due to an increase of $38.4 million in average balances of interest‑earning deposits compared to the prior year, mainly consisting of proceeds from the Corporation’s sales of available for sale securities and issuance of subordinated debt in the second quarter of 2025, and despite a decrease of 40 basis points in the average yield on interest‑earning deposits compared to the prior year as a result of the decline in the fed funds rate.

Interest and dividend income on taxable securities decreased primarily due to the Corporation’s sales of available for sale securities with a book value of $244.8 million in the second quarter of 2025. These sales, as well as normal paydown activity on mortgage‑backed securities and SBA pooled‑loan securities, resulted in a decrease of $169.7 million in average balances of taxable securities, compared to the prior year. Additionally, the average yield on taxable securities decreased 12 basis points compared to the prior year, largely due to optimization of securities sales proceeds, which reflects the sale of relatively higher‑yielding securities in the second quarter of 2025, partially offset by a decrease in total amortization expense on available for sale securities compared to the prior year.

Average interest‑earning assets decreased $18.0 million, while average interest‑bearing liabilities decreased $32.2 million during 2025, each compared to the prior year, largely the result of the Corporation’s balance sheet repositioning efforts in the current year. The average yield on interest‑earning assets increased 23 basis points to 4.97%, while the average cost of interest‑bearing liabilities decreased 37 basis points to 2.50%. The total cost of funds was 1.86% for the year ended December 31, 2025, compared to 2.15% in the prior year, a decrease of 29 basis points.

43

Average Consolidated Balance Sheet and Interest Analysis

The following table presents certain information related to the Corporation’s average Consolidated Balance Sheets and its Consolidated Statements of Income for the years ended December 31, 2025, and 2024. It also reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the years ended December 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.

(1) Net interest rate spread is the difference in the average yield on interest-earning assets less the average cost of interest-bearing liabilities.

(2) Net interest margin is the ratio of fully taxable equivalent net interest income divided by average interest-earning assets.

(3) Taxable equivalent adjustments have been made using a 19.6% blended rate equaling the 21.0% federal statutory rate less the impact of the Corporation's effective New York State income tax rate of 6.8%

44

Changes Due to Rate and Volume

Net interest income can be analyzed in terms of the impact of changes in rates and volumes. The table below illustrates the extent to which changes in interest rates and in the volume of average interest-earning assets and interest-bearing liabilities have affected the Corporation’s interest income and interest expense during the years indicated. 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 purposes 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 years 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.

45

Provision for credit losses

Management has established and maintains a methodology for determining and adjusting its allowance for credit losses in conformity with ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. 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.

The provision for credit losses increased $4.5 million, from a credit of $46 thousand for the year ended December 31, 2024 to a provision of $4.4 million for the year ended December 31, 2025. The increase was largely due to the annual review and update to the loss drivers which the Bank's CECL model is based upon, resulting in an increase in baseline loss rates during the current year, compared to a decrease in baseline loss rates as a result of the prior year's update, which led to a credit (provision recapture) for the prior year. Additionally an increase in loan growth for the year ended December 31, 2025 compared to loan growth for the prior year, as well as unfavorable changes in model inputs during 2025, including a decline in modeled prepayment speeds and a higher modeled unemployment rate, also contributed to the increase. The increase in net charge-offs for the year ended December 31, 2025 compared to the prior year did not meaningfully contribute to the increase in provision for credit losses.

Non-interest income

The following table presents non-interest income for the years ended December 31, 2025 and 2024, and the dollar and percent change (in thousands, except percentages):

Non-interest income for the year ended December 31, 2025 was $7.9 million compared with $23.2 million for the prior year, a decrease of $15.3 million, or 65.8%. The decrease was due primarily to the loss on securities sales transactions of $17.5 million. This was partially offset by increases of $1.4 million in other non-interest income and $0.4 million in service charges on deposit accounts, as well as $0.4 million in wealth management group fee income.

Other non-interest income

Other non-interest income increased compared to the prior year primarily due to the gain of $0.6 million on the sale of the previous Ithaca "Station" branch property, interest received from the IRS in relation to the Corporation's receipt of proceeds from the Employee Retention Tax Credit (ERTC), an increase in commercial interest rate swap fee income, and recognition of incentives from a debit card service provider arrangement.

Wealth management group fee income and service charges on deposit accounts

The increases in wealth management group fee income and services charges on deposit accounts were primarily due to fee schedule increases, which were implemented in the second half of 2024.

46

Non-interest expense

The following table presents non-interest expense for the years ended December 31, 2025 and 2024, and the dollar and percent change (in thousands, except percentages):

Non-interest expense increased $3.5 million, or 5.2%, in 2025, compared to the prior year. The increase was primarily due to an increase of $3.4 million in total compensation expense, as well as a $0.1 million increase in total non-compensation expense.

Compensation expense

Compensation expense increased $3.4 million, or 9.5%, compared to the prior year, primarily due to increases of $2.1 million in salaries and wages as well as increases of $0.8 million in pension and other employee benefits and $0.5 million in other components of net periodic pension benefits.

The increase in salaries and wages was primarily attributable to additional staffing in the Corporation's Canal Bank division in the Western New York market, including commercial lenders, wealth management professionals, and branch personnel, as well as merit-based wage increases. The increase in pension and other employee benefits was largely due to an increase in employee healthcare-related expense and payroll tax expense, compared to the prior year. The increase in other components of net periodic pension benefits was primarily due to a change in annual actuarial estimates.

Non-compensation expense

Non-compensation expense increased $0.1 million, or 0.3%, mainly due to increases of $0.5 million in other non-compensation expense and $0.4 million in professional services, offset by decreases of $0.6 million in FDIC insurance and $0.1 million in other real estate owned expense.

The increase in other non-compensation expense was primarily due to increases in losses on sales of repossessions, charitable donations made during the current year, and expense related to recruitment. The increase in professional services was primarily due to an increase in consulting services. The decrease in FDIC insurance was mainly due to improved metrics used to calculate the current year assessment, as well as a smaller decrease associated with a decline in total assessed assets. The decrease in other real estate owned expense was largely due to a decrease in the quantity of properties owned during 2025 compared to the prior year.

47

Income tax expense

The following table presents income tax expense and the effective tax rate for the years indicated, and the dollar and percent change (in thousands):

The effective tax rate increased to 24.2% for the year ended December 31, 2025 compared with 21.3% for the prior year. The increase in effective tax rate can be primarily attributed to an increase in the valuation allowance. The decrease in income tax expense can be primarily attributed to a decrease in pre-tax income, largely the result of losses realized on sales of available for sale securities.

Financial Condition

The following table presents selected financial information as of December 31, 2025 and 2024, and the dollar and percent change (in thousands):

Cash and cash equivalents

The increase in cash and cash equivalents was largely due to proceeds from the Corporation's sales of available for sale securities and issuance of subordinated debt, both in the second quarter of 2025, and normal paydown activity and maturities of available for sale securities, largely offset by loan origination activity during 2025, a decrease in total brokered deposits, and a net decrease in total borrowed funds compared to prior year-end.

48

Investment securities

The decrease in investment securities was mainly due to sales of available for sale securities with a fair value of $227.3 million, as of the sale dates, in the second quarter of 2025. Also contributing to the decrease in total investment securities were paydowns and maturities of available for sale securities during 2025, totaling $37.5 million and $2.1 million, respectively. Partially offsetting the total decrease in investment securities were $4.0 million and $0.2 million in purchases of available for sale and held to maturity securities, respectively, during 2025, and an increase in the fair value of securities due to favorable changes in interest rates as of December 31, 2025 compared to prior year-end.

Loans, net

Loans, net of deferred origination fees and costs, increased primarily due to growth concentrated in the commercial loan portfolio, which increased $217.4 million, or 14.3%. Growth in total commercial loans was further concentrated in commercial real estate loans, which increased $192.7 million, or 15.8%. Total commercial real estate loans comprised 62.1% of total loans as of December 31, 2025 compared to 58.7% as of December 31, 2024. Additionally, commercial and industrial loan balances increased $24.7 million, or 8.2%. Total residential mortgage loans increased $11.9 million, or 4.3%, largely due to stronger origination activity during 2025 compared to the prior year. Total consumer loans decreased $31.2 million, or 11.1%, largely due to net runoff of the indirect auto segment as the Corporation prioritized other types of lending during 2025.

Allowance for credit losses

The allowance for credit losses on loans increased $2.8 million, or 13.2%, from $21.4 million as of December 31, 2024 to $24.2 million as of December 31, 2025. The increase was largely due to an increase in total loan volume, particularly concentrated in commercial real estate loans, as well as changes in model inputs between December 31, 2024 and 2025, which included an annual review and update to loss drivers used in the CECL model, which were applied in the first quarter of 2025 and resulted in an increase in baseline modeled loss rates. Additionally, a decrease in modeled prepayment speeds and an increase in forecasted unemployment contributed to the overall increase in the allowance. Partially offsetting the increase were improvements in forecasted GDP growth and a net decrease in specific allowance allocations on individually analyzed loans.

Goodwill and other intangible assets, net

There were no impairments of goodwill during the years ended December 31, 2025 and 2024, and there were no other intangible assets on the Corporation's Consolidated Balance Sheets as of December 31, 2025 and 2024.

Other assets

The decrease in other assets was largely due to a decrease in interest rate swap assets of $6.5 million, resulting from a decrease in market interest rates, and a decrease in deferred tax assets, due to an increase in the fair value of available for sale securities, which was also largely attributed to a decrease in market interest rates.

Deposits

Total deposits decreased largely due to the payoff of brokered deposits with a portion of the proceeds from the Corporation's sales of available for sale securities and issuance of subordinated debt. There were no brokered deposits outstanding as of December 31, 2025, compared to $92.2 million, or 3.8% of total deposits as of the prior year-end. Additionally, total customer time deposits decreased $68.1 million compared to prior year-end. Partially offsetting the decrease in total deposits were increases of $20.1 million, $8.9 million, and $6.3 million in interest-bearing demand deposits, savings deposits, and money market deposits, respectively.

FHLBNY advances and finance lease obligations

FHLBNY advances and finance lease obligations decreased primarily due to a decrease of $22.0 million in FHLBNY overnight advances as of December 31, 2025 compared to prior year-end.

Subordinated debt, net of deferred issuance costs

The Corporation issued $45.0 million in 7.75% fixed-to-floating rate subordinated notes during 2025, net of $1.0 million in total related issuance costs, the majority of which were unamortized as of December 31, 2025. The subordinated notes were issued as part of the Corporation's strategic balance sheet repositioning during 2025.

Other liabilities

The decrease in other liabilities was mainly due to decreases of $6.4 million in interest rate swap liabilities, resulting from a decrease in market interest rates, and a decrease of $1.6 million in accrued interest payable, largely offset by increases across other components of other liabilities.

49

Shareholders’ equity

The increase in shareholders' equity was due primarily to a decrease of $29.0 million in accumulated other comprehensive loss, as well as an increase of $8.8 million in retained earnings. The decrease in accumulated other comprehensive loss was largely due to favorable changes in interest rates compared to prior year-end, while the increase in retained earnings was due to net income of $15.1 million, offset by $6.3 million in dividends declared for the year ended December 31, 2025. Treasury stock decreased $0.8 million, primarily due to the impact of the issuance of shares related to the Corporation's employee benefit plans.

Assets under management or administration

The market value of total assets under management or administration in the Wealth Management Group was $2.338 billion, including $301.8 million of assets held under management or administration for the Corporation, as of December 31, 2025 compared to $2.212 billion, including $301.9 million of assets held under management or administration for the Corporation as of December 31, 2024, an increase of $126.5 million, or 5.7%. Excluding assets under management or administration for the Corporation, the total market value of Wealth Management Group assets increased $126.6 million, or 6.6%, primarily due to improvements in financial markets during the current year.

Balance Sheet Comparisons

The table below contains selected year-end and average balance sheet information at and for the years ended December 31, 2025 and 2024 (in millions):

(1)    Interest-earning assets include: securities available for sale and securities held to maturity at amortized cost, loans and loans held for sale net of deferred loan fees, interest-earning deposits, FHLBNY stock, FRBNY stock, and equity investments.

(2) Loans and loans held for sale, net of deferred loan fees.

(3) Investments include securities available for sale at estimated fair value, securities held to maturity, at amortized cost, equity investments, FHLBNY stock, FRBNY stock, and interest-earning deposits.

(4)    Borrowings include overnight advances, term advances, subordinated debt, and finance lease obligations.

Cash and Cash Equivalents

Total cash and cash equivalents increased $3.1 million compared to December 31, 2024, due to an increase of $6.5 million in interest-earning deposits at other financial institutions, offset by a $3.4 million decrease in cash and due from financial institutions.

Securities

The Corporation’s Funds Management Policy includes an investment policy that generally requires debt securities purchased for the bond portfolio to carry a minimum agency rating of "Baa." After an independent credit analysis is performed, the policy also allows the Corporation to purchase local municipal obligations that are not rated. The Corporation intends to maintain a reasonable level of securities to provide adequate liquidity and in order to have securities available to pledge to secure public deposits, repurchase agreements, and other types of transactions. Fluctuations in the fair value of the Corporation’s securities relate primarily to changes in interest rates. Marketable securities are generally classified as Available for Sale, while certain investments in local municipal obligations are classified as Held to Maturity.

50

The available for sale segment of the securities portfolio totaled $280.6 million as of December 31, 2025, a decrease of $250.8 million, or 47.2%, from $531.4 million as of December 31, 2024. The decrease was primarily due to the sale of available for sale securities with a market value totaling $227.3 million in the second quarter of 2025. The sale of securities included the Corporation's entire portfolio of U.S. Treasury and SBA pooled-loan securities, as well as a portion of the mortgage-backed securities and municipal bonds portfolios. Also contributing to the decrease were net paydowns and maturities for the year totaling $43.1 million, mainly due to paydowns on mortgage-backed securities and SBA pooled loan securities. The market value of securities available for sale increased $21.0 million, due to favorable changes in market interest rates during the current year. Partially offsetting the decrease in total investment securities was an increase of $0.3 million in FHLBNY and FRBNY stock, at cost, primarily due to an increase in membership-based share requirements compared to the prior year-end. The held to maturity segment of the securities portfolio consists of obligations of political subdivisions in the Corporation’s market areas. These securities totaled $0.6 million and $0.8 million as of December 31, 2025 and December 31, 2024, respectively. Non-marketable equity securities as of December 31, 2025 include shares of FRBNY stock and FHLBNY stock, carried at their cost of $3.0 million and $6.4 million, respectively. The fair value of these securities is assumed to approximate their cost. The investment in these stocks is regulated by regulatory policies of the respective institutions.

The table below presents the composition of the Corporation's available for sale portfolio as of December 31, 2025 and 2024 (in thousands, except percentages):

The table below sets forth the carrying amounts and maturities of available for sale and held to maturity debt securities as of December 31, 2025 and the weighted average yields of such securities, all yields are calculated on the basis of the amortized cost and weighted for the scheduled maturity of each security. Mortgage-backed securities and collateralized mortgage obligations are presented based on final maturity dates. Tax equivalent adjustments have been made in calculating yields on tax-exempt obligations (in thousands, except percentages):

(1) Taxable equivalent adjustments have been made using a 19.6% blended rate equaling the 21.0% federal statutory rate less the impact of the Corporation's effective New York State income tax rate of 6.8%

51

The weighted-average yield on the Corporation's available for sale and held to maturity debt securities as of December 31, 2025 was 1.98% and 4.75%, respectively. Management evaluates securities for credit loss exposure on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For the years ended December 31, 2025 and 2024, the Corporation had no provisions for credit losses relating to its investment securities.

Loans

The table below presents the Corporation’s loan composition by type and percentage of total loans as of December 31, 2025 and December 31, 2024 (dollars in thousands):

Portfolio loans totaled $2.270 billion as of December 31, 2025 and $2.071 billion as of December 31, 2024, an increase of $198.1 million, or 9.6%. The increase was driven by increases of $192.7 million in total commercial mortgages, or 15.8%, $24.7 million in commercial and industrial loans, or 8.2%, and $11.9 million, or 4.3%, in residential mortgages, partially offset by a decrease of $45.4 million in total consumer loans, or 25.5%.

Commercial real estate lending continues to be the primary driver of asset growth for the Corporation, with persistent demand across the Corporation's footprint, particularly in the Capital and Western regions of New York, under the Corporation's Capital Bank and Canal Bank divisions, respectively. The increase in total commercial real estate loans was largely due to an increase of $130.9 million in non-owner occupied properties, along with smaller increases in both owner occupied properties and construction loans.

Total commercial real estate loans were concentrated in the Capital Bank division in the Corporation's Albany market, comprising $1.044 billion, or 74.0%, and $949.8 million, or 78.0%, of total commercial real estate as of December 31, 2025 and December 31, 2024, respectively, an increase of $93.8 million, or 9.9%. The decrease in the concentration of total commercial real estate loans in the Capital Bank division was largely due to origination activity in the recently established Canal Bank division in the Corporation's Buffalo market, particularly after the hiring of additional commercial lenders and opening of a regional banking center in Williamsville, NY in the later part of 2024. Commercial real estate loans in the Corporation's Canal Bank division totaled $188.9 million, or 13.4% of total commercial real estate loans as of December 31, 2025, compared to $112.1 million, or 9.2% of total commercial real estate loans as of December 31, 2024, an increase of $76.8 million, or 68.5%. Remaining commercial real estate balances were attributable to the Corporation's Chemung Canal Trust Company division in the Southern Tier and Finger Lakes regions of New York, and totaled $177.2 million as of December 31, 2025, or 12.6% of total commercial real estate loans, compared to $155.1 million, or 12.7% of total commercial real estate loans as of December 31, 2024, an increase of $22.1 million, or 14.2%. The increase in commercial and industrial loans was relatively evenly distributed across the Corporation's three bank divisions, led by increases of $9.5 million and $9.3 million in commercial and industrial loan balances in the Chemung Canal and Canal Bank divisions, respectively, compared to December 31, 2024.

52

Residential mortgage loans increased largely due to stronger origination volumes of mortgages held for investment during 2025, compared to origination volumes in recent years. Originations of residential mortgages held for investment for the year ended December 31, 2025 totaled $45.2 million, compared to $25.1 million for the prior year, an increase of $20.1 million, or 80.3%. The increase in origination volumes was largely due to improvements in market conditions for homebuyers during 2025, as well as the mix of originations in 2025 favoring larger jumbo mortgages compared to the prior year. Additionally, loans originated for sale and sold into the secondary market to Freddie Mac and the FHLBNY totaled $13.6 million for the year ended December 31, 2025, compared to $11.5 million for the prior year, an increase of $2.1 million, or 18.4%.

Total consumer loans decreased largely due to a decrease in originations of indirect auto loans during 2025, due to the Corporation prioritizing other types of lending during the year, as well as the relatively fast turnover in the portfolio, which exceeded originations during the year. Indirect consumer loans decreased $45.4 million, or 25.5%, compared to prior year-end. Partially offsetting the decrease in total consumer loans was an increase of $16.5 million, or 17.7%, in balances of home equity lines and loans compared to prior-year end. Home equity lines and loans increased largely due to an increase in home equity lines of credit, the result of promotional efforts during 2025, which included offering a below-market introductory interest rate.

The table below presents the Corporation’s outstanding loan balances by bank division (in thousands):

Commercial real estate lending represented the largest component of the Corporation's loan portfolio as of December 31, 2025 and 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 December 31, 2025 and 2024, total commercial real estate loans were $1.410 billion and $1.217 billion, respectively, representing 62.1% and 58.7% of total loan balances, respectively.

As the largest component of the Corporation's loan portfolio, quantitative and qualitative attributes of commercial real estate have a significant impact on management's strategic initiatives, and understanding such attributes are critical in understanding the Corporation's anticipated future liquidity needs and sensitivity to changes in interest rates. Management closely monitors maturity and repricing schedules as part of its broader risk management framework, enabling measures to proactively manage economic volatility and promote longer-term portfolio stability. 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.

The Corporation also monitors its level of non-owner occupied commercial real estate loans in relation to regulatory capital, as defined by the Bank's regulators. As of December 31, 2025 and 2024, total non-owner occupied commercial real estate loans divided by total Bank risk-based capital was 384.9% and 399.4%, respectively.

The following table presents commercial real estate loans by maturity and repricing date as of December 31, 2025 (dollars in thousands):

(1) Includes fixed rate loans

53

The table below presents the amortized basis of commercial real estate loans by type and percentage as of December 31, 2025 and 2024 (dollars in thousands):

(1) 1-4 Family Residential loans included in the commercial real estate segment are comprised of properties whose primary purpose is to generate rental income for the borrower, but are not considered multifamily properties within the FFIEC's Call Report definition of a multifamily property. This may include single family residences, duplexes, triplexes, and quadplexes.

Commercial real estate loans are primarily made within the counties comprising the geographic footprint of the Corporation's physical branch network, as well as to borrowers whose business interests include projects that may be located in counties geographically contiguous with the Corporation's physical footprint. The location of collateral securing commercial real estate loans typically mirrors the location of the properties being financed. However, certain commercial real estate loans are secured by property other than the property being financed, and therefore the geographic location of collateral may differ from that of the financed property.

The table below presents the amortized basis of commercial real estate loans by regional location of collateral and percentage as of December 31, 2025 and 2024 (dollars in thousands):

(1) Includes $77.6 million in commercial real estate loans located outside of New York State as of December 31, 2025.

54

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 the amortized basis of commercial real estate loans by borrower industry and percentage as of December 31, 2025 and 2024, as well as the weighted average (WA) loan to value (LTV) ratio for each industry as of December 31, 2025 (dollars in thousands):

Loan concentrations are considered to exist when there are amounts loaned to multiple borrowers engaged in similar activities, which may cause them to be similarly impacted by changes in economic or other conditions. Industries are identified using NAICS codes, and the Corporation monitors specific NAICS industry classifications of commercial loans to identify concentrations of greater than 10.0% of total loans. As of December 31, 2025 and 2024, commercial loans to borrowers involved in the real estate, and real estate rental and leasing businesses, were 52.1% 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 December 31, 2025 and 2024.

The table below shows the maturity of loans outstanding as of December 31, 2025. Also provided are the amounts due after one year, classified according to fixed interest rates and variable interest rates (in thousands):

55

Non-Performing Loans and Non-Performing Assets

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 are 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.

56

The following table summarizes the Corporation's non-performing assets as of December 31, (in thousands):

NON-PERFORMING ASSETS

(1) Not included in non-performing assets above.

Non-performing loans totaled $7.9 million, or 0.35% of total loans, as of December 31, 2025, compared to $9.0 million, or 0.43% of total loans, as of December 31, 2024. Non-performing assets were $8.2 million, or 0.30% of total assets as of December 31, 2025, compared to $9.6 million, or 0.35% of total assets as of December 31, 2024. The decrease in non-performing loans was largely due to the payoff of six nonaccrual commercial real estate loans totaling $1.7 million during the year ended December 31, 2025 and the charge-off of three commercial and industrial loans during the year ended December 31, 2025, mostly in the second quarter, totaling $0.8 million. Additionally, there were $0.8 million in paydowns on other non-performing commercial loans, partially offset by $0.8 million in additions to nonaccrual commercial loans during the year ended December 31, 2025. Non-performing retail loans increased $1.4 million compared to December 31, 2024, driven by $3.9 million in additions to nonaccrual retail loans, partially offset by $1.2 million in net charge-offs and $1.5 million in paydowns during the year ended December 31, 2025.

Loan Modifications to Borrowers Experiencing Financial Difficulty

The Corporation works closely with borrowers experiencing financial difficulties to identify viable solutions that minimize the potential for loss. The Corporation especially monitors modifications made to borrowers experiencing financial difficulty where contractual cash flows are directly impacted, including through principal reductions, reductions in effective interest rates, term extensions, significant payment delays, or a combination thereof. As of December 31, 2025, the Corporation had ten active loans modified under such terms, totaling $6.3 million, compared to seven loans as of December 31, 2024, totaling $2.1 million. There were four loan modification made to borrowers experiencing financial difficulty during the year ended December 31, 2025; a payment delay on a $3.4 million non-owner occupied commercial real estate loan, a term extension on a $1.0 million non-owner occupied commercial real estate loan, a combination of a payment delay and term extension on a $0.4 million non-owner occupied commercial real estate loan, and a payment delay on a $0.2 million residential mortgage. During the year ended December 31, 2025, a $0.7 million unsecured commercial and industrial loan which had previously been given a six month term extension was fully charged-off. All other modified loans made to borrowers experiencing financial difficulty were performing according to their modified terms as of December 31, 2025.

Allowance for Credit Losses

The allowance for credit losses is an amount that management believes will be adequate to absorb the estimated lifetime credit losses inherent in assets exhibiting credit risk as of the measurement date. The allowance is in conformity with the requirements established by ASC 326 - Financial Instruments - Credit Losses. The allowance for credit losses covers a range of assets including loans, unfunded commitments, and debt securities, incorporating both quantitative and qualitative components. As of December 31, 2025 and 2024, the Corporation did not allocate any allowance for credit losses to its portfolios of available for sale or held to maturity debt securities, due to the explicit or implicit U.S. Government guarantee as to principal and interest payments on the majority of the portfolio, and the immateriality of credit risk on remaining unguaranteed securities.

Loans are analyzed for credit loss on either an individual basis or a pooled (collective) basis, determined by risk characteristics. The Corporation begins analyzing loans on an individual basis when management determines a loan no longer exhibits risk characteristics consistent with the risk characteristics in its designated pool under the Corporation's CECL methodology. The amortized cost basis of individually analyzed loans as of December 31, 2025 totaled $4.2 million, compared to $6.5 million as

57

of December 31, 2024. Remaining loans are analyzed on a pooled basis and are segmented based on groups of assigned FFIEC Call Report codes. Management seeks to disaggregate its loan portfolio in a granular enough manner to capture the risk profile of each loan, yet broad enough to accurately allow for the application of certain pool-level assumptions.

A majority of the Corporation's individually analyzed loans are secured and measured for credit loss based on collateral evaluations, using the collateral-dependent practical expedient prescribed by ASC 326. It is the Corporation's policy to obtain updated appraisals, by independent third parties, on loans secured by real estate at the time a loan is determined to require individual analysis. A measurement is performed based upon the most recent appraisal on file to determine the amount of any specific allocation to the allowance for credit losses or charge-off. In determining the amount of any specific allocation or charge-off, the Corporation makes adjustments to reflect the estimated costs to sell the property. Upon receipt and review of updated appraisals, an additional measurement is performed to determine if any adjustments are necessary to reflect proper provisioning or charge-offs. Individually analyzed loans are reviewed on a quarterly basis to determine if any changes in credit quality or market conditions would require additional allocations to the allowance for credit losses or recognition of additional charge-offs. Non-real estate collateral may be valued using (i) an appraisal, (ii) net book value of the collateral per the borrower’s financial statements, or (iii) accounts receivable aging reports, that may be adjusted based on management’s knowledge of the client and client’s business. If market conditions warrant, future appraisals are obtained for both real estate and non-real estate collateral. Certain individually analyzed loans determined not to be collateral-dependent are analyzed using a cash flow analysis.

For pooled loans, quantitative analysis is based on an estimated discounted cash flow analysis (DCF) performed at the loan level. The modeled reserve requirement is equal to the difference between the book balance of the loan as of the measurement date and the present value of assumed cash flows for the life of the loan. The underlying assumptions of the DCF are based on the relationship between a projected value of an economic indicator, and the implied historical loss experience amongst a group of curated peers. The Corporation utilizes a regression analysis to determine suitable loss drivers for each pool of loans. Based on these results a probability of default (PD) and loss given default (LGD) is assigned to each potential value of a chosen economic indicator for each pool of loans, and is then applied to the portfolio to derive the statistical loss implications thereof. An estimated loss for each period of the DCF, as well as implied recovery of past losses, is incorporated into the DCF. The Corporation relies on FOMC data, including its projections for U.S. civilian unemployment and U.S. GDP growth, as the source for its reasonable, supportable, and readily available economic forecast. The forecasted values are applied over a rolling four quarter period, and revert to the historic mean of the economic variable over an eight quarter period, on a straight-line basis.

Qualitative adjustments represent management's expectation of certain risks not being fully captured in the quantitative portion of the model. Qualitative adjustment rates are applied to each loan within a pool on a consistent basis. Factors considered as part of the qualitative adjustment analysis primarily include economic considerations not captured by the model, changes in conditions within the Bank such as lending standards, personnel, and concentrations of credit, among others, as well as external factors, such as changes in the regulatory and competitive landscape.

The allowance for credit losses is increased through a provision for credit losses, which is charged to operations. Separate provision accounts have been established for on-balance sheet credit exposures and off-balance sheet credit exposures, and are combined in the line item provision for credit losses on the Corporation's Consolidated Statements of Income. Loans are charged against the allowance for credit losses when management believes the collectability of all or a portion of the principal is unlikely. Management's evaluation of the adequacy of the allowance for credit losses is performed on a periodic basis and takes into consideration such factors as the outcomes of the quantitative analysis, a review of individually analyzed loans, and determinations concerning qualitative adjustments. While management uses available information to recognize estimated credit losses, future additions to the allowance may be necessary based on changing economic conditions or portfolio composition. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation's allowance for credit losses. Such agencies may require the Corporation to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

The allowance for credit losses was $24.2 million as of December 31, 2025, compared to $21.4 million as of December 31, 2024. The allowance for credit losses was 306.13% of non-performing loans as of December 31, 2025, compared to 238.87% as of December 31, 2024. The ratio of allowance for credit losses on loans to total loans was 1.07% as of December 31, 2025, compared to 1.03% as of December 31, 2024, respectively. Including the allowance for credit losses allocated to unfunded commitments, the ratio of the allowance for credit losses to total loans was 1.09% as of December 31, 2025, compared to 1.07% as of December 31, 2024. The allowance for credit losses on unfunded commitments is included in the line item accrued interest payable and other liabilities in the Consolidated Balance Sheets. The increase in the allowance for credit losses was largely due to the annual review and an update performed on the loss drivers used as the basis for the Bank's CECL model, commercial loan growth, and changes in model inputs such as economic forecasts and prepayment speeds. The overall increase in the allowance for credit losses was partially offset by a decrease in the allowance for credit losses on individually analyzed loans, due to charge-offs on loans which carried specific reserve allocations, as well as a net decrease in qualitative adjustments applied to the Bank's CECL model as of December 31, 2025 compared to December 31, 2024.

58

Net charge-offs for the year ended December 31, 2025 were $1.9 million compared with net charge-offs of $1.2 million for the year ended December 31, 2024. The ratio of net charge-offs to average loans outstanding was 0.09% for 2025 and 0.06% for 2024. Net charge-offs for the year ended December 31, 2025 were primarily due to $1.1 million in net charge-offs of total consumer loans, which were largely concentrated in indirect auto loans, and $0.8 million in net charge-offs of commercial and industrial loans, which included a $0.7 million charge-off in the second quarter of 2025 on a loan which had previously carried a $0.7 million specific allocation in the allowance for credit losses. Net charge-offs for the year ended December 31, 2024 were primarily due to $1.0 million in net charge-offs of total consumer loans, largely concentrated in indirect auto loans, and $0.2 million in net charge-offs on commercial and industrial loans, comprised of $0.3 million in charge-offs on two loans in the fourth quarter of 2024 and $0.1 million in recoveries of previously charged-off loans throughout the year.

The table below summarizes the Corporation’s allowance for credit losses, non-performing loans, and ratio of net charge-offs and recoveries to average loans outstanding by loan category at or for the years ended December 31, 2025 and 2024 (in thousands):

The increase in the allowance to non-performing loans ratio was primarily due to an increase of 13.2% in the allowance for credit losses, or $2.8 million, between December 31, 2024 and December 31, 2025, as well as a decrease of 11.7% in non-performing loans or $1.0 million. The increase in the allowance for credit losses primarily reflected higher baseline loss rates following the annual review and update of the model’s loss drivers, along with additional reserves attributable to growth in the commercial loan portfolio. Under the Corporation's CECL methodology, commercial loan pools generally received higher allocation rates within the allowance for credit losses during 2025. A majority of balances removed from non-performing loans during 2025 due to payoffs or return to accrual status did not have associated specific allocations in the allowance for credit losses. There were $0.8 million in non-performing commercial loan balances which were charged-off during 2025, which had specific allocation of $0.8 million in the allowance for credit losses at the time of charge-off.

59

The table below summarizes the Corporation's credit loss experience for the years ended December 31, 2025 and 2024 (in thousands, except ratio data):