markdown [Q2 2025 Results and Strategic Overview](index=1&type=section&id=Second%20Quarter%20Highlights) Chemung Financial Corporation reported a **$6.5 million net loss** for Q2 2025 due to a strategic balance sheet repositioning Q2 2025 Key Financial Results | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Income (Loss) | ($6.5 million) | $6.0 million | $5.0 million | | Diluted EPS | ($1.35) | $1.26 | $1.05 | - The Corporation executed a balance sheet repositioning by issuing **subordinated debt** and selling a significant portion of its **securities portfolio**. The CEO stated these actions strengthen **regulatory capital**, improve **commercial real estate concentration ratios**, and enhance flexibility for funding **loan growth**[2](index=2&type=chunk) Q2 2025 Strategic and Non-GAAP Highlights | Highlight | Value/Metric | | :--- | :--- | | Subordinated Notes Issued | $45.0 million | | Securities Sold (Book Value) | $245.5 million | | Realized Pre-tax Loss on Sale | $17.5 million | | Non-GAAP Net Income | $6.3 million | | Non-GAAP EPS | $1.31 | | Net Interest Margin | 3.05% (+9 bps QoQ) | | Dividends Declared per Share | $0.32 | [Quarter-over-Quarter Financial Analysis (Q2 2025 vs. Q1 2025)](index=1&type=section&id=2nd%20Quarter%202025%20vs%201st%20Quarter%202025) Net interest income increased by **$1.0 million**, but a **$17.5 million** securities loss led to a non-interest loss [Net Interest Income (QoQ)](index=1&type=section&id=Net%20Interest%20Income) Net interest income rose by **$1.0 million** to **$20.8 million**, driven by higher loan income and expanded **3.05%** net interest margin - **Net interest income increased by $1.0 million (5.0%)** to **$20.8 million**, driven by higher interest income on loans and interest-earning deposits, partially offset by lower income from taxable securities and higher expense on borrowed funds[6](index=6&type=chunk) - The increase in loan interest income was due to a **$30.8 million** rise in average loan balances, mainly in commercial real estate, and a **12 basis point** increase in the average yield on total loans[7](index=7&type=chunk) - Fully taxable equivalent net interest margin was **3.05%**, up from **2.96%** in Q1 2025. The average yield on interest-earning assets increased by **11 basis points** to **4.83%**, while the cost of funds rose by only **2 basis points** to **1.94%**[14](index=14&type=chunk) [Provision for Credit Losses (QoQ)](index=2&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses was **$1.1 million**, consistent with prior quarter, due to loan growth and economic forecasts - The provision for credit losses was **$1.1 million**, in line with the prior quarter. This was largely driven by **commercial loan growth** and changes in **macroeconomic forecasts** (increased unemployment, decline in GDP growth)[15](index=15&type=chunk) [Non-Interest Income (QoQ)](index=2&type=section&id=Non-Interest%20Income) The Corporation recorded a **$10.7 million** non-interest loss, driven by a **$17.5 million** pre-tax loss on securities - A pre-tax loss of **$17.5 million** on the sale of available-for-sale securities resulted in an overall negative non-interest income of **$10.7 million** for the quarter[16](index=16&type=chunk) - The securities sale was a **strategic move** to pay off more expensive **wholesale funding** and fund **future loan growth**. The securities sold had a weighted average book yield of approximately **2.1%**[17](index=17&type=chunk) - The Corporation also recognized a **$0.6 million** gain on the sale of a branch property in Ithaca, New York[18](index=18&type=chunk) [Non-Interest Expense (QoQ)](index=3&type=section&id=Non-Interest%20Expense) Non-interest expense increased by **$0.9 million** to **$17.8 million**, primarily due to higher salaries and professional costs - **Non-interest expense increased by $0.9 million (5.3%)** to **$17.8 million**, driven by increases in salaries and wages (**$0.4 million**), pension and other employee benefits (**$0.2 million**), and professional services (**$0.2 million**)[19](index=19&type=chunk) - The increase in salaries was due to a **higher number of full-time equivalent employees**, including new staff in the Western New York division, and adjustments related to the **deferred compensation plan**[20](index=20&type=chunk) [Income Tax Expense (QoQ)](index=3&type=section&id=Income%20Tax%20Expense) A tax benefit of **$2.4 million** was recorded, a **$4.1 million** decrease from prior quarter, due to securities loss - The Corporation recorded a tax benefit of **$2.4 million**, compared to a tax expense of **$1.7 million** in Q1 2025. The change was primarily due to the **net loss on the sale of available-for-sale securities**[21](index=21&type=chunk) [Year-over-Year Financial Analysis (Q2 2025 vs. Q2 2024)](index=3&type=section&id=2nd%20Quarter%202025%20vs%202nd%20Quarter%202024) Net interest income grew by **$3.0 million** to **$20.8 million**, driven by loan growth and decreased deposit expense [Net Interest Income (YoY)](index=3&type=section&id=Net%20Interest%20Income) Net interest income increased by **$3.0 million** to **$20.8 million**, driven by higher loan income and lower deposit expense - **Net interest income increased by $3.0 million (16.9%) YoY**, driven by higher interest income on loans (**$1.9 million**) and interest-earning deposits (**$0.5 million**), and a decrease in interest expense on deposits (**$1.6 million**)[22](index=22&type=chunk) - Average total loan balances grew by **$98.7 million**, concentrated in commercial loans. The average yield on total loans increased by **9 basis points**[23](index=23&type=chunk) - The total average cost of interest-bearing deposits decreased by **41 basis points**, from **2.86%** in Q2 2024 to **2.45%** in Q2 2025[27](index=27&type=chunk) - Fully taxable equivalent net interest margin was **3.05%**, up from **2.66%** in Q2 2024. The total cost of funds decreased by **26 basis points** to **1.94%**[29](index=29&type=chunk) [Provision for Credit Losses (YoY)](index=4&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses was **$1.1 million**, an increase of **$0.2 million** from prior year, due to loan growth - The provision for credit losses increased by **$0.2 million** to **$1.1 million** compared to Q2 2024. This was due to **stronger loan growth** (**$34.8 million**) and **more negative economic forecasts** (unemployment and GDP) in the current period[30](index=30&type=chunk) [Non-Interest Income (YoY)](index=4&type=section&id=Non-Interest%20Income) A non-interest loss of **$10.7 million** was recorded, primarily due to the **$17.5 million** pre-tax loss on securities - A pre-tax loss of **$17.5 million** on securities sales resulted in a total non-interest loss of **$10.7 million**, compared to a **$5.6 million** income in Q2 2024. Recurring non-interest income increased by **$0.6 million**[31](index=31&type=chunk) - The increase in recurring income was driven by **fee schedule increases** for service charges and **wealth management**, which were implemented in the second half of 2024[32](index=32&type=chunk) [Non-Interest Expense (YoY)](index=4&type=section&id=Non-Interest%20Expense) Non-interest expense rose by **$1.6 million** to **$17.8 million**, driven by higher salaries and data processing - **Non-interest expense increased by $1.6 million (9.9%) YoY**, driven by higher salaries and wages (**$0.8 million**), data processing (**$0.3 million**), and professional services (**$0.2 million**)[33](index=33&type=chunk) - The increase in salaries was due to **merit-based increases** and **additional staffing**. The rise in data processing was related to **core service provider expenses** and **Canal Bank operations**[34](index=34&type=chunk) [Income Tax Expense (YoY)](index=4&type=section&id=Income%20Tax%20Expense) The Corporation recorded a tax benefit of **$2.4 million**, a **$3.7 million** decrease from Q2 2024, due to securities loss - A tax benefit of **$2.4 million** was recorded, compared to a tax expense of **$1.3 million** in Q2 2024. The decrease was primarily due to the **net loss on the sale of securities**[35](index=35&type=chunk) [Asset Quality](index=4&type=section&id=Asset%20Quality) Asset quality improved as of June 30, 2025, with non-performing loans decreasing to **$8.2 million** and allowance increasing Asset Quality Indicators | Metric | June 30, 2025 | Dec. 31, 2024 | | :--- | :--- | :--- | | Non-performing loans | $8.2 million | $9.0 million | | NPLs to Total Loans | 0.39% | 0.43% | | Non-performing assets | $8.4 million | $9.6 million | | NPAs to Total Assets | 0.30% | 0.35% | - Annualized net charge-offs to total average loans were **0.19%** for Q2 2025, an increase from **0.05%** in Q1 2025, largely due to a **$0.7 million** charge-off on a previously reserved unsecured **commercial and industrial loan**[38](index=38&type=chunk) Allowance for Credit Losses | Metric | June 30, 2025 | Dec. 31, 2024 | | :--- | :--- | :--- | | Allowance for credit losses on loans | $22.7 million | $21.4 million | | Allowance to Total Loans | 1.06% | 1.03% | | Allowance to Non-performing Loans | 275.16% | 238.87% | [Balance Sheet Activity](index=5&type=section&id=Balance%20Sheet%20Activity) Total assets increased by **$76.3 million** to **$2.85 billion**, driven by cash and loan growth, liabilities grew - **Total assets increased by $76.3 million (2.7%)** to **$2.852 billion** since year-end 2024. The increase was driven by a **$273.0 million** rise in cash and cash equivalents and **$61.0 million** in net **loan growth**, offset by a **$244.1 million** decrease in securities available for sale[40](index=40&type=chunk) - **Total liabilities increased by $56.7 million (2.2%)** to **$2.618 billion**. This was driven by a **$72.1 million** increase in total deposits and **$44.1 million** in new **subordinated debt**, partially offset by a **$54.3 million** decrease in advances and other debt[45](index=45&type=chunk) - **Total shareholders' equity increased by $19.7 million (9.2%)** to **$235.0 million**. The increase was primarily due to a **$22.4 million** decrease in **accumulated other comprehensive loss**, largely from the **reclassification of losses** from the **securities sale**[49](index=49&type=chunk) Capital Ratios and Book Value | Metric | June 30, 2025 | Dec. 31, 2024 | | :--- | :--- | :--- | | Total equity to total assets | 8.24% | 7.76% | | Tangible equity to tangible assets | 7.53% | 7.02% | | Book value per share | $48.85 | $45.13 | | Tangible book value per share | $44.31 | $40.55 | [Liquidity](index=6&type=section&id=Liquidity) The Corporation maintains strong liquidity with **$320.1 million** in cash, ample resources, and is reducing wholesale funding - The Corporation maintains strong liquidity with cash and cash equivalents of **$320.1 million** as of June 30, 2025, largely from the proceeds of the **securities sale**[51](index=51&type=chunk) - As of June 30, 2025, the Bank had **$115.2 million** in available borrowing capacity at the **Federal Home Loan Bank of New York**[52](index=52&type=chunk) - Uninsured deposits totaled **$694.3 million**, or **28.1%** of total deposits, as of June 30, 2025. This includes **$187.4 million** of **municipal deposits** collateralized by **pledged assets**[53](index=53&type=chunk) - As part of its strategic repositioning, the Corporation paid off **$100.0 million** in **brokered deposits** that matured in early July 2025, reducing its reliance on **wholesale funding sources**[54](index=54&type=chunk) [Other Items](index=7&type=section&id=Other%20Items) Wealth Management Group's assets under management grew by **4.5%** to **$2.313 billion**, and a branch was sold for a **$0.6 million** gain - Total assets under management in the Wealth Management Group increased by **$101.0 million (4.5%)** to **$2.313 billion** as of June 30, 2025, compared to year-end 2024[55](index=55&type=chunk) - In April 2025, the Corporation sold a previous branch property in Ithaca, New York, resulting in a **pre-tax gain** of **$0.6 million**[56](index=56&type=chunk) - As of June 30, 2025, the Corporation had **200,816 shares** remaining under its **stock repurchase program**. No shares were repurchased during the second quarter of 2025[57](index=57&type=chunk) [Consolidated Financial Statements](index=8&type=section&id=Consolidated%20Financial%20Statements) This section presents unaudited consolidated financial statements, including Balance Sheets, Statements of Income, and Net Interest Income Analysis Consolidated Balance Sheets (Unaudited) | (in thousands of dollars) | June 30, 2025 | Dec. 31, 2024 | | :--- | :--- | :--- | | **ASSETS** | | | | Total cash and cash equivalents | $320,051 | $47,035 | | Total investment securities | $294,841 | $541,367 | | Loans, net | $2,109,749 | $2,050,031 | | **Total assets** | **$2,852,488** | **$2,776,147** | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | | | Total deposits | $2,468,962 | $2,396,883 | | Subordinated debt, net | $44,146 | $— | | **Total liabilities** | **$2,617,522** | **$2,560,838** | | **Total shareholders' equity** | **$234,966** | **$215,309** | Consolidated Statements of Income (Unaudited) - Three Months Ended June 30 | (in thousands of dollars, except per share data) | 2025 | 2024 | | :--- | :--- | :--- | | Net interest income | $20,808 | $17,761 | | Provision for credit losses | $1,145 | $879 | | Non-interest income | ($10,705) | $5,598 | | Non-interest expense | $17,769 | $16,219 | | Income before income tax expense | ($8,811) | $6,261 | | **Net income (loss)** | **($6,452)** | **$4,987** | | **Diluted earnings per share** | **($1.35)** | **$1.05** | [GAAP to Non-GAAP Reconciliations](index=16&type=section&id=GAAP%20to%20Non-GAAP%20Reconciliations) This section provides reconciliations for non-GAAP financial measures, including fully taxable equivalent net interest income, adjusted efficiency ratio, and tangible book value Non-GAAP Net Income Reconciliation (Q2 2025) | (in thousands of dollars, except per share data) | Amount | | :--- | :--- | | Reported net income (GAAP) | ($6,452) | | Net losses on security transactions (net of tax) | $13,237 | | Net gain on sale of branch property (net of tax) | ($463) | | **Net income (non-GAAP)** | **$6,322** | | Reported basic and diluted EPS (GAAP) | ($1.35) | | **Basic and diluted EPS (non-GAAP)** | **$1.31** | Tangible Book Value Reconciliation (June 30, 2025) | (in thousands of dollars, except per share data) | Amount | | :--- | :--- | | Total shareholders' equity (GAAP) | $234,966 | | Less: intangible assets | ($21,824) | | **Tangible equity (non-GAAP)** | **$213,142** | | Book value per share (GAAP) | $48.85 | | **Tangible book value per share (non-GAAP)** | **$44.31** | Adjusted Efficiency Ratio (Q2 2025) | Metric | Value | | :--- | :--- | | Efficiency ratio (unadjusted) | 175.88% | | **Efficiency ratio (adjusted, non-GAAP)** | **65.69%** |
Chemung Financial (CHMG) - 2025 Q2 - Quarterly Results