CHEMUNG FINANCIAL CORP

Previous wording

The following is the MD&A of the Corporation in this Form 10-K at December 31, 2023 and 2022, and for the years ended December 31, 2023, and 2022. 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.

Current wording

The following is the MD&A of the Corporation as of and for the years ended December 31, 2024 and 2023. 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.

Previous wording

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, cybersecurity risks, changes in FDIC assessments, 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.

Current wording

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, 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.

Previous wording

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 are reasonable based upon the information available at that time. These estimates, judgments, and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the years presented. Actual results could be different from these estimates.

Current wording

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.

Previous wording

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

Current wording

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

Previous wording

Because the Corporation's methodology for maintaining its allowance for credit losses is based on historical experience and trends, current economic information, forecasted data, and management's judgement, a range of estimates for the estimate of the allowance for credit losses may be supportable. Deteriorating conditions may lead to further required increases to the allowance; conversely, improvements to conditions may warrant further reductions to the allowance. In estimating the allowance for credit losses, management considers the sensitivity of the model and significant judgments and assumptions that could result in an amount that is materially different from management’s estimate, including as it relates to qualitative considerations.

Current wording

Because the Corporation's methodology for maintaining its allowance for credit losses is based on historical experience and trends, current economic information, forecasted data, and management's judgement, a range of estimates for the estimate of the allowance for credit losses may be supportable. Deteriorating conditions may lead to further required increases to the allowance; conversely, improvements to conditions may warrant reductions to the allowance. In estimating the allowance for credit losses, management considers the sensitivity of the model to significant judgments and assumptions that could result in an amount that is materially different from management’s estimate, including as it relates to qualitative considerations.

Previous wording

As of December 31, 2023, the allowance for credit losses totaled $22.5 million, compared to an allowance for loan losses of $19.7 million as of December 31, 2022. A significant portion of the allowance for credit losses is allocated to the commercial portfolio, both commercial real estate and commercial and industrial. As of December 31, 2023 and December 31, 2022, the allowance for credit losses (allowance for loan losses for December 31, 2022), allocated to the total commercial portfolio was $17.1 million and $14.9 million respectively, or 75.9% and 76.0%. Given the concentration of the allowance for credit losses allocated to the total commercial real estate and commercial and industrial portfolios, and the significant judgments made by management to derive qualitative factors, management closely analyzes the impact that changes in judgments relating to these portfolios could have on the allowance.

Current wording

As of December 31, 2024, the allowance for credit losses on loans totaled $21.4 million, compared to $22.5 million as of December 31, 2023. 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, 2024 and December 31, 2023, the allowance for credit losses allocated to the total commercial portfolio was $15.7 million and $17.1 million respectively, or 73.6% and 75.9%. For comparison, total commercial loans represented 73.2% and 70.3% of total loan balances, respectively, as of December 31, 2024 and 2023. Given the concentration of the allowance for credit losses allocated to the commercial portfolio, and the significant judgments made by management to derive its estimates, management analyzes risks distinctive to commercial lending with a high degree of scrutiny.

Previous wording

Changes in the FOMC's median forecasted year over year U.S. civilian unemployment rate and year over year change in U.S GDP could have a material impact on the model's estimation of the allowance. FOMC projections are sourced from a quarterly Summary of Projections, which accompanies select FOMC meetings. Each participant's projections represent the value to which selected variables would be expected to converge over time under appropriate monetary policy, and 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 $1.5 million, or 6.8%, to $24.0 million, assuming qualitative adjustment are kept at current levels.

Current wording

Changes in the FOMC's median forecasted year over year U.S. civilian unemployment rate and year over year change in U.S GDP could have a material impact on the model's estimation of the allowance. Currently, all pools, with the exception of the consumer loans pool, as defined in Note 1 to the Consolidated Financial Statements, utilize the FOMC's projections for unemployment as a loss driver, while the consumer pool 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 $1.3 million, or 6.2%, to $22.7 million, assuming qualitative adjustments are kept at current levels.

Previous wording

Management’s methodology and policy in determining 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 is depicted in supporting tables in Note 4 to the Consolidated Financial Statements included Part IV, Item 15 of this Annual Report on Form 10-K.

Current wording

Management’s methodology and policy in determining 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 Part IV, Item 15 of this Annual Report on Form 10-K.

Previous wording

(b) See the GAAP to Non-GAAP reconciliations on pages 63-66

Current wording

(a) See the GAAP to Non-GAAP reconciliations on pages 65-68.

Previous wording

Net income for the year ended December 31, 2023 was $25.0 million, or $5.28 per share, compared with net income of $28.8 million, or $6.13 per share, for the prior year. Return on average equity for the year ended December 31, 2023 was 14.11%, compared with 15.93% for the prior year. The decrease in net income for the year ended December 31, 2023, compared to the prior year, was due to increases in the provision for credit losses and non-interest expenses, offset by increases in non-interest income and net interest income, and a decrease in income tax expense.

Current wording

Net income for the year ended December 31, 2024 was $23.7 million, or $4.96 per share, compared with net income of $25.0 million, or $5.28 per share, for the prior year. Return on average equity for the year ended December 31, 2024 was 11.53%, compared with 14.11% for the prior year. The decrease in net income for the year ended December 31, 2024, compared to the prior year, was due to an increase in non-interest expense, decreases in non-interest income and net interest income, offset by decreases in the provision for credit losses and income tax expense.

Previous wording

Net interest income for the year ended December 31, 2023 totaled $74.5 million, an increase of $0.3 million, or 0.4%, compared with $74.2 million for the prior year. Fully taxable equivalent net interest margin was 2.85% for the year ended December 31, 2023 compared with 3.05% for the prior year. The increase in net interest income was primarily due to increases of $29.2 million in interest income on loans, including fees, $2.2 million in interest and dividend income on taxable securities, and $0.3 million in interest income on interest-earning deposits, offset by increases of $29.3 million in interest expense on deposits, and $2.1 million in interest expense on borrowed funds.

Current wording

Net interest income for the year ended December 31, 2024 totaled $74.1 million, a decrease of $0.4 million, or 0.5%, compared with $74.5 million for the prior year. Fully taxable equivalent net interest margin was 2.76% for the year ended December 31, 2024 compared with 2.85% for the prior year. The decrease in net interest income was primarily due to increases of $14.1 million in interest expense on deposits and $0.8 million in interest expense on borrowed funds, and a decrease of $1.3 million in interest and dividend income on taxable securities, offset by increases of $14.9 million in interest income on loans including fees, and $0.9 million in interest income on interest-earning deposits.

Previous wording

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, 2023, and 2022. It also reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the years ended December 31, 2023, and 2022. For the purpose of the table below, non-accruing loans are included in the daily average loan amounts outstanding. Daily balances were used for average balance computations. Investment securities are stated at amortized cost. Tax equivalent adjustments have been made in calculating yields on obligations of states and political subdivisions, tax-free commercial loans and dividends on equity investments.

Current wording

The following table presents certain information related to the Corporation’s average Consolidated Balance Sheets and its Consolidated Statements of Income for the years ended December 31, 2024, and 2023. It also reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the years ended December 31, 2024, and 2023. For the purpose of the table below, nonaccrual loans are included in the daily average loan amounts outstanding. Daily balances were used for average balance computations. Investment securities are stated at amortized cost. Tax equivalent adjustments have been made in calculating yields on obligations of states and political subdivisions, tax-free commercial loans, and dividends on equity investments.

Previous wording

Net interest income can be analyzed in terms of the impact of changes in rates and volumes. The 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 non-accrual loans and taxable equivalent adjustments were made.

Current wording

Net interest income can be analyzed in terms of the impact of changes in rates and volumes. The table below illustrates the extent to which changes in interest rates and 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.

Previous wording

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

Current wording

The following table presents non-interest income for the years ended December 31, 2024 and 2023, and the dollar and percent change (in thousands, except percentages):

Previous wording

Other non-interest income increased compared to the prior year primarily due to the $2.4 million recognition of an employee retention tax credit in the third quarter of 2023.

Current wording

Other non-interest income decreased compared to the prior year primarily due to the $2.4 million recognition of an employee retention tax credit in the third quarter of 2023.

Previous wording

The increase in wealth management group fee income was primarily attributed to an increase in the market value of total assets under management or administration, due to improved conditions in equity markets in 2023, when compared to the prior year.

Current wording

The increase in wealth management group fee income was primarily due to improved equity market conditions during 2024.

Previous wording

The following table presents non-interest expenses for the years indicated, and the dollar and percent change (in thousands):

Current wording

The following table presents non-interest expenses for the years ended December 31, 2024 and 2023, and the dollar and percent change (in thousands, except percentages):

Previous wording

Non-interest expense increased $5.0 million, or 8.4% in 2023. The increase was due primarily to increases of $2.5 million in total compensation expenses and $2.5 million in total non-compensation expenses.

Current wording

Non-interest expense increased $3.0 million, or 4.7%, in 2024. The increase was due primarily to increases of $2.1 million in total compensation expenses and $0.9 million in total non-compensation expenses.

Previous wording

Compensation expenses increased $2.5 million, or 7.9% when compared to the prior year, primarily due to increases of $1.8 million in salaries and wages and $1.0 million in other components of net periodic pension benefits, offset by a decrease of $0.3 million in pension and other employee benefits.

Current wording

Compensation expenses increased $2.1 million, or 6.3%, when compared to the prior year, primarily due to increases of $1.6 million in salaries and wages and $0.7 million in pension and other employee benefits, offset by a decrease of $0.2 million in other components of net periodic pension benefits.

Previous wording

The increase in salaries and wages was primarily attributable to an increase in the market value of the Corporation's deferred compensation plans and base salary increases, while the increase in other components of net periodic pension benefits was primarily due to a change in factors used to prepare annual actuarial estimates. The decrease in pension and other employee benefits was primarily due to a decrease in employee healthcare expenses when compared to the prior year.

Current wording

The increase in salaries and wages was primarily attributable to additional staffing in the Bank's new Western New York market, merit-based wage increases, and promotions, which was partially offset by savings from the outsourcing of certain back office functions during 2024. The increase in pension and other employee benefits was largely due to an increase in employee healthcare-related expenses, compared to the prior year. The decrease in other components of net periodic pension benefits was primarily due to a change in annual actuarial estimates.

Previous wording

Non-compensation expenses increased $2.5 million, or 8.9%, primarily due to increases of $0.9 million in data processing expense, $0.8 million in FDIC insurance expense, and $0.8 million in other non-interest expense.

Current wording

Non-compensation expenses increased $0.9 million, or 2.9%, primarily due to increases of $0.3 million in marketing and advertising, $0.3 million in data processing expense, and $0.2 million in net occupancy expense.

Previous wording

The effective tax rate decreased to 20.6% for the year ended December 31, 2023 compared with 22.0% for the prior year. The decrease in income tax expense can be primarily attributed to a decrease in pre-tax income.

Current wording

The effective tax rate increased to 21.3% for the year ended December 31, 2024 compared with 20.6% for the prior year. The decrease in income tax expense can be primarily attributed to a decrease in pre-tax income.

Previous wording

The following table presents selected financial information at December 31, 2023 and 2022, and the dollar and percent change (in thousands):

Current wording

The following table presents selected financial information as of December 31, 2024 and 2023, and the dollar and percent change (in thousands):

Previous wording

The decrease in cash and cash equivalents can be mostly attributed to changes in securities, loans, deposits, and borrowings, offset by net income.

Current wording

The increase in cash and cash equivalents can be mostly attributed to changes in securities, loans, deposits, borrowings, and net income.

Previous wording

Capital Lease Obligations and FHLBNY Advances

Current wording

Finance Lease Obligations and FHLBNY Advances

Previous wording

The decrease in capital lease obligations and FHLBNY advances can be mostly attributed to a decrease of $63.9 million in FHLBNY overnight advances.

Current wording

The increase in finance lease obligations and FHLBNY advances can be mostly attributed to an increase of $77.2 million in FHLBNY overnight advances and an increase of $0.7 million in finance lease obligations.

Previous wording

The increase in shareholders' equity was due primarily to an increase of $18.1 million in retained earnings and a decrease of $9.2 million in accumulated other comprehensive loss. The increase in retained earnings was due primarily to net income of $25.0 million, offset by $5.9 million in dividends declared and a $1.1 million one-time adjustment due to the implementation of CECL. The improvement in accumulated other comprehensive loss was primarily due to an improvement in the fair value of the available for sale securities portfolio, when compared to the prior year. Treasury stock decreased $1.1 million primarily due to the impact of the issuance of shares related to the Corporation's employee benefit plans.

Current wording

The increase in shareholders' equity was due primarily to an increase of $17.8 million in retained earnings and a decrease of $0.9 million in accumulated other comprehensive loss. The increase in retained earnings was due primarily to net income of $23.7 million, offset by $5.9 million in dividends declared for the year ended December 31, 2024. The improvement in accumulated other comprehensive loss was primarily due to revised actuarial assumptions related to the Corporation's pension plans, offset by the unfavorable impact of interest rates on available for sale securities during the current year. Treasury stock decreased $0.3 million primarily due to the impact of the issuance of shares related to the Corporation's employee benefit plans.

Previous wording

The market value of total assets under management or administration in WMG was $2.242 billion, including $381.3 million of assets held under management or administration for the Corporation, at December 31, 2023 compared to $2.053 billion, including $346.5 million of assets held under management or administration for the Corporation at December 31, 2022, an increase of $189.4 million, or 9.2%. The increase in total assets under management or administration for the Corporation can be mostly attributed to broad improvements in the financial markets during the year.

Current wording

The market value of total assets under management or administration in WMG was $2.212 billion, including $301.9 million of assets held under management or administration for the Corporation, as of December 31, 2024 compared to $2.242 billion, including $381.3 million of assets held under management or administration for the Corporation as of December 31, 2023, a decrease of $30.4 million, or 1.4%. Excluding assets under management or administration for the Corporation, total Wealth Management Group assets increased $49.0 million, or 2.6%, primarily due to market improvements during the year.

Previous wording

(1) Interest-earning assets include: securities available for sale at estimated fair value, 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, equity investments, and federal funds sold.

Current wording

(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, equity investments, and federal funds sold.

Previous wording

(4) Borrowings include overnight advances and capitalized lease obligations.

Current wording

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

Previous wording

Total cash and cash equivalents decreased $19.0 million when compared to December 31, 2022, due to decreases of $12.0 million in interest-earning deposits at other financial institutions, and $7.1 million in cash and due from financial institutions.

Current wording

Total cash and cash equivalents increased $10.2 million compared to December 31, 2023, due to increases of $6.2 million in interest-earning deposits at other financial institutions, and $4.0 million in cash and due from financial institutions.

Previous wording

The Corporation’s Funds Management Policy includes an investment policy that in general, 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.

Current wording

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.

Previous wording

Non-marketable equity securities at December 31, 2023 include shares of FRBNY stock and FHLBNY stock, carried at their cost of $1.9 million and $3.6 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.

Current wording

The available for sale segment of the securities portfolio totaled $531.4 million as of December 31, 2024, a decrease of $52.6 million, or 9.0%, from $584.0 million as of December 31, 2023. The decrease was primarily due to net paydowns and maturities of $49.6 million, mainly due to paydowns on mortgage-backed securities and SBA pooled loan securities. The market value of securities available for sale decreased $0.7 million, due to unfavorable changes in market interest rates during the current year. Partially offsetting the decrease in total investment securities was an increase of $3.6 million in FHLB and FRB stock, at cost, primarily due to an increase in FHLBNY overnight advances as of December 31, 2024, compared to the prior year. The held to maturity segment of the securities portfolio consists of obligations of political subdivisions in the Corporation’s market areas. These securities totaled $0.8 million as of December 31, 2024, and December 31, 2023. Non-marketable equity securities as of December 31, 2024 include shares of FRBNY stock and FHLBNY stock, carried at their cost of $1.9 million and $7.2 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 yield on the Corporation's investment portfolio, inclusive of interest-earnings deposits, as of December 31, 2024 and 2023 was 2.28% and 2.21% respectively, while the duration for the securities portfolio as of December 31, 2024 and 2023 was 4.0 years and 4.6 years, respectively.

Previous wording

The table below sets forth the carrying amounts and maturities of held to maturity debt securities at December 31, 2023 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 (in thousands):

Current wording

The table below sets forth the carrying amounts and maturities of held to maturity debt securities as of December 31, 2024 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 (in thousands, except percentages):

Previous wording

The weighted-average yield on the Corporation's held to maturity debt securities at December 31, 2023 was 3.90%, related to obligations of states and political subdivisions. 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, 2023 and 2022, the Corporation had no credit loss charges relating to its investment securities.

Current wording

The weighted-average yield on the Corporation's held to maturity debt securities as of December 31, 2024 was 4.83%, related to obligations of states and political subdivisions. 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, 2024 and 2023, the Corporation had no provisions for credit losses relating to its investment securities.

Previous wording

The table below presents the Corporation’s loan composition by type and percentage of total loans for the years ended December 31, 2023 and December 31, 2022 (in thousands, except percentages):

Current wording

The table below presents the Corporation’s loan composition by type and percentage of total loans for the years ended December 31, 2024 and December 31, 2023 (dollars in thousands):

Previous wording

The increase in total commercial real estate was the result of a $95.4 million increase in commercial mortgages, other, primarily driven by increases in multi-family properties, and a $30.6 million increase in construction loans. Commercial real estate lending continues to be the primary driver of asset growth for the Corporation, as demand for project financing remains robust across the Corporation's footprint, particularly in the Albany and Buffalo regions. At December 31, 2023, commercial real estate loans in the Albany and Buffalo regions have grown $91.5 million and $30.3 million from December 31, 2022, respectively. The increase in commercial and industrial loans was relatively evenly distributed across the Corporation's footprint.

Current wording

Commercial real estate lending continues to be a primary driver of asset growth for the Corporation, with persistent demand across the Corporation's footprint, particularly in the Capital and Western New York regions. The increase in total commercial real estate loans was the result of a $138.0 million increase in commercial mortgages, other, primarily driven by increases in non-owner occupied and multifamily properties, partially offset by a $43.9 million decrease in construction loans, which reflect the conversion of a number of projects to permanent financing. Commercial real estate growth in the Capital Bank division between December 31, 2023 and December 31, 2024 totaled $65.9 million, while growth in the Canal Bank division totaled $28.8 million, Commercial real estate balances in the legacy Chemung Canal Trust Company market decreased by $0.6 million. Growth in commercial and industrial balances was also primarily concentrated in the Capital and Western New York regions.

Previous wording

Commercial real estate lending represented the largest portion of the Corporation's loan portfolio as of December 31, 2023 and 2022. Commercial real estate lending is comprised of the Construction and Commercial mortgage, other segments of the loan portfolio, as presented in Note 4-Loans and Allowance for Credit Losses. As of December 31, 2023 and 2022, total commercial real estate loans totaled $1.123 billion and $0.997 billion respectively. Management evaluates the risk inherent in its portfolio of commercial real estate loans using a variety of metrics, including but not limited to type, geography, collateral, and borrower or sponsor industry.

Current wording

Commercial real estate lending represented the largest portion of the Corporation's loan portfolio as of December 31, 2024 and 2023. Commercial real estate lending is comprised of the Construction and Commercial mortgage, other segments of the loan portfolio, as presented in Note 4 to the Corporation's Consolidated Financial Statements. As of December 31, 2024 and 2023, total commercial real estate loans totaled $1.217 billion and $1.123 billion, respectively. As the largest component of the Corporation's loan portfolio, quantitative and qualitative attributes of commercial real estate such as maturity and repricing schedules may have a significant impact on management's strategic initiatives, and understanding such attributes is critical in understanding the Corporation's anticipated future liquidity needs and sensitivity to changes in interest rates.

Previous wording

The table below presents commercial real estate loans by type and percentage at December 31, 2023 and 2022 (in thousands, except percentages):

Current wording

The table below presents the amortized basis of commercial real estate loans by type and percentage as of December 31, 2024 and 2023 (dollars in thousands):

Previous wording

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

Current wording

(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.