CHEMUNG FINANCIAL CORP

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

The Corporation, through its wholly-owned subsidiaries, the Bank and CFS, provides a wide range of banking, financing, fiduciary, and other financial services to its clients. The Corporation and the Bank are subject to the regulations of certain federal and state agencies and undergo periodic examinations by those regulatory authorities.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in conformity with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 8 of Regulation S-X of the Exchange Act. These financial statements include the accounts of the Corporation and its subsidiaries, and all significant intercompany balances and transactions are eliminated in consolidation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and disclosures provided, and actual results could differ. In the opinion of management, all adjustments (consisting of normal recurring adjustments) and disclosures necessary for the fair presentation of the accompanying consolidated financial statements have been included. The unaudited consolidated financial statements should be read in conjunction with the Corporation's 2025 Annual Report on Form 10-K for the year ended December 31, 2025. The results of operations for any interim periods are not necessarily indicative of the results which may be expected for the entire year or any other period.

Reclassifications

Amounts in the prior year financial statements are reclassified whenever necessary to conform to the current year's presentation.

Accounting Standards Pending Adoption

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which will require enhanced disaggregation of certain expense categories in the notes to the financial statements. The standard is effective for public business entities for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. The Corporation is evaluating the impact the standard will have on its disclosures and expects to provide additional disclosures upon adoption.

NOTE 2 EARNINGS PER COMMON SHARE

Basic earnings per share is calculated using the two-class method, which is net income available to common shareholders divided by the weighted average number of common shares outstanding during the period, excluding participating securities. All outstanding unvested share-based payment awards, including those related to directors' and employee stock awards, contain rights to non-forfeitable dividends and are considered participating securities for this calculation. Restricted stock awards are grants of participating securities and are considered outstanding at grant date. There were no dilutive securities issuable or outstanding for the three month periods ended March 31, 2026 and 2025, respectively.

The calculation of basic earnings per share for the three month periods ended March 31, 2026 and 2025 is shown below (in thousands, except share and per share data):

NOTE 3 SECURITIES

The following tables present the amortized cost and estimated fair value of securities available for sale as of March 31, 2026 and December 31, 2025 (in thousands):

The following tables present the amortized cost and estimated fair value of securities held to maturity as of March 31, 2026 and December 31, 2025 (in thousands):

There were no proceeds from sales and calls of securities resulting in gains or losses for the three month periods ended March 31, 2026 and 2025.

The amortized cost and estimated fair value of debt securities are shown below by contractual maturity (in thousands). Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

Securities pledged as of March 31, 2026 and December 31, 2025 had a carrying value of $209.0 million and $178.2 million respectively, and were pledged to secure public deposits.

The following tables summarize the investment securities available for sale with unrealized losses as of March 31, 2026 and December 31, 2025 by aggregated major security type and length of time in a continuous unrealized loss position (in thousands):

Assessment of Available for Sale Debt Securities for Credit Risk

Management assesses the decline in fair value of investment securities on a regular basis. Unrealized losses on debt securities may occur from current market conditions, increases in interest rates since the time of purchase, a structural change in an investment, volatility in earnings of a specific issuer, or deterioration in credit quality of the issuer. Management evaluates both qualitative and quantitative factors to assess whether potential credit losses exist. The following is a discussion of the credit quality characteristics of portfolio segments carrying material unrealized losses as of March 31, 2026.

Oblig ations of U.S. Governmental agencies and sponsored enterprises:

As of March 31, 2026, the majority of the Corporation’s unrealized losses in available for sale investment securities related to mortgage-backed securities, issued by government-sponsored entities and agencies. Unrealized losses attributable to mortgage-backed securities were 95.5% of total unrealized losses on available for sale securities as of March 31, 2026. Declines in fair value were attributable to changes in interest rates, not credit quality. The Corporation does not have the intent, and is not likely to be required, to sell these securities prior to anticipated recovery. Due to affiliations with U.S. governmental agencies and or enterprises, the Corporation considers these obligations to carry zero loss estimates, and has not recorded an allowance for credit losses as of March 31, 2026.

Corporate bonds and notes:

The Corporation's corporate bonds and notes portfolio is comprised of subordinated debt issues of community and regional banks. Unrealized losses attributable to corporate bonds and notes were 3.4% of total unrealized losses on available for sale securities as of March 31, 2026. Management considers the credit quality of these investments on an individual basis. Management reviewed the collectability of these securities, taking into consideration such factors as the financial condition of issuers, reported regulatory capital ratios of issuers, and credit ratings when available, among other pertinent factors. All corporate bond debt securities continue to accrue interest and make payments as expected with no defaults or deferrals on the part of the issuers. The decreases in fair value were attributable to changes in interest rates. Therefore, the Corporation considers the potential credit risk of these issuers to be immaterial, and has not recorded an allowance for credit losses as of March 31, 2026.

Equity Investments

The Corporation holds a non-qualified deferred compensation plan to allow a select group of management and employees the opportunity to defer all or a portion of their annual compensation, and treats assets held under this plan as equity investments. As of both March 31, 2026 and December 31, 2025, the fair value of investments held in relation to the deferred compensation plan was $3.2 million. The Corporation also held $0.6 million of marketable securities as equity investments as of both March 31, 2026 and December 31, 2025.

NOTE 4 LOANS AND ALLOWANCE FOR CREDIT LOSSES

The composition of the loan portfolio, net of deferred origination fees and costs, is summarized as follows (in thousands):

The Corporation's concentrations of credit risk by loan type are reflected in the preceding table. The concentrations of credit risk with standby letters of credit, committed lines of credit, and commitments to originate new loans generally follow the loan classifications in the table above.

Accrued interest receivable on loans totaled $9.0 million as of March 31, 2026 and $8.9 million as of December 31, 2025, and is included in the accrued interest receivable and other assets line item on the Corporation's Consolidated Balance Sheets, and is excluded from the amortized cost basis of loans and estimate of the allowance for credit losses, as presented in this Note. Deferred loan costs, net of deferred loan fees, included in the amortized cost basis of loans as presented in this Note, totaled $3.8 million as of March 31, 2026 and $4.1 million as of December 31, 2025.

As of March 31, 2026, loans held for sale included $2.3 million in commercial credit card balances and $0.4 million in residential mortgages. Loans held for sale are excluded from the amortized cost basis of loans, as presented in this Note.

The following tables present the activity in the allowance for credit losses by portfolio segment for the three month periods ended March 31, 2026 and 2025 (in thousands):

(1)Additional provision related to off-balance sheet exposure was $14 thousand for the three months ended March 31, 2026.

(1)Additional provision related to off-balance sheet exposure was a $304 thousand credit for the three months ended March 31, 2025.

The Corporation performs an annual update to the loss drivers used in modeling its estimate of the allowance for credit losses. Annual updates for the model were completed during the three month periods ended March 31, 2026 and 2025.

Unfunded Commitments

The allowance for credit losses on unfunded commitments represents amounts held against credit exposures which are not represented on the Consolidated Balance Sheets. The allowance is recognized as a liability, a component of other liabilities on the Consolidated Balance Sheets, with adjustments to the allowance recognized in the provision for credit losses line item on the Consolidated Statements of Income.

The following table presents the activity in the allowance for credit losses on unfunded commitments for the three month periods ended March 31, 2026 and 2025 (in thousands):

The following table presents the provision for credit losses on loans and unfunded commitments for the three month periods ended March 31, 2026 and 2025 (in thousands):

The following tables present the balance in the allowance for credit losses by portfolio segment, as of March 31, 2026 and December 31, 2025 (in thousands):

The following tables present the amortized cost basis of loans by portfolio segment, as of March 31, 2026 and December 31, 2025 (in thousands):

Modifications to Loans Made to Borrowers Experiencing Financial Difficulty

The Corporation may occasionally make modifications to loans where the borrower is considered to be experiencing financial difficulty, and which may require disclosure in accordance with Financial Instruments-Credit Losses (Topic 326)-Troubled Debt Restructurings and Vintage Disclosures. Types of modifications considered under ASU 2022-02 include principal reductions, interest rate reductions, term extensions, significant payment delays, or a combination thereof.

The following table summarizes the amortized cost basis of loans modified during the three month period ended March 31, 2026 (in thousands):

(1)Represents amortized cost basis of loans modified during the period as a percentage of the period-end loan balances by class.

There were no loan modifications to borrowers experiencing financial difficulty during three month period ended March 31, 2025.

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during three month period ended March 31, 2026 (in thousands):

There wereno loans that experienced a payment default within twelve months of modification during the three month periods ended March 31, 2026 and 2025.

The Corporation had no outstanding commitments to lend additional amounts to borrowers for which modifications subject to ASU 2022-02 were made during the three month periods ended March 31, 2026 and 2025.

The Corporation monitors the performance of loans that have previously been modified under the guidance of ASU 2022-02 in order to gauge the effectiveness of modifications, and to determine the degree to which borrowers continue to demonstrate financial weakness following modification. The following tables present the performance of such loans that were modified in the twelve month periods preceding March 31, 2026 and March 31, 2025 (in thousands):

Collateral-Dependent Individually Analyzed Loans

As of March 31, 2026, the amortized cost basis of individually analyzed loans totaled $3.8 million, of which $1.0 million were considered collateral-dependent, and as of December 31, 2025, the amortized cost basis of individually analyzed loans totaled $4.2 million, of which $2.2 million were considered collateral-dependent. For collateral-dependent loans where the borrower is experiencing financial difficulty and repayment is likely to be substantially provided through the sale or operation of the collateral, the allowance for credit losses is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date.

Certain assets held as collateral may be exposed to future deterioration in fair value, particularly due to changes in real estate markets or usage. The Corporation closely monitors trends in real estate values throughout its market area to determine whether collateral values, after appropriate discounting, are likely to be sufficient to extinguish existing borrower indebtedness.

The following table presents the amortized cost basis and related allowance for credit loss of individually analyzed loans considered to be collateral-dependent as of March 31, 2026 and December 31, 2025 (in thousands):

(1) Secured by commercial real estate.

(2) Secured by residential real estate.

(3) Secured by business assets.

The following table presents the amortized cost basis of nonaccrual loans without an associated allocation in the allowance for credit losses, total nonaccrual loans, and loans past due greater than 90 days and still accruing, by class of loan as of March 31, 2026 and December 31, 2025 (in thousands):

There was an immaterial amount of interest income recognized on nonaccrual loans for the three month periods ended March 31, 2026 and 2025. Payments received on nonaccrual loans are generally applied to principal using the cost recovery method.

The following tables present the aging of the amortized cost basis of loans as of March 31, 2026 and December 31, 2025 (in thousands):

Credit Quality Indicators

The Corporation establishes a risk rating at origination for all commercial loans. The primary factors considered in assigning risk ratings include, but are not limited to: historic and future debt service coverage, collateral position, operating performance, liquidity, leverage, payment history, management ability, and the customer’s industry. Commercial relationship managers monitor all loans in their respective portfolios for any changes in the borrower’s ability to service its debt and affirm the risk ratings for the loans at least annually.

For retail loans, which include residential mortgages, indirect and direct consumer loans, and home equity lines and loans, once a loan is properly approved and closed, the Corporation evaluates credit quality based upon loan repayment. Retail loans that have been modified subject to ASU 2022-02, but are otherwise performing, are assigned a risk rating of Special Mention, as defined below. Retail loans are not rated until they become 90 days past due, or are modified under ASU 2022-02.

The Corporation uses the risk rating system to identify criticized and classified loans. Commercial relationships within the criticized and classified risk ratings are analyzed quarterly. The Corporation uses the following definitions for criticized and classified loans (which are consistent with regulatory guidelines):

Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capability of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Commercial loans not meeting the criteria above to be considered criticized or classified, are considered to be pass rated loans. Loans listed as not rated are included in groups of homogeneous loans performing under terms of the loan notes.

Based on the analyses performed as of March 31, 2026, the amortized cost basis of loans by class, risk category, and vintage, as well as gross charge-offs by class and vintage for the three month period ended March 31, 2026, were as follows (in thousands):

Based on the analyses performed as of December 31, 2025, the amortized cost basis of loans by class, risk category, and vintage, as well as gross charge-offs by class and vintage for the year ended December 31, 2025, were as follows (in thousands):

NOTE 5 FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. There are three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions market participants would use in pricing an asset or liability.

The Corporation used the following methods and significant assumptions to estimate fair value:

Available for Sale Securities: The fair values of securities available for sale are usually determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs), or matrix pricing, which is a mathematical technique widely used to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3 inputs).

Equity Investments: Securities that are held to fund a non-qualified deferred compensation plan and securities that have a readily determinable fair market value, are recorded with changes in fair value included in earnings. The fair value of equity investments is determined by quoted market prices (Level 1 inputs).

Collateral-Dependent Loans: Individually analyzed loans which receive a specific allocation as part of the allowance for credit losses or have been partially charged-off and are considered collateral-dependent are carried at fair value. For collateral-dependent loans, fair value is commonly based on real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, typically resulting in the utilization of Level 3 inputs. These loans are analyzed on a quarterly basis for additional credit loss and adjusted accordingly.

Other Real Estate Owned (OREO): Assets acquired through or in lieu of loan foreclosures are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Subsequent declines in fair value are recorded through the establishment of a valuation allowance, which may be reversed should fair value increase after the establishment of the valuation allowance.

Appraisals for both collateral-dependent individually analyzed loans and OREO are performed by certified general appraisers (commercial properties) or certified residential appraisers (residential properties) whose qualifications and licenses have been reviewed and verified by the Corporation. Once received, appraisals are reviewed for reasonableness of assumptions, approaches utilized, Uniform Standards of Professional Appraisal Practice and other regulatory compliance, as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Appraisals are generally completed within the 12 month period prior to a property being placed into OREO and updated appraisals are typically completed for collateral-dependent loans when management determines analysis on an individual basis is required. For individually analyzed loans, appraisal values are adjusted based on the age of the appraisal, the position of the lien, the type of the property, and its condition.

Derivatives: The fair value of interest rate swaps is based on valuation models using observable market data as of the measurement date (Level 2 inputs). Derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair value of derivatives is determined using quantitative models utilizing multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices, and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The Corporation also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counter-party's nonperformance risk in fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Corporation has considered the impact of any applicable credit enhancements, such as collateral postings. Although the Corporation has determined the majority of inputs used to value its derivatives are considered Level 2 inputs, credit valuation adjustments are based on credit default rate assumptions, which are considered Level 3 inputs. As of March 31, 2026, the Corporation evaluated the effect of credit valuation adjustments on the fair value of its derivative positions, and determined their impact was not significant; accordingly, the Corporation classifies the entirety of its derivative valuations within Level 2 of the hierarchy.

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

The Corporation transfers assets and liabilities between levels within the fair value inputs hierarchy when methodologies to obtain fair value change such that there are either more or fewer unobservable inputs as of the end of the indicated reporting period. The Corporation utilizes a "beginning of reporting period" timing assumption when recognizing transfers between hierarchy levels, consistent with ASC 820-10-50-2.

There were no transfers between Level 1 and Level 2 during the three month periods ended March 31, 2026 and 2025.

There were no transfers between Level 2 and Level 3 during the three month period ended March 31, 2026. During the three month period ended March 31, 2025, the Corporation transferred its investment inseven corporate subordinated debt issuances into Level 3 from Level 2 due to the lack of available market data for the issuances or issuances of similar size and structure. There wasone corporate subordinated debt issuance previously classified using Level 3 inputs which was redeemed by the issuer prior to its initial call date due to merger-related regulatory requirements during the three month period ended March 31, 2025, totaling $1.0 million.

The following tables present a reconciliation of assets measured at fair value on a recurring basis using unobservable inputs (Level 3) for the three month periods ended March 31, 2026 and 2025, and qualitative information regarding Level 3 significant unobservable inputs as of March 31, 2026 and December 31, 2025 (in thousands):

Assets and liabilities measured at fair value on a non-recurring basis as of March 31, 2026 and December 31, 2025 are summarized below (in thousands):

The following tables present quantitative information regarding Level 3 significant unobservable inputs for assets and liabilities measured at fair value on a non-recurring basis as of March 31, 2026 and December 31, 2025 (in thousands):

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values of financial instruments, as of March 31, 2026 and December 31, 2025, are as follows (in thousands):

(1) Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

(1) Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

NOTE 6 LEASES

Operating Leases

The Corporation leases certain properties under long-term, operating lease agreements. The leases expire at various dates through 2033 and generally include renewal options. As of March 31, 2026, the weighted average remaining lease term was 5.76 years with a weighted average discount rate of 3.59%. Rent expense was $0.3 million for the three months ended March 31, 2026. Certain leases provide for increases in future minimum annual rent payments as defined in the lease agreements. The Corporation’s operating lease agreements contain both lease and non-lease components, which are generally accounted for separately. The Corporation’s lease agreements do not contain any residual value guarantees.

Leased properties as of March 31, 2026 and December 31, 2025 classified as operating leases consist of the following (in thousands):

The following is a schedule by year of the undiscounted cash flows of the operating lease liabilities, excluding CAM charges, as of March 31, 2026 (in thousands):

As of March 31, 2026, the Corporation hadno operating leases that were signed but had not yet commenced.

Finance Leases

The Corporation leases certain buildings under finance leases. The lease arrangements require monthly payments through 2044. As of March 31, 2026, the weighted average remaining lease term of finance leases was 10.58 years with a weighted average discount rate of 4.10%. The Corporation has included these leases inpremises and equipment as of March 31, 2026 and December 31, 2025 as follows (in thousands):

The following is a schedule by year of future minimum lease payments under finance leases, together with the present value of net minimum lease payments as of March 31, 2026 (in thousands):

As of March 31, 2026, the Corporation hadone finance lease for a branch in West Seneca, New York that was signed, but had not yet commenced.

Related Party Transactions

The Bank leases its branch located at 2 Rush Street, Schenectady, New York, under a lease agreement through February, 2033 from a member of the Corporation's Board of Directors with monthly rent and CAM related expenses totaling$9 thousand per month. Rent and CAM related expenses paid to this Board member totaled $28 thousand for each of the three month periods ended March 31, 2026 and 2025, respectively.

NOTE 7 GOODWILL AND INTANGIBLE ASSETS

The changes in goodwill included in the core banking segment during the three month periods ended March 31, 2026 and 2025 were as follows (in thousands):

The Corporation hadno aggregate amortization expense for the three month periods ended March 31, 2026 and 2025.

The amount of goodwill reflected in the Corporation's Unaudited Consolidated Financial Statements is required to be tested by management for impairment on at least an annual basis. Goodwill impairment testing is performed annually as of December 31 andno impairment charges were incurred as of the last test on December 31, 2025.

NOTE 8 COMMITMENTS AND CONTINGENCIES

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection are issued by the Corporation to manage clients' requests for funding and other needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used and off-balance sheet risk of credit loss exists up to the face amount of these instruments. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment. These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk.

The following table presents the contractual amounts of financial instruments with off-balance sheet risk as of March 31, 2026 and December 31, 2025 (in thousands):

Commitments to make real estate and home equity loans are generally made for periods ofsixty days or less. As of March 31, 2026, the fixed rate real estate and home equity commitments to make loans have interest rates ranging from 5.88% to 7.38% and maturities ranging from five years tothirty years. Commitments to fund commercial draw notes are generally made for periods ofthree months totwenty-four months. As of March 31, 2026, the fixed rate commercial draw commitments have interest rates ranging from 4.00% to 7.88%.

Because many commitments and almost all standby letters of credit expire without being funded in whole or in part, the contract amounts are not estimates of future cash flows. Loan commitments and unused lines of credit have off-balance sheet credit risk because only origination fees are recognized on the Corporation's Consolidated Balance Sheets until commitments are fulfilled or expire. The credit risk amounts are equal to the contractual amounts, assuming the amounts are fully advanced and collateral or other security is of no value. These commitments also have off-balance sheet interest rate risk in that the interest rate at which these commitments were made may not be at market rates on the date the commitments are fulfilled.

The Corporation maintains an allowance for credit losses on unfunded commitments in accordance with ASU 2016-13, Financial Instruments-Credit Losses (Topic 326). The allowance represents expected future credit losses on financial instruments with off-balance sheet credit risk which are not unconditionally cancellable by the Corporation. As of both March 31, 2026 and December 31, 2025, the allowance for credit losses on unfunded commitments was $0.6 million.

In the normal course of business, there are various outstanding claims and legal proceedings involving the Corporation or its subsidiaries. As of March 31, 2026, the Corporation believes that it is not a party to any pending legal, arbitration, or regulatory proceedings that could have a material adverse impact on its financial results or liquidity.

NOTE 9 BORROWED FUNDS

The following tables summarize the Corporation's borrowed funds outstanding as of March 31, 2026 and December 31, 2025 (in thousands):

On June 10, 2025, the Corporation issued $45.0 million of 7.75% fixed-to-floating rate subordinated notes due June 15, 2035 in a private offering (the "Notes"). The Notes bear interest at a fixed rate of 7.75% per year, payable semi-annually, for the first five years. From June 15, 2030 to the June 15, 2035 maturity date, the interest rate will adjust to a floating rate equal to a benchmark rate which is expected to be the then-current three-month term SOFR plus 415 basis points, payable quarterly. If the then three-month term SOFR is below zero, the three-month term SOFR for the note will be deemed zero. 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. Subject to limited exceptions, the Corporation cannot redeem the Notes before the fifth anniversary of the issuance date. Proceeds, net of debt issuance costs of $1.0 million, were $44.0 million. 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 at the holding company level as Tier 2 capital under the capital guidelines of the Federal Reserve Board, when applicable. Interest expense for the three months ended March 31, 2026 was $0.9 million.

Collateral at the FHLBNY consisted of $258.8 million and $255.1 million of residential mortgage loans and home equity loans under a blanket lien arrangement as of March 31, 2026 and December 31, 2025, respectively. Based on this available collateral, the Corporation was eligible to borrow up to a total of $182.7 million as of March 31, 2026 at the FHLBNY with $107.0 million available as of March 31, 2026.

NOTE 10 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) represents the net unrealized holding gains or losses on securities available for sale and the funded status of the Corporation's defined benefit pension plan and other benefit plans, as of the Consolidated Balance Sheet dates, net of the related tax effect.

The following is a summary of the changes in accumulated other comprehensive income (loss) by component, net of tax, for the periods indicated (in thousands):

The following is the reclassification out of accumulated other comprehensive income for the periods indicated (in thousands):

(a) These accumulated other comprehensive income components are included in the computation of net periodic pension and other benefit plan costs (see Note 12 for additional information).

NOTE 11 REVENUE FROM CONTRACTS WITH CUSTOMERS

All of the Corporation's revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income. The following tables present the Corporation's non-interest income by revenue stream and reportable segment for the three month periods ended March 31, 2026 and 2025 (in thousands). Items outside the scope of ASC 606 are noted as such.

(a)Not within scope of ASC 606.

(b) The Core Banking column above includes amounts to eliminate transactions between segments.

(a) Not within scope of ASC 606.

(b) The Core Banking column above includes amounts to eliminate transactions between segments.

A description of the Corporation's revenue streams accounted for under ASC 606 follows:

Service Charges on Deposit Accounts: The Corporation earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which included services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Corporation fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are recognized at the time the maintenance occurs. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance.

Interchange Revenue from Debit Card Transactions: The Corporation earns interchange fees from debit cardholder transactions conducted through the Mastercard payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to cardholders.

WMG Fee Income (Gross): The Corporation earns wealth management fees from its contracts with trust customers to manage assets for investment, and/or to conduct transactions on their accounts. These fees are primarily earned over time as the Corporation provides the contracted monthly or quarterly services and are generally assessed based on a tiered scale of the market value of assets under management (AUM).

CFS Fee and Commission Income (Net): The Corporation earns fees from investment brokerage services provided to its customers by a third-party service provider. The Corporation receives commissions from the third-party service provider on a monthly basis based upon customer activity for the month. The Corporation (i) acts as an agent in arranging the relationship between the customer and the third-party service provider and (ii) does not control the services rendered to the customers. Investment brokerage fees are presented net of related costs. The Corporation also earns fees from tax services provided to its customers.

Net Gains (Losses) on Sales of OREO: The Corporation records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Corporation finances the sale of OREO to the buyer, the Corporation assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Corporation adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.

NOTE 12 COMPONENTS OF QUARTERLY AND YEAR TO DATE NET PERIODIC BENEFIT COSTS

The components of net periodic expense for the Corporation’s pension and other benefit plans for the periods indicated are as follows (in thousands):

NOTE 13 SEGMENT REPORTING

The Corporation manages its operations throughtwo primary business segments: core banking and WMG. The core banking segment provides revenues by attracting deposits from the general public and using such funds to originate consumer, commercial, commercial real estate, and residential mortgage loans, primarily in the Corporation’s local markets, and to invest in securities. The WMG services segment provides revenues by providing trust and investment advisory services to clients.

The Corporation's reportable segments are determined by the Executive Management Team (EMT), who collectively are designated Chief Operating Decision Maker (CODM). The CODM evaluates the financial performance of each business segment, which is based upon the business segment's net income. Components of net income for the business segments that are reviewed by the CODM include net interest income, provision for credit losses, non-interest income, non-interest expense and income tax expense. The CODM, in conjunction with management committees (such as ALCO and Corporate loan committees) evaluates financial performance to make decisions related to the products and services that are offered, pricing, and the allocation of resources for each business segment.

Accounting policies for the segments are the same as those described in Note 1 of the Corporation’s 2025 Annual Report on Form 10-K, which was filed with the SEC on March 13, 2026. Summarized financial information concerning the Corporation’s reportable segments and the reconciliation to the Corporation’s consolidated results are shown in the following tables. Income taxes are allocated based on the separate taxable income of each entity and indirect overhead expenses are allocated based on reasonable and equitable allocations applicable to the reportable segment.

The Holding Company and CFS columns below includes income and expenses related to insurance products, mutual funds, and brokerage services (in thousands).

(1) Included in net occupancy and furniture and equipment expense in the table above.

(1) Included in net occupancy and furniture and equipment expense in the table above.

NOTE 14 STOCK COMPENSATION

On June 3, 2025, the Corporation's shareholders approved the Corporation's 2025 Equity Incentive Plan (the "2025 Plan") which provides for the grant of stock-based awards to officers, employees and directors of the Corporation and the Bank. Compensation expense is recognized over the vesting period of the awards based on the fair value of the common stock at issue date.

Pursuant to the 2025 Plan, the Corporation may make discretionary grants of restricted shares of the Corporation’s common stock to or for the benefit of employees selected to participate in the 2025 Plan, the chief executive officer and members of the Board of Directors. Awards are based on the performance, responsibility, and contributions of the individual and are targeted at an average of the peer group. The maximum number of shares of the Corporation’s common stock that may be awarded as restricted shares related to the 2025 Plan may not exceed 160,000, upon which time a new plan may be created.

During the three months ended March 31, 2026 and 2025,30,223 and 33,872 shares, respectively, were re-issued from treasury to fund stock compensation. Effective for the 2024 fiscal year and thereafter, annual stock compensation is awarded the second month after the close of the fiscal year for the Corporation's employees and Chief Executive Officer. The expense related to these grants is recognized over aone year or afive year vesting period. Total expense related to stock compensation of $0.3 million was recognized during both the three month periods ended March 31, 2026 and 2025.

A summary of restricted stock activity for the three months ended March 31, 2026 is presented below:

As of March 31, 2026, there was $3.3 million of total unrecognized compensation cost related to nonvested shares granted under the Corporation's equity incentive plans. The cost is expected to be recognized over a weighted-average period of 3.22 years. The total fair value of shares vested was $0.9 million and $0.6 million for the three month periods ended March 31, 2026 and 2025, respectively.