Chemung Financial Corporation

What they do

Through Chemung Canal Trust Company and its financial services subsidiary CFS, the Corporation takes locally generated deposits and channels them into commercial, residential and consumer loans. It also provides wealth management services, employee benefit plans, insurance, mutual funds, brokerage and tax preparation services. The Bank derives income from interest and fees on loans, interest on investment securities, wealth management fee income, and deposit-related fees, while operating expenses are mainly deposit and borrowing interest, salaries and benefits, and general overhead.

Revenue drivers

• Net interest income on loans — The core earnings source, driven by commercial, residential and consumer lending funded by local deposits; net interest income was $24.7 million in Q2 2026, up 18.8% from the prior-year quarter, with commercial loan growth concentrated in non-owner-occupied commercial real estate.
• Commercial lending — Commercial loans are the growth engine, with year-to-date annualized commercial loan growth of 13.0% in 2026, driven mainly by the Canal Bank division in Western New York and the Capital Bank division in the Albany area.
• Wealth management (WMG) fee income — Wealth management fee income is specifically named in the filings as one of the Bank's primary income sources, alongside interest and fees on loans and fees from deposit and other services.
• CFS non-banking services — CFS, established in 2001, offers mutual funds, annuities, brokerage, insurance and tax preparation, providing fee-based income outside of traditional banking.

Recent performance

Second quarter 2026 net income was $8.8 million, or $1.82 per share, compared with $9.2 million, or $1.91 per share, in Q1 2026 and a net loss of $6.5 million, or $1.35 per share, in Q2 2025. Net interest income rose $3.9 million, or 18.8%, year over year to $24.7 million, and net interest margin expanded 62 basis points to 3.67%. Year-to-date annualized loan growth was 8.7%, including 13.0% annualized commercial loan growth, and annualized customer deposit growth was 8.3%. Non-interest-bearing deposits were 28.8% of total deposits at June 30, 2026, up from 27.5% at prior year-end. Full-year 2025 net income was $15.1 million, or $3.14 per diluted share, down from $23.7 million, or $4.96, in 2024.

Strategy

Management describes a balance sheet repositioning initiated in 2025 that it credits with improved earnings power, balance sheet flexibility and lower funding costs. Growth strategy centers on leveraging the branch and digital network in current or new markets, emphasizing stable low-cost checking and other low-interest deposits to fund high-quality loans. The Corporation completed two whole-bank acquisitions (Canton Bancorp in 2009 and Fort Orange Financial Corp. in 2011) and multiple branch acquisitions, and in 2021 expanded into Western New York via a de novo Erie County branch, followed by the 2024 launch of the Canal Bank brand and a Williamsville, New York regional banking center. In July 2026 the OCC conditionally approved the Bank's application to convert from a New York state charter to a national bank charter, expected to be completed before the end of 2026. In June 2025 the Corporation issued $45.0 million of ten-year 7.75% fixed-to-floating subordinated notes due 2035, qualifying as Tier 2 capital.

Risks

• Geographic and economic concentration — The Corporation's results are particularly exposed to adverse conditions in New York and Pennsylvania, where it operates.
• Credit risk in commercial real estate — Commercial loan growth has been concentrated in non-owner-occupied commercial real estate, a category sensitive to property values and rate resets.
• Interest rate and funding cost volatility — The filings cite the level and volatility of short-term and long-term interest rates and inflation as key factors affecting performance, and the 2025 subordinated notes carry a 7.75% fixed rate for five years.
• Regulatory and charter transition risk — The pending conversion from a New York state charter to a national bank charter (conditionally approved by the OCC in July 2026) involves changes in law and regulatory environment risk cited in the filings.

Outlook

Management stated that one year after initiating the balance sheet repositioning, the positive trajectory of operating results demonstrates the effectiveness of actions taken to enhance earnings power and balance sheet flexibility, and pointed to significant year-over-year net interest income growth, margin expansion, declining funding costs and strong commercial loan growth across key markets. The Bank expects to complete its conversion to a national bank charter prior to the end of 2026. The Corporation also continues to prioritize certain lending categories over others, as reflected in the planned decline in indirect auto lending.