ELMIRA — Chemung Financial Corporation (ticker: CHMG) reported net income of $2.4 million, or 53 cents a share, in the second quarter, down 7 percent from $2.6 million, or 57 cents a year ago.
Chemung Financial President and CEO Ronald M. Bentley attributed the decline to a decrease in both non-interest and net-interest income. The losses were partly offset by decreases in operating expenses and a lower provision for loan losses, he added.
“Despite the decrease in second-quarter earnings, our year-to-date earnings have improved significantly,” he said in a July 31 news release. Along with benefitting from its acquisition of Fort Orange Financial Corp. and its Capital Bank and Trust Company subsidiary last year, Chemung Financial also realized gains from a $2.2 million decrease in acquisition costs as well as a $780,000 gain from flood-insurance reimbursements for damage to the company’s Owego and Tioga offices.
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Second-quarter net-interest income declined $86,000 to $11.4 million, but non-interest income posted a double-digit loss. Non-interest income dropped 12.9 percent, or $613,000, as Chemung Financial saw reduced gains on the sale of securities and real estate, lower Wealth Management Group fee income, and lower fee and service-charge income.
Chemung Financial lowered its provision for loan losses by $73,000 during the quarter as asset quality improved and reduced operating expenses by 2.6 percent, or $317,000. However, when factoring out acquisition costs from last year’s expenses, all other operating expenses increased $867,000, or 7.9 percent, due to higher compensation and benefits expenses as well as increases in data-processing costs and marketing/advertising expenses.
Analyst’s reaction
Those expenses are really what took the toll on earnings for the quarter, says Alexander Twerdahl, an associate director in the research department of Sandler O’Neill & Partners, L.P. in New York City. Couple that with a low interest-rate environment making it difficult to see good yields, and the result is decreased earnings, he notes.
Chemung Financial hasn’t filed its quarterly statement with the Securities & Exchange Commission yet, so Twerdahl has not had a chance to review it, but he suspects much of its commercial growth stems from its Capital Bank market. Indirect auto loans also drove some growth at Chemung Financial, he says.
For the third quarter, Twerdahl expects the expense side of things to improve and says Chemung Financial has the opportunity to attract some new customers in its existing markets in the wake of the First Niagara’s acquisition of more than 100 HSBC branches. This is the time when customers, already facing having to switch banks, often shop around, Twerdahl says. And, Chemung Financial could use the opportunity to woo some new customers.
Chemung Financial’s net income for the first six months of 2012 jumped 41.4 percent to $6.1 million, while earnings per share rose 26 percent to $1.31, primarily due to the addition of Capital Bank and Trust last April.
Total assets increased 4.2 percent to $1.3 billion since Dec. 31, 2011, while total loans rose 7.4 percent to $855.9 million. Total deposits increased 5.5 percent to $1.1 billion.
Headquartered in Elmira, Chemung Financial (www.chemungcanal.com) is the holding company for Chemung Canal Trust Company, which has $1.3 billion in total assets and 28 offices in eight New York counties as well as Bradford County, Pa; and CFS Group, Inc., a financial-services subsidiary offering services including mutual funds, annuities, brokerage services, tax preparation, and insurance.
The latest FDIC statistics (as of June 30, 2011) showed Chemung Canal Trust was ranked first in deposit market share in the Elmira metro area, with a 41 percent share of total deposits, and ranked sixth in the Binghamton metro area, with a 5 percent share of total deposits.
