ELMIRA — Chemung Financial Corp. (NASDAQ: CHMG), parent company of Chemung Canal Trust Company, recently reported that its net income soared to $5.7 million, or $1.19 per share, in the third quarter from $2 million, or 40 cents, in the year-ago period. “Third quarter results included a 4.8 percent increase in net interest income and […]
ELMIRA — Chemung Financial Corp. (NASDAQ: CHMG), parent company of Chemung Canal Trust Company, recently reported that its net income soared to $5.7 million, or $1.19 per share, in the third quarter from $2 million, or 40 cents, in the year-ago period.
“Third quarter results included a 4.8 percent increase in net interest income and a 1.2 percent reduction in non-interest expenses, when compared to the third quarter of last year,” Anders M. Tomson, president and CEO of Chemung Financial, said in the banking company’s earnings report. “Our efficiency ratio continued to improve throughout the year as did our non-interest expense to average assets ratio, reinforcing our continued focus on expense management. We have remained committed to supporting our clients as they navigate these uncertain times, pivoting to assist as they begin the SBA’s loan forgiveness application process… Our company is well-positioned from a capital and liquidity perspective to provide the necessary stability to our customers and communities as they work toward renewal and recovery.”
Chemung Financial generated net interest income of $15.9 million in the third quarter, up from $15.1 million a year prior, due mainly to increases of about $200,000 in interest income on loans, including fees, about $100,000 in interest and dividend income on taxable securities, and a decrease of about $800,000 in total interest expense. That was offset by a decrease of roughly $400,000 in interest income on interest-earning deposits.
The increase in loan income resulted from a rise of about $400,000 in interest income on commercial loans, primarily attributable to a $210 million increase in average balances on commercial loans and receipt of $1.2 million of Paycheck Protection Program (PPP) loan fees. That was offset by a decrease in portfolio average yield due to a decrease in interest rates. Interest income on mortgage loans increased by about $300,000 primarily due to a rise of more than $36 million in average balances on mortgage loans. These increases were also offset by a decrease of about $500,000 in interest income on consumer loans, which can be attributed to both decreases in average balances and average portfolio yield on consumer loans.
The increase in interest and dividend income on taxable securities was due mainly to an increase in average invested balances of $67 million. The decrease in interest income on interest-earning deposits was due mainly to the sharp drop in interest rates on overnight deposits with the average yield on interest-earning deposits declining from 2.22 percent in the third quarter of 2019 to 0.31 percent in this year’s third quarter. The drop in interest expense on deposits was due primarily to the decreases in average interest rates paid on interest-bearing checking, savings, and money-market products in response to the Federal Reserve’s large interest-rate cuts in March.
Chemung Financial posted a net interest margin of 3.2 percent in this year’s third quarter, compared to 3.63 percent in the same quarter last year. Average interest-earning assets increased by more than $320 million in the third quarter, compared to the same period last year. The average yield on interest-earning assets decreased 66 basis points in the third quarter, while the average cost of interest-bearing liabilities fell by 34 basis points, compared to a year earlier.
The banking company took a provision for loan losses totaling about $700,000 in the third quarter, down from $4.4 million in the third quarter of 2019. It said this decrease was primarily due to a $4.2 million commercial credit exposure it faced in the year-ago quarter that it did not have this year.
Chemung Financial produced non-interest income $5.3 million in this year’s third quarter, up almost 8 percent from $5 million for the same period in in 2019.
Non-interest expense in the latest quarter fell slightly to $13.4 million from $13.5 million in the year-ago quarter, led by decreases in pension and other employee benefits, as well as other non-interest expenses — offset by an increase in FDIC insurance costs.
Non-performing loans totaled nearly $16 million at Chemung Financial as of Sept. 30, or 1.02 percent of total loans, compared to $18 million as of last Dec. 31, or 1.38 percent of total loans. The decrease in non-performing loans can mostly be attributed to the charge-off of one large commercial mortgage in the second quarter of 2020.
Chemung Financial explained that as its management evaluated the potential impact of the COVID-19 pandemic on its loan portfolio, management identified what it believes are higher-risk loans through a detailed analysis of industry codes. The banking company determined that an additional provision specifically related to the COVID-19 pandemic was not necessary in the third quarter.
Chemung Financial had total assets of nearly $2.2 billion as of Sept. 30, up 21 percent from $1.8 billion at the end of 2019. The banking company attributed the rise mainly to increases of $229 million in loans, net of deferred fees, $112 million in securities available for sale, at estimated fair value, $18 million in interest-earning deposits in other financial institutions, and $10 million in accrued interest receivable and other assets. That was partially offset by an increase of more than $1 million in allowance for loan losses. The increase in loans was due primarily to the growth of $216 million in commercial loans and $39 million in residential mortgages, offset by a decrease of almost $26 million in consumer loans. Chemung Financial said almost $190 million of the increase in loans was related to the PPP.
On or about Nov. 20, Chemung Canal Trust Company will consolidate two branches, reducing its total from 32 to 30. The Big Flats branch at 437 Maple St. will be consolidated into the nearby office at 29 Arnot Road, Horseheads. The branch located at 1054 State Route 17C in Owego will be consolidated into the nearby branch office at 203 Main St. in Owego.
Established in 1833, Chemung Canal Trust says it is the oldest, locally owned and managed community bank in New York. Chemung Financial is also parent of CFS Group, Inc., a financial-services subsidiary offering non-traditional services including mutual funds, annuities, brokerage services, tax-preparation services and insurance, and Chemung Risk Management, Inc., an insurance company based in Nevada.