CHEMUNG FINANCIAL CORP
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
CHMG$84.75-0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-08.
0000763563-24-000060
Item 2. : Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0000763563-24-000074
Item 2. : Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 185 previous paragraphs and 218 current paragraphs.
92 unchanged; 86 reworded; 30 added; 7 removed; 0 previous and 10 current paragraphs rearranged.
Tables are not compared: 33 previous and 39 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (30)
Current report
Net income for the six months ended June 30, 2024 was $12.0 million, or $2.53 per share, compared to $13.6 million, or $2.87 per share, for the same period in the prior year. Return on average equity for the six months ended June 30, 2024 was 12.37%, compared to 15.43% for the same period in the prior year. The decrease in net income was attributable to a decrease in net interest income and an increase in non-interest expense, offset by decreases in the provision for credit losses and income tax expense, and an increase in non-interest income.
Current report
Net interest income for the second quarter of 2024 decreased $0.8 million, or 4.5%, to $17.8 million compared to the same period in the prior year, due primarily to increases of $4.2 million in interest expense on deposits and $0.2 million in interest expense on borrowed funds, and a decrease of $0.4 million in interest and dividend income on taxable securities, offset by increases of $3.7 million in interest income on loans, including fees and $0.3 million in interest income on interest-earning deposits.
Current report
Interest and dividend income on taxable securities decreased primarily due to a $59.8 million decrease in the average balances of taxable securities, primarily due to paydowns and maturities, compared to the same period in the prior year. Interest income on interest-earning deposits increased due to an increase in average balances, compared to the same period in the prior year.
Current report
Net interest income for the six months ended June 30, 2024 totaled $35.9 million compared to $38.5 million for the same period in the prior year, a decrease of $2.7 million, or 7.0% due primarily to an increase of $11.3 million in interest expense, partially offset by an increase of $8.6 million in interest and dividend income. The increase in interest expense for the first six months of 2024 was primarily attributed to increases of $11.0 million in interest expense on deposits and $0.3 million in interest expense on borrowed funds. The increase in interest and dividend income for the first six months of 2024 was primarily attributed to increases of $8.6 million in interest income on loans, including fees, and $0.4 million in interest income on interest-earning deposits, offset by a decrease of $0.4 million in interest and dividend income on taxable securities.
Current report
The increase in interest expense on deposits was primarily due to an increase in the average balances of $170.9 million of customer time deposits, and a 133 basis points increase in the average interest rates paid on customer time deposits for the first six months of 2024, compared to the same period in the prior year. The increase in average balances of customer time deposits was primarily attributable to the funding of loan growth, as well as a shift in deposit demand towards higher cost account types. The increase in the average interest rates paid on customer time deposits was due primarily to the higher interest rate environment, as well as competitive pressures to attract and retain customer time deposits. The average balances of brokered deposits decreased $23.7 million, and the average interest rates paid on brokered deposits increased 36 basis points, for the first six months of 2024, compared to the same period in the prior year.
Current report
Also contributing to the increase in interest expense on deposits was an increase of $3.9 million in interest expense on savings and money market accounts, due to an increase of 96 basis points in the average interest rates paid, despite a decrease of $45.0 million in the average balances on savings and money market accounts, for the six months ended June 30, 2024, compared to the same period in the prior year. Interest expense paid on interest-bearing checking accounts increased $1.7 million, primarily due a 109 basis points increase in the average interest rates paid, for the six months ended June 30, 2024, compared to the same period in the prior year. The increase in interest expense on borrowed funds was due primarily to a nine basis points increase in the average interest rate paid on borrowed funds, and a $9.1 million increase in average balances of borrowed funds for the current six months, when compared to the same period in the prior year, in order to fund loan growth.
Current report
The increase in interest income on loans, including fees, was mostly attributable to an increase of $148.4 million in the average balances, and a 45 basis points increase in the average yields, of the commercial loan portfolio, primarily due to increases in average interest rates on new loan originations. Average yields on the residential and consumer loan portfolios also increased by 23 basis points and 83 basis points, respectively, for the six months ended June 30, 2024, due to increases on variable rate loans and originations within the indirect auto portfolio at higher interest rates, compared to the same period in the prior year. The increase in interest income on interest-earning deposits was primarily attributed to a $15.7 million increase in the average balances of interest-earning deposits.
Current report
The decrease in interest and dividend income on taxable securities was mostly attributable to a $60.8 million decrease in the average balances of taxable securities for the six months ended June 30, 2024, compared to the same period in the prior year. The decrease in the average balances of taxable securities was mostly attributable to paydowns on securities within the portfolio.
Current report
The average yield on interest-earning assets increased 49 basis points, to 4.69%, while the average cost of interest-bearing liabilities increased 109 basis points, to 2.90% for the six months ended June 30, 2024 compared to the same period in the prior year. Average interest-earning assets increased $88.9 million for the six months ended June 30, 2024 compared to the same period in the prior year. Fully taxable equivalent net interest margin was 2.69% for the six months ended June 30, 2024 compared to 3.00% for the same period in the prior year.
Current report
(3) Annualized.
Current report
The provision for credit losses increased $0.6 million for the second quarter of 2024, compared to the same period in the prior year. The increase was primarily attributable to less favorable changes in FOMC forecasted variables between the first and second quarters of 2024, compared to the favorable changes between the first and second quarters of 2023, a decline in modeled prepayment speeds, and a $0.2 million specific allocation on a commercial and industrial loan. FOMC projections for 2024 year-end U.S. civilian unemployment were unchanged between March and June 2024, while the 2025 year-end projections deteriorated slightly between March and June 2024, from 4.1% to 4.2%. Projections for 2024 and 2025 annual U.S. real GDP growth were unchanged between March and June 2024. 2024 and 2025 projections impacted the model equally for the second quarter of 2024. Total net charge offs increased $0.2 million in the second quarter of 2024, compared to the same period in the prior year.
Current report
The provision for credit losses for the six months ended June 30, 2024, was a credit of $1.2 million compared to a provision of $0.5 million for the same period in the prior year. The $1.7 million decrease in the provision for credit losses in the six months ended June 30, 2024, compared to the same period in the prior year, was primarily due to the annual review and update to the loss drivers used in the Bank's CECL model, which was reflected in the Corporation's allowance for credit losses in the first quarter of 2024. Loss drivers are the economic variables used when making forward looking projections to determine correlations between changes in economic variables and changes in historical loss experience. Recalibration of the loss drivers resulted in a decline in baseline loss rates utilized by the model, however the economic variables used were unchanged.
Current report
Net charge-offs for the three months ended June 30, 2024 were $0.3 million, compared to $0.1 million for the same period in the prior year. Net charge-offs for each of the three months ended June 30, 2024 and June 30, 2023 were primarily concentrated in the consumer indirect auto portfolio.
Current report
Net charge-offs for the six months ended June 30, 2024 were $0.5 million, compared to $0.4 million for the same period in the prior year. Net charge-offs for the six months ended June 30, 2024 were concentrated in the consumer indirect auto portfolio. Net charge-offs for the six months ended June 30, 2023 were primarily attributable to charge-offs in the consumer indirect auto portfolio, and a $0.2 million charge-off of a commercial and industrial loan.
Current report
Changes in Fair Value Equity Investments
Current report
The increase in changes in fair value of equity investments can primarily be attributed to a decline in the market value of a particular asset held by the Corporation during the same period in the prior year.
Current report
The decrease in other non-interest income can primarily be attributed to a decrease in swap fee income during the current period, compared to the same period in the prior year.
Current report
Total non-interest income for the six months ended June 30, 2024 increased $0.4 million compared to the same period in the prior year. The increase was primarily due to increases in WMG fee income and changes in fair value of equity investments, offset by a decrease in interchange revenue from debit card transactions.
Current report
WMG Fee Income
Current report
Changes in Fair Value of Equity Investments
Current report
The increase in the changes in fair value of equity investments was primarily due to an increase in the market value of assets held related to the Corporation's deferred compensation plan, relating to improvements in the financial markets compared to the same period in the prior year. This increase was also attributed to decline in the fair value of a particular equity investment held by the Corporation during the same period in the prior year.
Current report
Interchange Revenue from Debit Card Transactions
Current report
The decrease in interchange revenue from debit card transactions was primarily due to a decrease in client transaction volume compared to the same period in the prior year.
Current report
The decrease in non-compensation expense for the current period, compared to the same period in the prior year, can be primarily attributed to decreases in data processing and loan expenses, offset by increases in marketing and advertising and other non-interest expense. The decrease in data processing for the current period compared to the same period in the prior year was primarily due to a decrease in core processing expenses. The decrease in loan expenses was partially attributable to lower collection-related fees and overall lower origination activity in the current period. Marketing and advertising increased during the current period compared to the same period in the prior year primarily due to a deposit account promotion related to the Bank's 190th anniversary, increased advertising activity in the current period, and consulting engagements. Other non-interest expense increased primarily due to an increase in expenses related to community relations and other miscellaneous expenses.
Current report
Compensation expense
Current report
The increase in compensation expense for the current period, compared to the same period in the prior year, can be primarily attributed to increases in pension and other employee benefits and salaries and wages, offset by a decrease in other components of net periodic pension and postretirement benefits. The increase in pension and other employee benefits was attributable to an increase in healthcare related expenses for the current period, compared to the same period in the prior year. The increase in salaries and wages was primarily due to increases in base salaries and wages, which offset savings realized due to outsourcing, compared to the same period in the prior year. The decrease in other components of net periodic pension and postretirement benefits was primarily due to actuarial adjustments related to the Corporation's pension plans.
Current report
Non-compensation expense
Current report
Income tax expense for the three month periods ended June 30, 2024 and 2023 were $1.3 million and $1.6 million, respectively. The decrease in income tax expense was due primarily to a decrease of $1.6 million in income before income tax expense. The effective income tax rate decreased from 20.4% for the three months ended June 30, 2023 to 20.3% for the three months ended June 30, 2024.
Current report
Income tax expense for the six month periods ended June 30, 2024 and 2023 were $3.3 million and $3.6 million, respectively. The decrease in income tax expense was due primarily to a decrease of $1.8 million in income before income tax expense. The effective income tax rate increased from 21.0% for the six months ended June 30, 2023 to 21.6% for the six months ended June 30, 2024.
Current report
Other Real Estate Owned and Repossessed Vehicles
Removed paragraphs (7)
Previous report
Net interest income for the first quarter ended March 31, 2024 decreased $1.9 million, or 9.3%, to $18.1 million compared to the same period in the prior year, due primarily to increases of $6.8 million in interest expense on deposits, and $0.1 million in interest expense on borrowed funds, offset by increases of $4.9 million in interest income on loans, including fees, and $0.1 million in interest-earning deposits. Interest income on taxable securities was comparable between the first quarters of 2023 and 2024.
Previous report
Interest and dividend income on taxable securities was comparable between the first quarters of 2023 and 2024. The average yield on taxable securities increased 17 basis points, due to an increase in interest rates on variable rate securities. This increase was offset by $61.8 million decrease in the average balance of securities held in the portfolio between the first quarters of 2023 and 2024, primarily due to paydowns and maturities.
Previous report
The provision for credit losses decreased $2.3 million for the first quarter of 2024, compared to the first quarter of 2023. The decrease in provision was primarily attributable to the annual review and update of the loss drivers used in the Bank's CECL model, favorable changes in economic forecasts, and a comparatively smaller increase in loan volume during the current period. The Bank's updated loss drivers resulted in lower loss experience over the historical look back period, however the economic factors used did not change as a result of these updates. FOMC forecasts improved substantially between the first quarters of 2023 and 2024. Forecasted year-end 2023 U.S. unemployment was projected at 4.5% as of March 2023, and year-end 2024 unemployment was projected at 4.0% as of March 2024. U.S annual GDP growth was projected at 0.4% for year-end 2023 as of March 2023, and year-end 2024 U.S. annual GDP growth was projected at 2.1% as of March 2024. 2023 FOMC projections reflected uncertainty concerning the impact of interest rate increases in the wake of multiple regional banks being placed into receivership prior to the FOMC's March 2023 meeting. Loan growth in the first quarter of 2024 totaled $30.9 million, compared to $44.3 million in the first quarter of 2023, resulting in lower volume-related provisioning in the current period.
Previous report
The increase in other non-interest income was primarily due to gains on the transfer of two properties to OREO in the current period.
Previous report
Income tax expense was $2.0 million for each of the three month periods ended March 31, 2024 and 2023. The effective income tax rate for the periods ended March 31, 2024 and 2023 was 22.4% and 21.5%, respectively.
Previous report
^ Includes $108.2 million, $100.4 million, $79.8 million and $47.0 million as of March 31, 2024, December 31, 2023, December 31, 2022, and December 31, 2021, respectively, in the Western New York market.
Previous report
Other Real Estate Owned
Reworded paragraphs (86)
Previous wording
The following is the MD&A of the Corporation in this Quarterly Report on Form 10-Q for the three months ended March 31, 2024. Reference should be made to the accompanying unaudited consolidated financial statements and footnotes, and the Corporation’s 2023 Annual Report on Form 10-K, which was filed with the SEC on March 13, 2024, for an understanding of the following discussion and analysis. See the list of commonly used abbreviations and terms on pages 3–6.
Current wording
The following is the MD&A of the Corporation in this Quarterly Report on Form 10-Q for the three and six months ended June 30, 2024. Reference should be made to the accompanying unaudited consolidated financial statements and footnotes, and the Corporation’s 2023 Annual Report on Form 10-K, which was filed with the SEC on March 13, 2024, for an understanding of the following discussion and analysis. See the list of commonly used abbreviations and terms on pages 3–6.
Previous wording
The MD&A included in this Form 10-Q contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of the Corporation's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. For a discussion of those risks and uncertainties and the factors that could cause the Corporation’s actual results to differ materially from those risks and uncer tainties, see Forward-looking Statements below, in Part I, Item 1A, Risk Factors and on pages 20–31 of the Corporation’s 2023 Form 10-K. For a discussion of the use of non-GAAP financial measures, see pages 63-66 of the Corporation's 2023 Form 10-K, and pages 63-66 in this Form 10-Q.
Current wording
The MD&A included in this Form 10-Q contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of the Corporation's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. For a discussion of those risks and uncertainties and the factors that could cause the
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 economic conditions may lead to further required increases to the allowance; conversely, improvements to economic 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.
Previous wording
As of March 31, 2024 and December 31, 2023, the allowance for credit losses totaled $20.5 million and $22.5 million, respectively. Due to the nature and composition of the Bank's lending activities, 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 March 31, 2024 and December 31, 2023, the allowance for credit losses allocated to the total commercial portfolio was $14.9 million and $17.1 million respectively, or 72.8% and 75.9%, respectively.
Current wording
As of June 30, 2024 and December 31, 2023, the allowance for credit losses totaled $21.0 million and $22.5 million, respectively. Due to the nature and composition of the Bank's lending activities, 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 June 30, 2024 and December 31, 2023, the allowance for credit losses allocated to the total commercial portfolio was $15.4 million and $17.1 million respectively, or 73.2% and 75.9%, respectively.
Previous wording
Changes in the FOMC's median forecasted year over year U.S. civilian unemployment rate and the 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 considers 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 6.20%, to $21.7 million, assuming qualitative adjustment are kept at current levels, as of March 31, 2024.
Current wording
Changes in the FOMC's median forecasted year over year U.S. civilian unemployment rate and the 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 considers all currently available information. An immediate "shock" or increase of 100 basis points in the FOMC's projected rate of U.S. civilian unemployment, and a decrease of 50 basis points in the FOMC's projected rate of U.S. GDP growth would increase the model's total calculated allowance by $0.8 million, or 3.64%, to $21.8 million, assuming qualitative adjustment are kept at current levels, as of June 30, 2024.
Previous wording
In addition to analyzing the Corporation’s results on a reported basis, management uses certain non-GAAP financial measures because it believes these non-GAAP financial measures provide information to investors about the underlying operational performance and trends of the Corporation and, therefore, facilitate a comparison of the Corporation with the performance of other companies. Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by other companies. Refer to pages 63-66 for further explanation and reconciliation of the Corporation’s use of non-GAAP measures.
Current wording
In addition to analyzing the Corporation’s results on a reported basis, management uses certain non-GAAP financial measures because it believes these non-GAAP financial measures provide information to investors about the underlying operational performance and trends of the Corporation, and therefore facilitate a comparison of the Corporation with the performance of other companies. Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by other companies. Refer to pages 77-80 for further explanation and reconciliation of the Corporation’s use of non-GAAP measures.
Previous wording
The following section of the MD&A provides a comparative discussion of the Corporation’s Consolidated Results of Operations on a reported basis for the three months ended March 31, 2024 and 2023. For a discussion of the Critical Accounting Estimates that affect the Consolidated Results of Operations, see pages 38-39 of this Form 10-Q and page 37 of the Corporation’s 2023 Form 10-K.
Current wording
The following section of the MD&A provides a comparative discussion of the Corporation’s Consolidated Results of Operations on a reported basis for the three and six months ended June 30, 2024 and 2023. For a discussion of the Critical Accounting Estimates that affect the Consolidated Results of Operations, see pages 38-39 of this Form 10-Q and pages 47-48 of the Corporation’s 2023 Form 10-K.
Previous wording
Net income for the first quarter of 2024 was $7.1 million, or $1.48 per share, compared to $7.3 million, or $1.54 per share, for the same period in the prior year. Return on average equity for the current quarter was 14.48%, compared to 16.97% for the same period in the prior year. The decrease in net income was due primarily to a decrease in net interest income and an increase in non-interest expense, offset by a decrease in the provision for credit losses, and an increase in non-interest income.
Current wording
Net income for the second quarter of 2024 was $5.0 million, or $1.05 per share, compared to $6.3 million, or $1.33 per share, for the same period in the prior year. Return on average equity for the current quarter was 10.27%, compared to 13.97% for the same period in the prior year. The decrease in net income was attributable to a decrease in net interest income and increases in non-interest expense and the provision for credit losses, offset by a decrease in income tax expense, and an increase in non-interest income.
Previous wording
The increase in interest expense on deposits was due primarily to a 141 basis points increase in the average rates paid on interest-bearing deposits which included brokered deposits, due to the higher interest rate environment and increased competition, and an increase of $134.2 million in the average balance of customer interest-bearing deposits as a result of the increase in average time deposits. The average balance of brokered deposits increased $8.3 million, and the average interest rate paid on brokered deposits increased 50 basis points, compared to the same period in the prior year.
Current wording
The increase in interest expense on deposits was due primarily to a 85 basis points increase in the average interest rate paid on total interest-bearing deposits, which included brokered deposits, due to the higher interest rate environment and increased competition, and an increase of $152.9 million in the average balance of customer interest-bearing deposits, primarily due to an increase in average balances of time deposits. The increase in average balances of customer time deposits was partially due to the continuation of CD campaigns in the current period. The average balance of brokered deposits decreased $55.0 million, and the average interest rate paid on brokered deposits increased 23 basis points, compared to the same period in the prior year.
Previous wording
The increase in interest expense on borrowed funds was primarily due to a 24 basis points increase in the average interest rate paid on borrowed funds, and a $2.4 million increase in the average balances of borrowed funds, compared to the same period in the prior year. The composition of borrowed funds reflected the Corporation's shift to the lower cost funding source of the Federal Reserve Bank Term Funding Program (BTFP), related to a $50.0 million advance in the first quarter of 2024, partially replacing relatively higher cost FHLBNY overnight advances. The average balance of FHLBNY overnight advances decreased $35.8 million compared to the same period in the prior year, and the average interest rate paid on FHLBNY overnight advances increased 55 basis points.
Current wording
The increase in interest expense on borrowed funds was primarily due to a $15.4 million increase in the average balances of borrowed funds, partially offset by a decrease of nine basis points in the average interest rate paid on borrowed funds, compared to the same period in the prior year. The composition of borrowed funds reflected the Corporation's shift to the lower cost, short-term funding sources of the Federal Reserve Bank Term Funding Program (BTFP) and FHLBNY term advances, partially replacing relatively higher cost FHLBNY overnight advances in the current period. The average balance of FHLBNY overnight advances decreased $43.1 million, and the average interest rate paid on FHLBNY overnight advances increased 29 basis points compared to the same period in the prior year.
Previous wording
Interest income on loans, including fees, increased primarily due to a $145.9 million increase in average commercial loan balances, compared to the same period in the prior year, and an increase of 57 basis points in the average yield on commercial loans between these periods, due to the rising interest rate environment. Average consumer loan balances, supported by growth in the indirect auto portfolio, increased $1.9 million, and the average yield on consumer loans increased 90 basis points, primarily due to originations of higher rate indirect auto loans and interest rate increases on variable rate home equity loans. Average balances of residential mortgage loans decreased $7.9 million compared to the same period in the prior year, due to adverse conditions for borrowers in the residential real estate market, while the average yield on residential mortgage loans increased 23 basis points compared to the same period in the prior year.
Current wording
Interest income on loans, including fees, increased primarily due to a $151.0 million increase in average commercial loan balances, compared to the same period in the prior year, and an increase of 33 basis points in the average yield on commercial loans between these periods, due to the rising interest rate environment. Commercial loan growth was primarily concentrated in the Albany region of New York, with additional growth in Western New York. Average consumer loan balances decreased $9.9 million, primarily due to lower indirect auto loan originations in the first half of 2024 compared to the prior year, while the average yield on consumer loans increased 78 basis points, primarily due to originations of higher rate indirect auto loans and interest rate increases on variable rate home equity loans. Average balances of residential mortgage loans decreased $11.4 million compared to the same period in the prior year, due to lower origination activity and an increase in sales of new originations into the secondary market, while the average yield on residential mortgage loans increased 23 basis points compared to the same period in the prior year.
Previous wording
Fully taxable equivalent net interest margin was 2.73% in the first quarter of 2024, compared to 3.14% for the same period in the prior year. Average interest-earning assets increased $88.4 million for the three months ended March 31, 2024 compared to the same period in the prior year. The average yield on interest-earning assets increased 58 basis points to 4.70%, and the average cost of interest-bearing liabilities increased 136 basis points to 2.85%, for the three months ended March 31, 2024, compared to the same period in the prior year, due to the rising rate environment as well as a shift in the overall deposit mix to higher cost deposits.
Current wording
Fully taxable equivalent net interest margin was 2.66% for the second quarter of 2024, compared to 2.87% for the same period in the prior year. Average interest-earning assets increased $89.5 million for the three months ended June 30, 2024 compared to the same period in the prior year. The average yield on interest-earning assets increased 40 basis points to 4.69%, and the average cost of interest-bearing liabilities increased 83 basis points to 2.94%, for the three months ended June 30, 2024, compared to the same period in the prior year, due to the higher rate environment as well as a shift in the overall deposit mix to higher cost 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 three months ended March 31, 2024 and 2023. For the purpose of the table below, nonaccruing 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 tables present certain information related to the Corporation’s average consolidated balance sheets and its consolidated statements of income for the three and six months ended June 30, 2024 and 2023. For the purpose of the tables 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 the volume of average interest-earning assets and interest-bearing liabilities have affected the Corporation’s interest income and interest expense during the three months ended March 31, 2024 and 2023. 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 purpose 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 periods 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.
Current wording
Net interest income can be analyzed in terms of the impact of changes in rates and volumes. The tables below illustrate the extent to which changes in interest rates and the volume of average interest-earning assets and interest-bearing liabilities have affected the Corporation’s interest income and interest expense during the three and six months ended June 30, 2024 and 2023. 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 purpose of these tables, 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 periods 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
Management has established and maintains a methodology for determining and adjusting its allowance for credit losses in conformity with ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, adopted by the Corporation on January 1, 2023. The allowance is based on a combination of quantitative and qualitative analysis and changes in the required allowance are recorded through income as a provision (credit). The quantitative portion of the model is significantly influenced by changes in projected economic conditions, as well as changes in the composition of the numerous loan portfolio segments. Qualitative adjustments reflect the degree to which management anticipates future outcomes could differ from those projected by the quantitative model.
Current wording
Management has established and maintains a methodology for determining and adjusting its allowance for credit losses in conformity with ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, adopted by the Corporation on January 1, 2023. The allowance is based on a combination of quantitative and qualitative analysis and changes in the required allowance are recorded through income as a provision (credit). The quantitative portion of the model is significantly influenced by changes in projected economic conditions, as well as changes in the composition of the numerous loan portfolio segments. Qualitative adjustments reflect the degree to which management anticipates future outcomes may differ from those projected by the quantitative model.
Previous wording
Total non-interest income for the first quarter of 2024 increased $0.2 million compared to the same period in the prior year primarily due to increases in WMG fee income and other non-interest income. The remaining components of non-interest income in the first quarter of 2024 were relatively consistent compared to the same period in the prior year.
Current wording
Total non-interest income for the second quarter of 2024 increased $0.2 million compared to the same period in the prior year primarily due to an increases in WMG fee income and changes in fair value of equity investments, partially offset by a decrease in other non-interest income.
Previous wording
The increase in WMG fee income can primarily be attributed to an increase in assets under management when compared to the same period in the prior year.
Current wording
The increase in WMG fee income can primarily be attributed to an increase in assets under management compared to the same period in the prior year.
Previous wording
Total non-interest expense for the first quarter of 2024 increased $0.9 million compared to the same period in the prior year. The increase was due to increases in total compensation expense and total non-compensation expense. For the three months ended March 31, 2024, non-interest expense to average assets was 2.47%, compared to 2.44% for the same period in the prior year.
Current wording
Total non-interest expense for the second quarter of 2024 increased $0.3 million compared to the same period in the prior year. The increase was due to an increase in total compensation expense, offset by a decrease in non-compensation expense. For the three months ended June 30, 2024, non-interest expense to average assets was 2.38%, compared to 2.41% for the same period in the prior year.
Previous wording
The increase in compensation expense for the current period, compared to the same period in the prior year, can be primarily attributed to increases in pension and other employee benefits, and salaries and wages. The increase in pension and other employee benefits for the current quarter was primarily attributable to an increase in employee healthcare expense, compared to the same period in the prior year. Salaries and wages increased in the current quarter, compared to the same period in the prior year, primarily due to increases in base wages, severance expense, and an increase in the market value of the Corporation's deferred compensation plan.
Current wording
The increase in compensation expense for the current period, compared to the same period in the prior year, can be primarily attributed to increases in pension and other employee benefits and salaries and wages. The increase in pension and other employee benefits for the current quarter was primarily attributable to an increase in employee healthcare expense, compared to the same period in the prior year. Salaries and wages increased in the current period, compared to the same period in the prior year primarily due to increases in base wages and an increase in the market value of the Corporation's deferred compensation plan.
Previous wording
The increase in non-compensation expense for the current period, compared to the same period in the prior year, can be primarily attributed to increases in data processing expense, and professional services, offset by a decrease in other non-interest expense. The increase in data processing expense in the current quarter was primarily attributable to increases in software related expenses, compared to the same period in the prior year. Professional services increased in the current quarter, compared to the same period in the prior year, primarily due to outsourced services related to the realignment of certain back office functions, new strategic consulting arrangements, and fee increases. The decrease in other non-interest expense was primarily attributable to decreases across a majority of other expense categories in the current quarter, compared to the same period in the prior year.
Current wording
The increase in non-compensation expense can primarily be attributed to increases in marketing and advertising and professional services, offset by a decrease in loan expenses. Marketing and advertising increased during the current period compared to the same period in the prior year primarily due to expenditures related to a deposit account promotion related to the Bank's 190th anniversary, and an increase in advertising activity in the current period. Professional services increased in the current period, compared to the same period in the prior year, primarily due to outsourced services related to the realignment of certain back office functions, new strategic consulting arrangements, and fee increases. The decrease in loan expenses was partially attributable to lower collection-related fees and overall lower origination activity.
Previous wording
The following table presents selected financial information at the dates indicated, and the dollar and percent change (dollars in thousands):
Current wording
The following table presents selected financial information as of the dates indicated, and the dollar and percent change (dollars in thousands):
Previous wording
The decrease in investment securities can mostly be attributed to $11.9 million in paydowns and maturities in the securities available for sale portfolio, and a decrease in the fair value of the available for sale portfolio of $5.5 million. FHLB stock decreased $1.4 million due to lower FHLBNY overnight advance borrowing activity.
Current wording
The decrease in investment securities can mostly be attributed to $26.7 million in paydowns and maturities in the securities available for sale portfolio and a decrease in the fair value of the available for sale securities portfolio of $5.3 million.
Previous wording
The increase in loans, net of deferred loan fees, can primarily be attributed to increases of $22.9 million in commercial mortgages, and $15.2 million in commercial and industrial loans, offset by decreases of $6.3 million in indirect consumer loans, and $0.7 million in residential mortgages.
Current wording
The increase in loans, net of deferred loan fees, can primarily be attributed to increases of $31.8 million in commercial mortgages and $26.2 million in commercial and industrial loans, offset by decreases of $12.0 million in indirect consumer loans and $6.4 million in residential mortgages.
Previous wording
The decrease in the allowance for credit losses can primarily be attributed to the annual review and update of loss drivers used in the Bank's CECL model, paydown activity on individually analyzed loans for which specific reserve allocations had previously been made, and favorable changes in forecasted economic variables. The annual update to the loss drivers used in the Bank's CECL model resulted in baseline loss rates that were lower than previous iterations of the model, however the economic variables used to derive loss rates were unchanged. FOMC forecasted U.S. unemployment for year-end 2024 improved from 4.1% in December 2023 to 4.0% in March 2024, while the forecasted U.S. GDP growth rate for year-end 2024 improved from 1.4% in December 2023 to 2.1% in March 2024. Paydown activity on loans individually analyzed resulted in a decrease of $0.3 million in specific reserve allocations.
Current wording
The decrease in the allowance for credit losses can primarily be attributed to the annual review and update of loss drivers used in the Bank's CECL model. The annual update to the loss drivers used in the Bank's CECL model resulted in baseline loss rates that were lower than in previous iterations of the model. This decrease was partially offset by lower modeled prepayment speeds and growth in the loan portfolio. FOMC forecasted economic variables used in the Bank's CECL model were stable between December 2023 and June 2024, with a slight deterioration in 2025 year-end U.S. civilian unemployment rate and improvement in both 2024 and 2025 year-end U.S. real GDP growth.
Previous wording
The increase in other assets can primarily be attributed to increases of $1.3 million in interest rate swap assets, due to an increase in the market value of swaps, and $1.2 million in accrued interest receivable, primarily on loans.
Current wording
The increase in other assets can primarily be attributed to increases of $1.5 million in interest rate swap assets, due to an increase in the market value of swaps, and $1.5 million in deferred tax assets.
Previous wording
The increase in deposits can primarily be attributed to increases of $24.0 million in interest-bearing demand deposit accounts, and $17.1 million in total time deposits, which include customer time deposits and brokered deposits. Customer time deposits increased $33.9 million, while brokered deposits decreased $16.8 million. Insured money market accounts increased $7.6 million, and and non-interest bearing demand deposits increased $3.2 million, respectively. Savings deposits decreased $0.6 million.
Current wording
The decrease in deposits can primarily be attributed to decreases of $34.0 million in non-interest bearing demand deposits and $10.6 million in insured money market deposits. Total time deposits decreased $5.6 million, primarily due to a $73.3 million decrease in brokered deposits, offset by an increase of $67.7 million in customer time deposits. Additionally, savings deposits decreased $0.6 million. These decreases were partially offset by an increase of $37.2 million in interest bearing demand deposits.
Previous wording
The increase in advances and other debt can primarily be attributed to a $50.0 million advance from the Federal Reserve, as the Corporation took advantage of lower interest rates offered by the Bank Term Funding Program (BTFP), offset by a decrease of $31.9 million in FHLBNY overnight borrowings.
Current wording
The increase in advances and other debt can primarily be attributed to a $50.0 million advance from the Federal Reserve Bank Term Funding Program (BTFP), and a $30.0 million short-term advance from the FHLBNY, offset by a decrease of $31.9 million in FHLBNY overnight borrowings.
Previous wording
The increase in other liabilities can primarily be attributed to an increase of $1.2 million in interest rate swap liabilities, primarily due to an increase in the market value of swaps. and accrued interest payable of $1.9 million, primarily on deposits.
Current wording
The increase in other liabilities can primarily be attributed to increases of $1.2 million in interest payable on borrowed funds,$0.9 million in interest payable on deposits, and $1.5 million in interest rate swap liabilities, which was primarily due to an increase in the market value of swaps.
Previous wording
Shareholders’ equity was $197.1 million at March 31, 2024 compared to $195.2 million at December 31, 2023. The increase can primarily be attributed to an increase of $5.6 million in retained earnings, partially offset by an increase in accumulated other comprehensive loss of $4.1 million. The increase in retained earnings can primarily be attributed to net income of $7.1 million, offset by $1.5 million in dividends declared. The increase in accumulated other comprehensive loss can primarily be attributed to a decrease in the fair market value of the available for sale securities portfolio.
Current wording
Shareholders’ equity was $201.2 million at June 30, 2024 compared to $195.2 million at December 31, 2023. The increase can primarily be attributed to an increase of $9.1 million in retained earnings, partially offset by an increase in accumulated other comprehensive loss of $3.9 million. The increase in retained earnings can primarily be attributed to net income of $12.0 million, offset by $2.9 million in dividends declared, during the six months ended June 30, 2024. The increase in accumulated other comprehensive loss can primarily be attributed to a decrease in the fair market value of the available for sale securities portfolio due to unfavorable changes in market interest rates.
Previous wording
The market value of total assets under management or administration in WMG was $2.350 billion at March 31, 2024, including $390.2 million of assets held under management or administration for the Corporation, compared to $2.242 billion at December 31, 2023, including $381.3 million of assets held under management or administration for the Corporation, an increase of $108.0 million, or 4.8%, due to an increase in assets under management, due primarily to improvements in financial markets.
Current wording
The market value of total assets under management or administration in WMG was $2.377 billion as of June 30, 2024, including $412.1 million of assets held under management or administration for the Corporation, compared to $2.242 billion as of December 31, 2023, including $381.3 million of assets held under management or administration for the Corporation, an increase of $134.9 million, or 6.0%, due to an increase in assets under management primarily attributable to improvements in financial markets.
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. Marketable securities are classified as Available for Sale, while investments in local municipal obligations are generally classified as Held to Maturity.
Current 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. Marketable securities are generally classified as Available for Sale, while certain investments in local municipal obligations are classified as Held to Maturity.
Previous wording
The available for sale segment of the securities portfolio totaled $566.0 million at March 31, 2024, a decrease of $18.0 million, or 3.1%, from $584.0 million at December 31, 2023. The decrease can mostly be attributed to $11.9 million in paydowns and maturities, and a decrease in the fair value of the portfolio of $5.5 million. The held to maturity securities portfolio consists of obligations of political subdivisions in the Corporation’s market areas. These securities totaled $0.8 million each at March 31, 2024 and December 31, 2023, respectively.
Current wording
The available for sale segment of the securities portfolio totaled $550.9 million as of June 30, 2024, a decrease of $33.1 million, or 5.7%, from $584.0 million as of December 31, 2023. The decrease can mostly be attributed to $26.7 million in paydowns and maturities, and a decrease in the fair value of the portfolio of $5.3 million. The held to maturity securities portfolio consists of obligations of political subdivisions in the Corporation’s market areas. These securities totaled $0.7 million and $0.8 million as of June 30, 2024 and December 31, 2023, respectively.
Previous wording
Non-marketable equity securities at March 31, 2024 include shares of FRBNY stock and FHLBNY stock, carried at their cost of $1.9 million and $2.2 million, respectively. At December 31, 2023, non-marketable equity securities 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
Non-marketable equity securities as of June 30, 2024 and December 31, 2023 include shares of FRBNY stock and FHLBNY stock, carried at their cost. For each period, FRBNY stock and FHLBNY stock were $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.
Previous wording
The table below presents the Corporation’s loan composition by segment as of the dates indicated, and the dollar and percent change from December 31, 2023 to March 31, 2024 (in thousands, except percentages):
Current wording
The table below presents the Corporation’s loan composition by segment as of the dates indicated, and the dollar and percent change from December 31, 2023 to June 30, 2024 (dollars in thousands):
Previous wording
Portfolio loans totaled $2.004 billion as of March 31, 2024, an increase of $30.9 million, or 1.6%, from $1.973 billion as of December 31, 2023. The increase in loans can primarily be attributed to increases of $22.9 million in commercial mortgage loans and $15.2 million in commercial and industrial loans, and offset by a decrease of $6.3 million in indirect consumer loans.
Current wording
Portfolio loans totaled $2.011 billion as of June 30, 2024, an increase of $38.8 million, or 2.0%, from $1.973 billion as of December 31, 2023. The increase in loans can primarily be attributed to increases of $31.8 million in commercial mortgage loans and $26.2 million in commercial and industrial loans, offset by decreases of $12.0 million in indirect consumer loans and $6.4 million in residential mortgages.
Previous wording
Commercial real estate lending continues to be a 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. As of March 31, 2024, total commercial real estate loans, inclusive of construction loans, in the Albany and Buffalo regions have grown $20.9 million and $1.1 million from December 31, 2023, respectively. Growth in commercial and industrial loans between March 31, 2024 and December 31, 2023 was also concentrated in the Albany and Buffalo regions, which grew $8.5 million and $6.8 million, respectively.
Current wording
Commercial lending continues to be a primary driver of asset growth for the Corporation, as demand for project financing remains robust, particularly in the Albany region. As of June 30, 2024, total commercial real estate loans, inclusive of construction loans, in the Capital region grew by $21.1 million. Commercial real estate loan growth in the Southern Tier of New York and Western New York regions were $5.5 million and $5.1 million, respectively. Growth in commercial and industrial loans between December 31, 2023 and June 30, 2024 was also concentrated in the Capital region, growing by $16.9 million. Commercial and industrial loan growth in the Southern Tier of New York and Western New York regions were $6.3 million and $2.9 million, respectively.
Previous wording
Residential mortgage loans totaled $277.2 million as of March 31, 2024, a decrease of $0.7 million, or 0.3%, when compared to December 31, 2023. During the three months ended March 31, 2024, $7.1 million of residential mortgages were originated, of which $1.6 million were sold in the secondary market to Freddie Mac. Demand for residential mortgage originations continues to be weak as a result of the higher interest rate environment and low market mobility due to many borrowers securing lower interest rates in prior years. Indirect consumer loans totaled $204.1 million as of March 31, 2024, a decrease of $6.3 million, or 3.0%, from December 31, 2023 as consumer demand for automobiles weakened during the current period, as well as a shift in the composition of auto originations towards lower-cost used vehicles.
Current wording
Residential mortgage loans totaled $271.6 million as of June 30, 2024, a decrease of $6.4 million, or 2.3%, compared to December 31, 2023. During the six months ended June 30, 2024, $13.0 million in residential mortgages were originated, of which $4.3 million were sold in the secondary market to Freddie Mac and FHLBNY. Demand for residential mortgage originations continues to be weaker as a result of the higher interest rate environment and low market mobility due to many borrowers securing lower interest rates in prior years. Indirect consumer loans totaled $198.4 million as of June 30, 2024, a decrease of $12.0 million, or 5.7%, from December 31, 2023 as consumer demand for auto originations continued to favor lower-cost used vehicles and turnover in the portfolio exceeded total origination activity.
Previous wording
The table below presents the Corporation’s outstanding loan balance by bank division (in thousands):
Current wording
The table below presents the Corporation’s outstanding loan balances by Bank division (in thousands):
Previous wording
All loans, excluding those originated by the Capital Bank division.
Current wording
All loans, excluding those originated by the Capital Bank and Canal Bank divisions.
Previous wording
Commercial real estate lending represented the largest portion of the Corporation's loan portfolio as of March 31, 2024 and December 31, 2023. 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 to the Consolidated Financial Statements. As of March 31, 2024 and December 31, 2023, total commercial real estate loans totaled $1.146 billion and $1.123 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 June 30, 2024 and December 31, 2023. 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 to the Consolidated Financial Statements. As of June 30, 2024 and December 31, 2023, total commercial real estate loans totaled $1.155 billion and $1.123 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.
Showing the first 40 of 86 pairs. Open the source sections for the rest.
Rearranged current paragraphs (10)
Current report — wording carried from elsewhere
Corporation’s actual results to differ materially from those risks and uncerta inties, see Forward-looking Statements below, in Part I, Item 1A, Risk Factors, and on pages 20–31 of the Corporation’s 2023 Form 10-K. For a discussion of the use of non-GAAP financial measures, see pages 63-66 of the Corporation's 2023 Form 10-K, and pages 77-80 in this Form 10-Q.
Current report — wording carried from elsewhere
The following table presents net interest income for the periods indicated, and the dollar and percent change (in thousands):
Current report — wording carried from elsewhere
(1) Net interest rate spread is the difference in the average yield on interest-earning assets less the average rate on interest-bearing liabilities.
Current report — wording carried from elsewhere
(2) Net interest margin is the ratio of fully taxable equivalent net interest income divided by average interest-earning assets.
Current report — wording carried from elsewhere
(4) Corporation adopted CECL as of January 1, 2023.
Current report — wording carried from elsewhere
The following table presents non-interest income for the periods indicated, and the dollar and percent change (in thousands):
Current report — wording carried from elsewhere
The increase in WMG fee income can primarily be attributed to an increase in assets under management compared to the same period in the prior year.
Current report — wording carried from elsewhere
The following table presents non-interest expense for the periods indicated, and the dollar and percent change (in thousands):
Current report — wording carried from elsewhere
Total non-interest expense for the six months ended June 30, 2024 increased $1.2 million compared to the same period in the prior year. The increase was due to increases in total compensation expense and total non-compensation expense. For each of the six months ended June 30, 2024 and 2023, non-interest expense to average assets was 2.42%.
Current report — wording carried from elsewhere
The following table presents income tax expense and the effective tax rate for the periods indicated, and the dollar and percent change (in thousands):