CHEMUNG FINANCIAL CORP
For the period ended Sep 30, 2024. Filed Nov 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.
Sep 30, 2024 · Filed Nov 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 2024-06-30; filed 2024-08-07.
0000763563-24-000074
Item 2. : Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0000763563-24-000079
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 218 previous paragraphs and 219 current paragraphs.
126 unchanged; 87 reworded; 6 added; 4 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 39 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 (6)
Current report
The provision for credit losses increased $0.1 million for the third quarter of 2024, compared to the same period in the prior year. The increase was primarily attributable to unfavorable changes in FOMC forecasted variables in the third quarter of 2024, compared to favorable changes to forecasts in the third quarter of 2023, as well as a decline in modeled prepayment speeds. This increase was partially offset by a decrease of $0.3 million in net charge offs in the third quarter of 2024, compared to the third quarter of 2023.
Current report
The decrease in other non-interest income can primarily be attributed to the recognition of the employee retention tax credit (ERTC) in the third quarter of 2023.
Current report
Other Non-Interest Income
Current report
The decrease in other non-interest income can primarily be attributed to the recognition of the employee retention tax credit (ERTC) in the third quarter of 2023.
Current report
The increase in non-compensation expense for the current period, compared to the same period in the prior year, was primarily due to increases in other non-interest expense and loan expenses. The increase in other non-interest expense was primarily due to an increase in supplies and postage expenses, and losses recognized on the sale of repossessed vehicles in the current quarter. The increase in loan expenses can be primarily attributed to legal expenses related to various loan transactions.
Current report
The increase in non-compensation expense was primarily due to increases in other non-interest expense, marketing and advertising, net occupancy expense, and data processing expense. The increase in other non-interest expense was due to modest increases amongst most expense categories, including supplies and postage expense, charitable donations and corporate travel, when compared to the same period in the prior year. Marketing and advertising expenses 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, CD campaigns, and an increase in advertising activity in the current period. The increase in net occupancy expense was primarily due to an increase in building maintenance and property insurance expenses, when compared to the same period in the prior year. The increase in data processing expenses was primarily due to the addition of various new contracts and an increase in cybersecurity software expense, offset by a decrease in certain software maintenance and processing expenses, when compared to the same period in the prior year.
Removed paragraphs (4)
Previous 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.
Previous 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.
Previous 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.
Previous report
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.
Reworded paragraphs (87)
Previous 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.
Current wording
The following is the MD&A of the Corporation in this Quarterly Report on Form 10-Q for the three and nine months ended September 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
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 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 78-81 in this Form 10-Q.
Previous 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.
Current wording
As of September 30, 2024 and December 31, 2023, the allowance for credit losses totaled $21.4 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 September 30, 2024 and December 31, 2023, the allowance for credit losses allocated to the total commercial portfolio was $15.7 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 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.
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 $1.3 million, or 6.2%, to $22.8 million as of September 30, 2024, assuming qualitative adjustments are kept at current levels.
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 77-80 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 78-81 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 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.
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 nine months ended September 30, 2024 and 2023. For a discussion of the Critical Accounting Estimates that affect the Consolidated Results of Operations, see pages 47-48 of this Form 10-Q and page 37 of the Corporation’s 2023 Form 10-K.
Previous 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.
Current wording
Net income for the third quarter of 2024 was $5.7 million, or $1.19 per share, compared to $7.6 million, or $1.61 per share, for the same period in the prior year. Return on average equity for the current quarter was 10.81%, compared to 16.89% for the same period in the prior year. The decrease in net income was attributable to a decrease in non-interest income, an increase in non-interest expense, and an increase in the provision for credit losses, offset by an increase in net interest income and a decrease in income tax expense.
Previous wording
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 wording
Net income for the nine months ended September 30, 2024 was $17.8 million, or $3.72 per share, compared to $21.2 million, or $4.48 per share, for the same period in the prior year. Return on average equity for the nine months ended September 30, 2024 was 11.82%, compared to 15.93% for the same period in the prior year. The decrease in net income was attributable to decreases in net interest income and non-interest income, and an increase in non-interest expense, offset by decreases in the provision for credit losses and income tax expense.
Previous wording
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 wording
Net interest income for the third quarter of 2024 increased $0.4 million, or 2.1%, to $18.4 million compared to the same period in the prior year, due primarily to increases of $3.6 million in interest income on loans, including fees and $0.3 million in interest income on interest-earning deposits, partially offset by increases of $2.3 million in interest expense on deposits and $0.7 million in interest expense on borrowed funds, and a decrease of $0.5 million in interest and dividend income on taxable securities.
Previous 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.
Current wording
Interest income on loans, including fees, increased to $28.6 million for the three months ended September 30, 2024 from $25.0 million for the same period in the prior year. Interest income on loans, including fees, increased primarily due to a $134.3 million increase in average commercial loan balances, compared to the same period in the prior year, and an increase of 36 basis points in the average yield on commercial loans between these periods. The increase in the average balances of commercial loans was primarily due to year over year growth in both commercial and industrial and commercial real estate loan balances, while the increase in the average yield was primarily due to higher origination yields in 2024. Average balances of residential mortgage loans decreased $9.2 million for the three months ended September 30, 2024, compared to the same period in the prior year, primarily due to an increase in sales of new originations into the secondary market, while the average yield on residential mortgage loans increased 36 basis points for the three months ended September 30, 2024, compared to the same period in the prior year due to the higher interest rate environment. Average consumer loan balances decreased $13.9 million for the three months ended September 30, 2024, compared to the same period in the prior year, primarily due to lower indirect auto loan origination activity during 2024, while the average yield on consumer loans increased 60 basis points, primarily due to runoff of older vintage indirect auto loans, replaced by higher yielding new originations. Interest income on interest-earning deposits increased primarily due to a $21.2 million increase in the average balances of interest-earning deposits for the three months ended September 30, 2024 compared to the same period in the prior year.
Previous 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.
Current wording
Interest expense on deposits increased to $13.0 million for the three months ended September 30, 2024 from $10.7 million for the same period in the prior year. The increase in interest expense on deposits was due primarily to a 44 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 $175.6 million in the average balance of customer interest-bearing deposits, primarily due to an increase in average balances of customer time deposits. Both the increase in the average interest rate paid and the average balances of customer interest-bearing deposits were primarily attributable to CD campaigns throughout 2024, as well as a general shift in the deposit mix towards higher cost accounts. The average balances of brokered deposits decreased $123.7 million, while the average interest rate paid on brokered deposits increased nine basis points, compared to the same period in the prior year. The average balances of brokered deposits decreased primarily due to the utilization of the Bank Term Funding Program (BTFP) and FHLBNY term advances in the current quarter, which were not utilized in the same period in the prior year, as well as lower loan growth during the current quarter, compared to the same period in the prior year.
Previous 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.
Current wording
Interest expense on borrowed funds increased to $1.0 million for the three months ended September 30, 2024 from $0.3 million for the same period in the prior year. The increase in interest expense on borrowed funds was primarily due to a $54.8 million increase in the average balances of borrowed funds, partially offset by a decrease of 17 basis points in the average interest rate paid on borrowed funds for the three months ended September 30, 2024, 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 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 $17.3 million, and the average interest rate paid on FHLBNY overnight advances decreased 47 basis points for the three months ended September 30, 2024, compared to the same period in the prior year.
Previous wording
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 wording
Interest and dividend income on taxable securities decreased to $3.1 million for the three months ended September 30, 2024 from $3.5 million for the same period in the prior year. Interest and dividend income on taxable securities decreased primarily due to a $57.6 million decrease in the average balances of taxable securities for the three months ended September 30, 2024, primarily due to paydowns and maturities, compared to the same period in the prior year.
Previous 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.
Current wording
Fully taxable equivalent net interest margin was 2.72% for the third quarter of 2024, compared to 2.73% for the same period in the prior year. Average interest-earning assets increased $73.0 million for the three months ended September 30, 2024 compared to the same period in the prior year. The average yield on interest-earning assets increased 38 basis points to 4.78%, and the average cost of interest-bearing liabilities increased 50 basis points to 2.97%, for the three months ended September 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
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 wording
Net interest income for the nine months ended September 30, 2024 totaled $54.2 million compared to $56.6 million for the same period in the prior year, a decrease of $2.3 million, or 4.1% due primarily to an increase of $14.2 million in interest expense, partially offset by an increase of $11.9 million in interest and dividend income. The increase in interest expense for the first nine months of 2024 was primarily attributed to increases of $13.3 million in interest expense on deposits and $1.0 million in interest expense on borrowed funds. The increase in interest and dividend income for the first nine months of 2024 was primarily attributed to increases of $12.2 million in interest income on loans, including fees, and $0.6 million in interest income on interest-earning deposits, offset by a decrease of $0.9 million in interest and dividend income on taxable securities.
Previous wording
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 wording
Interest expense on deposits increased to $37.9 million for the first nine months of 2024 from $24.6 million for the same period in the prior year. The increase in interest expense on deposits was primarily due to an increase in the average balances of $171.2 million in customer time deposits, and a 119 basis points increase in the average interest rates paid on customer time deposits for the first nine 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 CD campaigns throughout 2024, 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 $57.7 million, while the average interest rates paid on brokered deposits increased 26 basis points, for the first nine months of 2024, compared to the same period in the prior year.
Previous wording
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 wording
Also contributing to the increase in interest expense on deposits was an increase of $4.5 million in interest expense on savings and money market accounts, due to an increase of 77 basis points in the average interest rates paid, despite a decrease of $38.5 million in the average balances of savings and money market accounts, for the nine months ended September 30, 2024, compared to the same period in the prior year. Interest expense paid on interest-bearing demand deposits increased $2.2 million, primarily due to an 89 basis points increase in the average interest rates paid, for the nine months ended September 30, 2024, compared to the same period in the prior year. Interest expense on borrowed funds increased to $2.9 million for the first nine months of 2024 from $1.9 million for the same period in the prior year. The increase in interest expense on borrowed funds was due primarily to a five basis points increase in the average interest rate paid on borrowed funds, and a $24.4 million increase in the average balances of borrowed funds for the current nine months, when compared to the same period in the prior year, to fund loan growth.
Previous wording
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 wording
Interest income on loans, including fees, increased to $83.3 million for the first nine months of 2024 from $71.1 million for the same period in the prior year. The increase in interest income on loans, including fees, was mostly attributable to an increase of $143.6 million in the average balances of commercial loans, and a 42 basis points increase in the average yield of the commercial loan portfolio, primarily due to increases in average interest rates on new loan originations. Average yields on the residential mortgage and consumer loan portfolios also increased by 27 basis points and 75 basis points, respectively, for the nine months ended September 30, 2024, The increase in average yield on the residential mortgage loan portfolio was primarily due to higher origination yields during 2024, while the increase in average yield on the consumer loan portfolio was primarily attributable to rate increases on variable rate home equity products, and the relatively fast turnover rate within the indirect auto portfolio and higher originations yields during 2024. The increase in interest income on interest-earning deposits was primarily attributed to a $17.6 million increase in the average balances of interest-earning deposits.
Previous wording
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 wording
Interest and dividend income on taxable securities decreased to $9.9 million for the first nine months of 2024 from $10.8 million for the same period in the prior year. The decrease in interest and dividend income on taxable securities was mostly attributable to a $59.7 million decrease in the average balances of taxable securities for the nine months ended September 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 available for sale portfolio.
Previous wording
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 wording
Fully taxable equivalent net interest margin was 2.70% for the nine months ended September 30, 2024 compared to 2.91% for the same period in the prior year. Average interest-earning assets increased $83.5 million for the nine months ended September 30, 2024 compared to the same period in the prior year. The average yield on interest-earning assets increased 45 basis points, to 4.72%, while the average cost of interest-bearing liabilities increased 89 basis points, to 2.92% for the nine months ended September 30, 2024 compared to the same period in the prior year.
Previous 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.
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 nine months ended September 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 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.
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 nine months ended September 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
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 wording
The provision for credit losses for the nine months ended September 30, 2024 was a credit of $0.6 million, compared to a provision of $1.0 million for the same period in the prior year. The $1.6 million decrease in the provision for credit losses in the nine months ended September 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, partially offset by unfavorable changes in economic forecasts and declines in modeled prepayment speeds. 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.
Previous wording
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 wording
Net charge-offs for the three months ended September 30, 2024 were $0.1 million, compared to $0.4 million for the same period in the prior year. Net charge-offs for each of the three months ended September 30, 2024 and 2023 were primarily concentrated in the consumer indirect auto portfolio.
Previous wording
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 wording
Net charge-offs for the nine months ended September 30, 2024 were $0.6 million, compared to $0.8 million for the same period in the prior year. Net charge-offs for the nine months ended September 30, 2024 were concentrated in the consumer indirect auto portfolio. Net charge-offs for the nine months ended September 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.
Previous 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.
Current wording
Total non-interest income for the third quarter of 2024 decreased $1.9 million compared to the same period in the prior year, primarily due to a decrease in other non-interest income, partially offset by increases in WMG fee income and changes in fair value of equity investments.
Previous 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.
Current wording
The increase in WMG fee income can primarily be attributed to an increase in the market value of total assets under management or administration and fee rate increases effective in the third quarter of 2024.
Previous wording
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 wording
The increase in changes in fair value of equity investments can primarily be attributed to an increase in the market value of assets held for the Corporation's deferred compensation plan.
Previous wording
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 wording
Total non-interest income for the nine months ended September 30, 2024 decreased $1.5 million compared to the same period in the prior year. The decrease was primarily due to decreases in other non-interest income and interchange revenue from debit card transactions, partially offset by increases in WMG fee income and changes in fair value of equity investments.
Previous wording
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 wording
The decrease in interchange revenue from debit card transactions was primarily due to a decrease in client transaction volume during the nine months ended September 30, 2024, compared to the same period in the prior year.
Previous 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.
Current wording
The increase in WMG fee income can primarily be attributed to an increase in the market value of total assets under management or administration and fee rate increases effective in the third quarter of 2024.
Previous wording
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 wording
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, related to improvements in the financial markets during the nine months ended September 30, 2024, compared to the same period in the prior year. The increase was also partially due to a decline in the fair value of a particular equity investment held by the Corporation during the same period in the prior year.
Previous 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.
Current wording
Total non-interest expense for the third quarter of 2024 increased $0.8 million compared to the same period in the prior year. The increase was due to increases in total compensation expense and non-compensation expense. For the three months ended September 30, 2024, non-interest expense to average assets was 2.39%, compared to 2.33% 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 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.
Current wording
The increase in compensation expense for the current period, compared to the same period in the prior year, was primarily due to an increase in salaries and wages, partially offset by a decrease in pension and other employee benefits. The increase in salaries and wages can be primarily attributed to an increase in base salaries, including additional staffing for the Corporation's newly opened Western New York regional banking center, as well as an increase in the market value of the assets held for the Corporation's deferred compensation plan. The decrease in pension and other employee benefits can be primarily attributed to a decrease in employee healthcare expenses in the current quarter.
Previous wording
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 wording
Total non-interest expense for the nine months ended September 30, 2024 increased $2.0 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 nine months ended September 30, 2024 and 2023, non-interest expense to average assets was 2.41% and 2.39%, respectively.
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, 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 wording
The increase in compensation expense for the current period, compared to the same period in the prior year, was primarily due to increases in salaries and wages and pension and other employee benefits, offset by a decrease in other components of net periodic pension and postretirement benefits. The increase in salaries and wages included additional staffing for the Corporation's newly opened Western New York regional banking center, as well as an increase in the market value of the assets held for the Corporation's deferred compensation plan, which offset savings realized due to outsourcing, compared to the same period in the prior year. The increase in pension and other employee benefits was primarily attributable to an increase in employee healthcare expenses for the current period, 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.
Previous wording
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 wording
Income tax expense for the three month periods ended September 30, 2024 and 2023 were $1.5 million and $2.1 million, respectively. The decrease in income tax expense was due primarily to a decrease of $2.5 million in income before income tax expense. The effective income tax rate decreased from 21.2% for the three months ended September 30, 2023 to 20.9% for the three months ended September 30, 2024.
Previous wording
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 wording
Income tax expense for the nine month periods ended September 30, 2024 and 2023 were $4.8 million and $5.7 million, respectively. The decrease in income tax expense was due primarily to a decrease of $4.3 million in income before income tax expense. The effective income tax rate increased from 21.1% for the nine months ended September 30, 2023 to 21.4% for the nine months ended September 30, 2024.
Previous 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.
Current wording
The decrease in investment securities can mostly be attributed to $42.3 million in paydowns and maturities in the securities available for sale portfolio, primarily attributable to paydowns on mortgage-backed securities and SBA pooled-loan securities, and an increase in the fair value of the available for sale securities portfolio of $14.7 million, due to favorable changes in interest rates.
Previous 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.
Current wording
The increase in loans, net of deferred loan fees, can primarily be attributed to increases of $52.0 million in commercial mortgages and $24.9 million in commercial and industrial loans, offset by decreases of $20.9 million in indirect consumer loans and $3.9 million in residential mortgages.
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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.