Financial Analysis and Rating of Chemung Financial Corporation
Ratings allocated by KBRA to Chemung Financial Corporation
Overview:In this report, we present an analysis of Chemung Financial Corporation's financial standing, focusing on its liquidity, earnings, and capital position, as well as the ratings assigned by KBRA.
- Liquidity:Chemung Financial Corporation shows a conservative approach to liquidity management, with a loan-to-deposit ratio hovering in the low-to-mid 80% range, ensuring a robust core deposit funding mix. A substantial 26% of total deposits come from non-interest-bearing accounts, which helps keep deposit costs at a reasonable 1.83% in Q1 of 2025[5].
- Earnings:Core earnings at Chemung Financial Corporation are supported by a consistent stream of non-spread revenue, largely derived from its wealth management division, which manages assets totaling $2.2 billion. Nonetheless, earnings capacity is not expected to see substantial growth until commercial lending initiatives in expansion markets begin to scale[3]. The company registers a strong fee income, contributing 23% of total revenues, though NIM have regularly underperformed peers due to a focus on lower-yielding loans[3].
- Capital Position:The company's capital reserves are fortified, with a CET1 ratio consistently surpassing the 11.5% mark, thanks to a low-risk weight asset density. However, an underwater AFS securities portfolio worth $60 million affects the TCE ratio, which measures around 7.4% as of Q1 2025. Excluding the AOCL impact, the TCE ratio would significantly improve, outpacing the rated peer group average[3].
KBRA RatingsKBRA has bestowed the following ratings on Chemung Financial Corporation:
- Senior Unsecured Debt Rating: BBB
- Subordinated Debt Rating: BBB-
- Short-term Debt Rating: K3
For its subsidiary, Chemung Canal Trust Company, the corresponding ratings are:
- Deposit and Senior Unsecured Debt Rating: BBB+
- Subordinated Debt Rating: BBB
- Short-term Deposit and Debt Rating: K2
The long-term ratings outlook remains Stable, indicative of the company's secure funding base and prudent liquidity management[5].
[5] Business Wire[3] KBRA
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- The conservative approach to liquidity management by Chemung Financial Corporation, as evident in the low-to-mid 80% range of their loan-to-deposit ratio, extends to cloud computing as they ensure a robust core deposit funding mix similar to data storage, with 26% of total deposits coming from non-interest-bearing accounts, reminiscent of databases with minimal maintenance costs.
- The earnings capacity of Chemung Financial Corporation with a stream of non-spread revenue, primarily from their wealth management division, sees potential growth parallel to news agencies seeking diversified revenue streams, as commercial lending initiatives in expansion markets begin to scale, similar to digital subscriptions and advertising.
- The company's focus on low-yielding loans, resulting in underperforming Net Interest Margin (NIM), is comparable to the banking-and-insurance industry's trend of providing affordable services to boost market penetration, aiming to cater to a broader customer base within the finance industry, as seen in cloud service providers offering low-cost storage solutions.
