Chemung in N.Y. discloses exposure to loan default

Chemung Financial in Elmira, N.Y., has disclosed its exposure to a loan participation.

The $1.7 billion-asset company said in a regulatory filing Thursday that it has a $4.2 million participating interest in a $36 million commercial credit that went into default as a result of “potentially fraudulent activity.” The loan is secured by business assets.

Chemung said that, while it is evaluating the situation, it believes its third-quarter net income “will be adversely affected.”

Chemung provided no other information on the loan, but the exposure resembles a credit issue disclosed earlier this week by Pioneer Bancorp in Albany, N.Y. The $1.4 billion-asset Pioneer disclosed that it has $16 million in lending exposure to the unnamed client.

Pioneer’s exposure also includes about $19 million of deposit activity.