ELMIRA, N.Y., Oct. 18, 2019 (GLOBE NEWSWIRE) -- Chemung Financial Corporation (the “Corporation”) (Nasdaq: CHMG), the parent company of Chemung Canal Trust Company (the “Bank”), today reported net income of $2.0 million, or $0.40 per share, for the third quarter of 2019, compared to $6.9 million, or $1.43 per share, for the third quarter of 2018.  The primary reason for the decrease in net income for the third quarter of 2019 as compared to the same period in the prior year was an increase in the provision for loan losses attributed to a specific impairment of $4.2 million related to the previously disclosed participation interest in a commercial credit.

Anders M. Tomson, Chemung Financial Corporation CEO, stated:

“The results for the 3rd quarter were materially impacted by the $4.2 million participation loan impairment highlighted in our 8-K dated September 12, 2019.  We continue to work with law enforcement and the lead bank in an attempt to seek recovery from the borrower.  The net results for the quarter overshadow our strong core earnings performance. Net interest income for the third quarter increased from the prior quarter and our interest margin remains strong at 3.63%, reflective of our low 60 basis point cost of interest bearing deposits. Our efficiency ratio improved from the second quarter, as did our  non-interest expense to average assets ratio. While we are all disappointed in our credit events this year, we believe that they are not a reflection of the overall quality of our loan portfolio. We remain laser focused on our longer term tactical and strategic plan and committed to our high touch community banking service model while continuing to grow tangible book value per share and capital.“

Third Quarter Highlights1:

  • Total shareholders’ equity increased $17.0 million, or 9.9%.
     
  • Tangible book value per share increased to $32.69.
     
  • Dividends declared during the second quarter remained at $0.26 per share.             

Balance sheet comparisons are calculated for June 30, 2019 versus December 31, 2018. 

3rd Quarter 2019 vs 3rd Quarter 2018

Net Interest Income:

Net interest income increased by less than $0.1 million, or 0.4%, to $15.1 million for the current quarter compared to the same period in the prior year, due primarily to an increase of $0.7 million in interest and dividend income and a decrease of $0.2 million in interest expense on borrowed funds, offset by a $0.6 million increase in total interest expense.  Interest and fees from loans increased $0.1 million, interest from taxable securities increased $0.1 million, and interest from interest-earning deposits increased $0.4 million in the third quarter of 2019 as compared to the same period in the prior year.  Interest expense on deposits increased $0.8 million, while interest expense on borrowed funds decreased $0.2 million in the third quarter of 2019 when compared to the same period in the prior year.  Fully taxable equivalent net interest margin was 3.63% in the third quarter of 2019, compared with 3.71% for the same period in the prior year.  The average yield on interest-earning assets increased 7 basis points, while the average cost of interest-bearing liabilities increased 22 basis points, compared to the same period in the prior year.  Average interest-earning assets increased $40.7 million, compared to the same period in the prior year.  The increase in interest and dividend income for the current quarter can be mostly attributed to average annualized yield increases of 12 basis points on commercial loans, 25 basis points on consumer loans, and 23 basis points on taxable securities, due to rising interest rates, along with a $74.1 million increase in the average balance of interest-earning deposits, compared to the same period in the prior year.  The increase in interest expense for the current quarter can be mostly attributed to an increase in interest rates on average interest-bearing deposits, including promotional rates on time deposits, offset by a $29.1 million decrease in the average balance of FHLB advances, other debt and repurchase agreements.

Non-Interest Income:

Non-interest income for the current quarter was $5.0 million compared with $7.4 million for the same period in the prior year, a decrease of $2.4 million, or 32.9%.  The decrease can be mostly attributed to a decrease of $2.2 million in the change in fair value of equity investments.  The decrease was due primarily to an increase in the fair value of Visa Class B shares in the third quarter of 2018, which were then subsequently sold during the third quarter of 2018.

Non-Interest Expense:

Non-interest expense for the current quarter was $13.5 million compared with $13.4 million for the same period in the prior year, an increase of $0.1 million, or 0.7%.  The increase can be mostly attributed to increases of $0.2 million in salaries and wages, $0.2 million in pension and other employee benefits, $0.1 million in furniture and equipment expenses, and a $0.3 million reduced credit in other components of net periodic pension and post-retirement benefits, offset by decreases of $0.2 million in net occupancy expense, and $0.3 million in FDIC insurance expense.  The increase in salaries and wages can be mostly attributed to annual merit increases. The increase in pension and other employee benefits was due to increased health care costs. The increase in furniture and equipment expenses was due to the timing of various projects. The decrease in net occupancy expense was due primarily to the closure of two branches in 2019.  The decrease in FDIC insurance expense was primarily due to the receipt of a $0.2 million credit related to the Deposit Insurance Fund’s (DIF) minimum reserve ratio assessment. 

Income Tax Expense:

Income tax expense for the current quarter was $0.2 million compared with $1.8 million for the same period in the prior year.  The decrease in income tax expense was due primarily to a decrease of $6.6 million in income before income tax expense for the third quarter of 2019 as compared to the same period in the prior year.  The effective income tax rate decreased from 20.6% for the third quarter of 2018 to 8.3% for the third quarter of 2019.

3rd Quarter 2019 vs 2nd Quarter 2019

Net Interest Income:

Net interest income increased by less than $0.1 million, or 0.3%, to $15.1 million compared to the prior quarter.  Interest and fees from loans increased $0.1 million and interest and dividend income from investment securities increased $0.1 million.  Interest expense on deposits increased $0.1 million due primarily to an increase of $14.5 million in the average balance of time deposits, along with a seven basis points increase in the average cost of time deposits due to promotional rates on time deposits.  Fully taxable equivalent net interest margin was 3.63% in the third quarter of 2019, a decrease of six basis points compared with 3.69% for the prior quarter.  Average interest-earning assets increased $11.6 million in the third quarter of 2019, while the average yield on interest-earning assets decreased four basis points compared to the prior quarter.   The average cost of interest-bearing liabilities increased three basis points in the third quarter of 2019, compared to the prior quarter.

Non-Interest Income:

Non-interest income for the current quarter was $5.0 million compared with $5.1 million for the prior quarter, a decrease of $0.1 million, or 2.6%.  The decrease in non-interest income was due primarily to a $0.2 million decrease in WMG fee income.  The decrease in WMG fee income can be mostly attributed to a decrease in fees from terminating trusts and a decrease in tax preparation fees.

Non-Interest Expense:

Non-interest expense for the current quarter was $13.5 million compared with $13.8 million for the prior quarter, a decrease of $0.3 million, or 2.2%.  The decrease can be mostly attributed to decreases of $0.2 million in FDIC insurance expense and $0.2 million in other non-interest expense, offset by an increase of $0.1 million in furniture and equipment expense.  The decrease in FDIC insurance expense was primarily due to the receipt of a $0.2 million credit related to the Deposit Insurance Fund’s (DIF) minimum reserve ratio assessment.  The decrease in other non-interest expense can be mostly attributed to a decrease in bank sponsorships of $0.1 million compared to the prior quarter. The increase in furniture and equipment expense was related to the timing of various projects.

Income Tax Expense:

Income tax expense for the current quarter was $0.2 million compared with $1.2 million for the prior quarter, a decrease of $1.1 million, or 85.7%.  The decrease in income tax expense can be attributed to a $4.1 million decrease in income before income tax expense for the third quarter of 2019, when compared to the prior quarter.  The effective income tax rate decreased from 19.8% for the second quarter of 2019 to 8.3% for the third quarter of 2019.

Asset Quality

Non-performing loans totaled $23.5 million at September 30, 2019, or 1.80% of total loans, compared with $12.3 million at December 31, 2018, or 0.93% of total loans.  Non-performing assets, which are comprised of non-performing loans and other real estate owned, were $23.7 million, or 1.32% of total assets, at September 30, 2019, compared with $12.8 million, or 0.73% of total assets, at December 31, 2018. The increase in non-performing loans can be mostly attributed to two commercial mortgage relationships and one participating interest in a commercial credit, offset by decreases in the non-performing residential mortgage and consumer loan portfolios.

Management performs an ongoing assessment of the adequacy of the allowance for loan losses based upon a number of factors including an analysis of historical loss factors, collateral evaluations, recent charge-off experience, credit quality of the loan portfolio, current economic conditions and loan growth.  Based on this analysis, the provision for loan losses for the third quarter of 2019 was $4.4 million, an increase of $4.1 million compared with the same period in the prior year.  The increase in the provision for loan losses can be mostly attributed to a specific impairment of $4.2 million related to the aforementioned participating interest in a commercial credit.  Net charge-offs for the third quarter of 2019 were $0.2 million, compared with $0.3 million for the third quarter of 2018. 

The allowance for loan losses was $23.9 million at September 30, 2019 compared with $18.9 million at December 31, 2018.  The allowance for loan losses was 101.94% of non-performing loans at September 30, 2019 compared with 154.59% at December 31, 2018.  The ratio of the allowance for loan losses to total loans was 1.83% at September 30, 2019 compared with 1.44% at December 31, 2018.

Balance Sheet Activity

Total assets were $1.794 billion at September 30, 2019 compared with $1.755 billion at December 31, 2018, an increase of $38.3 million, or 2.2%.  The increase can be mostly attributed to increases of $16.3 million in cash and cash equivalents, $25.3 million in securities available for sale, and $8.1 million in operating lease right-to-use assets related to the adoption of ASU No. 2016-02 Leases (“Topic 842”) as of January 1, 2019, offset by decreases of $10.2 million in total loans, net, and $2.0 million in premises and equipment, net.

The increase in cash and cash equivalents was due to changes in securities, loans, deposits, and borrowings.  The decrease in total loans, net, can be mostly attributed to decreases of $9.9 million in commercial mortgages, $12.9 million in indirect consumer loans, $8.4 million in other consumer loans, and a $5.0 million increase in the allowance for loan losses, offset by increases of $24.6 million in commercial and agriculture loans and $1.3 million in residential mortgages.  The increase in securities available for sale can be mostly attributed to purchases in the amount of $67.6 million, offset by $15.2 million in sales of mortgage-backed and municipal securities, along with maturities and paydowns.

Total liabilities were $1.612 billion at September 30, 2019 compared with $1.590 billion at December 31, 2018, an increase of $21.3 million or 1.3%.  The increase in total liabilities can be mostly attributed to increases of $7.3 million in total deposits, $8.1 million in operating lease liabilities related to the January 1, 2019 adoption of Topic 842, and $6.0 million in accrued interest payable and other liabilities.  The increase in deposits from $1.569 billion at December 31, 2018 to $1.577 billion at September 30, 2019 can be mostly attributed to an increase of $28.6 million in interest-bearing demand deposits and $19.6 million of time deposits, offset by decreases of $27.8 million in money market accounts and $11.8 million in non-interest bearing demand deposits.  The decreases in non-interest-bearing demand deposit and money market accounts can be mostly attributed to an outflow of commercial deposits.

Total shareholders’ equity was $182.0 million at September 30, 2019 compared with $165.0 million at December 31, 2018, an increase of $17.0 million, or 9.9%.  The increase in retained earnings of $7.6 million can be mostly attributed to earnings of $11.4 million, offset by $3.8 million in dividends declared.  The decrease in accumulated other comprehensive loss of $8.1 million can be mostly attributed to the increase in the fair market value of the securities portfolio.  Also, treasury stock decreased $0.6 million, due to the issuance of shares to the Corporation’s employee benefit stock plans and directors’ stock plans.

The total equity to total assets ratio was 10.15% at September 30, 2019 compared with 9.40% at December 31, 2018.  The tangible equity to tangible assets ratio was 9.00% at September 30, 2019 compared with 8.19% at December 31, 2018.  Book value per share increased to $37.35 at September 30, 2019 from $33.99 at December 31, 2018.  As of September 30, 2019, the Bank’s capital ratios were in excess of those required to be considered well-capitalized under the regulatory framework for prompt corrective action.

Other Items

The market value of total assets under management or administration in our Wealth Management Group was $1.863 billion at September 30, 2019, including $301.3 million of assets under management or administration for the Corporation, compared to $1.768 billion at December 31, 2018, including $283.0 million of assets under management or administration for the Corporation, an increase of $94.4 million, or 5.3%.  The increase in total assets under management or administration can be mostly attributed to increases in the market value of total assets.

About Chemung Financial Corporation

Chemung Financial Corporation is a $1.8 billion financial services holding company headquartered in Elmira, New York and operates 33 retail offices through its principal subsidiary, Chemung Canal Trust Company, a full service community bank with trust powers.  Established in 1833, Chemung Canal Trust Company is the oldest locally-owned and managed community bank in New York State.  Chemung Financial Corporation is also the parent of CFS Group, Inc., a financial services subsidiary offering non-traditional services including mutual funds, annuities, brokerage services, tax preparation services and insurance, and Chemung Risk Management, Inc., a captive insurance company based in the State of Nevada.

This press release may be found at: www.chemungcanal.com under Investor Relations.

Forward-Looking Statements:

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and the Private Securities Litigation Reform Act of 1995.  The Corporation intends its forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in this press release.  All statements regarding the Corporation's expected financial position and operating results, the Corporation's business strategy, the Corporation's financial plans, forecasted demographic and economic trends relating to the Corporation's industry and similar matters are forward-looking statements.  These statements can sometimes be identified by the Corporation's use of forward-looking words such as "may," "will," "anticipate," "estimate," "expect," or "intend."  The Corporation cannot promise that its expectations in such forward-looking statements will turn out to be correct.  The Corporation's actual results could be materially different from expectations because of various factors, including changes in economic conditions or interest rates, credit risk, difficulties in managing the Corporation’s growth, competition, changes in law or the regulatory environment, including the Dodd-Frank Act, and changes in general business and economic trends.  Information concerning these and other factors can be found in the Corporation’s periodic filings with the Securities and Exchange Commission (“SEC”), including the 2018 Annual Report on Form 10-K.  These filings are available publicly on the SEC's website at http://www.sec.gov, on the Corporation's website at http://www.chemungcanal.com or upon request from the Corporate Secretary at (607) 737-3746.  Except as otherwise required by law, the Corporation undertakes no obligation to publicly update or revise its forward-looking statements, whether as a result of new information, future events, or otherwise.

For further information contact:
Karl F. Krebs, EVP and CFO
kkrebs@chemungcanal.com
Phone:  607-737-3714

           
           
Chemung Financial Corporation          
Consolidated Balance Sheets (Unaudited)          
  Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
(in thousands)  2019   2019   2019   2018   2018 
ASSETS          
Cash and due from financial institutions $36,497  $32,622  $28,153  $33,040  $31,831 
Interest-earning deposits in other financial institutions  109,801   83,838   97,657   96,932   82,081 
Total cash and cash equivalents  146,298   116,460   125,810   129,972   113,912 
           
Equity investments  2,065   2,079   2,032   1,909   1,987 
           
Securities available for sale  267,529   269,286   266,721   242,258   246,473 
Securities held to maturity  3,420   4,090   3,861   4,875   4,203 
FHLB and FRB stocks, at cost  3,091   3,091   3,143   3,138   3,138 
Total investment securities  274,040   276,467   273,725   250,271   253,814 
           
Commercial  878,703   855,298   862,597   864,024   857,954 
Mortgage  184,013   183,835   181,428   182,724   188,636 
Consumer  243,922   249,238   255,012   265,158   274,048 
Loans, net of deferred loan fees  1,306,638   1,288,371   1,299,037   1,311,906   1,320,638 
Allowance for loan losses  (23,923)  (19,656)  (19,745)  (18,944)  (19,635)
Loans, net  1,282,715   1,268,715   1,279,292   1,292,962   1,301,003 
           
Loans held for sale  1,313   624   658   502   1,715 
Premises and equipment, net  22,962   23,605   24,279   24,980   25,514 
Operating lease right-of-use assets  8,051   8,220   8,391   -   - 
Goodwill  21,824   21,824   21,824   21,824   21,824 
Other intangible assets, net  886   1,037   1,188   1,351   1,527 
Accrued interest receivable and other assets  33,489   33,966   32,373   31,572   32,568 
Total assets $1,793,643  $1,752,997  $1,769,572  $1,755,343  $1,753,864 
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
Deposits:          
Non-interest-bearing demand deposits $472,600  $451,985  $462,000  $484,433  $469,887 
Interest-bearing demand deposits  208,222   188,843   187,834   179,603   211,099 
Money market accounts  510,194   505,084   540,476   537,948   532,489 
Savings deposits  215,665   217,434   219,199   217,027   217,621 
Time deposits  169,825   177,792   156,993   150,226   144,901 
Total deposits  1,576,506   1,541,138   1,566,502   1,569,237   1,575,997 
           
FHLB advances and other debt  4,140   4,195   4,250   4,304   4,358 
Operating lease liabilities  8,125   8,250   8,399   -   - 
Accrued interest payable and other liabilities  22,828   21,027   18,887   16,773   17,010 
Total liabilities  1,611,599   1,574,610   1,598,038   1,590,314   1,597,365 
           
Shareholders' equity          
Common stock  53   53   53   53   53 
Additional-paid-in capital  46,464   46,284   46,174   45,820   46,006 
Retained earnings  150,759   150,063   146,340   143,129   138,654 
Treasury stock, at cost  (11,956)  (12,062)  (12,191)  (12,562)  (12,927)
Accumulated other comprehensive loss  (3,276)  (5,951)  (8,842)  (11,411)  (15,287)
Total shareholders' equity  182,044   178,387   171,534   165,029   156,499 
Total liabilities and shareholders' equity $1,793,643  $1,752,997  $1,769,572  $1,755,343  $1,753,864 
           
Period-end shares outstanding  4,874   4,868   4,863   4,855   4,837 
           


Chemung Financial Corporation            
Consolidated Statements of Income (Unaudited)            
  Three Months Ended   Nine Months Ended  
  September 30, Percent September 30, Percent
(in thousands, except per share data)  2019   2018  Change  2019   2018  Change
Interest and dividend income:            
Loans, including fees $14,664  $14,580  0.6  $43,723  $42,930  1.8 
Taxable securities  1,349   1,200  12.4   3,825   3,753  1.9 
Tax exempt securities  293   272  7.7   872   875  (0.3)
Interest-earning deposits  502   84  497.6   1,735   116  1395.7 
Total interest and dividend income  16,808   16,136  4.2   50,155   47,674  5.2 
                       
Interest expense:                      
Deposits  1,629   858  89.9   4,634   1,967  135.6 
Securities sold under agreements to repurchase  -   -  N/M   -   137  (100.0)
Borrowed funds  37   199  (81.4)  111   574  (80.7)
Total interest expense  1,666   1,057  57.6   4,745   2,678  77.2 
              
Net interest income  15,142   15,079  0.4   45,410   44,996  0.9 
Provision for loan losses  4,441   300  1380.3   5,684   3,371  68.6 
Net interest income after provision for loan losses  10,701   14,779  (27.6)  39,726   41,625  (4.6)
              
Non-interest income:             
Wealth management group fee income  2,315   2,406  (3.8)  7,115   7,095  0.3 
Service charges on deposit accounts  1,141   1,231  (7.3)  3,330   3,539  (5.9)
Interchange revenue from debit card transactions  1,058   982  7.7   3,113   3,013  3.3 
Net gains on securities transactions  -   -  N/M   19   -  N/M 
Change in fair value of equity investments  (10)  2,141  (100.5)  106   2,165  (95.1)
Net gains on sales of loans held for sale  69   79  (12.7)  146   184  (20.7)
Net gains (losses) on sales of other real estate owned  (1)  123  N/M   (87)  119  N/M 
Income from bank owned life insurance  17   17  0.0   48   50  (4.0)
Other  367   402  (8.7)  1,177   2,016  (41.6)
Total non-interest income  4,956   7,381  (32.9)  14,967   18,181  (17.7)
              
Non-interest expense:             
Salaries and wages  5,874   5,691  3.2   17,375   16,969  2.4 
Pension and other employee benefits  1,470   1,262  16.5   4,488   4,438  1.1 
Other components of net periodic pension and postretirement benefits  (141)  (408) N/M   (423)  (1,224) N/M 
Net occupancy  1,424   1,671  (14.8)  4,469   4,922  (9.2)
Furniture and equipment  717   581  23.4   1,840   1,941  (5.2)
Data processing  1,818   1,782  2.0   5,418   5,288  2.5 
Professional services  395   479  (17.5)  1,218   1,527  (20.2)
Legal accruals and settlements  -   -  N/M   -   989  (100.0)
Amortization of intangible assets  151   182  (17.0)  465   558  (16.7)
Marketing and advertising  231   212  9.0   644   816  (21.1)
Other real estate owned expense  9   83  (89.2)  80   321  (75.1)
FDIC insurance  (10)  263  (103.8)  476   881  (46.0)
Loan expense  171   262  (34.7)  557   615  (9.4)
Other  1,416   1,368  3.5   4,238   4,520  (6.2)
Total non-interest expense  13,525   13,428  0.7   40,845   42,561  (4.0)
              
Income before income tax expense  2,132   8,732  (75.6)  13,848   17,245  (19.7)
Income tax expense  176   1,802  (90.2)  2,443   3,349  (27.1)
Net income $1,956  $6,930  (71.8) $11,405  $13,896  (17.9)
              
Basic and diluted earnings per share $0.40  $1.43     $2.34  $2.88   
Cash dividends declared per share  0.26   0.26      0.78   0.78   
Average basic and diluted shares outstanding  4,871   4,834      4,866   4,828   
              
N/M - Not meaningful             
              


Chemung Financial Corporation               
Consolidated Financial Highlights (Unaudited)               
            As of or for the 
  As of or for the Three Months Ended
 Nine Months Ended 
  Sept. 30, June 30, March 31, Dec. 31, Sept. 30, Sept. 30, Sept. 30, 
(in thousands, except per share data)  2019   2019   2019   2018   2018   2019   2018  
RESULTS OF OPERATIONS               
Interest income $16,808  $16,682  $16,665  $16,879  $16,136  $50,155  $47,674  
Interest expense  1,666   1,581   1,498   1,395   1,057   4,745   2,678  
Net interest income  15,142   15,101   15,167   15,484   15,079   45,410   44,996  
Provision (credit) for loan losses  4,441   150   1,093   (218)  300   5,684   3,371  
Net interest income after provision (credit) for loan losses  10,701   14,951   14,074   15,702   14,779   39,726   41,625  
Non-interest income  4,956   5,086   4,925   4,893   7,381   14,967   18,181  
Non-interest expense  13,525   13,823   13,497   14,205   13,428   40,845   42,561  
Income before income tax expense  2,132   6,214   5,502   6,390   8,732   13,848   17,245  
Income tax expense  176   1,233   1,034   660   1,802   2,443   3,349  
Net income $1,956  $4,981  $4,468  $5,730  $6,930  $11,405  $13,896  
                
Basic and diluted earnings per share $0.40  $1.02  $0.92  $1.18  $1.43  $2.34  $2.88  
Average basic and diluted shares outstanding  4,871   4,866   4,860   4,843   4,834   4,866   4,828  
                
PERFORMANCE RATIOS               
Return on average assets  0.44%  1.15%  1.03%  1.29%  1.61%  0.87%  1.09% 
Return on average equity  4.29%  11.51%  10.83%  14.29%  17.81%  8.76%  12.22% 
Return on average tangible equity (a)  4.91%  13.27%  12.56%  16.74%  21.01%  10.09%  14.47% 
Efficiency ratio (unadjusted) (f)  67.30%  68.47%  67.18%  69.71%  59.79%  67.65%  67.37% 
Efficiency ratio (adjusted) (a) (b)  66.21%  67.44%  66.04%  68.49%  64.72%  66.56%  66.80% 
Non-interest expense to average assets  3.05%  3.18%  3.12%  3.21%  3.13%  3.12%  3.34% 
Loans to deposits  82.88%  83.60%  82.93%  83.60%  83.80%  82.88%  83.80% 
                
YIELDS / RATES - Fully Taxable Equivalent               
Yield on loans  4.50%  4.54%  4.54%  4.54%  4.36%  4.53%  4.34% 
Yield on investments  2.36%  2.41%  2.42%  2.16%  2.18%  2.39%  2.20% 
Yield on interest-earning assets  4.03%  4.07%  4.07%  4.01%  3.96%  4.05%  3.95% 
Cost of interest-bearing deposits  0.60%  0.57%  0.54%  0.48%  0.33%  0.57%  0.25% 
Cost of borrowings  3.53%  3.52%  3.52%  3.58%  2.38%  3.52%  2.33% 
Cost of interest-bearing liabilities  0.61%  0.58%  0.55%  0.50%  0.39%  0.58%  0.33% 
Interest rate spread  3.42%  3.49%  3.52%  3.51%  3.57%  3.47%  3.62% 
Net interest margin, fully taxable equivalent  3.63%  3.69%  3.71%  3.68%  3.71%  3.67%  3.73% 
                
CAPITAL               
Total equity to total assets at end of period  10.15%  10.18%  9.69%  9.40%  8.92%  10.15%  8.92% 
Tangible equity to tangible assets at end of period (a) 9.00%  8.99%  8.50%  8.19%  7.69%  9.00%  7.69% 
                
Book value per share $37.35  $36.64  $35.27  $33.99  $32.35  $37.35  $32.35  
Tangible book value per share (a)  32.69   31.95   30.54   29.22   27.53   32.69   27.53  
Period-end market value per share  42.00   48.34   46.93   41.31   42.43   42.00   42.43  
Dividends declared per share  0.26   0.26   0.26   0.26   0.26   0.78   0.78  
                
AVERAGE BALANCES               
Loans and loans held for sale (c) $1,295,167  $1,290,923  $1,296,200  $1,306,556  $1,330,071  $1,294,093  $1,324,610  
Interest earning assets  1,665,793   1,654,156   1,671,063   1,680,269   1,625,132   1,664,188   1,624,830  
Total assets  1,760,385   1,744,599   1,753,788   1,756,765   1,704,721   1,752,948   1,703,834  
Deposits  1,545,858   1,539,739   1,565,371   1,576,629   1,501,082   1,550,251   1,495,111  
Total equity  180,896   173,534   167,385   159,032   154,331   173,988   152,026  
Tangible equity (a)  158,111   150,598   144,293   135,766   130,891   151,052   128,396  
                
ASSET QUALITY               
Net charge-offs $174  $239  $292  $472  $310  $705  $4,897  
Non-performing loans (d)  23,468   19,505   15,099   12,254   12,629   23,468   12,629  
Non-performing assets (e)  23,679   19,719   15,304   12,828   13,356   23,679   13,356  
Allowance for loan losses  23,923   19,656   19,745   18,944   19,635   23,923   19,635  
                
Annualized net charge-offs to average loans  0.05%  0.07%  0.09%  0.14%  0.09%  0.07%  0.49% 
Non-performing loans to total loans  1.80%  1.51%  1.16%  0.93%  0.96%  1.80%  0.96% 
Non-performing assets to total assets  1.32%  1.12%  0.86%  0.73%  0.76%  1.32%  0.76% 
Allowance for loan losses to total loans  1.83%  1.53%  1.52%  1.44%  1.49%  1.83%  1.49% 
Allowance for loan losses to non-performing loans  101.94%  100.77%  130.77%  154.59%  155.48%  101.94%  155.48% 
                
(a) See the GAAP to Non-GAAP reconciliations.               
(b) Efficiency ratio (adjusted) is non-interest expense less amortization of intangible assets less legal reserve divided by the total of fully taxable equivalent net interest income plus non-interest income less net gains or losses on securities transactions.
(c) Loans and loans held for sale do not reflect the allowance for loan losses.           
(d) Non-performing loans include non-accrual loans only.             
(e) Non-performing assets include non-performing loans plus other real estate owned.         
(f) Efficiency ratio (unadjusted) is non-interest expense divided by the total of net interest income plus non-interest income.     
                


Chemung Financial Corporation                  
Average Consolidated Balance Sheets & Net Interest Income Analysis and Rate/Volume Analysis of Net Interest Income (Unaudited)    
                   
  Three Months Ended
September 30, 2019
 Three Months Ended
September 30, 2018
 Three Months Ended
September 30, 2019 vs. 2018
(in thousands) Average
Balance
 Interest Yield /
Rate
 Average
Balance
 Interest Yield /
Rate
 Total
Change
 Due to
Volume
 Due to
Rate
   
Interest earning assets:                  
Commercial loans $864,923  $10,160  4.66% $861,513  $9,868  4.54% $292  $38  $254 
Mortgage loans  184,090   1,788  3.85%  191,493   1,824  3.78%  (36)  (70)  34 
Consumer loans  246,154   2,752  4.44%  277,065   2,925  4.19%  (173)  (340)  167 
Taxable securities  234,075   1,350  2.29%  231,340   1,201  2.06%  149   14   135 
Tax-exempt securities  46,945   357  3.02%  48,226   333  2.74%  24   (9)  33 
Interest-earning deposits  89,606   502  2.22%  15,495   84  2.15%  418   415   3 
Total interest earning assets  1,665,793   16,909  4.03%  1,625,132   16,235  3.96%  674   48   626 
                   
Non- interest earnings assets:                  
Cash and due from banks  25,784       27,686           
Other assets  88,841       71,782           
Allowance for loan losses  (20,033)      (19,879)          
Total assets $1,760,385      $1,704,721           
                   
Interest-bearing liabilities:                  
Interest-bearing checking $180,852  $170  0.37% $147,340  $78  0.21%  92   22   70 
Savings and money market  724,451   794  0.43%  745,235   513  0.27%  281   (14)  295 
Time deposits  178,107   665  1.48%  144,037   267  0.74%  398   76   322 
FHLB advances, other debt and                  
repurchase agreements  4,161   37  3.53%  33,227   199  2.38%  (162)  (228)  66 
Total int.-bearing liabilities  1,087,571   1,666  0.61%  1,069,839   1,057  0.39%  609   (144)  753 
                   
Non-interest-bearing liabilities:                  
Demand deposits  462,448       464,470           
Other liabilities  29,470       16,081           
Total liabilities  1,579,489       1,550,390           
Shareholders' equity  180,896       154,331           
Total liabilities and shareholders' equity $1,760,385      $1,704,721           
                   
Fully taxable equivalent net interest income    15,243       15,178    $65  $192  $(127)
Net interest rate spread (1)     3.42%     3.57%      
Net interest margin, fully taxable equivalent (2)     3.63%     3.71%      
Taxable equivalent adjustment    (101)      (99)        
Net interest income   $15,142      $15,079         
                   
(1) Net interest rate spread is the difference in the average yield on interest-earning assets less the average rate on interest-bearing liabilities.  
(2) Net interest margin is the ratio of fully taxable equivalent net interest income divided by average interest-earning assets.     
                   


Chemung Financial Corporation                  
Average Consolidated Balance Sheets & Net Interest Income Analysis and Rate/Volume Analysis of Net Interest Income (Unaudited)    
       
Nine Months Ended
September 30, 2019
Nine Months Ended
September 30, 2018
 Nine Months Ended
September 30, 2019 vs. 2018
(in thousands) Average
Balance
 Interest Yield /
Rate
 Average
Balance
 Interest Yield /
Rate
 Total
Change
 Due to
Volume
 Due to
Rate
   
Interest earning assets:                  
Commercial loans $858,997  $30,184  4.70% $853,832  $28,962  4.54% $1,222  $179  $1,043 
Mortgage loans  182,657   5,223  3.82%  193,539   5,435  3.75%  (212)  (311)  99 
Consumer loans  252,439   8,425  4.46%  277,239   8,643  4.17%  (218)  (799)  581 
Taxable securities  226,029   3,830  2.27%  240,650   3,758  2.09%  72   (239)  311 
Tax-exempt securities  48,550   1,063  2.93%  51,769   1,075  2.78%  (12)  (69)  57 
Interest-earning deposits  95,516   1,735  2.43%  7,801   116  1.99%  1,619   1,587   32 
Total interest earning assets  1,664,188   50,460  4.05%  1,624,830   47,989  3.95%  2,471   348   2,123 
                   
Non-interest earnings assets:                  
Cash and due from banks  25,860       27,358           
Other assets  82,684       72,425           
Allowance for loan losses  (19,784)      (20,779)          
Total assets $1,752,948      $1,703,834           
                   
                   
Interest-bearing liabilities:                  
Interest-bearing checking $186,327  $554  0.40% $143,556  $141  0.13% $413  $52  $361 
Savings and money market  738,869   2,378  0.43%  762,993   1,306  0.23%  1,072   (42)  1,114 
Time deposits  165,088   1,702  1.38%  130,628   520  0.53%  1,182   167   1,015 
FHLB advances, other debt and                  
repurchase agreements  4,214   111  3.52%  40,778   711  2.33%  (600)  (845)  245 
Total int.-bearing liabilities  1,094,498   4,745  0.58%  1,077,955   2,678  0.33%  2,067   (668)  2,735 
                   
Non-interest-bearing liabilities:                  
Demand deposits  459,967       457,934           
Other liabilities  24,495       15,919           
Total liabilities  1,578,960       1,551,808           
Shareholders' equity  173,988       152,026           
Total liabilities and shareholders' equity $1,752,948      $1,703,834           
                   
Fully taxable equivalent net interest income    45,715       45,311    $404  $1,016  $(612)
Net interest rate spread (1)     3.47%     3.62%      
Net interest margin, fully taxable equivalent (2)     3.67%     3.73%      
Taxable equivalent adjustment    (305)      (315)        
Net interest income   $45,410      $44,996         
                   
(1) Net interest rate spread is the difference in the average yield on interest-earning assets less the average rate on interest-bearing liabilities.  
(2) Net interest margin is the ratio of fully taxable equivalent net interest income divided by average interest-earning assets.     
                   

Chemung Financial Corporation

GAAP to Non-GAAP Reconciliations (Unaudited)

The Corporation prepares its Consolidated Financial Statements in accordance with GAAP.  See the Corporation’s unaudited consolidated balance sheets and statements of income contained within this press release. That presentation provides the reader with an understanding of the Corporation’s results that can be tracked consistently from period-to-period and enables a comparison of the Corporation’s performance with other companies’ GAAP financial statements.

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 its competitors. Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by other companies.

The SEC has adopted Regulation G, which applies to all public disclosures, including earnings releases, made by registered companies that contain “non-GAAP financial measures.”  Under Regulation G, companies making public disclosures containing non-GAAP financial measures must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure and a statement of the Corporation’s reasons for utilizing the non-GAAP financial measure as part of its financial disclosures.  The SEC has exempted from the definition of “non-GAAP financial measures” certain commonly used financial measures that are not based on GAAP.  When these exempted measures are included in public disclosures, supplemental information is not required.  The following measures used in this Report, which are commonly utilized by financial institutions, have not been specifically exempted by the SEC and may constitute "non-GAAP financial measures" within the meaning of the SEC's rules, although we are unable to state with certainty that the SEC would so regard them.

Fully Taxable Equivalent Net Interest Income and Net Interest Margin

Net interest income is commonly presented on a tax-equivalent basis.  That is, to the extent that some component of the institution's net interest income, which is presented on a before-tax basis, is exempt from taxation (e.g., is received by the institution as a result of its holdings of state or municipal obligations), an amount equal to the tax benefit derived from that component is added to the actual before-tax net interest income total.  This adjustment is considered helpful in comparing one financial institution's net interest income to that of other institutions or in analyzing any institution’s net interest income trend line over time, to correct any analytical distortion that might otherwise arise from the fact that financial institutions vary widely in the proportions of their portfolios that are invested in tax-exempt securities, and that even a single institution may significantly alter over time the proportion of its own portfolio that is invested in tax-exempt obligations.  Moreover, net interest income is itself a component of a second financial measure commonly used by financial institutions, net interest margin, which is the ratio of net interest income to average interest-earning assets.  For purposes of this measure as well, fully taxable equivalent net interest income is generally used by financial institutions, as opposed to actual net interest income, again to provide a better basis of comparison from institution to institution and to better demonstrate a single institution’s performance over time.  The Corporation follows these practices.

            As of or for the
  As of or for the Three Months Ended
 Nine Months Ended
  Sept. 30, June 30, March 31, Dec. 31, Sept. 30, Sept. 30, Sept. 30,
(in thousands, except per share data)  2019   2019   2018   2018   2018   2019   2018 
NET INTEREST MARGIN - FULLY TAXABLE EQUIVALENT                
Net interest income (GAAP) $15,142  $15,101  $15,167  $15,484  $15,079  $45,410  $44,996 
Fully taxable equivalent adjustment  101   104   100   105   99   305   315 
Fully taxable equivalent net interest income (non-GAAP) $15,243  $15,205  $15,267  $15,589  $15,178  $45,715  $45,311 
               
Average interest-earning assets (GAAP) $1,665,793  $1,654,156  $1,671,063  $1,680,269  $1,625,132  $1,664,188  $1,624,830 
               
Net interest margin - fully taxable equivalent (non-GAAP)  3.63%  3.69%  3.71%  3.68%  3.71%  3.67%  3.73%
               

Efficiency Ratio

The unadjusted efficiency ratio is calculated as non-interest expense divided by total revenue (net interest income and non-interest income).  The adjusted efficiency ratio is a non-GAAP financial measure which represents the Corporation’s ability to turn resources into revenue and is calculated as non-interest expense divided by total revenue (fully taxable equivalent net interest income and non-interest income), adjusted for one-time occurrences and amortization.  This measure is meaningful to the Corporation, as well as investors and analysts, in assessing the Corporation’s productivity measured by the amount of revenue generated for each dollar spent.

            As of or for the
  As of or for the Three Months Ended  Nine Months Ended
  Sept. 30, June 30, March 31, Dec. 31, Sept. 30, Sept. 30, Sept. 30,
(in thousands, except per share data)  2019   2019   2018   2018   2018   2019   2018 
EFFICIENCY RATIO              
Net interest income (GAAP) $15,142  $15,101  $15,167  $15,484  $15,079  $45,410  $44,996 
Fully taxable equivalent adjustment  101   104   100   105   99   305   315 
Fully taxable equivalent net interest income (non-GAAP) $15,243  $15,205  $15,267  $15,589  $15,178  $45,715  $45,311 
               
Non-interest income (GAAP) $4,956  $5,086  $4,925  $4,893  $7,381  $14,967  $18,181 
Less: changes in fair value of equity investments  -   -   -   -   (2,093)  -   (2,093)
Less: net (gains) losses on security transactions  -   (19)  -   -   -   (19)  - 
Adjusted non-interest income (non-GAAP) $4,956  $5,067  $4,925  $4,893  $5,288  $14,948  $16,088 
               
Non-interest expense (GAAP) $13,525  $13,823  $13,497  $14,205  $13,428  $40,845  $42,561 
Less: amortization of intangible assets  (151)  (151)  (163)  (176)  (182)  (465)  (558)
Less: legal reserve  -   -   -   -   -   -   (989)
Adjusted non-interest expense (non-GAAP) $13,374  $13,672  $13,334  $14,029  $13,246  $40,380  $41,014 
               
Efficiency ratio (unadjusted)  67.30%  68.47%  67.18%  69.71%  59.79%  67.65%  67.37%
Efficiency ratio (adjusted)  66.21%  67.44%  66.04%  68.49%  64.72%  66.56%  66.80%
                             

Tangible Equity and Tangible Assets (Period-End)

Tangible equity, tangible assets, and tangible book value per share are each non-GAAP financial measures. Tangible equity represents the Corporation’s stockholders’ equity, less goodwill and intangible assets.  Tangible assets represents the Corporation’s total assets, less goodwill and other intangible assets.  Tangible book value per share represents the Corporation’s tangible equity divided by common shares at period-end.  These measures are meaningful to the Corporation, as well as investors and analysts, in assessing the Corporation’s use of equity.

            As of or for the
  As of or for the Three Months Ended Nine Months Ended
  Sept. 30, June 30, March 31, Dec. 31, Sept. 30, Sept. 30, Sept. 30,
(in thousands, except per share and ratio data)  2019   2019   2018   2018   2018   2019   2018 
TANGIBLE EQUITY AND TANGIBLE ASSETS              
(PERIOD END)              
Total shareholders' equity (GAAP) $182,044  $178,387  $171,534  $165,029  $156,499  $182,044  $156,499 
Less: intangible assets  (22,710)  (22,861)  (23,012)  (23,175)  (23,351)  (22,710)  (23,351)
Tangible equity (non-GAAP) $159,334  $155,526  $148,522  $141,854  $133,148  $159,334  $133,148 
               
Total assets (GAAP) $1,793,643  $1,752,997  $1,769,572  $1,755,343  $1,753,864  $1,793,643  $1,753,864 
Less: intangible assets  (22,710)  (22,861)  (23,012)  (23,175)  (23,351)  (22,710)  (23,351)
Tangible assets (non-GAAP) $1,770,933  $1,730,136  $1,746,560  $1,732,168  $1,730,513  $1,770,933  $1,730,513 
               
Total equity to total assets at end of period (GAAP)  10.15%  10.18%  9.69%  9.40%  8.92%  10.15%  8.92%
Book value per share (GAAP) $37.35  $36.64  $35.27  $33.99  $32.35  $37.35  $32.35 
               
Tangible equity to tangible assets at              
end of period (non-GAAP)  9.00%  8.99%  8.50%  8.19%  7.69%  9.00%  7.69%
Tangible book value per share (non-GAAP) $32.69  $31.95  $30.54  $29.22  $27.53  $32.69  $27.53 
               

Tangible Equity (Average)

Average tangible equity and return on average tangible equity are each non-GAAP financial measures. Average tangible equity represents the Corporation’s average stockholders’ equity, less average goodwill and intangible assets for the period.  Return on average tangible equity measures the Corporation’s earnings as a percentage of average tangible equity.  These measures are meaningful to the Corporation, as well as investors and analysts, in assessing the Corporation’s use of equity.

     As of or for the
  As of or for the Three Months Ended
 Nine Months Ended
  Sept. 30, June 30, March 31, Dec. 31, Sept. 30, Sept. 30, Sept. 30,
(in thousands, except ratio data)  2019   2019   2018   2018   2018   2019   2018 
TANGIBLE EQUITY (AVERAGE)              
Total average shareholders' equity (GAAP) $180,896  $173,534  $167,385  $159,032  $154,331  $173,988  $152,026 
Less: average intangible assets  (22,785)  (22,936)  (23,092)  (23,266)  (23,440)  (22,936)  (23,630)
Average tangible equity (non-GAAP) $158,111  $150,598  $144,293  $135,766  $130,891  $151,052  $128,396 
               
Return on average equity (GAAP)  4.29%  11.51%  10.83%  14.29%  17.81%  8.76%  12.22%
Return on average tangible equity (non-GAAP)  4.91%  13.27%  12.56%  16.74%  21.01%  10.09%  14.47%
               

 

Adjustments for Certain Items of Income or Expense

In addition to disclosures of certain GAAP financial measures, including net income, EPS, ROA, and ROE, we may also provide comparative disclosures that adjust these GAAP financial measures for a particular period by removing from the calculation thereof the impact of certain transactions or other material items of income or expense occurring during the period, including certain nonrecurring items.  The Corporation believes that the resulting non-GAAP financial measures may improve an understanding of its results of operations by separating out any such transactions or items that may have had a disproportionate positive or negative impact on the Corporation’s financial results during the particular period in question. In the Corporation’s presentation of any such non-GAAP (adjusted) financial measures not specifically discussed in the preceding paragraphs, the Corporation supplies the supplemental financial information and explanations required under Regulation G.

     As of or for the
  As of or for the Three Months Ended
 Nine Months Ended
  Sept. 30, June 30, March 31, Dec. 31, Sept. 30, Sept. 30, Sept. 30,
(in thousands, except per share and ratio data)  2019   2019   2018   2018   2018   2019   2018 
NON-GAAP NET INCOME              
Reported net income (GAAP) $1,956  $4,981  $4,468  $5,730  $6,930  $11,405  $13,896 
Net changes in fair value of investments (net of tax)  -   -   -   -   (1,559)  -   (1,559)
Net (gains) losses on security transactions (net of tax)  -   (14)  -   -   -   (14)  - 
Legal reserve (net of tax)  -   -   -   -   -   -   737 
Revaluation of net deferred tax asset  -   -   -   (445)  -   -   - 
Net income (non-GAAP) $1,956  $4,967  $4,468  $5,285  $5,371  $11,391  $13,074 
               
Average basic and diluted shares outstanding  4,871   4,866   4,860   4,843   4,834   4,866   4,828 
               
Reported basic and diluted earnings per share (GAAP) $0.40  $1.02  $0.92  $1.18  $1.43  $2.34  $2.88 
Reported return on average assets (GAAP)  0.44%  1.15%  1.03%  1.29%  1.61%  0.87%  1.09%
Reported return on average equity (GAAP)  4.29%  11.51%  10.83%  14.29%  17.81%  8.76%  12.22%
               
Basic and diluted earnings per share (non-GAAP) $0.40  $1.02  $0.92  $1.09  $1.11  $2.34  $2.71 
Return on average assets (non-GAAP)  0.44%  1.14%  1.03%  1.19%  1.25%  0.87%  1.03%
Return on average equity (non-GAAP)  4.29%  11.48%  10.83%  13.18%  13.81%  8.75%  11.50%