ELMIRA, N.Y., July 18, 2018 (GLOBE NEWSWIRE) -- Chemung Financial Corporation (the “Corporation”) (Nasdaq:CHMG), the parent company of Chemung Canal Trust Company (the “Bank”), today reported net income for the second quarter of 2018 of $2.5 million, or $0.52 per share, compared to $3.0 million, or $0.62 per share, for the second quarter of 2017.
Anders M. Tomson, Chemung Financial Corporation CEO, stated:
“The second quarter included two significant events, one was the settlement of an ongoing legal proceeding regarding a lease in Ithaca, NY, which led to an additional $1.0 million in expense for the quarter. The second event related to the charge-off of multiple commercial loans to a long-term customer of the Bank, which impacted the Bank’s provision for loan losses. Due to the $3.6 million charge-off, the Bank’s historical loss factors increased, leading to an additional $1.6 million in expense for the quarter, specifically for the charge-off of this one relationship. While the finalization of these events negatively impacted our earnings this quarter, it allows us to put these items behind us and focus on the future.
The environment for deposits and commercial loans continues to be competitive. We are managing balance sheet growth, while continuing our focus on balancing liquidity needs with the cost of interest-bearing liabilities, ever mindful of the overall impact to our net interest margin.”
Second Quarter Highlights1
- Net interest income increased $1.1 million, or 7.6%
- Non-interest income increased $0.3 million, or 6.0%
- Effective tax rate decreased from 29.9% to 16.1%
- Loans, net of deferred fees, increased $22.6 million, or 1.7%
- Commercial loans increased $16.9 million, or 2.0%
- Deposits increased $11.5 million, or 0.8%
- Dividends declared during the second quarter of 2018 were $0.26 per share
A more detailed summary of financial performance follows.
1 Balance sheet comparisons are calculated for June 30, 2018 versus December 31, 2017. Income statement comparisons are calculated for the second quarter of 2018 versus second quarter of 2017.
2nd Quarter 2018 vs 2nd Quarter 2017
Net Interest Income:
Net interest income for the current quarter totaled $15.0 million compared with $14.0 million for the same period in the prior year, an increase of $1.0 million, or 7.6%. Interest and fees from loans increased $1.5 million, while interest from investments, including interest-earning deposits, decreased $0.3 million in the second quarter of 2018 as compared to the same period in the prior year. Interest expense on deposits and borrowed funds both increased $0.1 million, while interest expense on securities sold under agreements to repurchase decreased $0.1 million in the second quarter of 2018 when compared to the same period in the prior year. Fully taxable equivalent net interest margin was 3.73% in the second quarter of 2018, compared with 3.47% for the same period in the prior year. Average interest-earning assets decreased $9.4 million in the second quarter of 2018, compared to the same period in the prior year. The average yield on interest-earning assets increased 29 basis points, while the average cost of interest-bearing liabilities increased six basis points in the second quarter of 2018, compared to the same period in the prior year. The increase in the average yield on interest-earning assets can be mostly attributed to a 23 basis points increase in the average yield on commercial loans, due to an increase in PRIME and LIBOR, and a $75.9 million increase in the average balance of commercial loans, compared to the same period in the prior year. The increase in the average cost of interest-bearing liabilities can be attributed to a 14 basis points increase in time deposits and a $14.2 million increase in the average balance of FHLB advances and repos, offset by a 41 basis points decline in the average cost of FHLB advances and repos due to the maturity of one $4.0 million FHLB advance (3.90% rate) in October 2017, one $2.0 million FHLB term advance (3.05%) in January 2018, and one $10.0 million repurchase agreement (3.72% rate) in May 2018.
Non-Interest Income:
Non-interest income for the current quarter was $5.3 million compared with $5.0 million for the same period in the prior year, an increase of $0.3 million, or 6.0%. The increase was due primarily to increases of $0.1 million in wealth management group fee income and $0.3 million in other non-interest income. The increase in WMG fee income can be attributed to an increase in assets under management or administration. The increase in other non-interest income can be mostly attributed to an increase in swap fee income and rent income from other real estate owned.
Non-Interest Expense:
Non-interest expense for the current quarter was $15.0 million compared with $14.3 million for the same period in the prior year, an increase of $0.7 million, or 4.4%. The increase was due primarily to increases of $0.1 million in salaries and wages, $0.2 million in data processing expenses, $0.1 million in legal accruals and settlements, $0.1 million in marketing and advertising expenses, $0.1 million in other real estate owned expenses, and $0.1 million in other non-interest expenses. The increase in salaries and wages can be attributed to annual merit increases and an increase in headcount associated with two denovo branches opened in 2018. The Bank opened one denovo branch in Schenectady, New York in January 2018 and one denovo branch in Wilton, New York in May 2018. The increase in data processing can be attributed to the timing of projects and the addition of two new denovo branches in 2018. The increase in legal accruals and settlements can be attributed to the settlement agreement in the matter of Fane vs. Chemung Canal Trust Company (the “Action”) during the second quarter of 2018. As noted within the Current Report on Form 8-K filed on June 15, 2018, the two parties agreed to release each other from any and all liabilities, claims, counterclaims, demands, charges, complaints and causes of action, to dismiss the Action with prejudice, and the Bank agreed to pay Fane $3.3 million in connection with the settlement of the Action. The increase in marketing and advertising expense can be attributed to the promotion of two new denovo branches in 2018 and the timing of campaigns and sponsored events. The increase in other real estate owned expenses can be attributed to additional OREO properties, compared to the prior year.
Income Tax Expense:
Income tax expense for the quarter was $0.5 million compared with $1.3 million for the same period in the prior year, a decrease of $0.8 million, or 61.5%. The decrease was due primarily to the decline in the Federal income tax rate from 34% to 21%, with the enactment of the Tax Cuts and Jobs Act of 2017. Additionally, the Corporation increased income generated from CCTC Funding Corp., a real estate investment trust subsidiary of the Bank, reducing the Corporation’s state income tax. Finally, the Corporation recognized a $1.2 million decline in income before income tax expense for the quarter, when compared to the same period in the prior year.
2nd Quarter 2018 vs 1st Quarter 2018
Net Interest Income:
Net interest income for the current quarter totaled $15.0 million compared with $14.9 million for the prior quarter, an increase of $0.1 million, or 0.8%. Interest and fees from loans increased $0.3 million, while interest from investments, including interest-earning deposits, decreased $0.1 million in the second quarter of 2018 as compared to the prior quarter. Interest expense on deposits increased $0.1 million in the second quarter of 2018 when compared to prior quarter. Fully taxable equivalent net interest margin was 3.73% in the second quarter of 2018, compared with 3.75% for the prior quarter. Average interest-earning assets increased $1.8 million in the second quarter of 2018, compared to the prior quarter. The average yield on interest-earning assets was flat, while the average cost of interest-bearing liabilities increased three basis points in the second quarter of 2018, compared to the prior quarter. The average yield on interest-earning assets was flat due to $0.3 million in prepayment penalties during the first quarter of 2018, offset by an increase in PRIME and LIBOR during the second quarter of 2018. The increase in the average cost of interest-bearing liabilities can be attributed to an 18 basis points increase in the average cost of borrowings due to an increase in the FHLB overnight borrowing rate for the second quarter of 2018, compared to the prior quarter.
Non-Interest Income:
Non-interest income for the current quarter was $5.3 million compared with $5.5 million for the prior quarter, a decrease of $0.2 million, or 2.8%. The decrease was due primarily to net losses on sales of other real estate owned and a decline in other non-interest income. The decrease in other non-interest income can be mostly attributed to a $0.4 million New York State sales tax refund received during the first quarter of 2018, offset by an increase in swap fees and rent income from other real estate owned during the second quarter of 2018.
Non-Interest Expense:
Non-interest expense for the current quarter was $15.0 million compared with $14.2 million for the prior quarter, an increase of $0.8 million, or 5.7%. The increase was due primarily to increases of $1.0 million in legal accruals and settlements and $0.2 million in other non-interest expenses, partially offset by decreases of $0.2 million in salaries and wages, $0.1 million in pension and other employee benefits, and $0.1 million in marketing and advertising expenses. The increase in legal accruals and settlements can be attributed to the settlement agreement in the matter of Fane vs. Chemung Canal Trust Company (the “Action”) during the second quarter of 2018. As noted within the Current Report on Form 8-K filed on June 15, 2018, the two parties agreed to release each other from any and all liabilities, claims, counterclaims, demands, charges, complaints and causes of action, to dismiss the Action with prejudice, and the Bank agreed to pay Fane $3.3 million in connection with the settlement of the Action. The Bank had previously reserved $2.3 million for the matter and therefore recognized an additional $1.0 million in legal accruals and settlements during the second quarter of 2018. The decrease in salaries and wages can be attributed to the reduction of merit rewards for the current quarter, compared to the prior quarter, and an acceleration of restricted stock awards during the prior quarter. The decrease in pension and other employee benefits can be attributed to a decline in healthcare costs in the current quarter, when compared to the prior quarter. The decrease in marketing and advertising can be attributed to the promotion of two new denovo branches in 2018 and timing of promotions and sponsored events.
Income Tax Expense:
Income tax expense for the quarter was $0.5 million compared with $1.1 million for the prior quarter, a decrease of $0.6 million, or 54.2%. The decrease was due primarily to a $2.5 million decline in income before income tax expense for the second quarter of 2018, when compared to the prior quarter.
Asset Quality
Non-performing loans totaled $12.8 million at June 30, 2018, or 0.96% of total loans, compared with $17.3 million at December 31, 2017, or 1.32% of total loans. Non-performing assets, which are comprised of non-performing loans and other real estate owned, were $13.7 million, or 0.80% of total assets, at June 30, 2018, compared with $19.3 million, or 1.13% of total assets, at December 31, 2017. The decline in non-performing loans can be mostly attributed to the charge-off of multiple large commercial loans to one borrower for $3.6 million during the second quarter of 2018. The decline in non-performing assets can be mostly attributed to the charge-off of multiple large commercial loans to one borrower for $3.6 million and the sale of one other real estate owned property during the second quarter of 2018.
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 second quarter of 2018 was $2.4 million, an increase of $1.9 million compared with the same period in the prior year. The increase in the provision can be mostly attributed to an increase in the historical loss factor of the commercial and industrial loan portfolio, due to the charge-off of multiple large commercial loans to one borrower for $3.6 million during the second quarter of 2018. Net charge-offs for the second quarter of 2018 were $4.1 million, compared with $0.3 million for the second quarter of 2017.
The allowance for loan losses was $19.6 million at June 30, 2018 compared with $21.2 million at December 31, 2017. The allowance for loan losses was 153.60% of non-performing loans at June 30, 2018 compared with 122.15% at December 31, 2017. The ratio of the allowance for loan losses to total loans was 1.47% at June 30, 2018 compared with 1.61% at December 31, 2017.
Balance Sheet Activity
Total assets totaled $1.710 billion at June 30, 2018 compared with $1.708 billion at December 31, 2017, an increase of $2.5 million, or 0.1%. The increase can be mostly attributed to increases of $4.1 million in cash and cash equivalents, $24.2 million in loans, net, and $3.2 million in accrued interest receivable and other assets, offset by a decrease of $27.9 million in securities available for sale.
The increase in cash and equivalents was due to changes in securities, loans, deposits, and borrowings. The increase in total loans can be mostly attributed to increases of $21.7 million in commercial mortgages and $9.8 million in indirect consumer loans, partially offset by decreases of $4.9 million in commercial and agriculture loans, $1.0 million in residential mortgages, and $3.0 million in other consumer loans. The increase in accrued interest receivable and other assets can be mostly attributed to the fair market adjustment to interest rate swaps for the year ($1.3 million) and increases in operating prepaid assets and the net deferred tax asset. The decrease in securities available for sale can be mostly attributed to pay-downs, maturities, and an increase in unrealized losses.
Total liabilities totaled $1.558 billion at June 30, 2018, flat as compared to December 31, 2017. Deposits totaled $1.479 billion at June 30, 2018 compared with $1.467 billion at December 31, 2017, an increase of $11.5 million, or 0.8%. The growth was attributable to increases of $8.6 million in money market accounts, $3.7 million in savings accounts, and $27.7 million in time deposits, due to a rate promotion, offset by decreases of $5.4 million in non-interest bearing demand deposit accounts and $23.2 million in interest-bearing demand deposit accounts. FHLB advances and other debt totaled $63.4 million at June 30, 2018 compared with $64.2 million at December 31, 2017, a decrease of $0.8 million, or 1.3%. The decline in FHLB advances can be attributed to an increase in deposits and decline in securities, offset by growth in the loan portfolio.
Total shareholders’ equity was $151.8 million at June 30, 2018 compared with $149.8 million at December 31, 2017, an increase of $2.0 million, or 1.3%. The increase in retained earnings of $4.5 million was due primarily to earnings of $7.0 million, offset by $2.5 million in dividends declared during the first half of 2018. The increase in accumulated other comprehensive loss of $3.8 million can be attributed to the decline in the fair market value of the securities portfolio. Also, additional-paid-in capital decreased $0.1 million and treasury stock decreased $1.3 million, due to the issuance of shares to the Corporation’s employee benefit stock plans.
The total equity to total assets ratio was 8.88% at June 30, 2018 compared with 8.77% at December 31, 2017. The tangible equity to tangible assets ratio was 7.60% at June 30, 2018 compared with 7.48% at December 31, 2017. Book value per share increased to $31.42 at June 30, 2018 from $31.10 at December 31, 2017. As of June 30, 2018, the Bank’s capital ratios were in excess of those required to be considered well-capitalized under the regulatory framework for prompt corrective action and the Corporation met all capital adequacy requirements to which it is subject.
Other Items
The market value of total assets under management or administration in our Wealth Management Group was $1.894 billion at June 30, 2018, including $289.7 million of assets under management or administration for the Corporation, compared to $1.952 billion at December 31, 2017, including $346.8 million of assets under management or administration for the Corporation, a decrease of $57.6 million, or 3.0%. The decline in total assets under management or administration can be mostly attributed to a decrease in the Corporation’s pledged securities portfolio for municipal deposits, which is held by its Wealth Management Group.
About Chemung Financial Corporation
Chemung Financial Corporation is a $1.7 billion financial services holding company headquartered in Elmira, New York and operates 35 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.
| Chemung Financial Corporation | |||||||||||||||||||||
| Consolidated Balance Sheets (Unaudited) | |||||||||||||||||||||
| June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||||||
| (in thousands) | 2018 | 2018 | 2017 | 2017 | 2017 | ||||||||||||||||
| ASSETS | |||||||||||||||||||||
| Cash and due from financial institutions | $ | 30,837 | $ | 25,473 | $ | 27,966 | $ | 34,572 | $ | 26,684 | |||||||||||
| Interest-earning deposits in other financial institutions | 3,978 | 5,531 | 2,763 | 21,806 | 37,862 | ||||||||||||||||
| Total cash and cash equivalents | 34,815 | 31,004 | 30,729 | 56,378 | 64,546 | ||||||||||||||||
| Equity investments | 2,112 | 2,154 | 2,337 | 2,248 | 2,207 | ||||||||||||||||
| Securities available for sale | 265,157 | 278,984 | 293,091 | 311,700 | 323,777 | ||||||||||||||||
| Securities held to maturity | 3,806 | 3,640 | 3,781 | 3,865 | 4,928 | ||||||||||||||||
| FHLB and FRB stocks, at cost | 5,816 | 3,097 | 5,784 | 3,497 | 3,764 | ||||||||||||||||
| Total investment securities | 274,779 | 285,721 | 302,656 | 319,062 | 332,469 | ||||||||||||||||
| Commercial | 860,209 | 848,075 | 843,337 | 826,554 | 794,175 | ||||||||||||||||
| Mortgage | 193,423 | 194,600 | 194,440 | 197,210 | 200,629 | ||||||||||||||||
| Consumer | 280,812 | 277,236 | 274,047 | 265,049 | 257,843 | ||||||||||||||||
| Loans, net of deferred loan fees | 1,334,444 | 1,319,911 | 1,311,824 | 1,288,813 | 1,252,647 | ||||||||||||||||
| Allowance for loan losses | (19,645 | ) | (21,390 | ) | (21,161 | ) | (15,694 | ) | (15,104 | ) | |||||||||||
| Loans, net | 1,314,799 | 1,298,521 | 1,290,663 | 1,273,119 | 1,237,543 | ||||||||||||||||
| Loans held for sale | 684 | 190 | 542 | 1,246 | 386 | ||||||||||||||||
| Premises and equipment, net | 26,049 | 26,136 | 26,657 | 27,366 | 27,836 | ||||||||||||||||
| Goodwill | 21,824 | 21,824 | 21,824 | 21,824 | 21,824 | ||||||||||||||||
| Other intangible assets, net | 1,709 | 1,891 | 2,085 | 2,292 | 2,506 | ||||||||||||||||
| Accrued interest receivable and other assets | 33,395 | 32,513 | 30,127 | 28,147 | 29,255 | ||||||||||||||||
| Total assets | $ | 1,710,166 | $ | 1,699,954 | $ | 1,707,620 | $ | 1,731,682 | $ | 1,718,572 | |||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||||||
| Deposits: | |||||||||||||||||||||
| Non-interest-bearing demand deposits | $ | 462,233 | $ | 460,271 | $ | 467,610 | $ | 449,841 | $ | 436,017 | |||||||||||
| Interest-bearing demand deposits | 125,867 | 144,707 | 149,026 | 156,094 | 144,239 | ||||||||||||||||
| Money market accounts | 522,328 | 574,075 | 513,782 | 586,795 | 591,751 | ||||||||||||||||
| Savings deposits | 222,387 | 222,700 | 218,666 | 218,106 | 220,227 | ||||||||||||||||
| Time deposits | 146,094 | 116,447 | 118,362 | 126,182 | 132,803 | ||||||||||||||||
| Total deposits | 1,478,909 | 1,518,200 | 1,467,446 | 1,537,018 | 1,525,037 | ||||||||||||||||
| Securities sold under agreements to repurchase | - | 10,000 | 10,000 | 10,000 | 11,937 | ||||||||||||||||
| FHLB advances and other debt | 63,361 | 4,464 | 64,217 | 13,577 | 13,658 | ||||||||||||||||
| Accrued interest payable and other liabilities | 16,116 | 17,028 | 16,144 | 16,810 | 15,978 | ||||||||||||||||
| Total liabilities | 1,558,386 | 1,549,692 | 1,557,807 | 1,577,405 | 1,566,610 | ||||||||||||||||
| Shareholders' equity | |||||||||||||||||||||
| Common stock | 53 | 53 | 53 | 53 | 53 | ||||||||||||||||
| Additional-paid-in capital | 45,873 | 46,404 | 45,967 | 46,089 | 45,966 | ||||||||||||||||
| Retained earnings | 132,973 | 131,694 | 128,453 | 130,006 | 127,585 | ||||||||||||||||
| Treasury stock, at cost | (12,998 | ) | (14,053 | ) | (14,320 | ) | (14,596 | ) | (14,670 | ) | |||||||||||
| Accumulated other comprehensive (loss) | (14,121 | ) | (13,836 | ) | (10,340 | ) | (7,275 | ) | (6,972 | ) | |||||||||||
| Total shareholders' equity | 151,780 | 150,262 | 149,813 | 154,277 | 151,962 | ||||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,710,166 | $ | 1,699,954 | $ | 1,707,620 | $ | 1,731,682 | $ | 1,718,572 | |||||||||||
| Period-end shares outstanding | 4,831 | 4,824 | 4,817 | 4,804 | 4,799 | ||||||||||||||||
| Chemung Financial Corporation | |||||||||||||||||||||||
| Consolidated Statements of Income (Unaudited) | |||||||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 30, | Percent | June 30, | Percent | ||||||||||||||||||||
| (in thousands, except per share data) | 2018 | 2017 | Change | 2018 | 2017 | Change | |||||||||||||||||
| Interest and dividend income: | |||||||||||||||||||||||
| Loans, including fees | $ | 14,300 | $ | 12,817 | 11.6 | $ | 28,350 | $ | 25,316 | 12.0 | |||||||||||||
| Taxable securities | 1,264 | 1,398 | (9.6 | ) | 2,553 | 2,820 | (9.5 | ) | |||||||||||||||
| Tax exempt securities | 295 | 276 | 6.9 | 603 | 514 | 17.3 | |||||||||||||||||
| Interest-earning deposits | 10 | 193 | (94.8 | ) | 32 | 348 | (90.8 | ) | |||||||||||||||
| Total interest and dividend income | 15,869 | 14,684 | 8.1 | 31,538 | 28,998 | 8.8 | |||||||||||||||||
| Interest expense: | |||||||||||||||||||||||
| Deposits | 608 | 549 | 10.7 | 1,109 | 1,087 | 2.0 | |||||||||||||||||
| Securities sold under agreements to repurchase | 44 | 95 | (53.7 | ) | 137 | 288 | (52.4 | ) | |||||||||||||||
| Borrowed funds | 200 | 90 | 122.2 | 375 | 179 | 109.5 | |||||||||||||||||
| Total interest expense | 852 | 734 | 16.1 | 1,621 | 1,554 | 4.3 | |||||||||||||||||
| Net interest income | 15,017 | 13,950 | 7.6 | 29,917 | 27,444 | 9.0 | |||||||||||||||||
| Provision for loan losses | 2,362 | 421 | 461.0 | 3,071 | 1,461 | 110.2 | |||||||||||||||||
| Net interest income after provision for loan losses | 12,655 | 13,529 | (6.5 | ) | 26,846 | 25,983 | 3.3 | ||||||||||||||||
| Non-interest income: | |||||||||||||||||||||||
| Wealth management group fee income | 2,373 | 2,269 | 4.6 | 4,689 | 4,378 | 7.1 | |||||||||||||||||
| Service charges on deposit accounts | 1,144 | 1,225 | (6.6 | ) | 2,308 | 2,409 | (4.2 | ) | |||||||||||||||
| Interchange revenue from debit card transactions | 996 | 964 | 3.3 | 2,031 | 1,884 | 7.8 | |||||||||||||||||
| Net gains on securities transactions | - | 12 | (100.0 | ) | - | 12 | (100.0 | ) | |||||||||||||||
| Net gains on sales of loans held for sale | 59 | 53 | 11.3 | 105 | 122 | (13.9 | ) | ||||||||||||||||
| Net gains (losses) on sales of other real estate owned | (48 | ) | (9 | ) | 433.3 | (4 | ) | 8 | (150.0 | ) | |||||||||||||
| Income from bank owned life insurance | 17 | 18 | (5.6 | ) | 33 | 35 | (5.7 | ) | |||||||||||||||
| Other | 784 | 490 | 60.0 | 1,638 | 1,021 | 60.4 | |||||||||||||||||
| Total non-interest income | 5,325 | 5,022 | 6.0 | 10,800 | 9,869 | 9.4 | |||||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||
| Salaries and wages | 5,564 | 5,422 | 2.6 | 11,278 | 10,697 | 5.4 | |||||||||||||||||
| Pension and other employee benefits | 1,518 | 1,540 | (1.4 | ) | 3,176 | 3,091 | 2.7 | ||||||||||||||||
| Other components of net periodic pension and postretirement benefits | (408 | ) | (333 | ) | 22.5 | (816 | ) | (666 | ) | 22.5 | |||||||||||||
| Net occupancy | 1,643 | 1,702 | (3.5 | ) | 3,251 | 3,308 | (1.7 | ) | |||||||||||||||
| Furniture and equipment | 702 | 781 | (10.1 | ) | 1,360 | 1,462 | (7.0 | ) | |||||||||||||||
| Data processing | 1,764 | 1,587 | 11.2 | 3,506 | 3,191 | 9.9 | |||||||||||||||||
| Professional services | 508 | 417 | 21.8 | 1,048 | 717 | 46.2 | |||||||||||||||||
| Legal accruals and settlements | 989 | 850 | 16.4 | 989 | 850 | 16.4 | |||||||||||||||||
| Amortization of intangible assets | 182 | 213 | (14.6 | ) | 376 | 439 | (14.4 | ) | |||||||||||||||
| Marketing and advertising | 255 | 118 | 116.1 | 604 | 367 | 64.6 | |||||||||||||||||
| Other real estate owned expense | 100 | 11 | 809.1 | 238 | 31 | 667.7 | |||||||||||||||||
| FDIC insurance | 301 | 309 | (2.6 | ) | 618 | 634 | (2.5 | ) | |||||||||||||||
| Loan expense | 184 | 166 | 10.8 | 353 | 282 | 25.2 | |||||||||||||||||
| Other | 1,665 | 1,549 | 7.5 | 3,152 | 2,974 | 6.0 | |||||||||||||||||
| Total non-interest expense | 14,967 | 14,332 | 4.4 | 29,133 | 27,377 | 6.4 | |||||||||||||||||
| Income before income tax expense | 3,013 | 4,219 | (28.6 | ) | 8,513 | 8,475 | 0.4 | ||||||||||||||||
| Income tax expense | 486 | 1,263 | (61.5 | ) | 1,547 | 2,540 | (39.1 | ) | |||||||||||||||
| Net income | $ | 2,527 | $ | 2,956 | (14.5 | ) | $ | 6,966 | $ | 5,935 | 17.4 | ||||||||||||
| Basic and diluted earnings per share | $ | 0.52 | $ | 0.62 | $ | 1.44 | $ | 1.24 | |||||||||||||||
| Cash dividends declared per share | 0.26 | 0.26 | 0.52 | 0.52 | |||||||||||||||||||
| Average basic and diluted shares outstanding | 4,828 | 4,797 | 4,825 | 4,793 | |||||||||||||||||||
| N/M - Not meaningful | |||||||||||||||||||||||
| Chemung Financial Corporation | ||||||||||||||||||||||||||||
| Consolidated Financial Highlights (Unaudited) | ||||||||||||||||||||||||||||
| As of or for the | ||||||||||||||||||||||||||||
| As of or for the Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||
| June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | June 30, | June 30, | ||||||||||||||||||||||
| (in thousands, per share data) | 2018 | 2018 | 2017 | 2017 | 2017 | 2018 | 2017 | |||||||||||||||||||||
| RESULTS OF OPERATIONS | ||||||||||||||||||||||||||||
| Interest income | $ | 15,869 | $ | 15,669 | $ | 15,560 | $ | 15,497 | $ | 14,684 | $ | 31,538 | $ | 28,998 | ||||||||||||||
| Interest expense | 852 | 769 | 780 | 734 | 734 | 1,621 | 1,554 | |||||||||||||||||||||
| Net interest income | 15,017 | 14,900 | 14,780 | 14,763 | 13,950 | 29,917 | 27,444 | |||||||||||||||||||||
| Provision for loan losses | 2,362 | 709 | 6,272 | 1,289 | 421 | 3,071 | 1,461 | |||||||||||||||||||||
| Net interest income after provision for loan losses | 12,655 | 14,191 | 8,508 | 13,474 | 13,529 | 26,846 | 25,983 | |||||||||||||||||||||
| Non-interest income | 5,325 | 5,475 | 5,456 | 5,166 | 5,022 | 10,800 | 9,869 | |||||||||||||||||||||
| Non-interest expense | 14,967 | 14,166 | 13,111 | 13,276 | 14,332 | 29,133 | 27,377 | |||||||||||||||||||||
| Income before income tax expense | 3,013 | 5,500 | 853 | 5,364 | 4,219 | 8,513 | 8,475 | |||||||||||||||||||||
| Income tax expense | 486 | 1,061 | 3,012 | 1,710 | 1,263 | 1,547 | 2,540 | |||||||||||||||||||||
| Net income (loss) | $ | 2,527 | $ | 4,439 | $ | (2,159 | ) | $ | 3,654 | $ | 2,956 | $ | 6,966 | $ | 5,935 | |||||||||||||
| Basic and diluted earnings per share | $ | 0.52 | $ | 0.92 | $ | (0.45 | ) | $ | 0.76 | $ | 0.62 | $ | 1.44 | $ | 1.24 | |||||||||||||
| Average basic and diluted shares outstanding | 4,828 | 4,822 | 4,809 | 4,802 | 4,797 | 4,825 | 4,793 | |||||||||||||||||||||
| PERFORMANCE RATIOS | ||||||||||||||||||||||||||||
| Return on average assets | 0.59 | % | 1.06 | % | (0.50 | )% | 0.85 | % | 0.69 | % | 0.82 | % | 0.70 | % | ||||||||||||||
| Return on average equity | 6.70 | % | 11.96 | % | (5.53 | )% | 9.46 | % | 7.90 | % | 9.31 | % | 8.06 | % | ||||||||||||||
| Return on average tangible equity (a) | 7.94 | % | 14.21 | % | (6.55 | )% | 11.24 | % | 9.43 | % | 11.05 | % | 9.66 | % | ||||||||||||||
| Efficiency ratio (a) (b) | 67.47 | % | 68.21 | % | 63.43 | % | 64.83 | % | 69.28 | % | 67.84 | % | 69.27 | % | ||||||||||||||
| Non-interest expense to average assets | 3.52 | % | 3.37 | % | 3.01 | % | 3.09 | % | 3.34 | % | 3.45 | % | 3.23 | % | ||||||||||||||
| Loans to deposits | 90.23 | % | 86.94 | % | 89.40 | % | 83.85 | % | 82.14 | % | 90.23 | % | 82.14 | % | ||||||||||||||
| YIELDS / RATES - Fully Taxable Equivalent | ||||||||||||||||||||||||||||
| Yield on loans | 4.33 | % | 4.34 | % | 4.26 | % | 4.34 | % | 4.18 | % | 4.34 | % | 4.18 | % | ||||||||||||||
| Yield on investments | 2.21 | % | 2.22 | % | 2.15 | % | 2.16 | % | 2.01 | % | 2.22 | % | 2.01 | % | ||||||||||||||
| Yield on interest-earning assets | 3.94 | % | 3.94 | % | 3.82 | % | 3.86 | % | 3.65 | % | 3.94 | % | 3.65 | % | ||||||||||||||
| Cost of interest-bearing deposits | 0.24 | % | 0.20 | % | 0.20 | % | 0.20 | % | 0.20 | % | 0.22 | % | 0.20 | % | ||||||||||||||
| Cost of borrowings | 2.41 | % | 2.23 | % | 2.42 | % | 2.95 | % | 2.82 | % | 2.31 | % | 2.94 | % | ||||||||||||||
| Cost of interest-bearing liabilities | 0.32 | % | 0.29 | % | 0.28 | % | 0.27 | % | 0.26 | % | 0.30 | % | 0.28 | % | ||||||||||||||
| Interest rate spread | 3.62 | % | 3.65 | % | 3.54 | % | 3.59 | % | 3.39 | % | 3.64 | % | 3.37 | % | ||||||||||||||
| Net interest margin, fully taxable equivalent | 3.73 | % | 3.75 | % | 3.63 | % | 3.68 | % | 3.47 | % | 3.74 | % | 3.46 | % | ||||||||||||||
| CAPITAL | ||||||||||||||||||||||||||||
| Total equity to total assets at end of period | 8.88 | % | 8.84 | % | 8.77 | % | 8.91 | % | 8.84 | % | 8.88 | % | 8.84 | % | ||||||||||||||
| Tangible equity to tangible assets at end of period (a) | 7.60 | % | 7.55 | % | 7.48 | % | 7.62 | % | 7.53 | % | 7.60 | % | 7.53 | % | ||||||||||||||
| Book value per share | $ | 31.42 | $ | 31.16 | $ | 31.10 | $ | 32.11 | $ | 31.67 | $ | 31.42 | $ | 31.67 | ||||||||||||||
| Tangible book value per share (a) | 26.55 | 26.24 | 26.14 | 27.09 | 26.60 | 26.55 | 26.60 | |||||||||||||||||||||
| Period-end market value per share | 50.11 | 46.47 | 48.10 | 47.10 | 40.88 | 50.11 | 40.88 | |||||||||||||||||||||
| Dividends declared per share | 0.26 | 0.26 | 0.26 | 0.26 | 0.26 | 0.52 | 0.52 | |||||||||||||||||||||
| AVERAGE BALANCES | ||||||||||||||||||||||||||||
| Loans and loans held for sale (c) | $ | 1,328,386 | $ | 1,315,207 | $ | 1,291,414 | $ | 1,259,919 | $ | 1,237,189 | $ | 1,321,834 | $ | 1,226,377 | ||||||||||||||
| Interest earning assets | 1,625,591 | 1,623,748 | 1,639,257 | 1,615,833 | 1,634,955 | 1,624,676 | 1,620,290 | |||||||||||||||||||||
| Total assets | 1,703,722 | 1,703,047 | 1,727,616 | 1,707,111 | 1,723,664 | 1,703,386 | 1,709,014 | |||||||||||||||||||||
| Deposits | 1,495,410 | 1,488,708 | 1,516,390 | 1,512,685 | 1,532,819 | 1,492,076 | 1,514,374 | |||||||||||||||||||||
| Total equity | 151,216 | 150,495 | 154,767 | 153,244 | 150,155 | 150,857 | 148,408 | |||||||||||||||||||||
| Tangible equity (a) | 127,591 | 126,665 | 130,759 | 129,024 | 125,720 | 127,130 | 123,864 | |||||||||||||||||||||
| ASSET QUALITY | ||||||||||||||||||||||||||||
| Net charge-offs | $ | 4,107 | $ | 480 | $ | 805 | $ | 699 | $ | 277 | $ | 4,587 | $ | 610 | ||||||||||||||
| Non-performing loans (d) | 12,790 | 17,280 | 17,324 | 14,028 | 15,208 | 12,790 | 15,208 | |||||||||||||||||||||
| Non-performing assets (e) | 13,676 | 19,113 | 19,264 | 14,216 | 15,545 | 13,676 | 15,545 | |||||||||||||||||||||
| Allowance for loan losses | 19,645 | 21,390 | 21,161 | 15,694 | 15,104 | 19,645 | 15,104 | |||||||||||||||||||||
| Annualized net charge-offs to average loans | 1.24 | % | 0.15 | % | 0.25 | % | 0.22 | % | 0.09 | % | 0.70 | % | 0.10 | % | ||||||||||||||
| Non-performing loans to total loans | 0.96 | % | 1.31 | % | 1.32 | % | 1.09 | % | 1.21 | % | 0.96 | % | 1.21 | % | ||||||||||||||
| Non-performing assets to total assets | 0.80 | % | 1.12 | % | 1.13 | % | 0.82 | % | 0.90 | % | 0.80 | % | 0.90 | % | ||||||||||||||
| Allowance for loan losses to total loans | 1.47 | % | 1.62 | % | 1.61 | % | 1.22 | % | 1.21 | % | 1.47 | % | 1.21 | % | ||||||||||||||
| Allowance for loan losses to non-performing loans | 153.60 | % | 123.78 | % | 122.15 | % | 111.88 | % | 99.32 | % | 153.60 | % | 99.32 | % | ||||||||||||||
| (a) See the GAAP to Non-GAAP reconciliations. | ||||||||||||||||||||||||||||
| (b) Efficiency ratio 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 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. | ||||||||||||||||||||||||||||
| Chemung Financial Corporation | ||||||||||||||||||||||||||||||||||
| Average Consolidated Balance Sheets & Net Interest Income Analysis and Rate/Volume Analysis of Net Interest Income (Unaudited) | ||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | Three Months Ended June 30, 2018 vs. 2017 | ||||||||||||||||||||||||||||||||
| (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 | $ | 855,121 | $ | 9,663 | 4.53 | % | $ | 779,218 | $ | 8,357 | 4.30 | % | $ | 1,306 | $ | 843 | $ | 463 | ||||||||||||||||
| Mortgage loans | 194,244 | 1,800 | 3.72 | % | 201,093 | 1,867 | 3.72 | % | (67 | ) | (67 | ) | - | |||||||||||||||||||||
| Consumer loans | 279,021 | 2,873 | 4.13 | % | 256,878 | 2,658 | 4.15 | % | 215 | 228 | (13 | ) | ||||||||||||||||||||||
| Taxable securities | 240,800 | 1,266 | 2.11 | % | 275,275 | 1,400 | 2.04 | % | (134 | ) | (180 | ) | 46 | |||||||||||||||||||||
| Tax-exempt securities | 52,527 | 363 | 2.77 | % | 51,027 | 401 | 3.15 | % | (38 | ) | 12 | (50 | ) | |||||||||||||||||||||
| Interest-earning deposits | 3,878 | 10 | 1.03 | % | 71,464 | 193 | 1.08 | % | (183 | ) | (174 | ) | (9 | ) | ||||||||||||||||||||
| Total interest earning assets | 1,625,591 | 15,975 | 3.94 | % | 1,634,955 | 14,876 | 3.65 | % | 1,099 | 662 | 437 | |||||||||||||||||||||||
| Non- interest earnings assets: | ||||||||||||||||||||||||||||||||||
| Cash and due from banks | 27,130 | 24,446 | ||||||||||||||||||||||||||||||||
| Premises and equipment, net | 26,287 | 28,205 | ||||||||||||||||||||||||||||||||
| Other assets | 56,002 | 54,033 | ||||||||||||||||||||||||||||||||
| Allowance for loan losses | (21,218 | ) | (15,060 | ) | ||||||||||||||||||||||||||||||
| AFS valuation allowance | (10,070 | ) | (2,915 | ) | ||||||||||||||||||||||||||||||
| Total assets | $ | 1,703,722 | $ | 1,723,664 | ||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||
| Interest-bearing checking | $ | 131,863 | $ | 28 | 0.09 | % | $ | 142,892 | $ | 33 | 0.09 | % | (5 | ) | (5 | ) | - | |||||||||||||||||
| Savings and money market | 774,020 | 419 | 0.22 | % | 822,989 | 394 | 0.19 | % | 25 | (27 | ) | 52 | ||||||||||||||||||||||
| Time deposits | 130,432 | 161 | 0.50 | % | 137,502 | 122 | 0.36 | % | 39 | (6 | ) | 45 | ||||||||||||||||||||||
| FHLB advances and repos | 40,557 | 244 | 2.41 | % | 26,341 | 185 | 2.82 | % | 59 | 89 | (30 | ) | ||||||||||||||||||||||
| Total int.-bearing liabilities | 1,076,872 | 852 | 0.32 | % | 1,129,724 | 734 | 0.26 | % | 118 | 51 | 67 | |||||||||||||||||||||||
| Non-interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||
| Demand deposits | 459,095 | 429,436 | ||||||||||||||||||||||||||||||||
| Other liabilities | 16,539 | 14,349 | ||||||||||||||||||||||||||||||||
| Total liabilities | 1,552,506 | 1,573,509 | ||||||||||||||||||||||||||||||||
| Shareholders' equity | 151,216 | 150,155 | ||||||||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,703,722 | $ | 1,723,664 | ||||||||||||||||||||||||||||||
| Fully taxable equivalent net interest income | 15,123 | 14,142 | $ | 981 | $ | 611 | $ | 370 | ||||||||||||||||||||||||||
| Net interest rate spread (1) | 3.62 | % | 3.39 | % | ||||||||||||||||||||||||||||||
| Net interest margin, fully taxable equivalent (2) | 3.73 | % | 3.47 | % | ||||||||||||||||||||||||||||||
| Taxable equivalent adjustment | (106 | ) | (192 | ) | ||||||||||||||||||||||||||||||
| Net interest income | $ | 15,017 | $ | 13,950 | ||||||||||||||||||||||||||||||
| (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) | ||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2018 | Six Months Ended June 30, 2017 | Six Months Ended June 30, 2018 vs. 2017 | ||||||||||||||||||||||||||||||||
| (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 | $ | 849,927 | $ | 19,096 | 4.53 | % | $ | 770,267 | $ | 16,387 | 4.29 | % | $ | 2,709 | $ | 1,758 | $ | 951 | ||||||||||||||||
| Mortgage loans | 194,579 | 3,610 | 3.74 | % | 199,740 | 3,754 | 3.79 | % | (144 | ) | (95 | ) | (49 | ) | ||||||||||||||||||||
| Consumer loans | 277,328 | 5,717 | 4.16 | % | 256,370 | 5,300 | 4.17 | % | 417 | 430 | (13 | ) | ||||||||||||||||||||||
| Taxable securities | 245,382 | 2,557 | 2.10 | % | 273,935 | 2,823 | 2.08 | % | (266 | ) | (293 | ) | 27 | |||||||||||||||||||||
| Tax-exempt securities | 53,570 | 742 | 2.79 | % | 47,910 | 747 | 3.14 | % | (5 | ) | 83 | (88 | ) | |||||||||||||||||||||
| Interest-earning deposits | 3,890 | 32 | 1.66 | % | 72,068 | 348 | 0.97 | % | (316 | ) | (462 | ) | 146 | |||||||||||||||||||||
| Total interest earning assets | 1,624,676 | 31,754 | 3.94 | % | 1,620,290 | 29,359 | 3.65 | % | 2,395 | 1,421 | 974 | |||||||||||||||||||||||
| Non-interest earnings assets: | ||||||||||||||||||||||||||||||||||
| Cash and due from banks | 27,191 | 25,161 | ||||||||||||||||||||||||||||||||
| Premises and equipment, net | 26,415 | 28,429 | ||||||||||||||||||||||||||||||||
| Other assets | 54,882 | 53,994 | ||||||||||||||||||||||||||||||||
| Allowance for loan losses | (21,236 | ) | (14,706 | ) | ||||||||||||||||||||||||||||||
| AFS valuation allowance | (8,542 | ) | (4,154 | ) | ||||||||||||||||||||||||||||||
| Total assets | $ | 1,703,386 | $ | 1,709,014 | ||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||
| Interest-bearing checking | $ | 141,632 | $ | 63 | 0.09 | % | $ | 147,895 | $ | 67 | 0.09 | % | $ | (4 | ) | $ | (4 | ) | $ | - | ||||||||||||||
| Savings and money market | 772,019 | 793 | 0.21 | % | 803,269 | 771 | 0.19 | % | 22 | (37 | ) | 59 | ||||||||||||||||||||||
| Time deposits | 123,813 | 253 | 0.41 | % | 139,366 | 250 | 0.36 | % | 3 | (30 | ) | 33 | ||||||||||||||||||||||
| FHLB advances and repos | 44,616 | 512 | 2.31 | % | 31,973 | 466 | 2.94 | % | 46 | 159 | (113 | ) | ||||||||||||||||||||||
| Total int.-bearing liabilities | 1,082,080 | 1,621 | 0.30 | % | 1,122,503 | 1,554 | 0.28 | % | 67 | 88 | (21 | ) | ||||||||||||||||||||||
| Non-interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||
| Demand deposits | 454,612 | 423,844 | ||||||||||||||||||||||||||||||||
| Other liabilities | 15,837 | 14,259 | ||||||||||||||||||||||||||||||||
| Total liabilities | 1,552,529 | 1,560,606 | ||||||||||||||||||||||||||||||||
| Shareholders' equity | 150,857 | 148,408 | ||||||||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,703,386 | $ | 1,709,014 | ||||||||||||||||||||||||||||||
| Fully taxable equivalent net interest income | 30,133 | 27,805 | $ | 2,328 | $ | 1,333 | $ | 995 | ||||||||||||||||||||||||||
| Net interest rate spread (1) | 3.64 | % | 3.37 | % | ||||||||||||||||||||||||||||||
| Net interest margin, fully taxable equivalent (2) | 3.74 | % | 3.46 | % | ||||||||||||||||||||||||||||||
| Taxable equivalent adjustment | (216 | ) | (361 | ) | ||||||||||||||||||||||||||||||
| Net interest income | $ | 29,917 | $ | 27,444 | ||||||||||||||||||||||||||||||
| (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, Net Interest Margin, and Efficiency Ratio
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.
The 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 | Six Months Ended | |||||||||||||||||||||||||||
| June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | June 30, | June 30, | ||||||||||||||||||||||
| (in thousands, except per share data) | 2018 | 2018 | 2017 | 2017 | 2017 | 2018 | 2017 | |||||||||||||||||||||
| NET INTEREST MARGIN - FULLY TAXABLE EQUIVALENT | ||||||||||||||||||||||||||||
| AND EFFICIENCY RATIO | ||||||||||||||||||||||||||||
| Net interest income (GAAP) | $ | 15,017 | $ | 14,900 | $ | 14,780 | $ | 14,763 | $ | 13,950 | $ | 29,917 | $ | 27,444 | ||||||||||||||
| Fully taxable equivalent adjustment | 106 | 110 | 206 | 220 | 192 | 216 | 361 | |||||||||||||||||||||
| Fully taxable equivalent net interest income (non-GAAP) | $ | 15,123 | $ | 15,010 | $ | 14,986 | $ | 14,983 | $ | 14,142 | $ | 30,133 | $ | 27,805 | ||||||||||||||
| Non-interest income (GAAP) | $ | 5,325 | $ | 5,475 | $ | 5,456 | $ | 5,166 | $ | 5,022 | $ | 10,800 | $ | 9,869 | ||||||||||||||
| Less: net (gains) losses on security transactions | - | - | (97 | ) | - | (12 | ) | - | (12 | ) | ||||||||||||||||||
| Adjusted non-interest income (non-GAAP) | $ | 5,325 | $ | 5,475 | $ | 5,359 | $ | 5,166 | $ | 5,010 | $ | 10,800 | $ | 9,857 | ||||||||||||||
| Non-interest expense (GAAP) | $ | 14,967 | $ | 14,166 | $ | 13,111 | $ | 13,276 | $ | 14,332 | $ | 29,133 | $ | 27,377 | ||||||||||||||
| Less: amortization of intangible assets | (182 | ) | (194 | ) | (207 | ) | (214 | ) | (213 | ) | (376 | ) | (439 | ) | ||||||||||||||
| Less: legal reserve | (989 | ) | - | - | - | (850 | ) | (989 | ) | (850 | ) | |||||||||||||||||
| Adjusted non-interest expense (non-GAAP) | $ | 13,796 | $ | 13,972 | $ | 12,904 | $ | 13,062 | $ | 13,269 | $ | 27,768 | $ | 26,088 | ||||||||||||||
| Average interest-earning assets (GAAP) | $ | 1,625,591 | $ | 1,623,748 | $ | 1,639,257 | $ | 1,615,833 | $ | 1,634,955 | $ | 1,624,676 | $ | 1,620,290 | ||||||||||||||
| Net interest margin - fully taxable equivalent (non-GAAP) | 3.73 | % | 3.75 | % | 3.63 | % | 3.68 | % | 3.47 | % | 3.74 | % | 3.46 | % | ||||||||||||||
| Efficiency ratio (non-GAAP) | 67.47 | % | 68.21 | % | 63.43 | % | 64.83 | % | 69.28 | % | 67.84 | % | 69.27 | % | ||||||||||||||
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 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 | Six Months Ended | |||||||||||||||||||||||||||
| June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | June 30, | June 30, | ||||||||||||||||||||||
| (in thousands, except per share and ratio data) | 2018 | 2018 | 2017 | 2017 | 2017 | 2018 | 2017 | |||||||||||||||||||||
| TANGIBLE EQUITY AND TANGIBLE ASSETS | ||||||||||||||||||||||||||||
| (PERIOD END) | ||||||||||||||||||||||||||||
| Total shareholders' equity (GAAP) | $ | 151,780 | $ | 150,262 | $ | 149,813 | $ | 154,277 | $ | 151,962 | $ | 151,780 | $ | 151,962 | ||||||||||||||
| Less: intangible assets | (23,533 | ) | (23,715 | ) | (23,909 | ) | (24,116 | ) | (24,330 | ) | (23,533 | ) | (24,330 | ) | ||||||||||||||
| Tangible equity (non-GAAP) | $ | 128,247 | $ | 126,547 | $ | 125,904 | $ | 130,161 | $ | 127,632 | $ | 128,247 | $ | 127,632 | ||||||||||||||
| Total assets (GAAP) | $ | 1,710,166 | $ | 1,699,954 | $ | 1,707,620 | $ | 1,731,682 | $ | 1,718,572 | $ | 1,710,166 | $ | 1,718,572 | ||||||||||||||
| Less: intangible assets | (23,533 | ) | (23,715 | ) | (23,909 | ) | (24,116 | ) | (24,330 | ) | (23,533 | ) | (24,330 | ) | ||||||||||||||
| Tangible assets (non-GAAP) | $ | 1,686,633 | $ | 1,676,239 | $ | 1,683,711 | $ | 1,707,566 | $ | 1,694,242 | $ | 1,686,633 | $ | 1,694,242 | ||||||||||||||
| Total equity to total assets at end of period (GAAP) | 8.88 | % | 8.84 | % | 8.77 | % | 8.91 | % | 8.84 | % | 8.88 | % | 8.84 | % | ||||||||||||||
| Book value per share (GAAP) | $ | 31.42 | $ | 31.16 | $ | 31.10 | $ | 32.11 | $ | 31.67 | $ | 31.42 | $ | 31.67 | ||||||||||||||
| Tangible equity to tangible assets at | ||||||||||||||||||||||||||||
| end of period (non-GAAP) | 7.60 | % | 7.55 | % | 7.48 | % | 7.62 | % | 7.53 | % | 7.60 | % | 7.53 | % | ||||||||||||||
| Tangible book value per share (non-GAAP) | $ | 26.55 | $ | 26.24 | $ | 26.14 | $ | 27.09 | $ | 26.60 | $ | 26.55 | $ | 26.60 | ||||||||||||||
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 | Six Months Ended | |||||||||||||||||||||||||||
| June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | June 30, | June 30, | ||||||||||||||||||||||
| (in thousands, except ratio data) | 2018 | 2018 | 2017 | 2017 | 2017 | 2018 | 2017 | |||||||||||||||||||||
| TANGIBLE EQUITY (AVERAGE) | ||||||||||||||||||||||||||||
| Total average shareholders' equity (GAAP) | $ | 151,216 | $ | 150,495 | $ | 154,767 | $ | 153,244 | $ | 150,155 | $ | 150,857 | $ | 148,408 | ||||||||||||||
| Less: average intangible assets | (23,625 | ) | (23,830 | ) | (24,008 | ) | (24,220 | ) | (24,435 | ) | (23,727 | ) | (24,544 | ) | ||||||||||||||
| Average tangible equity (non-GAAP) | $ | 127,591 | $ | 126,665 | $ | 130,759 | $ | 129,024 | $ | 125,720 | $ | 127,130 | $ | 123,864 | ||||||||||||||
| Return on average equity (GAAP) | 6.70 | % | 11.96 | % | (5.53 | )% | 9.46 | % | 7.90 | % | 9.31 | % | 8.06 | % | ||||||||||||||
| Return on average tangible equity (non-GAAP) | 7.94 | % | 14.21 | % | (6.55 | )% | 11.24 | % | 9.43 | % | 11.05 | % | 9.66 | % | ||||||||||||||
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 | Six Months Ended | |||||||||||||||||||||||||||
| June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | June 30, | June 30, | ||||||||||||||||||||||
| (in thousands, except per share and ratio data) | 2018 | 2018 | 2017 | 2017 | 2017 | 2018 | 2017 | |||||||||||||||||||||
| NON-GAAP NET INCOME | ||||||||||||||||||||||||||||
| Reported net income (GAAP) | $ | 2,527 | $ | 4,439 | $ | (2,159 | ) | $ | 3,654 | $ | 2,956 | $ | 6,966 | $ | 5,935 | |||||||||||||
| Net (gains) losses on security transactions (net of tax) | - | - | (60 | ) | - | (8 | ) | - | (8 | ) | ||||||||||||||||||
| Legal reserve (net of tax) | 737 | - | - | - | 528 | 737 | 528 | |||||||||||||||||||||
| Revaluation of net deferred tax asset | - | - | 2,927 | - | - | - | - | |||||||||||||||||||||
| Non-GAAP net income | $ | 3,264 | $ | 4,439 | $ | 708 | $ | 3,654 | $ | 3,476 | $ | 7,703 | $ | 6,455 | ||||||||||||||
| Average basic and diluted shares outstanding | 4,828 | 4,822 | 4,809 | 4,802 | 4,797 | 4,825 | 4,793 | |||||||||||||||||||||
| Reported basic and diluted earnings per share (GAAP) | $ | 0.52 | $ | 0.92 | $ | (0.45 | ) | $ | 0.76 | $ | 0.62 | $ | 1.44 | $ | 1.24 | |||||||||||||
| Reported return on average assets (GAAP) | 0.59 | % | 1.06 | % | (0.50 | )% | 0.85 | % | 0.69 | % | 0.82 | % | 0.70 | % | ||||||||||||||
| Reported return on average equity (GAAP) | 6.70 | % | 11.96 | % | (5.53 | )% | 9.46 | % | 7.90 | % | 9.31 | % | 8.06 | % | ||||||||||||||
| Core basic and diluted earnings per share (non-GAAP) | $ | 0.68 | $ | 0.92 | $ | 0.15 | $ | 0.76 | $ | 0.72 | $ | 1.60 | $ | 1.35 | ||||||||||||||
| Core return on average assets (non-GAAP) | 0.77 | % | 1.06 | % | 0.16 | % | 0.85 | % | 0.81 | % | 0.91 | % | 0.76 | % | ||||||||||||||
| Core return on average equity (non-GAAP) | 8.66 | % | 11.96 | % | 1.81 | % | 9.46 | % | 9.29 | % | 10.30 | % | 8.77 | % | ||||||||||||||
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 2017 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