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CST: 19/09/2019 00:07:13   

Chemung Financial Corporation Reports Second Quarter 2019 Net Income of $5.0 Million, or $1.02 per Share

58 Days ago

ELMIRA, N.Y., July 22, 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 $5.0 million, or $1.02 per share, for the second quarter of 2019, compared to $2.5 million, or $0.52 per share, for the second quarter of 2018.

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

“We are very pleased to report another quarter of strong earnings for 2019.  Our results are a direct reflection of our focused approach to managing interest rate sensitivity, liquidity, and efficiency while positioning the balance sheet for the remainder of 2019 and into 2020.  Our net interest margin remains steady, even though there is downward pressure due to the increasing costs of obtaining deposits.  We are looking forward to the benefits of a stronger balance sheet and capital ratios that will provide us with the opportunity to support continued growth.”

Second Quarter Highlights 1

  • Provision for loan losses decreased $2.2 million, or 93.6%

  • Total shareholders’ equity increased $13.4 million, or 8.1%

  • Total equity to total assets ratio increased to 10.18% at June 30, 2019

  • Dividends declared during the second quarter of 2019 were $0.26 per share

A more detailed summary of financial performance follows.

1 Balance sheet comparisons are calculated for June 30, 2019 versus December 31, 2018.  Income statement comparisons are calculated for the second quarter of 2019 versus the second quarter of 2018.

2nd Quarter 2019 vs 2nd Quarter 2018

Net Interest Income:

Net interest income for the current quarter totaled $15.1 million compared with $15.0 million for the same period in the prior year, an increase of $0.1 million, or 0.6%, due primarily to a $0.8 million increase in total interest and dividend income, offset by a $0.7 million increase in total interest expense.  Interest and fees from loans increased $0.3 million and interest from interest-earning deposits increased $0.5 million in the second quarter of 2019 as compared to the same period in the prior year.  Interest expense on deposits increased $0.9 million, while interest expense on borrowed funds decreased $0.2 million in the second quarter of 2019 when compared to the same period in the prior year.  Fully taxable equivalent net interest margin was 3.69% in the second quarter of 2019, compared with 3.73% for the same period in the prior year.  The average yield on interest-earning assets increased 13 basis points, while the average cost of interest-bearing liabilities increased 26 basis points in the second quarter of 2019, compared to the same period in the prior year.  Average interest-earning assets increased $28.6 million in the second quarter of 2019, 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 155 basis points on interest-earning deposits, 19 basis points on commercial loans, 34 basis points on consumer loans and 12 basis points on taxable securities, due to rising interest rates, along with a $77.9 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 $36.3 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 $5.1 million compared with $5.3 million for the same period in the prior year, a decrease of $0.2 million, or 4.5%.  The decrease can be mostly attributed to a decrease of $0.4 million in other non-interest income, offset by an increase of $0.2 million in Wealth Management Group fee (“WMG”) income.  The decrease in other non-interest income was due primarily to the $0.2 million decrease in swap fees and various other non-interest income items.  The increase in WMG fee income can be mostly attributed to an increase in fees from terminating trusts.  

Non-Interest Expense:

Non-interest expense for the current quarter was $13.8 million compared with $15.0 million for the same period in the prior year, a decrease of $1.2 million, or 7.6%.  The decrease can be mostly attributed to decreases of $1.0 million in legal accruals and settlements, $0.2 million in net occupancy expenses, $0.1 million in furniture and equipment expenses, and $0.1 million in marketing and advertising expenses, offset by increases of $0.2 million in salaries and wages, $0.1 million in data process expenses, and a $0.3 million reduced credit in other components of net periodic pension and postretirement benefits.  The decrease in legal accruals and settlements can be attributed to the settlement agreement in the matter of Fane vs. Chemung Canal Trust Company during the second quarter of 2018.  The decrease in net occupancy expense was due primarily to the closure of two branches in 2019.  The increase in salaries and wages can be mostly attributed to annual merit increases. 

Income Tax Expense:

Income tax expense for the current quarter was $1.2 million compared with $0.5 million for the same period in the prior year.  The increase in income tax expense was due primarily to an increase of $3.2 million in income before income tax expense for the second quarter of 2019 as compared to the same period in the prior year.  The effective income tax rate increased from 16.1% for the second quarter of 2018 to 19.8% for the second quarter of 2019.

2nd Quarter 2019 vs 1st Quarter 2019

Net Interest Income:

Net interest income for the current quarter totaled $15.1 million compared with $15.2 million for the prior quarter, a decrease of $0.1 million, or 0.4%, due primarily to a $0.1 million increase in total interest expense.  Interest and fees from loans increased $0.1 million and interest and dividend income from investment securities increased $0.1 million, while interest from interest-earning deposits decreased $0.2 million compared to the prior quarter.  Interest expense on deposits increased due primarily to a 19 basis points increase in the average cost of time deposits, along with an increase of $10.4 million in the average balance of time deposits due to promotional rates on time deposits.  Fully taxable equivalent net interest margin was 3.69% in the second quarter of 2019, a slight decrease of two basis points compared with 3.71% for the prior quarter.  Average interest-earning assets decreased $16.9 million in the second quarter of 2019, while the average yield on interest-earning assets was level compared to the prior quarter.   The average cost of interest-bearing liabilities increased three basis points in the second quarter of 2019, compared to the prior quarter.

Non-Interest Income:

Non-interest income for the current quarter was $5.1 million compared with $4.9 million for the prior quarter, an increase of $0.2 million, or 3.3%.  The increase in non-interest income was due primarily to a $0.2 million increase in WMG fee income.  The increase in WMG fee income can be mostly attributed to an increase in the market value of total assets under management or administration and an increase in tax preparation fees.

Non-Interest Expense:

Non-interest expense for the current quarter was $13.8 million compared with $13.5 million for the prior quarter, an increase of $0.3 million, or 2.4%.  The increase can be mostly attributed to increases of $0.4 million in other non-interest expense and $0.1 million in data processing expense, offset by a decrease of $0.1 million in marketing and advertising expense.  The increase in other non-interest expense can be mostly attributed to a $0.2 million increase in the debit card rewards program.  The increase in data processing expense and the decrease in marketing and advertising expense were both related to the timing of various projects.

Income Tax Expense:

Income tax expense for the current quarter was $1.2 million compared with $1.0 million for the prior quarter, an increase of $0.2 million, or 19.2%.  The increase in income tax expense can be attributed to a $0.7 million increase in income before income tax expense for the second quarter of 2019, when compared to the prior quarter.  The effective income tax rate increased from 18.8% for the first quarter of 2019 to 19.8% for the second quarter of 2019.

Asset Quality

Non-performing loans totaled $19.5 million at June 30, 2019, or 1.51% 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 $19.7 million, or 1.12% of total assets, at June 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, offset by decreases in the 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 second quarter of 2019 was $0.2 million, a decrease of $2.2 million compared with the same period in the prior year.  The decrease in the provision for loan losses can be mostly attributed to a decrease in the total loan portfolio of $46.1 million between June 30, 2018 and June 30, 2019.  Additionally, during 2018 there was an increase in the historical loss factor on the commercial and industrial loan portfolio, due to the charge-off of multiple large commercial loans to one borrower for $3.6 million in the second quarter.  Net charge-offs for the second quarter of 2019 were $0.2 million, compared with $4.1 million for the second quarter of 2018. 

The allowance for loan losses was $19.7 million at June 30, 2019 compared with $18.9 million at December 31, 2018.  The allowance for loan losses was 100.77% of non-performing loans at June 30, 2019 compared with 154.59% at December 31, 2018.  The ratio of the allowance for loan losses to total loans was 1.53% at June 30, 2019 compared with 1.44% at December 31, 2018.

Balance Sheet Activity

Total assets were $1.753 billion at June 30, 2019 compared with $1.755 billion at December 31, 2018, a decrease of $2.3 million, or 0.1%.  The decrease can be mostly attributed to decreases of $13.5 million in cash and cash equivalents and $23.5 million in total loans, offset by increases of $27.0 million in securities available for sale and $8.2 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.

The decrease in cash and cash equivalents was due to changes in securities, loans, deposits, and borrowings.  The decrease in total loans can be mostly attributed to decreases of $13.4 million in commercial mortgages, $10.7 million in indirect consumer loans and $5.2 million in other consumer loans, offset by increases of $4.7 million in commercial and agriculture loans and $1.1 million in residential mortgages.  The increase in securities available for sale can be mostly attributed to purchases in the amount of $57.3 million, offset by $15.2 million in sales of mortgage-backed and municipal securities, along with maturities and paydowns.

Total liabilities were $1.575 billion at June 30, 2019 compared with $1.590 billion at December 31, 2018, a decrease of $15.7 million or 1.0%.  The decrease in total liabilities can be mostly attributed to a decrease of $28.1 million in deposits, offset by increases of $8.3 million in operating lease liabilities related to the January 1, 2019 adoption of Topic 842 and $4.3 million in accrued interest payable and other liabilities.  The decline in deposits from $1.569 billion at December 31, 2018 to $1.541 billion at June 30, 2019 can be mostly attributed to decreases of $32.4 million in non-interest bearing demand deposits accounts and $32.9 million in money market accounts, offset by increases of $27.6 million in time deposits, due to a rate promotion, and $9.2 million in interest-bearing demand deposit accounts.  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 $178.4 million at June 30, 2019 compared with $165.0 million at December 31, 2018, an increase of $13.4 million, or 8.1%.  The increase in retained earnings of $6.9 million can be mostly attributed to earnings of $9.4 million, offset by $2.5 million in dividends declared.  The decrease in accumulated other comprehensive loss of $5.5 million can be mostly attributed to the increase in the fair market value of the securities portfolio.  Also, treasury stock decreased $0.5 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 10.18% at June 30, 2019 compared with 9.40% at December 31, 2018.  The tangible equity to tangible assets ratio was 8.99% at June 30, 2019 compared with 8.19% at December 31, 2018.  Book value per share increased to $36.64 at June 30, 2019 from $33.99 at December 31, 2018.  As of June 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 $1.838 billion at June 30, 2019, including $273.5 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 $69.7 million, or 3.9%.  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.

                     
Chemung Financial Corporation                    
Consolidated Balance Sheets (Unaudited)                    
    June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,
(in thousands)     2019       2019       2018       2018       2018  
ASSETS                    
Cash and due from financial institutions   $ 32,622     $ 28,153     $ 33,040     $ 31,831     $ 30,837  
Interest-earning deposits in other financial institutions     83,838       97,657       96,932       82,081       3,978  
Total cash and cash equivalents     116,460       125,810       129,972       113,912       34,815  
                     
Equity investments     2,079       2,032       1,909       1,987       2,112  
                     
Securities available for sale     269,286       266,721       242,258       246,473       265,157  
Securities held to maturity     4,090       3,861       4,875       4,203       3,806  
FHLB and FRB stocks, at cost     3,091       3,143       3,138       3,138       5,816  
Total investment securities     276,467       273,725       250,271       253,814       274,779  
                     
Commercial     855,298       862,597       864,024       857,954       860,209  
Mortgage     183,835       181,428       182,724       188,636       193,423  
Consumer     249,238       255,012       265,158       274,048       280,812  
Loans, net of deferred loan fees     1,288,371       1,299,037       1,311,906       1,320,638       1,334,444  
Allowance for loan losses     (19,656 )     (19,745 )     (18,944 )     (19,635 )     (19,645 )
Loans, net     1,268,715       1,279,292       1,292,962       1,301,003       1,314,799  
                     
Loans held for sale     624       658       502       1,715       684  
Premises and equipment, net     23,605       24,279       24,980       25,514       26,049  
Operating lease right-of-use assets     8,220       8,391       -       -       -  
Goodwill     21,824       21,824       21,824       21,824       21,824  
Other intangible assets, net     1,037       1,188       1,351       1,527       1,709  
Accrued interest receivable and other assets     33,966       32,373       31,572       32,568       33,395  
Total assets   $ 1,752,997     $ 1,769,572     $ 1,755,343     $ 1,753,864     $ 1,710,166  
                     
LIABILITIES AND SHAREHOLDERS' EQUITY                    
Deposits:                    
Non-interest-bearing demand deposits   $ 451,985     $ 462,000     $ 484,433     $ 469,887     $ 462,233  
Interest-bearing demand deposits     188,843       187,834       179,603       211,099       125,867  
Money market accounts     505,084       540,476       537,948       532,489       522,328  
Savings deposits     217,434       219,199       217,027       217,621       222,387  
Time deposits     177,792       156,993       150,226       144,901       146,094  
Total deposits     1,541,138       1,566,502       1,569,237       1,575,997       1,478,909  
                     
FHLB advances and other debt     4,195       4,250       4,304       4,358       63,361  
Operating lease liabilities     8,250       8,399       -       -       -  
Accrued interest payable and other liabilities     21,027       18,887       16,773       17,010       16,116  
Total liabilities     1,574,610       1,598,038       1,590,314       1,597,365       1,558,386  
                     
Shareholders' equity                    
Common stock     53       53       53       53       53  
Additional-paid-in capital     46,284       46,174       45,820       46,006       45,873  
Retained earnings     150,063       146,340       143,129       138,654       132,973  
Treasury stock, at cost     (12,062 )     (12,191 )     (12,562 )     (12,927 )     (12,998 )
Accumulated other comprehensive loss     (5,951 )     (8,842 )     (11,411 )     (15,287 )     (14,121 )
Total shareholders' equity     178,387       171,534       165,029       156,499       151,780  
Total liabilities and shareholders' equity   $ 1,752,997     $ 1,769,572     $ 1,755,343     $ 1,753,864     $ 1,710,166  
                     
Period-end shares outstanding     4,868       4,863       4,855       4,837       4,831  

 

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)     2019       2018     Change     2019       2018     Change
Interest and dividend income:                        
Loans, including fees   $ 14,570     $ 14,300     1.9     $ 29,059     $ 28,350     2.5  
Taxable securities     1,281       1,264     1.3       2,476       2,553     (3.0 )
Tax exempt securities     306       295     3.7       579       603     (4.0 )
Interest-earning deposits     525       10     5150.0       1,233       32     3753.1  
Total interest and dividend income     16,682       15,869     5.1       33,347       31,538     5.7  
                         
Interest expense:                        
Deposits     1,544       608     153.9       3,005       1,109     171.0  
Securities sold under agreements to repurchase     -       44     (100.0 )     -       137     (100.0 )
Borrowed funds     37       200     (81.5 )     74       375     (80.3 )
Total interest expense     1,581       852     85.6       3,079       1,621     89.9  
                         
Net interest income     15,101       15,017     0.6       30,268       29,917     1.2  
Provision for loan losses     150       2,362     (93.6 )     1,243       3,071     (59.5 )
Net interest income after provision for loan losses     14,951       12,655     18.1       29,025       26,846     8.1  
                         
Non-interest income:                        
Wealth management group fee income     2,524       2,373     6.4       4,800       4,689     2.4  
Service charges on deposit accounts     1,085       1,144     (5.2 )     2,189       2,308     (5.2 )
Interchange revenue from debit card transactions     1,024       996     2.8       2,055       2,031     1.2  
Net gains on securities transactions     19       -     N/M     19       -     N/M  
Change in fair value of equity investments     27       26     3.8       116       24     383.3  
Net gains on sales of loans held for sale     29       59     (50.8 )     77       105     (26.7 )
Net gains (losses) on sales of other real estate owned     (3 )     (48 )   N/M     (86 )     (4 )   N/M  
Income from bank owned life insurance     16       17     (5.9 )     31       33     (6.1 )
Other     365       758     (51.8 )     810       1,614     (49.8 )
Total non-interest income     5,086       5,325     (4.5 )     10,011       10,800     (7.3 )
                         
Non-interest expense:                        
Salaries and wages     5,780       5,564     3.9       11,501       11,278     2.0  
Pension and other employee benefits     1,473       1,518     (3.0 )     3,018       3,176     (5.0 )
Other components of net periodic pension and postretirement benefits     (141 )     (408 )   N/M     (282 )     (816 )   N/M  
Net occupancy     1,478       1,643     (10.0 )     3,045       3,251     (6.3 )
Furniture and equipment     595       702     (15.2 )     1,123       1,360     (17.4 )
Data processing     1,873       1,764     6.2       3,600       3,506     2.7  
Professional services     418       508     (17.7 )     823       1,048     (21.5 )
Legal accruals and settlements     -       989     (100.0 )     -       989     (100.0 )
Amortization of intangible assets     151       182     (17.0 )     314       376     (16.5 )
Marketing and advertising     145       255     (43.1 )     413       604     (31.6 )
Other real estate owned expense     40       100     (60.0 )     71       238     (70.2 )
FDIC insurance     221       301     (26.6 )     486       618     (21.4 )
Loan expense     190       184     3.3       386       353     9.3  
Other     1,600       1,665     (3.9 )     2,822       3,152     (10.5 )
Total non-interest expense     13,823       14,967     (7.6 )     27,320       29,133     (6.2 )
                         
Income before income tax expense     6,214       3,013     106.2       11,716       8,513     37.6  
Income tax expense     1,233       486     153.7       2,267       1,547     46.5  
Net income   $ 4,981     $ 2,527     97.1     $ 9,449     $ 6,966     35.6  
                         
Basic and diluted earnings per share   $ 1.02     $ 0.52         $ 1.94     $ 1.44      
Cash dividends declared per share     0.26       0.26           0.52       0.52      
Average basic and diluted shares outstanding     4,866       4,828           4,863       4,825      
                         
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, except per share data)     2019       2019       2018       2018       2018       2019       2018  
RESULTS OF OPERATIONS                            
Interest income   $ 16,682     $ 16,665     $ 16,879     $ 16,136     $ 15,869     $ 33,347     $ 31,538  
Interest expense     1,581       1,498       1,395       1,057       852       3,079       1,621  
Net interest income     15,101       15,167       15,484       15,079       15,017       30,268       29,917  
Provision (credit) for loan losses     150       1,093       (218 )     300       2,362       1,243       3,071  
Net interest income after provision (credit) for loan losses   14,951       14,074       15,702       14,779       12,655       29,025       26,846  
Non-interest income     5,086       4,925       4,893       7,381       5,325       10,011       10,800  
Non-interest expense     13,823       13,497       14,205       13,428       14,967       27,320       29,133  
Income before income tax expense     6,214       5,502       6,390       8,732       3,013       11,716       8,513  
Income tax expense     1,233       1,034       660       1,802       486       2,267       1,547  
Net income   $ 4,981     $ 4,468     $ 5,730     $ 6,930     $ 2,527     $ 9,449     $ 6,966  
                             
Basic and diluted earnings per share   $ 1.02     $ 0.92     $ 1.18     $ 1.43     $ 0.52     $ 1.94     $ 1.44  
Average basic and diluted shares outstanding     4,866       4,860       4,843       4,834       4,828       4,863       4,825  
                             
PERFORMANCE RATIOS                            
Return on average assets     1.15 %     1.03 %     1.29 %     1.61 %     0.59 %     1.09 %     0.82 %
Return on average equity     11.51 %     10.83 %     14.29 %     17.81 %     6.70 %     11.18 %     9.31 %
Return on average tangible equity (a)     13.27 %     12.56 %     16.74 %     21.01 %     7.94 %     12.92 %     11.05 %
Efficiency ratio (unadjusted) (f)     68.47 %     67.18 %     69.71 %     59.79 %     73.58 %     67.83 %     71.55 %
Efficiency ratio (adjusted) (a) (b)     67.44 %     66.04 %     68.49 %     64.72 %     67.47 %     66.74 %     67.84 %
Non-interest expense to average assets     3.18 %     3.12 %     3.21 %     3.13 %     3.52 %     3.15 %     3.45 %
Loans to deposits     83.60 %     82.93 %     83.60 %     83.80 %     90.23 %     83.60 %     90.23 %
                             
YIELDS / RATES - Fully Taxable Equivalent                            
Yield on loans     4.54 %     4.54 %     4.54 %     4.36 %     4.33 %     4.54 %     4.34 %
Yield on investments     2.41 %     2.42 %     2.16 %     2.18 %     2.21 %     2.41 %     2.22 %
Yield on interest-earning assets     4.07 %     4.07 %     4.01 %     3.96 %     3.94 %     4.07 %     3.94 %
Cost of interest-bearing deposits     0.57 %     0.54 %     0.48 %     0.33 %     0.24 %     0.55 %     0.22 %
Cost of borrowings     3.52 %     3.52 %     3.58 %     2.38 %     2.41 %     3.52 %     2.31 %
Cost of interest-bearing liabilities     0.58 %     0.55 %     0.50 %     0.39 %     0.32 %     0.57 %     0.30 %
Interest rate spread     3.49 %     3.52 %     3.51 %     3.57 %     3.62 %     3.50 %     3.64 %
Net interest margin, fully taxable equivalent     3.69 %     3.71 %     3.68 %     3.71 %     3.73 %     3.69 %     3.74 %
                             
CAPITAL                            
Total equity to total assets at end of period     10.18 %     9.69 %     9.40 %     8.92 %     8.88 %     10.18 %     8.88 %
Tangible equity to tangible assets at end of period (a)     8.99 %     8.50 %     8.19 %     7.69 %     7.60 %     8.99 %     7.60 %
                             
Book value per share   $ 36.65     $ 35.27     $ 33.99     $ 32.35     $ 31.42     $ 36.65     $ 31.42  
Tangible book value per share (a)     31.95       30.54       29.22       27.53       26.55       31.95       26.55  
Period-end market value per share     48.34       46.93       41.31       42.43       50.11       48.34       50.11  
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)   $ 1,290,923     $ 1,296,200     $ 1,306,556     $ 1,330,071     $ 1,328,386     $ 1,293,547     $ 1,321,834  
Interest earning assets     1,654,156       1,671,063       1,680,269       1,625,132       1,625,591       1,663,372       1,624,676  
Total assets     1,744,599       1,753,788       1,756,765       1,704,721       1,703,722       1,749,168       1,703,386  
Deposits     1,539,739       1,565,371       1,576,629       1,501,082       1,495,410       1,552,485       1,492,076  
Total equity     173,534       167,385       159,032       154,331       151,216       170,476       150,857  
Tangible equity (a)     150,598       144,293       135,766       130,891       127,591       147,463       127,130  
                             
ASSET QUALITY                            
Net charge-offs   $ 239     $ 292     $ 472     $ 310     $ 4,107     $ 531     $ 4,587  
Non-performing loans (d)     19,505       15,099       12,254       12,629       12,790       19,505       12,790  
Non-performing assets (e)     19,719       15,304       12,828       13,356       13,676       19,719       13,676  
Allowance for loan losses     19,656       19,745       18,944       19,635       19,645       19,656       19,645  
                             
Annualized net charge-offs to average loans     0.07 %     0.09 %     0.14 %     0.09 %     1.24 %     0.08 %     0.70 %
Non-performing loans to total loans     1.51 %     1.16 %     0.93 %     0.96 %     0.96 %     1.51 %     0.96 %
Non-performing assets to total assets     1.12 %     0.86 %     0.73 %     0.76 %     0.80 %     1.12 %     0.80 %
Allowance for loan losses to total loans     1.53 %     1.52 %     1.44 %     1.49 %     1.47 %     1.53 %     1.47 %
Allowance for loan losses to non-performing loans     100.77 %     130.77 %     154.59 %     155.48 %     153.60 %     100.77 %     153.60 %
                             
(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
June 30, 2019
  Three Months Ended
June 30, 2018
  Three Months Ended
June 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   $ 857,748     $ 10,098     4.72 %   $ 855,121     $ 9,663     4.53 %   $ 435     $ 30     $ 405  
Mortgage loans     182,134       1,713     3.77 %     194,244       1,800     3.72 %     (87 )     (111 )     24  
Consumer loans     251,041       2,795     4.47 %     279,021       2,873     4.13 %     (78 )     (303 )     225  
Taxable securities     230,085       1,282     2.23 %     240,800       1,266     2.11 %     16       (56 )     72  
Tax-exempt securities     51,413       373     2.91 %     52,527       363     2.77 %     10       (8 )     18  
Interest-earning deposits     81,735       525     2.58 %     3,878       10     1.03 %     515       479       36  
Total interest earning assets     1,654,156       16,786     4.07 %     1,625,591       15,975     3.94 %     811       31       780  
                                     
Non- interest earnings assets:                                    
Cash and due from banks     25,450               27,130                      
Other assets     85,051               72,219                      
Allowance for loan losses     (20,058 )             (21,218 )                    
Total assets   $ 1,744,599             $ 1,703,722                      
                                     
Interest-bearing liabilities:                                    
Interest-bearing checking   $ 182,480     $ 179     0.39 %   $ 131,863     $ 28     0.09 %     151       15       136  
Savings and money market     738,188       790     0.43 %     774,020       419     0.22 %     371       (21 )     392  
Time deposits     163,619       575     1.41 %     130,432       161     0.50 %     414       50       364  
FHLB advances, other debt and                                    
repurchase agreements     4,214       37     3.52 %     40,557       244     2.41 %     (207 )     (285 )     78  
Total int.-bearing liabilities     1,088,501       1,581     0.58 %     1,076,872       852     0.32 %     729       (241 )     970  
                                     
Non-interest-bearing liabilities:                                    
Demand deposits     455,452               459,095                      
Other liabilities     27,112               16,539                      
Total liabilities     1,571,065               1,552,506                      
Shareholders' equity     173,534               151,216                      
Total liabilities and shareholders' equity   $ 1,744,599             $ 1,703,722                      
                                     
Fully taxable equivalent net interest income         15,205               15,123         $ 82     $ 272     $ (190 )
Net interest rate spread (1)           3.49 %           3.62 %            
Net interest margin, fully taxable equivalent (2)           3.69 %           3.73 %            
Taxable equivalent adjustment         (104 )             (106 )                
Net interest income       $ 15,101             $ 15,017                  
                                     
(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, 2019
Six Months Ended
June 30, 2018
  Six Months Ended
June 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   $ 855,985     $ 20,025     4.72 %   $ 849,927     $ 19,096     4.53 %   $ 929     $ 135     $ 794  
Mortgage loans     181,928       3,434     3.81 %     194,579       3,610     3.74 %     (176 )     (242 )     66  
Consumer loans     255,634       5,673     4.48 %     277,328       5,717     4.16 %     (44 )     (466 )     422  
Taxable securities     221,939       2,480     2.25 %     245,382       2,557     2.10 %     (77 )     (253 )     176  
Tax-exempt securities     49,366       706     2.88 %     53,570       742     2.79 %     (36 )     (59 )     23  
Interest-earning deposits     98,520       1,233     2.52 %     3,890       32     1.66 %     1,201       1,175       26  
Total interest earning assets     1,663,372       33,551     4.07 %     1,624,676       31,754     3.94 %     1,797       290       1,507  
                                     
Non-interest earnings assets:                                    
Cash and due from banks     25,898               27,191                      
Other assets     79,556               72,755                      
Allowance for loan losses     (19,658 )             (21,236 )                    
Total assets   $ 1,749,168             $ 1,703,386                      
                                     
                                     
Interest-bearing liabilities:                                    
Interest-bearing checking   $ 189,111     $ 384     0.41 %   $ 141,632     $ 63     0.09 %   $ 321     $ 27     $ 294  
Savings and money market     746,197       1,584     0.43 %     772,019       793     0.21 %     791       (28 )     819  
Time deposits     158,470       1,037     1.32 %     123,813       253     0.41 %     784       87       697  
FHLB advances, other debt and                                    
repurchase agreements     4,241       74     3.52 %     44,616       512     2.31 %     (438 )     (616 )     178  
Total int.-bearing liabilities     1,098,019       3,079     0.57 %     1,082,080       1,621     0.30 %     1,458       (530 )     1,988  
                                     
Non-interest-bearing liabilities:                                    
Demand deposits     458,707               454,612                      
Other liabilities     21,966               15,837                      
Total liabilities     1,578,692               1,552,529                      
Shareholders' equity     170,476               150,857                      
Total liabilities and shareholders' equity   $ 1,749,168             $ 1,703,386                      
                                     
Fully taxable equivalent net interest income         30,472               30,133         $ 339     $ 820     $ (481 )
Net interest rate spread (1)           3.50 %           3.64 %            
Net interest margin, fully taxable equivalent (2)           3.69 %           3.74 %            
Taxable equivalent adjustment         (204 )             (216 )                
Net interest income       $ 30,268             $ 29,917                  
                                     
(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   Six Months Ended
    June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,   June 30,   June 30,
(in thousands, except per share data)     2019       2019       2018       2018       2018       2019       2018  
NET INTEREST MARGIN - FULLY TAXABLE EQUIVALENT                            
Net interest income (GAAP)   $ 15,101     $ 15,167     $ 15,484     $ 15,079     $ 15,017     $ 30,268     $ 29,917  
Fully taxable equivalent adjustment     104       100       105       99       106       204       216  
Fully taxable equivalent net interest income (non-GAAP)   $ 15,205     $ 15,267     $ 15,589     $ 15,178     $ 15,123     $ 30,472     $ 30,133  
                             
Average interest-earning assets (GAAP)   $ 1,654,156     $ 1,671,063     $ 1,680,269     $ 1,625,132     $ 1,625,591     $ 1,663,372     $ 1,624,676  
                             
Net interest margin - fully taxable equivalent (non-GAAP)     3.69 %     3.71 %     3.68 %     3.71 %     3.73 %     3.69 %     3.74 %


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   Six Months Ended
    June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,   June 30,   June 30,
(in thousands, except per share data)     2019       2019       2018       2018       2018       2019       2018  
EFFICIENCY RATIO                            
Net interest income (GAAP)   $ 15,101     $ 15,167     $ 15,484     $ 15,079     $ 15,017     $ 30,268     $ 29,917  
Fully taxable equivalent adjustment     104       100       105       99       106       204       216  
Fully taxable equivalent net interest income (non-GAAP)   $ 15,205     $ 15,267     $ 15,589     $ 15,178     $ 15,123     $ 30,472     $ 30,133  
                             
Non-interest income (GAAP)   $ 5,086     $ 4,925     $ 4,893     $ 7,381     $ 5,325     $ 10,011     $ 10,800  
Less:  changes in fair value of equity investments     -       -       -       (2,093 )     -       -       -  
Less:  net (gains) losses on security transactions     (19 )     -       -       -       -       (19 )     -  
Adjusted non-interest income (non-GAAP)   $ 5,067     $ 4,925     $ 4,893     $ 5,288     $ 5,325     $ 9,992     $ 10,800  
                             
Non-interest expense (GAAP)   $ 13,823     $ 13,497     $ 14,205     $ 13,428     $ 14,967     $ 27,320     $ 29,133  
Less:  amortization of intangible assets     (151 )     (163 )     (176 )     (182 )     (182 )     (314 )     (376 )
Less:  legal reserve     -       -       -       -       (989 )     -       (989 )
Adjusted non-interest expense (non-GAAP)   $ 13,672     $ 13,334     $ 14,029     $ 13,246     $ 13,796     $ 27,006     $ 27,768  
                             
Efficiency ratio (unadjusted)     68.47 %     67.18 %     69.71 %     59.79 %     73.58 %     67.83 %     71.55 %
Efficiency ratio (adjusted)     67.44 %     66.04 %     68.49 %     64.72 %     67.47 %     66.74 %     67.84 %


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)     2019       2019       2018       2018       2018       2019       2018  
TANGIBLE EQUITY AND TANGIBLE ASSETS                            
(PERIOD END)                            
Total shareholders' equity (GAAP)   $ 178,387     $ 171,534     $ 165,029     $ 156,499     $ 151,780     $ 178,387     $ 151,780  
Less:  intangible assets     (22,861 )     (23,012 )     (23,175 )     (23,351 )     (23,533 )     (22,861 )     (23,533 )
Tangible equity (non-GAAP)   $ 155,526     $ 148,522     $ 141,854     $ 133,148     $ 128,247     $ 155,526     $ 128,247  
                             
Total assets (GAAP)   $ 1,752,997     $ 1,769,572     $ 1,755,343     $ 1,753,864     $ 1,710,166     $ 1,752,997     $ 1,710,166  
Less:  intangible assets     (22,861 )     (23,012 )     (23,175 )     (23,351 )     (23,533 )     (22,861 )     (23,533 )
Tangible assets (non-GAAP)   $ 1,730,136     $ 1,746,560     $ 1,732,168     $ 1,730,513     $ 1,686,633     $ 1,730,136     $ 1,686,633  
                             
Total equity to total assets at end of period (GAAP)     10.18 %     9.69 %     9.40 %     8.92 %     8.88 %     10.18 %     8.88 %
Book value per share (GAAP)   $ 36.64     $ 35.27     $ 33.99     $ 32.35     $ 31.42     $ 36.65     $ 31.42  
                             
Tangible equity to tangible assets at                            
end of period (non-GAAP)     8.99 %     8.50 %     8.19 %     7.69 %     7.60 %     8.99 %     7.60 %
Tangible book value per share (non-GAAP)   $ 31.95     $ 30.54     $ 29.22     $ 27.53     $ 26.55     $ 31.95     $ 26.55  


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)     2019       2019       2018       2018       2018       2019       2018  
TANGIBLE EQUITY (AVERAGE)                            
Total average shareholders' equity (GAAP)   $ 173,534     $ 167,385     $ 159,032     $ 154,331     $ 151,216     $ 170,476     $ 150,857  
Less:  average intangible assets     (22,936 )     (23,092 )     (23,266 )     (23,440 )     (23,625 )     (23,013 )     (23,727 )
Average tangible equity (non-GAAP)   $ 150,598     $ 144,293     $ 135,766     $ 130,891     $ 127,591     $ 147,463     $ 127,130  
                             
Return on average equity (GAAP)     11.51 %     10.83 %     14.29 %     17.81 %     6.70 %     11.18 %     9.31 %
Return on average tangible equity (non-GAAP)     13.27 %     12.56 %     16.74 %     21.01 %     7.94 %     12.92 %     11.05 %


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)     2019       2019       2018       2018       2018       2019       2018  
NON-GAAP NET INCOME                            
Reported net income (GAAP)   $ 4,981     $ 4,468     $ 5,730     $ 6,930     $ 2,527     $ 9,449     $ 6,966  
Net changes in fair value of investments (net of tax)     -       -       -       (1,559 )     -       -       -  
Net (gains) losses on security transactions (net of tax)     (14 )     -       -       -       -       (14 )     -  
Legal reserve (net of tax)     -       -       -       -       737       -       737  
Revaluation of net deferred tax asset     -       -       (445 )     -       -       -       -  
Net income (non-GAAP)   $ 4,967     $ 4,468     $ 5,285     $ 5,371     $ 3,264     $ 9,435     $ 7,703  
                             
Average basic and diluted shares outstanding     4,866       4,860       4,843       4,834       4,828       4,863       4,825  
                             
Reported basic and diluted earnings per share (GAAP)   $ 1.02     $ 0.92     $ 1.18     $ 1.43     $ 0.52     $ 1.94     $ 1.44  
Reported return on average assets (GAAP)     1.15 %     1.03 %     1.29 %     1.61 %     0.59 %     1.09 %     0.82 %
Reported return on average equity (GAAP)     11.51 %     10.83 %     14.29 %     17.81 %     6.70 %     11.18 %     9.31 %
                             
Basic and diluted earnings per share (non-GAAP)   $ 1.02     $ 0.92     $ 1.09     $ 1.11     $ 0.68     $ 1.94     $ 1.60  
Return on average assets (non-GAAP)     1.14 %     1.03 %     1.19 %     1.25 %     0.77 %     1.09 %     0.91 %
Return on average equity (non-GAAP)     11.48 %     10.83 %     13.18 %     13.81 %     8.66 %     11.16 %     10.30 %


For further information, contact:

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