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CST: 24/01/2021 02:14:21   

Chemung Financial Corporation Reports Third Quarter 2019 Net Income of $2.0 Million, or $0.40 per Share

463 Days ago

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

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

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

Third Quarter Highlights1:

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

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

3rd Quarter 2019 vs 3rd Quarter 2018

Net Interest Income:

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

Non-Interest Income:

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

Non-Interest Expense:

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

Income Tax Expense:

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

3rd Quarter 2019 vs 2nd Quarter 2019

Net Interest Income:

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

Non-Interest Income:

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

Non-Interest Expense:

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

Income Tax Expense:

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

Asset Quality

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

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

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

Balance Sheet Activity

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

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

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

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

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

Other Items

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

About Chemung Financial Corporation

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

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

Forward-Looking Statements:

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

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

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


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


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


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


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

Chemung Financial Corporation

GAAP to Non-GAAP Reconciliations (Unaudited)

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

In addition to analyzing the Corporation’s results on a reported basis, management uses certain non-GAAP financial measures, because it believes these non-GAAP financial measures provide information to investors about the underlying operational performance and trends of the Corporation and, therefore, facilitate a comparison of the Corporation with the performance of its competitors. Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by other companies.

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

Fully Taxable Equivalent Net Interest Income and Net Interest Margin

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

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

Efficiency Ratio

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

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

Tangible Equity and Tangible Assets (Period-End)

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

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