Chemung Financial Corporation Reports Fourth Quarter 2019 Net Income of $4.2 Million, or $0.87 per Share

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ELMIRA, N.Y., Jan. 22, 2020 (GLOBE NEWSWIRE) -- Chemung Financial Corporation (the “Corporation”) (CHMG), the parent company of Chemung Canal Trust Company (the “Bank”), today reported net income of $4.2 million, or $0.87 per share, for the fourth quarter of 2019, compared to $5.7 million, or $1.18 per share, for the fourth quarter of 2018.

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

“2019 was a year of mixed results for the corporation, largely dominated by the deterioration of two large commercial credits, both of which required a significant reserve allowance earlier in the calendar year. These previously reported, isolated incidents overshadowed our continuing focus on balance sheet quality, expense reduction through operating efficiencies and the increase of fee income generated by the portfolio expansion of our Wealth Management Group,” said Anders M. Tomson, President & CEO. “We are optimistic that our community banking model will yield positive results in the coming year, and when coupled with strategic technology opportunities, continued enhancements to our delivery channels and an even greater emphasis on client attraction and retention, we expect to continue to deliver strong results to our constituent stakeholders,” Tomson added.

2019 Highlights1:

  • Total shareholders’ equity increased $17.6 million, or 10.7%

  • Tangible book value per share increased from $29.22 to $32.74, or 12.05%

  • Average interest earning assets increased $35.9 million to $1.675 billion

  • Net charge-offs to average loans decreased from .41% to .11%

  • Total equity to total assets at the end of the period increased from 9.40% to 10.22%

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

2019 vs 2018

Net Interest Income:

Net interest income for the year ended December 31, 2019 totaled $60.6 million compared with $60.5 million for the prior year, an increase of $0.1 million, or 0.2%, due primarily to a $2.4 million increase in total interest and dividend income, offset by a $2.2 million increase in total interest expense. The increase in total interest and dividend income was due primarily to increases in interest income on interest-earning deposits of $1.5 million, interest and fees of $0.4 million from loans, and interest income from taxable securities of $0.5 million, compared to the prior year. The increase in total interest expense was due primarily to an increase in interest expense of $2.9 million on deposits, offset by decreases in interest expense on securities sold under agreements to repurchase of $0.1 million, and interest expense on borrowed funds of $0.5 million, compared to the prior year. Fully taxable equivalent net interest margin was 3.64% in 2019, compared with 3.72% for the prior year. Average interest-earning assets increased $35.9 million in 2019 compared to the prior year. The average yield on interest-earning assets increased six basis points, while the average cost of interest-bearing liabilities increased twenty basis points, as compared to the prior year. The increase in interest and dividend income in 2019 was due primarily to a $67.2 million increase in the average balance of interest-earning deposits, and a $9.2 million increase in the average balance of commercial loans, compared to the prior year. The increase in interest expense in 2019 was due primarily to an increase in interest rates on interest-bearing deposit accounts, including promotional interest rates on time deposits.

Non-Interest Income:

Non-interest income for the year ended December 31, 2019 was $20.1 million compared with $23.1 million for the prior year, a decrease of $3.0 million, or 13.0%. The decrease was due primarily to decreases of $1.9 million in the fair value of equity investments, $0.8 million in other non-interest income, $0.2 million in net gains (losses) on sales of other real estate owned, and $0.3 million in service charges on deposit accounts, offset by an increase of $0.2 million in Wealth Management Group (“WMG”) fee income. The decrease in the fair value of equity investments was due primarily to the $2.1 million increase in the fair value of Visa Class B shares in the prior year, and a $0.1 million loss related to an investment in a limited partnership in the current year. Subsequent to the change in fair value, the Visa Class B shares were sold during the third quarter of 2018. The decrease in other non-interest income was due to a $0.4 million state sales tax refund in the prior year, a reduction of $0.1 million in rental income from other property owned in the prior year, and a decrease of $0.1 million in interest rate swap income primarily due to changes in market value in the current year. The increase in WMG fee income can be mostly attributed to an increase in the market value of assets under management and additional fee income from terminating trusts.

Non-Interest Expense:

Non-interest expense for the year ended December 31, 2019 was $55.7 million compared with $56.8 million for the prior year, a decrease of $1.1 million, or 1.9%. The decrease was due primarily to decreases of $1.0 million in legal accruals and settlements, $0.6 million in net occupancy expenses, $0.6 million in FDIC insurance expense, $0.2 million in marketing and advertising expenses, $0.3 million in professional services, $0.3 million in other real estate owned expenses, and $0.1 in furniture and equipment expenses. These items were partially offset by increases of $1.1 million in salaries and wages, $0.4 million in pension and other employee benefits, $0.4 million in data processing expenses, and $0.1 million in other non-interest expenses. The decrease in legal accruals and settlements was due to the resolution of a legal matter in 2018. The decrease in net occupancy and furniture and equipment expenses was mostly attributable to runoff in depreciation expense related to mechanical equipment, the closing of two branches in 2019, and the reduction in non-capitalizable fixed asset purchases as compared to the prior year due to the opening of two new branches in 2018. The decrease in FDIC insurance expense was primarily due to the receipt of a $0.4 million credit related to the Deposit Insurance Fund’s (DIF) minimum reserve ratio assessment. The decrease in marketing and advertising expenses was due to opening two denovo branches during 2018. The decrease in professional services was due to consulting fees incurred in the prior year associated with a sales tax refund in the prior year. The decrease in other real estate owned expenses can be attributed to fewer OREO properties acquired during 2019 as compared to 2018. The increase in salaries and wages can be attributed to annual merit increases and a lower vacancy rate in 2019. The increase in pension and other employee benefits can be attributed to full vesting of stock awards related to an executive retirement. The increase in other non-interest expense can be attributed to the impairment of a fixed asset.

Income Tax Expense:

Income tax expense for 2019 was $3.4 million compared with $4.0 million for the prior year, a decrease of $0.6 million, or 14.3%. The effective tax rate for 2019 increased to 18.0% compared with 17.0% for the prior year. The decrease in income tax expense was primarily due to a decrease in pretax income.

4th Quarter 2019 vs 4th Quarter 2018

Net Interest Income:

Net interest income decreased $0.3 million, or 1.8%, to $15.2 million for the current quarter compared to the same period in the prior year, due primarily to a decrease of $0.1 million in interest and dividend income, and a $0.2 million increase in total interest expense. Interest and fees from loans decreased $0.4 million, interest from taxable securities increased $0.4 million, and interest from interest-earning deposits decreased $0.1 million in the fourth quarter of 2019 as compared to the same period in the prior year. Interest expense on deposits increased $0.2 million in the fourth quarter of 2019 when compared to the same period in the prior year. Fully taxable equivalent net interest margin was 3.56% in the fourth quarter of 2019, compared with 3.68% for the same period in the prior year. Average interest-earning assets increased $25.5 million, compared to the same period in the prior year. The average yield on interest-earning assets decreased 9 basis points, while the average cost of interest-bearing liabilities increased 6 basis points in the fourth quarter of 2019, compared to the same period in the prior year.

The decrease in interest and dividend income for the current quarter can be mostly attributed to decreases in interest income on consumer loans, commercial loans, and interest-earning deposits, offset by an increase in interest and dividend income on taxable securities. The decrease on consumer loans was primarily due to a decrease of $25.4 million in the average balance. The decrease on commercial loans was primarily due to an 18 basis points decrease in the average yield on commercial loans, offset by a $21.5 million increase in the average balance of commercial loans. The decrease in interest income on interest-earning deposits was primarily due to a 49 basis points decrease in the average yield of interest-earning deposits. The increase in interest and dividend income on taxable securities was due to a 42 basis points increase on the average yield and a $26.9 million increase in the average balance of taxable securities. The increase in interest expense for the current quarter can be mostly attributed to a 47 basis points increase in the average cost of time deposits, and a $15.8 million increase on the average balance of time deposits.

Non-Interest Income:

Non-interest income for the current quarter was $5.1 million compared with $4.9 million for the same period in the prior year, an increase of $0.2 million, or 4.4%. The increase can be mostly attributed to increases of $0.2 million in Wealth Management Group (“WMG”) fee income, and $0.1 million in the change in fair value of equity investments. The increase in WMG fee income can be mostly attributed to an increase in fees from estates and agency accounts, and an increase in the market value of assets under management.

Non-Interest Expense:

Non-interest expense for the current quarter was $14.9 million compared with $14.2 million for the same period in the prior year, an increase of $0.6 million, or 4.5%. The increase can be mostly attributed to increases of $0.7 million in salaries and wages, $0.3 million in pension and other employee benefits, $0.3 million in data processing expenses, and $0.4 million in other non-interest expense, offset by decreases of $0.1 million in net occupancy expense, $0.2 million in FDIC insurance expense, $0.1 in marketing and advertising expenses, and a $0.6 million decrease in other components of net periodic pension and post-retirement benefits. The increase in salaries and wages can be mostly attributed to annual merit increases and a lower vacancy rate. The increase in pension and other employee benefits was due to full vesting of stock awards related to an executive retirement. The increase in other non-interest expense can be partially attributed to the impairment of a fixed asset. The increase in data processing expenses was primarily attributed to timing of various projects. The decrease in marketing and advertising 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. The decrease in other components of net periodic pension cost (benefits) was primarily due to a lump sum settlement in the fourth quarter of 2018 to terminated, vested employees.

Income Tax Expense:

Income tax expense for the current quarter was $1.0 million compared with $0.7 million for the same period in the prior year. The increase in income tax expense was due primarily to a tax benefit of $0.4 million recorded in December 2018 due to the enactment of the Tax Cuts and Jobs Act of 2017. The effective income tax rate increased from 10.3% for the fourth quarter of 2018 to 19.1% for the fourth quarter of 2019.

4th Quarter 2019 vs 3rd Quarter 2019

Net Interest Income:

Net interest income for the current quarter totaled $15.2 million compared with $15.1 million for the prior quarter, an increase of $0.1 million, or 0.4%. Interest and fees from loans decreased $0.1 million and interest and dividend income from investment securities increased $0.1 million. Interest expense on deposits decreased $0.1 million due primarily to a six basis points decrease in the average cost on savings and money market accounts.

Fully taxable equivalent net interest margin was 3.56% in the fourth quarter of 2019, a decrease of seven basis points compared with 3.63% for the prior quarter. Average interest-earning assets increased $40.0 million in the fourth quarter of 2019, while the average yield on interest-earning assets decreased eleven basis points compared to the prior quarter. The average cost of interest-bearing liabilities decreased five basis points in the fourth quarter of 2019, compared to the prior quarter.

Non-Interest Income:

Non-interest income for the current quarter was $5.1 million compared with $5.0 million for the prior quarter, an increase of $0.1 million, or 3.0%. The increase in non-interest income can be attributed to a $0.1 million increase in interest rate swap fee income primarily due to changes in market value.

Non-Interest Expense:

Non-interest expense for the current quarter was $14.9 million compared with $13.5 million for the prior quarter, an increase of $1.4 million, or 9.8%. The increase can be mostly attributed to increases of $0.3 million in professional services, $0.2 in salaries and wage expense, $0.5 million in other non-interest expense, $0.2 million in data processing expenses, $0.1 million in net occupancy expenses, and $0.1 million in FDIC insurance expense. The increases in professional services and data processing expenses were related to the timing of various projects. The increase in salaries and wage expenses was primarily due to merit increases and a lower vacancy rate. The increase in other non-interest expense was primarily due to increases in charitable contributions, bank service fees and the impairment of a fixed asset. The increase in FDIC insurance expense was primarily due to the receipt of a credit related to the Deposit Insurance Fund’s (DIF) minimum reserve ratio assessment which fully offset the expense in the third quarter of 2019, and partially offset the expense in the fourth quarter of 2019.

Income Tax Expense:

Income tax expense for the current quarter was $1.0 million compared with $0.2 million for the prior quarter, an increase of $0.8 million. The increase in income tax expense can be attributed to a $3.1 million increase in income before income tax expense for the fourth quarter of 2019, when compared to the prior quarter. The effective income tax rate increased from 8.3% for the third quarter of 2019 to 19.1% for the fourth quarter of 2019.

Asset Quality

Non-performing loans totaled $18.0 million at December 31, 2019, or 1.38% 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 $18.5 million, or 1.04% of total assets, at December 31, 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 one commercial mortgage relationship and one participating interest in a commercial credit, offset by decreases in the non-performing residential mortgage, consumer loan, and the remaining commercial 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 fourth quarter of 2019 was $0.3 million, an increase of $0.5 million compared with the same period in the prior year. The increase in the provision for loan losses can be mostly attributed to a $0.2 million credit adjustment in the fourth quarter of 2018. Net charge-offs for the fourth quarter of 2019 were $0.7 million, compared with $0.5 million for the fourth quarter of 2018.

The allowance for loan losses was $23.5 million at December 31, 2019 compared with $18.9 million at December 31, 2018. The allowance for loan losses was 130.38% of non-performing loans at December 31, 2019 compared with 154.59% at December 31, 2018. The ratio of the allowance for loan losses to total loans was 1.79% at December 31, 2019 compared with 1.44% at December 31, 2018. The increase in the allowance for loan losses can be mostly attributed to the aforementioned non-performing commercial mortgage relationship and participating interest in a commercial credit.

Balance Sheet Activity

Total assets were $1.788 billion at December 31, 2019 compared with $1.755 billion at December 31, 2018, an increase of $32.5 million, or 1.9%. The increase can be mostly attributed to increases of $41.8 million in securities available for sale, and $8.0 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 $7.2 million in total loans, net, $8.1 million in cash and cash equivalents, and $2.6 million in premises and equipment, net.

The decrease in cash and cash equivalents was due to changes in securities, loans, deposits, and borrowings, offset by year to date net income. The decrease in total loans, net, can be mostly attributed to decreases of $14.4 million in indirect consumer loans, $12.9 million in commercial mortgages, and $9.0 million in other consumer loans, offset by increases of $28.0 million in commercial and agriculture loans and $5.6 million in residential mortgages. The increase in securities available for sale can be mostly attributed to purchases in the amount of $118.1 million, offset by $33.7 million in sales of mortgage-backed and municipal securities, and $42.6 million of maturities and paydowns.

Total liabilities were $1.605 billion at December 31, 2019 compared with $1.590 billion at December 31, 2018, an increase of $14.9 million or 0.9%. The increase in total liabilities can be mostly attributed to increases of $2.9 million in total deposits, $8.1 million in operating lease liabilities related to the January 1, 2019 adoption of Topic 842, and $4.1 million in accrued interest payable and other liabilities. The increase in deposits from $1.569 billion at December 31, 2018 to $1.572 billion at December 31, 2019 can be mostly attributed to an increase of $20.5 million in interest-bearing demand deposits and $11.0 million of time deposits, offset by decreases of $7.7 million in money market accounts and $16.2 million in non-interest bearing demand deposits. The decrease in non-interest-bearing demand deposits was mostly attributed to a decrease in personal customer deposits. The decrease in money market accounts can mostly be attributed to a decrease in ICS deposits, offset by an increase in personal customer deposits.

Total shareholders’ equity was $182.6 million at December 31, 2019 compared with $165.0 million at December 31, 2018, an increase of $17.6 million, or 10.7%. The increase in retained earnings of $10.6 million can be mostly attributed to earnings of $15.6 million, offset by $5.0 million in dividends paid. The decrease in accumulated other comprehensive loss of $5.6 million can be mostly attributed to the increase in the fair market value of the securities portfolio. Also, treasury stock decreased $0.9 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 10.22% at December 31, 2019 compared with 9.40% at December 31, 2018. The tangible equity to tangible assets ratio was 9.07% at December 31, 2019 compared with 8.19% at December 31, 2018. Book value per share increased to $37.35 at December 31, 2019 from $33.99 at December 31, 2018. As of December 31, 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 $1.915 billion at December 31, 2019, including $289.7 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 $147.1 million, or 8.3%. 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.


Chemung Financial Corporation

Consolidated Balance Sheets (Unaudited)

Dec. 31,

Sept. 30,

June 30,

March 31,

Dec. 31,

(in thousands)

2019

2019

2019

2019

2018

ASSETS

Cash and due from financial institutions

$

25,203

$

36,497

$

32,622

$

28,153

$

33,040

Interest-earning deposits in other financial institutions

96,701

109,801

83,838

97,657

96,932

Total cash and cash equivalents

121,904

146,298

116,460

125,810

129,972

Equity investments

2,174

2,065

2,079

2,032

1,909

Securities available for sale

284,090

267,529

269,286

266,721

242,258

Securities held to maturity

3,115

3,420

4,090

3,861

4,875

FHLB and FRB stocks, at cost

3,099

3,091

3,091

3,143

3,138

Total investment securities

290,304

274,040

276,467

273,725

250,271

Commercial

879,085

878,703

855,298

862,597

864,024

Mortgage

188,338

184,013

183,835

181,428

182,724

Consumer

241,796

243,922

249,238

255,012

265,158

Loans, net of deferred loan fees

1,309,219

1,306,638

1,288,371

1,299,037

1,311,906

Allowance for loan losses

(23,478

)

(23,923

)

(19,656

)

(19,745

)

(18,944

)

Loans, net

1,285,741

1,282,715

1,268,715

1,279,292

1,292,962

Loans held for sale

1,185

1,313

624

658

502

Premises and equipment, net

22,417

22,962

23,605

24,279

24,980

Operating lease right-of-use assets

8,001

8,051

8,220

8,391

-

Goodwill

21,824

21,824

21,824

21,824

21,824

Other intangible assets, net

742

886

1,037

1,188

1,351

Accrued interest receivable and other assets

33,535

33,489

33,966

32,373

31,572

Total assets

$

1,787,827

$

1,793,643

$

1,752,997

$

1,769,572

$

1,755,343

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:

Non-interest-bearing demand deposits

$

468,238

$

472,600

$

451,985

$

462,000

$

484,433

Interest-bearing demand deposits

200,089

208,222

188,843

187,834

179,603

Money market accounts

530,241

510,194

505,084

540,476

537,948

Savings deposits

212,393

215,665

217,434

219,199

217,027

Time deposits

161,177

169,825

177,792

156,993

150,226

Total deposits

1,572,138

1,576,506

1,541,138

1,566,502

1,569,237

FHLB advances and other debt

4,085

4,140

4,195

4,250

4,304

Operating lease liabilities

8,084

8,125

8,250

8,399

-

Accrued interest payable and other liabilities

20,893

22,828

21,027

18,887

16,773

Total liabilities

1,605,200

1,611,599

1,574,610

1,598,038

1,590,314

Shareholders' equity

Common stock

53

53

53

53

53

Additional-paid-in capital

46,382

46,464

46,284

46,174

45,820

Retained earnings

153,701

150,759

150,063

146,340

143,129

Treasury stock, at cost

(11,710

)

(11,956

)

(12,062

)

(12,191

)

(12,562

)

Accumulated other comprehensive loss

(5,799

)

(3,276

)

(5,951

)

(8,842

)

(11,411

)

Total shareholders' equity

182,627

182,044

178,387

171,534

165,029

Total liabilities and shareholders' equity

$

1,787,827

$

1,793,643

$

1,752,997

$

1,769,572

$

1,755,343

Period-end shares outstanding

4,889

4,874

4,868

4,863

4,855


Chemung Financial Corporation

Consolidated Statements of Income (Unaudited)

Three Months Ended

Twelve Months Ended

(in thousands, except

December 31,

Percent

December 31,

Percent

per share data)

2019

2018

Change

2019

2018

Change

Interest and dividend income:

Loans, including fees

$

14,522

$

14,910

(2.6

)

$

58,245

$

57,840

0.7

Taxable securities

1,440

1,051

37.0

5,265

4,804

9.6

Tax exempt securities

280

278

0.7

1,152

1,153

(0.1

)

Interest-earning deposits

535

640

(16.4

)

2,270

756

200.3

Total interest and dividend income

16,777

16,879

(0.6

)

66,932

64,553

3.7

Interest expense:

Deposits

1,539

1,356

13.5

6,173

3,323

85.8

Securities sold under agreements to repurchase

-

-

N/M

-

137

(100.0

)

Borrowed funds

37

39

(5.1

)

148

613

(75.9

)

Total interest expense

1,576

1,395

13.0

6,321

4,073

55.2

Net interest income

15,201

15,484

(1.8

)

60,611

60,480

0.2

Provision for loan losses

261

(218

)

(219.7

)

5,945

3,153

88.6

Net interest income after provision for loan losses

14,940

15,702

(4.9

)

54,666

57,327

(4.6

)

Non-interest income:

Wealth management group fee income

2,388

2,222

7.5

9,503

9,317

2.0

Service charges on deposit accounts

1,130

1,188

(4.9

)

4,460

4,727

(5.6

)

Interchange revenue from debit card transactions

991

1,027

(3.5

)

4,104

4,040

1.6

Net gains on securities transactions

-

-

N/M

19

-

N/M

Change in fair value of equity investments

(25

)

(161

)

(84.5

)

81

2,004

(96.0

)

Net gains on sales of loans held for sale

102

167

(38.9

)

248

351

(29.3

)

Net gains (losses) on sales of other real estate owned

(12

)

(29

)

(58.6

)

(99

)

90

(210.0

)

Income from bank owned life insurance

15

16

(6.3

)

63

66

(4.5

)

Other

517

463

11.7

1,694

2,479

(31.7

)

Total non-interest income

5,106

4,893

4.4

20,073

23,074

(13.0

)

Non-interest expense:

Salaries and wages

6,045

5,353

12.9

23,420

22,322

4.9

Pension and other employee benefits

1,414

1,086

30.2

5,902

5,524

6.8

Other components of net periodic pension and postretirement benefits

(118

)

454

(126.0

)

(541

)

(770

)

(29.7

)

Net occupancy

1,500

1,628

(7.9

)

5,969

6,550

(8.9

)

Furniture and equipment

657

609

7.9

2,497

2,550

(2.1

)

Data processing

1,968

1,709

15.2

7,386

6,997

5.6

Professional services

667

642

3.9

1,885

2,169

(13.1

)

Legal accruals and settlements

-

-

N/M

-

989

(100.0

)

Amortization of intangible assets

144

176

(18.2

)

609

734

(17.0

)

Marketing and advertising

288

365

(21.1

)

932

1,181

(21.1

)

Other real estate owned expense

35

101

(65.3

)

115

422

(72.7

)

FDIC insurance

61

261

(76.6

)

537

1,142

(53.0

)

Loan expense

230

248

(7.3

)

787

863

(8.8

)

Other

1,960

1,573

24.6

6,198

6,093

1.7

Total non-interest expense

14,851

14,205

4.5

55,696

56,766

(1.9

)

Income before income tax expense

5,195

6,390

(18.7

)

19,043

23,635

(19.4

)

Income tax expense

991

660

50.2

3,434

4,009

(14.3

)

Net income

$

4,204

$

5,730

(26.6

)

$

15,609

$

19,626

(20.5

)

Basic and diluted earnings per share

$

0.87

$

1.18

$

3.21

$

4.06

Cash dividends declared per share

0.26

0.26

1.04

1.04

Average basic and diluted shares outstanding

4,879

4,843

4,869

4,832

N/M - Not meaningful


Chemung Financial Corporation

Consolidated Financial Highlights (Unaudited)

As of or for the

As of or for the Three Months Ended

Twelve Months Ended

(in thousands, except

Dec. 31,

Sept. 30,

June 30,

March 31,

Dec. 31,

Dec. 31,

Dec. 31,

per share data)

2019

2019

2019

2019

2018

2019

2018

RESULTS OF OPERATIONS

Interest income

$

16,777

$

16,808

$

16,682

$

16,665

$

16,879

$

66,932

$

64,553

Interest expense

1,576

1,666

1,581

1,498

1,395

6,321

4,073

Net interest income

15,201

15,142

15,101

15,167

15,484

60,611

60,480

Provision (credit) for loan losses

261

4,441

150

1,093

(218

)

5,945

3,153

Net interest income after provision (credit) for loan losses

14,940

10,701

14,951

14,074

15,702

54,666

57,327

Non-interest income

5,106

4,956

5,086

4,925

4,893

20,073

23,074

Non-interest expense

14,851

13,525

13,823

13,497

14,205

55,696

56,766

Income before income tax expense

5,195

2,132

6,214

5,502

6,390

19,043

23,635

Income tax expense

991

176

1,233

1,034

660

3,434

4,009

Net income

$

4,204

$

1,956

$

4,981

$

4,468

$

5,730

$

15,609

$

19,626

Basic and diluted earnings per share

$

0.87

$

0.40

$

1.02

$

0.92

$

1.18

$

3.21

$

4.06

Average basic and diluted shares outstanding

4,879

4,871

4,866

4,860

4,843

4,869

4,832

PERFORMANCE RATIOS

Return on average assets

0.93

%

0.44

%

1.15

%

1.03

%

1.29

%

0.88

%

1.14

%

Return on average equity

9.14

%

4.29

%

11.51

%

10.83

%

14.29

%

8.86

%

12.76

%

Return on average tangible equity (a)

10.43

%

4.91

%

13.27

%

12.56

%

16.74

%

10.18

%

15.07

%

Efficiency ratio (unadjusted) (f)

73.13

%

67.30

%

68.47

%

67.18

%

69.71

%

69.03

%

67.94

%

Efficiency ratio (adjusted) (a) (b)

72.08

%

66.21

%

67.44

%

66.04

%

68.49

%

67.95

%

67.22

%

Non-interest expense to average assets

3.28

%

3.05

%

3.18

%

3.12

%

3.21

%

3.16

%

3.31

%

Loans to deposits

83.28

%

82.88

%

83.60

%

82.93

%

83.60

%

83.28

%

83.60

%

YIELDS / RATES - Fully Taxable Equivalent

Yield on loans

4.43

%

4.50

%

4.54

%

4.54

%

4.54

%

4.50

%

4.39

%

Yield on investments

2.29

%

2.36

%

2.41

%

2.42

%

2.16

%

2.37

%

2.19

%

Yield on interest-earning assets

3.92

%

4.03

%

4.07

%

4.07

%

4.01

%

4.02

%

3.96

%

Cost of interest-bearing deposits

0.55

%

0.60

%

0.57

%

0.54

%

0.48

%

0.56

%

0.31

%

Cost of borrowings

3.58

%

3.53

%

3.52

%

3.52

%

3.58

%

3.53

%

2.37

%

Cost of interest-bearing liabilities

0.56

%

0.61

%

0.58

%

0.55

%

0.50

%

0.57

%

0.37

%

Interest rate spread

3.36

%

3.42

%

3.49

%

3.52

%

3.51

%

3.45

%

3.59

%

Net interest margin, fully taxable equivalent

3.56

%

3.63

%

3.69

%

3.71

%

3.68

%

3.64

%

3.72

%

CAPITAL

Total equity to total assets at end of period

10.22

%

10.15

%

10.18

%

9.69

%

9.40

%

10.22

%

9.40

%

Tangible equity to tangible assets at end of period (a)

9.07

%

9.00

%

8.99

%

8.50

%

8.19

%

9.07

%

8.19

%

Book value per share

$

37.35

$

37.35

$

36.64

$

35.27

$

33.99

$

37.35

$

33.99

Tangible book value per share (a)

32.74

32.69

31.95

30.54

29.22

32.74

29.22

Period-end market value per share

42.50

42.00

48.34

46.93

41.31

42.50

41.31

Dividends declared per share

0.26

0.26

0.26

0.26

0.26

1.04

1.04

AVERAGE BALANCES

Loans and loans held for sale (c)

$

1,303,349

$

1,295,167

$

1,290,923

$

1,296,200

$

1,306,556

$

1,296,426

$

1,320,059

Interest earning assets

1,705,766

1,665,793

1,654,156

1,671,063

1,680,269

1,674,668

1,638,803

Total assets

1,798,385

1,760,385

1,744,599

1,753,788

1,756,765

1,764,401

1,716,992

Deposits

1,581,645

1,545,858

1,539,739

1,565,371

1,576,629

1,558,164

1,515,658

Total equity

182,522

180,896

173,534

167,385

159,032

176,138

153,793

Tangible equity (a)

159,889

158,111

150,598

144,293

135,766

153,278

130,256

ASSET QUALITY

Net charge-offs

$

698

$

174

$

239

$

292

$

472

$

1,403

$

5,369

Non-performing loans (d)

18,008

23,468

19,505

15,099

12,254

18,008

12,254

Non-performing assets (e)

18,525

23,679

19,719

15,304

12,828

18,525

12,828

Allowance for loan losses

23,478

23,923

19,656

19,745

18,944

23,478

18,944

Annualized net charge-offs to average loans

0.21

%

0.05

%

0.07

%

0.09

%

0.14

%

0.11

%

0.41

%

Non-performing loans to total loans

1.38

%

1.80

%

1.51

%

1.16

%

0.93

%

1.38

%

0.93

%

Non-performing assets to total assets

1.04

%

1.32

%

1.12

%

0.86

%

0.73

%

1.04

%

0.73

%

Allowance for loan losses to total loans

1.79

%

1.83

%

1.53

%

1.52

%

1.44

%

1.79

%

1.44

%

Allowance for loan losses to non-performing loans

130.38

%

101.94

%

100.77

%

130.77

%

154.59

%

130.38

%

154.59

%

(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
December 31, 2019

Three Months Ended
December 31, 2018

Three Months Ended
December 31, 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

$

872,992

$

10,066

4.57

%

$

851,484

$

10,203

4.75

%

$

(137

)

$

251

$

(388

)

Mortgage loans

186,780

1,775

3.77

%

186,116

1,762

3.76

%

13

22

(9

)

Consumer loans

243,577

2,708

4.41

%

268,956

2,982

4.40

%

(274

)

(254

)

(20

)

Taxable securities

242,828

1,446

2.36

%

215,883

1,057

1.94

%

389

142

247

Tax-exempt securities

44,240

345

3.09

%

48,860

340

2.76

%

5

(34

)

39

Interest-earning deposits

115,349

535

1.84

%

108,970

640

2.33

%

(105

)

36

(141

)

Total interest earning assets

1,705,766

16,875

3.92

%

1,680,269

16,984

4.01

%

(109

)

163

(272

)

Non- interest earnings assets:

Cash and due from banks

26,322

26,424

Other assets

90,454

69,878

Allowance for loan losses

(24,157

)

(19,806

)

Total assets

$

1,798,385

$

1,756,765

Interest-bearing liabilities:

Interest-bearing checking

$

207,878

$

214

0.41

%

$

194,639

$

224

0.46

%

(10

)

15

(25

)

Savings and money market

741,044

694

0.37

%

768,656

738

0.38

%

(44

)

(25

)

(19

)

Time deposits

163,170

631

1.53

%

147,327

394

1.06

%

237

46

191

FHLB advances, other debt and repurchase agreements

4,104

37

3.58

%

4,327

39

3.58

%

(2

)

(2

)

-

Total int.-bearing liabilities

1,116,196

1,576

0.56

%

1,114,949

1,395

0.50

%

181

34

147

Non-interest-bearing liabilities:

Demand deposits

469,553

466,007

Other liabilities

30,114

16,777

Total liabilities

1,615,863

1,597,733

Shareholders' equity

182,522

159,032

Total liabilities and shareholders' equity

$

1,798,385

$

1,756,765

Fully taxable equivalent net interest income

15,299

15,589

$

(290

)

$

129

$

(419

)

Net interest rate spread (1)

3.36

%

3.51

%

Net interest margin, fully taxable equivalent (2)

3.56

%

3.68

%

Taxable equivalent adjustment

(98

)

(105

)

Net interest income

$

15,201

$

15,484

(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)

Twelve Months Ended
December 31, 2019

Twelve Months Ended
December 31, 2018

Twelve Months Ended
December 31, 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

$

862,479

$

40,250

4.67

%

$

853,240

$

39,166

4.59

%

$

1,084

$

415

$

669

Mortgage loans

183,696

6,998

3.81

%

191,668

7,197

3.75

%

(199

)

(310

)

111

Consumer loans

250,251

11,133

4.45

%

275,151

11,625

4.22

%

(492

)

(1,097

)

605

Taxable securities

230,263

5,276

2.29

%

234,407

4,815

2.05

%

461

(87

)

548

Tax-exempt securities

47,464

1,408

2.97

%

51,036

1,414

2.77

%

(6

)

(103

)

97

Interest-earning deposits

100,515

2,270

2.26

%

33,301

756

2.27

%

1,514

1,517

(3

)

Total interest earning assets

1,674,668

67,335

4.02

%

1,638,803

64,973

3.96

%

2,362

335

2,027

Non-interest earnings assets:

Cash and due from banks

25,976

27,122

Other assets

84,643

71,601

Allowance for loan losses

(20,886

)

(20,534

)

Total assets

$

1,764,401

$

1,716,992

Interest-bearing liabilities:

Interest-bearing checking

$

191,759

$

767

0.40

%

$

156,432

$

365

0.23

%

$

402

$

94

$

308

Savings and money market

739,417

3,073

0.42

%

764,420

2,044

0.27

%

1,029

(71

)

1,100

Time deposits

164,604

2,333

1.42

%

134,837

914

0.68

%

1,419

239

1,180

FHLB advances, other debt and repurchase agreements

4,187

148

3.53

%

31,590

750

2.37

%

(602

)

(853

)

251

Total int.-bearing liabilities

1,099,967

6,321

0.57

%

1,087,279

4,073

0.37

%

2,248

(591

)

2,839

Non-interest-bearing liabilities:

Demand deposits

462,384

459,969

Other liabilities

25,912

15,951

Total liabilities

1,588,263

1,563,199

Shareholders' equity

176,138

153,793

Total liabilities and shareholders' equity

$

1,764,401

$

1,716,992

Fully taxable equivalent net interest income

61,014

60,900

$

114

$

926

$

(812

)

Net interest rate spread (1)

3.45

%

3.59

%

Net interest margin, fully taxable equivalent (2)

3.64

%

3.72

%

Taxable equivalent adjustment

(403

)

(420

)

Net interest income

$

60,611

$

60,480

(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 Three Months Ended

Twelve Months Ended

(in thousands,

Dec. 31,

Sept. 30,

June 30,

March 31,

Dec. 31,

Dec. 31,

Dec. 31,

except per share data)

2019

2019

2019

2019

2018

2019

2018

NET INTEREST MARGIN - FULLY TAXABLE EQUIVALENT

Net interest income (GAAP)

$

15,201

$

15,142

$

15,101

$

15,167

$

15,484

$

60,611

$

60,480

Fully taxable equivalent adjustment

98

101

104

100

105

403

420

Fully taxable equivalent net interest income (non-GAAP)

$

15,299

$

15,243

$

15,205

$

15,267

$

15,589

$

61,014

$

60,900

Average interest-earning assets (GAAP)

$

1,705,766

$

1,665,793

$

1,654,156

$

1,671,063

$

1,680,269

$

1,674,668

$

1,638,803

Net interest margin - fully taxable equivalent (non-GAAP)

3.56

%

3.63

%

3.69

%

3.71

%

3.68

%

3.64

%

3.72

%

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

Twelve Months Ended

(in thousands, except

Dec. 31,

Sept. 30,

June 30,

March 31,

Dec. 31,

Dec. 31,

Dec. 31,

per share data)

2019

2019

2019

2019

2018

2019

2018

EFFICIENCY RATIO

Net interest income (GAAP)

$

15,201

$

15,142

$

15,101

$

15,167

$

15,484

$

60,611

$

60,480

Fully taxable equivalent adjustment

98

101

104

100

105

403

420

Fully taxable equivalent net interest income (non-GAAP)

$

15,299

$

15,243

$

15,205

$

15,267

$

15,589

$

61,014