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

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ELMIRA, N.Y., Oct. 18, 2019 (GLOBE NEWSWIRE) -- Chemung Financial Corporation (the “Corporation”) (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.

1 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