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Chemung Financial Corporation Reports First Quarter 2018 Net Income of $4.4 Million, or $0.92 per Share

ELMIRA, N.Y., April 18, 2018 (GLOBE NEWSWIRE) -- Chemung Financial Corporation (the “Corporation”) (Nasdaq:CHMG), the parent company of Chemung Canal Trust Company (the “Bank”), today reported net income for the first quarter of 2018 of $4.4 million, or $0.92 per share, compared to $3.0 million, or $0.62 per share, for the first quarter of 2017.

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

“We had a great start to 2018 with strong growth in year-over-year net income, which continues to be driven by our commercial and indirect loan portfolios and improving margins. Due to the seasonality of our commercial and indirect consumer portfolios, we expect to see stronger growth in our loan portfolios during the next two quarters. We remain optimistic about the strength of the economy, however, the environment for deposits and commercial loans remains intensely competitive. We continue to assess our environment to meet the expectations of our clients, while tightly managing our cost of interest-bearing liabilities.”

First Quarter Highlights1

  • Net interest income increased $1.4 million, or 10.4%
  • Non-interest income increased $0.6 million, or 13.0%
  • Effective tax rate decreased from 30.0% to 19.3%
  • Loans, net of deferred fees, increased $8.1 million, or 0.6%
  • Commercial loans increased $4.7 million, or 0.6%
  • Deposits increased $50.8 million, or 3.5%
  • Dividends declared during the first quarter of 2018 were $0.26 per share

A more detailed summary of financial performance follows.

1 Balance sheet comparisons are calculated for March 31, 2018 versus December 31, 2017. Income statement comparisons are calculated for the first quarter of 2018 versus first quarter of 2017.

1st Quarter 2018 vs 1st Quarter 2017

Net Interest Income:

Net interest income for the current quarter totaled $14.9 million compared with $13.5 million for the same period in the prior year, an increase of $1.4 million, or 10.4%. Interest and fees from loans increased $1.6 million, while interest from investments, including interest-earning deposits, decreased $0.2 million in the current quarter as compared to the same period in the prior year. Interest expense on borrowed funds increased $0.1 million, while interest expense on securities sold under agreements to repurchase decreased $0.1 million in the first quarter of 2018 when compared to the same period in the prior year. Fully taxable equivalent net interest margin was 3.75% in the first quarter of 2018, compared with 3.45% for the same period in the prior year. Average interest-earning assets increased $18.3 million in the first quarter of 2018, compared to the same period in the prior year. The average yield on interest-earning assets increased 28 basis points, while the average cost of interest-bearing liabilities decreased one basis point in the first quarter of 2018, compared to the same period in the prior year. The increase in the average yield on interest-earning assets can be mostly attributed to a 25 basis points increase in the average yield on commercial loans, due to an increase in PRIME and LIBOR, along with a $0.3 million increase in prepayments penalties during the first quarter of 2018, compared to the same period in the prior year. Additionally, the average yield on investments increased 22 basis points due to the increase in the average yield on interest-earnings assets, compared to the same period in the prior year. The decline in the average cost of interest-bearing liabilities can be attributed to an 81 basis points decline in the cost of borrowings due to the maturity of one $10.0 million repurchase agreement (4.54% rate) in March 2017, one $4.0 million FHLB advance (3.90% rate) in October 2017, and one $2.0 million FHLB term advance (3.05%) in January 2018.

Non-Interest Income:

Non-interest income for the current quarter was $5.5 million compared with $4.8 million for the same period in the prior year, an increase of $0.6 million, or 13.0%. The increase was due primarily to increases of $0.2 million in wealth management group fee income and $0.3 million in other non-interest income. The increase in WMG fee income can be attributed to an increase in assets under management or administration. The increase in other non-interest income can be mostly attributed to a $0.4 million New York State sales tax refund received during the first quarter of 2018.

Non-Interest Expense:

Non-interest expense for the current quarter was $14.2 million compared with $13.0 million for the same period in the prior year, an increase of $1.1 million, or 8.6%. The increase was due primarily to increases of $0.4 million in salaries and wages, $0.1 million in data processing expenses, $0.2 million in professional services, $0.1 million in marketing and advertising expenses, and $0.1 million in other real estate owned expenses. The increase in salaries and wages can be attributed to an increase in the number of employees, compared to the prior year, and annual merit increases. The Bank opened one denovo branch in Schenectady, New York in January 2018. The increase in professional services can be mostly attributed to consulting costs associated with the New York State sales tax refund noted above within the Non-Interest Income section. The increase in data processing and marketing and advertising can be attributed to the timing of projects. The increase in other real estate owned expenses can be attributed to additional OREO properties, compared to the prior year.

Income Tax Expense:

Income tax expense for the quarter was $1.1 million compared with $1.3 million for the same period in the prior year, a decrease of $0.2 million, or 16.9%. The decrease was due primarily to the decline in the Federal income tax rate from 34% to 21%, with the enactment of the Tax Cuts and Jobs Act of 2017. Additionally, the Corporation increased income generated from CCTC Funding Corp., a real estate investment trust subsidiary of the Bank, reducing the Corporation’s state income tax. Partially offsetting these tax benefits was higher income before income tax expense for the quarter, when compare to the same period in the prior year.

Asset Quality

Non-performing loans totaled $17.3 million at March 31, 2018, or 1.31% of total loans, compared with $17.3 million at December 31, 2017, or 1.32% of total loans. Non-performing assets, which are comprised of non-performing loans and other real estate owned, were $19.1 million, or 1.12% of total assets, at March 31, 2018, compared with $19.3 million, or 1.13% of total assets, at December 31, 2017.

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 first quarter of 2018 was $0.7 million, a decrease of $0.3 million compared with the same period in the prior year. The decline in the provision can be attributed to a decline in specific impairments and slower growth in the loan portfolio compared to the same period in the prior year. Net charge-offs for the first quarter of 2018 were $0.5 million, compared with $0.3 million for the first quarter of 2017. 

The allowance for loan losses was $21.4 million as of March 31, 2018 and $21.2 million as of December 31, 2017. The allowance for loan losses was 123.78% of non-performing loans at March 31, 2018 compared with 122.15% at December 31, 2017. The ratio of the allowance for loan losses to total loans was 1.62% at March 31, 2018 compared with 1.61% at December 31, 2017.

Balance Sheet Activity

Assets totaled $1.700 billion at March 31, 2018 compared with $1.708 billion at December 31, 2017, a decrease of $7.7 million, or 0.4%. The decline was due primarily to decreases of $14.1 million in securities available for sale and $2.7 million in FHLB stock, offset by increases of $8.1 million in loans and $2.4 million in accrued interest receivable and other assets. 

The decrease in securities available for sale can be mostly attributed to pay-downs, maturities, and an increase in unrealized losses. The decrease in FHLB stock can be attributed to the pay-down of the FHLB overnight advances. The increase in total loans can be attributed to increases of $3.0 million in commercial mortgages, $1.7 million in commercial and agriculture loans, $0.2 million in residential mortgages, and $3.9 million in indirect consumer loans, offset by a decrease of $0.7 million in other consumer loans. The increase in accrued interest receivable and other assets can be mostly attributed to the fair market value adjustment to interest rate swaps of $0.9 million at March 31, 2018.

Deposits totaled $1.518 billion at March 31, 2018 compared with $1.467 billion at December 31, 2017, an increase of $50.8 million, or 3.5%. The growth was attributable to increases of $60.3 million in money market accounts and $4.0 million in savings deposits, offset by decreases of $7.3 million in non-interest-bearing demand deposits, $4.3 million in interest-bearing demand deposits, and $1.9 million in time deposits. The increase in money market accounts can be attributed to the seasonal inflow of deposits from existing municipal clients. FHLB advances and other debt totaled $4.5 million at March 31, 2018 compared with $64.2 million at December 31, 2017, a decrease of $59.8 million, or 93.0%. The decline can be attributed to the pay-down of FHLB overnight advances due to the increase in deposits.

Total shareholders’ equity was $150.3 million at March 31, 2018 compared with $149.8 million at December 31, 2017, an increase of $0.4 million, or 0.3%. The increase in retained earnings of $3.2 million was due primarily to earnings of $4.4 million, offset by $1.2 million in dividends declared during the first quarter of 2018. The increase in accumulated other comprehensive loss of $3.5 million can be attributed to the decline in the fair market value of the securities portfolio. Also, additional-paid-in capital increased $0.4 million and treasury stock decreased $0.3 million, due to the issuance of shares to the Corporation’s employee benefit stock plans.

The total equity to total assets ratio was 8.84% at March 31, 2018 compared with 8.77% at December 31, 2017. The tangible equity to tangible assets ratio was 7.55% at March 31, 2018 compared with 7.48% at December 31, 2017. Book value per share increased to $31.16 at March 31, 2018 from $31.10 at December 31, 2017. As of March 31, 2018, the Bank’s capital ratios were in excess of those required to be considered well-capitalized under the regulatory framework for prompt corrective action and the Corporation met all capital adequacy requirements to which it is subject.

Other Items

The market value of total assets under management or administration in our Wealth Management Group was $1.957 billion at March 31, 2018, including $361.6 million of assets under management or administration for the Corporation, compared to $1.952 billion at December 31, 2017, including $346.8 million of assets under management or administration for the Corporation, an increase of $5.0 million, or 0.3%.

About Chemung Financial Corporation

Chemung Financial Corporation is a $1.7 billion financial services holding company headquartered in Elmira, New York and operates 34 retail offices through its principal subsidiary, Chemung Canal Trust Company, a full service community bank with trust powers. Established in 1833, Chemung Canal Trust Company is the oldest locally-owned and managed community bank in New York State. Chemung Financial Corporation is also the parent of CFS Group, Inc., a financial services subsidiary offering non-traditional services including mutual funds, annuities, brokerage services, tax preparation services and insurance, and Chemung Risk Management, Inc., a captive insurance company based in the State of Nevada.

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

                     
Chemung Financial Corporation                    
Consolidated Balance Sheets (Unaudited)  
    March 31,   Dec. 31,   Sept. 30,   June 30,   March 31,
(in thousands)     2018       2017       2017       2017       2017  
ASSETS                    
Cash and due from financial institutions   $ 25,473     $ 27,966     $ 34,572     $ 26,684     $ 26,275  
Interest-earning deposits in other financial institutions     5,531       2,763       21,806       37,862       99,410  
Total cash and cash equivalents     31,004       30,729       56,378       64,546       125,685  
                     
Equity investments     2,154       2,337       2,248       2,207       2,150  
                     
Securities available for sale     278,984       293,091       311,700       323,777       302,074  
Securities held to maturity     3,640       3,781       3,865       4,928       3,721  
FHLB and FRB stocks, at cost     3,097       5,784       3,497       3,764       3,597  
Total investment securities     285,721       302,656       319,062       332,469       309,392  
                     
Commercial     848,075       843,337       826,554       794,175       780,687  
Mortgage     194,600       194,440       197,210       200,629       198,020  
Consumer     277,236       274,047       265,049       257,843       255,544  
Loans, net of deferred loan fees     1,319,911       1,311,824       1,288,813       1,252,647       1,234,251  
Allowance for loan losses     (21,390 )     (21,161 )     (15,694 )     (15,104 )     (14,960 )
Loans, net     1,298,521       1,290,663       1,273,119       1,237,543       1,219,291  
                     
Loans held for sale     190       542       1,246       386       20  
Premises and equipment, net     26,136       26,657       27,366       27,836       28,206  
Goodwill     21,824       21,824       21,824       21,824       21,824  
Other intangible assets, net     1,891       2,085       2,292       2,506       2,719  
Accrued interest receivable and other assets     32,513       30,127       28,147       29,255       26,813  
Total assets   $ 1,699,954     $ 1,707,620     $ 1,731,682     $ 1,718,572     $ 1,736,100  
                     
LIABILITIES AND SHAREHOLDERS' EQUITY                    
Deposits:                    
Non-interest-bearing demand deposits   $ 460,271     $ 467,610     $ 449,841     $ 436,017     $ 432,062  
Interest-bearing demand deposits     144,707       149,026       156,094       144,239       154,848  
Money market accounts     574,075       513,782       586,795       591,751       597,547  
Savings deposits     222,700       218,666       218,106       220,227       219,180  
Time deposits     116,447       118,362       126,182       132,803       140,614  
Total deposits     1,518,200       1,467,446       1,537,018       1,525,037       1,544,251  
                     
Securities sold under agreements to repurchase     10,000       10,000       10,000       11,937       15,215  
FHLB advances and other debt     4,464       64,217       13,577       13,658       13,736  
Accrued interest payable and other liabilities     17,028       16,144       16,810       15,978       14,641  
Total liabilities     1,549,692       1,557,807       1,577,405       1,566,610       1,587,843  
                     
Shareholders' equity                    
Common stock     53       53       53       53       53  
Additional-paid-in capital     46,404       45,967       46,089       45,966       45,901  
Retained earnings     131,694       128,453       130,006       127,585       125,860  
Treasury stock, at cost     (14,053 )     (14,320 )     (14,596 )     (14,670 )     (14,801 )
Accumulated other comprehensive (loss)     (13,836 )     (10,340 )     (7,275 )     (6,972 )     (8,756 )
Total shareholders' equity     150,262       149,813       154,277       151,962       148,257  
Total liabilities and shareholders' equity   $ 1,699,954     $ 1,707,620     $ 1,731,682     $ 1,718,572     $ 1,736,100  
                     
Period-end shares outstanding     4,822       4,817       4,804       4,799       4,794  
                     
                     


             
Chemung Financial Corporation            
Consolidated Statements of Income (Unaudited)  
    Three Months Ended    
    March 31,   Percent
(in thousands, except per share data)     2018       2017     Change
Interest and dividend income:            
Loans, including fees   $ 14,050     $ 12,499     12.4  
Taxable securities     1,289       1,422     (9.4 )
Tax exempt securities     308       238     29.4  
Interest-earning deposits     22       155     (85.8 )
Total interest and dividend income     15,669       14,314     9.5  
           
Interest expense:            
Deposits     501       538     (6.9 )
Securities sold under agreements to repurchase     93       193     (51.8 )
Borrowed funds     175       89     96.6  
Total interest expense     769       820     (6.2 )
           
Net interest income     14,900       13,494     10.4  
Provision for loan losses     709       1,040     (31.8 )
Net interest income after provision for loan losses     14,191       12,454     13.9  
           
Non-interest income:            
Wealth management group fee income     2,316       2,109     9.8  
Service charges on deposit accounts     1,164       1,184     (1.7 )
Interchange revenue from debit card transactions     1,035       920     12.5  
Net gains on sales of loans held for sale     46       69     (33.3 )
Net gains (losses) on sales of other real estate owned     44       17     158.8  
Income from bank owned life insurance     16       17     (5.9 )
Other     854       531     60.8  
Total non-interest income     5,475       4,847     13.0  
             
Non-interest expense:            
Salaries and wages     5,714       5,275     8.3  
Pension and other employee benefits     1,250       1,218     2.6  
Net occupancy     1,608       1,606     0.1  
Furniture and equipment     658       682     (3.5 )
Data processing     1,742       1,604     8.6  
Professional services     540       300     80.0  
Amortization of intangible assets     194       226     (14.2 )
Marketing and advertising     349       249     40.2  
Other real estate owned expense     138       19     626.3  
FDIC insurance     317       325     (2.5 )
Loan expense     169       116     45.7  
Other     1,487       1,425     4.4  
Total non-interest expense     14,166       13,045     8.6  
             
Income before income tax expense     5,500       4,256     29.2  
Income tax expense     1,061       1,277     (16.9 )
Net income   $ 4,439     $ 2,979     49.0  
             
Basic and diluted earnings per share   $ 0.92     $ 0.62      
Cash dividends declared per share     0.26       0.26      
Average basic and diluted shares outstanding     4,822       4,790      
             
             


 
Chemung Financial Corporation                    
Consolidated Financial Highlights (Unaudited)  
                     
    As of or for the Three Months Ended
    March 31,   Dec. 31,   Sept. 30,   June 30,   March 31,
(in thousands, per share data)   2018   2017   2017   2017   2017
RESULTS OF OPERATIONS                
Interest income   $ 15,669     $ 15,560     $ 15,497     $ 14,684     $ 14,314  
Interest expense     769       780       734       734       820  
Net interest income     14,900       14,780       14,763       13,950       13,494  
Provision for loan losses     709       6,272       1,289       421       1,040  
Net interest income after provision for loan losses     14,191       8,508       13,474       13,529       12,454  
Non-interest income     5,475       5,456       5,166       5,022       4,847  
Non-interest expense     14,166       13,111       13,276       14,332       13,045  
Income before income tax expense     5,500       853       5,364       4,219       4,256  
Income tax expense     1,061       3,012       1,710       1,263       1,277  
Net income (loss)   $ 4,439     $ (2,159 )   $ 3,654     $ 2,956     $ 2,979  
                     
Basic and diluted earnings per share   $ 0.92     $ (0.45 )   $ 0.76     $ 0.62     $ 0.62  
Average basic and diluted shares outstanding     4,822       4,809       4,802       4,797       4,790  
                     
PERFORMANCE RATIOS                    
Return on average assets     1.06 %     (0.50 )%     0.85 %     0.69 %     0.71 %
Return on average equity     11.96 %     (5.53 )%     9.46 %     7.90 %     8.24 %
Return on average tangible equity (a)     14.21 %     (6.55 )%     11.24 %     9.43 %     9.90 %
Efficiency ratio (a) (b)     68.21 %     63.43 %     64.83 %     69.28 %     69.25 %
Non-interest expense to average assets     3.37 %     3.01 %     3.09 %     3.34 %     3.12 %
Loans to deposits     86.94 %     89.40 %     83.85 %     82.14 %     79.93 %
                     
YIELDS / RATES - Fully Taxable Equivalent                    
Yield on loans     4.34 %     4.26 %     4.34 %     4.18 %     4.19 %
Yield on investments     2.22 %     2.15 %     2.16 %     2.01 %     2.00 %
Yield on interest-earning assets     3.94 %     3.82 %     3.86 %     3.65 %     3.66 %
Cost of interest-bearing deposits     0.20 %     0.20 %     0.20 %     0.20 %     0.20 %
Cost of borrowings     2.23 %     2.42 %     2.95 %     2.82 %     3.04 %
Cost of interest-bearing liabilities     0.29 %     0.28 %     0.27 %     0.26 %     0.30 %
Interest rate spread     3.65 %     3.54 %     3.59 %     3.39 %     3.36 %
Net interest margin, fully taxable equivalent     3.75 %     3.63 %     3.68 %     3.47 %     3.45 %
                     
CAPITAL                    
Total equity to total assets at end of period     8.84 %     8.77 %     8.91 %     8.84 %     8.54 %
Tangible equity to tangible assets at end of period (a)     7.55 %     7.48 %     7.62 %     7.53 %     7.23 %
                     
Book value per share   $ 31.16     $ 31.10     $ 32.11     $ 31.67     $ 30.93  
Tangible book value per share (a)     26.24       26.14       27.09       26.60       25.81  
Period-end market value per share     46.47       48.10       47.10       40.88       39.50  
Dividends declared per share     0.26       0.26       0.26       0.26       0.26  
                     
AVERAGE BALANCES                    
Loans and loans held for sale (c)   $ 1,315,207     $ 1,291,414     $ 1,259,919     $ 1,237,189     $ 1,215,445  
Interest earning assets     1,623,748       1,639,257       1,615,833       1,634,955       1,605,460  
Total assets     1,703,047       1,727,616       1,707,111       1,723,664       1,694,199  
Deposits     1,488,708       1,516,390       1,512,685       1,532,819       1,495,724  
Total equity     150,495       154,767       153,244       150,155       146,642  
Tangible equity (a)     126,665       130,759       129,024       125,720       121,988  
                     
ASSET QUALITY                    
Net charge-offs   $ 479     $ 805     $ 699     $ 277     $ 333  
Non-performing loans (d)     17,280       17,324       14,028       15,208       12,914  
Non-performing assets (e)     19,113       19,264       14,216       15,545       13,251  
Allowance for loan losses     21,390       21,161       15,694       15,104       14,960  
                     
Annualized net charge-offs to average loans     0.15 %     0.25 %     0.22 %     0.09 %     0.11 %
Non-performing loans to total loans     1.31 %     1.32 %     1.09 %     1.21 %     1.05 %
Non-performing assets to total assets     1.12 %     1.13 %     0.82 %     0.90 %     0.76 %
Allowance for loan losses to total loans     1.62 %     1.61 %     1.22 %     1.21 %     1.21 %
Allowance for loan losses to non-performing loans     123.78 %     122.15 %     111.88 %     99.32 %     115.84 %
                     
(a)  See the GAAP to Non-GAAP reconciliations.                    
(b)  Efficiency ratio is non-interest expense less amortization of intangible assets less legal reserve divided by the total of fully taxable equivalent net interest income plus non-interest income less net gains on securities transactions.
(c)  Loans and loans held for sale do not reflect the allowance for loan losses.                
(d)  Non-performing loans include non-accrual loans only.                    
(e)  Non-performing assets include non-performing loans plus other real estate owned.            
                     
 


                                     
Chemung Financial Corporation                                    
Average Consolidated Balance Sheets & Net Interest Income Analysis and Rate/Volume Analysis of Net Interest Income (Unaudited)        
                                     
    Three Months Ended
 March 31, 2018
  Three Months Ended
 March 31, 2017
  Three Months Ended
March 31, 2018 vs. 2017
(in thousands)   Average
Balance

  Interest
  Yield /
Rate

  Average
Balance

  Interest
  Yield /
Rate

  Total
Change

  Due to
Volume

  Due to
Rate

                                                                     
Interest earning assets:                                    
Commercial loans   $ 844,674     $ 9,431     4.53 %   $ 761,216     $ 8,030     4.28 %   $ 1,401     $ 914     $ 487  
Mortgage loans     194,917       1,811     3.77 %     198,373       1,887     3.86 %     (76 )     (33 )     (43 )
Consumer loans     275,616       2,845     4.19 %     255,856       2,642     4.19 %     203       203       -  
Taxable securities     250,015       1,291     2.09 %     272,580       1,424     2.12 %     (133 )     (114 )     (19 )
Tax-exempt securities     54,624       379     2.81 %     44,757       345     3.13 %     34       71       (37 )
Interest-earning deposits     3,902       22     2.29 %     72,678       155     0.86 %     (133 )     (234 )     101  
Total interest earning assets     1,623,748       15,779     3.94 %     1,605,460       14,483     3.66 %     1,296       807       489  
                                     
Non- interest earnings assets:                                    
Cash and due from banks     27,252               25,885                      
Premises and equipment, net     26,545               28,655                      
Other assets     53,753               53,954                      
Allowance for loan losses     (21,253 )             (14,349 )                    
AFS valuation allowance     (6,998 )             (5,406 )                    
Total assets   $ 1,703,047             $ 1,694,199                      
                                     
Interest-bearing liabilities:                                    
Interest-bearing checking   $ 151,511     $ 35     0.09 %   $ 152,954     $ 36     0.10 %     (1 )     -       (1 )
Savings and money market     769,997       374     0.20 %     783,330       375     0.19 %     (1 )     (9 )     8  
Time deposits     117,120       92     0.32 %     141,250       127     0.36 %     (35 )     (21 )     (14 )
FHLB advances and repos     48,720       268     2.23 %     37,666       282     3.04 %     (14 )     71       (85 )
Total int.-bearing liabilities     1,087,348       769     0.29 %     1,115,200       820     0.30 %     (51 )     41       (92 )
                                     
Non-interest-bearing liabilities:                                    
Demand deposits     450,080               418,190                      
Other liabilities     15,124               14,167                      
Total liabilities     1,552,552               1,547,557                      
Shareholders' equity     150,495               146,642                      
Total liabilities and shareholders' equity   $ 1,703,047             $ 1,694,199                      
                                     
Fully taxable equivalent net interest income         15,010               13,663         $ 1,347     $ 766     $ 581  
Net interest rate spread (1)           3.65 %           3.36 %            
Net interest margin, fully taxable equivalent (2)           3.75 %           3.45 %            
Taxable equivalent adjustment         (110 )             (169 )                
Net interest income       $ 14,900             $ 13,494                  
                                     
(1)  Net interest rate spread is the difference in the average yield on interest-earning assets less the average rate on interest-bearing liabilities.    
(2)  Net interest margin is the ratio of fully taxable equivalent net interest income divided by average interest-earning assets.          
                                     

Chemung Financial Corporation

GAAP to Non-GAAP Reconciliations (Unaudited)

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

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

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

Fully Taxable Equivalent Net Interest Income, Net Interest Margin, and Efficiency Ratio

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

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

                     
    As of or for the Three Months Ended
    March 31,   Dec. 31,   Sept. 30,   June 30,   March 31,
(in thousands, except per share data)   2018   2017   2017   2017   2017
NET INTEREST MARGIN - FULLY TAXABLE EQUIVALENT                    
AND EFFICIENCY RATIO                    
Net interest income (GAAP)   $ 14,900     $ 14,780     $ 14,763     $ 13,950     $ 13,494  
Fully taxable equivalent adjustment     110       206       220       192       169  
Fully taxable equivalent net interest income (non-GAAP)   $ 15,010     $ 14,986     $ 14,983     $ 14,142     $ 13,663  
                     
Non-interest income (GAAP)   $ 5,475     $ 5,456     $ 5,166     $ 5,022     $ 4,847  
Less:  net (gains) losses on security transactions     -       (97 )     -       (12 )     -  
Adjusted non-interest income (non-GAAP)   $ 5,475     $ 5,359     $ 5,166     $ 5,010     $ 4,847  
                     
Non-interest expense (GAAP)   $ 14,166     $ 13,111     $ 13,276     $ 14,332     $ 13,045  
Less:  amortization of intangible assets     (194 )     (207 )     (214 )     (213 )     (226 )
Less:  legal reserve     -       -       -       (850 )     -  
Adjusted non-interest expense (non-GAAP)   $ 13,972     $ 12,904     $ 13,062     $ 13,269     $ 12,819  
                     
Average interest-earning assets (GAAP)   $ 1,623,748     $ 1,639,257     $ 1,615,833     $ 1,634,955     $ 1,605,460  
                     
Net interest margin - fully taxable equivalent (non-GAAP)     3.75 %     3.63 %     3.68 %     3.47 %     3.45 %
Efficiency ratio (non-GAAP)     68.21 %     63.43 %     64.83 %     69.28 %     69.25 %
                     

Tangible Equity and Tangible Assets (Period-End)

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

                     
                     
    As of or for the Three Months Ended
    March 31,   Dec. 31,   Sept. 30,   June 30,   March 31,
(in thousands, except per share and ratio data)   2018   2017   2017   2017   2017
TANGIBLE EQUITY AND TANGIBLE ASSETS                    
(PERIOD END)                    
Total shareholders' equity (GAAP)   $ 150,262     $ 149,813     $ 154,277     $ 151,962     $ 148,257  
Less:  intangible assets     (23,715 )     (23,909 )     (24,116 )     (24,330 )     (24,543 )
Tangible equity (non-GAAP)   $ 126,547     $ 125,904     $ 130,161     $ 127,632     $ 123,714  
                     
Total assets (GAAP)   $ 1,699,954     $ 1,707,620     $ 1,731,682     $ 1,718,572     $ 1,736,100  
Less:  intangible assets     (23,715 )     (23,909 )     (24,116 )     (24,330 )     (24,543 )
Tangible assets (non-GAAP)   $ 1,676,239     $ 1,683,711     $ 1,707,566     $ 1,694,242     $ 1,711,557  
                     
Total equity to total assets at end of period (GAAP)     8.84 %     8.77 %     8.91 %     8.84 %     8.54 %
Book value per share (GAAP)   $ 31.16     $ 31.10     $ 32.11     $ 31.67     $ 30.93  
                     
Tangible equity to tangible assets at                    
end of period (non-GAAP)     7.55 %     7.48 %     7.62 %     7.53 %     7.23 %
Tangible book value per share (non-GAAP)   $ 26.24     $ 26.14     $ 27.09     $ 26.60     $ 25.81  
                     

Tangible Equity (Average)

Average tangible equity and return on average tangible equity are each non-GAAP financial measures. Average tangible equity represents the Corporation’s average stockholders’ equity, less average goodwill and intangible assets for the period. Return on average tangible equity measures the Corporation’s earnings as a percentage of average tangible equity. These measures are meaningful to the Corporation, as well as investors and analysts, in assessing the Corporation’s use of equity.

                     
    As of or for the Three Months Ended
    March 31,   Dec. 31,   Sept. 30,   June 30,   March 31,
(in thousands, except ratio data)   2018   2017   2017   2017   2017
TANGIBLE EQUITY (AVERAGE)                    
Total average shareholders' equity (GAAP)   $ 150,495     $ 154,767     $ 153,244     $ 150,155     $ 146,642  
Less:  average intangible assets     (23,830 )     (24,008 )     (24,220 )     (24,435 )     (24,654 )
Average tangible equity (non-GAAP)   $ 126,665     $ 130,759     $ 129,024     $ 125,720     $ 121,988  
                     
Return on average equity (GAAP)     11.96 %     (5.53 )%     9.46 %     7.90 %     8.24 %
Return on average tangible equity (non-GAAP)     14.21 %     (6.55 )%     11.24 %     9.43 %     9.90 %
                     

Adjustments for Certain Items of Income or Expense

In addition to disclosures of certain GAAP financial measures, including net income, EPS, ROA, and ROE, we may also provide comparative disclosures that adjust these GAAP financial measures for a particular period by removing from the calculation thereof the impact of certain transactions or other material items of income or expense occurring during the period, including certain nonrecurring items. The Corporation believes that the resulting non-GAAP financial measures may improve an understanding of its results of operations by separating out any such transactions or items that may have had a disproportionate positive or negative impact on the Corporation’s financial results during the particular period in question. In the Corporation’s presentation of any such non-GAAP (adjusted) financial measures not specifically discussed in the preceding paragraphs, the Corporation supplies the supplemental financial information and explanations required under Regulation G.

                     
    As of or for the Three Months Ended
    March 31,   Dec. 31,   Sept. 30,   June 30,   March 31,
(in thousands, except per share and ratio data)   2018   2017   2017   2017   2017
NON-GAAP NET INCOME                    
Reported net income (GAAP)   $ 4,439     $ (2,159 )   $ 3,654     $ 2,956     $ 2,979  
Net (gains) losses on security transactions (net of tax)     -       (60 )     -       (8 )     -  
Legal reserve (net of tax)     -       -       -       528       -  
Revaluation of net deferred tax asset     -       2,927       -       -       -  
Non-GAAP net income   $ 4,439     $ 708     $ 3,654     $ 3,476     $ 2,979  
                     
Average basic and diluted shares outstanding     4,822       4,809       4,802       4,797       4,790  
                     
Reported basic and diluted earnings per share (GAAP)   $ 0.92     $ (0.45 )   $ 0.76     $ 0.62     $ 0.62  
Reported return on average assets (GAAP)     1.06 %     (0.50 )%     0.85 %     0.69 %     0.71 %
Reported return on average equity (GAAP)     11.96 %     (5.53 )%     9.46 %     7.90 %     8.24 %
                     
Core basic and diluted earnings per share (non-GAAP)   $ 0.92     $ 0.15     $ 0.76     $ 0.72     $ 0.62  
Core return on average assets (non-GAAP)     1.06 %     0.16 %     0.85 %     0.81 %     0.71 %
Core return on average equity (non-GAAP)     11.96 %     1.81 %     9.46 %     9.29 %     8.24 %
                     

Forward-Looking Statements:

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and the Private Securities Litigation Reform Act of 1995. The Corporation intends its forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in this press release. All statements regarding the Corporation's expected financial position and operating results, the Corporation's business strategy, the Corporation's financial plans, forecasted demographic and economic trends relating to the Corporation's industry and similar matters are forward-looking statements. These statements can sometimes be identified by the Corporation's use of forward-looking words such as "may," "will," "anticipate," "estimate," "expect," or "intend." The Corporation cannot promise that its expectations in such forward-looking statements will turn out to be correct. The Corporation's actual results could be materially different from expectations because of various factors, including changes in economic conditions or interest rates, credit risk, difficulties in managing the Corporation’s growth, competition, changes in law or the regulatory environment, including the Dodd-Frank Act, and changes in general business and economic trends. Information concerning these and other factors can be found in the Corporation’s periodic filings with the Securities and Exchange Commission (“SEC”), including the 2017 Annual Report on Form 10-K. These filings are available publicly on the SEC's website at http://www.sec.gov, on the Corporation's website at http://www.chemungcanal.com or upon request from the Corporate Secretary at (607) 737-3746. Except as otherwise required by law, the Corporation undertakes no obligation to publicly update or revise its forward-looking statements, whether as a result of new information, future events, or otherwise.

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

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