ELMIRA, N.Y., July 20, 2017 (GLOBE NEWSWIRE) -- Chemung Financial Corporation (the "Corporation") (Nasdaq:CHMG), the parent company of Chemung Canal Trust Company (the "Bank"), today reported net income of $3.0 million, or $0.62 per share, for the second quarter of 2017, compared to $1.6 million, or $0.34 per share, for the second quarter of 2016.

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

"We continue to see solid growth in revenues, earnings, loans and deposits.  Our return on average equity for the second quarter improved to 7.90%, compared to 4.57% for the same period in the prior year.  The efficiency ratio has also improved year over year, improving from 77.00% to 69.28%.  As part of our plan to improve profitability, we completed the relocation of our 120 Genesee Street branch in Auburn, NY to 110 Genesee Street, which allowed us to downsize our space by nearly two thirds and will generate future cost savings for us.  I am excited for the remainder of the year and working with our employees to continue delivering long-term value for our shareholders, customers and the communities we serve."

Second Quarter Highlights 1
  • Loans, net of deferred fees, increased $52.4 million, or 4.4%
  • Commercial loans increased $49.0 million, or 6.6%
  • Deposits increased $68.7 million, or 4.7%
  • Net interest income increased $1.0 million, or 7.6%   
  • Non-interest expense decreased $1.2 million, or 8.0%
  • Dividends declared during the quarter were $0.26

A more detailed summary of financial performance follows.

1 Balance sheet comparisons are calculated for June 30, 2017 versus December 31, 2016.   Income statement comparisons are calculated for the second quarter of 2017 versus second quarter of 2016.

2nd Quarter 2017 vs 2nd Quarter 2016

Net Interest Income:

Net interest income for the current quarter totaled $14.0 million compared with $13.0 million for the same period in the prior year, an increase of $1.0 million, or 7.6%.  Interest and fees from loans increased $0.5 million and interest from investments, including interest-bearing deposits, increased $0.3 million while interest expense on borrowed funds and securities sold under agreements to repurchase both decreased $0.1 million when compared to the same period in the prior year.  Fully taxable equivalent net interest margin was 3.47%, compared with 3.36% for the same period in the prior year.  Average interest-earning assets increased $61.6 million compared to the same period in the prior year.  The yield on interest-earning assets increased five basis points, while the cost of interest-bearing liabilities decreased nine basis points compared to the same period in the prior year.  The increase in the yield on interest-earning assets can be mostly attributed to a 20 basis point increase in the yield on investments due to the reinvestment of maturing securities into higher yielding mortgage-backed and municipal securities.  The decline in the cost of interest-bearing liabilities can be attributed to a 34 basis point decline in the cost of borrowings due to the maturity of one $10.0 million FHLB term advance (4.60% rate) in December 2016 and one $10.0 million repurchase agreement (4.54% rate) in March 2017.

Non-Interest Income:

Non-interest income for the current quarter was $5.0 million compared with $5.2 million for the same period in the prior year, a decrease of $0.2 million, or 3.7%.  The decrease was due primarily to a $0.2 million decline in other non-interest income related to rent income from other real estate owned and swap fees.

Non-Interest Expense:

Non-interest expense for the current quarter was $14.3 million compared with $15.6 million for the same period in the prior year, a decrease of $1.3 million, or 8.0%.  The decrease was due primarily to decreases of $0.4 million in pension and other employee benefits, $0.4 million in legal reserve, $0.2 million in net occupancy and furniture and equipment expenses, and $0.2 million in marketing and advertising expenses.  The decrease in pension and other employee benefits can be attributed to a $0.7 million decrease due to the freezing of accruals for the pension and post-retirement healthcare plans during the fourth quarter of 2016, offset by increases of $0.1 million in 401(k) expense and $0.3 million in healthcare costs.  Please refer to page four under "Other Items" for further discussion of the legal reserve.  The decrease in net occupancy and furniture and equipment expenses can be attributed to the closure of the branch at 202 East State Street in Ithaca, NY at the end of May 2016, along with a decrease in exit costs for the branch at 120 Genesee Street in Auburn, NY in 2017, compared to exit costs for the closure of the branch at 202 East State Street.  The decrease in marketing and advertising expenses can be mostly attributed to timing.

2nd Quarter 2017 vs 1st Quarter 2017

Net Interest Income:

Net interest income for the current quarter totaled $14.0 million compared with $13.5 million for the prior quarter, an increase of $0.5 million, or 3.4%.  Interest and fees from loans increased $0.3 million while interest expense on securities sold under agreements to repurchase decreased $0.1 million when compared to the prior quarter.  Fully taxable equivalent net interest margin was 3.47%, compared with 3.45% for the prior quarter.  Average interest-earning assets increased $29.5 million compared to the prior quarter.  The yield on interest-earning assets decreased one basis point, while the cost of interest-bearing liabilities decreased four basis points compared to the prior quarter.  The decline in the yield on interest-earning assets can be mostly attributed to a two basis point decline in the yield on loans offset by a one basis point increase in the yield on investments.

Non-Interest Income:

Non-interest income for the current quarter was $5.0 million compared with $4.8 million for the prior quarter, an increase of $0.2 million, or 3.6%.  The increase was due to a $0.2 million increase in Wealth Management Group fee income.

Non-Interest Expense:

Non-interest expense for the current quarter was $14.3 million compared with $13.0 million for the prior quarter, an increase of $1.3 million, or 9.9%.  The increase was due primarily to an increase in the legal reserve by an additional $0.9 million, and increases of $0.2 million in net occupancy and furniture and equipment expenses, $0.1 million in salaries and wages and in professional fees, offset by a decrease of $0.1 million in marketing and advertising expense.  Please refer to page four under "Other Items" for further discussion of the legal reserve.  The increase in net occupancy and furniture and equipment expenses was due primarily to exit costs for the branch at 120 Genesee Street in Auburn, NY during the second quarter of 2017.  The decrease in marketing and advertising expenses can be mostly attributed to timing.

Asset Quality

Non-performing loans totaled $15.2 million at June 30, 2017, or 1.21% of total loans, compared with $12.0 million at December 31, 2016, or 1.00% of total loans.  The increase in non-performing loans at June 30, 2017 was primarily in the commercial mortgage segment and related to one large commercial loan, offset by decreases in the residential mortgage and consumer segments.  Non-performing assets, which are comprised of non-performing loans and other real estate owned, were $15.5 million, or 0.90% of total assets, at June 30, 2017, compared with $12.4 million, or 0.75% of total assets, at December 31, 2016.  As noted above, the increase in non-performing assets was primarily due to the commercial mortgage segment of the loan portfolio.

Management performs an ongoing assessment of the adequacy of the allowance for loan losses based upon a number of factors including an analysis of historical loss factors, collateral evaluations, recent charge-off experience, credit quality of the loan portfolio, current economic conditions and loan growth.  Based on this analysis, the provision for loan losses for the second quarter of 2017 was $0.4 million, level with the same period in the prior year.  Net charge-offs for the second quarter of 2017 were $0.3 million, consistent with $0.2 million for the second quarter of 2016.

The allowance for loan losses was $15.1 million as of June 30, 2017 and $14.3 million as of December 31, 2016.  The allowance for loan losses was 99.32% of non-performing loans at June 30, 2017 compared with 118.35% at December 31, 2016.  The decline was due to an increase in non-performing loans as noted above.  The ratio of the allowance for loan losses to total loans was 1.21% at June 30, 2017 compared with 1.19% at December 31, 2016.

Balance Sheet Activity

Assets totaled $1.719 billion at June 30, 2017 compared with $1.657 billion at December 31, 2016, an increase of $61.4 million, or 3.7%.  The growth was due primarily to increases of $20.9 million in securities available for sale and $52.4 million in the loan portfolio, offset by a decrease of $9.6 million in cash and cash equivalents.  

The increase in total loans can be mostly attributed to increases of $36.2 million in commercial mortgages, $12.8 million in commercial and agriculture loans, $2.1 million in residential mortgages and $1.2 million in indirect consumer loans.  The increase in securities available for sale can be mostly attributed to additional purchases of mortgage-backed and municipal securities.  The decrease in cash and cash equivalents can be attributed to an increase in deposits, offset by an increase in securities available for sale and total loans.

Deposits totaled $1.525 billion at June 30, 2017 compared with $1.456 billion at December 31, 2016, an increase of $68.7 million, or 4.7%.  The growth was attributable to increases of $18.2 million in non-interest bearing demand deposits, $7.4 million in interest-bearing demand deposits, $42.8 million in money market accounts and $11.6 million in savings deposits.  Partially offsetting the increases noted above was a decrease of $11.3 million in time deposits.  The changes in money market accounts and demand deposits can be attributed to new municipal clients, along with the seasonal inflow of deposits from existing municipal clients.

Total equity was $152.0 million at June 30, 2017 compared with $143.7 million at December 31, 2016, an increase of $8.3 million, or 5.7%.  The increase was primarily due to earnings of $5.9 million, a reduction of $0.6 million in treasury stock, and a decrease of $3.8 million in accumulated other comprehensive loss, mostly attributable to the increase in the fair market value of the securities portfolio, offset by $2.4 million in dividends declared during the year.

The total equity to total assets ratio was 8.84% at June 30, 2017 compared with 8.67% at December 31, 2016.  The tangible equity to tangible assets ratio was 7.53% at June 30, 2017 compared with 7.29% at December 31, 2016.  Book value per share increased to $31.67 at June 30, 2017 from $30.07 at December 31, 2016.  As of June 30, 2017, the Bank's capital ratios were in excess of those required to be considered well-capitalized under regulatory capital guidelines and the Corporation met capital requirements under regulatory guidelines.

Other Items

The market value of total assets under management or administration in our Wealth Management Group was $1.826 billion at June 30, 2017, including $323.9 million of assets under management or administration for the Corporation, compared to $1.721 billion at December 31, 2016, including $294.9 million of assets under management or administration for the Corporation, an increase of $104.6 million, or 6.1%.

As previously disclosed on July 6, 2017, the Corporation on June 29, 2017, received Notice of Entry of the decision and Order of the New York Appellate Division, Third Department, in the matter of Fane v. Chemung Canal Trust Company, involving claims by the owner of the leased premises at 202 East State Street, Ithaca, New York against Chemung Canal Trust Company, the bank subsidiary of the Corporation. The Court affirmed the State of New York Supreme Court for the County of Tompkins' decision in favor of the plaintiff with damages to be determined at a later proceeding.  The Bank established an additional legal reserve in the amount of $0.9 million, in connection with this case, during the second quarter of 2017.  The Bank's total reserve with respect to this matter, as of June 30, 2017, now stands at $2.3 million, including $0.2 million accrued for related expenses not yet paid.

About Chemung Financial Corporation

Chemung Financial Corporation is a $1.7 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.
                     
Chemung Financial Corporation                    
Consolidated Balance Sheets (Unaudited)  
    June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,
(in thousands)     2017       2017       2016       2016       2016  
ASSETS                    
Cash and due from financial institutions   $   26,684     $   26,275     $   28,205     $   35,345     $   27,233  
Interest-bearing deposits in other financial institutions       37,862         99,410         45,957         100,159         80,121  
  Total cash and cash equivalents       64,546         125,685         74,162         135,504         107,354  
                     
Trading assets, at fair value       877         826         774         720         767  
                     
Securities available for sale       324,293         302,581         303,402         303,259         300,277  
Securities held to maturity       4,928         3,721         4,705         4,504         3,518  
FHLB and FRB stocks, at cost       3,764         3,597         4,041         4,491         4,491  
  Total investment securities       332,985         309,899         312,148         312,254         308,286  
                     
Commercial       794,175         780,687         745,217         759,675         742,874  
Mortgage       200,629         198,020         198,493         197,665         196,200  
Consumer       257,843         255,544         256,580         259,226         262,082  
  Loans, net of deferred loan fees       1,252,647         1,234,251         1,200,290         1,216,566         1,201,156  
Allowance for loan losses       (15,104 )       (14,960 )       (14,253 )       (15,325 )       (14,668 )
  Loans, net       1,237,543         1,219,291         1,186,037         1,201,241         1,186,488  
                     
Loans held for sale       386         20         412         119         809  
Premises and equipment, net       27,836         28,206         28,923         29,084         29,706  
Goodwill       21,824         21,824         21,824         21,824         21,824  
Other intangible assets, net       2,506         2,719         2,945         3,183         3,428  
Accrued interest receivable and other assets      30,069         27,630         29,954         24,936         25,270  
  Total assets   $   1,718,572     $   1,736,100     $   1,657,179     $   1,728,865     $   1,683,932  
                     
LIABILITIES AND SHAREHOLDERS' EQUITY                    
Deposits:                    
Non-interest-bearing demand deposits   $   436,017     $   432,062     $   417,812     $   424,243     $   408,846  
Interest-bearing demand deposits       144,239         154,848         136,826         149,527         126,305  
Money market accounts       591,751         597,547         548,963         579,211         562,028  
Savings deposits       220,227         219,180         208,636         207,544         212,086  
Time deposits       132,803         140,614         144,106         148,419         158,655  
  Total deposits       1,525,037         1,544,251         1,456,343         1,508,944         1,467,920  
                     
Securities sold under agreements to repurchase       11,937         15,215         27,606         30,002         28,778  
FHLB advances and other debt       13,658         13,736         13,815         23,893         23,970  
Accrued interest payable and other liabilities     15,978         14,641         15,667         21,214         19,855  
  Total liabilities       1,566,610         1,587,843         1,513,431         1,584,053         1,540,523  
                     
Shareholders' equity                    
Common stock       53         53         53         53         53  
Additional-paid-in capital       45,966         45,901         45,603         45,724         45,639  
Retained earnings       127,585         125,860         124,111         122,382         120,860  
Treasury stock, at cost       (14,670 )       (14,801 )       (15,265 )       (15,542 )       (15,608 )
Accumulated other comprehensive (loss)       (6,972 )       (8,756 )       (10,754 )       (7,805 )       (7,535 )
  Total shareholders' equity       151,962         148,257         143,748         144,812         143,409  
  Total liabilities and shareholders' equity   $   1,718,572     $   1,736,100     $   1,657,179     $   1,728,865     $   1,683,932  
                     
Period-end shares outstanding       4,799         4,794         4,781         4,768         4,762  

                         
Chemung Financial Corporation                      
Consolidated Statements of Income (Unaudited)  
    Three Months Ended       Six Months Ended    
    June 30,   Percent   June 30,   Percent
(in thousands, except per share data)     2017       2016     Change     2017       2016     Change
Interest and dividend income:                        
Loans, including fees   $   12,817     $   12,321     4.0     $   25,316     $   24,567     3.0  
Taxable securities       1,398         1,281     9.1         2,820         2,718     3.8  
Tax exempt securities       276         240     15.0         514         494     4.0  
Interest-bearing deposits       193         83     132.5         348         95     266.3  
  Total interest and dividend income       14,684         13,925     5.5         28,998         27,874     4.0  
                       
Interest expense:                        
Deposits       549         539     1.9         1,087         1,046     3.9  
Securities sold under agreements to repurchase       95         211     (55.0 )       288         422     (31.8 )
Borrowed funds       90         207     (56.5 )       179         413     (56.7 )
  Total interest expense       734         957     (23.3 )       1,554         1,881     (17.4 )
                       
  Net interest income       13,950         12,968     7.6         27,444         25,993     5.6  
Provision for loan losses       421         388     8.5         1,461         983     48.6  
  Net interest income after provision for loan losses       13,529         12,580     7.5         25,983         25,010     3.9  
                       
Non-interest income:                        
Wealth management group fee income       2,269         2,201     3.1         4,378         4,213     3.9  
Service charges on deposit accounts       1,225         1,285     (4.7 )       2,409         2,420     (0.5 )
Interchange revenue from debit card transactions       964         939     2.7         1,884         1,832     2.8  
Net gains on securities transactions       12       -     N/M       12         908     (98.7 )
Net gains on sales of loans held for sale       53         97     (45.4 )       122         158     (22.8 )
Net gains (losses) on sales of other real estate owned       (9 )       (11 )   N/M       8         (16 )   (150.0 )
Income from bank owned life insurance       18         18     0.0         35         36     (2.8 )
Other       490         687     (28.7 )       1,021         1,266     (19.4 )
  Total non-interest income       5,022         5,216     (3.7 )       9,869         10,817     (8.8 )
                         
Non-interest expense:                        
Salaries and wages       5,422         5,182     4.6         10,697         10,365     3.2  
Pension and other employee benefits       1,207         1,646     (26.7 )       2,425         3,321     (27.0 )
Net occupancy       1,702         1,878     (9.4 )       3,308         3,784     (12.6 )
Furniture and equipment       780         829     (5.9 )       1,462         1,601     (8.7 )
Data processing       1,587         1,720     (7.7 )       3,191         3,434     (7.1 )
Professional services       417         575     (27.5 )       717         916     (21.7 )
Legal accruals and settlements       850         1,200     (29.2 )       850         1,200     (29.2 )
Amortization of intangible assets       213         245     (13.1 )       439         503     (12.7 )
Marketing and advertising       118         325     (63.7 )       367         547     (32.9 )
Other real estate owned expense       12         57     (78.9 )       31         109     (71.6 )
FDIC insurance       309         277     11.6         634         571     11.0  
Loan expense       166         188     (11.7 )       282         300     (6.0 )
Other       1,549         1,448     7.0         2,974         2,927     1.6  
  Total non-interest expense       14,332         15,570     (8.0 )       27,377         29,578     (7.4 )
                         
  Income before income tax expense       4,219         2,226     89.5         8,475         6,249     35.6  
Income tax expense       1,263         605     108.8         2,540         1,921     32.2  
  Net income   $   2,956     $   1,621     82.4     $   5,935     $   4,328     37.1  
                         
Basic and diluted earnings per share   $   0.62     $   0.34         $   1.24     $   0.91      
Cash dividends declared per share       0.26         0.26             0.52         0.52      
Average basic and diluted shares outstanding       4,797         4,760             4,793         4,754      
                         
N/M - Not meaningful                        

Chemung Financial Corporation                            
Consolidated Financial Highlights (Unaudited)  
                        As of or for the
    As of or for the Three Months Ended   Six Months Ended
    June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,   June 30,   June 30,
(in thousands, per share data)     2017       2017       2016       2016       2016       2017       2016  
RESULTS OF OPERATIONS                      
Interest income   $ 14,684     $   14,314     $   14,269     $   14,025     $   13,925     $   28,998     $   27,874  
Interest expense     734       820       973       985       957       1,554       1,881  
Net interest income     13,950       13,494       13,296       13,040       12,968       27,444       25,993  
Provision for loan losses     421       1,040       404       1,050       388       1,461       983  
Net interest income after provision for loan losses     13,529       12,454       12,892       11,990       12,580       25,983       25,010  
Non-interest income     5,022       4,847       4,897       5,435       5,216       9,869       10,817  
Non-interest expense     14,332       13,045       13,561       13,471       15,570       27,377       29,578  
Income before income tax expense     4,219       4,256       4,228       3,954       2,226       8,475       6,249  
Income tax expense     1,263       1,277       1,274       1,209       605       2,540       1,921  
Net income   $ 2,956     $   2,979     $   2,954     $   2,745     $   1,621     $   5,935     $   4,328  
                             
Basic and diluted earnings per share   $ 0.62     $   0.62     $   0.62     $   0.58     $   0.34     $   1.24     $   0.91  
Average basic and diluted shares outstanding     4,797       4,790       4,773       4,765       4,760       4,793       4,754  
                             
PERFORMANCE RATIOS                            
Return on average assets     0.69 %     0.71 %     0.69 %     0.65 %     0.39 %     0.70 %     0.53 %
Return on average equity     7.90 %     8.24 %     8.20 %     7.55 %     4.57 %     8.06 %     6.14 %
Return on average tangible equity (a)     9.43 %     9.90 %     9.92 %     9.14 %     5.55 %     9.66 %     7.48 %
Efficiency ratio (a) (b)     69.28 %     69.25 %     72.63 %     71.28 %     77.00 %     69.27 %     76.95 %
Non-interest expense to average assets     3.34 %     3.12 %     3.18 %     3.20 %     3.75 %     3.23 %     3.61 %
Loans to deposits     82.14 %     79.93 %     82.42 %     80.62 %     81.83 %     82.14 %     81.83 %
                             
YIELDS / RATES - Fully Taxable Equivalent                            
Yield on loans     4.18 %     4.19 %     4.16 %     4.16 %     4.17 %     4.18 %     4.19 %
Yield on investments     2.01 %     2.00 %     1.75 %     1.73 %     1.81 %     2.01 %     1.94 %
Yield on interest-earning assets     3.65 %     3.66 %     3.57 %     3.58 %     3.60 %     3.65 %     3.66 %
Cost of interest-bearing deposits     0.20 %     0.20 %     0.21 %     0.21 %     0.21 %     0.20 %     0.20 %
Cost of borrowings     2.82 %     3.04 %     3.13 %     3.15 %     3.16 %     2.94 %     2.89 %
Cost of interest-bearing liabilities     0.26 %     0.30 %     0.35 %     0.36 %     0.35 %     0.28 %     0.35 %
Interest rate spread     3.39 %     3.36 %     3.22 %     3.22 %     3.25 %     3.37 %     3.31 %
Net interest margin, fully taxable equivalent     3.47 %     3.45 %     3.33 %     3.33 %     3.36 %     3.46 %     3.41 %
                             
CAPITAL                            
Total equity to total assets at end of period     8.84 %     8.54 %     8.67 %     8.38 %     8.52 %     8.84 %     8.52 %
Tangible equity to tangible assets at end of period (a)     7.53 %     7.23 %     7.29 %     7.03 %     7.12 %     7.53 %     7.12 %
                             
Book value per share   $ 31.67     $   30.93     $   30.07     $   30.37     $   30.12     $   31.67     $   30.12  
Tangible book value per share     26.60       25.81       24.89       25.13       24.81       26.60       24.81  
Period-end market value per share     40.88       39.50       36.35       28.99       29.35       40.88       29.35  
Dividends declared per share     0.26       0.26       0.26       0.26       0.26       0.52       0.52  
                             
AVERAGE BALANCES                            
Loans and loans held for sale (c)   $ 1,237,189     $   1,215,445     $   1,210,922     $   1,199,367     $   1,192,786     $   1,226,377     $   1,183,919  
Earning assets     1,634,955       1,605,460       1,607,287       1,577,348       1,573,306       1,620,290       1,550,481  
Total assets     1,723,664       1,694,199       1,699,059       1,674,492       1,669,654       1,709,014       1,647,121  
Deposits     1,532,819       1,495,724       1,483,348       1,456,622       1,457,173       1,514,374       1,430,840  
Total equity     150,155       146,642       143,388       144,631       142,746       148,408       141,795  
Tangible equity (a)     125,720       121,988       118,502       119,504       117,374       123,864       116,297  
                             
ASSET QUALITY                            
Net charge-offs   $ 277     $   333     $   1,476     $   393     $   247     $   610     $   575  
Non-performing loans (d)     15,208       12,914       12,043       12,903       12,429       15,208       12,429  
Non-performing assets (e)     15,545       13,251       12,431       13,270       12,822       15,545       12,822  
Allowance for loan losses     15,104       14,960       14,253       15,325       14,668       15,104       14,668  
                             
Annualized net charge-offs to average loans     0.09 %     0.11 %     0.48 %     0.13 %     0.08 %     0.10 %     0.10 %
Non-performing loans to total loans     1.21 %     1.05 %     1.00 %     1.06 %     1.03 %     1.21 %     1.03 %
Non-performing assets to total assets     0.90 %     0.76 %     0.75 %     0.77 %     0.76 %     0.90 %     0.76 %
Allowance for loan losses to total loans     1.21 %     1.21 %     1.19 %     1.26 %     1.22 %     1.21 %     1.22 %
Allowance for loan losses to non-performing loans     99.32 %     115.84 %     118.35 %     118.77 %     118.01 %     99.32 %     118.01 %
                             
(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 less gain from bargain purchase less gain on liquidation of trust preferred securities.      
(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)        
                                     
    QTD - June 30, 2017   QTD - June 30, 2016   QTD - June 30, 2017 vs. June 30, 2016
    AverageBalance   Interest   Yield /Rate   AverageBalance   Interest   Yield /Rate   TotalChange   Due toVolume   Due toRate
     
Earning assets:                                    
Commercial loans   $   779,218     $   8,357     4.30 %   $   732,265     $   7,893     4.34 %   $   464     $   533     $   (69 )
Mortgage loans       201,093         1,867     3.72 %       196,502         1,916     3.92 %       (49 )       46         (95 )
Consumer loans       256,878         2,658     4.15 %       264,019         2,562     3.90 %       96         (69 )       165  
Taxable securities       275,275         1,400     2.04 %       269,434         1,283     1.92 %       117         30         87  
Tax-exempt securities       51,027         401     3.15 %       45,665         347     3.06 %       54         43         11  
Interest-bearing deposits       71,464         193     1.08 %       65,421         83     0.51 %       110         8         102  
Total earning assets       1,634,955         14,876     3.65 %       1,573,306         14,084     3.60 %       792         591         201  
                                     
Non-earnings assets:                                    
Cash and due from banks       24,446                 26,500                      
Premises and equipment, net       28,205                 30,316                      
Other assets       54,033                 51,414                      
Allowance for loan losses       (15,060 )               (14,647 )                    
AFS valuation allowance       (2,915 )               2,765                      
  Total assets   $  1,723,664             $  1,669,654                      
                                     
Interest-bearing liabilities:                                    
Interest-bearing checking   $   142,892     $   33     0.09 %   $   134,938     $   37     0.11 %       (4 )       2         (6 )
Savings and money market       822,989         394     0.19 %       756,674         353     0.19 %       41         41       -  
Time deposits       137,502         122     0.36 %       161,921         149     0.37 %       (27 )       (23 )       (4 )
FHLB advances and repos       26,341         185     2.82 %       53,137         418     3.16 %       (233 )       (192 )       (41 )
Total int.-bearing liabilities       1,129,724         734     0.26 %       1,106,670         957     0.35 %       (223 )       (172 )       (51 )
                                     
Non-interest-bearing liabilities:                                    
Demand deposits       429,436                 403,640                      
Other liabilities       14,349                 16,598                      
Total liabilities       1,573,509                 1,526,908                      
Shareholders' equity       150,155                 142,746                      
  Total liabilities and shareholders' equity   $  1,723,664             $  1,669,654                      
                                     
Fully taxable equivalent net interest income           14,142                 13,127         $   1,015     $   763     $   252  
Net interest rate spread (1)           3.39 %           3.25 %            
Net interest margin, fully taxable equivalent (2)           3.47 %           3.36 %            
Taxable equivalent adjustment           (192 )               (159 )                
Net interest income       $   13,950             $   12,968                  
                                     
(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)        
             
YTD - June 30, 2017 YTD - June 30, 2016   YTD - June 30, 2017 vs. June 30, 2016
(in thousands)   AverageBalance   Interest   Yield /Rate   AverageBalance   Interest   Yield /Rate   TotalChange   Due toVolume   Due toRate
     
Earning assets:                                    
Commercial loans   $   770,267     $   16,387     4.29 %   $   720,903     $   15,650     4.37 %   $   737     $   1,033     $   (296 )
Mortgage loans       199,740         3,754     3.79 %       196,551         3,856     3.95 %       (102 )       60         (162 )
Consumer loans       256,370         5,300     4.17 %       266,465         5,161     3.89 %       139         (207 )       346  
Taxable securities       273,935         2,823     2.08 %       281,876         2,722     1.94 %       101         (81 )       182  
Tax-exempt securities       47,910         747     3.14 %       46,902         713     3.06 %       34         15         19  
Interest-bearing deposits       72,068         348     0.97 %       37,784         95     0.51 %       253         127         126  
Total earning assets       1,620,290         29,359     3.65 %       1,550,481         28,197     3.66 %       1,162         947         215  
                                     
Non-earnings assets:                                    
Cash and due from banks       25,161                 26,588                      
Premises and equipment, net       28,429                 29,758                      
Other assets       53,994                 52,266                      
Allowance for loan losses       (14,706 )               (14,496 )                    
AFS valuation allowance       (4,154 )               2,524                      
  Total assets   $  1,709,014             $  1,647,121                      
                                     
                                     
Interest-bearing liabilities:                                    
Interest-bearing checking   $   147,895     $   67     0.09 %   $   138,528     $   75     0.11 %   $   (8 )   $   5     $   (13 )
Savings and money market       803,269         771     0.19 %       730,641         672     0.18 %       99         64         35  
Time deposits       139,366         250     0.36 %       163,250         299     0.37 %       (49 )       (41 )       (8 )
FHLB advances and repos       31,973         466     2.94 %       58,114         835     2.89 %       (369 )       (383 )       14  
Total int.-bearing liabilities       1,122,503         1,554     0.28 %       1,090,533         1,881     0.35 %       (327 )       (355 )       28  
                                     
Non-interest-bearing liabilities:                                    
Demand deposits       423,844                 398,421                      
Other liabilities       14,259                 16,372                      
Total liabilities       1,560,606                 1,505,326                      
Shareholders' equity       148,408                 141,795                      
  Total liabilities and shareholders' equity   $  1,709,014             $  1,647,121                      
                                     
Fully taxable equivalent net interest income           27,805                 26,316         $   1,489     $   1,302     $   187  
Net interest rate spread (1)           3.37 %           3.31 %            
Net interest margin, fully taxable equivalent (2)           3.46 %           3.41 %            
Taxable equivalent adjustment           (361 )               (323 )                
Net interest income       $   27,444             $   25,993                  
                                     
(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 CorporationGAAP 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 new 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
    As of or for the Three Months Ended   Six Months Ended
    June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,   June 30,   June 30,
(in thousands, except per share data)     2017       2017       2016       2016       2016       2017       2016  
NET INTEREST MARGIN - FULLY TAXABLE EQUIVALENT                            
AND EFFICIENCY RATIO                            
Net interest income (GAAP)   $   13,950     $   13,494     $   13,296     $   13,040     $   12,968     $   27,444     $   25,993  
Fully taxable equivalent adjustment       192         169         154         154       159       361       323  
Fully taxable equivalent net interest income (non-GAAP)   $   14,142     $   13,663     $   13,450     $   13,194     $   13,127     $   27,805     $   26,316  
                             
Non-interest income (GAAP)   $   5,022     $   4,847     $   4,897     $   5,435     $   5,216     $   9,869     $   10,817  
Less:  net (gains) losses on security transactions       (12 )       -         (4 )       (75 )       -         (12 )       (908 )
Adjusted non-interest income (non-GAAP)   $   5,010     $   4,847     $   4,893     $   5,360     $   5,216     $   9,857     $   9,909  
                             
Non-interest expense (GAAP)   $   14,332     $   13,045     $   13,561     $   13,471     $   15,570     $   27,377     $   29,578  
Less:  amortization of intangible assets       (213 )       (226 )       (238 )       (245 )       (245 )       (439 )       (503 )
Less:  legal reserve       (850 )       -         -         -         (1,200 )       (850 )       (1,200 )
Adjusted non-interest expense (non-GAAP)   $   13,269     $   12,819     $   13,323     $   13,226     $   14,125     $   26,088     $   27,875  
                             
Average interest-earning assets (GAAP)   $   1,634,955     $   1,605,460     $   1,607,287     $   1,577,348     $   1,573,306     $   1,620,290     $   1,550,481  
                             
Net interest margin - fully taxable equivalent (non-GAAP)     3.47 %     3.45 %     3.33 %     3.33 %     3.36 %     3.46 %     3.41 %
Efficiency ratio (non-GAAP)     69.28 %     69.25 %     72.63 %     71.28 %     77.00 %     69.27 %     76.95 %

Tangible Equity and Tangible Assets (Period-End)

Tangible equity, tangible assets, and tangible book value per share are each non-GAAP financial measures. Tangible equity represents the Corporation's stockholders' equity, less goodwill and intangible assets.  Tangible assets represents the Corporation's total assets, less goodwill and other intangible assets.  Tangible book value per share represents the Corporation's equity divided by common shares at period-end.  These measures are meaningful to the Corporation, as well as investors and analysts, in assessing the Corporation's use of equity.
                        As of or for the
    As of or for the Three Months Ended   Six Months Ended
    June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,   June 30,   June 30,
(in thousands, except per share and ratio data)     2017       2017       2016       2016       2016       2017       2016  
TANGIBLE EQUITY AND TANGIBLE ASSETS                            
(PERIOD END)                            
Total shareholders' equity (GAAP)   $   151,962     $   148,257     $   143,748     $   144,812     $   143,409     $   151,962     $   143,409  
Less:  intangible assets     (24,330 )     (24,543 )     (24,769 )     (25,007 )     (25,252 )     (24,330 )     (25,252 )
Tangible equity (non-GAAP)   $   127,632     $   123,714     $   118,979     $   119,805     $   118,157     $   127,632     $   118,157  
                             
Total assets (GAAP)   $   1,718,572     $   1,736,100     $   1,657,179     $   1,728,865     $   1,683,932     $   1,718,572     $   1,683,932  
Less:  intangible assets     (24,330 )     (24,543 )     (24,769 )     (25,007 )     (25,252 )     (24,330 )     (25,252 )
Tangible assets (non-GAAP)   $   1,694,242     $   1,711,557     $   1,632,410     $   1,703,858     $   1,658,680     $   1,694,242     $   1,658,680  
                             
Total equity to total assets at end of period (GAAP)     8.84 %     8.54 %     8.67 %     8.38 %     8.52 %     8.84 %     8.52 %
Book value per share (GAAP)   $   31.67     $   30.93     $   30.07     $   30.37     $   30.12     $   31.67     $   30.12  
                             
Tangible equity to tangible assets at                            
  end of period (non-GAAP)     7.53 %     7.23 %     7.29 %     7.03 %     7.12 %     7.53 %     7.12 %
Tangible book value per share (non-GAAP)   $   26.60     $   25.81     $   24.89     $   25.13     $   24.81     $   26.60     $   24.81  

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
    As of or for the Three Months Ended   Six Months Ended
    June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,   June 30,   June 30,
(in thousands, except ratio data)     2017       2017       2016       2016       2016       2017       2016  
TANGIBLE EQUITY (AVERAGE)                            
Total average shareholders' equity (GAAP)   $   150,155     $   146,642     $   143,388     $   144,631     $   142,746     $   148,408     $   141,795  
Less:  average intangible assets     (24,435 )     (24,654 )     (24,886 )     (25,127 )     (25,372 )     (24,544 )     (25,498 )
Average tangible equity (non-GAAP)   $   125,720     $   121,988     $   118,502     $   119,504     $   117,374     $   123,864     $   116,297  
                             
Return on average equity (GAAP)     7.90 %     8.24 %     8.20 %     7.55 %     4.57 %     8.06 %     6.14 %
Return on average tangible equity (non-GAAP)     9.43 %     9.90 %     9.92 %     9.14 %     5.55 %     9.66 %     7.48 %

Adjustments for Certain Items of Income or Expense

In addition to disclosures of certain GAAP financial measures, including net income, EPS, ROA, and ROE, we may also provide comparative disclosures that adjust these GAAP financial measures for a particular period by removing from the calculation thereof the impact of certain transactions or other material items of income or expense occurring during the period, including certain nonrecurring items.  The Corporation believes that the resulting non-GAAP financial measures may improve an understanding of its results of operations by separating out any such transactions or items that may have had a disproportionate positive or negative impact on the Corporation's financial results during the particular period in question. In the Corporation's presentation of any such non-GAAP (adjusted) financial measures not specifically discussed in the preceding paragraphs, the Corporation supplies the supplemental financial information and explanations required under Regulation G.
                        As of or for the
    As of or for the Three Months Ended   Six Months Ended
    June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,   June 30,   June 30,
(in thousands, except per share and ratio data)     2017       2017       2016       2016       2016       2017       2016  
NON-GAAP NET INCOME                            
Reported net income (GAAP)   $   2,956     $   2,979     $   2,954     $   2,745     $   1,621     $   5,935     $   4,328  
Net (gains) losses on security transactions (net of tax)     (7 )       -         (2 )       (47 )       -       (7 )       (565 )
Legal reserve     528         -         -         -         747       528         747  
Non-GAAP net income   $   3,477     $   2,979     $   2,952     $   2,698     $   2,368     $   6,456     $   4,510  
                             
Average basic and diluted shares outstanding     4,797       4,790       4,773       4,765       4,760       4,793       4,754  
                             
Reported basic and diluted earnings per share (GAAP)   $   0.62     $   0.62     $   0.62     $   0.58     $   0.34     $   1.24     $   0.91  
Reported return on average assets (GAAP)     0.69 %     0.71 %     0.69 %     0.65 %     0.39 %     0.70 %     0.53 %
Reported return on average equity (GAAP)     7.90 %     8.24 %     8.20 %     7.55 %     4.57 %     8.06 %     6.14 %
                             
Core basic and diluted earnings per share (non-GAAP)   $   0.72     $   0.62     $   0.62     $   0.57     $   0.50     $   1.35     $   0.95  
Core return on average assets (non-GAAP)     0.81 %     0.71 %     0.69 %     0.64 %     0.57 %     0.76 %     0.55 %
Core return on average equity (non-GAAP)     9.29 %     8.24 %     8.19 %     7.42 %     6.67 %     8.77 %     6.40 %

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 2016 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 CFOkkrebs@chemungcanal.comPhone:  607-737-3714

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