ELMIRA, N.Y., Oct. 19, 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 $3.7 million, or $0.76 per share, for the third quarter of 2017, compared to $2.7 million, or $0.58 per share, for the third quarter of 2016.

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

"Our continued focus on our customers and clients produced another quarter of strong results, recognizing solid growth in net interest income, earnings, loans, and deposits.  To continue our growth in loans and deposits, we are excited to be opening a new branch in Schenectady, NY during the fourth quarter of 2017."

Third Quarter Highlights 1
  • Loans, net of deferred fees, increased $88.5 million, or 7.4%
  • Commercial loans increased $81.3 million, or 10.9%
  • Deposits increased $80.7 million, or 5.5%
  • Net interest income increased $1.8 million, or 13.2%
  • Non-interest expense decreased $0.2 million, or 1.4%
  • Dividends declared during the quarter were $0.26

Karl F. Krebs, Chemung Financial Corporation CFO, stated:

"Strong growth in high quality loans continues to drive interest income. Year-to-date 2017 interest income increased $2.6 million or 6.2%, over year-to-date 2016. Over the same period, we have reduced our non-interest expense by $2.4 million or 5.6%. Our continued focus on growth in high quality assets and strengthening financial performance has allowed us to improve our return on average assets 32%, from 0.57% to 0.75%, our efficiency ratio from 75.03% to 67.72%, and our return on average equity from 6.62% to 8.54%."

A more detailed summary of financial performance follows.

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

3rd Quarter 2017 vs 3rd Quarter 2016

Net Interest Income:

Net interest income for the current quarter totaled $14.8 million compared with $13.0 million for the same period in the prior year, an increase of $1.8 million, or 13.2%.  Interest and fees from loans increased $1.2 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 decreased $0.2 million when compared to the same period in the prior year.  Fully taxable equivalent net interest margin was 3.68%, compared with 3.33% for the same period in the prior year.  Average interest-earning assets increased $38.5 million compared to the same period in the prior year.  The yield on interest-earning assets increased 28 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 43 basis point increase in the yield on investments due to the reinvestment of maturing securities into higher yielding mortgage-backed and municipal securities, along with an 18 basis point increase in the yield on loans due to payoffs of nonaccrual loans and an increase in PRIME and LIBOR.  The decline in the cost of interest-bearing liabilities can be attributed to a 20 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 $5.2 million compared with $5.4 million for the same period in the prior year, a decrease of $0.2 million, or 4.9%.  The decrease was due primarily to a $0.3 million decline in interchange revenue from debit card transactions.

Non-Interest Expense:

Non-interest expense for the current quarter was $13.3 million compared with $13.5 million for the same period in the prior year, a decrease of $0.2 million, or 1.4%.  The decrease was due primarily to decreases of $0.6 million in pension and other employee benefits, offset by increases in salaries and wages, marketing and advertising, and other non-interest expense.  The decrease in pension and other employee benefits can be mostly attributed to a $0.7 million decrease related to the freezing of accruals for the pension and post-retirement healthcare plans during the fourth quarter of 2016.  The increase in salaries and wages can be attributed to annual merit increases, while the increase in marketing and advertising expenses can be mostly attributed to timing.  The increase in other non-interest expense can be mostly attributed to an increase in non-loan charge-offs and other non-interest expenses.

3rd Quarter 2017 vs 2nd Quarter 2017

Net Interest Income:

Net interest income for the current quarter totaled $14.8 million compared with $14.0 million for the prior quarter, an increase of $0.8 million, or 5.8%.  Interest and fees from loans increased $0.9 million while interest from interest-bearing deposits decreased $0.1 million when compared to the prior quarter.  Fully taxable equivalent net interest margin was 3.68%, compared with 3.47% for the prior quarter.  Average interest-earning assets decreased $19.1 million compared to the prior quarter.  The yield on interest-earning assets increased 21 basis points, while the cost of interest-bearing liabilities increased one basis point compared to the prior quarter.  The increase in the yield on interest-earning assets can be mostly attributed to a 15 basis point increase in the yield on investments due to the reinvestment of maturing securities into higher yielding municipal securities and interest-bearing deposits, along with a 16 basis point increase in the yield on loans due to payoffs of nonaccrual loans and an increase in PRIME and LIBOR.

Non-Interest Income:

Non-interest income for the current quarter was $5.2 million compared with $5.0 million for the prior quarter, an increase of $0.2 million, or 2.9%.  The increase can be mostly attributed to an increase of $0.1 million in swap fee income. 

Non-Interest Expense:

Non-interest expense for the current quarter was $13.3 million compared with $14.3 million for the prior quarter, a decrease of $1.0 million, or 7.4%.  The decrease was due primarily to an increase in the legal reserve of $0.9 million during the second quarter, and decreases of $0.2 million in pension and other employee benefits, and $0.3 million in net occupancy and furniture and equipment expenses, offset by an increase of $0.1 million in marketing and advertising expense.  The decrease in pension and other employee benefits can be mostly attributed to lower healthcare costs during the third quarter.  The decrease in net occupancy and furniture and equipment expenses was due primarily to exit costs for the branch at 120 Genesee Street in Auburn, NY recognized in the second quarter of 2017.  The increase in marketing and advertising expenses can be mostly attributed to timing.

Asset Quality

Non-performing loans totaled $14.0 million at September 30, 2017, or 1.09% 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 September 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 $14.2 million, or 0.82% of total assets, at September 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 third quarter of 2017 was $1.3 million, an increase of $0.2 million compared with the same period in the prior year.  Net charge-offs for the third quarter of 2017 were $0.7 million, compared with $0.4 million for the third quarter of 2016. 

The allowance for loan losses was $15.7 million as of September 30, 2017 and $14.3 million as of December 31, 2016.  The allowance for loan losses was 111.88% of non-performing loans at September 30, 2017 compared with 118.35% at December 31, 2016.  The ratio of the allowance for loan losses to total loans was 1.22% at September 30, 2017 compared with 1.19% at December 31, 2016.

Balance Sheet Activity

Assets totaled $1.732 billion at September 30, 2017 compared with $1.657 billion at December 31, 2016, an increase of $74.5 million, or 4.5%.  The growth was due primarily to increases of $8.8 million in securities available for sale and $88.5 million in the loan portfolio, offset by a decrease of $17.8 million in cash and cash equivalents.  

The increase in total loans can be mostly attributed to increases of $81.3 million in commercial loans and $8.5 million in consumer loans, offset by a $1.3 million decrease in residential mortgages.  The increase in securities available for sale can be mostly attributed to additional purchases of municipal securities and SBA loan pools.  The decrease in cash and cash equivalents can be attributed to an increase in securities available for sale and total loans, offset by an increase in deposits. 

Deposits totaled $1.537 billion at September 30, 2017 compared with $1.456 billion at December 31, 2016, an increase of $80.7 million, or 5.5%.  The growth was attributable to increases of $32.0 million in non-interest bearing demand deposits, $19.3 million in interest-bearing demand deposits, $37.8 million in money market accounts and $9.5 million in savings deposits.  Partially offsetting the increases noted above was a decrease of $17.9 million in time deposits.  The changes in money market accounts and demand deposits can be mostly attributed to new municipal clients, along with the seasonal inflow of deposits from existing municipal clients, and deposits of commercial clients. 

Total equity was $154.3 million at September 30, 2017 compared with $143.7 million at December 31, 2016, an increase of $10.5 million, or 7.3%.  The increase was primarily due to earnings of $9.6 million, a $0.5 million increase in additional paid in capital, a reduction of $0.7 million in treasury stock, and a decrease of $3.5 million in accumulated other comprehensive loss, mostly attributable to the increase in the fair market value of the securities portfolio, offset by $3.7 million in dividends declared during the year.

The total equity to total assets ratio was 8.91% at September 30, 2017 compared with 8.67% at December 31, 2016.  The tangible equity to tangible assets ratio was 7.62% at September 30, 2017 compared with 7.29% at December 31, 2016.  Book value per share increased to $32.11 at September 30, 2017 from $30.07 at December 31, 2016.  As of September 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 $1.890 billion at September 30, 2017, including $345.0 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 $169.3 million, or 9.8%.

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)  
    Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30,
(in thousands)   2017   2017   2017   2016   2016
ASSETS                    
Cash and due from financial institutions   $ 34,572     $ 26,684     $ 26,275     $ 28,205     $ 35,345  
Interest-bearing deposits in other financial institutions     21,806       37,862       99,410       45,957       100,159  
Total cash and cash equivalents     56,378       64,546       125,685       74,162       135,504  
                     
Trading assets, at fair value     909       877       826       774       720  
                     
Securities available for sale     312,226       324,293       302,581       303,402       303,259  
Securities held to maturity     3,865       4,928       3,721       4,705       4,504  
FHLB and FRB stocks, at cost     3,497       3,764       3,597       4,041       4,491  
Total investment securities     319,588       332,985       309,899       312,148       312,254  
                     
Commercial     826,554       794,175       780,687       745,217       759,675  
Mortgage     197,210       200,629       198,020       198,493       197,665  
Consumer     265,049       257,843       255,544       256,580       259,226  
Loans, net of deferred loan fees     1,288,813       1,252,647       1,234,251       1,200,290       1,216,566  
Allowance for loan losses     (15,694 )     (15,104 )     (14,960 )     (14,253 )     (15,325 )
Loans, net     1,273,119       1,237,543       1,219,291       1,186,037       1,201,241  
                     
Loans held for sale     1,246       386       20       412       119  
Premises and equipment, net     27,366       27,836       28,206       28,923       29,084  
Goodwill     21,824       21,824       21,824       21,824       21,824  
Other intangible assets, net     2,292       2,506       2,719       2,945       3,183  
Accrued interest receivable and other assets     28,960       30,069       27,630       29,954       24,936  
Total assets   $ 1,731,682     $ 1,718,572     $ 1,736,100     $ 1,657,179     $ 1,728,865  
                     
LIABILITIES AND SHAREHOLDERS' EQUITY                    
Deposits:                    
Non-interest-bearing demand deposits   $ 449,841     $ 436,017     $ 432,062     $ 417,812     $ 424,243  
Interest-bearing demand deposits     156,094       144,239       154,848       136,826       149,527  
Money market accounts     586,795       591,751       597,547       548,963       579,211  
Savings deposits     218,106       220,227       219,180       208,636       207,544  
Time deposits     126,182       132,803       140,614       144,106       148,419  
Total deposits     1,537,018       1,525,037       1,544,251       1,456,343       1,508,944  
                     
Securities sold under agreements to repurchase     10,000       11,937       15,215       27,606       30,002  
FHLB advances and other debt     13,577       13,658       13,736       13,815       23,893  
Accrued interest payable and other liabilities     16,810       15,978       14,641       15,667       21,214  
Total liabilities     1,577,405       1,566,610       1,587,843       1,513,431       1,584,053  
                     
Shareholders' equity                    
Common stock     53       53       53       53       53  
Additional-paid-in capital     46,089       45,966       45,901       45,603       45,724  
Retained earnings     130,006       127,585       125,860       124,111       122,382  
Treasury stock, at cost     (14,596 )     (14,670 )     (14,801 )     (15,265 )     (15,542 )
Accumulated other comprehensive (loss)     (7,275 )     (6,972 )     (8,756 )     (10,754 )     (7,805 )
Total shareholders' equity     154,277       151,962       148,257       143,748       144,812  
Total liabilities and shareholders' equity   $ 1,731,682     $ 1,718,572     $ 1,736,100     $ 1,657,179     $ 1,728,865  
                     
Period-end shares outstanding     4,804       4,799       4,794       4,781       4,768  
                     

 
Chemung Financial Corporation                      
Consolidated Statements of Income (Unaudited)  
    Three Months Ended       Nine Months Ended    
    September 30,   Percent   September 30,   Percent
(in thousands, except per share data)   2017   2016   Change   2017   2016   Change
Interest and dividend income:                        
Loans, including fees   $ 13,709     $ 12,487     9.8     $ 39,025     $ 37,054     5.3  
Taxable securities     1,369       1,225     11.8       4,189       3,943     6.2  
Tax exempt securities     322       228     41.2       836       722     15.8  
Interest-bearing deposits     97       85     14.1       445       180     147.2  
Total interest and dividend income     15,497       14,025     10.5       44,495       41,899     6.2  
                       
Interest expense:                        
Deposits     545       561     (2.9 )     1,632       1,607     1.6  
Securities sold under agreements to repurchase     95       214     (55.6 )     383       636     (39.8 )
Borrowed funds     94       210     (55.2 )     273       623     (56.2 )
Total interest expense     734       985     (25.5 )     2,288       2,866     (20.2 )
                       
Net interest income     14,763       13,040     13.2       42,207       39,033     8.1  
Provision for loan losses     1,289       1,050     22.8       2,750       2,033     35.3  
Net interest income after provision for loan losses     13,474       11,990     12.4       39,457       37,000     6.6  
                       
Non-interest income:                        
Wealth management group fee income     2,147       2,027     5.9       6,525       6,240     4.6  
Service charges on deposit accounts     1,269       1,361     (6.8 )     3,678       3,781     (2.7 )
Interchange revenue from debit card transactions     925       1,203     (23.1 )     2,809       3,035     (7.4 )
Net gains on securities transactions     -       75     (100.0 )     12       983     (98.8 )
Net gains on sales of loans held for sale     71       115     (38.3 )     193       273     (29.3 )
Net gains (losses) on sales of other real estate owned     30       10     200.0       38       (6 )   N/M  
Income from bank owned life insurance     17       19     (10.5 )     52       55     (5.5 )
Other     707       625     13.1       1,728       1,891     (8.6 )
Total non-interest income     5,166       5,435     (4.9 )     15,035       16,252     (7.5 )
                         
Non-interest expense:                        
Salaries and wages     5,480       5,355     2.3       16,177       15,720     2.9  
Pension and other employee benefits     992       1,573     (36.9 )     3,417       4,894     (30.2 )
Net occupancy     1,476       1,503     (1.8 )     4,784       5,287     (9.5 )
Furniture and equipment     657       685     (4.1 )     2,119       2,286     (7.3 )
Data processing     1,667       1,624     2.6       4,858       5,058     (4.0 )
Professional services     452       502     (10.0 )     1,169       1,418     (17.6 )
Legal accruals and settlements     -       -     N/M       850       1,200     (29.2 )
Amortization of intangible assets     214       245     (12.7 )     653       748     (12.7 )
Marketing and advertising     213       101     110.9       580       648     (10.5 )
Other real estate owned expense     4       41     (90.2 )     35       150     (76.7 )
FDIC insurance     312       324     (3.7 )     946       895     5.7  
Loan expense     165       162     1.9       447       462     (3.2 )
Other     1,644       1,356     21.2       4,618       4,283     7.8  
Total non-interest expense     13,276       13,471     (1.4 )     40,653       43,049     (5.6 )
                         
Income before income tax expense     5,364       3,954     35.7       13,839       10,203     35.6  
Income tax expense     1,710       1,209     41.4       4,250       3,130     35.8  
  Net income   $ 3,654     $ 2,745     33.1     $ 9,589     $ 7,073     35.6  
                         
Basic and diluted earnings per share   $ 0.76     $ 0.58         $ 2.00     $ 1.49      
Cash dividends declared per share     0.26       0.26           0.78       0.78      
Average basic and diluted shares outstanding     4,802       4,765           4,796       4,758      
                         
N/M - Not meaningful                        
                         

 
Chemung Financial Corporation                            
Consolidated Financial Highlights (Unaudited)        
                        As of or for the
    As of or for the Three Months Ended   Nine Months Ended
    Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30,   Sept. 30,   Sept. 30,
(in thousands, per share data)   2017   2017   2017   2016   2016   2017   2016
RESULTS OF OPERATIONS                                    
Interest income   $ 15,497     $ 14,684     $ 14,314     $ 14,269     $ 14,025     $ 44,495     $ 41,899  
Interest expense     734       734       820       973       985       2,288       2,866  
Net interest income     14,763       13,950       13,494       13,296       13,040       42,207       39,033  
Provision for loan losses     1,289       421       1,040       404       1,050       2,750       2,033  
Net interest income after provision for loan losses     13,474       13,529       12,454       12,892       11,990       39,457       37,000  
Non-interest income     5,166       5,022       4,847       4,897       5,435       15,035       16,252  
Non-interest expense     13,276       14,332       13,045       13,561       13,471       40,653       43,049  
Income before income tax expense     5,364       4,219       4,256       4,228       3,954       13,839       10,203  
Income tax expense     1,710       1,263       1,277       1,274       1,209       4,250       3,130  
Net income   $ 3,654     $ 2,956     $ 2,979     $ 2,954     $ 2,745     $ 9,589     $ 7,073  
                             
Basic and diluted earnings per share   $ 0.76     $ 0.62     $ 0.62     $ 0.62     $ 0.58     $ 2.00     $ 1.49  
Average basic and diluted shares outstanding     4,802       4,797       4,790       4,773       4,765       4,796       4,758  
                             
PERFORMANCE RATIOS                            
Return on average assets     0.85 %     0.69 %     0.71 %     0.69 %     0.65 %     0.75 %     0.57 %
Return on average equity     9.46 %     7.90 %     8.24 %     8.20 %     7.55 %     8.54 %     6.62 %
Return on average tangible equity (a)     11.24 %     9.43 %     9.90 %     9.92 %     9.14 %     10.21 %     8.05 %
Efficiency ratio (a) (b)     64.83 %     69.28 %     69.25 %     72.63 %     71.28 %     67.72 %     75.03 %
Non-interest expense to average assets     3.09 %     3.34 %     3.12 %     3.18 %     3.20 %     3.18 %     3.47 %
Loans to deposits     83.85 %     82.14 %     79.93 %     82.42 %     80.62 %     83.85 %     80.62 %
                             
YIELDS / RATES - Fully Taxable Equivalent                            
Yield on loans     4.34 %     4.18 %     4.19 %     4.16 %     4.16 %     4.24 %     4.18 %
Yield on investments     2.16 %     2.01 %     2.00 %     1.75 %     1.73 %     2.05 %     1.86 %
Yield on interest-earning assets     3.86 %     3.65 %     3.66 %     3.57 %     3.58 %     3.72 %     3.63 %
Cost of interest-bearing deposits     0.20 %     0.20 %     0.20 %     0.21 %     0.21 %     0.20 %     0.21 %
Cost of borrowings     2.95 %     2.82 %     3.04 %     3.13 %     3.15 %     2.95 %     2.97 %
Cost of interest-bearing liabilities     0.27 %     0.26 %     0.30 %     0.35 %     0.36 %     0.27 %     0.35 %
Interest rate spread     3.59 %     3.39 %     3.36 %     3.22 %     3.22 %     3.45 %     3.28 %
Net interest margin, fully taxable equivalent     3.68 %     3.47 %     3.45 %     3.33 %     3.33 %     3.53 %     3.38 %
                             
CAPITAL                            
Total equity to total assets at end of period     8.91 %     8.84 %     8.54 %     8.67 %     8.38 %     8.91 %     8.38 %
Tangible equity to tangible assets at end of period (a)     7.62 %     7.53 %     7.23 %     7.29 %     7.03 %     7.62 %     7.03 %
                             
Book value per share   $ 32.11     $ 31.67     $ 30.93     $ 30.07     $ 30.37     $ 32.11     $ 30.37  
Tangible book value per share     27.09       26.60       25.81       24.89       25.13       27.09       25.13  
Period-end market value per share     47.10       40.88       39.50       36.35       28.99       47.10       28.99  
Dividends declared per share     0.26       0.26       0.26       0.26       0.26       0.78       0.78  
                             
AVERAGE BALANCES                            
Loans and loans held for sale (c)   $ 1,259,919     $ 1,237,189     $ 1,215,445     $ 1,210,922     $ 1,199,367     $ 1,237,681     $ 1,189,105  
Earning assets     1,615,833       1,634,955       1,605,460       1,607,287       1,577,348       1,618,788       1,559,500  
Total assets     1,707,111       1,723,664       1,694,199       1,699,059       1,674,492       1,708,360       1,656,313  
Deposits     1,512,685       1,532,819       1,495,724       1,483,348       1,456,622       1,513,804       1,439,497  
Total equity     153,244       150,155       146,642       143,388       144,631       150,038       142,745  
Tangible equity (a)     129,024       125,720       121,988       118,502       119,504       125,603       117,372  
                             
ASSET QUALITY                            
Net charge-offs   $ 699     $ 277     $ 333     $ 1,476     $ 393     $ 1,309     $ 968  
Non-performing loans (d)     14,028       15,208       12,914       12,043       12,903       14,028       12,903  
Non-performing assets (e)     14,216       15,545       13,251       12,431       13,270       14,216       13,270  
Allowance for loan losses     15,694       15,104       14,960       14,253       15,325       15,694       15,325  
                             
Annualized net charge-offs to average loans     0.22 %     0.09 %     0.11 %     0.48 %     0.13 %     0.14 %     0.11 %
Non-performing loans to total loans     1.09 %     1.21 %     1.05 %     1.00 %     1.06 %     1.09 %     1.06 %
Non-performing assets to total assets     0.82 %     0.90 %     0.76 %     0.75 %     0.77 %     0.82 %     0.77 %
Allowance for loan losses to total loans     1.22 %     1.21 %     1.21 %     1.19 %     1.26 %     1.22 %     1.26 %
Allowance for loan losses to non-performing loans     111.88 %     99.32 %     115.84 %     118.35 %     118.77 %     111.88 %     118.77 %
                             
(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)        
             
YTD - September 30, 2017 YTD - September 30, 2016   YTD - Sept. 30, 2017 vs. Sept. 30, 2016
(in thousands)   Average Balance   Interest   Yield / Rate   Average Balance   Interest   Yield / Rate   Total Change   Due to Volume   Due to Rate
     
Earning assets:                                    
Commercial loans   $ 780,120     $ 25,425     4.36 %   $ 727,824     $ 23,617     4.33 %   $ 1,808     $ 1,649     $ 159  
Mortgage loans     199,625       5,716     3.83 %     196,799       5,806     3.94 %     (90 )     79       (169 )
Consumer loans     257,936       8,082     4.19 %     264,482       7,784     3.93 %     298       (199 )     497  
Taxable securities     273,124       4,194     2.05 %     277,346       3,947     1.90 %     247       (61 )     308  
Tax-exempt securities     51,016       1,214     3.18 %     45,824       1,042     3.04 %     172       95       77  
Interest-bearing deposits     56,967       445     1.04 %     47,225       180     0.51 %     265       44       221  
Total earning assets     1,618,788       45,076     3.72 %     1,559,500       42,376     3.63 %     2,700       1,607       1,093  
                                     
Non-earnings assets:                                    
Cash and due from banks     25,456               26,867                      
Premises and equipment, net     28,208               29,696                      
Other assets     53,965               51,564                      
Allowance for loan losses     (14,866 )             (14,592 )                    
AFS valuation allowance     (3,191 )             3,278                      
Total assets   $ 1,708,360             $ 1,656,313                      
                                     
                                     
Interest-bearing liabilities:                                    
Interest-bearing checking   $ 144,683     $ 98     0.09 %   $ 132,988     $ 106     0.11 %   $ (8 )   $ 11     $ (19 )
Savings and money market     802,700       1,168     0.19 %     743,808       1,060     0.19 %     108       108       -  
Time deposits     136,359       366     0.36 %     160,352       441     0.37 %     (75 )     (63 )     (12 )
FHLB advances and repos     29,760       656     2.95 %     56,605       1,259     2.97 %     (603 )     (595 )     (8 )
Total int.-bearing liabilities     1,113,502       2,288     0.27 %     1,093,753       2,866     0.35 %     (578 )     (539 )     (39 )
                                     
Non-interest-bearing liabilities:                                    
Demand deposits     430,062               402,349                      
Other liabilities     14,758               17,466                      
Total liabilities     1,558,322               1,513,568                      
Shareholders' equity     150,038               142,745                      
Total liabilities and shareholders' equity   $ 1,708,360             $ 1,656,313                      
                                     
Fully taxable equivalent net interest income         42,788               39,510         $ 3,278     $ 2,146     $ 1,132  
Net interest rate spread (1)           3.45 %           3.28 %            
Net interest margin, fully taxable equivalent (2)           3.53 %           3.38 %            
Taxable equivalent adjustment         (581 )             (477 )                
Net interest income       $ 42,207             $ 39,033                  
                                     
(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)  
                                     
    QTD - September 30, 2017   QTD - September 30, 2016   QTD - Sept. 30, 2017 vs. Sept. 30, 2016
    Average Balance   Interest   Yield / Rate   Average Balance   Interest   Yield / Rate   Total Change   Due to Volume   Due to Rate
     
Earning assets:                                    
Commercial loans   $ 799,505     $ 9,037     4.48 %   $ 741,515     $ 7,967     4.27 %   $ 1,070     $ 657     $ 413  
Mortgage loans     199,396       1,963     3.91 %     197,292       1,950     3.93 %     13       22       (9 )
Consumer loans     261,018       2,782     4.23 %     260,559       2,623     4.00 %     159       5       154  
Taxable securities     271,529       1,371     2.00 %     268,388       1,225     1.82 %     146       15       131  
Tax-exempt securities     57,127       467     3.24 %     43,692       329     3.00 %     138       110       28  
Interest-bearing deposits     27,258       97     1.41 %     65,902       85     0.51 %     12       (72 )     84  
Total earning assets     1,615,833       15,717     3.86 %     1,577,348       14,179     3.58 %     1,538       737       801  
                                     
Non-earnings assets:                                    
Cash and due from banks     26,036               27,420                      
Premises and equipment, net     27,774               29,575                      
Other assets     53,944               50,397                      
Allowance for loan losses     (15,179 )             (14,783 )                    
AFS valuation allowance     (1,297 )             4,535                      
Total assets   $ 1,707,111             $ 1,674,492                      
                                     
Interest-bearing liabilities:                                    
Interest-bearing checking   $ 138,364     $ 32     0.09 %   $ 122,030     $ 27     0.09 %     5       5       -  
Savings and money market     801,580       398     0.20 %     769,855       392     0.20 %     6       6       -  
Time deposits     130,445       115     0.35 %     154,618       142     0.37 %     (27 )     (20 )     (7 )
FHLB advances and repos     25,405       189     2.95 %     53,619       424     3.15 %     (235 )     (210 )     (25 )
Total int.-bearing liabilities     1,095,794       734     0.27 %     1,100,122       985     0.36 %     (251 )     (219 )     (32 )
                                     
Non-interest-bearing liabilities:                                    
Demand deposits     442,296               410,119                      
Other liabilities     15,777               19,620                      
Total liabilities     1,553,867               1,529,861                      
Shareholders' equity     153,244               144,631                      
Total liabilities and shareholders' equity   $ 1,707,111             $ 1,674,492                      
                                     
Fully taxable equivalent net interest income         14,983               13,194         $ 1,789     $ 956     $ 833  
Net interest rate spread (1)           3.59 %           3.22 %            
Net interest margin, fully taxable equivalent (2)           3.68 %           3.33 %            
Taxable equivalent adjustment         (220 )             (154 )                
Net interest income       $ 14,763             $ 13,040                  
                                     
(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 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   Nine Months Ended
    Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30,   Sept. 30,   Sept. 30,
(in thousands, except per share data)   2017   2017   2017   2016   2016   2017   2016
NET INTEREST MARGIN - FULLY TAXABLE EQUIVALENT                            
AND EFFICIENCY RATIO                            
Net interest income (GAAP)   $ 14,763     $ 13,950     $ 13,494     $ 13,296     $ 13,040     $ 42,207     $ 39,033  
Fully taxable equivalent adjustment     220       192       169       154       154       581       477  
Fully taxable equivalent net interest income (non-GAAP)   $ 14,983     $ 14,142     $ 13,663     $ 13,450     $ 13,194     $ 42,788     $ 39,510  
                             
Non-interest income (GAAP)   $ 5,166     $ 5,022     $ 4,847     $ 4,897     $ 5,435     $ 15,035     $ 16,252  
Less:  net (gains) losses on security transactions     -       (12 )     -       (4 )     (75 )     (12 )     (983 )
Adjusted non-interest income (non-GAAP)   $ 5,166     $ 5,010     $ 4,847     $ 4,893     $ 5,360     $ 15,023     $ 15,269  
                             
Non-interest expense (GAAP)   $ 13,276     $ 14,332     $ 13,045     $ 13,561     $ 13,471     $ 40,653     $ 43,049  
Less:  amortization of intangible assets     (214 )     (213 )     (226 )     (238 )     (245 )     (653 )     (748 )
Less:  legal reserve     -       (850 )     -       -       -       (850 )     (1,200 )
Adjusted non-interest expense (non-GAAP)   $ 13,062     $ 13,269     $ 12,819     $ 13,323     $ 13,226     $ 39,150     $ 41,101  
                             
Average interest-earning assets (GAAP)   $ 1,615,833     $ 1,634,955     $ 1,605,460     $ 1,607,287     $ 1,577,348     $ 1,618,788     $ 1,559,500  
                             
Net interest margin - fully taxable equivalent (non-GAAP)     3.68 %     3.47 %     3.45 %     3.33 %     3.33 %     3.53 %     3.38 %
Efficiency ratio (non-GAAP)     64.83 %     69.28 %     69.25 %     72.63 %     71.28 %     67.72 %     75.03 %
                             

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   Nine Months Ended
    Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30,   Sept. 30,   Sept. 30,
(in thousands, except per share and ratio data)   2017   2017   2017   2016   2016   2017   2016
TANGIBLE EQUITY AND TANGIBLE ASSETS                            
(PERIOD END)                            
Total shareholders' equity (GAAP)   $ 154,277     $ 151,962     $ 148,257     $ 143,748     $ 144,812     $ 154,277     $ 144,812  
Less:  intangible assets     (24,116 )     (24,330 )     (24,543 )     (24,769 )     (25,007 )     (24,116 )     (25,007 )
Tangible equity (non-GAAP)   $ 130,161     $ 127,632     $ 123,714     $ 118,979     $ 119,805     $ 130,161     $ 119,805  
                             
Total assets (GAAP)   $ 1,731,682     $ 1,718,572     $ 1,736,100     $ 1,657,179     $ 1,728,865     $ 1,731,682     $ 1,728,865  
Less:  intangible assets     (24,116 )     (24,330 )     (24,543 )     (24,769 )     (25,007 )     (24,116 )     (25,007 )
Tangible assets (non-GAAP)   $ 1,707,566     $ 1,694,242     $ 1,711,557     $ 1,632,410     $ 1,703,858     $ 1,707,566     $ 1,703,858  
                             
Total equity to total assets at end of period (GAAP)     8.91 %     8.84 %     8.54 %     8.67 %     8.38 %     8.91 %     8.38 %
Book value per share (GAAP)   $ 32.11     $ 31.67     $ 30.93     $ 30.07     $ 30.37     $ 32.11     $ 30.37  
                             
Tangible equity to tangible assets at                            
end of period (non-GAAP)     7.62 %     7.53 %     7.23 %     7.29 %     7.03 %     7.62 %     7.03 %
Tangible book value per share (non-GAAP)   $ 27.09     $ 26.60     $ 25.81     $ 24.89     $ 25.13     $ 27.09     $ 25.13  
                             

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   Nine Months Ended
    Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30,   Sept. 30,   Sept. 30,
(in thousands, except ratio data)   2017   2017   2017   2016   2016   2017   2016
TANGIBLE EQUITY (AVERAGE)                            
Total average shareholders' equity (GAAP)   $ 153,244     $ 150,155     $ 146,642     $ 143,388     $ 144,631     $ 150,038     $ 142,745  
Less:  average intangible assets     (24,220 )     (24,435 )     (24,654 )     (24,886 )     (25,127 )     (24,435 )     (25,373 )
Average tangible equity (non-GAAP)   $ 129,024     $ 125,720     $ 121,988     $ 118,502     $ 119,504     $ 125,603     $ 117,372  
                             
Return on average equity (GAAP)     9.46 %     7.90 %     8.24 %     8.20 %     7.55 %     8.54 %     6.62 %
Return on average tangible equity (non-GAAP)     11.24 %     9.43 %     9.90 %     9.92 %     9.14 %     10.21 %     8.05 %
                             

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   Nine Months Ended
    Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30,   Sept. 30,   Sept. 30,
(in thousands, except per share and ratio data)   2017   2017   2017   2016   2016   2017   2016
NON-GAAP NET INCOME                            
Reported net income (GAAP)   $ 3,654     $ 2,956     $ 2,979     $ 2,954     $ 2,745     $ 9,589     $ 7,073  
Net (gains) losses on security transactions (net of tax)     -       (8 )     -       (2 )     (47 )     (8 )     (612 )
Legal reserve     -       528       -       -       -       528       747  
Non-GAAP net income   $ 3,654     $ 3,476     $ 2,979     $ 2,952     $ 2,698     $ 10,109     $ 7,208  
                             
Average basic and diluted shares outstanding     4,802       4,797       4,790       4,773       4,765       4,796       4,758  
                             
Reported basic and diluted earnings per share (GAAP)   $ 0.76     $ 0.62     $ 0.62     $ 0.62     $ 0.58     $ 2.00     $ 1.49  
Reported return on average assets (GAAP)     0.85 %     0.69 %     0.71 %     0.69 %     0.65 %     0.75 %     0.57 %
Reported return on average equity (GAAP)     9.46 %     7.90 %     8.24 %     8.20 %     7.55 %     8.54 %     6.62 %
                             
Core basic and diluted earnings per share (non-GAAP)   $ 0.76     $ 0.72     $ 0.62     $ 0.62     $ 0.57     $ 2.10     $ 1.51  
Core return on average assets (non-GAAP)     0.85 %     0.81 %     0.71 %     0.69 %     0.64 %     0.79 %     0.58 %
Core return on average equity (non-GAAP)     9.46 %     9.29 %     8.24 %     8.19 %     7.42 %     9.01 %     6.75 %
                             

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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