Chemung Financial Corporation Reports First Quarter 2017 Net Income of $3.0 Million, or $0.62 per Share

ELMIRA, N.Y., April 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 first quarter of 2017, compared to $2.7 million, or $0.57 per share, for the first quarter of 2016.

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

“Strong organic growth in our loan portfolio and cost saving measures implemented in 2016 contributed to our strong growth in earnings of ten percent year-over-year.  Our cost savings initiatives reduced our non-interest expense $1.0 million during the period.  We are very encouraged to see our business initiatives translate into higher shareholder returns.”

First Quarter Highlights1

  • Loans, net of deferred fees, increased $34.0 million, or 2.8%
  • Commercial loans increased $35.5 million, or 4.8%
  • Deposits increased $87.9 million, or 6.0%
  • Net interest income increased $0.5 million, or 3.6%
  • Effective tax rate decreased from 32.7% to 30.0%
  • Dividends declared during the quarter were $0.26
  • A more detailed summary of financial performance follows.

1 Balance sheet comparisons are calculated for March 31, 2017 versus December 31, 2016.   Income statement comparisons are calculated for the first quarter of 2017 versus prior-year first quarter.

1st Quarter 2017 vs 1st Quarter 2016

Net Interest Income:

Net interest income for the current quarter totaled $13.5 million compared with $13.0 million for the same period in the prior year, an increase of $0.5 million, or 3.6%.  Interest and fees from loans increased $0.3 million and interest from interest-bearing deposits increased $0.1 million when compared to the same period in the prior year.  Fully taxable equivalent net interest margin was 3.45%, compared with 3.47% for the same period in the prior year.  Average interest-earning assets increased $77.8 million compared to the same period in the prior year.  The yield on interest-earning assets decreased six basis points, while the cost of interest-bearing liabilities decreased five basis points compared to the same period in the prior year.  The decline in the yield on interest-earning assets can be mostly attributed to a two basis decline in the yield on loans and seven basis point decline in the yield on investments.

Non-Interest Income:

Non-interest income for the current quarter was $4.8 million compared with $5.6 million for the same period in the prior year, a decrease of $0.8 million, or 13.5%.  The decrease was due primarily to the $0.9 million net gain on security transactions when the Bank sold approximately $14.5 million in U.S. Treasuries during the prior year.

Non-Interest Expense:

Non-interest expense for the current quarter was $13.0 million compared with $14.0 million for the same period in the prior year, a decrease of $1.0 million, or 6.9%.  The decrease was due primarily to decreases of $0.5 million in pension and other employee benefits, $0.3 million in net occupancy expenses, and $0.1 million in data processing expenses.  The decrease in pension and other employee benefits can be attributed to the freezing of accruals for the pension and post-retirement healthcare plans during the fourth quarter of 2016.  The decrease in net occupancy expenses can be attributed to the closure of the branch office at 202 East State Street in Ithaca, NY at the end of May 2016 and the related $0.1 million of additional depreciation expense recognized during the first quarter of 2016.

Income Tax Expense:

The effective tax rate decreased to 30.0% for the current quarter compared with 32.7% for the same period in the prior year.  The decrease in the effective tax rate can be attributed to the formation of Chemung Risk Management, Inc., a captive insurance subsidiary of the Corporation, during the second quarter of 2016 and increasing the utilization of the Bank’s real estate investment trust.

Asset Quality

Non-performing loans totaled $12.9 million at March 31, 2017, or 1.05% 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 March 31, 2017 was primarily in the commercial mortgage segment, offset by a decrease in the residential mortgage segment.  Non-performing assets, which are comprised of non-performing loans and other real estate owned, were $13.3 million, or 0.76% of total assets, at March 31, 2017, compared with $12.4 million, or 0.75% of total assets, at December 31, 2016.  The increase in non-performing assets was primarily due to the commercial mortgage segment.

Management performs an ongoing assessment of the adequacy of the allowance for loan losses based upon a number of factors including an analysis of historical loss factors, collateral evaluations, recent charge-off experience, credit quality of the loan portfolio, current economic conditions and loan growth.  Based on this analysis, the provision for loan losses for the first quarter of 2017 and 2016 were $1.0 million and $0.6 million, respectively.  The increase in the provision for loan losses can be mostly attributed to an increase in the commercial loan portfolio and additional reserves on problem assets previously identified.  Net charge-offs for the first quarter of 2017 were $0.3 million, consistent with the same period in the prior year.

The allowance for loan losses was $15.0 million as of March 31, 2017 and $14.3 million as of December 31, 2016.  The allowance for loan losses was 115.84% of non-performing loans at March 31, 2017 compared with 118.35% at December 31, 2016.  The ratio of the allowance for loan losses to total loans was 1.21% at March 31, 2017 compared with 1.19% at December 31, 2016.

Balance Sheet Activity

Assets totaled $1.736 billion at March 31, 2017 compared with $1.657 billion at December 31, 2016, an increase of $78.8 million, or 4.8%.  The growth was due primarily to increases of $51.5 million in cash and cash equivalents and $34.0 million in the loan portfolio, offset by a decrease of $2.2 million in investment securities. 

The increase in cash and cash equivalents can be attributed to an increase in deposits, offset by an increase in total loans.  The increase in total loans can be mostly attributed to increases of $34.3 million in commercial mortgages and $1.2 million in commercial and agriculture loans, offset by a decrease of $1.3 million in indirect consumer loans.  The decrease in investment securities can be mostly attributed to maturities and calls, offset by additional purchases and a decline in unrealized losses.

Deposits totaled $1.544 billion at March 31, 2017 compared with $1.456 billion at December 31, 2016, an increase of $87.9 million, or 6.0%.  The growth was attributable to increases of $14.3 million in non-interest bearing demand deposits, $18.0 million in interest-bearing demand deposits, $48.6 million in money market accounts, and $10.5 million in savings deposits.  Partially offsetting the increases noted above was a decrease of $3.5 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 $148.3 million at March 31, 2017 compared with $143.7 million at December 31, 2016, an increase of $4.4 million, or 3.1%.  The increase was primarily due to earnings of $3.0 million, a reduction of $0.5 million in treasury stock, and a decrease of $2.0 million in accumulated other comprehensive loss, mostly attributable to the increase in the fair market value of the securities portfolio, offset by $1.2 million in dividends declared during the year.

The total equity to total assets ratio was 8.54% at March 31, 2017 compared with 8.67% at December 31, 2016.  The tangible equity to tangible assets ratio was 7.23% at March 31, 2017 compared with 7.29% at December 31, 2016.  Book value per share increased to $30.92 at March 31, 2017 from $30.07 at December 31, 2016.  As of March 31, 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 $1.803 billion at March 31, 2017, including $327.5 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 $81.6 million, or 4.7%.

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)  
      March 31,     Dec. 31,     Sept. 30,     June 30,     March 31,
(in thousands)       2017         2016         2016         2016         2016  
ASSETS                              
Cash and due from financial institutions     $ 26,275       $ 28,205       $ 35,345       $ 27,233       $ 26,471  
Interest-bearing deposits in other financial institutions       99,410         45,957         100,159         80,121         29,388  
Total cash and cash equivalents       125,685         74,162         135,504         107,354         55,859  
                               
Trading assets, at fair value       826         774         720         767         734  
                               
Securities available for sale       302,581         303,402         303,259         300,277         324,484  
Securities held to maturity       3,721         4,705         4,504         3,518         4,577  
FHLB and FRB stocks, at cost       3,597         4,041         4,491         4,491         4,179  
Total investment securities       309,899         312,148         312,254         308,286         333,240  
                               
Commercial       780,687         745,216         759,675         742,874         725,596  
Mortgage       198,020         198,492         197,665         196,200         196,751  
Consumer       255,544         256,582         259,226         262,082         264,546  
Loans, net of deferred loan fees       1,234,251         1,200,290         1,216,566         1,201,156         1,186,893  
Allowance for loan losses       (14,960 )       (14,253 )       (15,325 )       (14,668 )       (14,527 )
Loans, net       1,219,291         1,186,037         1,201,241         1,186,488         1,172,366  
                               
Loans held for sale       20         412         119         809         593  
Premises and equipment, net       28,206         28,923         29,084         29,706         28,620  
Goodwill       21,824         21,824         21,824         21,824         21,824  
Other intangible assets, net       2,719         2,945         3,183         3,428         3,673  
Accrued interest receivable and other assets       27,630         29,954         24,936         25,270         26,317  
Total assets     $ 1,736,100       $ 1,657,179       $ 1,728,865       $ 1,683,932       $ 1,643,226  
                               
LIABILITIES AND SHAREHOLDERS’ EQUITY                              
Deposits:                              
Non-interest-bearing demand deposits     $ 432,062       $ 417,812       $ 424,243       $ 408,846       $ 393,121  
Interest-bearing demand deposits       154,848         136,826         149,527         126,305         141,457  
Money market accounts       597,547         548,963         579,211         562,028         527,578  
Savings deposits       219,180         208,636         207,544         212,086         208,555  
Time deposits       140,614         144,106         148,419         158,655         163,541  
Total deposits       1,544,251         1,456,343         1,508,944         1,467,920         1,434,252  
                               
Securities sold under agreements to repurchase       15,215         27,606         30,002         28,778         28,825  
FHLB advances and other debt       9,065         13,815         23,893         23,970         22,012  
Accrued interest payable and other liabilities       19,312         15,667         21,214         19,855         17,091  
Total liabilities       1,587,843         1,513,431         1,584,053         1,540,523         1,502,180  
                               
Shareholders’ equity                              
Common stock       53         53         53         53         53  
Additional-paid-in capital       45,901         45,603         45,724         45,639         45,652  
Retained earnings       125,860         124,111         122,382         120,860         120,460  
Treasury stock, at cost       (14,801 )       (15,265 )       (15,542 )       (15,608 )       (15,781 )
Accumulated other comprehensive (loss)       (8,756 )       (10,754 )       (7,805 )       (7,535 )       (9,338 )
Total shareholders’ equity       148,257         143,748         144,812         143,409         141,046  
Total liabilities and shareholders’ equity     $ 1,736,100       $ 1,657,179       $ 1,728,865       $ 1,683,932       $ 1,643,226  
                               
Period-end shares outstanding       4,794         4,781         4,768         4,762         4,759  

 

             
Chemung Financial Corporation            
Consolidated Statements of Income (Unaudited)  
    Three Months Ended    
    March 31,   Percent
(in thousands, except per share data)     2017       2016     Change
Interest and dividend income:            
Loans, including fees   $ 12,499     $ 12,246     2.1  
Taxable securities     1,422       1,437     (1.0 )
Tax exempt securities     238       254     (6.3 )
Interest-bearing deposits     155       12     1191.7  
Total interest and dividend income     14,314       13,949     2.6  
           
Interest expense:            
Deposits     538       507     6.1  
Securities sold under agreements to repurchase     193       211     (8.5 )
Borrowed funds     89       206     (56.8 )
Total interest expense     820       924     (11.3 )
           
Net interest income     13,494       13,025     3.6  
Provision for loan losses     1,040       595     74.8  
Net interest income after provision for loan losses     12,454       12,430     0.2  
           
Non-interest income:            
Wealth management group fee income     2,109       2,012     4.8  
Service charges on deposit accounts     1,184       1,135     4.3  
Interchange revenue from debit card transactions     920       893     3.0  
Net gains on securities transactions           908     (100.0 )
Net gains on sales of loans held for sale     69       61     13.1  
Net gains (losses) on sales of other real estate owned     17       (5 )   N/M  
Income from bank owned life insurance     17       18     (5.6 )
Other     531       579     (8.3 )
Total non-interest income     4,847       5,601     (13.5 )
             
Non-interest expense:            
Salaries and wages     5,275       5,183     1.8  
Pension and other employee benefits     1,218       1,675     (27.3 )
Net occupancy     1,606       1,906     (15.7 )
Furniture and equipment     682       772     (11.7 )
Data processing     1,604       1,714     (6.4 )
Professional services     300       341     (12.0 )
Amortization of intangible assets     226       258     (12.4 )
Marketing and advertising     249       222     12.2  
Other real estate owned expense     19       52     (63.5 )
FDIC insurance     325       294     10.5  
Loan expense     116       112     3.6  
Other     1,425       1,479     (3.7 )
Total non-interest expense     13,045       14,008     (6.9 )
             
Income before income tax expense     4,256       4,023     5.8  
Income tax expense     1,277       1,316     (3.0 )
  Net income   $ 2,979     $ 2,707     10.0  
             
Basic and diluted earnings per share   $ 0.62     $ 0.57      
Cash dividends declared per share     0.26       0.26      
Average basic and diluted shares outstanding     4,790       4,750      
             
N/M – Not meaningful            

Chemung Financial Corporation                    
Consolidated Financial Highlights (Unaudited)  
                     
    As of or for the Three Months Ended
    March 31,   Dec. 31,   Sept. 30,   June 30,   March 31,
(in thousands, per share data)     2017       2016       2016       2016       2016  
RESULTS OF OPERATIONS                                        
Interest income   $ 14,314     $ 14,269     $ 14,025     $ 13,925     $ 13,949  
Interest expense     820       973       985       957       924  
Net interest income     13,494       13,296       13,040       12,968       13,025  
Provision for loan losses     1,040       404       1,050       388       595  
Net interest income after provision for loan losses     12,454       12,892       11,990       12,580       12,430  
Non-interest income     4,847       4,897       5,435       5,216       5,601  
Non-interest expense     13,045       13,561       13,471       15,570       14,008  
Income before income tax expense     4,256       4,228       3,954       2,226       4,023  
Income tax expense     1,277       1,274       1,209       605       1,316  
Net income   $ 2,979     $ 2,954     $ 2,745     $ 1,621     $ 2,707  
                     
Basic and diluted earnings per share   $ 0.62     $ 0.62     $ 0.58     $ 0.34     $ 0.57  
Average basic and diluted shares outstanding     4,790       4,773       4,765       4,760       4,750  
                     
PERFORMANCE RATIOS                    
Return on average assets     0.71 %     0.69 %     0.65 %     0.39 %     0.67 %
Return on average equity     8.24 %     8.20 %     7.55 %     4.57 %     7.73 %
Return on average tangible equity (a)     9.90 %     9.92 %     9.14 %     5.55 %     9.45 %
Efficiency ratio (a) (b)     69.25 %     72.63 %     71.28 %     77.00 %     76.89 %
Non-interest expense to average assets     3.12 %     3.18 %     3.20 %     3.75 %     3.48 %
Loans to deposits     79.93 %     82.42 %     80.62 %     81.83 %     82.75 %
                     
YIELDS / RATES – Fully Taxable Equivalent                    
Yield on loans     4.19 %     4.16 %     4.16 %     4.17 %     4.21 %
Yield on investments     2.00 %     1.75 %     1.73 %     1.81 %     2.07 %
Yield on interest-earning assets     3.66 %     3.57 %     3.58 %     3.60 %     3.72 %
Cost of interest-bearing deposits     0.20 %     0.21 %     0.21 %     0.21 %     0.20 %
Cost of borrowings     3.04 %     3.13 %     3.15 %     3.16 %     2.66 %
Cost of interest-bearing liabilities     0.30 %     0.35 %     0.36 %     0.35 %     0.35 %
Interest rate spread     3.36 %     3.22 %     3.22 %     3.25 %     3.37 %
Net interest margin, fully taxable equivalent     3.45 %     3.33 %     3.33 %     3.36 %     3.47 %
                     
CAPITAL                    
Total equity to total assets at end of period     8.54 %     8.67 %     8.38 %     8.52 %     8.58 %
Tangible equity to tangible assets at end of period (a)     7.23 %     7.29 %     7.03 %     7.12 %     7.14 %
                     
Book value per share   $ 30.93     $ 30.07     $ 30.37     $ 30.12     $ 29.64  
Tangible book value per share     25.81       24.89       25.13       24.81       24.28  
Period-end market value per share     39.50       36.35       28.99       29.35       26.35  
Dividends declared per share     0.26       0.26       0.26       0.26       0.26  
                     
AVERAGE BALANCES                    
Loans and loans held for sale (c)   $ 1,215,445     $ 1,210,922     $ 1,199,367     $ 1,192,786     $ 1,175,051  
Earning assets     1,605,460       1,607,287       1,577,348       1,573,306       1,527,656  
Total assets     1,694,199       1,699,059       1,674,492       1,669,654       1,620,547  
Deposits     1,495,724       1,483,348       1,456,622       1,457,173       1,404,487  
Total equity     146,642       143,388       144,631       142,746       140,864  
Tangible equity (a)     121,988       118,502       119,504       117,374       115,240  
                     
ASSET QUALITY                    
Net charge-offs   $ 333     $ 1,476     $ 393     $ 247     $ 328  
Non-performing loans (d)     12,914       12,043       12,903       12,429       12,774  
Non-performing assets (e)     13,251       12,431       13,270       12,822       14,416  
Allowance for loan losses     14,960       14,253       15,325       14,668       14,527  
                     
Annualized net charge-offs to average loans     0.11 %     0.48 %     0.13 %     0.08 %     0.11 %
Non-performing loans to total loans     1.05 %     1.00 %     1.06 %     1.03 %     1.08 %
Non-performing assets to total assets     0.76 %     0.75 %     0.77 %     0.76 %     0.88 %
Allowance for loan losses to total loans     1.21 %     1.19 %     1.26 %     1.22 %     1.22 %
Allowance for loan losses to non-performing loans     115.84 %     118.35 %     118.77 %     118.01 %     113.72 %
                     
(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 – March 31, 2017  
      QTD – March 31, 2016  
      QTD – Mar. 31, 2017 vs. Mar. 31, 2016
      Average
Balance

    Interest
    Yield /
Rate

      Average
Balance

    Interest
    Yield /
Rate

      Total
Change

    Due to
Volume

    Due to
Rate
                                                                               
Earning assets:                                                                              
Commercial loans     $   761,216     $   8,030     4.28 %       $   709,541     $   7,758     4.40 %       $   272     $   504     $   (232 )
Mortgage loans         198,373         1,887     3.86 %           196,600         1,940     3.97 %           (53 )       13         (66 )
Consumer loans         255,856         2,642     4.19 %           268,911         2,598     3.89 %           44         (137 )       181  
Taxable securities         272,580         1,424     2.12 %           294,319         1,438     1.97 %           (14 )       (114 )       100  
Tax-exempt securities         44,757         345     3.13 %           48,138         367     3.07 %           (22 )       (28 )       6  
Interest-bearing deposits         72,678         155     0.86 %           10,147         12     0.48 %           143         128         15  
Total earning assets         1,605,460         14,483     3.66 %           1,527,656         14,113     3.72 %           370         366         4  
                                               
Non-earnings assets:                                              
Cash and due from banks         25,885                     26,676                          
Premises and equipment, net         28,655                     29,199                          
Other assets         53,954                     48,846                          
Allowance for loan losses         (14,349 )                   (14,346 )                        
AFS valuation allowance         (5,406 )                   2,516                          
  Total assets     $   1,694,199                 $   1,620,547                          
                                                                               
Interest-bearing liabilities:                                                                              
Interest-bearing checking     $   152,954         36     0.10 %       $   142,117         40     0.11 %           (4 )       2         (6 )
Savings and money market         783,330         375     0.19 %           704,587         317     0.18 %           58         39         19  
Time deposits         141,250         127     0.36 %           164,580         150     0.37 %           (23 )       (19 )       (4 )
FHLB advances and repos          37,666         282     3.04 %           63,092         417     2.66 %           (135 )       (187 )       52  
Total int.-bearing liabilities         1,115,200         820     0.30 %           1,074,376         924     0.35 %           (104 )       (165 )       61  
                                 
Non-interest-bearing liabilities:                                              
Demand deposits         418,190                     393,202                          
Other liabilities         14,167                     12,105                          
Total liabilities         1,547,557                     1,479,683                          
Shareholders’ equity         146,642                     140,864                          
  Total liabilities and shareholders’ equity     $   1,694,199                 $   1,620,547                          
                                               
Fully taxable equivalent net interest income             13,663                     13,189             $   474     $   531     $   (57 )
Net interest rate spread (1)             3.36 %               3.37 %                
Net interest margin, fully taxable equivalent (2)             3.45 %               3.47 %                
Taxable equivalent adjustment             (169 )                   (164 )                    
Net interest income         $   13,494                 $   13,025                      
 
(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, facilitates 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 Three Months Ended 
      March 31,     Dec. 31,     Sept. 30,     June 30,     March 31,
(in thousands, except per share data)       2017         2016         2016         2016         2016  
NET INTEREST MARGIN – FULLY TAXABLE EQUIVALENT                                                  
AND EFFICIENCY RATIO                                                  
Net interest income (GAAP)     $   13,494       $   13,296       $   13,040       $   12,968       $   13,025  
Fully taxable equivalent adjustment         169           154           154           159         164  
Fully taxable equivalent net interest income (non-GAAP)     $   13,663       $   13,450       $   13,194       $   13,127       $   13,189  
 
Non-interest income (GAAP)     $   4,847       $   4,897       $   5,435       $   5,216       $   5,601  
Less:  net (gains) losses on security transactions         –           (4 )         (75 )         –           (908 )
Adjusted non-interest income (non-GAAP)     $   4,847       $   4,893       $   5,360       $   5,216       $   4,693  
 
Non-interest expense (GAAP)     $   13,045       $   13,561       $   13,471       $   15,570       $   14,008  
Less:  amortization of intangible assets         (226 )         (238 )         (245 )         (245 )         (258 )
Less:  legal reserve         –           –           –           (1,200 )         –  
Adjusted non-interest expense (non-GAAP)     $   12,819       $   13,323       $   13,226       $   14,125       $   13,750  
 
Average interest-earning assets (GAAP)     $   1,605,460       $   1,607,287       $   1,577,348       $   1,573,306       $   1,527,656  
 
Net interest margin – fully taxable equivalent (non-GAAP)       3.45 %       3.33 %       3.33 %       3.36 %       3.47 %
Efficiency ratio (non-GAAP)       69.25 %       72.63 %       71.28 %       77.00 %       76.89 %
                                                   

Tangible Equity and Tangible Assets (Period-End)

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

                       
      As of or for the Three Months Ended
      March 31,   Dec. 31,   Sept. 30,   June 30,   March 31,
(in thousands, except per share and ratio data)       2017       2016       2016       2016       2016  
TANGIBLE EQUITY AND TANGIBLE ASSETS                                          
(PERIOD END)                                          
Total shareholders’ equity (GAAP)     $   148,257     $   143,748     $   144,812     $   143,409     $   141,046  
Less:  intangible assets       (24,543 )     (24,769 )     (25,007 )     (25,252 )     (25,497 )
Tangible equity (non-GAAP)     $   123,714     $   118,979     $   119,805     $   118,157     $   115,549  
                       
Total assets (GAAP)     $   1,736,100     $   1,657,179     $   1,728,865     $   1,683,932     $   1,643,226  
Less:  intangible assets       (24,543 )     (24,769 )     (25,007 )     (25,252 )     (25,497 )
Tangible assets (non-GAAP)     $   1,711,557     $   1,632,410     $   1,703,858     $   1,658,680     $   1,617,729  
                       
Total equity to total assets at end of period (GAAP)       8.54 %     8.67 %     8.38 %     8.52 %     8.58 %
Book value per share (GAAP)     $   30.93     $   30.07     $   30.37     $   30.12     $   29.64  
 
Tangible equity to tangible assets at      
  end of period (non-GAAP)       7.23 %     7.29 %     7.03 %     7.12 %     7.14 %
Tangible book value per share (non-GAAP)     $   25.81     $   24.89     $   25.13     $   24.81     $   24.28  
                                           

Tangible Equity (Average)

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

                                 
        As of or for the Three Months Ended
        March 31,     Dec. 31,     Sept. 30,     June 30,     March 31,
(in thousands, except ratio data)         2017         2016         2016         2016         2016  
TANGIBLE EQUITY (AVERAGE)                                                    
Total average shareholders’ equity (GAAP)       $ 146,642       $ 143,388       $ 144,631       $ 142,746       $ 140,864  
Less:  average intangible assets         (24,654 )       (24,886 )       (25,127 )       (25,372 )       (25,624 )
Average tangible equity (non-GAAP)       $ 121,988       $ 118,502       $ 119,504       $ 117,374       $ 115,240  
 
Return on average equity (GAAP)         8.24 %       8.20 %       7.55 %       4.57 %       7.73 %
Return on average tangible equity (non-GAAP)         9.90 %       9.92 %       9.14 %       5.55 %       9.45 %

Adjustments for Certain Items of Income or Expense

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

      As of or for the Three Months Ended 
      March 31,     Dec. 31,     Sept. 30,     June 30,     March 31,
(in thousands, except per share and ratio data)       2017         2016         2016         2016         2016  
NON-GAAP NET INCOME      
Reported net income (GAAP)     $   2,979       $   2,954       $   2,745       $   1,621       $   2,707  
Net (gains) losses on security transactions (net of tax)         –           (2 )         (47 )         –           (565 )
Legal reserve (net of tax)         –           –           –           747           –  
Non-GAAP net income     $   2,979       $   2,952       $   2,698       $   2,368       $   2,142  
                               
Average basic and diluted shares outstanding       4,790         4,773         4,765         4,760         4,750  
                                                   
Reported basic and diluted earnings per share (GAAP)     $   0.62       $   0.62       $   0.58       $   0.34       $   0.57  
Reported return on average assets (GAAP)       0.71 %       0.69 %       0.65 %       0.39 %       0.67 %
Reported return on average equity (GAAP)       8.24 %       8.20 %       7.55 %       4.57 %       7.73 %
 
Core basic and diluted earnings per share (non-GAAP)     $   0.62       $   0.62       $   0.57       $   0.50       $   0.45  
Core return on average assets (non-GAAP)       0.71 %       0.69 %       0.64 %       0.57 %       0.53 %
Core return on average equity (non-GAAP)       8.24 %       8.19 %       7.42 %       6.67 %       6.12 %

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.

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

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