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Chemung Financial Reports Third Quarter 2014 Earnings

ELMIRA, N.Y., Oct. 23, 2014 (GLOBE NEWSWIRE) -- Chemung Financial Corporation (Nasdaq:CHMG), the parent company of Chemung Canal Trust Company, today reported net income and earnings per share for the quarter and nine months ended September 30, 2014. Highlights for the quarter and nine months include:

  • Net income for the third quarter of 2014 was $2.3 million, or $0.48 per share, compared with $2.2 million, or $0.47 per share, for the same quarter in the prior year.
  • Net income for the nine months ended September 30, 2014 was $6.3 million, or $1.34 per share, compared with $7.2 million, or $1.56 per share for the same period in the prior year.
  • Fully taxable equivalent net interest margin for the third quarter of 2014 was 3.56%, compared with 3.51% for the preceding quarter and 3.90% for the same quarter in the prior year. Fully taxable equivalent net interest margin for the nine months ended September 30, 2014, was 3.55%, down from 3.99% for the same period in the prior year.
  • Average interest-earning assets increased $218.5 million year-over-year as a result of organic loan growth and the fourth quarter 2013 branch acquisition.
  • Total loans increased $118.3 million, or 11.9%, from $995.9 million at December 31, 2013 to $1.114 billion at September 30, 2014. This increase was primarily attributable to growth of $82.5 million, or 15.9%, in commercial loans and $38.9 million, or 13.8%, in consumer loans.
  • Non-performing assets to total assets ratio was 0.68% at September 30, 2014 compared with 0.61% at September 30, 2013.
  • Book value per share was $30.34 at September 30, 2014 compared with $28.93 at September 30, 2013, an increase of $1.41, or 4.9%. Tangible book value per share was $24.53 at September 30, 2014 compared with $23.28 at September 30, 2013, an increase of $1.25, or 5.4%.
  • Dividends declared during the quarter ended September 30, 2014 were $0.26 per share, level with the prior year.

Ronald M. Bentley, President and CEO stated, "By channeling deposits from the branch offices acquired in late 2013 into loans, the loan portfolio increased $118.3 million, or 11.9%, from the beginning of the year. The growth was driven by commercial loans in the Capital Region, along with an increase in indirect consumer loans, and contributed to the increase in net interest margin to 3.56% for the third quarter of 2014 from 3.51% for the preceding quarter. We expect to continue realizing benefits from the branch offices acquired in late 2013. We are also excited for the opening of our new Capital Bank headquarters and Wealth Management Group office in downtown Albany, scheduled for January 2015."

Summary:

Chemung Financial Corporation reported net income of $2.3 million for the third quarter of 2014, an increase of $0.1 million, or 4.2%, compared with $2.2 million for the same period in the prior year. Earnings per share for the third quarter of 2014 totaled $0.48, compared with $0.47 for the same period in the prior year. Return on average assets and return on average equity for the third quarter of 2014 were 0.60% and 6.30%, respectively, compared with 0.67% and 6.45%, respectively, for the same period in the prior year.

Core net income (see the GAAP to non-GAAP reconciliations) for the third quarter of 2014 was $2.3 million, or $0.48 per share, compared with $2.3 million, or $0.50 per share, for the same period in the prior year. The core net income for the current quarter was the same as reported net income. Core net income for the third quarter of 2013 excluded the pre-tax acquisition expenses of $0.2 million. Net interest income and non-interest income increased $0.9 million and $0.6 million, respectively, along with a reduction of $0.5 million in the provision for loan losses. These items were partially offset by an increase of $1.9 million in non-interest expense. The increase in non-interest expense was due primarily to increases of $0.6 million in salaries and wages, $0.4 million in occupancy expense and $0.3 million in data processing expense. A portion of the increase in non-interest expense was due to operating expenses directly related to the branch offices acquired in late 2013, along with annual merit increases in salaries and wages and upgrades for ATMs and software. Core return on average assets and core return on average equity for the third quarter of 2014 were 0.60% and 6.30%, respectively, compared with 0.71% and 6.85%, respectively, for the same period in the prior year.

Net income of $2.3 million for the current quarter ended September 30, 2014 represents an increase of $0.4 million, or 17.6%, from net income of $1.9 million for the preceding quarter ended June 30, 2014. The increase in earnings was due primarily to an increase of $0.4 million in net interest income and a reduction of $0.5 million in the provision for loan losses. These items were partially offset by a decrease of $0.4 million in non-interest income related to a net gain on securities transactions in the preceding quarter, and an increase of $0.2 million in income taxes. Earnings per share for the current quarter totaled $0.48 compared with $0.41 for the preceding quarter. Return on average assets and return on average equity for the current quarter were 0.60% and 6.30%, respectively, compared with 0.51% and 5.44%, respectively, for the preceding quarter.

Net income for the nine months ended September 30, 2014 was $6.3 million, a decrease of $0.9 million, or 13.6%, compared with $7.2 million for the nine months ended September 30, 2013. Earnings per share for the nine months ended September 30, 2014 was $1.34, compared with $1.56 for the nine months ended September 30, 2013. Return on average assets and return on average equity for the nine months ended September 30, 2014 were 0.56% and 5.89%, respectively, compared with 0.76% and 7.25%, respectively, for the same period in the prior year.

Core net income for the nine months ended September 30, 2014 was $6.0 million, or $1.29 per share, compared with $7.4 million, or $1.58 per share, for the nine months ended September 30, 2013. The current year core net income excluded pre-tax items of $0.5 million in net gain on securities transactions and $0.1 million in acquisition expenses. The core net income for the nine months ended September 30, 2013 excluded the pre-tax acquisition expenses of $0.2 million. The decrease in core net income was due primarily to increases of $5.6 million in non-interest expense and $0.6 million in provision for loan losses. These items were partially offset by increases of $2.0 million in net interest income and $2.0 million in non-interest income, and a reduction of $0.8 million in income taxes. The increase in non-interest expense was due primarily to increases of $1.5 million in salaries and wages, $1.2 million in occupancy expense, $1.0 million in data processing expense, $0.5 million in furniture and equipment expense and $0.3 million in amortization of intangible assets. A portion of the increase in non-interest expense was due to operating expenses directly related to the branch offices acquired in late 2013, along with annual merit increases in salaries and wages and upgrades for ATMs and software. Core return on average assets and core return on average equity for the nine months ended September 30, 2014 were 0.54% and 5.66%, respectively, compared with 0.77% and 7.38%, respectively, for the same period in the prior year.

Net Interest Income:

Net interest income for the third quarter of 2014 totaled $12.4 million compared with $11.5 million for the same period in the prior year, an increase of $0.9 million, or 7.9%. Fully taxable equivalent net interest margin was 3.56% for the third quarter of 2014 compared with 3.90% for the same period in the prior year. The decline in net interest margin was due in part to a 41 basis point decrease in the yield on interest-earning assets, partially offset by a ten basis point decline in the cost of funds and an increase of $214.2 million in average interest-earning assets. The Corporation anticipated a decline in the yield on interest-earning assets due in part to its investment of cash from the acquired branch offices into investment securities.

Net interest income for the current quarter totaled $12.4 million compared with $12.1 million for the preceding quarter ended June 30, 2014, an increase of $0.3 million, or 2.9%. Fully taxable equivalent net interest margin was 3.56% for the current quarter compared with 3.51% for the preceding quarter. The increase in net interest margin was due primarily to a five basis point increase in the yield on interest-earnings assets and an increase of $4.0 million in average interest-earning assets.

Net interest income for the nine months ended September 30, 2014 totaled $36.5 million compared with $34.6 million for the prior year, an increase of $1.9 million, or 5.7%. Fully taxable equivalent net interest margin was 3.55% for the nine months ended September 30, 2014 compared with 3.99% for the same period in the prior year. The increase in net interest income was due to an increase of $218.5 million in average interest-earning assets and a 12 basis point decline in the cost of funds, partially offset by a 52 basis point decrease in the yield on interest-earning assets. The decline in net interest margin was due primarily to yields on interest-earning assets decreasing at a faster rate than the cost of interest-bearing liabilities. The decrease in yield on interest-earning assets was attributable to lower loan yields as loans continue to reprice at current market rates. The Corporation anticipated a decline in the yield on interest-earning assets due in part to its investment of cash from the acquired branch offices into investment securities.

Non-Interest Income:

Non-interest income for the third quarter of 2014 was $5.0 million compared with $5.4 million for the preceding quarter ended June 30, 2014 and $4.4 million for the third quarter in the prior year. The decrease from the preceding quarter was due primarily to a decrease of $0.5 million in net gain on securities transactions. The increase from the year-ago quarter was due primarily to increases of $0.2 million in check-card fee income, $0.2 million in service charges on deposit accounts and $0.1 million in Wealth Management Group fee income.

Non-interest income for the nine months ended September 30, 2014 was $15.4 million compared with $12.8 million for the prior year, an increase of $2.6 million, or 19.5%. The increase was due primarily to a $0.5 million net gain on securities transactions, increases of $0.7 million in check-card fee income, $0.6 million in service charges on deposit accounts, $0.4 million in Wealth Management Group fee income and a gain of $0.5 million from the liquidation of the Corporation's investment in a pool of trust preferred securities.

Non-Interest Expense:

Non-interest expense for the third quarter of 2014 was $13.5 million compared with $11.8 million for the prior year, an increase of $1.7 million, or 14.4%. The increase was due primarily to increases of $0.6 million in salaries and wages, $0.4 million in occupancy expense, $0.3 million in data processing expense and $0.2 million in furniture and equipment expense. The majority of the increase in non-interest expense was due to operating expenses directly related to the branches acquired in the fourth quarter of 2013.

Non-interest expense for the current quarter was $13.5 million compared with $13.6 million for the preceding quarter ended June 30, 2014, a decrease of $0.1 million, or 0.5%.

Non-interest expense for the nine months ended September 30, 2014 was $40.4 million compared with $34.9 million for the prior year, an increase of $5.5 million, or 15.8%. The increase was due primarily to increases of $1.5 million in salaries and wages, $1.2 million in occupancy expense, $0.9 million in data processing expense, $0.5 million in furniture and equipment expense, $0.3 million in amortization of intangible assets and $0.7 million in other non-interest expense related to various items. A portion of the increase in non-interest expense was due to operating expenses directly related to the branch offices acquired in late 2013, along with annual merit increases in salaries and wages and upgrades for ATMs and software.

Asset Quality:

Non-performing loans totaled $7.2 million at September 30, 2014, or 0.65% of total loans, compared with $7.6 million, or 0.79%, at September 30, 2013. The decrease in non-performing loans at September 30, 2014 was primarily in the commercial loan and residential mortgage segments of the loan portfolio. Non-performing assets, which are comprised of non-performing loans and other real estate owned, was 0.68% of total assets, or $10.3 million at September 30, 2014, compared with 0.61%, or $8.2 million, at September 30, 2013. The increase in non-performing assets was due primarily to the transfer of one acquired purchase-credit-impaired commercial loan to other real estate owned. The Corporation's peer group average for the ratio of non-performing assets to total assets was 1.27% at June 30, 2014 (the most recent period available).

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 2014 was $0.6 million compared with $1.1 million for the preceding quarter ended June 30, 2014, and $0.9 million for the same period in the prior year. The decrease in the provision for loan losses from the preceding quarter was due primarily to a reduction in the provision for loan losses related to organic loan growth. Net charge-offs for the current quarter were $1.1 million compared with $0.6 million for the preceding quarter and $0.3 million for the same period in the prior year. The net charge-offs for the current quarter were due primarily to a $0.9 million charge-off of an acquired purchase-credit-impaired loan that was transferred to other real estate owned. The net charge-offs for the preceding quarter were due primarily to a $0.3 million charge-off of an acquired purchase-credit-impaired loan that was transferred to other real estate owned and a $0.3 million originated commercial loan.

The provision for loan losses for the nine months ended September 30, 2014 was $2.3 million compared with $1.8 million for the same period in the prior year. The increase in the provision for loans losses was due to an increase in net charge-offs and growth in the loan portfolio. Net charges-offs for the nine months ended September 30, 2014 were $2.0 million compared with $0.3 million for the same period in the prior year. The increase in net charge-offs from the prior year was due primarily to the charge-off of three commercial loans, the majority attributable to two acquired purchase-credit-impaired loans.

At September 30, 2014 the allowance for loan losses was $13.2 million, compared with $11.9 million at September 30, 2013. The allowance for loan losses was 182.42% of non-performing loans at September 30, 2014, compared with 155.12% at September 30, 2013. The ratio of the allowance for loan losses to total loans was 1.18% at September 30, 2014, compared with 1.23% at September 30, 2013.

Balance Sheet Activity:

Assets totaled $1.522 billion at September 30, 2014 compared with $1.341 billion at September 30, 2013, an increase of $180.8 million, or 13.5%. The growth was due primarily to increases of $146.5 million, or 15.1%, in total portfolio loans and $25.3 million in investment securities. The increase in portfolio loans was due to strong growth of $100.1 million in commercial loans and $47.7 million in consumer loans.

Assets totaled $1.522 billion at September 30, 2014 compared with $1.476 billion at December 31, 2013, an increase of $45.8 million, or 3.1%. The growth was due primarily to increases of $118.3 million, or 11.9%, in total portfolio loans, partially offset by decreases of $59.1 million in investment securities and $16.6 million in cash and cash equivalents. The increase in portfolio loans was due to strong growth of $82.5 million in commercial loans and $38.9 million in consumer loans. The decrease in securities available for sale was used to fund the growth in the loan portfolio.

Deposits totaled $1.311 billion at September 30, 2014 compared with $1.090 billion at September 30, 2013, an increase of $220.5 million, or 20.2%. The increase was primarily attributable to $177.7 million from the branch acquisition and $42.8 million in organic deposit growth, due in part to the seasonal inflow of municipal deposits. At September 30, 2014, demand deposit accounts, excluding money market accounts, comprised 39.0% of total deposits compared with 36.1% at September 30, 2013.

Deposits totaled $1.311 billion at September 30, 2014 compared with $1.266 billion at December 31, 2014, an increase of $44.7 million, or 3.5%. The increase was primarily attributable to increases of $30.6 million in money market accounts, due in part to the seasonal inflow of municipal deposits, $21.7 million in non-interest-bearing demand deposits, $24.1 million in interest-bearing demand deposits and $1.6 million in savings accounts. These items were partially offset by a decrease $33.2 million in time deposits.

Total equity was $142.1 million at September 30, 2014 compared with $134.8 million at September 30, 2013, an increase of $7.3 million, or 5.4%. The total equity to total assets ratio was 9.34% at September 30, 2014 compared with 10.05% at September 30, 2013. The tangible equity to tangible assets ratio was 7.69% at September 30, 2014 compared with 8.25% at September 30, 2013. Book value per share increased to $30.34 at September 30, 2014 from $28.93 at September 30, 2013. As of September 30, 2014, both the Corporation's and the Bank's capital ratios were in excess of those required to be considered well-capitalized under regulatory capital guidelines.

Other Items:

The market value of total assets under management or administration in our Wealth Management Group was $1.910 billion at September 30, 2014 compared with $1.829 billion at September 30, 2013, an increase of $81.2 million, or 4.4%.

About Chemung Financial Corporation:

Chemung Financial Corporation is a $1.5 billion financial services holding company headquartered in Elmira, New York and operates 34 retail offices through its principal subsidiary, Chemung Canal Trust Company, a full-service community bank with trust powers. Established in 1833, Chemung Canal Trust Company is the oldest locally-owned and managed community bank in New York State. Chemung Financial Corporation is also the parent of CFS Group, Inc., a financial services subsidiary offering non-traditional services including mutual funds, annuities, brokerage services, tax preparation services and insurance.

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

Forward-Looking Statements:

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Corporation intends its forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding, among other things, the Corporation's expected financial condition and results of operations, 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 Wall Street Reform and Consumer Protection 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, including in our 2013 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.

Chemung Financial Corporation
Consolidated Balance Sheets (Unaudited)
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
(Dollars in thousands, except share data) 2014 2014 2014 2013 2013
ASSETS
Cash and due from financial institutions $ 31,957 $ 35,981 $ 34,478 $ 31,600 $ 37,491
Interest-bearing deposits in other financial institutions 3,069 30,301 22,670 20,009 2,438
Total cash and cash equivalents 35,026 66,282 57,148 51,609 39,929
Trading assets, at fair value 483 450 413 366 313
Securities available for sale 288,098 286,398 337,134 346,016 259,275
Securities held to maturity 5,430 5,274 6,126 6,495 6,544
FHLB and FRB stocks, at cost 4,362 4,730 4,482 4,482 6,725
Total investment securities 297,890 296,402 347,742 356,993 272,544
Commercial 601,018 581,170 542,082 518,510 500,957
Mortgage 192,870 194,603 196,396 195,997 194,042
Consumer 320,294 308,580 286,087 281,359 272,635
Total loans 1,114,182 1,084,353 1,024,565 995,866 967,634
Allowance for loan losses (13,151) (13,632) (13,155) (12,776) (11,856)
Loans, net 1,101,031 1,070,721 1,011,410 983,090 955,778
Loans held for sale 1,167 914 75 695 866
Premises and equipment, net 32,431 29,938 29,351 30,039 25,087
Goodwill 21,824 21,824 21,824 21,824 21,824
Other intangible assets, net 5,384 5,708 6,033 6,377 4,481
Other assets 26,660 23,642 23,535 25,150 20,269
Total assets $ 1,521,896 $ 1,515,881 $ 1,497,531 $ 1,476,143 $ 1,341,091
Deposits:
Non-interest-bearing demand deposits $ 372,916 $ 365,056 $ 354,727 $ 351,222 $ 297,053
Interest-bearing demand deposits 138,751 124,803 114,507 114,679 96,191
Insured money market accounts 391,671 393,390 387,912 361,095 289,459
Savings deposits 196,406 199,664 198,876 194,768 185,824
Time deposits 211,255 225,515 235,868 244,492 221,938
Total deposits 1,310,999 1,308,428 1,291,890 1,266,256 1,090,465
Securities sold under agreements to repurchase 30,981 30,746 30,646 32,701 30,499
FHLB advances and other debt 27,125 24,520 25,189 25,243 75,146
Other liabilities 10,642 10,406 9,283 13,365 10,175
Total liabilities 1,379,747 1,374,100 1,357,008 1,337,565 1,206,285
Shareholders' equity
Common stock 53 53 53 53 53
Additional-paid-in capital 45,555 45,494 45,516 45,399 45,556
Retained earnings 113,693 112,624 111,895 111,031 110,740
Treasury stock, at cost (17,640) (17,640) (17,728) (18,060) (18,266)
Accumulated other comprehensive income (loss) 488 1,250 787 155 (3,277)
Total shareholders' equity 142,149 141,781 140,523 138,578 134,806
Total liabilities and shareholders' equity $ 1,521,896 $ 1,515,881 $ 1,497,531 $ 1,476,143 $ 1,341,091
Period-end shares outstanding 4,685,627 4,682,369 4,679,396 4,671,066 4,660,217
Chemung Financial Corporation
Consolidated Statements of Income (Unaudited)
Nine Months Ended Three Months Ended
September 30, Percent September 30, Percent
(Dollars in thousands, except share and per share data) 2014 2013 Change 2014 2013 Change
Interest and dividend income:
Loans, including fees $ 34,590 $ 33,605 2.9 $ 11,973 $ 11,245 6.5
Taxable securities 3,889 3,120 24.6 1,122 1,003 11.9
Tax exempt securities 752 845 (11.0) 230 258 (10.9)
Interest-bearing deposits 59 21 181.0 16 3 433.3
Total interest and dividend income 39,290 37,591 4.5 13,341 12,509 6.7
Interest expense:
Deposits 1,550 1,791 (13.5) 511 572 (10.7)
Securities sold under agreements to repurchase 634 645 (1.7) 214 214 0.0
Borrowed funds 572 594 (3.7) 190 206 (7.8)
Total interest expense 2,756 3,030 (9.0) 915 992 (7.8)
Net interest income 36,534 34,561 5.7 12,426 11,517 7.9
Provision for loan losses 2,330 1,755 32.8 589 874 (32.6)
Net interest income after provision for loan losses 34,204 32,806 4.3 11,837 10,643 11.2
Non-interest income:
Wealth management group fee income 5,816 5,448 6.8 1,943 1,813 7.2
Service charges on deposit accounts 3,962 3,378 17.3 1,381 1,222 13.0
Net gain on securities transactions 522 1 N/M -- -- N/M
Net gain on sales of loans held for sale 209 425 (50.8) 84 134 (37.3)
Net gain (loss) on sales of other real estate owned (40) 33 (221.2) 4 18 (77.8)
Other 4,887 3,563 37.2 1,574 1,164 35.2
Total non-interest income 15,356 12,848 19.5 4,986 4,351 14.6
Non-interest expense:
Salaries and wages 15,653 14,138 10.7 5,344 4,721 13.2
Pension and other employee benefits 4,132 4,162 (0.7) 1,294 1,372 (5.7)
Net occupancy 5,174 4,016 28.8 1,721 1,315 30.9
Furniture and equipment 2,052 1,600 28.3 707 514 37.5
Data processing 4,383 3,433 27.7 1,488 1,192 24.8
Professional fees 911 713 27.8 268 188 42.6
Amortization of intangible assets 993 663 49.8 324 214 51.4
Marketing and advertising 879 782 12.4 255 297 (14.1)
Other real estate owned expense 154 138 11.6 22 76 (71.1)
FDIC insurance 814 625 30.2 271 206 31.6
Loan expenses 564 537 5.0 269 202 33.2
Merger and acquisition expenses 115 217 (47.0) -- 217 (100.0)
Other 4,611 3,905 18.1 1,550 1,299 19.3
Total non-interest expense 40,435 34,929 15.8 13,513 11,813 14.4
Income before income tax expense 9,125 10,725 (14.9) 3,310 3,181 4.1
Income tax expense 2,861 3,479 (17.8) 1,040 1,002 3.8
Net income $ 6,264 $ 7,246 (13.6) $ 2,270 $ 2,179 4.2
Basic and diluted earnings per share $ 1.34 $ 1.56 $ 0.48 $ 0.47
Cash dividends declared per share 0.78 0.78 0.26 0.26
Average basic and diluted shares outstanding 4,680,583 4,658,199 4,683,797 4,660,336
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
(Dollars in thousands, except share and per share data) Sept. 30,
2014
June 30,
2014
March 31,
2014
Dec. 31,
2013
Sept. 30,
2013
Sept. 30,
2014
Sept. 30,
2013
RESULTS OF OPERATIONS
Interest income $ 13,341 $ 12,996 $ 12,954 $ 13,072 $ 12,509 $ 39,290 $ 37,591
Interest expense 915 921 921 1,002 992 2,756 3,030
Net interest income 12,426 12,075 12,033 12,070 11,517 36,534 34,561
Provision for loan losses 589 1,103 639 1,000 874 2,330 1,755
Net interest income after provision for loan losses 11,837 10,972 11,394 11,070 10,643 34,204 32,806
Non-interest income 4,986 5,406 4,964 5,229 4,351 15,356 12,848
Non-interest expense 13,513 13,579 13,343 14,470 11,813 40,435 34,929
Income before income tax expense 3,310 2,799 3,015 1,829 3,181 9,125 10,725
Income tax expense 1,040 869 951 343 1,002 2,861 3,479
Net income $ 2,270 $ 1,930 $ 2,064 $ 1,486 $ 2,179 $ 6,264 $ 7,246
Basic and diluted earnings per share $ 0.48 $ 0.41 $ 0.44 $ 0.32 $ 0.47 $ 1.34 $ 1.56
Average basic and diluted shares outstanding 4,683,797 4,680,776 4,677,178 4,664,140 4,660,336 4,680,583 4,658,199
PERFORMANCE RATIOS
Return on average assets 0.60% 0.51% 0.56% 0.42% 0.67% 0.56% 0.76%
Return on average equity 6.30% 5.44% 5.93% 4.34% 6.45% 5.89% 7.25%
Return on average tangible equity (a) 7.79% 6.75% 7.41% 5.40% 8.04% 7.32% 9.05%
Efficiency ratio (b) 75.01% 77.21% 77.28% 76.66% 70.97% 76.50% 71.01%
Non-interest expense to average assets 3.55% 3.62% 3.64% 4.09% 3.65% 3.60% 3.67%
Loans to deposits 84.99% 82.87% 79.31% 78.65% 88.74% 84.99% 88.74%
YIELDS / RATES - Fully Taxable Equivalent
Yield on loans 4.34% 4.40% 4.51% 4.67% 4.71% 4.41% 4.85%
Yield on investments 1.95% 1.91% 2.09% 2.05% 2.32% 1.98% 2.40%
Yield on interest-earning assets 3.82% 3.77% 3.85% 4.02% 4.23% 3.81% 4.33%
Cost of interest-bearing deposits 0.22% 0.22% 0.23% 0.26% 0.30% 0.22% 0.31%
Cost of borrowings 2.85% 2.93% 2.91% 1.90% 2.49% 2.89% 2.69%
Cost of interest-bearing liabilities 0.37% 0.37% 0.38% 0.42% 0.47% 0.37% 0.49%
Interest rate spread 3.45% 3.40% 3.47% 3.60% 3.76% 3.44% 3.84%
Net interest margin, fully taxable equivalent 3.56% 3.51% 3.58% 3.72% 3.90% 3.55% 3.99%
CAPITAL
Total equity to total assets at end of period 9.34% 9.35% 9.38% 9.39% 10.05% 9.34% 10.05%
Tangible equity to tangible assets at end of period (a) 7.69% 7.68% 7.67% 7.62% 8.25% 7.69% 8.25%
Book value per share $ 30.34 $ 30.28 $ 30.03 $ 29.67 $ 28.93 $ 30.34 $ 28.93
Tangible book value per share 24.53 24.40 24.08 23.63 23.28 24.53 23.28
Period-end market value per share 28.09 29.54 27.12 34.17 34.63 28.09 34.63
Dividends declared per share 0.26 0.26 0.26 0.26 0.26 0.78 0.78
AVERAGE BALANCES
Loans (c) $ 1,097,133 $ 1,047,181 $ 1,007,415 $ 981,491 $ 950,657 $ 1,050,905 $ 929,906
Earning assets 1,404,165 1,400,174 1,381,604 1,306,934 1,189,978 1,395,397 1,176,896
Total assets 1,509,297 1,504,153 1,488,577 1,404,770 1,283,577 1,500,754 1,273,206
Deposits 1,301,083 1,298,159 1,282,917 1,163,065 1,073,571 1,294,119 1,069,174
Total equity 142,972 142,318 141,061 135,979 133,955 142,124 133,714
Tangible equity (a) 115,581 114,603 112,996 109,082 107,528 114,403 107,068
ASSET QUALITY
Net charge-offs (recoveries) $ 1,070 $ 625 $ 260 $ 80 $ 338 $ 1,955 $ 332
Non-performing loans (d) 7,209 7,712 8,567 8,511 7,643 7,209 7,643
Non-performing assets (e) 10,328 8,345 8,808 9,049 8,207 10,328 8,207
Allowance for loan losses 13,151 13,632 13,155 12,776 11,856 13,151 11,856
Annualized net charge-offs to average loans 0.39% 0.24% 0.10% 0.03% 0.14% 0.25% 0.05%
Non-performing loans to total loans 0.65% 0.71% 0.84% 0.85% 0.79% 0.65% 0.79%
Non-performing assets to total assets 0.68% 0.55% 0.59% 0.61% 0.61% 0.68% 0.61%
Allowance for loan losses to total loans 1.18% 1.26% 1.28% 1.28% 1.23% 1.18% 1.23%
Allowance for loan losses to non-performing loans 182.42% 176.76% 153.55% 150.11% 155.12% 182.42% 155.12%
(a) See the GAAP to Non-GAAP reconciliations.
(b) Efficiency ratio is non-interest expense less merger and acquisition expenses less amortization of intangible assets divided by the total of fully taxable equivalent net interest income plus non-interest income less net gain on securities transactions less gain from bargain purchase less gain on liquidation of trust preferred securities.
(c) Loans include loans held for sale. Loans 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.
N/M - Not meaningful.

Chemung Financial Corporation

GAAP to Non-GAAP Reconciliations (Unaudited)

The table below shows computations of core net income, tangible equity and tangible assets and certain related ratios, all of which are considered to be non-GAAP financial measures. The tangible equity to tangible assets ratio has become a focus of some investors and management believes this ratio may assist in analyzing the Corporation's capital position, absent the effects of intangible assets. These non-GAAP financial measures have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of results reported under GAAP. Because not all companies use identical calculations, the non-GAAP measures presented in the following table may not be comparable to those reported by other companies.

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,
(Dollars in thousands, except per share data) 2014 2014 2013 2013 2013 2014 2013
CORE NET INCOME
Reported net income (GAAP) $ 2,270 $ 1,930 $ 2,064 $ 1,486 $ 2,179 $ 6,264 $ 7,246
Net (gain) loss on securities transactions (net of tax) -- (322) -- 9 -- (322) (1)
Gain from bargain purchase (net of tax) -- -- -- (470) -- -- --
Merger and acquisition related expenses (net of tax) -- 18 53 720 134 71 134
Core net income (non-GAAP) $ 2,270 $ 1,626 $ 2,117 $ 1,745 $ 2,313 $ 6,013 $ 7,379
Average basic and diluted shares outstanding 4,683,797 4,680,776 4,677,178 4,664,140 4,660,336 4,680,583 4,658,199
Reported basic and diluted earning per share (GAAP) $0.48 $0.41 $0.44 $0.32 $0.47 $1.34 $1.56
Reported return on average assets (GAAP) 0.60% 0.51% 0.56% 0.42% 0.67% 0.56% 0.76%
Reported return on average equity (GAAP) 6.30% 5.44% 5.93% 4.34% 6.45% 5.89% 7.25%
Core basic and diluted earning per share (non-GAAP) $0.48 $0.35 $0.45 $0.37 $0.50 $1.29 $1.58
Core return on average assets (non-GAAP) 0.60% 0.43% 0.58% 0.49% 0.71% 0.54% 0.77%
Core return on average equity (non-GAAP) 6.30% 4.58% 6.09% 5.09% 6.85% 5.66% 7.38%
TANGIBLE EQUITY AND TANGIBLE ASSETS
(PERIOD END)
Total shareholders' equity (GAAP) $ 142,149 $ 141,781 $ 140,523 $ 138,578 $ 134,806 $ 142,149 $ 134,806
Less: intangible assets (27,208) (27,532) (27,857) (28,201) (26,305) (27,208) (26,305)
Tangible equity (non-GAAP) $ 114,941 $ 114,249 $ 112,666 $ 110,377 $ 108,501 $ 114,941 $ 108,501
Total assets (GAAP) $ 1,521,896 $ 1,515,881 $ 1,497,531 $ 1,476,143 $ 1,341,091 $ 1,521,896 $ 1,341,091
Less: intangible assets (27,208) (27,532) (27,857) (28,201) (26,305) (27,208) (26,305)
Tangible assets (non-GAAP) $ 1,494,688 $ 1,488,349 $ 1,469,674 $ 1,447,942 $ 1,314,786 $ 1,494,688 $ 1,314,786
Total equity to total assets at end of period (GAAP) 9.34% 9.35% 9.38% 9.39% 10.05% 9.34% 10.05%
Book value per share (GAAP) $ 30.34 $ 30.28 $ 30.03 $ 29.67 $ 28.93 $ 30.34 $ 28.93
Tangible equity to tangible assets at end of period (non-GAAP) 7.69% 7.68% 7.67% 7.62% 8.25% 7.69% 8.25%
Tangible book value per share (non-GAAP) $ 24.53 $ 24.40 $ 24.08 $ 23.63 $ 23.28 $ 24.53 $ 23.28
TANGIBLE EQUITY AND TANGIBLE ASSETS
(AVERAGE)
Total shareholders' equity (GAAP) $ 142,972 $ 142,318 $ 141,061 $ 135,979 $ 133,955 $ 142,124 $ 133,714
Less: intangible assets (27,391) (27,715) (28,065) (26,897) (26,427) (27,721) (26,646)
Tangible equity (non-GAAP) $ 115,581 $ 114,603 $ 112,996 $ 109,082 $ 107,528 $ 114,403 $ 107,068
Return on average equity (GAAP) 6.30% 5.44% 5.93% 4.34% 6.45% 5.89% 7.25%
Return on average tangible equity (non-GAAP) 7.79% 6.75% 7.41% 5.40% 8.04% 7.32% 9.05%

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

Source:Chemung Financial Corporation