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Chemung Financial Reports First Quarter 2015 Net Income of $2.3 Million, or $0.48 Per Share, on Net Interest Income of $12.3 Million

ELMIRA, N.Y., April 23, 2015 (GLOBE NEWSWIRE) -- Chemung Financial Corporation (Nasdaq:CHMG), the parent company of Chemung Canal Trust Company ("the Bank"), today reported net income of $2.3 million, or $0.48 per share, for the first quarter of 2015, compared to $2.1 million, or $0.44 per share, for the first quarter of 2014.

Ronald M. Bentley, President and CEO, stated:

"The continued growth in our commercial loan portfolio drove a $22 million increase in our loans outstanding and a 2.6% increase in net interest income. Higher revenue in our Wealth Management Group enabled us to increase our non-interest income by 4.5% year over year. Managing expenses is a priority for us and we continue to look for opportunities to gain efficiencies in our day-to-day operations."

First Quarter Highlights1

  • Loans increased $22.0 million, or 2.0%
  • Deposits increased $88.1 million, or 6.9%
  • Net interest income increased $0.3 million, or 2.6%
  • Provision for loan losses decreased $0.2 million, or 39.0%
  • Non-interest income increased $0.2 million, or 4.5%
  • Dividends declared during the quarter were $0.26

1 Balance sheet comparisons are calculated for March 31, 2015 versus December 31, 2014. Income statement comparisons are calculated for the first quarter of 2015 versus prior-year first quarter.

A more detailed summary of financial performance is included below:

Net Interest Income:

Net interest income for the quarter totaled $12.3 million compared with $12.0 million for the same period in the prior year, an increase of $0.3 million, or 2.6%. The increase was due primarily to interest income from our commercial loan portfolio, offset by a decrease in interest and dividends from our taxable securities. Fully taxable equivalent net interest margin was 3.49%, compared with 3.58% for the same period in the prior year. The yield on interest-earning assets decreased eleven basis points, while the cost of interest-bearing liabilities decreased three basis points. Average interest-earning assets increased $68.6 million during the quarter.

Non-Interest Income:

Non-interest income for the quarter was $5.2 million compared with $5.0 million for the same period in the prior year, an increase of $0.2 million, or 4.5%. The increase was due primarily to additional wealth management group fee income of $0.2 million and a gain on sale of other real estate owned of $0.1 million, offset by a $0.1 million decrease in service charges on deposit accounts.

Non-Interest Expense:

Non-interest expense for the quarter was $13.7 million compared with $13.3 million for the same period in the prior year, an increase of $0.4 million, or 2.9%. The increase was due primarily to increases of $0.4 million in pension and other employee benefits and $0.1 million in furniture and equipment expenses, offset by a decrease of $0.1 million in merger and acquisition expenses. The $0.4 million increase in pension and other employee benefits was due to the adoption of updated mortality tables at December 31, 2014, which increased the life expectancy of employees, and a reduced discount rate for determining pension costs.

Asset Quality:

Non-performing loans totaled $10.4 million at March 31, 2015, or 0.91% of total loans, compared with $7.8 million at December 31, 2014, or 0.69% of total loans. The increase in non-performing loans at March 31, 2015 was primarily in the commercial loan segment of the loan portfolio. Non-performing assets, which are comprised of non-performing loans and other real estate owned, were $12.9 million, or 0.82% of total assets, at March 31, 2015, compared with $10.8 million, or 0.71% of total assets, at December 31, 2014. The Corporation's ratio of non-performing assets to total assets compared favorably to our peer group ratio of 1.11% at December 31, 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 first quarter of 2015 and 2014 was $0.4 and $0.6 million, respectively. Net charge-offs for the quarter were $0.2 million compared with $0.3 million for the same period in the prior year.

At March 31, 2015 the allowance for loan losses was $13.9 million, compared with $13.7 million at December 31, 2014. The allowance for loan losses was 133.3% of non-performing loans at March 31, 2015, compared with 176.0% at December 31, 2014. The ratio of the allowance for loan losses to total loans was 1.21% at March 31, 2015, compared with 1.22% at December 31, 2014.

Balance Sheet Activity:

Assets totaled $1.585 billion at March 31, 2015 compared with $1.525 billion at December 31, 2014, an increase of $60.2 million, or 4.0%. The growth was due primarily to increases of $55.7 million, or 191.0%, in cash and cash equivalents and $22.0 million, or 2.0%, in the loan portfolio, partially offset by a decrease of $15.7 million, or 5.4% in investment securities. The increase in cash and cash equivalents can be attributed to the seasonal inflow of municipal deposits, offset by the reduction of FHLB overnight advances. The increase in loans can be attributed to increases of $33.2 million in commercial loans and $1.8 million in mortgages, offset by a $13.0 million decrease in consumer loans, attributed mostly to the indirect loan portfolio. The $15.7 million decrease in investment securities can be mostly attributed to bonds that were called or matured during the quarter.

Deposits totaled $1.368 billion at March 31, 2015 compared with $1.280 billion at December 31, 2014, an increase of $88.1 million, or 6.9%. The growth was mostly attributable to increases of $83.6 million in money market accounts, $16.8 million in interest-bearing demand deposits, and $10.5 million in non-interest bearing demand deposits. Partially offsetting the increases noted above was a $23.9 million decrease in time deposits. The changes in money market accounts, interest-bearing demand deposits, and time deposits can be attributed to the seasonal net inflow of deposits from our municipal clients.

Total equity was $136.3 million at March 31, 2015 compared with $133.6 million at December 31, 2014, an increase of $2.7 million, or 2.0%. The increase was primarily due to earnings of $2.3 million, a reduction of $1.0 million in accumulated other comprehensive loss, and a reduction of $0.5 million in treasury stock, offset by $1.2 million in dividends declared during the quarter.

The total equity to total assets ratio was 8.60% at March 31, 2015 compared with 8.77% at December 31, 2014. The tangible equity to tangible assets ratio was 7.04% at March 31, 2015 compared with 7.13% at December 31, 2014. Book value per share increased to $28.92 at March 31, 2015 from $28.44 at December 31, 2014. As of March 31, 2015, 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 $1.979 billion at March 31, 2015 compared with $1.956 billion at December 31, 2014, an increase of $23.1 million, or 1.2%.

About Chemung Financial Corporation:

Chemung Financial Corporation is a $1.6 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.

Chemung Financial Corporation
Consolidated Balance Sheets (Unaudited)
March 31, Dec. 31, Sept. 30, June 30, March 31,
(Dollars in thousands, except share data) 2015 2014 2014 2014 2014
ASSETS
Cash and due from financial institutions $ 29,643 $ 28,130 $ 31,957 $ 35,981 $ 34,478
Interest-bearing deposits in other financial institutions 55,230 1,033 3,069 30,301 22,670
Total cash and cash equivalents 84,873 29,163 35,026 66,282 57,148
Trading assets, at fair value 601 549 483 450 413
Securities available for sale 266,307 280,507 288,097 286,398 337,134
Securities held to maturity 5,693 5,831 5,430 5,274 6,126
FHLB and FRB stocks, at cost 4,148 5,535 4,362 4,730 4,482
Total investment securities 276,148 291,873 297,889 296,402 347,742
Commercial 652,217 619,002 601,018 581,170 542,082
Mortgage 198,628 196,806 192,870 194,603 196,396
Consumer 292,727 305,766 320,294 308,580 286,087
Loans, net of deferred loan fees 1,143,572 1,121,574 1,114,182 1,084,353 1,024,565
Allowance for loan losses (13,892) (13,686) (13,151) (13,632) (13,155)
Loans, net 1,129,680 1,107,888 1,101,031 1,070,721 1,011,410
Loans held for sale 628 665 1,167 914 75
Premises and equipment, net 31,548 32,287 32,431 29,938 29,351
Goodwill 21,824 21,824 21,824 21,824 21,824
Other intangible assets, net 4,763 5,067 5,384 5,708 6,033
Accrued interest receivable and other assets 34,707 35,223 28,322 23,642 23,535
Total assets $ 1,584,772 $ 1,524,539 $ 1,523,557 $ 1,515,881 $ 1,497,531
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing demand deposits $ 376,773 $ 366,298 $ 372,916 $ 365,056 $ 354,727
Interest-bearing demand deposits 127,593 110,819 138,751 124,803 114,507
Insured money market accounts 476,464 392,871 391,671 393,390 387,912
Savings deposits 199,349 198,183 196,406 199,664 198,876
Time deposits 187,951 211,843 211,255 225,515 235,868
Total deposits 1,368,130 1,280,014 1,310,999 1,308,428 1,291,890
FHLB overnight advances -- 30,830 -- -- --
Securities sold under agreements to repurchase 31,084 29,652 30,981 30,746 30,646
FHLB advances and other debt 22,259 22,286 27,125 24,520 25,189
Accrued interest payable and other liabilities 27,006 28,129 14,891 10,406 9,283
Total liabilities 1,448,479 1,390,911 1,383,996 1,374,100 1,357,008
Shareholders' equity
Common stock 53 53 53 53 53
Additional-paid-in capital 45,477 45,355 45,555 45,494 45,516
Retained earnings 115,450 114,383 111,105 112,624 111,895
Treasury stock, at cost (16,900) (17,378) (17,640) (17,640) (17,728)
Accumulated other comprehensive income (loss) (7,787) (8,785) 488 1,250 787
Total shareholders' equity 136,293 133,628 139,561 141,781 140,523
Total liabilities and shareholders' equity $ 1,584,772 $ 1,524,539 $ 1,523,557 $ 1,515,881 $ 1,497,531
Period-end shares outstanding 4,712,156 4,699,186 4,685,627 4,682,369 4,679,396
Chemung Financial Corporation
Consolidated Statements of Income (Unaudited)
Three Months Ended
March, 31 Percent
(Dollars in thousands, except share and per share data) 2015 2014 Change
Interest and dividend income:
Loans, including fees $ 11,903 $ 11,168 6.6
Taxable securities 1,089 1,503 (27.5)
Tax exempt securities 219 264 (17.0)
Interest-bearing deposits 23 19 21.1
Total interest and dividend income 13,234 12,954 2.2
Interest expense:
Deposits 486 522 (6.9)
Securities sold under agreements to repurchase 209 209 0.0
Borrowed funds 197 190 3.7
Total interest expense 892 921 (3.1)
Net interest income 12,342 12,033 2.6
Provision for loan losses 390 639 (39.0)
Net interest income after provision for loan losses 11,952 11,394 4.9
Non-interest income:
Wealth management group fee income 2,126 1,883 12.9
Service charges on deposit accounts 1,138 1,232 (7.6)
Net gains on securities transactions 50 -- N/M
Net gains on sales of loans held for sale 52 41 26.8
Net gains (losses) on sales of other real estate owned 78 (30) N/M
Other 1,742 1,838 (5.2)
Total non-interest income 5,186 4,964 4.5
Non-interest expense:
Salaries and wages 5,100 5,153 (1.0)
Pension and other employee benefits 1,729 1,359 27.2
Net occupancy 1,850 1,793 3.2
Furniture and equipment 733 630 16.3
Data processing 1,561 1,481 5.4
Professional services 269 222 21.2
Amortization of intangible assets 304 344 (11.6)
Marketing and advertising 235 293 (19.8)
Other real estate owned expense 84 87 (3.4)
FDIC insurance 286 269 6.3
Loan expense 140 149 (6.0)
Merger and acquisition expenses -- 86 (100.0)
Other 1,445 1,477 (2.2)
Total non-interest expense 13,736 13,343 2.9
Income before income tax expense 3,402 3,015 12.8
Income tax expense 1,126 951 18.4
Net income $ 2,276 $ 2,064 10.3
Basic and diluted earnings per share $ 0.48 $ 0.44
Cash dividends declared per share 0.26 0.26
Average basic and diluted shares outstanding 4,706,774 4,677,178
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,
(Dollars in thousands, except share and per share data) 2015 2014 2014 2014 2014
RESULTS OF OPERATIONS
Interest income $ 13,234 $ 13,922 $ 13,341 $ 12,996 $ 12,954
Interest expense 892 888 915 921 921
Net interest income 12,342 13,034 12,426 12,075 12,033
Provision for loan losses 390 1,650 589 1,103 639
Net interest income after provision for loan losses 11,952 11,384 11,837 10,972 11,394
Non-interest income 5,186 11,400 4,986 5,406 4,964
Non-interest expense 13,736 15,792 17,763 13,579 13,343
Income (loss) before income tax expense (benefit) 3,402 6,992 (940) 2,799 3,015
Income tax expense (benefit) 1,126 2,510 (621) 869 951
Net income (loss) $ 2,276 $ 4,482 $ (319) $ 1,930 $ 2,064
Basic and diluted earnings (loss) per share $ 0.48 $ 0.96 $ (0.07) $ 0.41 $ 0.44
Average basic and diluted shares outstanding 4,706,774 4,690,519 4,683,797 4,680,776 4,677,178
PERFORMANCE RATIOS
Return on average assets 0.59% 1.17% (0.08)% 0.51% 0.56%
Return on average equity 6.79% 12.54% (0.90)% 5.44% 5.93%
Return on average tangible equity (a) 8.45% 15.49% (1.11)% 6.75% 7.41%
Efficiency ratio (b) 76.26% 85.10% 75.07% 77.21% 77.28%
Non-interest expense to average assets (c) 3.57% 4.11% 3.55% 3.62% 3.64%
Loans to deposits 83.59% 87.62% 84.99% 82.87% 79.31%
YIELDS / RATES - Fully Taxable Equivalent
Yield on loans 4.28% 4.49% 4.33% 4.40% 4.51%
Yield on investments 1.83% 1.98% 1.95% 1.91% 2.09%
Yield on interest-earning assets 3.74% 3.96% 3.82% 3.77% 3.85%
Cost of interest-bearing deposits 0.20% 0.21% 0.22% 0.22% 0.23%
Cost of borrowings 2.74% 2.65% 2.85% 2.93% 2.91%
Cost of interest-bearing liabilities 0.35% 0.36% 0.37% 0.37% 0.38%
Interest rate spread 3.39% 3.60% 3.45% 3.40% 3.47%
Net interest margin, fully taxable equivalent 3.49% 3.71% 3.55% 3.51% 3.58%
CAPITAL
Total equity to total assets at end of period 8.60% 8.77% 9.16% 9.35% 9.38%
Tangible equity to tangible assets at end of period (a) 7.04% 7.13% 7.51% 7.68% 7.67%
Book value per share $ 28.92 $ 28.44 $ 29.78 $ 30.28 $ 30.03
Tangible book value per share 23.28 22.71 23.98 24.40 24.08
Period-end market value per share 28.30 27.66 28.09 29.54 27.12
Dividends declared per share 0.26 0.26 0.26 0.26 0.26
AVERAGE BALANCES
Loans (d) $ 1,132,473 $ 1,112,297 $ 1,097,133 $ 1,047,181 $ 1,007,415
Earning assets 1,450,249 1,410,804 1,404,165 1,400,174 1,381,604
Total assets 1,558,919 1,522,834 1,509,315 1,504,153 1,488,577
Deposits 1,338,913 1,307,305 1,301,083 1,298,159 1,282,917
Total equity 135,974 141,845 142,944 142,318 141,061
Tangible equity (a) 109,219 114,786 115,553 114,603 112,996
ASSET QUALITY
Net charge-offs $ 184 $ 1,116 $ 1,070 $ 625 $ 260
Non-performing loans (e) 10,419 7,778 7,209 7,712 8,567
Non-performing assets (f) 12,925 10,843 10,328 8,345 8,808
Allowance for loan losses 13,892 13,686 13,151 13,632 13,155
Annualized net charge-offs to average loans 0.07% 0.40% 0.39% 0.24% 0.10%
Non-performing loans to total loans 0.91% 0.69% 0.65% 0.71% 0.84%
Non-performing assets to total assets 0.82% 0.71% 0.68% 0.55% 0.59%
Allowance for loan losses to total loans 1.21% 1.22% 1.18% 1.26% 1.28%
Allowance for loan losses to non-performing loans 133.33% 175.96% 182.42% 176.76% 153.55%
(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 less legal settlement 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) For the non-interest expense to average assets ratio, non-interest expense does not include legal settlement expense.
(d) Loans include loans held for sale. Loans do not reflect the allowance for loan losses.
(e) Non-performing loans include non-accrual loans only.
(f) 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 (loss), 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 Three Months Ended
March 31, Dec. 31, Sept. 30, June 30, March 31,
(amounts in thousands, except per share data) 2015 2014 2014 2014 2014
CORE NET INCOME
Reported net income (loss) (GAAP) $ 2,276 $ 4,482 $ (319) $ 1,930 $ 2,064
Net gain on securities transactions (net of tax) (31) (3,907) -- (322) --
Legal settlement (net of tax) -- -- 2,617 -- --
Merger and acquisition related expenses (net of tax) -- -- -- 18 53
Core net income (non-GAAP) $ 2,245 $ 575 $ 2,298 $ 1,626 $ 2,117
Average basic and diluted shares outstanding 4,706,774 4,690,519 4,683,797 4,680,776 4,677,178
Reported basic and diluted earnings (loss) per share (GAAP) $0.48 $0.96 ($0.07) $0.41 $0.44
Reported return on average assets (GAAP) 0.59% 1.17% (0.08)% 0.51% 0.56%
Reported return on average equity (GAAP) 6.79% 12.54% (0.90)% 5.44% 5.93%
Core basic and diluted earnings per share (non-GAAP) $0.48 $0.12 $0.49 $0.35 $0.45
Core return on average assets (non-GAAP) 0.58% 0.15% 0.60% 0.43% 0.58%
Core return on average equity (non-GAAP) 6.70% 1.61% 6.38% 4.58% 6.09%
TANGIBLE EQUITY AND TANGIBLE ASSETS
(PERIOD END)
Total shareholders' equity (GAAP) $ 136,293 $ 133,628 $ 139,561 $ 141,781 $ 140,523
Less: intangible assets (26,587) (26,891) (27,208) (27,532) (27,857)
Tangible equity (non-GAAP) $ 109,706 $ 106,737 $ 112,353 $ 114,249 $ 112,666
Total assets (GAAP) $ 1,584,772 $ 1,524,539 $ 1,523,557 $ 1,515,881 $ 1,497,531
Less: intangible assets (26,587) (26,891) (27,208) (27,532) (27,857)
Tangible assets (non-GAAP) $ 1,558,185 $ 1,497,648 $ 1,496,349 $ 1,488,349 $ 1,469,674
Total equity to total assets at end of period (GAAP) 8.60% 8.77% 9.16% 9.35% 9.38%
Book value per share (GAAP) $ 28.92 $ 28.44 $ 29.78 $ 30.28 $ 30.03
Tangible equity to tangible assets at end of period (non-GAAP) 7.04% 7.13% 7.51% 7.68% 7.67%
Tangible book value per share (non-GAAP) $ 23.28 $ 22.71 $ 23.98 $ 24.40 $ 24.08
TANGIBLE EQUITY AND TANGIBLE ASSETS
(AVERAGE)
Total shareholders' equity (GAAP) $ 135,974 $ 141,845 $ 142,944 $ 142,318 $ 141,061
Less: intangible assets (26,755) (27,059) (27,391) (27,715) (28,065)
Tangible equity (non-GAAP) $ 109,219 $ 114,786 $ 115,553 $ 114,603 $ 112,996
Return on average equity (GAAP) 6.79% 12.54% (0.90)% 5.44% 5.93%
Return on average tangible equity (non-GAAP) 8.45% 15.49% (1.11)% 6.75% 7.41%

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 2014 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: Karl F. Krebs, EVP and CFO kkrebs@chemungcanal.com Phone: 607-737-3714

Source:Chemung Financial Corporation