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Chemung Financial Reports Second Quarter 2015 Net Income of $2.6 Million, or $0.55 Per Share, on Net Interest Income of $12.6 Million

ELMIRA, N.Y., July 23, 2015 (GLOBE NEWSWIRE) -- Chemung Financial Corporation (Nasdaq:CHMG), the parent company of Chemung Canal Trust Company ("the Bank"), today reported net income of $2.6 million, or $0.55 per share, for the second quarter of 2015 compared to $1.9 million, or $0.41 per share, for the second quarter of 2014.

Ronald M. Bentley, Chemung Financial Corporation CEO stated:

"The continued growth in our commercial loan portfolio drove a $29 million increase in loans outstanding during the year and a 4.7% increase in net interest income in the second quarter over the same period in the prior year. Increasing net interest income and managing expenses remains a priority for us and we continue to look for opportunities to enhance income and gain efficiencies in our day-to-day operations."

Second Quarter Highlights1

  • Loans, net of deferred fees increased $28.8 million, or 2.6%
  • Commercial loans increased $46.3 million, or 7.5%
  • Deposits increased $52.0 million, or 4.1%
  • Net interest income increased $0.5 million, or 4.7%
  • Provision for loan losses decreased $0.8 million, or 76.5%
  • Dividends declared during the quarter were $0.26

A more detailed summary of financial performance follows:

1 Balance sheet comparisons are calculated for June 30, 2015 versus December 31, 2014. Income statement comparisons are calculated for the second quarter of 2015 versus prior-year second quarter.

2nd Quarter vs 1st Quarter 2015

Net Interest Income:

Net interest income for the quarter totaled $12.6 million compared with $12.3 million for the prior quarter, an increase of $0.3 million, or 2.5%. The increase was due primarily to interest income from our commercial loan portfolio and interest and dividends from our taxable securities. Fully taxable equivalent net interest margin was 3.50%, compared with 3.49% for the prior quarter. The yield on interest-earning assets was flat, while the cost of interest-bearing liabilities decreased one basis point. Average interest-earning assets increased $12.6 million compared to the prior quarter.

Non-Interest Income:

Non-interest income for the quarter was $5.3 million compared with $5.2 million for the prior quarter, an increase of $0.1 million, or 2.7%. The increase was primarily due to increases of $0.2 million in net gains on security transactions, $0.1 million in service charges on deposit accounts, and $0.1 million in wealth management group fee income. These increases were offset by a $0.2 million decrease in other non-interest income. The $0.2 million in net gains on security transactions was due to the sale of $48.3 million of U.S. government sponsored agencies and Treasury securities during the quarter to reallocate funds to higher yielding mortgage-backed securities. The $0.2 million decrease in other non-interest income was mostly due to additional other real estate owned rental income during the prior quarter.

Non-Interest Expense:

Non-interest expense for the quarter was $13.8 million compared with $13.7 million for the prior quarter, an increase of $0.1 million, or 0.6%. The increase was due primarily to increases of $0.1 million in professional services, other real estate owned expenses, and salaries and wages, respectively. These increases were offset by decreases of $0.2 million in pension and other employee benefits and $0.1 million in other non-interest expense. The $0.1 million increase in other real estate owned expenses was due to a $0.1 million fair market adjustment on three properties with pending accepted offers. The $0.2 million decrease in pension and other employee benefits was mostly due to lower healthcare claims and reimbursement of workers' compensation costs from the prior year.

2nd Quarter 2015 vs 2014

Net Interest Income:

Net interest income for the quarter totaled $12.6 million compared with $12.1 million for the same period in the prior year, an increase of $0.5 million, or 4.7%. 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 3.50%, compared with 3.51% for the same period in the prior year. The yield on interest-earning assets and cost of interest-bearing liabilities both decreased three basis points, respectively. Average interest-earning assets increased $62.7 million compared to the same period in the prior year.

Non-Interest Income:

Non-interest income for the quarter was $5.3 million compared with $5.4 million for the same period in the prior year, a decrease of $0.1 million, or 1.5%. The decrease was due primarily to a decrease in net gains on security transactions, as $48.3 million of U.S. government sponsored agencies and Treasury securities were sold in the second quarter of 2015 to reallocate funds to higher yielding mortgage-backed securities resulting in a gain on sale of $0.2 million, compared to $29.2 million sold during the same period in the prior year, generating a $0.5 million gain. In addition, service charges on deposit accounts decreased $0.1 million, which was offset by additional wealth management group fee income of $0.2 million.

Non-Interest Expense:

Non-interest expense for the quarter was $13.8 million compared with $13.6 million for the same period in the prior year, an increase of $0.2 million, or 1.8%. The increase was due primarily to increases of $0.2 million in other real estate owned expenses and increases of $0.1 million in net occupancy, pension and other employee benefits, data processing, and furniture and equipment, respectively. These increases were offset by a $0.3 million decrease in other non-interest expense. The $0.2 million increase in other real estate owned expenses was due in part to a $0.1 million fair market adjustment on three properties with pending accepted offers.

Asset Quality

Non-performing loans totaled $12.9 million at June 30, 2015, or 1.12% 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 June 30, 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 $15.2 million, or 0.98% of total assets, at June 30, 2015, compared with $10.8 million, or 0.71% of total assets, at December 31, 2014.

Management performs an ongoing assessment of the adequacy of the allowance for loan losses based upon a number of factors including an analysis of historical loss factors, collateral evaluations, recent charge-off experience, credit quality of the loan portfolio, current economic conditions and loan growth. Based on this analysis, the provision for loan losses for the second quarter of 2015 and 2014 were $0.3 million and $1.1 million, respectively. Net charge-offs for the quarter were $0.1 million compared with $0.6 million for the same period in the prior year.

At June 30, 2015 the allowance for loan losses was $14.0 million, compared with $13.7 million at December 31, 2014. The allowance for loan losses was 109.1% of non-performing loans at June 30, 2015, compared with 176.0% at December 31, 2014. The ratio of the allowance for loan losses to total loans was 1.22% at June 30, 2015, compared with 1.22% at December 31, 2014.

Balance Sheet Activity

Assets totaled $1.554 billion at June 30, 2015 compared with $1.525 billion at December 31, 2014, an increase of $29.1 million, or 1.9%. The growth was due primarily to increases of $28.8 million, or 2.6%, in the loan portfolio, $9.6 million, or 3.3% in investment securities, partially offset by a decrease of $7.6 million, or 21.6% in accrued interest receivable and other assets. The increase in loans can be attributed to increases of $46.3 million in commercial loans and $1.6 million in mortgages, offset by a $19.1 million decrease in consumer loans, attributed mostly to the indirect loan portfolio after ending promotional rates during the last quarter of 2014. The $9.6 million increase in investment securities can be mostly attributed to the investment of excess cash from our municipal client deposits into higher yielding mortgage-backed securities during the quarter. The $7.6 million decrease in accrued interest receivable and other assets can be mostly attributed to the receipt of insurance proceeds from the Wealth Management Group legal settlement during the second quarter.

Deposits totaled $1.332 billion at June 30, 2015 compared with $1.280 billion at December 31, 2014, an increase of $52.0 million, or 4.1%. The growth was mostly attributable to increases of $54.5 million in money market accounts, $19.2 million in non-interest-bearing demand deposits, and $8.2 million in interest-bearing demand deposits. Partially offsetting the increases noted above was a $31.1 million decrease in time deposits. The changes in money market accounts and demand deposits can be attributed to the seasonal net inflow of deposits from our municipal clients.

Total equity was $136.5 million at June 30, 2015 compared with $133.6 million at December 31, 2014, an increase of $2.9 million, or 2.2%. The increase was primarily due to earnings of $4.9 million, a reduction of $0.7 million in treasury stock, offset by a $0.3 million increase in accumulated other comprehensive loss and $2.4 million in dividends declared during the year.

The total equity to total assets ratio was 8.79% at June 30, 2015 compared with 8.77% at December 31, 2014. The tangible equity to tangible assets ratio was 7.22% at June 30, 2015 compared with 7.13% at December 31, 2014. Book value per share increased to $28.92 at June 30, 2015 from $28.44 at December 31, 2014. As of June 30, 2015, 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 $1.917 billion at June 30, 2015 compared with $1.956 billion at December 31, 2014, a decrease of $38.8 million, or 2.0%.

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)
(In thousands, except share data) June 30,
2015
March 31,
2015
Dec. 31,
2014
Sept. 30,
2014
June 30,
2014
ASSETS
Cash and due from financial institutions $ 28,014 $ 29,643 $ 28,130 $ 31,957 $ 35,981
Interest-bearing deposits in other financial institutions 1,650 55,230 1,033 3,069 30,301
Total cash and cash equivalents 29,664 84,873 29,163 35,026 66,282
Trading assets, at fair value 635 601 549 483 450
Securities available for sale 290,571 266,307 280,507 288,097 286,398
Securities held to maturity 6,045 5,693 5,831 5,430 5,274
FHLB and FRB stocks, at cost 4,873 4,148 5,535 4,362 4,730
Total investment securities 301,489 276,148 291,873 297,889 296,402
Commercial 665,303 652,217 619,002 601,018 581,170
Mortgage 198,469 198,628 196,806 192,870 194,603
Consumer 286,634 292,727 305,766 320,294 308,580
Loans, net of deferred loan fees 1,150,406 1,143,572 1,121,574 1,114,182 1,084,353
Allowance for loan losses (14,028) (13,892) (13,686) (13,151) (13,632)
Loans, net 1,136,378 1,129,680 1,107,888 1,101,031 1,070,721
Loans held for sale 668 628 665 1,167 914
Premises and equipment, net 30,874 31,548 32,287 32,431 29,938
Goodwill 21,824 21,824 21,824 21,824 21,824
Other intangible assets, net 4,478 4,763 5,067 5,384 5,708
Accrued interest receivable and other assets 27,623 34,707 35,223 28,322 23,642
Total assets $ 1,553,633 $ 1,584,772 $ 1,524,539 $ 1,523,557 $ 1,515,881
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing demand deposits $ 385,467 $ 376,773 $ 366,298 $ 372,916 $ 365,056
Interest-bearing demand deposits 118,988 127,593 110,819 138,751 124,803
Insured money market accounts 447,360 476,464 392,871 391,671 393,390
Savings deposits 199,437 199,349 198,183 196,406 199,664
Time deposits 180,725 187,951 211,843 211,255 225,515
Total deposits 1,331,977 1,368,130 1,280,014 1,310,999 1,308,428
FHLB overnight advances 15,600 -- 30,830 -- --
Securities sold under agreements to repurchase 31,882 31,084 29,652 30,981 30,746
FHLB advances and other debt 22,201 22,259 22,286 27,125 24,520
Accrued interest payable and other liabilities 15,453 27,006 28,129 14,891 10,406
Total liabilities 1,417,113 1,448,479 1,390,911 1,383,996 1,374,100
Shareholders' equity
Common stock 53 53 53 53 53
Additional-paid-in capital 45,468 45,477 45,355 45,555 45,494
Retained earnings 116,817 115,450 114,383 111,105 112,624
Treasury stock, at cost (16,704) (16,900) (17,378) (17,640) (17,640)
Accumulated other comprehensive income (loss) (9,114) (7,787) (8,785) 488 1,250
Total shareholders' equity 136,520 136,293 133,628 139,561 141,781
Total liabilities and shareholders' equity $ 1,553,633 $ 1,584,772 $ 1,524,539 $ 1,523,557 $ 1,515,881
Period-end shares outstanding 4,719,874 4,712,156 4,699,186 4,685,627 4,682,369
Chemung Financial Corporation
Consolidated Statements of Income (Unaudited)
Three Months Ended
June 30,
Percent Six Months Ended
June 30,
Percent
(In thousands, except share and per share data) 2015 2014 Change 2015 2014 Change
Interest and dividend income:
Loans, including fees $ 12,096 $ 11,449 5.7 $ 23,999 $ 22,617 6.1
Taxable securities 1,164 1,264 (7.9) 2,253 2,768 (18.6)
Tax exempt securities 239 258 (7.4) 458 522 (12.3)
Interest-bearing deposits 20 25 (20.0) 43 43 0.0
Total interest and dividend income 13,519 12,996 4.0 26,753 25,950 3.1
Interest expense:
Deposits 492 517 (4.8) 978 1,040 (6.0)
Securities sold under agreements to repurchase 212 212 0.0 421 420 0.2
Borrowed funds 168 192 (12.5) 365 382 (4.5)
Total interest expense 872 921 (5.3) 1,764 1,842 (4.2)
Net interest income 12,647 12,075 4.7 24,989 24,108 3.7
Provision for loan losses 259 1,103 (76.5) 649 1,741 (62.7)
Net interest income after provision for loan losses 12,388 10,972 12.9 24,340 22,367 8.8
Non-interest income:
Wealth management group fee income 2,198 1,989 10.5 4,324 3,872 11.7
Service charges on deposit accounts 1,224 1,350 (9.3) 2,362 2,582 (8.5)
Net gains on securities transactions 252 522 (51.7) 302 522 (42.1)
Net gains on sales of loans held for sale 98 83 18.1 150 125 20.0
Net gains (losses) on sales of other real estate owned 42 (14) N/M 120 (44) N/M
Other 1,512 1,476 2.4 3,254 3,313 (1.8)
Total non-interest income 5,326 5,406 (1.5) 10,512 10,370 1.4
Non-interest expense:
Salaries and wages 5,188 5,156 0.6 10,288 10,309 (0.2)
Pension and other employee benefits 1,557 1,479 5.3 3,286 2,838 15.8
Net occupancy 1,757 1,659 5.9 3,607 3,452 4.5
Furniture and equipment 789 715 10.3 1,522 1,345 13.2
Data processing 1,552 1,414 9.8 3,113 2,895 7.5
Professional services 420 421 (0.2) 689 643 7.2
Amortization of intangible assets 285 324 (12.0) 589 669 (12.0)
Marketing and advertising 271 332 (18.4) 506 625 (19.0)
Other real estate owned expense 224 45 397.8 308 132 133.3
FDIC insurance 280 274 2.2 566 543 4.2
Loan expense 175 146 19.9 315 295 6.8
Merger and acquisition expenses -- 29 (100.0) -- 115 (100.0)
Other 1,325 1,585 (16.4) 2,770 3,062 (9.5)
Total non-interest expense 13,823 13,579 1.8 27,559 26,923 2.4
Income before income tax expense 3,891 2,799 39.0 7,293 5,814 25.4
Income tax expense 1,314 869 51.2 2,440 1,820 34.1
Net income $ 2,577 $ 1,930 33.5 $ 4,853 $ 3,994 21.5
Basic and diluted earnings per share $ 0.55 $ 0.41 $ 1.03 $ 0.85
Cash dividends declared per share 0.26 0.26 0.52 0.52
Average basic and diluted shares outstanding 4,716,734 4,680,776 4,711,699 4,678,977
N/M - Not meaningful
Chemung Financial Corporation
Consolidated Financial Highlights (Unaudited)
As of or for the Three Months Ended As of or for the
Six Months Ended
(In thousands, except share and per share data) June 30,
2015
March 31,
2015
Dec. 31,
2014
Sept. 30,
2014
June 30,
2014
June 30,
2015
June 30,
2014
RESULTS OF OPERATIONS
Interest income $ 13,519 $ 13,234 $ 13,922 $ 13,341 $ 12,996 $ 26,753 $ 25,950
Interest expense 872 892 888 915 921 1,764 1,842
Net interest income 12,647 12,342 13,034 12,426 12,075 24,989 24,108
Provision for loan losses 259 390 1,650 589 1,103 649 1,741
Net interest income after provision for loan losses 12,388 11,952 11,384 11,837 10,972 24,340 22,367
Non-interest income 5,326 5,186 11,400 4,986 5,406 10,512 10,370
Non-interest expense 13,823 13,736 15,792 17,763 13,579 27,559 26,923
Income (loss) before income tax expense (benefit) 3,891 3,402 6,992 (940) 2,799 7,293 5,814
Income tax expense (benefit) 1,314 1,126 2,510 (621) 869 2,440 1,820
Net income (loss) $ 2,577 $ 2,276 $ 4,482 $ (319) $ 1,930 $ 4,853 $ 3,994
Basic and diluted earnings (loss) per share $ 0.55 $ 0.48 $ 0.96 $ (0.07) $ 0.41 $ 1.03 $ 0.85
Average basic and diluted shares outstanding 4,716,734 4,706,774 4,690,519 4,683,797 4,680,776 4,711,699 4,678,977
PERFORMANCE RATIOS
Return on average assets 0.66% 0.59% 1.17% (0.08)% 0.51% 0.63% 0.54%
Return on average equity 7.52% 6.79% 12.54% (0.90)% 5.44% 7.16% 5.68%
Return on average tangible equity (a) 9.32% 8.45% 15.49% (1.11)% 6.75% 8.89% 7.08%
Efficiency ratio (b) 75.83% 76.26% 85.10% 75.07% 77.21% 76.04% 77.25%
Non-interest expense to average assets (c) 3.55% 3.57% 4.11% 3.55% 3.62% 3.56% 3.63%
Loans to deposits 86.37% 83.59% 87.62% 84.99% 82.87% 86.37% 82.87%
YIELDS / RATES - Fully Taxable Equivalent
Yield on loans 4.26% 4.28% 4.49% 4.33% 4.40% 4.27% 4.45%
Yield on investments 1.91% 1.83% 1.98% 1.95% 1.91% 1.87% 2.00%
Yield on interest-earning assets 3.74% 3.74% 3.96% 3.82% 3.77% 3.74% 3.81%
Cost of interest-bearing deposits 0.21% 0.20% 0.21% 0.22% 0.22% 0.21% 0.23%
Cost of borrowings 2.64% 2.74% 2.65% 2.85% 2.93% 2.69% 2.92%
Cost of interest-bearing liabilities 0.34% 0.35% 0.36% 0.37% 0.37% 0.35% 0.37%
Interest rate spread 3.40% 3.39% 3.60% 3.45% 3.40% 3.39% 3.44%
Net interest margin, fully taxable equivalent 3.50% 3.49% 3.71% 3.55% 3.51% 3.50% 3.55%
CAPITAL
Total equity to total assets at end of period 8.79% 8.60% 8.77% 9.16% 9.35% 8.79% 9.35%
Tangible equity to tangible assets at end of period (a) 7.22% 7.04% 7.13% 7.51% 7.68% 7.22% 7.68%
Book value per share $ 28.92 $ 28.92 $ 28.44 $ 29.78 $ 30.28 $ 28.92 $ 30.28
Tangible book value per share 23.35 23.28 22.71 23.98 24.40 23.35 24.40
Period-end market value per share 26.48 28.30 27.66 28.09 29.54 26.48 29.54
Dividends declared per share 0.26 0.26 0.26 0.26 0.26 0.52 0.52
AVERAGE BALANCES
Loans (d) $ 1,141,412 $ 1,132,473 $ 1,112,297 $ 1,097,133 $ 1,047,181 $ 1,136,967 $ 1,027,408
Earning assets 1,462,842 1,450,249 1,410,804 1,404,165 1,400,156 1,456,580 1,390,922
Total assets 1,563,346 1,558,919 1,522,834 1,509,315 1,504,153 1,561,056 1,496,412
Deposits 1,353,895 1,338,913 1,307,305 1,301,083 1,298,159 1,346,452 1,290,581
Total equity 137,386 135,974 141,845 142,944 142,318 136,684 141,693
Tangible equity (a) 110,945 109,219 114,786 115,553 114,603 110,087 113,804
ASSET QUALITY
Net charge-offs (recoveries) $ 123 $ 184 $ 1,116 $ 1,070 $ 625 $ 307 $ 885
Non-performing loans (e) 12,862 10,419 7,778 7,209 7,712 12,862 7,712
Non-performing assets (f) 15,238 12,925 10,843 10,328 8,345 15,238 8,345
Allowance for loan losses 14,028 13,892 13,686 13,151 13,632 14,028 13,632
Annualized net charge-offs to average loans 0.04% 0.07% 0.40% 0.39% 0.24% 0.05% 0.17%
Non-performing loans to total loans 1.12% 0.91% 0.69% 0.65% 0.71% 1.12% 0.71%
Non-performing assets to total assets 0.98% 0.82% 0.71% 0.68% 0.55% 0.98% 0.55%
Allowance for loan losses to total loans 1.22% 1.21% 1.22% 1.18% 1.26% 1.22% 1.26%
Allowance for loan losses to non-performing loans 109.07% 133.33% 175.96% 182.42% 176.76% 109.07% 176.76%
(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 gains 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 Corporation prepares its Consolidated Financial Statements in accordance with GAAP; these financial statements appear on pages 5-6. That presentation provides the reader with an understanding of the Corporation's results that can be tracked consistently from period-to-period and enables a comparison of the Corporation's performance with other companies' GAAP financial statements.

In addition to analyzing the Corporation's results on a reported basis, management uses certain non-GAAP financial measures, because it believes these non-GAAP financial measures provide information to investors about the underlying operational performance and trends of the Corporation and, therefore, facilitate a comparison of the Corporation with the performance of its competitors. Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by other companies.

The SEC has adopted Regulation G, which applies to all public disclosures, including earnings releases, made by registered companies that contain "non-GAAP financial measures." Under Regulation G, companies making public disclosures containing non-GAAP financial measures must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure and a statement of the Corporation's reasons for utilizing the non-GAAP financial measure as part of its financial disclosures. The SEC has exempted from the definition of "non-GAAP financial measures" certain commonly used financial measures that are not based on GAAP. When these exempted measures are included in public disclosures, supplemental information is not required. The following measures used in this Report, which are commonly utilized by financial institutions, have not been specifically exempted by the SEC and may constitute "non-GAAP financial measures" within the meaning of the SEC's new rules, although we are unable to state with certainty that the SEC would so regard them.

Fully Taxable Equivalent Net Interest Income, Net Interest Margin, and Efficiency Ratio

Net interest income is commonly presented on a tax-equivalent basis. That is, to the extent that some component of the institution's net interest income, which is presented on a before-tax basis, is exempt from taxation (e.g., is received by the institution as a result of its holdings of state or municipal obligations), an amount equal to the tax benefit derived from that component is added to the actual before-tax net interest income total. This adjustment is considered helpful in comparing one financial institution's net interest income to that of other institutions or in analyzing any institution's net interest income trend line over time, to correct any analytical distortion that might otherwise arise from the fact that financial institutions vary widely in the proportions of their portfolios that are invested in tax-exempt securities, and that even a single institution may significantly alter over time the proportion of its own portfolio that is invested in tax-exempt obligations. Moreover, net interest income is itself a component of a second financial measure commonly used by financial institutions, net interest margin, which is the ratio of net interest income to average interest-earning assets. For purposes of this measure as well, fully taxable equivalent net interest income is generally used by financial institutions, as opposed to actual net interest income, again to provide a better basis of comparison from institution to institution and to better demonstrate a single institution's performance over time. The Corporation follows these practices.

The efficiency ratio is a non-GAAP financial measures 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 As of or for the
Six Months Ended
June 30,
2015
March 31,
2015
Dec. 31,
2014
Sept. 30,
2014
June 30,
2014
June 30,
2015
June 30,
2014
(In thousands, except per share data)
NET INTEREST MARGIN - FULLY TAXABLE EQUIVALENT
AND EFFICIENCY RATIO
Net interest income (GAAP) $ 12,647 $ 12,342 $ 13,034 $ 12,426 $ 12,075 $ 24,989 $ 24,108
Fully taxable equivalent adjustment 133 136 148 156 170 269 346
Fully taxable equivalent net interest income (non-GAAP) $ 12,780 $ 12,478 $ 13,182 $ 12,582 $ 12,245 $ 25,258 $ 24,454
Non-interest income (GAAP) $ 5,326 $ 5,186 $ 11,400 $ 4,986 $ 5,406 $ 10,512 $ 10,370
Less: net gains on security transactions (252) (50) (6,347) -- (522) (302) (522)
Less: recoveries from other-than-temporary impairments -- -- (50) -- -- -- (465)
Adjusted non-interest income (non-GAAP) $ 5,074 $ 5,136 $ 5,003 $ 4,986 $ 4,884 $ 10,210 $ 9,383
Non-interest expense (GAAP) $ 13,823 $ 13,736 $ 15,792 $ 17,763 $ 13,579 $ 27,559 $ 26,923
Less: merger and acquisition expenses -- -- -- -- (29) -- (115)
Less: amortization of intangible assets (285) (304) (317) (324) (324) (589) (669)
Less: legal settlements -- -- -- (4,250) -- -- --
Adjusted non-interest expense (non-GAAP) $ 13,538 $ 13,432 $ 15,475 $ 13,189 $ 13,226 $ 26,970 $ 26,139
Average interest-earning assets (GAAP) $ 1,462,842 $ 1,450,249 $ 1,410,804 $ 1,404,165 $ 1,400,156 $ 1,456,580 $ 1,390,922
Net interest margin - fully taxable equivalent (non-GAAP) 3.50% 3.49% 3.71% 3.55% 3.51% 3.50% 3.55%
Efficiency ratio (non-GAAP) 75.83% 76.26% 85.10% 75.07% 77.21% 76.04% 77.25%

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 As of or for the
Six Months Ended
June 30,
2015
March 31,
2015
Dec. 31,
2014
Sept. 30,
2014
June 30,
2014
June 30,
2015
June 30,
2014
(In thousands, except per share and ratio data)
TANGIBLE EQUITY AND TANGIBLE ASSETS
(PERIOD END)
Total shareholders' equity (GAAP) $ 136,520 $ 136,293 $ 133,628 $ 139,561 $ 141,781 $ 136,520 $ 141,781
Less: intangible assets (26,302) (26,587) (26,891) (27,208) (27,532) (26,302) (27,532)
Tangible equity (non-GAAP) $ 110,218 $ 109,706 $ 106,737 $ 112,353 $ 114,249 $ 110,218 $ 114,249
Total assets (GAAP) $ 1,553,633 $ 1,584,772 $ 1,524,539 $ 1,523,557 $ 1,515,881 $ 1,553,633 $ 1,515,881
Less: intangible assets (26,302) (26,587) (26,891) (27,208) (27,532) (26,302) (27,532)
Tangible assets (non-GAAP) $ 1,527,331 $ 1,558,185 $ 1,497,648 $ 1,496,349 $ 1,488,349 $ 1,527,331 $ 1,488,349
Total equity to total assets at end of period (GAAP) 8.79% 8.60% 8.77% 9.16% 9.35% 8.79% 9.35%
Book value per share (GAAP) $ 28.92 $ 28.92 $ 28.44 $ 29.78 $ 30.28 $ 28.92 $ 30.28
Tangible equity to tangible assets at end of period (non-GAAP) 7.22% 7.04% 7.13% 7.51% 7.68% 7.22% 7.68%
Tangible book value per share (non-GAAP) $ 23.35 $ 23.28 $ 22.71 $ 23.98 $ 24.40 $ 23.35 $ 24.40

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 As of or for the
Six Months Ended
June 30,
2015
March 31,
2015
Dec. 31,
2014
Sept. 30,
2014
June 30,
2014
June 30,
2015
June 30,
2014
(In thousands, except ratio data)
TANGIBLE EQUITY (AVERAGE)
Total average shareholders' equity (GAAP) $ 137,386 $ 135,974 $ 141,845 $ 142,944 $ 142,318 $ 136,684 $ 141,693
Less: average intangible assets (26,441) (26,755) (27,059) (27,391) (27,715) (26,597) (27,889)
Average tangible equity (non-GAAP) $ 110,945 $ 109,219 $ 114,786 $ 115,553 $ 114,603 $ 110,087 $ 113,804
Return on average equity (GAAP) 7.52% 6.79% 12.54% (0.90)% 5.44% 7.16% 5.68%
Return on average tangible equity (non-GAAP) 9.32% 8.45% 15.49% (1.11)% 6.75% 8.89% 7.08%

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 As of or for the
Six Months Ended
June 30,
2015
March 31,
2015
Dec. 31,
2014
Sept. 30,
2014
June 30,
2014
June 30,
2015
June 30,
2014
(In thousands, except share, per share and ratio data)
CORE NET INCOME
Reported net income (loss) (GAAP) $ 2,577 $ 2,276 $ 4,482 $ (319) $ 1,930 $ 4,853 $ 3,994
Net gains on security transactions (net of tax) (156) (31) (3,907) -- (322) (187) (322)
Legal settlements (net of tax) -- -- -- 2,617 -- -- --
Merger and acquisition related expenses (net of tax) -- -- -- -- 18 -- 71
Core net income (non-GAAP) $ 2,421 $ 2,245 $ 575 $ 2,298 $ 1,626 $ 4,666 $ 3,743
Average basic and diluted shares outstanding 4,716,734 4,706,774 4,690,519 4,683,797 4,680,776 4,711,699 4,678,977
Reported basic and diluted earnings (loss) per share (GAAP) $ 0.55 $ 0.48 $ 0.96 $ (0.07) $ 0.41 $ 1.03 $ 0.85
Reported return on average assets (GAAP) 0.66% 0.59% 1.17% (0.08)% 0.51% 0.63% 0.54%
Reported return on average equity (GAAP) 7.52% 6.79% 12.54% (0.90)% 5.44% 7.16% 5.68%
Core basic and diluted earnings per share (non-GAAP) $0.51 $0.48 $0.12 $0.49 $0.35 $0.99 $0.80
Core return on average assets (non-GAAP) 0.62% 0.58% 0.15% 0.60% 0.43% 0.60% 0.50%
Core return on average equity (non-GAAP) 7.07% 6.70% 1.61% 6.38% 4.58% 6.88% 5.33%

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

Source:Chemung Financial Corporation