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Chemung Financial Reports Annual and Fourth Quarter 2015 Net Income of $9.4 Million, or $2.00 per Share, and $2.1 Million, or $0.45 per Share

ELMIRA, N.Y., Jan. 28, 2016 (GLOBE NEWSWIRE) -- Chemung Financial Corporation (Nasdaq:CHMG), the parent company of Chemung Canal Trust Company (“the Bank”), today reported net income of $9.4 million, or $2.00 per share, for the full year of 2015 compared to $8.2 million, or $1.74 per share, for the full year of 2014. Net income for the fourth quarter of 2015 was $2.1 million, or $0.45 per share, compared to $4.5 million, or $0.96 per share, for the fourth quarter of 2014.

Ronald M. Bentley, Chemung Financial Corporation CEO stated:

“We saw improvements in our earnings for the year, which increased nearly 15% year over year, due to the continued growth in our commercial loan and investment securities portfolios, along with expense control. For 2016 we will focus on increasing net interest income and managing expenses, as we continue to look for opportunities to enhance income and gain efficiencies in our day-to-day operations.”

Fourth Quarter Highlights1

  • Loans, net of deferred fees increased $47.1 million, or 4.2%
  • Commercial loans increased $80.7 million, or 13.0%
  • Deposits increased $120.3 million, or 9.4%
  • Net interest income decreased $0.1 million, or 0.6%
  • Provision for loan losses decreased $1.0 million, or 62.7%
  • Dividends declared during the quarter were $0.26


A more detailed summary of financial performance follows:

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

YTD 2015 vs YTD 2014

Net Interest Income:

Net interest income for the year ended December 31, 2015 totaled $50.6 million compared with $49.6 million for the preceding year, an increase of $1.0 million, or 2.2%. The increase was due primarily to interest income from the commercial loan portfolio, as the year-to-date average commercial loan balance increased $88.6 million when compared to the preceding year. Fully taxable equivalent net interest margin was 3.46%, compared with 3.59% for the preceding year. The decline in net interest margin was a result of the commercial loan portfolio repricing to current market rates. The yield on interest-earning assets decreased by fourteen basis points, while the cost of interest-bearing liabilities decreased two basis points. Average interest-earning assets increased $78.2 million compared to the prior year, primarily in commercial loans.

Non-Interest Income:

Non-interest income for the year ended December 31, 2015 was $20.4 million compared with $26.8 million for the preceding year, a decrease of $6.3 million, or 23.6%. The decrease was primarily due to the $6.3 million net gains on security transactions that occurred during the fourth quarter of 2014, when the Bank sold the majority of its equity securities portfolio, along with decreases of $0.4 million in services charges on deposit accounts and $0.3 million in other non-interest income. These decreases were offset by a $0.8 million increase in wealth management group fee income, due to fee increases that went into effect at the beginning of 2015.

Non-Interest Expense:

Non-interest expense for the year ended December 31, 2015 was $55.4 million compared with $60.5 million for the preceding year, a decrease of $5.1 million, or 8.4%. The decrease was due primarily to the $4.3 million legal settlement that occurred in 2014, relating to the Bank’s Wealth Management Group, and decreases of $0.3 million in professional services, $0.2 million in amortization of intangible assets, $0.2 million in marketing and advertising, and $0.6 million in other non-interest expense. These decreases were offset by a $0.2 million increase in pension and other employee benefits, $0.2 million data processing, and $0.6 million in other real estate owned expenses. The decrease in professional services relates to the consulting costs associated with the rebranding of the Bank’s debit cards from Visa to Mastercard in 2014. The increase in other real estate owned expenses is due to expenses related to maintaining two properties, along with fair market value adjustments during the year.

4th Quarter 2015 vs 4th Quarter 2014

Net Interest Income:

Net interest income for the current quarter totaled $13.0 million, consistent with the same period in the prior year. Interest and fees from loans decreased $0.4 million, while interest and dividend income from securities increased $0.4 million when compared to the same period in the prior year. Average interest-earning assets increased $111.4 million compared to the same period in the prior year. Fully taxable equivalent net interest margin was 3.42%, compared with 3.71% for the same period in the prior year, which included one-time pre-payment fees and purchased credit impairment adjustments of $0.4 million. The yield on interest-earning assets and cost of interest-bearing liabilities decreased thirty and one basis points, respectively.

Non-Interest Income:

Non-interest income for the quarter was $5.0 million compared with $11.4 million for the same period in the prior year, a decrease of $6.4 million, or 55.9%. The decrease was due primarily to the $6.3 million net gain on security transactions that occurred during the fourth quarter of 2014, when the Bank sold the majority of its equity securities portfolio.

Non-Interest Expense:

Non-interest expense for the quarter was $14.2 million compared with $15.8 million for the same period in the prior year, a decrease of $1.6 million, or 9.9%. The decrease was due primarily to decreases of $0.5 million in pension and other employee benefits, $0.2 million in net occupancy, $0.2 million in furniture and equipment, $0.3 million in data processing, $0.3 million in professional services, and $0.3 million in other non-interest expense. These items were offset by increases of $0.1 million in salaries and wages and $0.3 million in other real estate owned expenses. The decrease in pension and other employee benefits was primarily due to lower health care costs during the quarter, as the Bank is self-insured. The decreases in net occupancy, furniture and equipment, data processing, professional services, and other non-interest expense were due to cost savings measures put into place by management during the year. The increase in other real estate owned expenses relates to a fair market value adjustment during the fourth quarter of 2015 for one property, based upon an accepted offer.

4th Quarter vs 3rd Quarter 2015

Net Interest Income:

Net interest income for the fourth quarter totaled $13.0 million compared with $12.7 million for the preceding quarter, an increase of $0.3 million, or 2.1%. The increase was due primarily to interest income from the commercial loan portfolio and interest and dividends from taxable securities. Average interest-earning assets increased $48.1 million compared to the preceding quarter, primarily in commercial loans and investment securities. Fully taxable equivalent net interest margin was 3.42%, compared with 3.45% for the preceding quarter. The decline in net interest margin was a result of the commercial loan portfolio repricing to current market rates. The yield on interest-earning assets decreased by four basis points, while the cost of interest-bearing liabilities remained consistent with the prior quarter.

Non-Interest Income:

Non-interest income for the fourth quarter was $5.0 million compared with $4.9 million for the preceding quarter, an increase of $0.1 million, or 2.3%. The increase was primarily due to increases of $0.2 million in other non-interest income and $0.1 million in net gains on security transactions. These increases were offset by decreases of less than $0.1 million in wealth management group fee income, service charges on deposit accounts, net gains on sales of loans held for sale and net losses on sales of other real estate owned.

Non-Interest Expense:

Non-interest expense for the fourth quarter was $14.2 million compared with $13.6 million for the preceding quarter, an increase of $0.6 million, or 4.4%. The increase was due primarily to increases of $0.7 million in salaries and wages, $0.2 million in professional services, and $0.3 million in other real estate owned expenses. These increases were offset by a $0.5 million decrease in pension and other employee benefits. The increase in salaries and wages was due to an adjustment to the incentive awards during the fourth quarter, as annual targets were met. The increase in other real estate owned expenses was due to a fair market value adjustment to one property, based on an accepted offer from an independent third-party. The decrease in pension and other employee benefits was due to lower health care costs, as the Bank is self-insured, and a year-end adjustment to the pension liability due to a larger than expected number of employees retiring during the year and lower than expected salary increases.

Asset Quality

Non-performing loans totaled $12.2 million at December 31, 2015, or 1.05% 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 December 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 $13.8 million, or 0.85% of total assets, at December 31, 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 fourth quarter of 2015 and 2014 were $0.6 million and $1.7 million, respectively. Net charge-offs for the fourth quarter of 2015 were $0.4 million compared with $1.1 million for the same period in the prior year. The provision for loan losses for the year ended 2015 and 2014 were $1.6 million and $4.0 million, respectively. Net charge-offs for the year ended 2015 were $1.0 million compared with $3.1 million for the same period in the prior year.

At December 31, 2015 the allowance for loan losses was $14.3 million, compared with $13.7 million at December 31, 2014. The allowance for loan losses was 116.7% of non-performing loans at December 31, 2015, compared with 176.0% at December 31, 2014. The decline in the allowance for loan losses to non-performing loans is due to two commercial real estate loans which were placed in non-accrual status during the year. The Bank believes the specific allowance for both of these commercial real estate loans are adequate to absorb probably incurred losses. The ratio of the allowance for loan losses to total loans was 1.22% at December 31, 2015, level with December 31, 2014.

Balance Sheet Activity

Assets totaled $1.620 billion at December 31, 2015 compared with $1.525 billion at December 31, 2014, an increase of $95.4 million, or 6.3%. The growth was due primarily to increases of $47.1 million, or 4.2%, in the loan portfolio and $62.3 million, or 21.3% in investment securities, partially offset by a decrease of $3.0 million, or 10.2% in cash and cash equivalents and $7.0 million, or 19.8% in accrued interest receivable and other assets. The increase in loans can be attributed to increases of $80.7 million in commercial loans, offset by decreases of $1.0 million in mortgages and $32.6 million decrease in consumer loans, attributed mostly to the indirect loan portfolio. The $62.3 million increase in investment securities can be mostly attributed to the investment of excess cash from municipal client deposits into higher yielding mortgage-backed securities during the year. The $7.0 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 of 2015.

Deposits totaled $1.400 billion at December 31, 2015 compared with $1.280 billion at December 31, 2014, an increase of $120.3 million, or 9.4%. The growth was mostly attributable to increases of $104.8 million in money market accounts, $35.9 million in non-interest-bearing demand deposits, $19.8 million in interest-bearing demand deposits, and $5.6 million in savings deposits. Partially offsetting the increases noted above was a $45.8 million decrease in time deposits. The changes in money market accounts and demand deposits can be attributed to the net inflow of deposits from municipal clients, as well as new municipal client relationships.

Total equity was $137.2 million at December 31, 2015 compared with $133.6 million at December 31, 2014, an increase of $3.6 million, or 2.7%. The increase was primarily due to earnings of $9.4 million and a reduction of $1.0 million in treasury stock, offset by an increase of $2.2 million in accumulated other comprehensive loss and $4.8 million in dividends declared during the year.

The total equity to total assets ratio was 8.47% at December 31, 2015 compared with 8.77% at December 31, 2014. The tangible equity to tangible assets ratio was 6.99% at December 31, 2015 compared with 7.13% at December 31, 2014. Book value per share increased to $28.96 at December 31, 2015 from $28.44 at December 31, 2014. As of December 31, 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 $1.856 billion at December 31, 2015 compared with $1.956 billion at December 31, 2014, a decrease of $100.2 million, or 5.1%. The decrease can be attributed to a decline in the market values of assets.

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)
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
(in thousands, except share data) 2015 2015 2015 2015 2014
ASSETS
Cash and due from financial institutions $ 24,886 $ 30,800 $ 28,014 $ 29,643 $ 28,130
Interest-bearing deposits in other financial institutions 1,299 44,449 1,650 55,230 1,033
Total cash and cash equivalents 26,185 75,249 29,664 84,873 29,163
Trading assets, at fair value 701 636 635 601 549
Securities available for sale 344,820 335,571 290,571 266,307 280,507
Securities held to maturity 4,566 4,604 6,045 5,693 5,831
FHLB and FRB stocks, at cost 4,797 4,171 4,873 4,148 5,535
Total investment securities 354,183 344,346 301,489 276,148 291,873
Commercial 699,712 664,505 665,303 652,217 618,999
Mortgage 195,778 197,506 198,469 198,628 196,809
Consumer 273,143 279,926 286,634 292,727 305,766
Loans, net of deferred loan fees 1,168,633 1,141,937 1,150,406 1,143,572 1,121,574
Allowance for loan losses (14,260) (14,022) (14,028) (13,892) (13,686)
Loans, net 1,154,373 1,127,915 1,136,378 1,129,680 1,107,888
Loans held for sale 1,076 316 668 628 665
Premises and equipment, net 29,397 30,023 30,874 31,548 32,287
Goodwill 21,824 21,824 21,824 21,824 21,824
Other intangible assets, net 3,931 4,201 4,478 4,763 5,067
Accrued interest receivable and other assets 28,256 27,129 27,623 34,707 35,223
Total assets $ 1,619,926 $ 1,631,639 $ 1,553,633 $ 1,584,772 $ 1,524,539
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing demand deposits $ 402,236 $ 392,734 $ 385,467 $ 376,773 $ 366,298
Interest-bearing demand deposits 130,573 144,097 118,988 127,593 110,819
Insured money market accounts 497,658 503,411 447,360 476,464 392,871
Savings deposits 203,749 196,994 199,437 199,349 198,183
Time deposits 166,079 173,205 180,725 187,951 211,843
Total deposits 1,400,295 1,410,441 1,331,977 1,368,130 1,280,014
FHLB overnight advances 13,900 - 15,600 - 30,830
Securities sold under agreements to repurchase 28,453 30,358 31,882 31,084 29,652
FHLB advances and other debt 22,076 22,140 22,201 22,259 22,286
Accrued interest payable and other liabilities 17,960 29,985 15,453 27,006 28,129
Total liabilities 1,482,684 1,492,924 1,417,113 1,448,479 1,390,911
Shareholders' equity
Common stock 53 53 53 53 53
Additional-paid-in capital 45,537 45,545 45,468 45,477 45,355
Retained earnings 118,973 118,057 116,817 115,450 114,383
Treasury stock, at cost (16,379) (16,654) (16,704) (16,900) (17,378)
Accumulated other comprehensive income (loss) (10,942) (8,286) (9,114) (7,787) (8,785)
Total shareholders' equity 137,242 138,715 136,520 136,293 133,628
Total liabilities and shareholders' equity $ 1,619,926 $ 1,631,639 $ 1,553,633 $ 1,584,772 $ 1,524,539
Period-end shares outstanding 4,738,750 4,724,432 4,719,874 4,712,156 4,699,186

Chemung Financial Corporation
Consolidated Statements of Income (Loss) (Unaudited)
Three Months Ended Twelve Months Ended
December 31, Percent December 31, Percent
(in thousands, except share and per share data) 2015 2014 Change 2015 2014 Change
Interest and dividend income:
Loans, including fees $ 12,158 $ 12,549 (3.1) $ 48,271 $ 47,139 2.4
Taxable securities 1,468 1,153 27.3 4,958 5,043 (1.7)
Tax exempt securities 254 215 18.1 939 967 (2.9)
Interest-bearing deposits 16 5 220.0 76 64 18.8
Total interest and dividend income 13,896 13,922 (0.2) 54,244 53,213 1.9
Interest expense:
Deposits 525 492 6.7 2,003 2,043 (2.0)
Securities sold under agreements to repurchase 214 214 0.0 848 848 0.0
Borrowed funds 195 182 7.1 751 754 (0.4)
Total interest expense 934 888 5.2 3,602 3,645 (1.2)
Net interest income 12,962 13,034 (0.6) 50,642 49,568 2.2
Provision for loan losses 615 1,650 (62.7) 1,571 3,981 (60.5)
Net interest income after provision for loan losses 12,347 11,384 8.5 49,071 45,587 7.6
Non-interest income:
Wealth management group fee income 2,076 1,931 7.5 8,522 7,747 10.0
Service charges on deposit accounts 1,249 1,319 (5.3) 4,886 5,281 (7.5)
Net gains (losses) on securities transactions 81 6,347 (98.7) 372 6,869 (94.6)
Net gains on sales of loans held for sale 55 92 (40.2) 294 301 (2.3)
Net gains (losses) on sales of other real estate owned (36) (24) N/M 84 (64) N/M
Income from bank owned life insurance 19 20 (5.0) 75 78 (3.8)
Other 1,579 1,715 (7.9) 6,214 6,544 (5.0)
Total non-interest income 5,023 11,400 (55.9) 20,447 26,756 (23.6)
Non-interest expense:
Salaries and wages 5,800 5,663 2.4 21,223 21,315 (0.4)
Pension and other employee benefits 1,060 1,602 (33.8) 5,908 5,733 3.1
Net occupancy 1,698 1,925 (11.8) 7,006 7,098 (1.3)
Furniture and equipment 715 921 (22.4) 2,979 2,972 0.2
Data processing 1,722 2,010 (14.3) 6,586 6,393 3.0
Professional services 404 685 (41.0) 1,293 1,597 (19.0)
Legal settlements - - N/M - 4,250 (100.0)
Amortization of intangible assets 270 317 (14.8) 1,136 1,310 (13.3)
Marketing and advertising 185 200 (7.5) 899 1,079 (16.7)
Other real estate owned expense 425 93 357.0 812 247 228.7
FDIC insurance 232 302 (23.2) 1,075 1,116 (3.7)
Loan expense 166 247 (32.8) 693 811 (14.5)
Merger and acquisition expenses - - N/M - 115 (100.0)
Other 1,557 1,827 (14.8) 5,817 6,441 (9.7)
Total non-interest expense 14,234 15,792 (9.9) 55,427 60,477 (8.4)
Income (loss) before income tax expense 3,136 6,992 (55.1) 14,091 11,866 18.8
Income tax expense (benefit) 1,007 2,510 (59.9) 4,658 3,709 25.6
Net income (loss) $ 2,129 $ 4,482 (52.5) $ 9,433 $ 8,157 15.6
Basic and diluted earnings (loss) per share $ 0.45 $ 0.96 $ 2.00 $ 1.74
Cash dividends declared per share 0.26 0.26 1.04 1.04
Average basic and diluted shares outstanding 4,730,806 4,690,519 4,719,278 4,683,067

Chemung Financial Corporation
Consolidated Financial Highlights (Unaudited)
As of or for the
As of or for the Three Months Ended Twelve Months Ended
Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31,
(in thousands, except share and per share data) 2015 2015 2015 2015 2014 2015 2014
RESULTS OF OPERATIONS
Interest income $ 13,896 $ 13,595 $ 13,519 $ 13,234 $ 13,922 $ 54,244 $ 53,213
Interest expense 934 904 872 892 888 3,602 3,645
Net interest income 12,962 12,691 12,647 12,342 13,034 50,642 49,568
Provision for loan losses 615 307 259 390 1,650 1,571 3,981
Net interest income after provision for loan losses 12,347 12,384 12,388 11,952 11,384 49,071 45,587
Non-interest income 5,023 4,912 5,326 5,186 11,400 20,447 26,756
Non-interest expense 14,234 13,634 13,823 13,736 15,792 55,427 60,477
Income (loss) before income tax expense (benefit) 3,136 3,662 3,891 3,402 6,992 14,091 11,866
Income tax expense (benefit) 1,007 1,211 1,314 1,126 2,510 4,658 3,709
Net income (loss) $ 2,129 $ 2,451 $ 2,577 $ 2,276 $ 4,482 $ 9,433 $ 8,157
Basic and diluted earnings (loss) per share $ 0.45 $ 0.52 $ 0.55 $ 0.48 $ 0.96 $ 2.00 $ 1.74
Average basic and diluted shares outstanding 4,730,806 4,722,449 4,716,734 4,706,774 4,690,519 4,719,278 4,683,067
PERFORMANCE RATIOS
Return on average assets 0.52% 0.62% 0.66% 0.59% 1.17% 0.60% 0.54%
Return on average equity 6.05% 7.05% 7.52% 6.79% 12.54% 6.84% 5.74%
Return on average tangible equity (a) 7.42% 8.71% 9.32% 8.45% 15.49% 8.45% 7.12%
Efficiency ratio (b) 77.35% 75.25% 75.83% 76.26% 85.10% 76.18% 78.75%
Non-interest expense to average assets (c) 3.49% 3.44% 3.55% 3.57% 4.11% 3.51% 3.73%
Loans to deposits 83.46% 80.96% 86.37% 83.59% 87.62% 83.46% 87.62%
YIELDS / RATES - Fully Taxable Equivalent
Yield on loans 4.20% 4.22% 4.26% 4.28% 4.49% 4.24% 4.43%
Yield on investments 1.98% 1.89% 1.91% 1.83% 1.98% 1.91% 1.98%
Yield on interest-earning assets 3.66% 3.70% 3.74% 3.74% 3.96% 3.71% 3.85%
Cost of interest-bearing deposits 0.20% 0.20% 0.21% 0.20% 0.21% 0.20% 0.22%
Cost of borrowings 2.99% 3.03% 2.64% 2.74% 2.65% 2.85% 2.83%
Cost of interest-bearing liabilities 0.35% 0.35% 0.34% 0.35% 0.36% 0.35% 0.37%
Interest rate spread 3.31% 3.35% 3.40% 3.39% 3.60% 3.36% 3.48%
Net interest margin, fully taxable equivalent 3.42% 3.45% 3.50% 3.49% 3.71% 3.46% 3.59%
CAPITAL
Total equity to total assets at end of period 8.47% 8.50% 8.79% 8.60% 8.77% 8.47% 8.77%
Tangible equity to tangible assets at end of period (a) 6.99% 7.02% 7.22% 7.04% 7.13% 6.99% 7.13%
Book value per share $ 28.96 $ 29.36 $ 28.92 $ 28.92 $ 28.44 $ 28.96 $ 28.44
Tangible book value per share 23.53 23.85 23.35 23.28 22.71 23.53 22.71
Period-end market value per share 27.50 28.03 26.48 28.30 27.66 27.50 27.66
Dividends declared per share 0.26 0.26 0.26 0.26 0.26 1.04 1.04
AVERAGE BALANCES
Loans (d) $ 1,151,469 $ 1,142,402 $ 1,141,412 $ 1,132,473 $ 1,112,297 $ 1,141,992 $ 1,066,379
Earning assets 1,522,176 1,474,098 1,462,842 1,450,249 1,410,804 1,477,529 1,399,285
Total assets 1,617,322 1,570,818 1,563,346 1,558,919 1,522,834 1,577,831 1,506,324
Deposits 1,410,017 1,367,853 1,353,895 1,338,913 1,307,305 1,367,717 1,297,443
Total equity 139,697 137,855 137,386 135,974 141,845 137,891 142,046
Tangible equity (a) 113,812 111,693 110,945 109,219 114,786 111,583 114,492
ASSET QUALITY
Net charge-offs $ 377 $ 313 $ 123 $ 184 $ 1,116 $ 997 $ 3,071
Non-performing loans (e) 12,223 12,368 12,862 10,419 7,778 12,223 7,778
Non-performing assets (f) 13,753 14,744 15,238 12,925 10,843 13,753 10,843
Allowance for loan losses 14,260 14,022 14,028 13,892 13,686 14,260 13,686
Annualized net charge-offs to average loans 0.13% 0.11% 0.04% 0.07% 0.40% 0.09% 0.29%
Non-performing loans to total loans 1.05% 1.08% 1.12% 0.91% 0.69% 1.05% 0.69%
Non-performing assets to total assets 0.85% 0.90% 0.98% 0.82% 0.71% 0.85% 0.71%
Allowance for loan losses to total loans 1.22% 1.23% 1.22% 1.21% 1.22% 1.22% 1.22%
Allowance for loan losses to non-performing loans 116.67% 113.37% 109.07% 133.33% 175.96% 116.67% 175.96%
(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.

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 6-7. 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
As of or for the Three Months Ended Twelve Months Ended
Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31,
(in thousands, except per share data) 2015 2015 2015 2015 2014 2015 2014
NET INTEREST MARGIN - FULLY TAXABLE EQUIVALENT
AND EFFICIENCY RATIO
Net interest income (GAAP) $ 12,962 $ 12,691 $ 12,647 $ 12,342 $ 13,034 $ 50,642 $ 49,568
Fully taxable equivalent adjustment 149 136 133 136 148 554 650
Fully taxable equivalent net interest income (non-GAAP) $ 13,111 $ 12,827 $ 12,780 $ 12,478 $ 13,182 $ 51,196 $ 50,218
Non-interest income (GAAP) $ 5,023 $ 4,912 $ 5,326 $ 5,186 $ 11,400 $ 20,447 $ 26,756
Less: net gains (losses) on security transactions (81) 11 (252) (50) (6,347) (372) (6,869)
Less: recoveries from other-than-temporary impairments - - - - (50) - (515)
Adjusted non-interest income (non-GAAP) $ 4,942 $ 4,923 $ 5,074 $ 5,136 $ 5,003 $ 20,075 $ 19,372
Non-interest expense (GAAP) $ 14,234 $ 13,634 $ 13,823 $ 13,736 $ 15,792 $ 55,427 $ 60,477
Less: merger and acquisition expenses - - - - - - (115)
Less: amortization of intangible assets (270) (277) (285) (304) (317) (1,136) (1,310)
Less: legal settlements - - - - - - (4,250)
Adjusted non-interest expense (non-GAAP) $ 13,964 $ 13,357 $ 13,538 $ 13,432 $ 15,475 $ 54,291 $ 54,802
Average interest-earning assets (GAAP) $ 1,522,176 $ 1,474,098 $ 1,462,842 $ 1,450,249 $ 1,410,804 $ 1,477,529 $ 1,399,285
Net interest margin - fully taxable equivalent (non-GAAP) 3.42% 3.45% 3.50% 3.49% 3.71% 3.46% 3.59%
Efficiency ratio (non-GAAP) 77.35% 75.25% 75.83% 76.26% 85.10% 76.18% 78.75%
Tangible Equity and Tangible Assets (Period-End)

Tangible equity, tangible assets, and tangible book value per share are each non-GAAP financial measures. Tangible equity represents the Corporation’s stockholders’ equity, less goodwill and intangible assets. Tangible assets represents the Corporation’s total assets, less goodwill and other intangible assets. Tangible book value per share represents the Corporation’s equity divided by common shares at period-end. These measures are meaningful to the Corporation, as well as investors and analysts, in assessing the Corporation’s use of equity.
As of or for the
As of or for the Three Months Ended Twelve Months Ended
Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31,
(in thousands, except per share and ratio data) 2015 2015 2015 2015 2014 2015 2014
TANGIBLE EQUITY AND TANGIBLE ASSETS
(PERIOD END)
Total shareholders' equity (GAAP) $ 137,242 $ 138,715 $ 136,520 $ 136,293 $ 133,628 $ 137,242 $ 133,628
Less: intangible assets (25,755) (26,025) (26,302) (26,587) (26,891) (25,755) (26,891)
Tangible equity (non-GAAP) $ 111,487 $ 112,690 $ 110,218 $ 109,706 $ 106,737 $ 111,487 $ 106,737
Total assets (GAAP) $ 1,619,926 $ 1,631,639 $ 1,553,633 $ 1,584,772 $ 1,524,539 $ 1,619,926 $ 1,524,539
Less: intangible assets (25,755) (26,025) (26,302) (26,587) (26,891) (25,755) (26,891)
Tangible assets (non-GAAP) $ 1,594,171 $ 1,605,614 $ 1,527,331 $ 1,558,185 $ 1,497,648 $ 1,594,171 $ 1,497,648
Total equity to total assets at end of period (GAAP) 8.47% 8.50% 8.79% 8.60% 8.77% 8.47% 8.77%
Book value per share (GAAP) $ 28.96 $ 29.36 $ 28.92 $ 28.92 $ 28.44 $ 28.96 $ 28.44
Tangible equity to tangible assets at
end of period (non-GAAP) 6.99% 7.02% 7.22% 7.04% 7.13% 6.99% 7.13%
Tangible book value per share (non-GAAP) $ 23.53 $ 23.85 $ 23.35 $ 23.28 $ 22.71 $ 23.53 $ 22.71
Tangible Equity (Average)

Average tangible equity and return on average tangible equity are each non-GAAP financial measures. Average tangible equity represents the Corporation’s average stockholders’ equity, less average goodwill and intangible assets for the period. Return on average tangible equity measures the Corporation’s earnings as a percentage of average tangible equity. These measures are meaningful to the Corporation, as well as investors and analysts, in assessing the Corporation’s use of equity.
As of or for the
As of or for the Three Months Ended Twelve Months Ended
Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31,
(in thousands, except ratio data) 2015 2015 2015 2015 2014 2015 2014
TANGIBLE EQUITY (AVERAGE)
Total average shareholders' equity (GAAP) $ 139,697 $ 137,855 $ 137,386 $ 135,974 $ 141,845 $ 137,891 $ 142,046
Less: average intangible assets (25,885) (26,162) (26,441) (26,755) (27,059) (26,308) (27,554)
Average tangible equity (non-GAAP) $ 113,812 $ 111,693 $ 110,945 $ 109,219 $ 114,786 $ 111,583 $ 114,492
Return on average equity (GAAP) 6.05% 7.05% 7.52% 6.79% 12.54% 6.84% 5.74%
Return on average tangible equity (non-GAAP) 7.42% 8.71% 9.32% 8.45% 15.49% 8.45% 7.12%
Adjustments for Certain Items of Income or Expense

In addition to disclosures of certain GAAP financial measures, including net income, EPS, ROA, and ROE, we may also provide comparative disclosures that adjust these GAAP financial measures for a particular period by removing from the calculation thereof the impact of certain transactions or other material items of income or expense occurring during the period, including certain nonrecurring items. The Corporation believes that the resulting non-GAAP financial measures may improve an understanding of its results of operations by separating out any such transactions or items that may have had a disproportionate positive or negative impact on the Corporation’s financial results during the particular period in question. In the Corporation’s presentation of any such non-GAAP (adjusted) financial measures not specifically discussed in the preceding paragraphs, the Corporation supplies the supplemental financial information and explanations required under Regulation G.
As of or for the
As of or for the Three Months Ended Twelve Months Ended
Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Dec. 31, Dec. 31,
(in thousands, except share, per share and ratio data) 2015 2015 2015 2015 2014 2015 2014
CORE NET INCOME
Reported net income (loss) (GAAP) $ 2,129 $ 2,451 $ 2,577 $ 2,276 $ 4,482 $ 9,433 $ 8,157
Net gains (losses) on security transactions (net of tax) (50) 7 (156) (31) (3,907) (230) (4,229)
Legal settlements (net of tax) - - - - - - 2,617
Merger and acquisition related expenses (net of tax) - - - - - - 71
Core net income (non-GAAP) $ 2,079 $ 2,458 $ 2,421 $ 2,245 $ 575 $ 9,203 $ 6,616
Average basic and diluted shares outstanding 4,730,806 4,722,449 4,716,734 4,706,774 4,690,519 4,719,278 4,683,067
Reported basic and diluted earnings (loss) per share (GAAP) $ 0.45 $ 0.52 $ 0.55 $ 0.48 $ 0.96 $ 2.00 $ 1.74
Reported return on average assets (GAAP) 0.52% 0.62% 0.66% 0.59% 1.17% 0.60% 0.54%
Reported return on average equity (GAAP) 6.05% 7.05% 7.52% 6.79% 12.54% 6.84% 5.74%
Core basic and diluted earnings per share (non-GAAP) $0.44 $0.52 $0.51 $0.48 $0.12 $1.95 $1.41
Core return on average assets (non-GAAP) 0.51% 0.62% 0.62% 0.58% 0.15% 0.58% 0.44%
Core return on average equity (non-GAAP) 5.90% 7.07% 7.07% 6.70% 1.61% 6.67% 4.66%

Forward-Looking Statements:

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and the Private Securities Litigation Reform Act of 1995. The Corporation intends its forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in this press release. All statements regarding the Corporation's expected financial position and operating results, the Corporation's business strategy, the Corporation's financial plans, forecasted demographic and economic trends relating to the Corporation's industry and similar matters are forward-looking statements. These statements can sometimes be identified by the Corporation's use of forward-looking words such as "may," "will," "anticipate," "estimate," "expect," or "intend." The Corporation cannot promise that its expectations in such forward-looking statements will turn out to be correct. The Corporation's actual results could be materially different from expectations because of various factors, including changes in economic conditions or interest rates, credit risk, difficulties in managing the Corporation’s growth, competition, changes in law or the regulatory environment, including the Dodd-Frank Act, and changes in general business and economic trends. Information concerning these and other factors can be found in the Corporation’s periodic filings with the Securities and Exchange Commission (“SEC”), including the 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.

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

Source:Chemung Financial Corp