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

ELMIRA, N.Y., April 20, 2017 (GLOBE NEWSWIRE) -- Chemung Financial Corporation (the “Corporation”) (Nasdaq:CHMG), the parent company of Chemung Canal Trust Company (the “Bank”), today reported net income of $3.0 million, or $0.62 per share, for the first quarter of 2017, compared to $2.7 million, or $0.57 per share, for the first quarter of 2016.

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

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

First Quarter Highlights1

  • Loans, net of deferred fees, increased $34.0 million, or 2.8%

  • Commercial loans increased $35.5 million, or 4.8%

  • Deposits increased $87.9 million, or 6.0%

  • Net interest income increased $0.5 million, or 3.6%

  • Effective tax rate decreased from 32.7% to 30.0%

  • Dividends declared during the quarter were $0.26

  • A more detailed summary of financial performance follows.

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

1st Quarter 2017 vs 1st Quarter 2016

Net Interest Income:

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

Non-Interest Income:

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

Non-Interest Expense:

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

Income Tax Expense:

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

Asset Quality

Non-performing loans totaled $12.9 million at March 31, 2017, or 1.05% of total loans, compared with $12.0 million at December 31, 2016, or 1.00% of total loans. The increase in non-performing loans at March 31, 2017 was primarily in the commercial mortgage segment, offset by a decrease in the residential mortgage segment. Non-performing assets, which are comprised of non-performing loans and other real estate owned, were $13.3 million, or 0.76% of total assets, at March 31, 2017, compared with $12.4 million, or 0.75% of total assets, at December 31, 2016. The increase in non-performing assets was primarily due to the commercial mortgage segment.

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

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

Balance Sheet Activity

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

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

Deposits totaled $1.544 billion at March 31, 2017 compared with $1.456 billion at December 31, 2016, an increase of $87.9 million, or 6.0%. The growth was attributable to increases of $14.3 million in non-interest bearing demand deposits, $18.0 million in interest-bearing demand deposits, $48.6 million in money market accounts, and $10.5 million in savings deposits. Partially offsetting the increases noted above was a decrease of $3.5 million in time deposits. The changes in money market accounts and demand deposits can be attributed to new municipal clients, along with the seasonal inflow of deposits from existing municipal clients.

Total equity was $148.3 million at March 31, 2017 compared with $143.7 million at December 31, 2016, an increase of $4.4 million, or 3.1%. The increase was primarily due to earnings of $3.0 million, a reduction of $0.5 million in treasury stock, and a decrease of $2.0 million in accumulated other comprehensive loss, mostly attributable to the increase in the fair market value of the securities portfolio, offset by $1.2 million in dividends declared during the year.

The total equity to total assets ratio was 8.54% at March 31, 2017 compared with 8.67% at December 31, 2016. The tangible equity to tangible assets ratio was 7.23% at March 31, 2017 compared with 7.29% at December 31, 2016. Book value per share increased to $30.92 at March 31, 2017 from $30.07 at December 31, 2016. As of March 31, 2017, the Bank’s capital ratios were in excess of those required to be considered well-capitalized under regulatory capital guidelines and the Corporation met capital requirements under regulatory guidelines.

Other Items

The market value of total assets under management or administration in our Wealth Management Group was $1.803 billion at March 31, 2017, including $327.5 million of assets under management or administration for the Corporation, compared to $1.721 billion at December 31, 2016, including $294.9 million of assets under management or administration for the Corporation, an increase of $81.6 million, or 4.7%.

About Chemung Financial Corporation

Chemung Financial Corporation is a $1.7 billion financial services holding company headquartered in Elmira, New York and operates 33 retail offices through its principal subsidiary, Chemung Canal Trust Company, a full-service community bank with trust powers. Established in 1833, Chemung Canal Trust Company is the oldest locally-owned and managed community bank in New York State. Chemung Financial Corporation is also the parent of CFS Group, Inc., a financial services subsidiary offering non-traditional services including mutual funds, annuities, brokerage services, tax preparation services and insurance, and Chemung Risk Management, Inc., a captive insurance company based in the State of Nevada.

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

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

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


Chemung Financial Corporation
Consolidated Financial Highlights (Unaudited)
As of or for the Three Months Ended
March 31, Dec. 31, Sept. 30, June 30, March 31,
(in thousands, per share data) 2017 2016 2016 2016 2016
RESULTS OF OPERATIONS
Interest income $14,314 $14,269 $14,025 $13,925 $13,949
Interest expense 820 973 985 957 924
Net interest income 13,494 13,296 13,040 12,968 13,025
Provision for loan losses 1,040 404 1,050 388 595
Net interest income after provision for loan losses 12,454 12,892 11,990 12,580 12,430
Non-interest income 4,847 4,897 5,435 5,216 5,601
Non-interest expense 13,045 13,561 13,471 15,570 14,008
Income before income tax expense 4,256 4,228 3,954 2,226 4,023
Income tax expense 1,277 1,274 1,209 605 1,316
Net income $2,979 $2,954 $2,745 $1,621 $2,707
Basic and diluted earnings per share $0.62 $0.62 $0.58 $0.34 $0.57
Average basic and diluted shares outstanding 4,790 4,773 4,765 4,760 4,750
PERFORMANCE RATIOS
Return on average assets 0.71% 0.69% 0.65% 0.39% 0.67%
Return on average equity 8.24% 8.20% 7.55% 4.57% 7.73%
Return on average tangible equity (a) 9.90% 9.92% 9.14% 5.55% 9.45%
Efficiency ratio (a) (b) 69.25% 72.63% 71.28% 77.00% 76.89%
Non-interest expense to average assets 3.12% 3.18% 3.20% 3.75% 3.48%
Loans to deposits 79.93% 82.42% 80.62% 81.83% 82.75%
YIELDS / RATES - Fully Taxable Equivalent
Yield on loans 4.19% 4.16% 4.16% 4.17% 4.21%
Yield on investments 2.00% 1.75% 1.73% 1.81% 2.07%
Yield on interest-earning assets 3.66% 3.57% 3.58% 3.60% 3.72%
Cost of interest-bearing deposits 0.20% 0.21% 0.21% 0.21% 0.20%
Cost of borrowings 3.04% 3.13% 3.15% 3.16% 2.66%
Cost of interest-bearing liabilities 0.30% 0.35% 0.36% 0.35% 0.35%
Interest rate spread 3.36% 3.22% 3.22% 3.25% 3.37%
Net interest margin, fully taxable equivalent 3.45% 3.33% 3.33% 3.36% 3.47%
CAPITAL
Total equity to total assets at end of period 8.54% 8.67% 8.38% 8.52% 8.58%
Tangible equity to tangible assets at end of period (a) 7.23% 7.29% 7.03% 7.12% 7.14%
Book value per share $30.93 $30.07 $30.37 $30.12 $29.64
Tangible book value per share 25.81 24.89 25.13 24.81 24.28
Period-end market value per share 39.50 36.35 28.99 29.35 26.35
Dividends declared per share 0.26 0.26 0.26 0.26 0.26
AVERAGE BALANCES
Loans and loans held for sale (c) $1,215,445 $1,210,922 $1,199,367 $1,192,786 $1,175,051
Earning assets 1,605,460 1,607,287 1,577,348 1,573,306 1,527,656
Total assets 1,694,199 1,699,059 1,674,492 1,669,654 1,620,547
Deposits 1,495,724 1,483,348 1,456,622 1,457,173 1,404,487
Total equity 146,642 143,388 144,631 142,746 140,864
Tangible equity (a) 121,988 118,502 119,504 117,374 115,240
ASSET QUALITY
Net charge-offs $333 $1,476 $393 $247 $328
Non-performing loans (d) 12,914 12,043 12,903 12,429 12,774
Non-performing assets (e) 13,251 12,431 13,270 12,822 14,416
Allowance for loan losses 14,960 14,253 15,325 14,668 14,527
Annualized net charge-offs to average loans 0.11% 0.48% 0.13% 0.08% 0.11%
Non-performing loans to total loans 1.05% 1.00% 1.06% 1.03% 1.08%
Non-performing assets to total assets 0.76% 0.75% 0.77% 0.76% 0.88%
Allowance for loan losses to total loans 1.21% 1.19% 1.26% 1.22% 1.22%
Allowance for loan losses to non-performing loans 115.84% 118.35% 118.77% 118.01% 113.72%
(a) See the GAAP to Non-GAAP reconciliations.
(b) Efficiency ratio is non-interest expense less amortization of intangible assets less legal reserve divided by the total of fully taxable equivalent net interest
income plus non-interest income less net gains on securities transactions less gain from bargain purchase less gain on liquidation of trust preferred securities.
(c) Loans and loans held for sale do not reflect the allowance for loan losses.
(d) Non-performing loans include non-accrual loans only.
(e) Non-performing assets include non-performing loans plus other real estate owned.


Chemung Financial Corporation
Average Consolidated Balance Sheets & Net Interest Income Analysis and Rate/Volume Analysis of Net Interest Income (Unaudited)
QTD - March 31, 2017
QTD - March 31, 2016
QTD - Mar. 31, 2017 vs. Mar. 31, 2016
Average
Balance

Interest
Yield /
Rate

Average
Balance

Interest
Yield /
Rate

Total
Change

Due to
Volume

Due to
Rate

Earning assets:
Commercial loans $ 761,216 $ 8,030 4.28% $ 709,541 $ 7,758 4.40% $ 272 $ 504 $ (232)
Mortgage loans 198,373 1,887 3.86% 196,600 1,940 3.97% (53) 13 (66)
Consumer loans 255,856 2,642 4.19% 268,911 2,598 3.89% 44 (137) 181
Taxable securities 272,580 1,424 2.12% 294,319 1,438 1.97% (14) (114) 100
Tax-exempt securities 44,757 345 3.13% 48,138 367 3.07% (22) (28) 6
Interest-bearing deposits 72,678 155 0.86% 10,147 12 0.48% 143 128 15
Total earning assets 1,605,460 14,483 3.66% 1,527,656 14,113 3.72% 370 366 4
Non-earnings assets:
Cash and due from banks 25,885 26,676
Premises and equipment, net 28,655 29,199
Other assets 53,954 48,846
Allowance for loan losses (14,349) (14,346)
AFS valuation allowance (5,406) 2,516
Total assets $ 1,694,199 $ 1,620,547
Interest-bearing liabilities:
Interest-bearing checking $ 152,954 36 0.10% $ 142,117 40 0.11% (4) 2 (6)
Savings and money market 783,330 375 0.19% 704,587 317 0.18% 58 39 19
Time deposits 141,250 127 0.36% 164,580 150 0.37% (23) (19) (4)
FHLB advances and repos 37,666 282 3.04% 63,092 417 2.66% (135) (187) 52
Total int.-bearing liabilities 1,115,200 820 0.30% 1,074,376 924 0.35% (104) (165) 61
Non-interest-bearing liabilities:
Demand deposits 418,190 393,202
Other liabilities 14,167 12,105
Total liabilities 1,547,557 1,479,683
Shareholders' equity 146,642 140,864
Total liabilities and shareholders' equity $ 1,694,199 $ 1,620,547
Fully taxable equivalent net interest income 13,663 13,189 $ 474 $ 531 $ (57)
Net interest rate spread (1) 3.36% 3.37%
Net interest margin, fully taxable equivalent (2) 3.45% 3.47%
Taxable equivalent adjustment (169) (164)
Net interest income $ 13,494 $ 13,025
(1) Net interest rate spread is the difference in the average yield on interest-earning assets less the average rate on interest-bearing liabilities.
(2) Net interest margin is the ratio of fully taxable equivalent net interest income divided by average interest-earning assets.

Chemung Financial Corporation

GAAP to Non-GAAP Reconciliations (Unaudited)

The Corporation prepares its Consolidated Financial Statements in accordance with GAAP. See the Corporation’s unaudited consolidated balance sheets and statements of income contained within this press release. That presentation provides the reader with an understanding of the Corporation’s results that can be tracked consistently from period-to-period and enables a comparison of the Corporation’s performance with other companies’ GAAP financial statements.

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

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

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

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

The efficiency ratio is a non-GAAP financial measure which represents the Corporation’s ability to turn resources into revenue and is calculated as non-interest expense divided by total revenue (fully taxable equivalent net interest income and non-interest income), adjusted for one-time occurrences and amortization. This measure is meaningful to the Corporation, as well as investors and analysts, in assessing the Corporation’s productivity measured by the amount of revenue generated for each dollar spent.

As of or for the Three Months Ended
March 31, Dec. 31, Sept. 30, June 30, March 31,
(in thousands, except per share data) 2017 2016 2016 2016 2016
NET INTEREST MARGIN - FULLY TAXABLE EQUIVALENT
AND EFFICIENCY RATIO
Net interest income (GAAP) $ 13,494 $ 13,296 $ 13,040 $ 12,968 $ 13,025
Fully taxable equivalent adjustment 169 154 154 159 164
Fully taxable equivalent net interest income (non-GAAP) $ 13,663 $ 13,450 $ 13,194 $ 13,127 $ 13,189
Non-interest income (GAAP) $ 4,847 $ 4,897 $ 5,435 $ 5,216 $ 5,601
Less: net (gains) losses on security transactions - (4) (75) - (908)
Adjusted non-interest income (non-GAAP) $ 4,847 $ 4,893 $ 5,360 $ 5,216 $ 4,693
Non-interest expense (GAAP) $ 13,045 $ 13,561 $ 13,471 $ 15,570 $ 14,008
Less: amortization of intangible assets (226) (238) (245) (245) (258)
Less: legal reserve - - - (1,200) -
Adjusted non-interest expense (non-GAAP) $ 12,819 $ 13,323 $ 13,226 $ 14,125 $ 13,750
Average interest-earning assets (GAAP) $ 1,605,460 $ 1,607,287 $ 1,577,348 $ 1,573,306 $ 1,527,656
Net interest margin - fully taxable equivalent (non-GAAP) 3.45% 3.33% 3.33% 3.36% 3.47%
Efficiency ratio (non-GAAP) 69.25% 72.63% 71.28% 77.00% 76.89%

Tangible Equity and Tangible Assets (Period-End)

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

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

Tangible Equity (Average)

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

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

Adjustments for Certain Items of Income or Expense

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

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

Forward-Looking Statements:

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and the Private Securities Litigation Reform Act of 1995. The Corporation intends its forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in this press release. All statements regarding the Corporation's expected financial position and operating results, the Corporation's business strategy, the Corporation's financial plans, forecasted demographic and economic trends relating to the Corporation's industry and similar matters are forward-looking statements. These statements can sometimes be identified by the Corporation's use of forward-looking words such as "may," "will," "anticipate," "estimate," "expect," or "intend." The Corporation cannot promise that its expectations in such forward-looking statements will turn out to be correct. The Corporation's actual results could be materially different from expectations because of various factors, including changes in economic conditions or interest rates, credit risk, difficulties in managing the Corporation’s growth, competition, changes in law or the regulatory environment, including the Dodd-Frank Act, and changes in general business and economic trends. Information concerning these and other factors can be found in the Corporation’s periodic filings with the Securities and Exchange Commission (“SEC”), including the 2016 Annual Report on Form 10-K. These filings are available publicly on the SEC's website at http://www.sec.gov, on the Corporation's website at http://www.chemungcanal.com or upon request from the Corporate Secretary at (607) 737-3746. Except as otherwise required by law, the Corporation undertakes no obligation to publicly update or revise its forward-looking statements, whether as a result of new information, future events, or otherwise.

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

Source:Chemung Financial Corp