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Chemung Financial Reports First Quarter 2013 Earnings

ELMIRA, N.Y., April 25, 2013 (GLOBE NEWSWIRE) -- Chemung Financial Corporation (Nasdaq:CHMG), the parent company of Chemung Canal Trust Company, reported quarter ended March 31, 2013, net income and earnings per share. Highlights for the current quarter include:

  • Net income for the three months ended March 31, 2013 was $2.4 million, or $0.52 per share, compared with $3.6 million, or $0.78 per share, for the same period in the prior year, a decrease of $1.2 million, or 33.3%.
  • Net interest margin for the three months ended March 31, 2013 was 4.07%, down from 4.29% for the same period in the prior year.
  • Non-performing assets to total assets ratio was 1.36% at March 31, 2013 compared with 1.32% at December 31, 2012. Excluding $6.3 million in accruing troubled debt restructurings and $3.2 million in accruing loans past due 90 days or more, the adjusted non-performing assets to total assets ratio was 0.61%.
  • Capital remains strong as the tangible equity to tangible assets ratio was 8.47% at March 31, 2013, compared with 8.53% at December 31, 2012 and 8.24% at March 31, 2012.
  • Dividends declared during the quarter ended March 31, 2013 were $0.26 per share compared with $0.25 per share for the prior year, an increase of 4.0%.

Ronald M. Bentley, President and CEO stated, "We are pleased that our financial performance remains strong despite the expected pressure on our net interest margin due to record low interest rates." Mr. Bentley continued, "Even though our level of non-performing assets has increased slightly from a year earlier, the ratio of non-performing assets to total assets, net of accruing troubled debt restructurings and accruing loans past due 90 days or more, continues to be a strong credit quality ratio at 0.61% versus 0.78% a year earlier."

Summary:

Chemung Financial Corporation reported net income of $2.4 million for the three months ended March 31, 2013, a decrease of $1.2 million, or 33.3%, compared with $3.6 million for the three months ended March 31, 2012. Earnings per share for the three months ended March 31, 2013, was $0.52 compared with $0.78 for the three months ended March 31, 2012. Return on average assets and return on average equity for the three months ended March 31, 2013, were 0.77% and 7.37%, respectively, compared with 1.18% and 11.34%, respectively, for the same period in the prior year.

The decline in 2013 earnings was due primarily to a decrease of $0.3 million in net interest income and reductions of $0.3 million in net gain on securities transactions and $0.8 million in pre-tax casualty gains from insurance reimbursements. In addition, non-interest expense increased $0.8 million. These items were partially offset by a reduction of $0.7 million in income taxes.

Net income of $2.4 million for the current quarter ended March 31, 2013 represents an increase of $0.3 million, or 13.2%, from net income of $2.1 million for the preceding quarter ended December 31, 2012. The increase was primarily due to an increase of $0.1 million in net interest income and a reduction of $0.9 million in non-interest expense. These items were partially offset by increases of $0.4 million in the provision for loan losses and $0.2 million in income taxes, along with a reduction of $0.2 million in non-interest income. Earnings per share for the current quarter totaled $0.52 compared with $0.46 for the preceding quarter. Return on average assets and return on average equity for the current quarter were 0.77% and 7.37%, respectively, compared with 0.67% and 6.33%, respectively, for the preceding quarter.

Net Interest Income:

Net interest income for the three months ended March 31, 2013 totaled $11.7 million compared with $12.0 million for the prior year, a decrease of $0.3 million, or 2.6%. Net interest margin was 4.07% for the three months ended March 31, 2013 compared with 4.29% for the same period in the prior year. The decline in net interest income was primarily due to a 40 basis point decrease in the yield on interest-earning assets, partially offset by an increase of $38.5 million in average earning assets. The decline in net interest margin was primarily due to yields on interest-earning assets decreasing at a faster rate than the cost of interest-bearing liabilities. The decrease in yield on interest-earning assets was attributable to lower loan yields as loans continue to reprice at current market rates.

Net interest income for the current quarter totaled $11.7 million compared with $11.6 million for the preceding quarter ended December 31, 2012, an increase of $0.1 million, or 0.7%. Net interest margin was 4.07% for the current quarter compared with 3.98% for the preceding quarter, due primarily to additional income accretion from our purchased credit impaired ("PCI") portfolio from prior acquisitions. Net of PCI adjustments, the net interest margin was 3.94% for the current quarter compared with 3.96% for the preceding quarter.

Non-Interest Income:

Non-interest income for the three months ended March 31, 2013 was $4.0 million compared with $4.9 million for the prior year, a decrease of $0.9 million, or 17.8%. The decline was primarily due to reductions of $0.8 million in casualty gains from insurance reimbursements and $0.3 million in net gain on securities transactions. These items were offset by an increase of $0.2 million in revenue from our equity investments.

Non-interest income for the three months ended March 31, 2013 was $4.0 million compared with $4.2 million for the preceding quarter ended December 31, 2012, a decrease of $0.2 million, or 4.1%. The decline was primarily due to decreases of $0.1 million in service charges on deposit accounts and $0.1 million in net gain on sales of loans held for sale.

Non-Interest Expense:

Non-interest expense for the three months ended March 31, 2013 was $11.7 million compared with $10.9 million for the prior year, an increase of $0.8 million, or 7.3%. The increase was primarily due to increases of $0.3 million in salaries and wages, $0.2 million in professional services and $0.1 million in pension and other employee benefits. The increase in salaries and wages was primarily due to compensation related to merit increases and incentive compensation. The increase in pension and other employee benefits was primarily due to higher pension costs and health benefits. The increase in professional services was due primarily to tax preparation costs for the Wealth Management Group. The tax preparation costs recorded in the first quarter of 2013 were level with 2012 costs, which were recorded in the second quarter of 2012.

Non-interest expense for the three months ended March 31, 2013 was $11.7 million compared with $12.6 million for the preceding quarter ended December 31, 2012, a decrease of $0.9 million, or 7.3%. The decrease was primarily due to decreases of $0.4 million in salaries and wages and $0.4 million in professional services. The decrease in salaries and wages was primarily due to incentive compensation recorded in the preceding quarter. The decrease in professional services was due to consultant fees recorded in the preceding quarter.

Asset Quality:

Non-performing loans totaled $16.8 million at March 31, 2013, or 1.82% of total loans, up slightly from $15.9 million, or 1.78%, at December 31, 2012. Non-performing assets which are comprised of non-performing loans and other real estate owned, totaled $17.4 million at March 31, 2013, or 1.36% of total assets, up slightly from $16.4 million, or 1.32%, at December 31, 2012. Excluding $6.3 million in accruing troubled debt restructurings and $3.2 million in accruing loans past due 90 days or more, the adjusted non-performing assets to total assets ratio was 0.61%.

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 three months ended March 31, 2013 was $0.4 million, down slightly from the prior year. Net charge-offs for the three months ended March 31, 2013 were less than $0.1 million compared with net recoveries of less than $0.1 million for the prior year.

The provision for loan losses for the three months ended March 31, 2013 was $0.4 million compared with $0.1 million for the preceding quarter ended December 31, 2012. The increase in the provision for loan losses is primarily due to the growth in portfolio loans. Net charge-offs for the current quarter were less than $0.1 million compared with $0.5 million for the preceding quarter.

At March 31, 2013 the allowance for loan losses was $10.8 million, compared with $10.4 million at December 31, 2012, and $10.3 million at March 31, 2012. The allowance for loan losses was 64.44% of non-performing loans at March 31, 2013, compared with 65.70% at December 31, 2012 and 67.93% at March 31, 2012. The ratio of the allowance for loan losses to total loans was 1.17% at March 31, 2013, level with December 31, 2012, and down from 1.28% at March 31, 2012.

Balance Sheet Activity:

Assets totaled $1.280 billion at March 31, 2013 compared with $1.248 billion at December 31, 2012, an increase of $31.8 million, or 2.5%. The growth was primarily due to increases of $27.9 million, or 3.1%, in total portfolio loans and $5.9 million in cash and cash equivalents. The increase in portfolio loans was due to strong growth of $27.0 million in commercial loans.

Deposits totaled $1.077 billion at March 31, 2013 compared with $1.045 million at December 31, 2012, an increase of $32.4 million, or 3.1%. The growth was primarily due to increases of $21.9 million in money market accounts, $11.5 million in interest-bearing demand deposits and $7.8 million in savings deposits. These items were partially offset by decreases of $4.2 million in non-interest-bearing demand deposits and $4.6 million in time deposits.

Total equity was $132.9 million at March 31, 2013 compared with $131.1 million at December 31, 2012. The total equity to total assets ratio was 10.38% at March 31, 2013 compared with 10.50% at December 31, 2012. The tangible equity to tangible assets ratio was 8.47% at March 31, 2013 compared with 8.53% at December 31, 2012. As of March 31, 2013, both the Corporation's and the Bank's capital ratios were in excess of those required to be considered well-capitalized under regulatory capital standards.

Other Item:

The market value of total assets under management or administration in our Wealth Management Group was $1.833 billion at March 31, 2013 compared with $1.735 billion at December 31, 2012 and $1.704 billion at March 31, 2012.

About Chemung Financial Corporation:

Chemung Financial Corporation is a $1.3 billion financial services holding company headquartered in Elmira, New York and operates 28 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. CFS Group, Inc. was founded in 2001.

This press release may be found at: www.chemungcanal.com under Shareholder Info.

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 2012 Annual Report on Form 10-K. These filings are available publicly on the SEC's website at http://www.sec.gov, on the Corporation's website at http://www.chemungcanal.com or upon request from the Corporate Secretary at (607) 737-3746. Except as otherwise required by law, the Corporation undertakes no obligation to publicly update or revise its forward-looking statements, whether as a result of new information, future events, or otherwise.

Chemung Financial Corporation
Consolidated Balance Sheets (Unaudited)
Mar. 31, Dec. 31, Sept. 30, June 30, March 31,
(Dollars in thousands, except share data) 2013 2012 2012 2012 2012
ASSETS
Cash and due from financial institutions $ 27,757 $ 29,239 $ 35,324 $ 33,673 $ 27,311
Interest-bearing deposits in other financial institutions 18,380 11,002 45,908 40,502 83,203
Total cash and cash equivalents 46,137 40,241 81,232 74,175 110,514
Trading assets, at fair value 384 348 275 252 254
Securities available for sale 235,307 239,686 253,669 260,942 259,450
Securities held to maturity 9,898 5,749 6,163 6,334 7,447
FHLB and FRB stocks, at cost 4,607 4,710 4,760 5,359 5,436
Total investment securities 249,812 250,145 264,592 272,635 272,333
Commercial 481,063 454,048 444,491 436,205 414,536
Mortgage 202,114 200,476 193,049 194,512 192,548
Consumer 238,256 238,993 238,818 225,230 195,949
Total loans 921,433 893,517 876,358 855,947 803,033
Allowance for loan losses (10,825) (10,433) (10,828) (10,392) (10,283)
Loans, net 910,608 883,084 865,530 845,555 792,750
Loans held for sale 786 1,057 1,165 482 826
Premises and equipment, net 24,800 25,484 24,863 24,718 24,977
Goodwill 21,824 21,824 21,824 21,824 21,824
Other intangible assets, net 4,909 5,144 5,382 5,642 5,906
Other assets 20,712 20,833 22,117 22,176 25,111
Total assets $ 1,279,972 $ 1,248,160 $ 1,286,980 $ 1,267,459 $ 1,254,495
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing demand deposits $ 296,361 $ 300,610 $ 302,509 $ 297,413 $ 272,055
Interest-bearing demand deposits 102,201 90,730 108,923 88,343 88,105
Insured money market accounts 265,025 243,115 248,722 232,870 212,376
Savings deposits 181,421 173,589 174,074 174,974 203,204
Time deposits 232,091 236,690 248,948 260,079 262,965
Total deposits 1,077,099 1,044,734 1,083,176 1,053,679 1,038,705
Securities sold under agreements to repurchase 31,427 32,711 32,918 31,750 34,998
FHLB term advances 27,158 27,225 28,046 41,128 43,227
Other liabilities 11,380 12,375 9,960 10,693 8,736
Total liabilities 1,147,064 1,117,045 1,154,100 1,137,250 1,125,666
Shareholders' equity
Common stock 53 53 53 53 53
Additional-paid-in capital 45,473 45,357 45,538 45,525 45,556
Retained earnings 108,296 107,078 106,092 104,402 103,100
Treasury stock, at cost (18,291) (18,566) (18,731) (18,915) (18,734)
Accumulated other comprehensive income (loss) (2,623) (2,807) (72) (856) (1,146)
Total shareholders' equity 132,908 131,115 132,880 130,209 128,829
Total liabilities and shareholders' equity $ 1,279,972 $ 1,248,160 $ 1,286,980 $ 1,267,459 $ 1,254,495
Period-end shares outstanding 4,657,151 4,649,741 4,642,317 4,632,014 4,639,565
Chemung Financial Corporation
Consolidated Statements of Income (Unaudited)
Three Months Ended
March 31, Percent
(Dollars in thousands, except share and per share data) 2013 2012 Change
Interest and dividend income:
Loans, including fees $ 11,304 $ 11,671 (3.1)
Taxable securities 1,131 1,486 (23.9)
Tax exempt securities 305 341 (10.6)
Interest-bearing deposits 8 42 (81.0)
Total interest and dividend income 12,748 13,540 (5.8)
Interest expense:
Deposits 624 913 (31.7)
Securities sold under agreements to repurchase 219 283 (22.6)
Borrowed funds 188 313 (39.9)
Total interest expense 1,031 1,509 (31.7)
Net interest income 11,717 12,031 (2.6)
Provision for loan losses 431 477 (9.6)
Net interest income after provision for loan losses 11,286 11,554 (2.3)
Non-interest income:
Wealth management group fee income 1,750 1,776 (1.5)
Service charges on deposit accounts 969 992 (2.3)
Net gain on securities transactions -- 297 (100.0)
Net gain on sales of loans held for sale 112 65 72.3
Net loss on sales of other real estate owned -- (6) N/M
Casualty gains -- 759 (100.0)
Other 1,191 1,007 18.3
Total non-interest income 4,022 4,890 (17.8)
Non-interest expense:
Salaries and wages 4,818 4,493 7.2
Pension and other employee benefits 1,424 1,290 10.4
Net occupancy 1,362 1,295 5.2
Furniture and equipment 518 518 0.0
Data processing 1,113 1,079 3.2
Professional fees 329 150 119.3
Amortization of intangible assets 235 284 (17.3)
Marketing and advertising 288 289 (0.3)
Other real estate owned expense 36 43 (16.3)
FDIC insurance 217 227 (4.4)
Loan expenses 143 180 (20.6)
Other 1,242 1,083 14.7
Total non-interest expense 11,725 10,931 7.3
Income before income tax expense 3,583 5,513 (35.0)
Income tax expense 1,171 1,898 (38.3)
Net income $ 2,412 $ 3,615 (33.3)
Basic and diluted earnings per share $ 0.52 $ 0.78
Cash dividends declared per share 0.26 0.25
Average basic and diluted shares outstanding 4,655,862 4,642,012
N/M -- Not meaningful.
Chemung Financial Corporation
Consolidated Financial Highlights (Unaudited)
As of or for the Three Months Ended
March 31, Dec. 31, Sept. 30, June 30, March 31,
(Dollars in thousands, except share and per share data) 2013 2012 2012 2012 2012
RESULTS OF OPERATIONS
Interest income $ 12,748 $ 12,757 $ 13,015 $ 12,765 $ 13,540
Interest expense 1,031 1,116 1,225 1,384 1,509
Net interest income 11,717 11,641 11,790 11,381 12,031
Provision for loan losses 431 74 225 52 477
Net interest income after provision for loan losses 11,286 11,567 11,565 11,329 11,554
Non-interest income 4,022 4,192 3,993 4,112 4,890
Non-interest expense 11,725 12,642 11,341 11,882 10,931
Income before income tax expense 3,583 3,117 4,217 3,559 5,513
Income tax expense 1,171 987 1,383 1,115 1,898
Net income $ 2,412 $ 2,130 $ 2,834 $ 2,444 $ 3,615
Basic and diluted earnings per share $ 0.52 $ 0.46 $ 0.61 $ 0.53 $ 0.78
Average basic and diluted shares outstanding 4,655,862 4,643,695 4,641,547 4,636,395 4,642,012
PERFORMANCE RATIOS
Return on average assets 0.77% 0.67% 0.89% 0.78% 1.18%
Return on average equity 7.37% 6.33% 8.53% 7.55% 11.34%
Return on average tangible equity (a) 9.24% 7.94% 10.76% 9.58% 14.47%
Efficiency ratio (b) 74.50% 79.85% 71.91% 76.81% 68.90%
Non-interest expense to average assets 3.75% 3.98% 3.57% 3.82% 3.56%
Loans to deposits 85.55% 85.53% 80.91% 81.23% 77.31%
YIELDS / RATES
Yield on loans 5.04% 5.02% 5.21% 5.39% 5.90%
Yield on investments 2.28% 2.23% 2.23% 2.13% 2.27%
Yield on interest-earning assets 4.43% 4.36% 4.46% 4.46% 4.83%
Cost of interest-bearing deposits 0.33% 0.36% 0.40% 0.43% 0.49%
Cost of borrowings 2.79% 2.74% 2.84% 3.01% 2.97%
Cost of interest-bearing liabilities 0.50% 0.54% 0.59% 0.66% 0.73%
Interest rate spread 3.93% 3.82% 3.87% 3.80% 4.10%
Net interest margin 4.07% 3.98% 4.04% 3.98% 4.29%
CAPITAL
Total equity to total assets at end of period 10.38% 10.50% 10.32% 10.27% 10.27%
Tangible equity to tangible assets at end of period (a) 8.47% 8.53% 8.39% 8.29% 8.24%
Book value per share $ 28.54 $ 28.20 $ 28.62 $ 28.11 $ 27.77
Tangible book value per share 22.80 22.40 22.76 22.18 21.79
Period-end market value per share 33.90 29.89 23.77 25.50 25.40
Dividends declared per share 0.26 0.25 0.25 0.25 0.25
AVERAGE BALANCES
Loans (c) $ 909,166 $ 888,515 $ 867,971 $ 823,754 $ 796,035
Earning assets 1,166,590 1,162,788 1,160,479 1,150,073 1,128,047
Total assets 1,266,379 1,264,125 1,262,648 1,252,461 1,235,453
Deposits 1,064,016 1,059,463 1,055,510 1,037,576 1,018,035
Total equity 132,783 133,799 132,186 130,254 128,194
Tangible equity (a) 105,913 106,703 104,827 102,635 100,465
ASSET QUALITY
Net charge-offs (recoveries) $ 39 $ 469 $ (210) $ (58) $ (23)
Non-performing loans 16,798 15,880 13,260 15,009 15,137
Non-performing assets 17,363 16,445 14,194 15,979 16,117
Allowance for loan losses 10,825 10,433 10,828 10,392 10,283
Annualized net charge-offs to average loans 0.02% 0.21% (0.10)% (0.03)% (0.01)%
Non-performing loans to total loans 1.82% 1.78% 1.51% 1.75% 1.88%
Non-performing assets to total assets 1.36% 1.32% 1.10% 1.26% 1.28%
Adjusted non-performing assets to total assets (d) 0.61% 0.53% 0.75% 0.77% 0.78%
Allowance for loan losses to total loans 1.17% 1.17% 1.24% 1.21% 1.28%
Allowance for originated loans to originated loans (e) 1.16% 1.18% 1.38% 1.38% 1.48%
Allowance for loan losses to non-performing loans 64.44% 65.70% 81.66% 69.24% 67.93%
(a) See the GAAP to Non-GAAP reconciliations.
(b) Efficiency ratio is non-interest expense divided by the total of net interest income plus non-interest income less net gain on securities transactions less casualty gains.
(c) Loans include loans held for sale. Loans do not reflect the allowance for loan losses.
(d) Adjusted non-performing assets include total non-performing assets less accruing troubled debt restructurings and accruing loans past due 90 days or more.
(e) Originated loans represent total loans excluding acquired loans.
Chemung Financial Corporation
GAAP to Non-GAAP Reconciliations (Unaudited)
The table below shows computations of tangible equity and tangible assets and certain related ratios, all of which are considered to be non-GAAP financial measures. The tangible equity to tangible assets ratio has become a focus of some investors and management believes this ratio may assist in analyzing the Corporation's capital position, absent the effects of intangible assets. These non-GAAP financial measures have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of results reported under GAAP. Because not all companies use identical calculations, the non-GAAP measures presented in the following table may not be comparable to those reported by other companies.
As of or for the Three Months Ended
(Dollars in thousands, March 31, Dec. 31, Sept. 30, June 30, March 31,
except per share data) 2013 2012 2012 2012 2012
TANGIBLE EQUITY AND TANGIBLE ASSETS
(PERIOD END)
Total shareholders' equity (GAAP) $ 132,908 $ 131,115 $ 132,880 $ 130,209 $ 128,829
Less: intangible assets (26,733) (26,968) (27,206) (27,466) (27,730)
Tangible equity (non-GAAP) $ 106,175 $ 104,147 $ 105,674 $ 102,743 $ 101,099
Total assets (GAAP) $ 1,279,972 $ 1,248,160 $ 1,286,980 $ 1,267,459 $ 1,254,495
Less: intangible assets (26,733) (26,968) (27,206) (27,466) (27,730)
Tangible assets (non-GAAP) $ 1,253,239 $ 1,221,192 $ 1,259,774 $ 1,239,993 $ 1,226,765
Total equity to total assets at end of period (GAAP) 10.38% 10.50% 10.32% 10.27% 10.27%
Book value per share (GAAP) $ 28.54 $ 28.20 $ 28.62 $ 28.11 $ 27.77
Tangible equity to tangible assets at end of period (non-GAAP) 8.47% 8.53% 8.39% 8.29% 8.24%
Tangible book value per share (non-GAAP) $ 22.80 $ 22.40 $ 22.76 $ 22.18 $ 21.79
TANGIBLE EQUITY AND TANGIBLE ASSETS
(AVERAGE)
Total shareholders' equity (GAAP) $ 132,783 $ 133,799 $ 132,186 $ 130,254 $ 128,194
Less: intangible assets (26,870) (27,096) (27,359) (27,619) (27,729)
Tangible equity (non-GAAP) $ 105,913 $ 106,703 $ 104,827 $ 102,635 $ 100,465
Return on average equity (GAAP) 7.37% 6.33% 8.53% 7.55% 11.34%
Return on average tangible equity (non-GAAP) 9.24% 7.94% 10.76% 9.58% 14.47%

CONTACT: Mark A. Severson, EVP and CFO Phone: 607-737-3714Source:Chemung Financial Corporation