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

    Source: Nasdaq GlobeNewswire / 20 Apr 2017 16:44:19   Eastern Standard Time

    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

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