Chemung Financial Reports First Quarter 2015 Net Income of $2.3 Million, or $0.48 Per Share, on Net Interest Income of $12.3 Million

ELMIRA, N.Y., April 23, 2015 (GLOBE NEWSWIRE) -- Chemung Financial Corporation (Nasdaq:CHMG), the parent company of Chemung Canal Trust Company ("the Bank"), today reported net income of $2.3 million, or $0.48 per share, for the first quarter of 2015, compared to $2.1 million, or $0.44 per share, for the first quarter of 2014.

Ronald M. Bentley, President and CEO, stated:

"The continued growth in our commercial loan portfolio drove a $22 million increase in our loans outstanding and a 2.6% increase in net interest income. Higher revenue in our Wealth Management Group enabled us to increase our non-interest income by 4.5% year over year. Managing expenses is a priority for us and we continue to look for opportunities to gain efficiencies in our day-to-day operations."

First Quarter Highlights¹

• Loans increased $22.0 million, or 2.0%
    
• Deposits increased $88.1 million, or 6.9%
    
• Net interest income increased $0.3 million, or 2.6%
    
• Provision for loan losses decreased $0.2 million, or 39.0%
    
• Non-interest income increased $0.2 million, or 4.5%
    
• Dividends declared during the quarter were $0.26

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

A more detailed summary of financial performance is included below:

Net Interest Income:

Net interest income for the quarter totaled $12.3 million compared with $12.0 million for the same period in the prior year, an increase of $0.3 million, or 2.6%. The increase was due primarily to interest income from our commercial loan portfolio, offset by a decrease in interest and dividends from our taxable securities. Fully taxable equivalent net interest margin was 3.49%, compared with 3.58% for the same period in the prior year. The yield on interest-earning assets decreased eleven basis points, while the cost of interest-bearing liabilities decreased three basis points. Average interest-earning assets increased $68.6 million during the quarter.

Non-Interest Income:

Non-interest income for the quarter was $5.2 million compared with $5.0 million for the same period in the prior year, an increase of $0.2 million, or 4.5%. The increase was due primarily to additional wealth management group fee income of $0.2 million and a gain on sale of other real estate owned of $0.1 million, offset by a $0.1 million decrease in service charges on deposit accounts.

Non-Interest Expense:

Non-interest expense for the quarter was $13.7 million compared with $13.3 million for the same period in the prior year, an increase of $0.4 million, or 2.9%. The increase was due primarily to increases of $0.4 million in pension and other employee benefits and $0.1 million in furniture and equipment expenses, offset by a decrease of $0.1 million in merger and acquisition expenses. The $0.4 million increase in pension and other employee benefits was due to the adoption of updated mortality tables at December 31, 2014, which increased the life expectancy of employees, and a reduced discount rate for determining pension costs.

Asset Quality:

Non-performing loans totaled $10.4 million at March 31, 2015, or 0.91% of total loans, compared with $7.8 million at December 31, 2014, or 0.69% of total loans. The increase in non-performing loans at March 31, 2015 was primarily in the commercial loan segment of the loan portfolio. Non-performing assets, which are comprised of non-performing loans and other real estate owned, were $12.9 million, or 0.82% of total assets, at March 31, 2015, compared with $10.8 million, or 0.71% of total assets, at December 31, 2014. The Corporation's ratio of non-performing assets to total assets compared favorably to our peer group ratio of 1.11% at December 31, 2014 (the most recent period available).

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 2015 and 2014 was $0.4 and $0.6 million, respectively. Net charge-offs for the quarter were $0.2 million compared with $0.3 million for the same period in the prior year.

At March 31, 2015 the allowance for loan losses was $13.9 million, compared with $13.7 million at December 31, 2014. The allowance for loan losses was 133.3% of non-performing loans at March 31, 2015, compared with 176.0% at December 31, 2014. The ratio of the allowance for loan losses to total loans was 1.21% at March 31, 2015, compared with 1.22% at December 31, 2014. 

Balance Sheet Activity:

Assets totaled $1.585 billion at March 31, 2015 compared with $1.525 billion at December 31, 2014, an increase of $60.2 million, or 4.0%. The growth was due primarily to increases of $55.7 million, or 191.0%, in cash and cash equivalents and $22.0 million, or 2.0%, in the loan portfolio, partially offset by a decrease of $15.7 million, or 5.4% in investment securities. The increase in cash and cash equivalents can be attributed to the seasonal inflow of municipal deposits, offset by the reduction of FHLB overnight advances. The increase in loans can be attributed to increases of $33.2 million in commercial loans and $1.8 million in mortgages, offset by a $13.0 million decrease in consumer loans, attributed mostly to the indirect loan portfolio. The $15.7 million decrease in investment securities can be mostly attributed to bonds that were called or matured during the quarter.

Deposits totaled $1.368 billion at March 31, 2015 compared with $1.280 billion at December 31, 2014, an increase of $88.1 million, or 6.9%. The growth was mostly attributable to increases of $83.6 million in money market accounts, $16.8 million in interest-bearing demand deposits, and $10.5 million in non-interest bearing demand deposits. Partially offsetting the increases noted above was a $23.9 million decrease in time deposits. The changes in money market accounts, interest-bearing demand deposits, and time deposits can be attributed to the seasonal net inflow of deposits from our municipal clients.

Total equity was $136.3 million at March 31, 2015 compared with $133.6 million at December 31, 2014, an increase of $2.7 million, or 2.0%. The increase was primarily due to earnings of $2.3 million, a reduction of $1.0 million in accumulated other comprehensive loss, and a reduction of $0.5 million in treasury stock, offset by $1.2 million in dividends declared during the quarter.

The total equity to total assets ratio was 8.60% at March 31, 2015 compared with 8.77% at December 31, 2014. The tangible equity to tangible assets ratio was 7.04% at March 31, 2015 compared with 7.13% at December 31, 2014. Book value per share increased to $28.92 at March 31, 2015 from $28.44 at December 31, 2014. As of March 31, 2015, both the Corporation's and the Bank's capital ratios were in excess of those required to be considered well-capitalized under regulatory capital guidelines.

Other Items:

The market value of total assets under management or administration in our Wealth Management Group was $1.979 billion at March 31, 2015 compared with $1.956 billion at December 31, 2014, an increase of $23.1 million, or 1.2%.

About Chemung Financial Corporation:

Chemung Financial Corporation is a $1.6 billion financial services holding company headquartered in Elmira, New York and operates 34 retail offices through its principal subsidiary, Chemung Canal Trust Company, a full-service community bank with trust powers. Established in 1833, Chemung Canal Trust Company is the oldest locally-owned and managed community bank in New York State. Chemung Financial Corporation is also the parent of CFS Group, Inc., a financial services subsidiary offering non-traditional services including mutual funds, annuities, brokerage services, tax preparation services and insurance.

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

Chemung Financial Corporation

GAAP to Non-GAAP Reconciliations (Unaudited)

The table below shows computations of core net income (loss), 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.

Forward-Looking Statements:

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Corporation intends its forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding, among other things, the Corporation's expected financial condition and results of operations, the Corporation's business strategy, the Corporation's financial plans, forecasted demographic and economic trends relating to the Corporation's industry and similar matters are forward-looking statements. These statements can sometimes be identified by the Corporation's use of forward-looking words such as "may," "will," "anticipate," "estimate," "expect," or "intend." The Corporation cannot promise that its expectations in such forward-looking statements will turn out to be correct. The Corporation's actual results could be materially different from expectations because of various factors, including changes in economic conditions or interest rates, credit risk, difficulties in managing the Corporation's growth, competition, changes in law or the regulatory environment, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, and changes in general business and economic trends. Information concerning these and other factors can be found in the Corporation's periodic filings with the Securities and Exchange Commission, including in our 2014 Annual Report on Form 10-K. These filings are available publicly on the SEC's website at http://www.sec.gov, on the Corporation's website at http://www.chemungcanal.com or upon request from the Corporate Secretary at (607) 737-3746. Except as otherwise required by law, the Corporation undertakes no obligation to publicly update or revise its forward-looking statements, whether as a result of new information, future events, or otherwise.

CONTACT: Karl F. Krebs, EVP and CFO
         kkrebs@chemungcanal.com
         Phone: 607-737-3714