ELMIRA, N.Y., Jan. 22, 2021 (GLOBE NEWSWIRE) — Chemung Financial Corporation (the “Corporation”) (Nasdaq: CHMG), the parent company of Chemung Canal Trust Company (the “Bank”), today reported net income of $19.3 million, or $4.01 per share, for the year ended December 31, 2020, compared to $15.6 million, or $3.21 per share, for the year ended December 31, 2019. Net income was $5.2 million, or $1.11 per share, for the fourth quarter of 2020, compared to $4.2 million, or $0.87 per share, for the fourth quarter of 2019.

« The year 2020 was certainly an extraordinary and challenging year for our employees, our communities and our country. COVID-19 fundamentally altered both business and social practices across the globe, and we reacted and adapted quickly. Although the coronavirus altered how our Company conducted business, we were confident that our strong financial position, our community focus and our strong culture would help us through the difficult times. Due to the hard work of so many, I am proud to report earnings of $1.11 per share for the fourth quarter of 2020, and $4.01 per share for the fiscal year 2020, » said Anders M. Tomson, President and CEO of Chemung Canal Trust Company. “As we look to 2021, our business, along with so many others, will remain disrupted by the pandemic. We are once again supporting local businesses through our continued participation in the Paycheck Protection Program, and we look ahead with optimism as we enter the Western New York market and continue to focus on expense management and non-interest income opportunities,” Tomson added.

Fourth Quarter Highlights1:

  • Fourth quarter earnings per share grew to $1.11 per share as of December 31, 2020 versus $0.87 per share as of December 31, 2019
  • Total shareholders’ equity increased $17.1 million, or 9.35% from December 31, 2019
  • Tangible book value per share increased from $32.74 to $37.83, or 15.5% from December 31, 2019 2
  • Loans, net of deferred fees, increased $227.2 million, including $150.9 million of Payroll Protection Program (PPP) loans, or 17.36% from December 31, 2019
  • Non-performing loans decreased from $18.0 million as of December 31, 2019 to $10.0 million as of December 31, 2020, 0.65% of total loans.

1 Balance sheet comparisons are calculated as of December 31, 2020 versus December 31, 2019.
2 See GAAP to Non-GAAP Reconciliations, included within.

2020 vs 2019

Net Interest Income:
Net interest income for the year ended December 31, 2020 totaled $62.9 million compared with $60.6 million for the prior year, an increase of $2.3 million, or 3.8%. The increase was primarily due to increases of $0.8 million in interest income on loans, including fees, and $0.7 million in interest and dividend income on taxable securities, and a decrease of $2.3 million in total interest expense, offset by a decrease of $1.5 million in interest income on interest-earning deposits.

The increase in interest income on loans was due primarily to an increase of $1.7 million in interest income on commercial loans primarily attributable to a $157.8 million increase in average balances on commercial loans and the recognition of $3.8 million of PPP loan fees, partially offset by a decrease in average commercial portfolio yield due to a decrease in interest rates. Interest income on mortgage loans increased $0.9 million primarily due to an increase of $28.2 million in average balances on mortgage loans, partially offset by a decrease in average portfolio yield due to a decrease in interest rates. These increases were offset by a decrease of $1.8 million in interest income on consumer loans which can be attributed to both decreases in average balances and average portfolio yield on consumer loans. The increase in interest and dividend income on taxable securities was due primarily to an increase in average invested balances of $77.7 million, partially offset by a decrease in average interest rates. The decrease in interest on interest-earning deposits was due primarily to the sharp drop in interest rates on overnight deposits with the average yield on interest-earning deposits declining from 2.26% in 2019 to 0.54% in 2020, offset by a $38.9 million increase in average balances on interest-earning deposits. The decrease in interest expense on deposits was due primarily to the decreases in average rates paid on interest-bearing checking, savings and money market products in response to the Federal Reserve’s 50 and 100 basis points drop on overnight rates in March, 2020.

Fully taxable equivalent net interest margin was 3.25% for the year ended December 31, 2020, compared with 3.64% for the prior year. Average interest-earning assets increased $270.4 million in 2020 compared to the prior year. The average yield on interest- earning assets decreased 56 basis points while the average cost of interest-bearing liabilities decreased 25 basis points in 2020 when compared to the prior year.

Provisions for loan losses for the year ended December 31, 2020 totaled $4.2 million compared with $5.9 million for the prior year, a decrease of $1.7 million, or 28.8%. The decrease in provision for loan losses in 2020 was primarily due to a specific impairment of $4.2 million related to a participation interest in a commercial credit in the prior year. The Corporation is closely monitoring the loan portfolio for effects related to COVID-19. In 2020, the Company increased the allowance by $4.5 million for future estimated credit losses related to the COVID-19 pandemic, of which $4.0 million remains part of the allowance at year end.

Non-Interest Income:
Non-interest income for the year ended December 31, 2020 was $21.1 million compared with $20.1 million for the prior year, an increase of $1.1 million, or 5.2%. The increase was due primarily to increases of $1.5 million in net gains on sales of residential mortgage loans sold into the secondary market, $0.2 million in net gains on the sale of four commercial loans, three of which were non-performing, $0.4 million in interest rate swap fees earned, and a $0.6 million credit adjustment to Chemung Risk Management loss reserves, offset by a decrease of $1.3 million in service charges on deposit accounts primarily attributable to a decrease in NSF and overdraft fees as compared to the prior year.

Non-Interest Expense:
Non-interest expense for the year ended December 31, 2020 was $55.9 million compared with $55.7 million in the prior year, an increase of $0.2 million, or 0.4%. The increase was due primarily to increases of $0.8 million in salaries and wage expense, $0.5 million in FDIC insurance expense, and $0.4 million in loan expenses, offset by decreased spending across most other categories, including $0.4 million in furniture and equipment expenses, $0.3 million in marketing and advertising expenses, and $0.3 million in pension and other employee benefits, and a $0.5 million increase in the credit related to the net periodic pension and post- retirement benefits.

The increase in salaries and wage expense was primarily attributed to annual merit increases and an increase in commission and reward expenses. The increase in FDIC insurance expense was primarily attributed to the receipt of a $0.4 million credit in 2019 related to the Deposit Insurance Fund’s (DIF) minimum reserve ratio assessment. The increase in loan expenses was primarily attributed to legal fees associated with a legal action taken by the Corporation related to the $4.2 million impairment of a commercial credit disclosed in the Corporations’ Current Report on Form 8-K, dated September 12, 2019, and an increase in loan volume during 2020 when compared to the prior year. The decrease in furniture and equipment expenses was primarily attributed to normal depreciation and a reduction in one-time service contract expenditures. The decrease in marketing and advertising expenses was primarily attributed to the cancellation of directed marketing initiatives due to the COVID-19 pandemic. The decrease in pension and other employee benefits in 2020 was primarily attributed to a decrease in healthcare expenses when compared to the prior year. The increase in the credit related to the net periodic pension and post-retirement benefits was primarily due to a change in factors used to prepare annual actuarial estimates.

Income Tax Expense:
Income tax expense for the year ended December 31, 2020 was $4.6 million compared with $3.4 million for the prior year, an increase of $1.2 million in income tax expense. The effective tax rate for the year ended December 31, 2020 increased to 19.3% compared to 18.0% for the prior year. The increase in income tax expense was primarily due to an increase in pretax income.

4th Quarter 2020 vs 4th Quarter 2019

Net Interest Income:

Net interest income for the current quarter totaled $16.4 million compared to $15.2 million for the same period in the prior year, an increase of $1.2 million, or 7.9%, due primarily to increases of $0.8 million in interest income on loans, including fees, and $0.2 million in interest and dividend income on taxable securities, and a decrease of $0.6 million in total interest expense, offset by a decrease of $0.4 million in interest income on interest-earning deposits.

The increase in interest income on loans was due primarily to an increase of $0.9 million in interest income on commercial loans primarily attributable to a $219.2 million increase in average balances on commercial loans and the recognition of $1.6 million of PPP loan fees, partially offset by a decrease in commercial portfolio average yield due to a decrease in interest rates. Interest income on mortgage loans increased $0.3 million primarily due to an increase of $49.7 million in average balances on mortgage loans, partially offset by a decrease in average portfolio yield due to a decrease in interest rates. These increases were also offset by a decrease of $0.5 million in interest income on consumer loans which can be attributed to both decreases in average balances and average portfolio yield on consumer loans.

The increase in interest and dividend income on taxable securities was due primarily to an increase in average invested balances of $177.0 million. The decrease in interest income on interest-earning deposits was due primarily to the sharp drop in interest rates on overnight deposits with the average yield on interest-earning deposits declining from 1.84% in the fourth quarter of 2019 to 0.31% in the fourth quarter of 2020. The decrease in interest expense on deposits was due primarily to the decreases in average rates paid on interest-bearing checking, savings and money market products in response to the Federal Reserve’s 50 and 100 basis points drop on overnight rates in March, 2020.

Fully taxable equivalent net interest margin was 3.06% for the fourth quarter 2020, compared to 3.56% for the same period in the prior year. Average interest-earning assets increased $439.1 million in the fourth quarter 2020 compared to the same period in the prior year. The average yield on interest-earning assets decreased 69 basis points in the fourth quarter of 2020, while the average cost of interest-bearing liabilities decreased 29 basis points, as compared to the same period in the prior year.

Non-Interest Income:

Non-interest income for the current quarter was $6.0 million compared to $5.1 million for the same period in the prior year, an increase of $0.9 million, or 17.0%. The increase was due primarily to increases of $0.5 million in net gains on sales of residential mortgage loans sold into the secondary market, $0.2 million in net gains on the sale of four commercial loans, three of which were non-performing, $0.1 million in change in fair value of equity investments, and $0.1 million in wealth management group fee income, offset by a decrease of $0.3 million in service charges on deposit accounts primarily attributable to a decrease in NSF and overdraft fees as compared to the same period in the prior year.

Non-Interest Expense:

Non-interest expense for the current quarter was $15.6 million compared to $14.9 million for the same period in the prior year, an increase of $0.7 million, or 5.0%. The increase can be mostly attributed to the establishment of a $0.7 million reserve for unresolved compliance matters, increases of $0.5 million in salaries and wage expense, and $0.2 million in FDIC insurance expense. These increases were offset by decreases of $0.3 million in professional services, $0.2 million in marketing and advertising expenses, and $0.2 million in furniture and equipment expenses. The increase in salaries and wage expense was primarily attributed to annual merit awards and commission and reward expenses. The increase in FDIC insurance was primarily due to the receipt of a $0.2 million credit in the fourth quarter of the prior year related to the Deposit Insurance Fund’s (DIF) minimum reserve ratio assessment. The decrease in professional services was primarily due to the timing of various projects. The decrease in marketing and advertising expenses was primarily attributed to the cancellation of directed marketing initiatives due to the COVID-19 pandemic.

Income Tax Expense:

Income tax expense for the current quarter was $1.3 million compared to $1.0 million for the same period in the prior year, an increase of $0.3 million. The effective tax rate for the current quarter increased to 19.8% compared to 19.1% for the same period in the prior year. The increase in income tax expense was primarily due to an increase in pretax income.

4th Quarter 2020 vs 3rd Quarter 2020

Net Interest Income:

Net interest income for the current quarter totaled $16.4 million compared to $15.9 million for the prior quarter, an increase of $0.5 million, or 3.3%, due primarily to increases of $0.4 million in interest income and fees from loans, and $0.2 million in interest and dividend income on taxable securities, offset by a $0.1 million increase in interest expense on deposits.

The increase in interest income and fees from loans was primarily attributed to a $24.9 million increase in average loan balances in the fourth quarter. Also in the fourth quarter, the Corporation recorded $1.6 million in PPP fees, $0.7 million of which represented accelerated recognition of fees related to SBA loan forgiveness of $39.0 million in loan balances. This $1.6 million in fees represents a $0.4 million increase over the third quarter 2020. The increase in interest and dividend income on taxable securities can be primarily attributed to an increase in average invested balances of $118.6 million in the fourth quarter of 2020.

Fully taxable equivalent net interest margin was 3.06% in the current quarter compared to 3.20% in the prior quarter. Average interest-earning assets increased $158.8 million in the current quarter as compared to the prior quarter, while the average yield on interest-earning assets decreased 14 basis points from 3.37% in the prior quarter to 3.23% in the current quarter. The average cost of interest-bearing liabilities remained the same in the fourth quarter of 2020, compared to the prior quarter.

The Corporation continues to closely monitor the loan portfolio for effects related to the COVID-19 pandemic. Changes in governmental policies during the pandemic placed stress on certain industries while other industries initially anticipated to be highly impacted by the pandemic demonstrated resilience. As a result, the Corporation re-evaluated various qualitative factors used to calculate the provision. In addition the Corporation charged off one large commercial mortgage and one participating interest in a commercial credit. In 2020, the Company increased the allowance by $4.5 million for future estimated credit losses related to the COVID-19 pandemic, of which $4.0 million remains part of the allowance at year end. In the fourth quarter of 2020, the Corporation sold and released reserves for three non-performing commercial loans. Provision for loan losses for the current quarter totaled $0.3 million compared to $0.7 million for the prior quarter, a decrease of $0.4 million.

Non-Interest Income:

Non-interest income for the current quarter was $6.0 million compared to $5.3 million for the prior quarter, an increase of $0.7 million, or 11.9%. The increase can mostly be attributed to increases of $0.1 million in net gains on sales of residential mortgage loans sold into the secondary market, $0.2 million in net gains on the sale of four commercial loans, three of which were non-performing, $0.1 million in Wealth Management Group fee income, and $0.1 million in service charges on deposit accounts.

The increase in net gains on sales of loans held for sale was primarily due to an increase in residential mortgage loans originated and sold into the secondary market. The increase in Wealth Management Group fee income was primarily attributed to an increase in market value of assets under management and additional fee income from terminating trusts. The increase in service charges on deposit accounts was primarily attributed to an increase in NSF and overdraft fees.

Non-Interest Expense:

Non-interest expense for the current quarter was $15.6 million compared to $13.4 million for the prior quarter, an increase of $2.2 million, or 16.7%. The increase can be mostly attributed to increases of $1.4 million in other non-interest expense, $0.5 million in salaries and wage expense, $0.2 million in pension and other employee benefits, and $0.2 million in data processing expenses. The increase in other non-interest expense was primarily attributed to the establishment of a $0.7 million reserve for unresolved compliance matters, and increases of $0.4 million related to the termination of the lease of the now closed Owego, New York branch, and $0.2 million in charitable contributions. The increase in salaries and wage expense was primarily attributed to annual merit increases and an increase in commission and reward expenses. The increase in pension and other employee benefits was primarily attributed to the recapture of $0.2 million in health insurance expense in the third quarter. The increase in data processing expenses was primarily attributed to timing of various projects.

Income Tax Expense:

Income tax expense for the current quarter was $1.3 million compared to $1.5 million for the prior quarter, a decrease of $0.2 million in income tax expense. The effective tax rate for the current quarter decreased to 19.8% compared to 20.3% in the prior period.

Asset Quality

Non-performing loans totaled $10.0 million at December 31, 2020, or 0.65% of total loans, compared to $18.0 million at December 31, 2019, or 1.38% of total loans. Non-performing assets, which are comprised of non-performing loans and other real estate owned, were $10.2 million, or 0.45% of total assets, at December 31, 2020, compared to $18.5 million, or 1.04% of total assets, at December 31, 2019. The decrease in non-performing loans can mostly be attributed to the charge off of one large commercial mortgage in the second quarter of 2020, and one participating interest in a commercial credit in the fourth quarter of 2020. In the fourth quarter of 2020, the Corporation sold four commercial loans with total balances of $4.9 million, three of which were non-performing with total balances of $3.8 million. The decrease in non- performing assets can be attributed to the decrease in non-performing loans.

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. Management continues to evaluate the potential impact of the COVID-19 pandemic as it relates to the loan portfolio. As part of this analysis, management identified what it believes to be higher risk loans through a detailed analysis of industry codes. Management increased certain allowance qualitative factors based on its assessment of the impact of the current pandemic on local, national, and global economic conditions as well as the perceived risks inherent in specific industries and credit characteristics during the first half of 2020. Based on this approach, the Corporation determined that a $0.5 million release of provision specifically related to the COVID-19 pandemic was appropriate in the fourth quarter of 2020. The total provision for loan losses for the fourth quarter of 2020 was $0.3 million, due to an increase in loan volume during the quarter. Net charge-offs for the fourth quarter of 2020 were $3.9 million, compared to $0.7 million for the fourth quarter of 2019.

The allowance for loan losses was $20.9 million at December 31, 2020 compared to $23.5 million at December 31, 2019. The allowance for loan losses was 210.25% of non-performing loans at December 31, 2020 compared to 130.38% at December 31, 2019. The ratio of the allowance for loan losses to total loans was 1.36% at December 31, 2020 compared to 1.79% at December 31, 2019. The ratio of the allowance for loan losses to total loans excluding PPP loans was 1.51% at December 31, 2020. The Corporation continues to closely monitor the loan portfolio for effects related to the COVID-19 pandemic. Changes in governmental policies during the pandemic placed stress on certain industries while other industries initially anticipated to be highly impacted by the pandemic demonstrated resilience. As a result, the Corporation re-evaluated various qualitative factors used to calculate the provision. The 2020 pandemic related provision was $4.5 million, of which $4.0 million remains part of the allowance at year end. In addition the Corporation charged off one large commercial mortgage and one participating interest in a commercial credit. In the fourth quarter of 2020, the Corporation sold and released reserves for three non-performing commercial loans.

Under Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (the « CARES Act »), « Temporary Relief from Troubled Debt Restructurings » loans less than 30 days past due as of December 31, 2019 will be considered current for COVID-19 related modifications and therefore will not be treated as TDRs.

On June 17, 2020 the New York legislature passed, and Governor Cuomo signed, new legislation which allows certain borrowers to extend the period of forbearance on a primary residence if financial hardship is demonstrated as a result of COVID-19. At its highest point as of May 31, 2020, total loan forbearances represented 15.77% of the Corporation’s total loan portfolio. As of December 31, 2020, total loan forbearances decreased to 1.35% of the total loan portfolio.

COVID-19 Loan Modifications Outstanding As Of
       
  September 30, 2020   December 31, 2020
               
      Total Loan       Total Loan
  # Clients   Balance   # Clients   Balance
               
Commercial 31   $43.3 million   13   $19.8 million
Retail and Residential 43   $2.5 million   17   $0.9 million

The above reflects the uncertain economic situation whereby the initial response by customers prompted a quick reaction to the unknown potential impact of COVID-19 on their business. Subsequently, customers may have reassessed their financial position prior to finalization of a modification, either modifying deferral requests or withdrawing the request altogether. In some cases, customers continued to make payments on modified loans. Of these modifications, 100% were considered current prior to the forbearance and primarily reflect deferrals for 90 days.

Balance Sheet Activity

Total assets were $2.279 billion at December 31, 2020 compared to $1.788 billion at December 31, 2019, an increase of $491.6 million, or 27.5%. The increase can be mostly attributed to increases of $227.2 million in loans, net of deferred fees, $270.5 million in securities available for sale, at estimated fair value, $9.6 million in accrued interest receivable and other assets, and a decrease of $2.6 million in allowance for loan losses, offset by decreases of $17.6 million in interest- earning deposits in other financial institutions, $2.3 million in premises and equipment, and $1.0 million in loans held for sale.

The increase in loans was due primarily to the growth of $206.5 million in commercial loans and $51.1 million in residential mortgages, offset by a decrease of $30.3 million in consumer loans. $150.9 million of the increase in loans related to the PPP. The increase in securities available for sale can be mostly attributed to purchases of $329.9 million and an increase in the value of the portfolio of $10.4 million due to the decreases in interest rates, offset by $67.4 million in maturities and paydowns. The decrease in interest earning deposits was due primarily to the increase in investment securities and loans during 2020. The increase in other assets was due primarily to an increase of $8.2 million in interest rate swap assets.

Total liabilities were $2.080 billion at December 31, 2020 compared to $1.605 billion at December 31, 2019, an increase of $474.6 million, or 29.6%. The increase in total liabilities can primarily be attributed to increases of $465.6 million, or 29.6% in deposits, and $10.0 million in accrued interest payable and other liabilities, offset by a decrease of $0.8 million in operating lease liabilities.

The increase in deposits was due primarily to increases of $100.4 million in consumer deposits, $230.4 million in commercial deposits, and $134.9 million in public deposits. The increase in deposits was partially attributed to the collection of stimulus checks and PPP loan disbursements. The increase in accrued interest payable and other liabilities was due primarily to an increase of $8.2 million in interest rate swap liabilities. The decrease in operating lease liabilities includes a $0.2 million decrease due to the termination of the lease of the now closed Owego, New York branch.

Total shareholders’ equity was $199.7 million at December 31, 2020 compared to $182.6 million at December 31, 2019, an increase of $17.1 million, or 9.3%. The increase in retained earnings of $14.3 million was due primarily to net income of $19.3 million offset by $5.0 million in dividends declared. The increase in accumulated other comprehensive income of $8.2 million can mostly be attributed to an increase in the fair market value of the securities portfolio. Treasury stock increased $5.8 million primarily due to the Corporation’s common stock repurchase program. As of December 31, 2020, all 250,000 shares have been repurchased at an average cost of $29.40 per share.

The total equity to total assets ratio was 8.76% at December 31, 2020 compared to 10.22% at December 31, 2019. The tangible equity to tangible assets ratio was 7.87% at December 31, 2020 compared to 9.07% at December 31, 2019. Book value per share increased to $42.53 at December 31, 2020 from $37.35 at December 31, 2019. As of December 31, 2020, the Bank’s capital ratios were in excess of those required to be considered well-capitalized under the regulatory framework for prompt corrective action.

Other Items

The market value of total assets under management or administration in our Wealth Management Group was $2.091 billion at December 31, 2020, including $305.5 million of assets under management or administration for the Corporation, compared to $1.915 billion at December 31, 2019, including $289.7 million of assets under management or administration for the Corporation, an increase of $175.5 million, or 9.2%. The increase in total assets under management or administration can be mostly attributed to an increase in the market value of total assets.

As previously announced on January 8, 2021, the Corporation announced that the Board of Directors approved a new stock repurchase program. Under the new repurchase program, the Corporation may repurchase up to 250,000 shares of its common stock, or approximately 5% of its then outstanding shares. The repurchase program permits shares to be repurchased in open market or privately negotiated transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. As of this press release, the Corporation has not initiated any repurchases under the new program.

As disclosed in the Corporation’s August 20, 2020 Current Report on Form 8-K, the Corporation consolidated two branches November 20, 2020. The Big Flats, New York branch at 437 Maple Street, Big Flats, NY, was consolidated into the nearby Arnot Road Office at 29 Arnot Road, Horseheads, NY. The Owego, New York branch located at 1054 State Route 17C, Owego, New York, was consolidated into the nearby Owego branch office at 203 Main Street, Owego, New York.

Chemung Financial’s COVID-19 Pandemic Update

The Corporation remained flexible with its COVID-19 response, adapting weekly to new micro-cluster zone restrictions and spiking positivity rates throughout our footprint. This flexibility allowed us to ensure a healthy and safe work environment for our colleagues, clients and the communities we assist. At all times, social distancing, sanitizing and facial coverings were required and at certain times, access to branches was limited or restricted. When the need arose to temporarily close a branch, impacted customers were directed to adjacent branches when possible, and offices were immediately deep-cleaned to ensure a safe work environment when employees and customers returned to work. At the date of this press release 29 of our 30 offices are open with normal business hours. The Corporation further assisted its customer base as the Paycheck Protection Program (PPP) moved forward with its Forgiveness phase, with the Small Business Administration (SBA) beginning to approve forgiveness applications on October 2, 2020. The Corporation is participating in the latest round of PPP, and began accepting applications on January 19, 2021, receiving a total of 250 applications for a total of $37.0 million, as of the date of this press release.

Management believes that the Corporation’s liquidity position is strong. The Corporation uses a variety of resources to meet its liquidity needs. These include short term investments, cash flow from lending and investing activities, core- deposit growth and non-core funding sources, such as time deposits of $100,000 or more, FHLB advances, securities sold under agreements to repurchase, and other borrowings. As of December 31, 2020, the Corporation’s cash and cash equivalents balance was $108.5 million. The Corporation also maintains an investment portfolio of securities available for sale, comprised primarily of mortgage-backed securities and municipal bonds. Although this portfolio generates interest income for the Corporation, it also serves as an available source of liquidity and capital if the need should arise. As of December 31, 2020, the Corporation’s investment in securities available for sale was $554.6 million, $373.8 million of which was not pledged as collateral. Additionally, the Bank’s unused borrowing capacity at the Federal Home Loan Bank of New York was $89.6 million, as of December 31, 2020. The Corporation did not experience excessive draws on available working capital lines of credit and home equity lines of credit during 2020 due to the COVID-19 crisis, nor has the Corporation experienced any significant or unusual activity related to customer reaction to the COVID-19 crisis that would create stress on the Corporation’s liquidity position.

With respect to the Corporation’s credit risk and lending activities, management has taken actions to identify and assess additional possible credit exposure due to the changing environment caused by the COVID-19 crisis based upon the industry types within our current loan portfolio. Lending risks, as mentioned, are being monitored by industry, based upon NAICS code, with specific attention being paid to those industries that may experience greater stress during this time.

The COVID-19 crisis is expected to continue to impact the Corporation’s financial results, as well as demand for its services and products during 2021. The short and long-term implications of the COVID-19 crisis, and related monetary and fiscal stimulus measures on the Corporation’s future revenues, earnings results, allowance for loan losses, capital reserves, and liquidity are uncertain at this time.

About Chemung Financial Corporation

Chemung Financial Corporation is a $2.3 billion financial services holding company headquartered in Elmira, New York and operates 30 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.

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.

As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, the Company could be subject to any of the following additional risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

  • demand for our products and services may decline, making it difficult to grow assets and income;
  • if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;
  • collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;
  • our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;
  • the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;
  • as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income;
  • a material decrease in net income over several quarters could result in a decrease in the rate of our quarterly cash dividend;
  • our cyber security risks are increased as the result of an increase in the number of employees working remotely;
  • we rely on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us; and
  • FDIC premiums may increase if the agency experiences additional resolution costs.

Information concerning these and other factors can be found in the Corporation’s periodic filings with the Securities and Exchange Commission (“SEC”), including the 2019 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) 
    Dec. 31,
  Sept. 30,   June 30,   March 31,
  Dec. 31,
(in thousands)     2020       2020       2020       2020       2019  
             
             
ASSETS            
Cash and due from financial institutions     29,467     $ 35,327     $ 28,689     $ 27,522     $ 25,203  
Interest-earning deposits in other financial institutions     79,071       114,575       126,473       116,936       96,701  
Total cash and cash equivalents     108,538       149,902       155,162       144,458       121,904  
Equity investments     2,542       2,291       2,169       1,999       2,174  
Securities available for sale     554,611       396,300       317,061       299,075       284,090  
Securities held to maturity     2,469       3,047       3,597       3,001       3,115  
FHLB and FRB stocks, at cost     3,150       3,150       3,150       3,099       3,099  
Total investment securities     560,230       402,497       323,808       305,175       290,304  
Commercial     1,085,554       1,095,170       1,065,901       895,741       879,085  
Mortgage     239,401       227,372       207,999       192,722       188,338  
Consumer     211,508       215,951       224,098       231,998       241,796  
Loans, net of deferred loan fees     1,536,463       1,538,493       1,497,998       1,320,461       1,309,219  
Allowance for loan losses     (20,924 )     (24,590 )     (24,130 )     (26,233 )     (23,478 )
Loans, net     1,515,539       1,513,903       1,473,868       1,294,228       1,285,741  
Loans held for sale     170       2,059       1,491       801       1,185  
Premises and equipment, net     20,119       20,891       21,395       21,781       22,417  
Operating lease right-of-use assets     7,145       7,474       7,650       7,826       8,001  
Goodwill     21,824       21,824       21,824       21,824       21,824  
Other intangible assets, net     258       371       491       610       742  
Accrued interest receivable and other assets     43,086       43,802       43,063       42,627       33,535  
Total assets   $ 2,279,451     $ 2,165,014     $ 2,050,921     $ 1,841,329     $ 1,787,827  
             
             

LIABILITIES AND SHAREHOLDERS’ EQUITY

           
Deposits:            
Non-interest-bearing demand deposits   $ 620,423     $ 619,412     $ 616,736     $ 469,535     $ 468,238  
Interest-bearing demand deposits     282,172       270,949       246,470       210,493       200,089  
Money market accounts     603,583       579,574       538,006       544,024       530,241  
Savings deposits     245,865       248,751       239,334       217,789       212,393  
Time deposits     285,731       205,503       170,710       166,262       161,177  
Total deposits     2,037,774       1,924,189       1,811,256       1,608,103       1,572,138  
Advances and other debt     3,849       4,155       3,969       4,028       4,085  
Operating lease liabilities     7,264       7,584       7,752       7,919       8,084  
Accrued interest payable and other liabilities     30,865       32,081       33,355       30,832       20,893  
Total liabilities     2,079,752       1,968,009       1,856,332       1,650,882       1,605,200  
Shareholders’ equity            
Common stock     53       53       53       53       53  
Additional-paid-in capital     46,764       46,892       46,758       46,754       46,382  
Retained earnings     168,006       163,987       159,505       154,926       153,701  
Treasury stock, at cost     (17,525 )     (15,569 )     (13,869 )     (11,204 )     (11,710 )
Accumulated other comprehensive income (loss)     2,401       1,642       2,142       (82 )     (5,799 )
Total shareholders’ equity     199,699       197,005       194,589       190,447       182,627  
Total liabilities and shareholders’ equity   $ 2,279,451     $ 2,165,014     $ 2,050,921     $ 1,841,329     $ 1,787,827  
Period-end shares outstanding     4,695       4,746       4,804       4,905       4,889  
 
 
Chemung Financial Corporation
Consolidated Statements of Income (Unaudited)
    Three Months Ended       Twelve Months Ended    
    December 31,   Percent   December 31,   Percent
(in thousands, except per share data)     2020       2019     Change     2020       2019     Change
Interest and dividend income:                                            
Loans, including fees   $ 15,319     $ 14,522     5.5     $ 59,089     $ 58,245     1.4  
Taxable securities     1,646       1,440     14.3       6,004       5,265     14.0  
Tax exempt securities     261       280     (6.8 )     1,060       1,152     (8.0 )
Interest-earning deposits     111       535     (79.3 )     754       2,270     (66.8 )
Total interest and dividend income     17,337       16,777     3.3       66,907       66,932      
Interest expense:                                            
Deposits     905       1,539     (41.2 )     3,827       6,173     (38.0 )
Borrowed funds     35       37     (5.4 )     161       148     8.8  
Total interest expense     940       1,576     (40.4 )     3,988       6,321     (36.9 )

Net interest income

   

16,397

     

15,201

   

7.9

     

62,919

     

60,611

   

3.8

 
Provision for loan losses     250       261     (4.2 )     4,239       5,945     (28.7 )
Net interest income after provision for loan losses     16,147       14,940     8.1       58,680       54,666     7.3  
Non-interest income:                                            
Wealth management group fee income     2,524       2,388     5.7       9,492       9,503     (0.1 )
Service charges on deposit accounts     840       1,130     (25.7 )     3,134       4,460     (29.7 )
Interchange revenue from debit card transactions     1,079       991     8.9       4,068       4,104     (0.9 )
Net gains on securities transactions               N/M             19     N/M  
Change in fair value of equity investments     122       (25 )   (588.0 )     89       81     9.9  
Net gains on sales of loans held for sale     814       102     698.0       1,730       248     597.6  
Net gains (losses) on sales of other real estate owned     (8 )     (12 )   N/M       (79 )     (99 )   (20.2 )
Income from bank owned life insurance     14       15     (6.7 )     161       63     155.6  
Other     590       517     14.1       2,529       1,694     49.3  
Total non-interest income     5,975       5,106     17.0       21,124       20,073     5.2  
Non-interest expense:                                            
Salaries and wages     6,572       6,045     8.7       24,250       23,420     3.5  
Pension and other employee benefits     1,458       1,414     3.1       5,553       5,902     (5.9 )
Other components of net periodic pension and postretirement benefits     (255 )     (118 )   116.1       (1,017 )     (541 )   88.0  
Net occupancy     1,479       1,500     (1.4 )     5,885       5,969     (1.4 )
Furniture and equipment     505       657     (23.1 )     2,078       2,497     (16.8 )
Data processing     1,946       1,968     (1.1 )     7,576       7,386     2.6  
Professional services     412       667     (38.2 )     1,725       1,885     (8.5 )
Amortization of intangible assets     113       144     (21.5 )     484       609     (20.5 )
Marketing and advertising     85       288     (70.5 )     631       932     (32.3 )
Other real estate owned expense     15       35     (57.1 )     102       115     (11.3 )
FDIC insurance     261       61     327.9       987       537     83.8  
Loan expense     375       230     63.0       1,173       787     49.0  
Other     2,631       1,960     34.2       6,508       6,198     5.0  
Total non-interest expense     15,597       14,851     5.0       55,935       55,696     0.4  
Income before income tax expense     6,525       5,195     25.6       23,869       19,043     25.3  
Income tax expense     1,292       991     30.4       4,607       3,434     34.2  
Net income   $ 5,233     $ 4,204     24.5     $ 19,262     $ 15,609     23.4  
Basic and diluted earnings per share   $ 1.11     $ 0.87         $ 4.01     $ 3.21      
Cash dividends declared per share     0.26       0.26           1.04       1.04      
Average basic and diluted shares outstanding     4,702       4,879           4,802       4,869      
N/M – Not Meaningful                
                 
                 
          As of or for the
Chemung Financial Corporation   As of or for the Three Months Ended     Twelve Months Ended
Consolidated Financial Highlights (Unaudited)   Dec. 31,
  Sept. 30,    June 30,
  March 31,
  Dec. 31,
  Dec. 31,
   Dec. 31, 
(in thousands, except per share data)   2020
  2020
    2020
  2020
  2019
  2020
   2019 
RESULTS OF OPERATIONS                                                        
Interest income   $ 17,337     $ 16,714     $  16,472     $ 16,384     $ 16,777     $ 66,907     $ 66,932  
Interest expense     940       845       881       1,322       1,576       3,988       6,321  
Net interest income     16,397       15,869       15,591       15,062       15,201       62,919       60,611  
Provision (credit) for loan losses     250       679       260       3,050       261       4,239       5,945  
Net interest income after provision for loan losses     16,147       15,190       15,331       12,012       14,940       58,680       54,666  
Non-interest income     5,975       5,339       5,080       4,730       5,106       21,124       20,073  
Non-interest expense     15,597       13,362       13,227       13,749       14,851       55,935       55,696  
Income before income tax expense     6,525       7,167       7,184       2,993       5,195       23,869       19,043  
Income tax expense     1,292       1,456       1,357       502       991       4,607       3,434  
Net income   $ 5,233     $ 5,711     $ 5,827     $ 2,491     $ 4,204     $ 19,262     $ 15,609  
Basic and diluted earnings per share   $ 1.11     $ 1.19     $ 1.20     $ 0.51     $ 0.87     $ 4.01     $ 3.21  
Average basic and diluted shares outstanding     4,702       4,773       4,850       4,895       4,879       4,802       4,869  
PERFORMANCE RATIOS                
Return on average assets     0.93 %     1.08 %     1.15 %     0.55 %     0.93 %     0.94 %     0.88 %
Return on average equity     10.51 %     11.56 %     12.22 %     5.32 %     9.14 %     9.94 %     8.86 %
Return on average tangible equity (a)     11.84 %     13.03 %     13.83 %     6.04 %     10.43 %     11.24 %     10.18 %
Efficiency ratio (unadjusted) (f)     69.72 %     63.00 %     63.99 %     69.47 %     73.13 %     66.56 %     69.03 %
Efficiency ratio (adjusted) (a) (b)     68.94 %     62.19 %     63.16 %     68.50 %     72.08 %     65.71 %     67.95 %
Non-interest expense to average assets     2.76 %     2.54 %     2.62 %     3.06 %     3.28 %     2.73 %     3.16 %
Loans to deposits     75.40 %     79.96 %     82.70 %     82.11 %     83.28 %     75.40 %     83.28 %
YIELDS / RATES – Fully Taxable Equivalent                
Yield on loans     3.96 %     3.91 %     4.06 %     4.37 %     4.43 %     4.06 %     4.50 %
Yield on investments     1.37 %     1.61 %     1.58 %     2.20 %     2.29 %     1.65 %     2.37 %
Yield on interest-earning assets     3.23 %     3.37 %     3.45 %     3.86 %     3.92 %     3.46 %     4.02 %
Cost of interest-bearing deposits     0.26 %     0.26 %     0.28 %     0.46 %     0.55 %     0.31 %     0.56 %
Cost of borrowings     3.52 %     3.54 %     0.82 %     3.58 %     3.58 %     1.65 %     3.53 %
Cost of interest-bearing liabilities     0.27 %     0.27 %     0.29 %     0.47 %     0.56 %     0.32 %     0.57 %
Interest rate spread     2.96 %     3.10 %     3.16 %     3.39 %     3.36 %     3.14 %     3.45 %
Net interest margin, fully taxable equivalent     3.06 %     3.20 %     3.26 %     3.55 %     3.56 %     3.25 %     3.64 %
CAPITAL                
Total equity to total assets at end of period     8.76 %     9.10 %     9.49 %     10.34 %     10.22 %     8.76 %     10.22 %
Tangible equity to tangible assets at end of period (a)     7.87 %     8.16 %     8.49 %     9.24 %     9.07 %     7.87 %     9.07 %
Book value per share   $ 42.53     $ 41.51     $ 40.51     $ 38.83     $ 37.35     $ 42.53     $ 37.35  
Tangible book value per share (a)     37.83       36.83       35.86       34.25       32.74       37.83       32.74  
Period-end market value per share     33.95       28.87       27.30       32.98       42.50       33.95       42.50  
Dividends declared per share     0.26       0.26       0.26       0.26       0.26       1.04       1.04  
AVERAGE BALANCES                                                        
Loans and loans held for sale (c)   $ 1,540,618     $ 1,515,762     $ 1,456,080     $ 1,310,342     $ 1,303,349     $ 1,456,096     $ 1,296,426  
Interest earning assets     2,144,891       1,986,043       1,931,107       1,715,562       1,705,766       1,945,062       1,674,668  
Total assets     2,249,949       2,094,114       2,032,729       1,807,753       1,798,385       2,046,786       1,764,401  
Deposits     2,009,211       1,853,557       1,776,275       1,588,147       1,581,645       1,807,478       1,558,164  
Total equity     198,036       196,569       191,853       188,427       182,522       193,741       176,138  
Tangible equity (a)     175,894       174,302       169,464       165,911       159,889       171,413       153,278  
ASSET QUALITY                                                        
Net charge-offs   $ 3,915     $ 219     $ 2,363     $ 294     $ 706     $ 6,792     $ 1,411  
Non-performing loans (d)     9,952       15,726       17,280       17,948       18,008       9,952       18,008  
Non-performing assets (e)     10,189       16,311       17,573       18,328       18,525       10,189       18,525  
Allowance for loan losses     20,924       24,590       24,130       26,233       23,478       20,924       23,478  
Annualized net charge-offs to average loans     1.01 %     0.06 %     0.65 %     0.09 %     0.21 %     0.47 %     0.11 %
Non-performing loans to total loans     0.65 %     1.02 %     1.15 %     1.36 %     1.38 %     0.65 %     1.38 %
Non-performing assets to total assets     0.45 %     0.75 %     0.86 %     1.00 %     1.04 %     0.45 %     1.04 %
Allowance for loan losses to total loans     1.36 %     1.60 %     1.61 %     1.99 %     1.79 %     1.36 %     1.79 %
Allowance for loan losses to non-performing loans     210.25 %     156.36 %     139.64 %     146.16 %     130.38 %     210.25 %     130.38 %

(a) See the GAAP to Non-GAAP reconciliations.
(b) Efficiency ratio (adjusted) 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 or losses on securities transactions.
(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.
(f)  Efficiency ratio (unadjusted) is non-interest expense divided by the total of net interest income plus non-interest income.

 

Chemung Financial Corporation
Average Consolidated Balance Sheets & Net Interest Income Analysis and Rate/Volume Analysis of Net Interest Income (Unaudited)

                                                                     
                                                                     
    Three Months Ended   Three Months Ended   Three Months Ended
    December 31, 2020   December 31, 2019   December 31, 2020 vs. 2019
                                                                     
    Average       Yield /     Average           Yield /     Total   Due to   Due to
    Balance   Interest   Rate   Balance   Interest   Rate    Change   Volume   Rate
(in thousands)                                                                    
Interest earning assets:                                                                    
Commercial loans   $ 1,092,236     $ 11,010     4.01 %   $ 872,992     $ 10,066     4.57 %   $ 944     $ 2,290     $ (1,346 )
Mortgage loans     236,461       2,123     3.57 %     186,780       1,775     3.77 %     348       447       (99 )
Consumer loans     211,921       2,208     4.14 %     243,577       2,708     4.41 %     (500 )     (340 )     (160 )
Taxable securities     419,871       1,651     1.56 %     242,828       1,446     2.36 %     205       808       (603 )
Tax-exempt securities     41,075       322     3.12 %     44,240       345     3.09 %     (23 )     (26 )     3  
Interest-earning deposits     143,327       112     0.31 %     115,349       535     1.84 %     (423 )     105       (528 )
Total interest earning assets     2,144,891       17,426     3.23 %     1,705,766       16,875     3.92 %     551       3,284       (2,733 )
Non- interest earnings assets:                            
Cash and due from banks     24,826             26,322                  
Other assets     104,664             90,454                  
Allowance for loan losses     (24,432 )           (24,157 )                
Total assets   $ 2,249,949           $ 1,798,385                  
                             
Interest-bearing liabilities:                            
Interest-bearing checking   $ 290,951     $ 72     0.10 %   $ 207,878     $ 214     0.41 %   $ (142 )   $ 63     $ (205 )
Savings and money market     864,540       281     0.13 %     741,044       694     0.37 %     (413 )     99       (512 )
Time deposits     239,262       552     0.92 %     163,170       631     1.53 %     (79 )     228       (307 )
Long-term advances and other debt     3,961       35     3.52 %     4,104       37     3.58 %     (2 )     (1 )     (1 )
Total int.-bearing liabilities     1,398,714       940     0.27 %     1,116,196       1,576     0.56 %     (636 )     389       (1,025 )
                                                                     
Non-interest-bearing liabilities:                                  
Demand deposits     614,458             469,553                  
Other liabilities     38,741             30,114                  
Total liabilities     2,051,913             1,615,863                  
Shareholders’ equity     198,036             182,522                  
Total liabilities and shareholders’ equity   $ 2,249,949           $ 1,798,385                  
                                                   

Fully taxable equivalent net interest income

       

16,486

         

15,299

     

$

1,187

   

$

2,898

   

$

(1,711

)

                                     
Net interest rate spread (1)           2.96 %         3.36 %                
Net interest margin, fully taxable equivalent (2)           3.06 %         3.56 %          
Taxable equivalent adjustment         (89 )