UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarterly period ended June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-13888
CHEMUNG FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
New York 16-1237038
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.
One Chemung Canal Plaza, Elmira, NY 14902
(Address of principal executive offices) (Zip Code)
(607) 737-3711
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES XX NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of March 31, 1995:
Common Stock, $5 par value -- outstanding 2,087,481 shares
CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARY
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
Condensed Consolidated Statements of Condition 1
Condensed Consolidated Statements of Income 2
Condensed Consolidated Statements of Cash Flow 3
Notes to Condensed Consolidated Financial Statmts. 4
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K 7
All other items required by Part II are either
inapplicable or would require an answer which is negative.
SIGNATURES 9
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
<TABLE>
CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
<CAPTION>
June 30 Dec 31
1995 1994
ASSETS Unaudited Audited
<S> <C> <C>
Cash and due from Banks $ 25,131,811 $ 24,380,592
Federal Funds Sold 10,200,000 8,000,000
Investment Securities Held to Maturity 16,009,594 15,168,682
(aggregate market value 1995 - $16,064,908
1994 - $15,012,570
Investment Securities Available for Sale 157,711,472 189,123,633
Allowance Valuation - Securities Available for Sale 4,892,983 (295,349)
Total Investment Securities AFS - Adj. to Market 162,604,455 188,828,284
Loans 252,905,103 236,497,448
Less: Allowance for Loan Losses 3,883,290 3,599,968
Loans, Net 249,021,813 232,897,480
Bank Premises and Equipment, Net 9,417,968 8,527,302
Goodwill and deposits base Intangible,
net of accumulated amortization 8,283,888 8,577,540
Other Assets 7,192,548 7,952,438
Total Assets $487,862,077 $494,332,318
LIABILITIES
Deposits: Non-interest Bearing $ 75,834,946 $ 81,135,334
Interest Bearing 344,697,391 351,135,386
Total Deposits 420,532,337 432,270,720
Securities sold under Agreement to Repurchase 9,418,725 10,203,785
Other Liabilities 7,577,956 6,119,067
Total Liabilities 437,529,018 448,593,572
SHAREHOLDERS' EQUITY
Common Stock (Authorized 3,000,000; Issued 2,150,067) 10,750,335 10,750,335
Surplus 10,068,563 10,068,563
Retained Earnings 28,029,783 26,374,590
Cost of Treasury Shares (Deduction) 62,586-1995
56,586-1994 (1,432,549) (1,279,549)
Unrealized G/L Security Valuation-Avail. for Sale 2,916,927 (175,193)
Total Shareholders' Equity 50,333,059 45,738,746
Total Liabilities & Shareholders' Equity $487,862,077 $494,332,318
See Accompanying Notes to Condensed Consolidated Financial Statements
</TABLE>
<TABLE>
CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
<CAPTION>
6 Months Ended 3 Months Ended
June 30 June 30
INTEREST INCOME 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest and Fees on Loans $11,502,463 $ 9,685,249 $5,919,074 $4,806,550
Interest and Dividends on
Investment Securities 5,975,512 3,819,475 2,870,782 2,066,036
Interest on Federal Funds Sold 237,882 183,981 122,224 92,204
Income Interest Bearing Deposits 90,184 67,662 50,972 61,813
Total Interest Income 17,806,041 13,756,367 8,963,052 7,026,603
INTEREST EXPENSE
Deposits $ 6,668,929 $ 4,376,142 $3,360,765 $2,262,410
Securities Sold Under Agreements
to Repurchase and Funds Borrowed 418,761 143,783 182,889 72,657
Total Interest Expense $ 7,087,690 $ 4,519,925 $3,543,654 $2,335,067
Net Interest Income $10,718,351 $ 9,236,442 $5,419,398 $4,691,536
Provision for Loan Losses 400,000 250,000 200,000 125,000
Net Interest Income after
Provision for Loan Losses $10,318,351 $ 8,986,442 $5,219,398 $4,566,536
Realized Gains-Security Trans. 325,154 139,985 279,875 139,978
Other Operating Income 2,923,057 2,673,066 1,453,841 1,327,522
$13,566,562 $11,799,493 $6,953,114 $6,034,036
Other Operating Expenses $ 9,580,223 $ 8,244,775 $4,806,651 $4,201,615
Income before Taxes 3,986,339 3,554,718 2,146,463 1,832,421
Income Taxes 1,327,716 1,207,403 741,961 631,903
Net Income $ 2,658,623 $ 2,347,315 $1,404,502 $1,200,518
Net Income per Share $1.27 $1.24 $.67 $.63
See Accompanying Notes to Condensed Consolidated Financial Statements
</TABLE>
<TABLE>
CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Six Months Ended
June 30
1995 1994
OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 2,658,623 $ 2,347,315
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Amortization of Deposit Base Intangible 293,652 0
Provision for Loan Losses 400,000 250,000
Provision for Depreciation and Amortization 553,777 462,818
Amortization for Investment Securities, Net (257,591) (497,564)
(Gain) Loss on Investment Security Sales, Net (325,154) (139,985)
(Increase) Decrease in Accrued Interest Receivable
and Other Assets 759,890 (6,458,479)
Increase (Decrease) in Accrued Interest Payable,
Taxes and Other Liabilities 1,413,921 1,003,110
Net Cash Provided by Operating Activities 5,497,118 (3,032,785)
INVESTING ACTIVITIES
Proceeds from Maturities of Securities - AFS 41,151,126 42,658,176
Proceeds from Maturities of Securities -HTM 4,471,292 2,375,975
Proceeds from Sales of Securities - AFS 5,445,178 10,239,418
Purchases of Securities - AFS (16,687,338) (119,839,740)
Purchases of Securities - HTM (5,322,476) (5,398,602)
Purchases of Bank Premises and Equipment, Net (1,444,443) (468,130)
Loan Originations, Net of Repayments
and Other Reductions (17,381,792) (318,096)
Proceeds from Sale of Student Loans 857,459 1,010,365
Net Cash Used by Investing Activities 11,089,006 (69,740,634)
FINANCING ACTIVITIES
Deposits of Acquired Branches 0 45,628,085
Net Increase (Decrease) in Demand Deposits, NOW,
Savings and Insured Money Market Accounts (17,692,587) 4,758,457
Net Increase (Decrease) in Certificates of Deposit
and Individual Retirement Accounts 5,954,204 (1,774,440)
Net Increase (Decrease) in Short term Borrowings (785,060) (5,554,948)
Sale of Treasury Shares 0 172,500
Purchase of Treasury Shares (153,000) 0
Cash Dividends Paid (958,462) (862,844)
Net Cash Provided by Financing Activities (13,634,905) 42,366,810
Net Increase (Decrease) in Cash and Cash Equivalents 2,951,219 (30,406,609)
Cash and Cash Equivalents at Beginning of Year 32,380,592 65,055,776
Cash and Cash Equivalents at End of Period $35,331,811 $34,649,167
See Accompanying Notes to Condensed Consolidated Financial Statements
</TABLE>
CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Chemung Financial Corporation, a one-bank holding company, commenced
operations on June 1, 1985 for the purpose of acquiring all the
outstanding shares of the Chemung Canal Trust Company, Elmira, NY. The
Trust Company's stock was acquired through the issuance of 431,498 shares
of the Corporation's stock in a transaction accounted for as a pooling of
interests.
2. In the opinion of management, the consolidated financial statements
included herein contain all adjustments necessary to present fairly the
financial position as of June 30, 1995 and December 31, 1994, the results
of operations for the six month period ending June 30, 1995 and 1994 and
the changes in cash flow position for the six-month period ending
June 30, 1995 and 1994.
3. Net income per share for the periods presented have been computed by
dividing net income by 2,090,481 average shares outstanding on June 30,
1995 and 1,898,863 average shares outstanding on June 30, 1994.
4. The Financial Accounting Standards Board issued Statement 114 Accounting
by Creditors for Impairment of a Loan as amended by Statement 118,
Accounting by Creditors for Impairment of a Loan - Income and Disclosure.
These statements prescribe recognition criteria for loan impairment,
generally related to commercial type loans, and measurement methods for
certain impaired loans and all loans whose terms are modified in troubled
debt restructuring subsequent to the adoption of these statements. A
loan is considered impaired when it is probable that the borrower will be
unable to repay the loan according to the original contractual terms of
the loan agreement.
As of January 1, 1995, the Company has adopted the provisions of SFAS No.
114 and SFAS No. 118 and has provided the required disclosures. The
effect of adoption was not material to the consolidated financial
statements. As of January 1, 1995, the company had no in substance
foreclosed assets to be reclassified into impaired loan status as
required by SFAS No. 114. For all prior periods presented, there were no
in substance foreclosures to be reclassified.
As a result of the adoption of SFAS No. 114, the allowance for possible
loan losses related to impaired loans that are identified for evaluation
in accordance with SFAS No. 114 is based on the present value of expected
cash flows discounted at the loan's initial effective interest rate,
except that as a practical expedient, impairment may be measured at the
loan's observable market price, or the fair value of the collateral for
certain loans where repayment of the loan is expected to be provided
solely by the underlying collateral (collateral dependent loans). The
Company considers estimated costs to sell, on a discounted basis, when
determining the fair value of collateral in the measurement of impairment
if those costs are expected to reduce the cash flows available to repay
or otherwise satisfy the loans. Prior to the adoption of SFAS No. 114
and 118, the allowance for possible loan losses related to these loans
was based on estimated undiscounted cash flows or the fair value of the
collateral, less estimated costs to sell for collateral dependent loans.
Other real estate owned included only formally foreclosed, and no
in-substance foreclosed real properties. In accordance with SFAS
No. 114, a loan is classified as an in-substance foreclosure when the
Company has taken possession of the collateral regardless of whether
formal foreclosure proceedings have taken place. Prior to the adoption
of SFAS No. 114 and SFAS No. 118, in-substance foreclosed properties
included those properties where the borrower had little or no remaining
equity in the property considering its fair value remaining equity; where
repayment was only expected to come from the operation or sale of the
property; and where the borrower had effectively abandoned control of the
property or it was doubtful that the borrower would be able to rebuild
equity in the property.
Changes in the allowance for possible loan losses for the six months
ended June 30, 1995 is as follows:
<TABLE>
<S> <C>
Amount (000's)
Balance at beginning of period 3,600
Provisions for possible loan losses 400
Loans charged off (176)
Recoveries on loans previously charged off 59
Balance at end of period 3,883
</TABLE>
At June 30, 1995, the recorded investment in loans that are considered to
be impaired under SFAS No. 114 totaled $642,915. Included in this amount
is $491,450 of impaired loans for which the related allowance for credit
losses is $252,370. In addition, included in the total impaired loans at
June 30, 1995 is $151,465 of impaired loans that as a result of the
adequacy of collateral values, do not have an allowance for credit losses
determined in accordance with SFAS No. 114. The average recorded
investments in impaired loans during the three months ended June 30, 1995
was approximately $694,391.
Impaired loans are included in non-performing loans, generally
as non-accrual loans. Commercial type loans past due greater than 90
days and still accruing are generally not considered to be impaired as
the Company expects to collect all amounts due, including interest
accrued at the contractual interest rate for the delinquent period. The
Company had no restructured loans prior to the adoption of SFAS No. 114.
In general, interest income on impaired loans is recorded on a cash basis
when collection in full is reasonably expected. If full collection is
uncertain, cash receipts are applied first to principal, then to interest
income.
For the three months ended June 30, 1995 the Company recognized interest
income on those impaired loans of $5,019 which included $3,222 of
interest income recognized using the cash basis method of income
recognition.
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
Consolidated total assets at June 30, 1995 were $487.9 million, a decline
of $6.4 million (1.3%) from the beginning of the year. This is within the
expectations of management as the Corporation moved to assimilate the operations
of four branches acquired during 1994. With the loan to deposit ratio at 54.7%
at the beginning of the year, there was little need to aggressively pursue
additional deposits through aggressive interest rate bidding.
Loan business, in accordance with the Corporation's plan, has been strong
in the commercial and auto loan areas and the long-term decline in 1-4 family
mortgage loans has been reversed during the period. Total loans at the end of
June 1995 were $252.9 million, up $7.6 million (3.1%) for the second quarter and
$16.4 million (6.9%) since the beginning of the year.
Total deposits at June 30, 1995 were $421 million, down $30 million
(6.7%) from the beginning of the quarter and $11.7 million (2.7%) from December
31, 1994. March 31 deposit balances represented somewhat of a distortion as
local school districts received and deposited their NYS State Aid checks on that
date, increasing their balances by approximately $25 million. Average total
deposit balances during the quarter were about $416 million. The loan to
deposit ratio at June 30 was 60.1%.
The Available for Sale segment of the securities portfolio at June 30,
1995 was $157.7 million, compared to $174 million at March 31 and $189 million
at the beginning of the year. Interest rates continued to trend lower during
the quarter, causing the Allowance valuation to increase to $4.9 million at
June 30, compared to $2.5 million at March 31 and $-295 thousand at December 31,
1994.
Consolidated net earnings for the second quarter of 1995 were $1.405
million, up $204 thousand (17%) over the second quarter of 1994. Net earnings
per share for the quarter were $0.67 vs $0.63, an increase of $0.04 (6.4%) on
197 thousand additional shares outstanding. Net earnings per share for the six
month period were $1.27 vs $1.24 (2.4%) on 191 additional shares outstanding.
The additional shares were issued in connection with the December 31, 1994
acquisition of the Owego National Bank in a tax exempt transaction which became
effective on the first day of business of 1995. Due to the sustained increase
in loan demand, management decided to increase the loan loss provision to $200
thousand during the first quarter and continued the allocation in the second
quarter. At 343% of non-performing loans and 1.53% of total loans, the reserve
is viewed by management as adequate relative to risk. Non-performing loans at
June 30, 1995 constituted 0.43% of total loans.
The Owego acquisition was accounted for on a "purchase" accounting basis,
a treatment which resulted in a good will intangible amounting to $2.7 million
at June 30, 1995. This intangible is being amortized on a straightline basis
over fifteen years. The amortization of good will is an after-tax expense.
The core deposit intangible in the amount of $5.5 million at June 30,
1995, which accounts for the premium paid in connection with the acquisition of
three branches from the Resolution Trust Corporation in June of last year, is
being amortized over 15 years for both book and tax purposes. Our actual
experience with the deposit accounts acquired in this transaction is under
continuing review.
On June 30, 1995, the Corporation's consolidated leverage ratio was 7.99%
versus 7.52% on March 31, and 7.51% at the beginning of the year. The Tier I
and Total Risk Adjusted Capital ratios were 13.39% and 14.89%, respectively.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Applicable Exhibits
(3.1) Certificate of Incorporation is filed as Exhibit 3.1 to
Registrant's Registration Statement on Form S-14, Registration No.
2-95743, and is incorporated herein by reference.
Certificate of Amendment to the Certificate of Incorporation, filed
with the Secretary of State of New York on April 1, 1988, is
incorporated herein by reference to Exhibit A of the registrant's
Form 10-K for the year ended December 31, 1988, File No. 0-13888.
(3.2) Bylaws of the Registrant, as amended to March 8, 1995 are
incorporated herein by reference to Exhibit A of the registrant's
Form 10-Q for the quarter ended March 31, 1995, File No. 0-13888.
(27) Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K
During the quarter ended June 30, 1995, no reports on Form 8-K or
amendments to any previously-filed Form 8-K were filed by the registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there to duly authorized.
CHEMUNG FINANCIAL CORPORATION
DATE: August 7, 1995 /s/ John W. Bennett
John W. Bennett
President & CEO
DATE: August 7, 1995 /s/ Jan P. Updegraff
Jan P. Updegraff
Vice President &
Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED QUARTERLY FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE
30, 1995 AS PRESENTED IN ITS SECOND QUARTER FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 24,911
<INT-BEARING-DEPOSITS> 221
<FED-FUNDS-SOLD> 10,200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 157,711
<INVESTMENTS-CARRYING> 16,010
<INVESTMENTS-MARKET> 16,065
<LOANS> 252,905
<ALLOWANCE> 3,883
<TOTAL-ASSETS> 487,862
<DEPOSITS> 420,532
<SHORT-TERM> 9,419
<LIABILITIES-OTHER> 7,578
<LONG-TERM> 0
<COMMON> 10,750
0
0
<OTHER-SE> 39,583
<TOTAL-LIABILITIES-AND-EQUITY> 487,862
<INTEREST-LOAN> 11,502
<INTEREST-INVEST> 5,976
<INTEREST-OTHER> 328
<INTEREST-TOTAL> 17,806
<INTEREST-DEPOSIT> 6,669
<INTEREST-EXPENSE> 7,088
<INTEREST-INCOME-NET> 10,718
<LOAN-LOSSES> 400
<SECURITIES-GAINS> 325
<EXPENSE-OTHER> 9,580
<INCOME-PRETAX> 3,986
<INCOME-PRE-EXTRAORDINARY> 2,659
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,659
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.27
<YIELD-ACTUAL> 4.84
<LOANS-NON> 987
<LOANS-PAST> 525
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,600
<CHARGE-OFFS> 176
<RECOVERIES> 60
<ALLOWANCE-CLOSE> 3,883
<ALLOWANCE-DOMESTIC> 566
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,317
</TABLE>
