Company Quick10K Filing
Quick10K
Chemung Financial
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$47.81 5 $232
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2019-02-20 Other Events, Exhibits
8-K 2019-01-30 Regulation FD, Exhibits
8-K 2019-01-23 Earnings, Exhibits
8-K 2019-01-23 Earnings, Exhibits
8-K 2018-12-19 Officers, Exhibits
8-K 2018-11-14 Other Events, Exhibits
8-K 2018-11-07 Regulation FD, Exhibits
8-K 2018-10-18 Earnings, Exhibits
8-K 2018-08-15 Other Events, Exhibits
8-K 2018-07-18 Earnings, Exhibits
8-K 2018-06-15 Other Events
8-K 2018-05-16 Amend Bylaw, Other Events, Exhibits
8-K 2018-05-10 Officers, Shareholder Vote, Exhibits
8-K 2018-04-18 Earnings, Exhibits
8-K 2018-02-21 Officers, Exhibits
8-K 2018-02-15 Earnings, Exhibits
8-K 2018-01-08 Officers, Exhibits
8-K 2017-12-20 Amend Bylaw, Exhibits
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CHMG 2018-09-30
Note 1 Summary of Significant Accounting Policies
Note 2 Earning per Common Share (Shares in Thousands)
Note 3 Securities
Note 4 Loans and Allowance for Loan Losses
Note 5 Fair Value
Note 6 Goodwill and Intangible Assets
Note 7 Securities Sold Under Agreements To Repurchase
Note 8 Commitments and Contingencies
Note 9 Accumulated Other Comprehensive Loss
Note 10 Revenue From Contracts with Customers
Note 11 Components of Quarterly and Year To Date Net Periodic Benefit Costs
Note 12 Segment Reporting
Note 13 Stock Compensation
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3: Quantitative and Qualitative Disclosures About Market Risk
Item 4: Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 chmg10q09302018exh31-1.htm
EX-31.2 chmg10q09302018exh31-2.htm
EX-32.1 chmg10q09302018exh32-1.htm
EX-32.2 chmg10q09302018exh32-2.htm

Chemung Financial Earnings 2018-09-30

CHMG 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 chmg0930201810q.htm 10-Q Document


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 September 30, 2018
Or
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File No. 000-13888
chemungfinanciallogo.jpg
CHEMUNG FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
 
New York
 
16-1237038
(State or other jurisdiction of incorporation or organization)
 
I.R.S. Employer Identification No.
 
One Chemung Canal Plaza, Elmira, NY
 
14901
(Address of principal executive offices)
 
(Zip Code)
 
(607) 737-3711 or (800) 836-3711
(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:    X         NO:____
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YES:    X        NO:____
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
[   ]
Non-accelerated filer
 
[   ]
Accelerated filer
[X]
Smaller reporting company
 
[X]
 
 
 
Emerging growth company
 
[   ]
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
YES:             NO:  X

The number of shares of the registrant's common stock, $.01 par value, outstanding on October 30, 2018 was 4,806,864.




CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES

INDEX


 
 
PAGES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2



GLOSSARY OF ABBREVIATIONS AND TERMS

To assist the reader the Corporation has provided the following list of commonly used abbreviations and terms included in the Notes to the Unaudited Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Abbreviations
ALCO
Asset-Liability Committee
ASU
Accounting Standards Update
Bank
Chemung Canal Trust Company
Basel III
The Third Basel Accord of the Basel Committee on Banking Supervision
Board of Directors
Board of Directors of Chemung Financial Corporation
CDARS
Certificate of Deposit Account Registry Service
CDO
Collateralized Debt Obligation
CECL
Current expected credit loss
CFS
CFS Group, Inc.
Corporation
Chemung Financial Corporation
CRM
Chemung Risk Management, Inc.
Dodd-Frank Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act
EPS
Earnings per share
Exchange Act
Securities Exchange Act of 1934
FASB
Financial Accounting Standards Board
FDIC
Federal Deposit Insurance Corporation
FHLBNY
Federal Home Loan Bank of New York
FRB
Board of Governors of the Federal Reserve System
FRBNY
Federal Reserve Bank of New York
Freddie Mac
Federal Home Loan Mortgage Corporation
GAAP
U.S. Generally Accepted Accounting Principles
ICS
Insured Cash Sweep Service
IFRS
International Financial Reporting Standards
MD&A
Management’s Discussion and Analysis of Financial Condition and Results of Operations
NAICS
North American Industry Classification System
N/M
Not meaningful
OPEB
Other postemployment benefits
OREO
Other real estate owned
OTTI
Other-than-temporary impairment
PCI
Purchased credit impaired
ROA
Return on average assets
Regulatory Relief Act
Economic Growth, Regulatory Relief, and Consumer Protection Act
ROE
Return on average equity
RWA
Risk-weighted assets
SBA
Small Business Administration
SEC
Securities and Exchange Commission
Securities Act
Securities Act of 1933
Tax Act
Tax Cuts and Jobs Act of 2017
TDRs
Troubled debt restructurings
WMG
Wealth Management Group




3



Terms
Allowance for loan losses to total loans
Represents period-end allowance for loan losses divided by retained loans.
Assets under administration
Represents assets that are beneficially owned by clients and all investment decisions pertaining to these assets are also made by clients.
Assets under management
Represents assets that are managed on behalf of clients.
Basel III
A comprehensive set of reform measures designed to improve the regulation, supervision, and risk management within the banking sector. The reforms require banks to maintain proper leverage ratios and meet certain capital requirements.
Benefit obligation
Refers to the projected benefit obligation for pension plans and the accumulated postretirement benefit obligation for OPEB plans.
Capital Bank
Division of Chemung Canal Trust Company located in the “Capital Region” of New York State and includes the counties of Albany and Saratoga.
CDARS
Product involving a network of financial institutions that exchange certificates of deposits among members in order to ensure FDIC insurance coverage on customer deposits above the single institution limit.  Using a sophisticated matching system, funds are exchanged on a dollar-for-dollar basis, so that the equivalent of an original deposit comes back to the originating institution.
Captive insurance company
A company that provides risk-mitigation services for its parent company.
Collateralized debt obligation
A structured financial product that pools together cash flow-generating assets, such as mortgages, bonds, and loans.
Collateralized mortgage obligations
A type of mortgage-backed security with principal repayments organized according to their maturities and into different classes based on risk.  The mortgages serve as collateral and are organized into classes based on their risk profile.
Dodd-Frank Act
The Dodd-Frank Act was enacted on July 21, 2010 and significantly changed the bank regulatory landscape and has impacted and will continue to impact the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies.  The Dodd-Frank Act requires various federal agencies to adopt a broad range of new rules and regulations, and to prepare various studies and reports for Congress.
Fully taxable equivalent basis
Income from tax-exempt loans and investment securities that have been increased by an amount equivalent to the taxes that would have been paid if this income were taxable at statutory rates; the corresponding income tax impact related to tax-exempt items is recorded within income tax expense.
GAAP
Accounting principles generally accepted in the United States of America.
Holding company
Consists of the operations for Chemung Financial Corporation (parent only).
ICS
Product involving a network of financial institutions that exchange interest-bearing money market deposits among members in order to ensure FDIC insurance coverage on customer deposits above the single institution limit.  Using a sophisticated matching system, funds are exchanged on a dollar-for-dollar basis, so that the equivalent of an original deposit comes back to the originating institution.
Loans held for sale
Residential real estate loans originated for sale on the secondary market with maturities from 15-30 years.
Long term lease obligation
An obligation extending beyond the current year, which is related to a long term capital lease that is considered to have the economic characteristics of asset ownership.
Mortgage-backed securities
A type of asset-backed security that is secured by a collection of mortgages.
Municipal clients
A political unit, such as a city, town, or village, incorporated for local self-government.
N/A
Data is not applicable or available for the period presented.
N/M
Not meaningful.
Non-GAAP
A calculation not made according to GAAP.
Obligations of state and political subdivisions
An obligation that is guaranteed by the full faith and credit of a state or political subdivision that has the power to tax.
Obligations of U.S. Government
A federally guaranteed obligation backed by the full power of the U.S. government, including Treasury bills, Treasury notes and Treasury bonds.

4



Obligations of U.S. Government sponsored enterprise obligations
Obligations of agencies originally established or chartered by the U.S. government to serve public purposes as specified by the U.S. Congress; these obligations are not explicitly guaranteed as to the timely payment of principal and interest by the full faith and credit of the U.S. government.
OREO
Represents real property owned by the Corporation, which is not directly related to its business and is most frequently the result of a foreclosure on real property.
OTTI
Impairment charge taken on a security whose fair value has fallen below the carrying value on the balance sheet and whose value is not expected to recover through the holding period of the security.
PCI loans
Represents loans that were acquired in the Fort Orange Financial Corp. transaction and deemed to be credit-impaired on the acquisition date in accordance with the guidance of FASB.
Political subdivision
A county, city, town, or other municipal corporation, a public authority, or a publicly-owned entity that is an instrumentality of a state or a municipal corporation.
Pre-provision profit/(loss)
Represents total net revenue less noninterest expense, before income tax expense (benefit).  The Corporation believes that this financial measure is useful in assessing the ability of a bank to generate income in excess of its provision for credit losses.
Regulatory Relief Act
The Economic Growth, Regulatory Relief and Consumer Protection Act was enacted on May 24, 2018 provides certain limited amendments to the Dodd-Frank Act, as well as certain targeted modifications to other post-financial crisis regulatory requirements.  In addition, the legislation establishes new consumer protections and amends various securities- and investment company-related requirements.
RWA
Risk-weighted assets consist of on- and off-balance sheet assets that are assigned to one of several broad risk categories and weighted by factors representing their risk and potential for default.  On-balance sheet assets are risk-weighted based on the perceived credit risk associated with the obligor or counterparty, the nature of any collateral, and the guarantor, if any.  Off-balance sheet assets such as lending-related commitments, guarantees, derivatives and other applicable off-balance sheet positions are risk-weighted by multiplying the contractual amount by the appropriate credit conversion factor to determine the on-balance sheet credit equivalent amount, which is then risk-weighted based on the same factors used for on-balance sheet assets.  Risk-weighted assets also incorporate a measure for market risk related to applicable trading assets-debt and equity instruments.  The resulting risk-weighted values for each of the risk categories are then aggregated to determine total risk-weighted assets.
SBA loan pools
Business loans partially guaranteed by the SBA.
Securities sold under agreements to repurchase
Sale of securities together with an agreement for the seller to buy back the securities at a later date.
Tax Act
The Tax Act was enacted on December 22, 2017 and amended the Internal Revenue Code of 1986. The legislation reduced the U.S. federal corporate income tax rate from 35 percent to 21 percent, with some related business deductions and credits being either reduced or eliminated.
TDR
A TDR is deemed to occur when the Corporation modifies the original terms of a loan agreement by granting a concession to a borrower that is experiencing financial difficulty.
Trust preferred securities
A hybrid security with characteristics of both subordinated debt and preferred stock which allows for early redemption by the issuer, makes fixed or variable payments, and matures at face value.
Unaudited
Financial statements and information that have not been subjected to auditing procedures sufficient to permit an independent certified public accountant to express an opinion.
WMG
Provides services as executor and trustee under wills and agreements, and guardian, custodian, trustee and agent for pension, profit-sharing and other employee benefit trusts, as well as various investment, financial planning, pension, estate planning and employee benefit administration services.


5



 
CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share data)
 
September 30,
2018
 
December 31,
2017
ASSETS
 
 
 
 
Cash and due from financial institutions
 
$
31,831

 
$
27,966

Interest-earning deposits in other financial institutions
 
82,081

 
2,763

Total cash and cash equivalents
 
113,912

 
30,729

 
 
 
 
 
Equity investments, at estimated fair value
 
1,987

 
2,337

Securities available for sale, at estimated fair value
 
246,473

 
293,091

Securities held to maturity, estimated fair value of $4,190 at September 30, 2018
  and $3,776 at December 31, 2017
 
4,203

 
3,781

FHLBNY and FRBNY Stock, at cost
 
3,138

 
5,784

 
 
 
 
 
Loans, net of deferred loan fees
 
1,320,638

 
1,311,824

Allowance for loan losses
 
(19,635
)
 
(21,161
)
Loans, net
 
1,301,003

 
1,290,663

 
 
 
 
 
Loans held for sale
 
1,715

 
542

Premises and equipment, net
 
25,514

 
26,657

Goodwill
 
21,824

 
21,824

Other intangible assets, net
 
1,527

 
2,085

Bank-owned life insurance
 
3,032

 
2,982

Accrued interest receivable and other assets
 
29,536

 
27,145

 
 
 
 
 
Total assets
 
$
1,753,864

 
$
1,707,620

 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 

Deposits:
 
 
 
 

Non-interest-bearing
 
$
469,887

 
$
467,610

Interest-bearing
 
1,106,110

 
999,836

Total deposits
 
1,575,997

 
1,467,446

 
 
 
 
 
FHLBNY overnight advances
 

 
57,700

Securities sold under agreements to repurchase
 

 
10,000

FHLBNY term advances
 

 
2,000

Long term capital lease obligation
 
4,358

 
4,517

Dividends payable
 
1,249

 
1,233

Accrued interest payable and other liabilities
 
15,761

 
14,911

Total liabilities
 
1,597,365

 
1,557,807

 
 
 
 
 
Shareholders' equity:
 
 
 
 

Common stock, $0.01 par value per share, 10,000,000 shares authorized;
  5,310,076 issued at September 30, 2018 and December 31, 2017
 
53

 
53

Additional paid-in capital
 
46,006

 
45,967

Retained earnings
 
138,654

 
128,453

Treasury stock, at cost; 504,676 shares at September 30, 2018 and 559,094
  shares at December 31, 2017
 
(12,927
)
 
(14,320
)
Accumulated other comprehensive loss
 
(15,287
)
 
(10,340
)
Total shareholders' equity
 
156,499

 
149,813

 
 
 
 
 
Total liabilities and shareholders' equity
 
$
1,753,864

 
$
1,707,620


See accompanying notes to unaudited consolidated financial statements.
6



CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in thousands, except per share data)
 
2018
 
2017
 
2018
 
2017
Interest and dividend income:
 
 
 
 
 
 
 
 
Loans, including fees
 
$
14,580

 
$
13,709

 
$
42,930

 
$
39,025

Taxable securities
 
1,200

 
1,369

 
3,753

 
4,189

Tax exempt securities
 
272

 
322

 
875

 
836

Interest-earning deposits
 
84

 
97

 
116

 
445

Total interest and dividend income
 
16,136

 
15,497

 
47,674

 
44,495

Interest expense:
 
 

 
 

 
 

 
 

Deposits
 
858

 
545

 
1,967

 
1,632

Securities sold under agreements to repurchase
 

 
95

 
137

 
383

Borrowed funds
 
199

 
94

 
574

 
273

Total interest expense
 
1,057

 
734

 
2,678

 
2,288

Net interest income
 
15,079

 
14,763

 
44,996

 
42,207

Provision for loan losses
 
300

 
1,289

 
3,371

 
2,750

Net interest income after provision for loan losses
 
14,779

 
13,474

 
41,625

 
39,457

 
 
 
 
 
 
 
 
 
Non-interest income:
 
 

 
 

 
 

 
 

WMG fee income
 
2,406

 
2,147

 
7,095

 
6,525

Service charges on deposit accounts
 
1,231

 
1,269

 
3,539

 
3,678

Interchange revenue from debit card transactions
 
982

 
925

 
3,013

 
2,809

Net gains (losses) on security transactions
 

 

 

 
12

Changes in fair value of equity investments
 
2,141

 
32

 
2,165

 
96

Net gains on sales of loans held for sale
 
79

 
71

 
184

 
193

Net gains on sales of other real estate owned
 
123

 
30

 
119

 
38

Income from bank-owned life insurance
 
17

 
17

 
50

 
52

Other
 
402

 
675

 
2,016

 
1,632

Total non-interest income
 
7,381

 
5,166

 
18,181

 
15,035

 
 
 
 
 
 
 
 
 
Non-interest expenses:
 
 

 
 

 
 

 
 

Salaries and wages
 
5,691

 
5,480

 
16,969

 
16,177

Pension and other employee benefits
 
1,262

 
1,325

 
4,438

 
4,416

Other components of net periodic pension and postretirement benefits
 
(408
)
 
(333
)
 
(1,224
)
 
(999
)
Net occupancy
 
1,671

 
1,476

 
4,922

 
4,784

Furniture and equipment
 
581

 
657

 
1,941

 
2,119

Data processing
 
1,782

 
1,667

 
5,288

 
4,858

Professional services
 
479

 
452

 
1,527

 
1,169

Legal accruals and settlements
 

 

 
989

 
850

Amortization of intangible assets
 
182

 
214

 
558

 
653

Marketing and advertising
 
212

 
213

 
816

 
580

Other real estate owned
 
83

 
4

 
321

 
35

FDIC insurance
 
263

 
312

 
881

 
946

Loan expense
 
262

 
165

 
615

 
447

Other
 
1,368

 
1,644

 
4,520

 
4,618

Total non-interest expenses
 
13,428

 
13,276

 
42,561

 
40,653

Income before income tax expense
 
8,732

 
5,364

 
17,245

 
13,839

Income tax expense
 
1,802

 
1,710

 
3,349

 
4,250

Net income
 
$
6,930

 
$
3,654

 
$
13,896

 
$
9,589

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
4,834

 
4,802

 
4,828

 
4,796

Basic and diluted earnings per share
 
$
1.43

 
$
0.76

 
$
2.88

 
$
2.00


See accompanying notes to unaudited consolidated financial statements.
7



CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in thousands)
 
2018
 
2017
 
2018
 
2017
Net income
 
$
6,930

 
$
3,654

 
$
13,896

 
$
9,589

Other comprehensive income (loss):
 
 

 
 

 
 

 
 

Unrealized holding gains (losses) on securities available for sale
 
(1,583
)
 
(522
)
 
(6,422
)
 
5,498

Reclassification adjustment for gains realized in net income
 

 

 

 
(12
)
Net unrealized gains (losses)
 
(1,583
)
 
(522
)
 
(6,422
)
 
5,486

Tax effect
 
(404
)
 
(198
)
 
(1,637
)
 
2,069

Net of tax amount
 
(1,179
)
 
(324
)
 
(4,785
)
 
3,417

 
 
 
 
 
 
 
 
 
Change in funded status of defined benefit pension plan and other benefit plans:
 
 

 
 

 
 

 
 

Reclassification adjustment for amortization of prior service costs
 
(55
)
 
(55
)
 
(165
)
 
(165
)
Reclassification adjustment for amortization of net actuarial loss
 
72

 
88

 
218

 
264

Total before tax effect
 
17

 
33

 
53

 
99

Tax effect
 
4

 
12

 
13

 
37

Net of tax amount
 
13

 
21

 
40

 
62

 
 
 
 
 
 
 
 
 
Total other comprehensive income (loss)
 
(1,166
)
 
(303
)
 
(4,745
)
 
3,479

 
 
 
 
 
 
 
 
 
Comprehensive income
 
$
5,764

 
$
3,351

 
$
9,151

 
$
13,068


See accompanying notes to unaudited consolidated financial statements.
8



CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
(in thousands, except share and per share data)
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Treasury Stock
 
Accumulated Other Comprehensive Loss
 
Total
Balances at January 1, 2017
$
53

 
$
45,603

 
$
124,111

 
$
(15,265
)
 
$
(10,754
)
 
$
143,748

Net income

 

 
9,589

 

 

 
9,589

Other comprehensive income

 

 

 

 
3,479

 
3,479

Restricted stock awards

 
162

 

 

 

 
162

Restricted stock units for directors' deferred compensation plan

 
72

 

 

 

 
72

Cash dividends declared ($0.78 per share)

 

 
(3,694
)
 

 

 
(3,694
)
Distribution of 7,880 shares of treasury stock for directors' compensation

 
68

 

 
201

 

 
269

Distribution of 5,861 shares of treasury stock for employee compensation

 
50

 

 
150

 

 
200

Distribution of 2,438 shares of treasury stock for deferred directors’ compensation

 
(51
)
 

 
62

 

 
11

Sale of 11,688 shares of treasury stock (a)

 
142

 

 
299

 

 
441

Forfeiture of 1,139 shares of restricted stock awards

 
43

 

 
(43
)
 

 

Balances at September 30, 2017
$
53

 
$
46,089

 
$
130,006

 
$
(14,596
)
 
$
(7,275
)
 
$
154,277

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances at December 31, 2017, as reported
$
53

 
$
45,967

 
$
128,453

 
$
(14,320
)
 
$
(10,340
)
 
$
149,813

Cumulative effect of accounting change (b)

 

 
40

 

 
(202
)
 
(162
)
Balances at January 1, 2018, as adjusted
53

 
45,967

 
128,493

 
(14,320
)
 
(10,542
)
 
149,651

Net income

 

 
13,896

 

 

 
13,896

Other comprehensive loss

 

 

 

 
(4,745
)
 
(4,745
)
Restricted stock awards

 
301

 

 

 

 
301

Restricted stock units for directors' deferred compensation plan

 
57

 

 

 

 
57

Cash dividends declared ($0.78 per share)

 

 
(3,735
)
 

 

 
(3,735
)
Distribution of 6,015 shares of treasury stock for directors' compensation

 
147

 

 
154

 

 
301

Distribution of 1,784 shares of treasury stock for employee compensation

 
44

 

 
45

 

 
89

Distribution of 36,681 shares of treasury stock for deferred directors’ compensation

 
(722
)
 

 
940

 

 
218

Sale of 9,938 shares of treasury stock (a)

 
212

 

 
254

 

 
466

Balances at September 30, 2018
$
53

 
$
46,006

 
$
138,654

 
$
(12,927
)
 
$
(15,287
)
 
$
156,499

(a) All treasury stock sales were completed at the prevailing market price with the Chemung Canal Trust Company Profit Sharing, Savings, and Investment Plan which is a defined contribution plan sponsored by the Bank.
(b) Due to implementation of ASC 2016-01. See "Adoption of New Accounting Standards" discussion in Note 1.

See accompanying notes to unaudited consolidated financial statements.
9



CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Nine Months Ended 
 September 30,
CASH FLOWS FROM OPERATING ACTIVITIES:
2018
 
2017
Net income
$
13,896

 
$
9,589

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Amortization of intangible assets
558

 
653

Provision for loan losses
3,371

 
2,750

Net losses on disposal of fixed assets
10

 
15

Depreciation and amortization of fixed assets
2,625

 
2,820

Amortization of premiums on securities, net
910

 
1,098

Gains on sales of loans held for sale, net
(184
)
 
(193
)
Proceeds from sales of loans held for sale
9,476

 
9,655

Loans originated and held for sale
(10,465
)
 
(10,296
)
Changes in fair value on equity investments
(2,165
)
 
(96
)
Proceeds from sales of equity investments
2,288

 
20

Net gains on securities transactions

 
(12
)
Net gains on sales of other real estate owned
(119
)
 
(38
)
Purchase of equity investments
(84
)
 
(59
)
Expense related to restricted stock units for directors' deferred compensation plan
57

 
72

Expense related to employee stock compensation
89

 
200

Expense related to employee restricted stock awards
301

 
162

Income from bank-owned life insurance
(50
)
 
(52
)
(Increase) decrease in other assets and accrued interest receivable
(3,510
)
 
888

(Increase) decrease in other assets and accrued interest payable
28

 
(26
)
Increase (decrease) in other liabilities
3,073

 
(565
)
Net cash provided by operating activities
20,105

 
16,585

 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Proceeds from sales and calls of securities available for sale
1,385

 
1,620

Proceeds from maturities and principal collected on securities available for sale
37,901

 
35,262

Proceeds from maturities and principal collected on securities held to maturity
988

 
2,807

Purchases of securities available for sale

 
(41,306
)
Purchases of securities held to maturity
(1,410
)
 
(1,967
)
Purchase of FHLBNY and FRBNY stock
(22,003
)
 
(1,708
)
Redemption of FHLBNY and FRBNY stock
24,649

 
2,252

Proceeds from sale of equipment

 
16

Purchases of premises and equipment
(1,492
)
 
(1,294
)
Proceeds from sales of other real estate owned
1,576

 
383

Net increase in loans
(13,955
)
 
(90,019
)
Net cash (used in) provided by investing activities
27,639

 
(93,954
)
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Net increase in demand deposits, interest-bearing demand accounts,
  savings accounts, and insured money market accounts
82,012

 
98,599

Net increase (decrease) in time deposits
26,539

 
(17,924
)
Net decrease in securities sold under agreements to repurchase
(10,000
)
 
(17,606
)
Net decrease in FHLBNY overnight advances
(57,700
)
 

Repayments of FHLBNY long term advances
(2,000
)
 
(84
)
Payments made on capital leases
(159
)
 
(154
)
Sale of treasury stock
466

 
441

Cash dividends paid
(3,719
)
 
(3,687
)
Net cash (used in) provided by financing activities
35,439

 
59,585

Net increase (decrease) in cash and cash equivalents
83,183

 
(17,784
)
Cash and cash equivalents, beginning of period
30,729

 
74,162

Cash and cash equivalents, end of period
$
113,912

 
$
56,378

(continued)
 
 
 

See accompanying notes to unaudited consolidated financial statements.
10



CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(UNAUDITED)
(in thousands)
Nine Months Ended 
 September 30,
Supplemental disclosure of cash flow information:
2018
 
2017
Cash paid (received) for:
 
 
 
Interest
$
2,650

 
$
2,314

Income taxes
$
1,355

 
$
4,050

Supplemental disclosure of non-cash activity:
 

 
 

  Transfer of loans to other real estate owned
$
244

 
$
187

Dividends declared, not yet paid
$
1,249

 
$
1,232

Distribution of treasury stock for directors' compensation
$
301

 
$
269

Distribution of treasury stock for deferred directors' compensation
$
218

 
$
11


See accompanying notes to unaudited consolidated financial statements.
11



CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

The Corporation, through its wholly-owned subsidiaries, the Bank and CFS, provides a wide range of banking, financing, fiduciary and other financial services to its clients.  The Corporation and the Bank are subject to the regulations of certain federal and state agencies and undergo periodic examinations by those regulatory authorities.

CRM, a wholly-owned subsidiary of the Corporation, which was formed and began operations on May 31, 2016, is a Nevada-based captive insurance company which insures against certain risks unique to the operations of the Corporation and its subsidiaries and for which insurance may not be currently available or economically feasible in today's insurance marketplace. CRM pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves. CRM is subject to regulations of the State of Nevada and undergoes periodic examinations by the Nevada Division of Insurance.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in conformity with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X of the Exchange Act.  These financial statements include the accounts of the Corporation and its subsidiaries, and all significant intercompany balances and transactions are eliminated in consolidation.  Amounts in the prior periods' consolidated financial statements are reclassified whenever necessary to conform to the current period's presentation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions based on available information.  These estimates and assumptions affect the amounts reported in the financial statements and disclosures provided, and actual results could differ.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) and disclosures necessary for the fair presentation of the accompanying consolidated financial statements have been included. The unaudited consolidated financial statements should be read in conjunction with the Corporation's 2017 Annual Report on Form 10-K for the year ended December 31, 2017. The results of operations for any interim periods are not necessarily indicative of the results which may be expected for the entire year or any other period.

Reclassifications

Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or shareholders' equity.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires companies that lease valuable assets to recognize on their balance sheets the assets and liabilities generated by contracts longer than a year. The amendments in this update are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018, though early adoption is permitted. The Corporation intends to adopt the new lease guidance as of January 1, 2019 and is currently evaluating the impact that adoption of these updates will have on its consolidated financial statements. Currently, the Corporation believes the implementation of this ASU will create a right of use asset of less than $15.0 million for the Corporation's 16 leased facilities and a related capital obligation of the same amount as of January 1, 2019.


12



In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The objective of the ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date by replacing the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to form credit loss estimates. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2019, though entities may adopt the amendments earlier for fiscal years beginning after December 15, 2018. The Corporation is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements. The Corporation anticipates that the adoption of the CECL model will result in an increase to the Corporation's allowance for loan losses. The Corporation has established a committee to oversee the implementation of CECL and has selected a vendor to assist in the implementation process. In 2018 the committee plans to begin establishing parameters which will be used in the CECL model with the selected vendor. The Corporation further plans to run its current incurred loss model and a CECL model concurrently for twelve months prior to the adoption of this guidance on January 1, 2020.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The objective of the ASU is to simplify the manner in which an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Additionally, the ASU removes the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails such qualitative test, to perform Step 2 of the goodwill impairment test. The amendments in this ASU are effective for annual, or any interim, goodwill impairment tests in fiscal years beginning after December 15, 2019. The adoption of the ASU is not expected to have a significant impact on the Corporation's consolidated financial statements.

In March 2017, the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The objective of the ASU is to align the amortization period of premiums and discounts to expectations incorporated in market pricing on the underlying securities. The amendment requires that the premium be amortized to the earliest call date, but does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments in this ASU are effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. The adoption of the ASU is not expected to have a significant impact on the Corporation's consolidated financial statements.

Adoption of New Accounting Standards

On January 1, 2018, the Corporation adopted ASU 2016-01, an amendment to Recognition and Measurement of Financial Assets and Financial Liabilities ("ASC 825"). The objectives of the ASC 825 were (1) require equity investments to be measured at fair value, with changes in fair value recognized in net income, (2) simplify the impairment assessment of equity investments without readily determinable fair values, (3) eliminate the requirement to disclose methods and significant assumptions used to estimate fair value for financial instruments measured at amortized cost on the balance sheet, (4) require the use of the exit price notion when measuring the fair value of financial instruments, and (5) clarify the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.

On January 1, 2018, the Corporation adopted ASU 2017-07, Compensation - Retirement Benefits - Improving the Presentation of Net Periodic Cost and Net Periodic Postretirement Benefit Cost ("ASC 715"). The objective of ASC 715 was to improve guidance related to the presentation of defined benefit costs in the income statement. Specifically, ASC 715 required that an employer report the service cost component in the same line item(s) as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. Additionally, ASC 715 allows only the service cost component to be eligible for capitalization, when applicable. Results for reporting periods beginning after January 1, 2018 are presented under ASC 715, while prior period amounts continue to be reported in accordance with legacy GAAP, with comparable periods presented retrospectively for the presentation of the service cost and net periodic postretirement benefit cost in the income statement. The Corporation elected the practical expedient, which permits employers to use the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the estimation for applying retrospective presentation requirements.



13



NOTE 2        EARNING PER COMMON SHARE (shares in thousands)

Basic earnings per share is net income divided by the weighted average number of common shares outstanding during the period.  Issuable shares, including those related to directors’ restricted stock units and directors’ stock compensation, are considered outstanding and are included in the computation of basic earnings per share.  All outstanding unvested share based payment awards that contain rights to non-forfeitable dividends are considered participating securities for this calculation.  Restricted stock awards are grants of participating securities and are considered outstanding at grant date.  Earnings per share information is adjusted to present comparative results for stock splits and stock dividends that occur.  Earnings per share were computed by dividing net income by 4,834 and 4,802 weighted average shares outstanding for the three-month periods ended September 30, 2018 and 2017, respectively. Earnings per share were computed by dividing net income by 4,828 and 4,796 weighted average shares outstanding for the nine- month periods ended September 30, 2018 and 2017, respectively. There were no common stock equivalents during the three and nine-month periods ended September 30, 2018 or 2017.


NOTE 3        SECURITIES

Amortized cost and estimated fair value of securities available for sale are as follows (in thousands):
 
 
September 30, 2018
 
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Estimated Fair Value
Obligations of U.S. Government and U.S. Government sponsored enterprises
 
$
10,487

 
$
8

 
$
42

 
$
10,453

Mortgage-backed securities, residential
 
196,977

 
58

 
10,258

 
186,777

Obligations of states and political subdivisions
 
46,544

 
17

 
1,016

 
45,545

Corporate bonds and notes
 
249

 
1

 

 
250

SBA loan pools
 
3,494

 

 
46

 
3,448

Total
 
$
257,751

 
$
84

 
$
11,362

 
$
246,473


 
 
December 31, 2017
 
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Estimated Fair Value
Obligations of U.S. Government and U.S. Government sponsored enterprises
 
$
15,492

 
$
20

 
$
21

 
$
15,491

Mortgage-backed securities, residential
 
224,939

 
136

 
5,166

 
219,909

Obligations of states and political subdivisions
 
52,928

 
355

 
151

 
53,132

Corporate bonds and notes
 
249

 
2

 

 
251

SBA loan pools
 
4,339

 
1

 
32

 
4,308

Total
 
$
297,947

 
$
514

 
$
5,370

 
$
293,091


Amortized cost and estimated fair value of securities held to maturity are as follows (in thousands):
 
 
September 30, 2018
 
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Estimated Fair Value
Obligations of states and political subdivisions
 
$
2,123

 
$

 
$

 
$
2,123

Time deposits with other financial institutions
 
2,080

 

 
13

 
2,067

Total
 
$
4,203

 
$

 
$
13

 
$
4,190



14



 
 
December 31, 2017
 
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Estimated Fair Value
Obligations of states and political subdivisions
 
$
1,946

 
$

 
$

 
$
1,946

Time deposits with other financial institutions
 
1,835

 

 
5

 
1,830

Total
 
$
3,781

 
$

 
$
5

 
$
3,776


The amortized cost and estimated fair value of debt securities are shown below by expected maturity.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.  Securities not due at a single maturity date are shown separately (in thousands):
 
 
September 30, 2018
 
 
Available for Sale
 
Held to Maturity
 
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Within one year
 
$
16,284

 
$
16,241

 
$
1,785

 
$
1,781

After one, but within five years
 
15,932

 
15,728

 
2,185

 
2,176

After five, but within ten years
 
24,580

 
23,831

 
233

 
233

After ten years
 
484

 
448

 

 

 
 
57,280

 
56,248

 
4,203

 
4,190

Mortgage-backed securities, residential
 
196,977

 
186,777

 

 

SBA loan pools
 
3,494

 
3,448

 

 

Total
 
$
257,751

 
$
246,473

 
$
4,203

 
$
4,190


The proceeds from sales and calls of securities resulting in gains or losses for the three months ended September 30, 2018 and 2017 are listed below (in thousands):
 
 
2018
 
2017
Proceeds
 
$

 
$
545

Gross gains
 

 

Tax expense
 

 


The proceeds from sales and calls of securities resulting in gains or losses for the nine months ended September 30, 2018 and 2017 are listed below (in thousands):
 
 
2018
 
2017
Proceeds
 
$

 
$
1,620

Gross gains
 

 
12

Tax expense
 

 
4


The following tables summarize the investment securities available for sale with unrealized losses at September 30, 2018 and December 31, 2017 by aggregated major security type and length of time in a continuous unrealized loss position (in thousands):

 
Less than 12 months
 
12 months or longer
 
Total
September 30, 2018
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
Obligations of U.S. Government and U.S. Government sponsored enterprises
$
9,953

 
$
42

 
$

 
$

 
$
9,953

 
$
42

Mortgage-backed securities, residential
11,248

 
448

 
173,420

 
9,810

 
184,668

 
10,258

Obligations of states and political subdivisions
38,405

 
746

 
4,250

 
270

 
42,655

 
1,016

SBA loan pools
214

 
1

 
3,234

 
45

 
3,448

 
46

Total temporarily impaired securities
$
59,820

 
$
1,237

 
$
180,904

 
$
10,125

 
$
240,724

 
$
11,362



15



 
Less than 12 months
 
12 months or longer
 
Total
December 31, 2017
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
Obligations of U.S. Government and U.S. Government sponsored enterprises
$
14,982

 
$
21

 
$

 
$

 
$
14,982

 
$
21

Mortgage-backed securities, residential
83,562

 
1,013

 
131,165

 
4,153

 
214,727

 
5,166

Obligations of states and political subdivisions
20,526

 
133

 
271

 
18

 
20,797

 
151

SBA loan pools
3,937

 
32

 

 

 
3,937

 
32

Total temporarily impaired securities
$
123,007

 
$
1,199

 
$
131,436

 
$
4,171

 
$
254,443

 
$
5,370


Other-Than-Temporary Impairment

As of September 30, 2018, the majority of the Corporation’s unrealized losses in the investment securities portfolio related to mortgage-backed securities.  At September 30, 2018, all of the unrealized losses related to mortgage-backed securities were issued by U.S. government sponsored entities, Fannie Mae and Freddie Mac. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because it is not likely that the Corporation will be required to sell these securities before their anticipated recovery, the Corporation does not consider these securities to be other-than-temporarily impaired at September 30, 2018.

Equity Investments

Beginning January 1, 2018, upon adoption of ASU 2016-01, equity securities with readily determinable fair values are stated at fair value with realized and unrealized gains and losses reported in the consolidated statement of income. For periods prior to adoption, equity investments were classified as available-for-sale and stated at fair value with unrealized gains and losses reports as a separate component of accumulated other comprehensive income, net of tax.

The Corporation recognized a change in fair value of equity investments of $2.1 million during the three and nine month period ending September 30, 2018, primarily related to the sale of Visa Class B shares during the third quarter of 2018.


NOTE 4        LOANS AND ALLOWANCE FOR LOAN LOSSES

The composition of the loan portfolio, net of deferred origination fees and costs, is summarized as follows (in thousands):
 
 
September 30, 
 2018
 
December 31, 
 2017
Commercial and agricultural:
 
 
 
 
Commercial and industrial
 
$
192,093

 
$
198,463

Agricultural
 
287

 
544

Commercial mortgages:
 
 

 
 

Construction
 
50,353

 
45,558

Commercial mortgages, other
 
615,221

 
598,772

Residential mortgages
 
188,636

 
194,440

Consumer loans:
 
 

 
 

Credit cards
 
1,393

 
1,517

Home equity lines and loans
 
98,239

 
100,591

Indirect consumer loans
 
157,123

 
153,060

Direct consumer loans
 
17,293

 
18,879

Total loans, net of deferred origination fees and costs
 
1,320,638

 
1,311,824

Interest receivable on loans
 
3,884

 
3,758

Total recorded investment in loans
 
$
1,324,522

 
$
1,315,582



16



The Corporation's concentrations of credit risk by loan type are reflected in the preceding table.  The concentrations of credit risk with standby letters of credit, committed lines of credit and commitments to originate new loans generally follow the loan classifications in the table above.

The following tables present the activity in the allowance for loan losses by portfolio segment for the three and nine-month periods ended September 30, 2018 and 2017 (in thousands):
 
Three Months Ended September 30, 2018
Allowance for loan losses
Commercial and Agricultural
 
Commercial Mortgages
 
Residential Mortgages
 
Consumer Loans
 
Total
Beginning balance
$
4,969

 
$
8,740

 
$
1,445

 
$
4,491

 
$
19,645

Charge-offs

 

 
(60
)
 
(380
)
 
(440
)
Recoveries
13

 

 

 
117

 
130

Net recoveries (charge-offs)
13

 

 
(60
)
 
(263
)
 
(310
)
Provision
285

 
(91
)
 
11

 
95

 
300

Ending balance
$
5,267

 
$
8,649

 
$
1,396

 
$
4,323

 
$
19,635

 
Three Months Ended September 30, 2017
Allowance for loan losses
Commercial and Agricultural
 
Commercial Mortgages
 
Residential Mortgages
 
Consumer Loans
 
Total
Beginning balance
$
1,883

 
$
7,778

 
$
1,517

 
$
3,926

 
$
15,104

Charge-offs
(89
)
 
(154
)
 
(133
)
 
(440
)
 
(816
)
Recoveries
34

 
1

 

 
82

 
117

Net recoveries (charge-offs)
(55
)
 
(153
)
 
(133
)
 
(358
)
 
(699
)
Provision
99

 
758

 
12

 
420

 
1,289

Ending balance
$
1,927

 
$
8,383

 
$
1,396

 
$
3,988

 
$
15,694

 
Nine Months Ended September 30, 2018
Allowance for loan losses
Commercial and Agricultural
 
Commercial Mortgages
 
Residential Mortgages
 
Consumer Loans
 
Total
Beginning balance:
$
6,976

 
$
8,514

 
$
1,316

 
$
4,355

 
$
21,161

Charge-offs:
(3,644
)
 
(145
)
 
(225
)
 
(1,301
)
 
(5,315
)
Recoveries:
34

 
2

 
5

 
377

 
418

Net recoveries (charge-offs)
(3,610
)
 
(143
)
 
(220
)
 
(924
)
 
(4,897
)
Provision
1,901

 
278

 
300

 
892

 
3,371

Ending balance
$
5,267

 
$
8,649

 
$
1,396

 
$
4,323

 
$
19,635

 
Nine Months Ended September 30, 2017
Allowance for loan losses
Commercial and Agricultural
 
Commercial Mortgages
 
Residential Mortgages
 
Consumer Loans
 
Total
Beginning balance:
$
1,589

 
$
7,270

 
$
1,523

 
$
3,871

 
$
14,253

Charge-offs:
(96
)
 
(154
)
 
(193
)
 
(1,265
)
 
(1,708
)
Recoveries:
95

 
4

 
30

 
270

 
399

Net recoveries (charge-offs)
(1
)
 
(150
)
 
(163
)
 
(995
)
 
(1,309
)
Provision
339

 
1,263

 
36

 
1,112

 
2,750

Ending balance
$
1,927

 
$
8,383

 
$
1,396

 
$
3,988

 
$
15,694




17



The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2018 and December 31, 2017 (in thousands):
 
September 30, 2018
Allowance for loan losses:
Commercial and Agricultural
 
Commercial Mortgages
 
Residential Mortgages
 
Consumer Loans
 
Total
Ending allowance balance attributable to loans:
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
1,713

 
$
496

 
$

 
$

 
$
2,209

Collectively evaluated for impairment
3,554

 
8,153

 
1,396

 
4,323

 
17,426

   Total ending allowance balance
$
5,267

 
$
8,649

 
$
1,396

 
$
4,323

 
$
19,635

 
December 31, 2017
Allowance for loan losses:
Commercial and Agricultural
 
Commercial Mortgages
 
Residential Mortgages
 
Consumer Loans
 
Total
Ending allowance balance attributable to loans:
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
5,135

 
$
802

 
$

 
$

 
$
5,937

Collectively evaluated for impairment
1,841

 
7,683

 
1,316

 
4,355

 
15,195

Loans acquired with deteriorated credit quality

 
29

 

 

 
29

   Total ending allowance balance
$
6,976

 
$
8,514

 
$
1,316

 
$
4,355

 
$
21,161

 
September 30, 2018
Loans:
Commercial and Agricultural
 
Commercial Mortgages
 
Residential Mortgages
 
Consumer Loans
 
Total
Loans individually evaluated for impairment
$
2,181

 
$
6,572

 
$
410

 
$
58

 
$
9,221

Loans collectively evaluated for  impairment
190,777

 
661,003

 
188,751

 
274,770

 
1,315,301

   Total ending loans balance
$
192,958

 
$
667,575

 
$
189,161

 
$
274,828

 
$
1,324,522

 
December 31, 2017
Loans:
Commercial and Agricultural
 
Commercial Mortgages
 
Residential Mortgages
 
Consumer Loans
 
Total
Loans individually evaluated for impairment
$
6,133

 
$
7,302

 
$
427