CHEMUNG FINANCIAL CORPORATION 2009 ANNUAL REPORT
FINANCIAL HIGHLIGHTS
(in thousands, except per share data)
OPERATING RESULTS - Year Ended December 31
Net Interest Income
Provision for loan losses
Non-interest income:
Securities gains, net
Trust Preferred impairment writedown
Trust & Investment Services Income
Other operating income
Other operating expense
Net income
At Year End:
Assets
Loans, net of deferred fees and costs,
and unearned income
Allowance for loan losses
Deposits
Shareholders’ equity
Employees (full time equivalent)
Share and Per Share Data:
Net income
Book value, at year end
Tangible book value, at year end
Dividends declared
Shares outstanding (average)
Ratios:
Allowance to total loans
Return on average assets
Return on average Tier I Equity
2009
$ 33,155
2,450
2008
$ 30,668
1,450
% of Change
8.11%
68.97%
785
-2,242
8,089
9,078
39,321
5,233
589
-803
6,834
10,518
33,968
8,354
$ 975,919
$ 838,318
595,853
9,967
801,063
90,086
327
1.45
24.97
20.64
1.00
3,603
1.67%
0.56%
6.97%
565,185
9,106
656,909
83,007
309
2.32
23.14
18.96
1.00
3,594
1.61%
1.00%
11.45%
33.28%
179.20%
18.36%
-13.69%
15.76%
-37.36%
16.41%
5.43%
9.46%
21.94%
8.53%
5.83%
-37.50%
7.91%
8.86%
0.00%
0.25%
Trust Assets Under Administration (Market Value)
as Fiduciary
as Custodian
$1,163,880
468,317
$1,632,197
$1,131,802
446,569
$1,578,371
2.83%
4.87%
3.41%
Market Prices of Chemung Financial Corporation
Stock During Past Three Years (dollars)
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
2009
15.00 – 22.00
17.25 – 23.00
18.75 – 21.25
19.55 – 23.00
2008
24.35 – 28.25
25.50 – 28.25
22.15 – 26.30
19.55 – 25.10
2007
30.00 – 33.00
29.05 – 32.10
27.55 – 31.00
25.49 – 30.00
Dividends Paid Per Common Share by Chemung
Financial Corporation During Past Three Years
January 2
April 1
July 1
October 1
2009
0.25
0.25
0.25
0.25
1.00
2008
0.25
0.25
0.25
0.25
1.00
2007
0.24
0.24
0.24
0.24
0.96
As of December 31, 2009 there were 555 registered holders of record of the Corporation’s stock. Chemung Financial Corporation common stock is
inactively traded in the over-the-counter market.
The quarterly market price ranges for the Corporation’s stock for the past three (3) years are based upon actual transactions as reported by brokerage
firms which maintain a market or conduct trades in the Corporation’s stock and other transactions known by the Corporation’s management.
MISSION
The mission of Chemung Financial Corporation
is to remain a strong and independent financial
services organization creating value for shareholders,
customers, employees and the communities where
the company does business, while maintaining the
highest standards of business ethics. Chemung
Financial is a community-oriented, client-focused
organization.
VISION
The vision of Chemung Financial Corporation
is to be a high-performing community bank
remaining true to our mission, and to become
the company of choice for customers, employees,
investors and financial services companies
seeking a partner.
Cover image: Overlooking the Chemung Valley ©2010 Polly Smith-Blackwell
May totaling approximately $1.448 million; other-than-
temporary impairment (OTTI) charges of $2.242 million on
trust preferred securities pools carried in the Corporation’s
investment portfolio; a $1.0 million increase in the provision
for loan losses; higher FDIC insurance costs of $1.402
million which included a special assessment of $439
thousand; and, higher pension costs totaling $2.323 million.
Recent accounting rule changes required that we expense
one-time acquisition charges at the time of acquisition in
contrast to past practices where these costs could be capi-
talized as part of acquisition goodwill. The write-down of
the trust preferred securities pools is required by current
accounting rules despite the fact that we continue to receive
all contractual payments on these securities. The increase in
the provision for loan losses was principally due to increases
in nonperforming and classified loans as well as higher net
loan charge-offs. It should be noted that our allowance for
loan losses as a percent of total loans at year end was 1.67%,
a level considered very healthy and higher than most of our
peers. The higher FDIC insurance costs are a direct result of
the increase in bank failures and the need for the FDIC to
replenish the deposit insurance fund. Notwithstanding
another “special assessment” on top of our regular premi-
ums, this expense will be less in 2010. The higher pension
costs were driven by the equity market decline in the latter
part of last year, but we are pleased to report that we have
recovered most of these losses in the market value of our
pension plan and the expense for 2010 will be greatly
reduced. When you eliminate the one-time, non-recurring
items, our results were essentially on target.
With the softening of our local economy, we have seen a rise
in delinquencies and nonperforming loans, although they
remain at very manageable levels. Excluding a USDA
guarantee on a large portion of a large commercial credit that
has been restructured and, therefore, included in our nonper-
forming loan figures, total nonperforming loans as a percent
of total loans was 1.50%, a level consistent with other banks
in the northeast.
At December 31, 2009, our balance sheet reflects total assets
of $976 million, total loans of $596 million, total deposits
of $801 million and total shareholders’ equity of $90 million.
Our capital ratios remain at levels well above those consid-
ered to be well capitalized by regulators. The market value of
total assets under management or administration in our Trust
& Investment Center exceeds $1.6 billion.
1
Ronald M. Bentley
David J. Dalrymple
TO OUR SHAREHOLDERS
We are pleased to report that 2009 was another good, albeit
challenging, year for your company. While earnings were
down from the previous year, our financial results were
in line with our expectations after accounting for several
extraordinary items which are discussed in detail below.
In May, we completed the successful acquisition and integra-
tion of the Bank of Canton, an $80 million community bank
headquartered in Canton, PA with branch offices in Troy
and Towanda, PA. This merger expanded our footprint into
the contiguous northern tier of Pennsylvania and was imme-
diately accretive to earnings, excluding one-time acquisition
related expenses. With the addition of these three offices in
Bradford County, PA, we now operate 23 full service offices
in seven counties. While our local economy has fared better
than many parts of the country, the Great Recession is clearly
being felt by our residents and businesses and, consequently,
our bank. Our disciplined underwriting and conservative
business model have prepared us well for these times. The
year was also marked by a maelstrom of potential change
coming out of Washington which will likely impact
future results.
Financial Results
Net income for the year was $5.233 million representing a
37% decrease from 2008. Earnings per share of $1.45 were
also 37% lower than last year. Our return on average assets
for 2009 was .56% and our return on average equity was
6.13%, down from 2008 levels of 1.00% and 9.36%, respec-
tively. In 2009, $3.522 million in dividends were declared
continuing over 100 years of uninterrupted dividend pay-
ments. Our 2009 financial results were negatively impacted
by several significant items including: one-time acquisition
costs related to the acquisition of Canton Bancorp, Inc. in
Growth and Acquisitions
In the Bank of Canton acquisition, we acquired approximately
$70 million in deposits, $59 million in loans and 9,000
accounts. The acquisition, systems conversion and integra-
tion went very smoothly and we continued to gain and refine
our expertise in this area, a critical and important skill as we
expect acquisitions will be a part of our future growth. Our
Bank of Canton colleagues did an admirable job throughout
the merger process and we are glad they are now members of
our organization. Due to this acquisition, as well as organic
growth, total assets grew $138 million or 16% and total
deposits climbed $144 million or 22%. Total loans, however,
only increased $31 million or 5% as a result of weaker loan
demand and our decision to sell most newly originated low
fixed rate residential mortgages in the secondary market for
interest rate risk management purposes. There is a popular
misconception across the nation that banks are not lending.
This is clearly not the case at Chemung Canal as we have
the capacity and willingness to make loans to creditworthy
borrowers.
In June of 2008, we purchased Cascio Financial Strategies,
a long-time Elmira firm providing financial planning, invest-
ment and tax preparation services. While market conditions
have hurt this line of business, we are well positioned to
serve the complete financial needs of our clients as the market
recovers and clients seek alternative investment opportunities.
In addition, our new tax preparation service has been very
well received by our clients and we expect to grow this
business markedly in 2010.
In March of 2008, we acquired three branches of M&T bank;
two in Broome County and one in Tioga County. This acqui-
sition expanded our presence into a contiguous and sizeable
market and we continue to be encouraged by the warm
reception we have received in these communities.
In January of 2009, we relocated our Community Corners
office in Ithaca to a free-standing building with greatly
improved visibility, accessibility and banking services. This
investment is already paying dividends as this office has seen
solid growth since the move.
tion growth has made us more efficient. But it does not stop
there. Behind the scenes, we are questioning and challeng-
ing everything we do in an effort to find a better way. It is
an essential and healthy process and one producing results.
Through these initiatives over the past three years, we have
delivered over $2 million in annual profit improvement.
To use an overused metaphor, we are hitting a lot of singles.
This past October, we launched a Private Banking/Wealth
Management practice. By combining some of our traditional
core strengths and resources with some newly acquired
capabilities, and staffed by professionals who understand the
needs of high net worth individuals, we have a platform that
can make a meaningful difference for this market segment.
With the exploration and development of the Marcellus
Shale, one of the most promising natural gas reserves in the
country, we collaborated with other professionals to help
educate landowners on the various aspects of gas land leases
and royalties. This development has the potential to create
significant wealth in our region and we have positioned
ourselves as a source for investment management and
estate planning.
Recent events in the financial and credit markets demonstrated
that many organizations lacked effective and sound risk
management systems. While we believe we effectively manage
major risks to our organization, we subscribe to the theory of
continuous improvement and re-examined our practices. As a
result, a new process that provides for overarching, umbrella
oversight of major risks has been implemented. We feel this
process has strengthened our risk management practices.
Capital Management
Growth remains the lifeblood of our business, any business.
Our strategy has been to grow our company organically,
through branch expansion and by acquiring branches, banks
and businesses that complement existing strengths and
market niches. Evidenced by the heated acquisition activity of
the past four years, we have used our capital to accomplish
this growth and believe shareholder value has been enhanced
as a result.
Other Accomplishments
One of our major goals as an organization is to become more
efficient. Naturally, leveraging our infrastructure and building
our balance sheet without adding overhead makes us a more
efficient company. Our recent history of organic and acquisi-
Investing in our People
In this crowded field of financial services providers, it is
the quality of our people and the service they deliver that
distinguishes Chemung Canal. Banking has become a
commodity business and service is the only sustainable and
2
defining competitive advantage. CanalCare, our service
promise to both external and internal clients, remains the
nucleus of our efforts to make client service the hallmark
of our success and our service quality measurement systems
strongly suggest we are exceeding client expectations.
We also continue to invest in the professional growth and
development of our “human assets.” Whether earning a
degree at a local college, attending an industry-sponsored
professional seminar, participating in an in-house coaching
program, or training our front-line personnel to uncover the
financial needs of our clients, we are committed to providing
the resources to help our people be successful in their jobs.
Community Involvement and Leadership
Creating value for the communities we serve has long been
an integral part of our mission and we do this in many ways
besides providing credit to individuals, businesses and other
organizations. Hundreds of organizations receive financial
support each year in the form of direct contributions or
sponsorships. Our sponsorship of the LPGA Corning Classic,
the Fourth of July Celebration at Eldridge Park, the Watkins
Glen Grand Prix Festival, the Clemens Center, the Arnot Art
Museum and the Binghamton Tennis Challenge, are examples
of Chemung Canal helping to bring quality events and
entertainment to our region making this place we call home
a more enjoyable place to live and work. Moreover, our
employees devote thousands of hours of their personal time
to community and philanthropic organizations. They are
involved and play a leadership role in many worthy causes
including the United Way, Susan G. Komen Race for the
Cure and the Buddy Walk for individuals with Down
Syndrome, just to name a few. We are proud of them and
appreciate their efforts which enhance the quality of life
for all.
Our Board of Directors
In connection with our merger with the Bank of Canton, we
invited Robert Storch to join our board of directors and his
election was approved by our shareholders in May. Bob is a
lifelong resident of Troy, PA and was a long-time member of
the Canton board. He brings to Chemung Canal extensive
experience in the dairy and farming industry and, with our
entry into northern Pennsylvania, adds a valued dimension to
our corporate governance. We look forward to his contribu-
tions to our organization.
The Future
In response to the credit and financial crisis, there is a dizzying
array of proposals coming out of Washington. Few of our
elected officials fully understand that community banks were
not responsible for this crisis. But once again, many will be
punished for the transgressions of the few. Our regulatory
burden is already stifling—we are disillusioned when we try
to quantify how much we spend on compliance. Our legisla-
tors and government officials are now bent on controlling
and regulating our every action from product offerings to
incentive compensation programs to overdraft and interchange
fees. We will continue to join forces with our industry trade
associations and other community banks to advocate for
balanced, sensible reform.
In this time of what promises to be dramatic change for our
industry, we are consoled by the fact that our community
banking philosophy and conservative business model have
served us well for over 175 years. The one certainty is our
unwavering dedication to our community bank mission. We
will continue to build long-term relationships with our clients
and play a vital role in the communities we serve. Deposits
gathered locally will be channeled back into our local
communities in the form of loans to businesses, individuals,
organizations and other enterprises. The growth we have
experienced over the past few years is compelling evidence
of the peoples’ preference for a community bank.
By any measure, we are well prepared to deal with whatever
comes our way and we are grateful to our staff and board
of directors for building this solid foundation. We are also
thankful for the continued support of our clients, employees,
shareholders and the communities we serve.
Ronald M. Bentley
President and Chief Executive Officer
David J. Dalrymple
Chairman of the Board
3
Sitting (l to r) R. Swan, R. Dalrymple, R. Bentley, D. Dalrymple, T. Meier, W. Eggers, Standing (l to r) C. Streeter, Jr. R. Agan, R. Meyer, J. Updegraff,
C. Drinkwater, S. Lounsberry III, R. Storch and J. Potter
BOARD OF DIRECTORS
Robert E. Agan
Chairman Emeritus
Hardinge, Inc.
Robert H. Dalrymple
Vice President and Secretary
Dalrymple Holding Corporation
Thomas K. Meier
President
Elmira College
Charles M. Streeter, Jr.
Retired President
Streeter Associates, Inc.
Ronald M. Bentley
President and Chief Executive Officer
Chemung Financial Corporation,
Chemung Canal Trust Company and
CFS Group, Inc.
David J. Dalrymple
Chairman of the Board
Chemung Financial Corporation,
Chemung Canal Trust Company and
President
Dalrymple Holding Corporation
Clover M. Drinkwater
Partner
Sayles & Evans
William D. Eggers
Senior Counsel
Nixon Peabody LLP
Stephen M. Lounsberry, III
President
Applied Technology
Manufacturing
Ralph H. Meyer
Retired President and Chief
Executive Officer
Guthrie Healthcare System
Richard W. Swan
Chairman of the Board
Swan and Sons-Morss Co. Inc.
John F. Potter
President
Seneca Beverage Corp.
Robert L. Storch
Retired Owner
Storchmont Dairy Farms
Jan P. Updegraff
Retired President and
Chief Executive Officer
Chemung Financial Corporation
and Chemung Canal Trust
Company
OTHER INFORMATION
Dividend Investment and Stock Purchase Plan
Registered shareholders of Chemung Financial Corporation,
through The Dividend Investment and Stock Purchase Plan,
may invest their dividends or make quarterly cash payments
to purchase additional stock of the Corporation. Shareholders
not enrolled in the plan may receive a descriptive brochure
and authorization card for the plan upon written request to
the Corporation’s secretary at the following address:
Chemung Financial Corporation
Attn: Corporate Secretary
P.O. Box 1522
Elmira, New York 14902-1522
www.chemungcanal.com
4
Form 10-K Annual Report
A copy of the Corporation’s Form 10-K Annual
Report is available without charge to shareholders after March
31, 2010 upon written request to the Corporation’s secretary.
A copy is also available on our Transfer Agent, American Stock
Transfer & Trust Company’s website at
www.amstock.com/proxymaterials/viewmaterials.asp.
Annual Meeting
The Annual Meeting of Shareholders will be held on
Wednesday, May 5, 2010 at 2:00 p.m. at the downtown
Holiday Inn, Elmira — Riverview.
CHEMUNG CANAL TRUST COMPANY & CFS GROUP, INC. OFFICERS
EXECUTIVE MANAGEMENT
TEAM
Ronald M. Bentley
President & Chief
Executive Officer
John R. Battersby, Jr.
Executive Vice President,
Chief Financial Officer
& Treasurer
James E. Corey, III
Executive Vice President,
Chief Risk Officer &
CanalCare Executive
Melinda A. Sartori
Executive Vice President
Trust & Investment Services
Jane H. Adamy
Senior Vice President,
Corporate Secretary &
Trust Compliance Officer
Richard G. Carr
Senior Vice President
Business Client Services
Michael J. Crimmins
Senior Vice President
Support Services
Louis C. DiFabio
Senior Vice President
Retail Client Services
Linda M. Struble
Senior Vice President
Human Resources
Norman R. Ward
Senior Vice President &
Auditor
Michael J. Wayne
Senior Vice President &
Director of Marketing
SENIOR VICE PRESIDENTS
Elizabeth T. Dalrymple
Trust & Estate Administration
Bradley S. Eaton
Regional Trust Executive
Douglas R. Johnson
Regional Trust Executive
Thomas J. Whitaker
Finance
Thomas W. Wirth, CFA
Trust Investment Services
VICE PRESIDENTS
Deborah A. Adams
Compliance & CRA
Joseph W. Ahern
Regional Trust Officer
Yvonne L. Albee
Trust Operations
Ronald E. Allison
Community Relations
Judy L. Barton
Bank Operations
James D. Ripley
Logistical Support
Debra A. Newcomer
Main Office Branch Manager
Nancy J. Battersby (1)
Trust & Estate Administration
Robert A. Roemmelt, Jr.
Arnot Road Branch Manager
Douglas F. Bissonette
Trust & Estate Administration
Larry W. Rudawsky
Retirement Services Group
Michael D. Blatt, CFA
Trust Investment Services
John J. Sentigar
Information Technology
Rose J. Catalano
Corporate Architect
Catherine B. Crandall
Trust & Estate Administration
Larry G. Denniston
Regional Investment Officer
Leslie J. Distin
Regional Trust Officer
Daniel R. Donovan
Consumer Lending
Jacqueline L. Stevens
Branch Administration
Kenneth L. Wilson (2)
Business Development
Executive
ASSISTANT VICE
PRESIDENTS
Kimberly A. Bailey
Canton Branch Manager
Michael J. Battersby
Horseheads Branch Manager
Lucimar Foo-Siam Escudero
Loan Review & Commercial
Credit
Pamela D. Burns
Human Resources
Alex A. Gilliam
Business Development
David Carlson
Troy Branch Manager
William M. Hodel
Commercial Lending
Marianne T. Kalec
Real Estate Lending
Pamela A. Kelley
Regional Trust Officer
Richard W. Carroll
Watkins Glen Branch Manager
Deborah A. Cram (1)
Southport Branch Manager
Gary K. Earley
Trust & Estate Administration
Celeste D. Knickerbocker
Finance
Constance L. English
Corning Branch Manager
John E. Kravec
BSA/AML Officer
Christopher J. Giammichele
Commercial Lending
Michael S. Lares (1)
Trust Investment Services
Ronald W. Lesch
Regional Commercial
Loan Executive
Sandra L. Grooms
The Station (Ithaca)
Branch Manager
Craig B. Heffner
Commercial Lending
Christopher B. Loughridge
Trust Investment Services
Scott T. Heffner
Marketing
Audrey Manchester
Branch Administration
Megan B. Horton
Owego Branch Manager
Brendan P. McCormick
Audit
Mary L. Keefe
e-Business Services
J. Edmond Morton, IV
Private Banking
Matthew T. Keefe
Information Technology
Joseph H. Perry
Ithaca Region
Robert M. Pichette
Commercial Lending Manager
Ronald W. Poole
Commercial Lending
Chester L. Reed (2)
Commercial Lending
Sandra J. Martinichio
Trust Tax Services
Eileen M. McCarthy
Trust & Investment
Administrative Services
Tina M. McGurgan
Information Technology
Mary Anne Narosky
Business Client Services
Kerry L. Oetting,
CPC, QPA, QKA
Retirement Services Group
Joan M. Smith
Finance
Debra L. Stanton, CFSA
Security Officer
Theresa A. Wagner
Deposit Operations
David A. Wakeman
Resource Recovery
ASSISTANT TREASURERS
John H. Brand
Trust Investment Services
Donna M. Coles
Elmira Heights Branch Manager
Alison J. Conklin-DeVita
Waverly Branch Manager
Cheryl A. DeBlock
Vestal Branch Manager
Karen A. Dimmick
Westside (Elmira) Branch Manager
Jennifer L. White
Bath Branch Manager
Tina M. Sabina
Real Estate Lending
Sheryl J. Scott
Big Flats Branch Manager
Jennifer Sczepanski
Community Corners (Ithaca)
Branch Manager
Andrea L. Seymour
Logistical Support
Lori A. Smith
Towanda Branch Manager
Todd N. Trencansky
Tioga (Owego) Branch Manager
Charolette R. Truxal
Oakdale Mall Branch Manager
Sheila A. Washburn
Bank Operations
Linda L. Wead
Montour Falls Branch Manager
Jean A. Wise
Painted Post Branch Manager
Joan M. Wittig-Smith, CFSA,
CFAP
Audit
CFS GROUP, INC.
Joseph M. Cascio, Sr.
Vice President & Group Manager
(1) Promoted 1/20/2010
(2) Elected 2/17/2010
OFFICE LOCATIONS
Main Office: One Chemung Canal Plaza, Elmira, NY 14901 (800) 836-3711 (607) 737-3711
Bath: 410 W. Morris St., Bath, NY 14810 (607) 776-3361
Big Flats: 437 Maple St., Big Flats, NY 14814 (607) 562-8474
Binghamton: 127 Court St., Binghamton, NY 13901 (607) 771-6369
Canton: 5 West Main St., Canton, PA 17724 (570) 673-5127
Corning: 149 W. Market St., Corning, NY 14830 (607) 962-4668
Elmira: 628 W. Church St., Elmira, NY 14905 (607) 734-7204
Elmira Heights: 100 W. McCanns Blvd., Elmira Heights, NY 14903 (607) 734-1323
*Herkimer: 219 N. Prospect St., Herkimer, NY 13350 (877) 457-3354
Horseheads: 602 S. Main St., Horseheads, NY 14845 (607) 739-8735
Horseheads: 29 Arnot Rd., Horseheads, NY 14845 (607) 739-0373
Ithaca: The Station, 806 W. Buffalo St., Ithaca, NY 14850 (607) 277-2609
Ithaca: Community Corners, 909 Hanshaw Road, Ithaca, NY 14850 (607) 257-2194
Johnson City: Oakdale Mall, 601-635 Harry L. Dr., Johnson City, NY 13790 (607) 729-6347
Montour Falls: 303 W. Main St., Montour Falls, NY 14865 (607) 535-7103
Owego: 203 Main St., Owego, NY 13827 (607) 687-0670
Owego: 1054 State Route 17C, Owego, NY 13827 (607) 687-5757
Painted Post: 243 N. Hamilton St., Painted Post, NY 14870 (607) 962-6811
Southport: 951 Pennsylvania Ave., Elmira, NY 14904 (607) 734-2111
Towanda: 304 Main St., Towanda, PA 18848 (570) 265-7169
Troy: 410 Canton St., Troy, PA 16947 (570) 297-0657
Vestal: 100 Rano Blvd., Vestal, NY 13850 (607) 797-1721
Watkins Glen: 318 N. Franklin St., Watkins Glen, NY 14891 (607) 535-7186
Waverly: 405 Chemung St., Waverly, NY 14892 (607) 565-8168
*Trust & Investment Office
Cayuga
Heights
Ithaca
Herkimer
Bath
Watkins
Glen
Montour
Falls
Painted
Post
Corning
Big
Flats
Horseheads
Elmira
Heights
Elmira
Southport
Owego
Johnson
City
Binghamton
Vestal
Waverly
New York
Pennsylvania
Troy
Towanda
Canton
All locations, except Trust & Investment offices, offer 24-hour ATM services. For office hours and a list of all Chemung Canal Trust Company
ATMs, please visit our website at chemungcanal.com.
GENERAL INFORMATION 607·737·3711 800·836·3711 chemungcanal.com Member FDIC Equal Housing Lender