2017
A N N U A L
R E P O R T
FINANCIAL HIGHLIGHTS
(in thousands, except per share data & employee count)
Operating Results – Year Ended December 31:
Net interest income
Provision for loan losses
Other operating income:
Securities gains, net
Wealth Management Group fee income
Other income
Other operating expenses:
Legal accruals and settlements
Other expenses
Income tax expense
Net income
At Year End:
Assets
Loans, net
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 for loan losses to total loans
Return on average assets
Return on average equity
Return on average tangible equity
% of
Change
8.9%
270.2%
(89.0)%
5.9%
(2.3)%
(29.2)%
(4.5)%
64.9%
(25.9)%
3.0%
9.3%
48.5%
0.8%
4.2%
0.8%
(26.5)%
3.4%
5.0%
0.8%
2017
$56,987
9,022
109
8,804
11,578
850
52,914
7,262
7,430
2016
$52,329
2,437
987
8,316
11,846
1,200
55,410
4,404
10,027
$1,707,620
1,311,824
21,161
1,467,446
149,813
371
$1,657,179
1,200,290
14,253
1,456,343
143,748
368
1.55
31.10
26.14
1.04
4,800
1.61%
0.43%
4.91%
5.85%
2.11
30.07
24.89
1.04
4,762
1.19%
0.60%
7.02%
8.52%
Trust Assets Under Administration (market value):
as Fiduciary
as Custodian
$1,531,433
420,119
$1,951,552
$1,340,362
380,787
$1,721,149
14.3%
10.3%
13.4%
Common Stock Market Prices & Dividends Paid During Past Two Years:
December 31, 2017
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
High
Low
Dividends
$54.30
47.10
41.43
39.50
$44.06
39.00
37.05
32.72
$0.26
0.26
0.26
0.26
December 31, 2016
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
High
Low
Dividends
$36.74
32.19
32.95
28.03
$28.29
27.47
26.20
26.25
$0.26
0.26
0.26
0.26
As of February 28, 2018, there were 512 registered holders of record of the Corporation’s stock.
LETTER TO SHAREHOLDERS
April 2018
Fellow Shareholders:
We are pleased to report
to you that 2017 was an im-
portant year for Chemung
Financial Corporation (the
“Corporation”). Our balance
sheet exhibited strong and
consistent growth, which
had a direct and material
impact on net income. We invested significantly in our banking platforms,
with an increasing focus on technology and digital banking. We welcomed
new members to our Executive Management Team and our Board of Di-
rectors, who will add meaningful perspective and expertise. And through
it all, we continued our long tradition of investing in our communities and
validating our strong community bank tradition of service and execution.
D. Dalrymple
A. Tomson
We are encouraged that the strategies we’ve implemented are
yielding positive results. We continue to grow our balance sheet result-
ing in a substantial increase in revenue, while maintaining our focus on
operational efficiencies. These improved results underscore our com-
mitment to deliver shareholder value.
Net income for 2017 was negatively influenced by two significant
events. First, our 2017 earnings were impacted by the re-measurement
of our net deferred tax asset (“DTA”),
as a result of the enactment of the
Tax Cuts and Jobs Act (“Tax Act”).
Additionally, net income was nega-
tively affected by a material increase
in our provision for loan loss in the
fourth quarter. Both of these items
are addressed within this letter.
Financial Results
Balance sheet growth was ex-
tremely important as we converted
excess liquidity to loans. Loans, net
of deferred fees, increased $111.5
million or 9.3%. Commercial loans
increased $98.1, million or 13.2%.
This loan growth prompted net inter-
est income to increase $4.7 million,
or 8.9% year over year. The Corporation remained disciplined in its cost
containment as non-interest expense decreased $2.8 million or 5.0%.
The Corporation’s fully taxable net interest margin was 3.6%,
compared to 3.4% for the preceding year. The increase in net interest
margin was the result of repricing on our loan and securities portfo-
lios to current market rates. Over the same period, we have main-
tained our low funding costs.
Total equity was $149.8 million at year end, an increase of $6.1
million or 4.2%. Book value per share increased to $31.10 from $30.07
year over year, an increase of 3.4%. Tangible book value per share in-
creased to $26.14 at year end, an increase of 5.0% from December 31,
2016. In 2017, the Corporation paid $4.9 million in dividends, continu-
ing its long history of uninterrupted dividend payments.
As stated above, our net income was reduced by two significant
fourth-quarter events. First, net income for the year included a $2.9
million, one-time tax expense, resulting from the re-measurement of
our DTA following the enactment of the Tax Act. Going forward, the Tax
Act will reduce our federal statutory tax rate from 34% to 21%. As a
result of the implementation of the Tax Act, the Corporation’s effective
tax rate increased to 49.4% for 2017, compared to 30.5% for the prior
year. Our effective rate for the year ending December 31, 2017, exclud-
ing the one-time impact of the re-measurement of our DTA, was 29.5%.
Second, impairment on a long-standing commercial credit resulted in
an increase of $3.9 million in our provision for loan losses during the
fourth quarter ending December 31, 2017. Although we believe this to
be an isolated event, it is none the less disappointing. We are working
vigorously to pursue recovery and look forward to its resolution.
We are pleased with the progress we’ve made this year to
strengthen our foundation. We are confident that our strong earn-
ings, our commitment to balance sheet growth and the reduction in
our federal statutory tax rate, position our Corporation for a more
profitable future. We are encouraged that our steadfast focus on our
community banking philosophy will allow us to continue gathering
low-cost, stable deposits, and invest in the clients and communities
that we proudly assist. As has been true for nearly 185 years, this
long-term strategy provides sustained value for our shareholders and
the other constituencies we serve across our 13-county footprint.
Growing Our Franchise, Planning for the Future
2017 was a year of growth. As stated above, our balance sheet growth
warrants specific mention. Of note,
loans in the Capital Region grew
$117.6 million, or 20.9%, com-
pared to the prior year. Redeploy-
ing deposits and securities into
loans, coupled with increases in
short-term rates, had a meaningful
impact on our interest margin and
net interest income growth. Also
significant was our ability to pay
off high-cost borrowings in 2017,
which prompted a 23 basis point
decline in our cost of borrowings.
In addition, we announced that
our physical distribution network
will change in 2018. As of the date
of this letter, we have opened our
new Schenectady, NY branch and
are well along in the development of a new branch in Wilton, NY. Our
Schenectady branch is crisp, clean and modern with all of the bells and
whistles of the branch of today, while planning for the future needs of “to-
morrow’s clients.” Most importantly, we’ve assembled a seasoned team
of professionals who embrace our core community-focused principles
and stand ready to make a difference. These two locations will greatly
enhance our distribution capabilities for our growing client base in the
Capital Region. Upon completion, our branch network will consist of 35
offices directly serving 13 counties in two states.
We continue to focus on our retail branch network. In Auburn, we
successfully relocated our Genesee Street office into a smaller, more
efficient space. As we progress, we will look for opportunities to right
size our branch network while providing uncompromising service to
our valued clients.
Investing in our digital banking capacity remains a high priority. In
fact, nearly one-third of our clients do not set foot inside of a branch.
We are committed to providing these clients the same superior ser-
vice they would receive with a face-to-face experience with one of our
New Schenectady Branch
BOARD OF DI REC TOR S
Anders M. Tomson
President & CEO,
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 Gravel
& Contracting
Larry H. Becker
COO,
Windsor Development
Group, Inc.
we are encouraged that
the strategies we’ve
implemented are yielding
positive results ... these
improved results underscore
our commitment to deliver
shareholder value.
bankers. Our clients interact with us not only in person, but also via email,
text, social media and video. We have deployed technology to allow them
to apply for loans and open deposit accounts online. In 2018, we will
deliver new technology, which will connect clients to our Contact Cen-
ter directly through our new intelligent video teller machines. Today, our
Contact Center is one of the busiest branches in our franchise and no
one sets foot inside its walls except our well-
trained and highly professional colleagues.
This year we enacted a three-year stra-
tegic plan for information technology and
deployed technology enhancements through-
out our entire platform. Led by our new Chief
Information Officer and restructured informa-
tion technology team, the Corporation has
increased its investment and targeted its
resources to ensure that the bank remains
competitive and provides cutting-edge bank-
ing services for our clients in the 21st century.
Another opportunity for continued growth
is small business lending. At Chemung Canal
and Capital Bank—small business is big busi-
ness. We expect our small business lending
to accelerate in 2018 as we focus on this important market sector. Small
business is the commercial backbone of our communities. It is imperative
that we remain a vital source of capital, a banking partner and trusted ad-
visor to these clients and stakeholders. To accomplish these goals, we’ve
reorganized our lending teams and created a new focus on this very signifi-
cant community resource. With new leadership, new lending parameters
and a fresh commitment of capital, we are ready to broaden our efforts on
behalf of these very important businesses.
We are committed to making deliberate and prudent investments
that enhance our risk profile over the long term. One measure we have
taken to meet this challenge is to separate our Board Audit and Risk
Committee, creating a new and distinct Enterprise Risk Committee. The
new committee’s charter is to ensure that the investments we make and
the risks we’re taking are in-line with our risk appetite and follow our
traditional community banking philosophy.
“
”
cities, towns and villages where we offer products and services. Led by
designated and empowered Market Team Executives in each of our key
areas, we are making a material, lasting and positive impact in all of
the communities across our footprint. We are proud and thankful for our
colleagues who commit so much of their time, talents and resources—
volunteering to help those in need, endeavoring to enhance the qual-
ity of life of their fellow citizens. We engage in
community forums, lead neighborhood organi-
zations, and dedicate countless hours of sup-
port to ensure no one is left behind. In fact, our
Corporation received an outstanding rating for
our service test, as a component of our overall
Community Reinvestment Act rating.
Board & Executive Management
Developments
We are pleased to have expanded our
Executive Management Team in 2017. Dale
Cole now serves as our Chief Information Of-
ficer and Duane Mittan joined the Corporation
as our Chief Internal Auditor. Additionally, we
named Dan Fariello President of Capital Bank,
our Capital Region division. We are excited about the positive impact they
are already having on our Corporation, and that we are a “company of
choice” when we recruit experienced professionals.
Recently, we welcomed new board members: David Buicko, De-
nise Gonick and Jeff Streeter. All of these individuals lead significant
businesses in addition to being recognized community leaders. Dave,
Denise and Jeff will provide unique and invaluable leadership, per-
spective and direction in support of the Corporation. We appreciate
their willingness to serve and look forward to their contributions.
At the same time, John Potter, one of our longest tenured Direc-
tors, will be retiring at this year’s annual meeting. John’s leadership,
his unwavering support and commitment to our community banking
philosophy have been evident throughout his 27 years of service to
our Corporation. We extend our sincere thanks and appreciation to
John for his service, dedication and loyalty.
We cannot discuss our community banking philosophy without
mentioning our commitment to our clients and neighbors within the
This year was also a difficult year for the Chemung Canal fam-
ily. With tremendous respect and admiration, we acknowledge the
Clover M. Drinkwater
Partner
Sayles & Evans
Stephen M.
Lounsberry III
President,
Applied Technology
Manufacturing
Richard
W. Swan
Retired Chairman
of the Board, Swan
and Sons-Morss
Co., Inc.
Ronald M. Bentley
Retired President & CEO,
Chemung Financial Corporation,
Chemung Canal Trust Company
and CFS Group, Inc.
Bruce W. Boyea
Chairman, President
& CEO, Security Mutual
Life Insurance
Co. of New York
Robert H. Dalrymple
Vice President & Secretary
Dalrymple Holding Corporation
passing of two retired board members. Both Nelson Mooers van den
Blink and Charlie Streeter are remembered for their many years of ser-
vice and incredible passion for this Corporation and our communities.
In their life, they touched many and we are fortunate to have had their
friendship and commitment to Chemung Canal Trust Company. Their
legacy of service is a standard we aspire to and has had a lasting effect
on all of us who are privileged to work for this Corporation.
Final Thoughts
Despite a challenging end to the year, we are pleased with our over-
all results for 2017. We again validated the direct and material impact
that our strong community banking strategy has on our shareholders,
clients, colleagues and communities. We embraced our strategy and
delivered tremendous results in the face of intense competition and
challenging regulatory constraints. 2017 was another year that af-
firmed our commitment and ability to deliver value to our stakeholders.
Today, we carefully consider the prospect of rising rates and the hope
for a steeper yield curve. There is renewed optimism across our footprint
that is fueled in some part by the newly enacted Tax Act. I am hopeful that
the country will benefit from the promise of more rational regulation and a
fairer tax plan. Unequivocally, the Tax Act will have a positive effect on our
net income. We will watch these developments closely and react prudently
to market changes. Looking forward, we have set another aggressive plan
of initiatives that focuses on delivering exceptional client service, finding
efficiencies in our banking platform, executing on our long-term strategic
technology plan and, as always, carefully managing risk.
This has been a year of incredible activity. We are committed to con-
tinuing our initiatives to support our clients and the communities we
serve. Our success is the direct result of our hard-working and talented
staff, and the guidance and dedication of our Board of Directors. We
are grateful for their assistance and support.
On behalf of the Board, our management and staff, thank you for
your support of our Corporation.
Anders M. Tomson
President & CEO
David J. Dalrymple
Chairman of the Board
Capital Bank Division
A DV I S O RY B OA R D
Carl Becker
Vice President & Counsel
The Windsor Company
Denise Gonick
President & CEO
MVP Healthcare
Gerald D. Jennings
Former Mayor
City of Albany
Spencer Jones
Dawn Homes Management
Paul Kasselman
President
Kasselman Electric Inc.
Raymond J. Kinley Jr.
Retired President & CEO
Clough Harbour & Associates
Dr. Lee McElroy
Director of Athletics
& Vice President
Rensselaer Polytechnic Institute
Jim Menzies
Founder
Leontine Consulting LLC
Gregory Oberting
President
Interstate Commodities, Inc.
Joseph A. Reilly
Retired President
NYS Broadcasters Association
Mark J. Rosen
President
Dawn Homes Management
Dean A. Rueckert
Past President
Rueckert Advertising
and Public Relations
Eugene M. Sneeringer Jr.
Principal
Sneeringer Monahan Provost
Redgrave Title Agency
Edward J. Trombly
Partner
Hiscock & Barclay
John F. Potter
President,
Seneca Beverage
Corporation
G. Thomas
Tranter Jr.
President
Corning
Enterprises
Kevin Tully
Partner,
Teal, Becker &
Chiaramonte,
CPAs PC
Thomas R.
Tyrrell
Vice President
Rose & Kiernan, Inc.
BOARD OF DI RECTORS
EXECUTI VE MANAGEM ENT TEA M
Anders M. Tomson
President &
Chief Executive Officer
Pamela D. Burns
Senior Vice President
Human Resources
Loren D. Cole
Senior Vice President
Chief Information Officer
Michael J. Crimmins
Senior Vice President
*retired March 31, 2018
Louis C. DiFabio
Executive Vice President
Business Client Services
Daniel D. Fariello
President
Capital Bank
Senior Vice Presidents
Catherine B. Crandall, WMG Estate Administration • Marianne T. Kalec, Retail Lending • Mark P. Lasch, WMG Regional Manager • J. Edmond Morton IV, WMG Regional Manager
Robert M. Pichette, Commercial Lending • Timothy P. Rubery, Small Business Lending • Joseph J. Tascone, WMG Investment Services • Thomas J. Whitaker, Finance
Vice Presidents
Yvonne L. Albee, Regulatory Risk • Dawn L. Aubin, Auburn/Seneca Falls • Roberta S. Bastow, Commercial Lending • Michael J. Battersby, Support Services • Michael D.
Blatt, WMG Investment Services • Matthew R. Crabtree, Finance • Bryce E. Cutler, Business Development • Mark J. Fife, Commercial Lending • Yvette M. Francisco, Loan
Review • Thomas E. Funk, Finance • Victoria A. Harkins, WMG Prestige Banking • Kevin P. Harrigan, Commercial Lending • James S. Hartle, Branch Administration • Scott
T. Heffner, Marketing • Mary L. Keefe, Business Services • Christopher K. Kelly, WMG Retirement Services Group • Christopher Kennedy, Commercial Lending • John T.
Kite, Commercial Lending • Michael S. Lares, WMG Investment Services • James M. Kresge, Commercial Credit • D. Tavis McKeon, E-Retail • Mary E. Meisner, BSA AML
Officer • Mary Anne Narosky, Business Client Services • Nino J. Pellegrino, Business Development • Ronald W. Poole, Commercial Lending • Jennifer Sczepanski, Branch
Administration • John J. Sentigar, Information Technology • Andrea L. Seymour, Logistical Support • John E. Shea, WMG Relationship Manager • George R. Spencer,
Business Development • Gregory Stewart, WMG Sr. Relationship Manager • Sheila A. Washburn, ATM & Card Services
Assistant Vice Presidents
Kimberly A. Bailey, Canton • Bruce E. Boughton, Montour Falls/Watkins Glen • Gregory J. Bruno, Clifton Park/Schenectady • David E. Carlson, Elmira Heights
Maureen L. Clarke, State St./Slingerlands • Pamela L. Colomaio, Bath • Alison J. Conklin-DeVita, Southport/Westside • Joel A. Crimmins, Commercial Lending
Jennifer J. Cruise, WMG Support Services • Jennifer L. Fulton, Finance • Sandra L. Grooms, Elmira Rd./The Station • Michael L. Hart, WMG Estate Administration
Matthew T. Keefe, Regulatory Risk • Sanya C. Lam, Latham/Wolf Rd. • Andrea D. McClure, WMG Tax Services • Jack O. Narosky, BCSG Relationship Manager
Brenda S. Praschunus, Arnot Rd/Big Flats • Randi Richer, Commercial Loan Operations • Sheryl J. Scott, Corning/Painted Post •Heidi J. Wahl, WMG Relationship
Manager • David A. Wakeman, Resource Recovery • Sue A. Williams, Waverly • Lauren K. Zell, WMG Retirement Services
Assistant Treasurers
Laura L. Bennett, Real Estate Lending • Marcia L. Boor, Business Services • Amy S. Chervinsky, Commercial Lending • Elizabeth M. Courtright, Regulatory Risk
Sarah A. Darling, Owego • Austin T. Farrell, Horseheads • Tara J. Humphrey, Retail & Small Business Loan Operations • Tonya L. Johnson, CRA/Fair Lending Officer
Barbara L. Keller, Consumer Lending • Alice J. Kiser, Bank Operations • Megan J. Kozdemba, Real Estate Lending • Patrick J. McFarland, Regulatory Risk • Julianne
E. Meeker, Computer Operations • Michael J. Novotny, Branch Administration • Aimee G. O’Connor, Towanda/Troy • Monica L. Ridosh, Human Resources • Jessica
L. Ryan, Main Office • Todd N. Trencansky, Vestal •Charolette R. Truxal, Binghamton/Oakdale Mall • Devin E. Wandell, WMG Estate Administration • Kristen E.
Wolowitz, Real Estate Lending • Kristen N. Woodward, Contact Center
CFS Group, Inc.
Marci L. Cartwright, Vice President
Kimberly A. Hazelton
Executive Vice President
Retail Client Services
Karl F. Krebs
Executive Vice President
Chief Financial Officer
& Treasurer
Karen R. Makowski
Executive Vice President
Chief Risk Officer
Kathleen S. McKillip
Assistant Treasurer,
Corporate Secretary
Duane W. Mittan
Vice President,
Chief Auditor
Michael J. Wayne
Senior Vice President,
Marketing
Effective as of February 28, 2018.
Thomas W. Wirth
Executive Vice President
Wealth Management
Group (WMG)
E XECUTIVE MA NAGEM ENT TEAM
OTHER INFORMATION
Forward-looking Statements: This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act, and the Private
Securities Litigation Reform Act of 1995. The Corporation intends its forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All
statements regarding the Corporation’s expected financial position and operating results, the Corporation’s business strategy, the Corporation’s financial plans, forecasted demographic and eco-
nomic trends relating to the Corporation’s industry and similar matters are forward-looking statements. These statements can sometimes be identified by the Corporation’s use of forward-looking
words such as “may,” “will,” “anticipate,” “estimate,” “expect,” or “intend.” The Corporation cannot promise that its expectations in such forward-looking statements will turn out to be correct.
The Corporation’s actual results could be materially different from expectations because of various factors, including changes in economic conditions or interest rates, credit risk, difficulties in
managing the Corporation’s growth, competition, changes in law or the regulatory environment, including the Dodd-Frank Act, and changes in general business and economic trends. Information
concerning these and other factors can be found in the Corporation’s periodic filings with the SEC, including the discussion under the heading “Item 1A. Risk Factors” in the Corporation’s 2017
Annual Report on Form 10-K. These filings are available publicly on the SEC’s website at www.sec.gov, on the Corporation’s website at chemungcanal.com or upon request from the Corporate
Secretary at (607) 737-3746. Except as otherwise required by law, the Corporation undertakes no obligation to publicly update or revise its forward-looking statements, whether as a result of new
information, future events or otherwise.
Dividend Reinvestment and Stock Purchase Plan: Registered shareholders of Chemung Financial Corporation, through The Dividend Reinvestment and Stock Purchase Plan, may
reinvest their dividends or make quarterly cash payments to purchase additional stock of the Corporation. Shareholders not enrolled in the plan may view and print a descriptive
brochure and enrollment form at www.astfinancial.com or receive the plan documents upon written request to the Corporation’s secretary at the following address: Chemung
Financial Corporation, Attn: Corporate Secretary, P.O Box 1522, Elmira, NY 14902-1522.
Form 10-K Annual Report: A copy of the Corporation’s Form 10-K Annual Report is available without charge to shareholders after March 30, 2018, 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.astproxyportal.com/ast/01079.
Annual Meeting: The Annual Meeting of Shareholders will be held on Thursday, May 10, 2018, at 2:00 p.m. at the downtown Holiday Inn, Elmira – Riverview.
ALBANY
132 State St., Albany
65 Wolf Rd., Albany
581 Loudon Rd., Latham
1365 New Scotland Rd., Slingerlands
BRADFORD
5 W. Main St., Canton
304 Main St., Towanda
159 Canton St., Troy
BROOME
127 Court St., Binghamton
601-635 Harry L. Dr., Johnson City
100 Rano Blvd., Vestal
CAYUGA
110 Genesee St., Auburn
185 Grant Ave., Auburn
CHEMUNG
437 Maple St., Big Flats
One Chemung Canal Plaza, Elmira
628 W. Church St., Elmira
100 W. McCann’s Blvd., Elmira Heights
29 Arnot Rd., Horseheads
602 S. Main St., Horseheads
951 Pennsylvania Ave., Southport
CORTLAND
1094 Highway 222, Cortland
SARATOGA
25 Park Ave., Clifton Park
3057 Route 50, Saratoga Springs*
SCHENECTADY
2 Rush St., Schenectady
*To open mid-April
SCHUYLER
303 W. Main St., Montour Falls
318 N. Franklin St., Watkins Glen
SENECA
54 Fall St., Seneca Falls
STEUBEN
410 W. Morris St., Bath
149 W. Market St., Corning
243 N. Hamilton St., Painted Post
TIOGA
203 Main St., Owego
1054 St. Rte. 17C, Owego
405 Chemung St., Waverly
TOMPKINS
909 Hanshaw Rd., Ithaca
304 Elmira Rd., Ithaca
806 W. Buffalo St., Ithaca
For a complete list of office hours and directions, visit chemungcanal.com or capitalbank.com.
For general information, call our Contact Center at 800.836.3711.