2018
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 of deferred loan fees
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
6.1%
65.1%
(100.0)%
5.8%
18.8%
16.4%
5.4%
(44.8)%
164.1%
2.8%
(10.5)%
6.9%
10.2%
0.8%
161.9%
9.3%
11.8%
0.7%
2018
$60,480
3,153
9,317
13,757
989
55,777
4,009
$19,626
2017
$56,987
9,022
109
8,804
11,578
850
52,914
7,262
$7,430
$1,755,343
1,311,906
18,944
1,569,237
165,029
374
$1,707,620
1,311,824
21,161
1,467,446
149,813
371
4.06
33.99
29.22
1.04
4,832
1.44%
1.14%
12.76%
15.07%
1.55
31.10
26.14
1.04
4,800
1.61%
0.43%
4.91%
5.85%
Trust Assets Under Administration (market value):
as Fiduciary
as Custodian
$1,411,564
356,615
$1,768,179
$1,531,433
420,119
$1,951,552
(7.8)%
(15.1)%
(9.4)%
Common Stock Market Prices & Dividends Paid During Past Two Years:
December 31, 2018
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
High
Low
Dividends
$44.52
51.69
52.99
50.24
$38.50
41.02
46.01
42.50
$0.26
0.26
0.26
0.26
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
As of February 28, 2019, there were 488 registered holders of record of the Corporation’s stock.
LETTER TO SHAREHOLDERS
2018 Annual Report
Fellow Shareholders:
We are pleased to report that
2018 was a successful year
for
Chemung Financial Corporation (the
“Corporation”). Through our collective
efforts, we achieved record earnings,
improved asset quality, and grew
capital through retained earnings. The
Corporation’s balance sheet is strong
with stable capital that supports our
risk-based assets and allows us to
execute banking strategies confidently.
We benefit from a profitable mix of low
liabilities funding a diversified
cost
base of income earning assets. During
this year, we implemented strategies
to increase liquidity, positioning the
bank for future growth while reliably
serving our clients. Our focus remains
on delivering strong results for all
of our constituent stakeholders:
our
colleagues,
shareholders, diverse
valued
communities, and our clients
whose loyalty and commitment
drive these results.
engaged
our
funding
industry
Our successes are especially
noteworthy when
considered
in the context of the significant
changes
has
encountered. Community banks
faced the challenge of diminished
liquidity as the fight for deposits visited
every corner of the country. Banks
experienced increasing loan-to-deposit
liability costs.
ratios and
Chemung Canal was not immune to
these market forces as interest rates on
our deposits and borrowings increased
and liquidity tightened. However, we
quickly reacted to these changes by
instituting initiatives that significantly
grew balance sheet
liquidity while
closely managing our liability costs. The
Corporation’s core deposit franchise
is strong and allows us to manage our
business profitably in the face of rising
rates and increased competition. When
compared to our peer group, our funding
costs remain noticeably below the
market and provide the Corporation with
a significant competitive advantage.
Today, the Corporation has excess
liquidity to grow our business and invest
prudently in loans and securities.
We invested meaningful resources
towards our banking platforms with
a continued emphasis on technology
and digital banking. We enhanced
our physical distribution network by
consolidating overlapping branches
and expanding our presence in growing
areas of our footprint that we believe
would value our customer-focused
community banking philosophy. This
expanded geography extends our
direct banking services for clients who
previously relied on alternate delivery
channels to complete many of their
banking needs. In 2018, we affirmed
our strong community bank tradition
of service, execution, and community
investment.
“
IN 2018, WE AFFIRMED OUR STRONG
COMMUNITY BANK TRADITION
OF SERVICE, EXECUTION, AND
COMMUNITY INVESTMENT.
”
A. Tomson
D. Dalrymple
affecting important client relationships.
These objectives were accomplished
while delivering capital confidently and
reliably in the market. While balance
sheet growth slowed, the Corporation
increased both profitability and capital
as the yield on loans and investments
grew more than the cost of our liabilities.
The result of these strategies improved
earnings and enhanced our balance
sheet.
As reflected in our accompanying
financials, total assets grew nearly $47.7
million in 2018, while total liabilities
increased $32.5 million.
Deposit
growth of $101.8 million allowed the
Corporation to reduce borrowings
by 94.2% at December 31,
2018. During this past year we
to work diligently
continued
with delinquent borrowers. The
result of those efforts prompted
a reduction
in non-performing
assets from $19.3 million at
December 31, 2017 to $12.8
million at December 31, 2018.
We are pleased with these results
and look forward to continuing
We are very pleased that our
strategies are yielding positive results.
We remain committed to growing the
Corporation with an emphasis on a
strong balance sheet and sustained
shareholder value.
Financial Results
year as market
Balance sheet growth slowed
this
changes
necessitated a refinement of our
lending strategies. We concentrated
on client relationships and targeted
initiatives to support core businesses.
To accomplish
these goals, we
increased the credit quality and yield
of our indirect loan portfolio, and
sold the majority of new residential
mortgages into the secondary market.
The Corporation decreased its ratio
of non-owner occupied real estate
loans to risk based capital through
a loan participation strategy without
this momentum in 2019.
For the year, net interest income
totaled $60.5 million compared with
$57 million for the prior year, an
increase of 6.1%. The Corporation was
able to raise loan yields while remaining
disciplined in managing the cost of
funding liabilities. The average yield
on interest-earning assets increased
21 basis points, while the average cost
of interest-bearing liabilities increased
nine basis points. The increase in
interest and dividend income in 2018
was due primarily to a $61.6 million
increase in the average balance of
commercial loans. At the same time,
the Corporation had a strong year in
its fee-based businesses, contributing
to the 12.6% increase in non-interest
income, from $20.5 million in the prior
year to $23.1 million in 2018.
Our Wealth Management Group
completed a successful 2018 that
BOARD OF DI REC TORS
Anders M. Tomson
President & CEO
Chemung Financial Corporation,
Chemung Canal Trust Company,
& CFS Group, Inc.
David J. Dalrymple
Chairman of the Board
Chemung Financial Corporation,
Chemung Canal Trust Company,
& CFS Group, Inc.
President
Dalrymple Gravel & Contracting
Larry H. Becker
Chief Operating Officer
The Windsor Companies
Ronald M. Bentley
Retired President & CEO
Chemung Financial Corporation,
Chemung Canal Trust Company,
& CFS Group, Inc.
Bruce W. Boyea
Chairman, President, & CEO
Security Mutual Life Insurance
Co. of New York
David M. Buicko
President & CEO
Galesi Group
Robert H. Dalrymple
Vice President & Secretary
Dalrymple Holding Corporation
President
Seneca Stone Corporation
Vice President
Chemung Contracting Corporation
Clover M. Drinkwater
Partner
Sayles & Evans
contributed meaningfully to the Corporation’s results. This division
grew revenues by over $0.5 million, with total income exceeding $9.3
million. In addition, the division had a strong year in new account
acquisitions, forming new relationships within all product lines and
multiple geographic regions. The established reputation of our Wealth
Management Group serves us well throughout our diverse footprint.
The Corporation’s capital ratios, as of December 31, 2018, are
considered well capitalized by our regulators. Total shareholders’
equity increased 10.1% from $149.8 million at December 31, 2017 to
$165 million at December 31, 2018. The increase in retained earnings
was due primarily to earnings of $19.6 million, offset by $5 million in
dividends declared. In 2018, the Corporation proudly continued its
long history of uninterrupted dividend payments.
We are pleased with our progress this year, achieved through
record earnings and an efficient execution of strategies that increased
net interest and non-interest income, and have created efficiencies
to help realize expense reductions within specific components of the
overall operating costs of the company. The Tax Cuts and Jobs Act
also had a significant impact on net earnings. We are confident that
our strong earnings, balance sheet and steadfast commitment to our
community banking values position the Corporation for continued
growth and profitability. As it has for 185 years, this long-term strategy
continues to provide sustained value for our shareholders and the
other constituencies we serve.
Growing Our Franchise and Planning for the Future
important refinements
Over the past decade, the Corporation has adapted to changes
in the economy, regulatory environment, customer trends, and
technology. We continue to evolve and remain an important resource
for our clients and communities. We are smart users of technology and
aim to satisfy client expectations and enhance our cost structure by
following a long term technology plan that addresses these objectives.
Our goal is to enhance our digital platform so clients may have a
complete banking experience without traveling to one of our physical
branches. To do so, we improved our online banking channels,
completed
to online account opening
capabilities, and expanded access to our remote deposit services.
We also improved and expanded the utility of our mobile applications.
These improvements allowed our clients to help manage a full
spectrum of their banking needs from our mobile app. Promisingly,
these features have accelerating adoption rates in our client base.
Moreover, we continue to retool our contact center and expand its
capacity to manage client needs remotely. Our vision is for the contact
center to achieve client functionality equal to our traditional branches.
In addition to enhancing our client facing technology, the
Corporation has invested in the safety and stability of its infrastructure.
This year, the bank completed a wholesale replacement of our
communications infrastructure to modernize our networks and
increase bandwidth at all branch locations. We also developed
secondary connections for business resiliency at all of our facilities.
Improving our cost structure is an overarching objective. We
incorporated technology applications and software to achieve this
imperative and have begun utilizing robotic process automation to
complete manual repetitive tasks. We have achieved some early
success with this strategy, freeing up our staff to focus on client needs
and issues of higher complexity.
BOARD OF DIRECTORS
Denise V. Gonick
President & CEO
MVP Health Care
Stephen M. Lounsberry III
President
Applied Technology
Manufacturing Corporation
Jeffrey B. Streeter
President
Streeter Associates
Richard W. Swan
Retired Chairman of the Board
Swan and Sons-Morss Co., Inc.
G. Thomas Tranter Jr.
President
Corning Enterprises
Kevin Tully
Tax Director
Teal, Becker &
Chiaramonte, CPAs PC
Thomas R. Tyrrell
Vice President
Rose & Kiernan, Inc.
This year, we reviewed and standardized our core operations
processes to reduce complexity and risk. In 2019, we embark on
a year of accelerating change in technology. We remain focused
on reimagining our external customer delivery channels, achieving
greater efficiency through technology, and aligning our core
processing operations to reduce risk and better match industry
models.
This year, we announced the consolidation of two branch offices
that have overlapping coverage at great expense to the Corporation.
After careful thought and planning, we elected to consolidate our
Painted Post office in Steuben County and Johnson City office in
Broome County. We will provide consistent service for these clients
from our enhanced digital platform and alternate locations in the
market. Although complex, client service and client experience are
the governing consideration in making these decisions.
We introduced two new branch offices in our Capital Bank division
this year. We opened an office in the City of Schenectady and the
“
THE CORPORATION RECOGNIZES THAT
OUR SUCCESS IS DEPENDENT UPON
CONSISTENTLY DELIVERING LONG-TERM
VALUE TO OUR SHAREHOLDERS.
”
Town of Wilton, Saratoga County. We recruited teams of seasoned
professionals who integrate into our client-focused culture and
embrace the Corporation’s community-minded principles. These
two locations enhance our distribution capabilities for our growing
client base in the Capital Region. Both branches have exceeded
expectations relative to client acquisition and financial results.
With these modifications, our branch network consists of 33 offices
serving 13 counties in two states.
This year, the Board of Directors unanimously approved a
three-year strategic plan for the Corporation. This plan defines our
priorities and memorializes our strategies across all business lines
and regions. The development of this plan followed many months
of research, analysis, and consideration. The plan outlines our
core values, principles, and value proposition. It will guide resource
allocation and inform the Corporation’s initiatives. Our success
will rely upon the execution of sound strategies that focus on long-
term shareholder value, exceptional client service, professional
execution, and a dynamic and engaged workforce.
We remain a reliable resource for the communities in our
footprint. We support important local constituencies with community
banking products and services, and provide valuable resources to
organizations and community groups that contribute to the stability
and wellness of the community. Our bankers are active participants
in these local organizations and take meaningful roles in developing
and executing their initiatives. We are thankful for our colleagues
who commit so much of their time, talents, and resources that are
enhancing the quality of life of their fellow citizens.
Capital Bank Division
Advisory Board
Raimundo Archibold Jr.
Managing Director
Schwartz Heslin Group
Joseph Reilly
President
Empire Broadcasting
Mark Rosen
President
Dawn Homes Management
Jacqueline Rosetti-Falvey
President
Rosetti Properties
Dean Rueckert
Past President
Rueckert Advertising
Edward Trombly
Partner
Barclay Damon
Carl Becker
Vice President & Counsel
The Windsor Companies
Gerald Jennings
Former Mayor
City of Albany
Spencer Jones
Dawn Homes Management
Raymond Kinley Jr.
Retired President & CEO
Clough Harbour & Associates
John Maloy
Managing Partner
James H. Maloy, Inc.
Dr. Lee McElroy
Director of Athletics
& Associate Vice President
Rensselaer Polytechnic Institute
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 economic trends relating to the
Corporation’s industry and similar matters are forward-looking statements.
These statements can sometimes be identified by the Corporation’s use
of forward-looking words such as “may,” “will,” “anticipate,” “estimate,”
“expect,” or “intend.” The Corporation cannot promise that its expectations in
such forward-looking statements will turn out to be correct. The Corporation’s
actual results could be materially different from expectations because of
various factors, including changes in economic conditions or interest rates,
credit risk, difficulties in managing the Corporation’s growth, competition,
changes in law or the regulatory environment, including the Dodd-Frank Act,
and changes in general business and economic trends. 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.
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, 2019, 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 9, 2019,
at 2:00 p.m. at the downtown Holiday Inn, Elmira – Riverview.
Board & Executive Management Developments
We are pleased to have enhanced our Executive Management
Team. Dale Cole joined the bank in 2017 as our Chief Information
Officer and Senior Vice President. After careful consideration,
the Corporation promoted Dale to Executive Vice President. This
elevation of the CIO to the executive level is significant. It is a
reflection of Dale’s important contributions, but more significantly, a
recognition of how important information technology is to the future
of our company. These matters are of the highest importance and
this realignment validates this priority.
In 2018, we welcomed three new board members: David Buicko,
Denise Gonick, and Jeffrey Streeter. All of these individuals make
significant contributions to our Corporation by bringing a diversity of
perspectives and backgrounds that strengthens our direction and
challenges us to improve. We are thankful for their commitment
and look forward to their continued engagement and impact. At the
same time, Clover Drinkwater will be retiring at this year’s annual
meeting. Clover’s leadership and support has been tremendously
valuable over her 13 years of service. We extend our sincere thanks
and appreciation to Clover for her effort, dedication, and loyalty.
Final Thoughts
We are pleased with the results for 2018, which validated the
positive impact that our strong community banking strategy has on
our shareholders, clients, colleagues, and communities. This year,
we encountered substantial dislocation in the market as new and
disruptive forces emerged. We reacted deftly to these challenges
and excelled in the face of stiff competition and challenging
economic conditions.
Today, we consider carefully the prospect of a stubbornly flat
yield curve as well as slower growth rates in portions of our market.
Although exacting, the Corporation is positioned to succeed in these
challenging market characteristics. Looking forward, we have
developed a thoughtful plan that delivers exceptional client service,
finds efficiencies in our banking platform, executes on our technology
plan, and carefully manages risk. The Corporation recognizes that
our success is dependent upon consistently delivering long-term
value to our shareholders.
This has been a year of incredible activity yielding very strong
financial results. We are committed to our initiatives that support
our clients and communities. 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
EX ECU TIVE
MANAG EMEN T TEAM
Anders M. Tomson
President &
Chief Executive Officer
Pamela D. Burns
Senior Vice President
Human Resources
Senior Vice Presidents
Robert Pichette
Catherine Crandall
Commercial Lending
WMG Estate Administration
Marianne Kalec
Retail Lending
Christopher Kelly
Retirement Services
Timothy Rubery
Small Business Lending
Joseph Tascone
WMG Investment Services
Mark Lasch
WMG Regional Manager
Thomas Whitaker
Finance
L. Dale Cole
Executive Vice President
& Chief Information Officer
J. Edmond Morton IV
WMG Regional Manager
Louis C. DiFabio
Executive Vice President
Business Client Services
Daniel D. Fariello
President
Capital Bank Division
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 Vice President
& Corporate Secretary
Duane W. Mittan
Vice President
& Chief Auditor
Michael J. Wayne
Senior Vice President
Marketing
Thomas W. Wirth
Executive Vice President
Wealth Management
Group (WMG)
Vice Presidents
Yvonne Albee
Regulatory Risk
Christopher Kennedy
Commercial Lending
Dawn Aubin
Auburn & Seneca Falls
John Kite
Special Assets
Roberta Bastow
Commercial Lending
Michael Battersby
Support Services
Michael Blatt
WMG Investment Services
Bryce Cutler
Business Development
Mark Fife
Commercial Lending
Yvette Francisco
Loan Review
Thomas Funk
Finance
Victoria Harkins
WMG Prestige Banking
Kevin Harrigan
Commercial Lending
James Hartle
Branch Administration
Scott Heffner
Marketing
Mary Keefe
Business Services
James Kresge
Commercial Credit
D. Tavis McKeon
E-Retail
Mary Meisner
Regulatory Risk
& BSA AML Officer
Mary Anne Narosky
Business Client Services
Nino Pellegrino
Business Development
Kellea Russell
Business Development
Jennifer Sczepanski
Branch Administration
John Sentigar
Information Technology
Andrea Seymour
Logistical Support
John Shea
WMG Relationship Manager
Gregory Stewart
WMG Sr. Relationship Manager
Sheila Washburn
ATM & Card Services
CFS Group, Inc.
Marci Cartwright
Vice President
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.
Assistant Vice Presidents
Kimberly Bailey
Canton & Troy
Matthew Keefe
Regulatory Risk
Bruce Boughton
Montour Falls
& Watkins Glen
Gregory Bruno
Clifton Park
& Schenectady
David Carlson
Elmira Heights
Amy Chervinsky
Consumer Loans
Maureen Clarke
State St. & Slingerlands
Christopher Coletta
Commercial Loans
Pamela Colomaio
Bath
Alison Conklin-DeVita
Southport & Westside
Joel Crimmins
Commercial Lending
Jennifer Cruise
WMG Support Services
Jennifer Fulton
Finance
Sandra Grooms
Elmira Rd. &
Ithaca Station
Sanya Lam
Latham & Wolf Rd.
Andrea McClure
WMG Tax Services
Patrick McFarland
Regulatory Risk
Jack Narosky
BCSG Relationship
Manager
Michael Novotny
Branch Administration
Brenda Praschunus
Arnot Rd. & Big Flats
Randi Richer
Loan Operations
Sheryl Scott
Corning & Painted Post
Heidi Wahl
WMG Estate Administration
Patrick Ward
WMG Presitge Banking
Tracey Wardwell
Wilton
Sue Williams
Waverly
Kristen Woodward
E-Retail
Michael Hart
WMG Estate Administration
Lauren Zell
WMG Retirement Services
Assistant Treasurers
Laura Bennett
Julianne Meeker
Real Estate Lending
Computer Operations
Marcia Boor
Business Services
Ann Burns
Special Assets
Sarah Darling
Owego & Tioga
Austin Farrell
Horseheads
Tara Humphrey
Loan Operations
Tonya Johnson
Regulatory Risk
Barbara Keller
Consumer Lending
Alice Kiser
Bank Operations
Megan Kozdemba
Real Estate Lending
Christopher Kuehner
Regulatory Risk
Aimee O’Connor
Towanda &
Business Development
Monica Ridosh
Human Resources
Cortni Pritchard
Credit Department
Andrew Stockwell
Community Corners
& Cortland
Charolette Truxal
Vestal & Binghamton
Devin Wandell
WMG Estate Administration
Tyler Wilson
Regulatory Risk
Heidi Wood
Resource Recovery
*Listing as of February 28, 2019*
S E R VING 13 C OUNTIES IN TWO S T AT ES
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
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 (Wilton)
SCHENECTADY
2 Rush St., Schenectady
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
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.