Chemung Financial Corporation
Annual Report 2022

Plain-text annual report

2022 CHEMUNG FINANCIAL CORPORATION ANNUAL REPORT Bank Anywhere, Anytime. ALBANY 132 State St., Albany 65 Wolf Rd., Albany 581 New Loudon Rd., Latham 1365 New Scotland Rd., Slingerlands BRADFORD, PA 5 W. Main St., Canton 159 Canton St., Troy BROOME 127 Court St., Binghamton 100 Rano Blvd., Vestal CAYUGA 110 Genesee St., Auburn 185 Grant Ave., Auburn 1 CHEMUNG One Chemung Canal Plaza, Elmira 628 W. Church St., Elmira 100 W. McCanns Blvd., Elmira Heights 29 Arnot Rd., Horseheads 602 S. Main St., Horseheads 951 Pennsylvania Ave., Southport CORTLAND 1094 Highway 222, Cortland ERIE 9159 Main St, Suite 1B, Clarence SARATOGA 25 Park Ave., Clifton Park 3057 Route 50, Saratoga Springs 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 201 Bath Plaza, Bath 149 W. Market St., Corning TIOGA 203 Main St., Owego 405 Chemung St., Waverly TOMPKINS 909 Hanshaw Rd., Ithaca 304 Elmira Rd., Ithaca 806 W. Buffalo St., Ithaca Operating Results - Year Ended December 31: 2022 2021 % of Change Financial Highlights (in thousands, except per share data and employee count) Net interest income Provision (credit) for loan losses Other operating income: Wealth Management Group fee income Other income Other operating 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 Efficiency ratio (adjusted) 13.1% N/M (7.2)% (12.8)% 6.5% 10.5% 8.9% 9.4% 20.5% (6.5)% 8.0% (21.3)% 0.9% 8.7% (21.7)% (24.1)% 4.2% 0.2% $74,179 (554) 10,280 11,156 59,280 $65,589 17 11,072 12,798 55,682 8,106 7,335 $28,783 $26,425 $2,645,553 1,829,448 19,659 2,327,227 166,388 340 $2,418,475 1,518,249 21,025 2,155,433 211,455 337 6.13 35.32 30.69 1.24 4,693 1.07% 1.15% 15.93% 18.12% 61.71% 5.64 45.09 40.44 1.19 4,683 1.38% 1.09% 12.94% 14.49% 61.71% Trust Assets Under Administration (market value): as Fiduciary as Custodian Common Stock Market Prices and Dividends Paid During Past Two Years: $1,639,794 413,156 $2,052,950 $1,941,412 383,413 $2,324,825 (15.5)% 7.8% (11.7)% December 31, 2022 High Low Dividends 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter December 31, 2021 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter $47.99 48.38 47.48 47.14 $41.21 41.80 40.88 45.25 $0.31 0.31 0.31 0.31 High $48.33 48.30 46.60 44.73 Low $44.29 42.81 42.09 33.46 Dividends $0.31 0.31 0.31 0.26 2 2022 Annual Letter to Shareholders For nearly 190 years, Chemung Canal Trust Company has executed with conviction its community-banking model. As our country emerges from the pandemic, we are proud of the support we extended to our communities. 2022 was certainly a dynamic year. Now, as new challenges emerge, we remain committed to providing the stakeholders of Chemung Financial Corporation the same high level of assistance and service that has been the hallmark of our proud Company. The economic environment of 2022 changed quickly as the urgency, if not the presence, of the pandemic lifted from our communities. Although a renewed sense of normalcy evolved, the ramifications of the pandemic steadily became evident. Inflation and rising interest rates created an uncertain outlook for our industry. In addition, the Russian invasion of Ukraine added to these levels of uncertainty. During the year, the consumer price index (CPI) increased 6.5 percent, primarily driven by increases in food and energy prices. As a result, the Federal Reserve Board (FRB) raised interest rates by 425 basis points to combat rising inflation. Despite these challenges, we are pleased to report a record year for the Corporation. Earnings at year-end 2022 totaled $28.8 million, or $6.13 per share, representing the highest annual earnings and highest earnings per share (EPS) in the Bank’s history, a year- over-year increase of 8.9 percent and 8.7 percent, respectively. Our balance sheet growth was strong in 2022. Assets increased by 9.4 percent and totaled $2.646 billion at year-end. In total, net loans increased 20.9 percent from the prior year, representing growth from significant activity across all lending segments. Specifically 3 noteworthy was production in the commercial, residential mortgage, and indirect auto business lines. Net interest income increased 13.1 percent, primarily due to increases in average loan yields and a $101.0 million increase in average loan balances. The Bank maintained its standard of exceptional credit quality, with non-performing loans representing only 0.45 percent of the total loan portfolio. These components drove results, with return on average assets yielding 1.15 percent, along with a return on average equity of 15.93 percent, representing improvements of 5.5 percent and 23.1 percent, respectively. Indicative of the Bank’s strong credit quality, the final $2.4 million pandemic-related portion of the allowance for loan losses was released, and we no longer hold an allowance associated with COVID-19. As previously noted, we established the specific allowance at the onset of the pandemic in anticipation of potential credit stress created by the crisis. Our traditionally low-cost deposits remained stable during the first half of the year. However, even our very strong deposit franchise was not immune to market forces. The Bank’s funding costs accelerated as the year progressed. Loan growth was funded through a combination of organic deposit growth, brokered certificates of deposit, and overnight borrowing from the Federal Home Loan Bank of New York. In spite of rising funding costs, our asset-sensitive balance sheet reacted positively to the rising rate environment, resulting in a noteworthy boost to net-interest income of 13.1 percent year- over-year. The Corporation’s Wealth Management Group again had a strong year in 2022. In spite of continued market volatility and downward pressure, investment performance remained positive on a relative basis and now exceeds seven years of benchmark assessments. Equally important, new client acquisition and client retention remained robust and our teams exceeded their targeted benchmarks in these key areas. For the second year in a row, the Corporation’s brokerage arm, CFS Group, Inc., had a meaningful impact on the company, exceeding $1 million in revenue in 2022. The Bank continues to enhance its distribution platform to foster growth. Our office in Western New York, now in its second year of service, continues to make a significant impact on the Bank’s success. Under new leadership in this market, total loans now exceed $80 million and make a meaningful contribution to the Corporation’s net interest income. Management and the Board of Directors are committed to building a solid presence in Western New York, and we look forward to making our full complement of products and services more readily available in this community in the near future. In 2022, the Corporation maintained a strong focus on the execution of its long-term strategic plan with a particular emphasis on mitigating risk and promoting efficiency. We continue to elevate our customer service commitment to create a frictionless, efficient and secure experience, especially through the Bank’s evolving digital banking platforms. Digital roadmaps for each line of business guide our implementation, execution, and investment in an effort to enhance internal and ELMIRA, NY external interaction. Digital product usage is broadly tracked to understand the digital needs of our customers and further refine those initiatives. In 2023, we continue our focus on evaluating digital products, while identifying opportunities to enable a holistic view of client relationships. As community bankers, we embrace our corporate responsibility. This requires inclusion, volunteerism, financial support, thoughtful partnerships and the responsible oversight of our environmental impact. In 2022, over half of our employees volunteered over 8,100 hours outside of their normal workdays in our communities. The Corporation distributed more than $540,000 to our communities in the form of sponsorships and contributions. In 2022, we continuously reviewed our process to make banking services more accessible to the unbanked and underbanked populations in the communities we serve. In conjunction with the national organization Cities for Financial Empowerment Fund, the Bank successfully launched a new account product, BankOn Checking, aimed at breaking down barriers associated with the account-opening process. Our BankOn Checking Account is certified as meeting over 25 national requirements for a safe and affordable consumer transaction account. We work to assist our communities through financial-literacy efforts and collaboration with small businesses. We focus on helping to provide financial services which enhance the economic opportunities for minority, women, and veteran businesses continuing our long tradition in helping to create small business and encourage entrepreneurs. We are humbled and proud of the effort and dedication of our colleagues as they assist our neighbors and raise up those in need. This year, they exhibited the same signature characteristics that have been a meaningful piece of our culture for 190 years. At last year’s annual meeting, Larry H. Becker retired from Chemung Financial Corporation’s Board of Directors. Larry was a strong advocate of our ... Read More 4 2022 Annual Letter to Shareholders - Continued Company and had a direct and meaningful impact on our success as we expanded into, and grew in, the Capital Region. We thank Larry for his years of service, wise oversight and commitment to our great Company. This year, the Board welcomed Joseph F. Meade IV, of Hammondsport, NY as a Director to the Boards of Chemung Financial Corporation and Chemung Canal Trust Company. Mr. Meade, President & CEO of Mercury Corporation, brings strong executive-level experience to our Board that will provide our company with immediate and impactful leadership. October of 2023 will mark Chemung Canal Trust Company’s 190th Anniversary. Our core banking principles, strong leadership and ability to adapt have enabled this great company to withstand every obstacle and economic anomaly since 1833. 2023 will certainly present its share of new challenges as the potential for a recession looms and the national economy continues to experience elevated levels of inflation. The FRB has committed to slowing growth in an effort to reverse broad-based inflationary pressures. Although an environment such as this may affect our Corporation’s earnings and credit performance, we are confident in our ability to react prudently as these situations continue to evolve. 2023 has already produced unique events that have heightened focus on the banking industry. In March, after the shuttering of two of the country’s larger banks, an immediate sense of unease permeated our communities, and our bankers reacted quickly to address the concerns of our clients and our employees. Unlike these failed banks, Chemung is well-positioned to withstand mounting inflationary pressures, rising interest rates and an inverted yield curve. The Bank continues to be considered well capitalized by our State and Federal regulators and has strong risk programs in place to manage potential market disruption. Our deposit base encompasses a diverse cross-section of customers and sources, which effectively protects us from industry-specific downturns. Further, low risk securities on our balance sheet safeguard our exposure to these exceptional conditions and provide a strong buffer against inevitable market disturbances. Chemung Financial Corporation is poised and ready to deliver strong results for our stakeholders. We will again execute on our defined business models, build on our past successes, and confidently manage through the challenges that lie ahead. We continue to focus on our core values and support the well- being, growth and prosperity of our employees, clients, shareholders, and communities. We thank you for your continued support of our great company. SCHENECTADY, NY Anders M. Tomson President & CEO David J. Dalrymple Chairman of the Board 5 g 8.9% $28.8 million Net Income g 5.5% 1.15% Return on Average Assets $0.31 Quarterly Cash Dividend g 9.4% $2.6 billion Total Assets unchanged 61.71% Efficiency Ratio h 24.1% $30.69 Tangible Book Valie Per Share g 23.1% 15.93% Return on Average Equity g 4.2% $1.24 Dividends Declared Per Share 9.53% Five-Year Shareholder Return 2022 by the Numbers Over 8,100 hours Volunteered by our Employees Over 50% Of our Employees Volunteered Over $540,000 To our Communities through Sponsorships & Contributions 6 Board of Directors The Annual Meeting of Shareholders will be held on Tuesday, June 6, 2023, at 2:00 p.m. Anders M. Tomson President & CEO Chemung Financial Corporation, Chemung Canal Trust Company, & CFS Group, Inc. Raimundo C. Archibold, Jr. Managing Director, Schwartz Heslin Group, Inc. Ronald M. Bentley Retired President & CEO Chemung Financial Corporation, Chemung Canal Trust Company, & CFS Group, Inc. David M. Buicko President & CEO Galesi Group David J. Dalrymple Chairman of the Board Chemung Financial Corporation, Chemung Canal Trust Company, & CFS Group, Inc.; President Dalrymple Gravel & Contracting Robert H. Dalrymple Vice President & Secretary Dalrymple Holding Corporation President, Seneca Stone Corporation; Vice President, Chemung Contracting Corporation Richard E. Forrestel, Jr. Treasurer Cold Spring Construction Co. Denise V. Gonick Owner & Strategic Advisor Cross Sound Concepts Stephen M. Lounsberry, III President Applied Technology Manufacturing Corporation Joesph F. Meade, IV President & CEO Mercury Corporation Inc. Jeffrey B. Streeter President Streeter Associates G. Thomas Tranter, Jr. Retired President Corning Enterprises Thomas R. Tyrrell Vice President NFP Corporation Forward-looking Statements: This report 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 guarantee 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 7 Executive Management Team Anders M. Tomson President & CEO Chemung Financial Corporation, Chemung Canal Trust Company, & CFS Group, Inc. L. Dale Cole Executive Vice President Chief Information Officer Peter K. Cosgrove Executive Vice President Chief Credit Officer & Chief Risk Officer Daniel D. Fariello President Capital Bank Division Kimberly A. Hazelton Executive Vice President Retail Client Services Scott T. Heffner Senior Vice President Director of Marketing Jeffrey P. Kenefick Regional President Chemung Canal Division Karl F. Krebs Executive Vice President Chief Financial Officer & Treasurer Kathleen S. McKillip Vice President Corporate Secretary Mary E. Meisner Senior Vice President Senior Risk Officer Duane W. Mittan Senior Vice President & Chief Auditor Monica L. Ridosh Vice President Director of Human Resources & Chief Diversity Officer 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. Thomas W. Wirth Executive Vice President Wealth Management Group regulatory environment, and changes in general business and economic trends. Information concerning these and other factors can be found in the Corporation’s 2022 Annual Report on Form 10-K. These filings are available publicly on the SEC’s website at http://www.sec.gov, on the Corporation’s website at http://www.chemungcanal.com or by written request to: Kathleen S. McKillip, Corporate Secretary, Chemung Financial Corporation, One Chemung Canal Plaza, Elmira, NY 14901. 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 April 28, 2023, 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. 8 Capital Bank Advisory Board Carl Becker Vice President & Counsel The Windsor Companies Larry Becker Chief Operating Officer The Windsor Companies Kenneth Brownell Managing Director Vanguard-Fine, LLC Michael Elmendorf President & CEO Associated General Contractors of NYS Robert Kind Managing Shareholder Teal, Becker & Chiaramonte CPAs Paola Horvath Owner Orange Theory Fitness Raymond Kinley, Jr. Retired President & CEO Clough Harbour & Associates Mark Rosen President Dawn Homes Management Jacqueline Rosetti-Falvey President Rosetti Properties Gerald Jennings Former Mayor City of Albany Jonathan deForest President & Principal BBL Construction Services, LLC Spencer Jones Vice President of Operations Cass Hill Development John Maloy Managing Partner James H. Maloy, Inc. Dr. Lee McElroy Director of Athletics & Associate Vice President Rensselaer Polytechnic Institute Dean Rueckert Past President Rueckert Advertising Edward Trombly Partner Barclay Damon Senior Vice Presidents Laura Bennett Retail Lending Christopher Kelly WMG Retirement Services Mark Lasch WMG Investment Services Joseph Tascone WMG Investment Services Catherine Crandall WMG Estate Administration Elizabeth Kraus Commercial Lending James Morton, IV WMG Investment Services Thomas Whitaker Finance Vice Presidents Roberta Bastow Commercial Lending Michael Battersby Support Services Kellea Bauda Business Banking Joshua Cukerstein Commercial Lending Bryce Cutler Business Banking Mary Keefe Business Services James Kresge Commercial Credit Shelby Fay WMG Investment Services Danielle Krisko Business Banking Michael Blatt WMG Investment Services Gregory Bruno Business Banking Mark Fife Business Banking Yvette Francisco Loan Review Sarah Manasse Commercial Lending Mary Anne Narosky Business Client Services Tyler Wilson Compliance Gregory Stewart WMG Investment Services Billie Taft-Sitler Commercial Lending Kristina Vaselewski WMG Prestige Banking Cortni Wickham Commercial Credit Peter Capozzola WMG Investment Services Nathan Gage WMG Retrement Services Michael Novotny Branch Administration Marci Cartwright CFS Group, Inc. Christopher Coletta Commercial Lending Christopher Conklin Information Security Kevin Harrigan Commercial Lending Darick Harriger Information Technology Nino Pellegrino Business Banking Kathryn Rayne Finance Michael Hart WMG Estate Administration Jennifer Sczepanski Branch Administration Alison Conklin-Devita Regulatory Risk James Hartle Branch Administration John Stempin Finance 9 Assistant Vice Presidents Kimberly Bailey Canton & Troy Austin Farrell WMG Estate Administration Megan Kozdemba Real Estate Lending Heidi Wahl WMG Estate Administration Bruce Boughton Montour Falls & Watkins Glen Deborah French Main Office Kevin Brimmer WMG Investment Services Judith Frisk Arnot Road & Westside Dena Carrigan Horseheads Pamela Colomaio Bath & Corning Joel Crimmins Commercial Lending Jennifer Cruise WMG Support Services Sarah Darling Human Resources Sandra Grooms Ithaca Tara Humphrey Loan Operations Tonya Johnson Regulatory Risk Barbara Keller Indirect Lending Mohammad Khan Latham & Slingerlands Garrett Dawson Wolf Road & Schenectady Zachary Knapp Municipal Banking Heather Machmer Commercial Lending Andrea McClure WMG Tax Services Julianne Meeker Information Technology Lenora Phillips Real Estate Lending Kyle Reyell Municipal Banking Patrick Ward WMG Prestige Banking Tracey Wardwell Clifton Park & Wilton Jon Wilcox Auburn & Seneca Falls Sue Williams Owego & Waverly Kristen Woodward Digital Client Experience Sara Soprano WMG Retirement Services Lauren Zell WMG Retirement Services Charolette Truxal Binghamton & Vestal Mary Beth Uebrick Real Estate Lending Assistant Treasurers Wendy Bixler Logistical Support Heidi Cleary Resource Recovery Kathleen Cook Executive Specialist Tonya DeLige Account Services Jebb Dennis Enterprise Project Management Erica Gaylord Branch Administration Jolie Guiles Contact Center Daniel Hoover Information Technology Carol Kane Southport Alice Kiser Regulatory Risk Lyanna Liu Audit Jody Scott Elmira Heights Ashley Skiff Account Services Andrew Stockwell Cortland Sarah Williamson Business Services BUFFALO, NY 10 Chemung Financial C o r p o r a t i o n A n n u a l 2022 R e p o r t 

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