Chemung Financial Corporation
Annual Report 2023

Plain-text annual report

Bank Anywhere, Anytime. ALBANY 132 State St., Albany 65 Wolf Rd., Albany 581 Loudon Rd., Latham 1365 New Scotland Rd., Slingerlands BRADFORD 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. McCann’s Blvd., Elmira Heights 29 Arnot Rd., Horseheads 602 S. Main St., Horseheads 951 Pennsylvania Ave., Southport CORTLAND 1094 Highway 222, Cortland ERIE 9159 Main Street, 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: 2023 2022 % of Change Financial Highlights (in thousands, except per share data and employee count) Net interest income Provision (credit) for credit losses (1) 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 credit losses (1) 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 credit losses to total loans (1) Return on average assets Return on average equity Return on average tangible equity Efficiency ratio (adjusted) Trust Assets Under Administration (market value): as Fiduciary as Custodian Common Stock Market Prices and Dividends Paid During Past Two Years: 0.4% 668.8% 1.8% 26.3% 8.4% (19.8)% (13.1)% 2.5% 7.8% 14.5% 4.4% 17.3% (0.3)% (13.9)% 16.3% 18.9% 0 % 0.8% $74,457 3,262 10,460 14,089 64,243 $74,179 (554) 10,280 11,156 59,280 6,501 8,106 $25,000 $28,783 $2,710,529 1,972,664 22,517 2,429,427 195,241 339 $2,645,553 1,829,448 19,659 2,327,227 166,388 340 5.28 41.07 36.48 1.24 4,732 1.14% 0.94% 14.11% 16.09% 66.20% 6.13 35.32 30.69 1.24 4,693 1.07% 1.15% 15.93% 18.12% 61.71% $1,492,676 465,173 $1,957,849 $1,639,794 413,156 $2,052,950 (9.0)% 12.6% (4.6)% December 31, 2023 High Low Dividends 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter $50.17 43.01 41.51 52.65 $39.00 37.60 34.20 41.50 $0.31 0.31 0.31 0.31 December 31, 2022 High Low Dividends 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter (1) The Corporation adopted CECL, January 1, 2023. $47.99 48.38 47.48 47.14 $41.21 41.80 40.88 45.25 $0.31 0.31 0.31 0.31 2 2023 Annual Letter to Shareholders In 2023, our Company celebrated its 190th anniversary, and our story is a remarkable one. Chemung Canal was established by an Act of the New York State Legislature on April 9, 1833. When our doors first opened on October 22, 1833, Andrew Jackson was President of the United States, which consisted of only 24 states. In fact, some of our Company’s first customers were veterans of the Revolutionary War. Today, we stand as the oldest locally owned and managed bank in New York State and the 10th oldest bank in the United States. This milestone would not have been attainable without the steadfast commitment to our communities and clients that is fundamental to our past, present and future success. Economic turmoil, political unrest and a challenging interest rate environment contributed to an uncertain landscape in the financial services industry in 2023. Earlier in the year, three significant bank failures highlighted the substantial impact of rapidly rising interest rates on bank balance sheets and liquidity. With bank failures having since been contained, a more significant crisis was averted. However, share prices across the broader banking sector were negatively impacted, and Chemung Financial Corporation was not immune. Despite the initial impact, our share price recovered over the course of the year, increasing 8.6 percent. This performance measured well against peers, whose median share price declined 7.8 percent year over year. This year, Chemung Financial Corporation delivered consistent and meaningful results for our constituents while navigating challenging economic times. Net income totaled $25.0 million, or $5.28 per share. Average 3 loan balances increased $252.4 million, or 15.3 percent, concentrated mainly in the commercial loan portfolio. This increase helped drive total assets to $2.7 billion at the end of the year, an increase of 2.5 percent. Commercial demand for financing continues to be strong across the Corporation's footprint, led by commercial real estate activity in the Capital Region. Consumer loans increased $12.8 million, or 4.3 percent, primarily driven by strong origination activity in the indirect auto segment. These increases were offset by a decrease in the residential mortgage portfolio of $7.7 million, or 2.7 percent. This decrease was a byproduct of our strategy to sell new loans into the secondary market and preserve liquidity for the businesses, consumers and charitable organizations that rely on us for support. Our expansion into Western New York continues. Operating from a single office in Clarence, we surpassed $100 million in loans for the Western New York region during the year. To build on this success and expand our footprint, we have selected a prime location in the Village of Williamsville for our first full-service regional banking center. We expect to open the new facility this year and look forward to bringing our relationship-focused banking style to this dynamic community. Throughout the year, inflation rose due to the easing of monetary policies during the pandemic, Courtesy of Chemung County Historical Society ELMIRA, NY and in response, the Federal Reserve continued to increase interest rates. In total, its benchmark rate increased 5.25 percent, since 2022. Like other institutions, the Bank experienced significant shifts in deposits from low-cost products to higher cost interest-bearing deposits. Deposit shifting impacted our funding throughout the year. However, the Bank’s liability cost remained in-line with the market and our peers. While the Corporation has the necessary liquidity to execute our business plan and meet the needs of our customers, we became more reliant on higher cost municipal funding and time deposits throughout the year. Wholesale funding more than doubled during 2023 to a yearly average of $190 million. To combat these high-cost funding sources, the Bank launched several deposit campaigns throughout the year. Year over year, total deposits grew 4.4 percent, primarily due to an increase in time deposits of $209.9 million. Customer time deposits increased $140.5 million, making up nearly 67 percent of the growth. Although successful, these campaigns only partially offset the need for wholesale funding. Even in this challenging economic environment, credit quality remained strong. Although steady for most of the year, delinquency rates in most consumer portfolios modestly increased in the fourth quarter, consistent with seasonal trends. Overall, delinquencies remain at, or below, historically normal levels, and management continues to diligently monitor the credit quality of relationships. These results are a testament to our strong and disciplined lending standards and protocols. Throughout the year, we evaluated and implemented solutions designed to enhance the customer experience and protect our customers from fraud. Behind the scenes, we continue to invest significantly in risk-focused technology solutions to safeguard our customers and company from emerging cyber-security and fraud threats. We also invested in our technology platform to ensure the continuous and reliable delivery of digital services to our clients. This allows us to ensure that our digital customer experience is personal, state of the art, and in-line with the exceptional customer experience that is the hallmark of our institution. Our commitment to our colleagues and communities remains a key priority. Staffing levels were managed throughout the year to maximize client experience and mitigate risks to the Corporation. We invested in our teams by providing opportunities such as Leadership Chemung, our in-house leadership program, and Career Circles, which facilities peer mentoring. We provide educational programs and vigorously support the professional development of our colleagues. Additionally, the Bank remains consistent with its commitment to community-based organizations. We focus on supporting not-for-profit organizations, schools, and groups that meet the basic needs of people, provide financial literacy, and support economic growth. Last year, our employees proudly volunteered over 10,400 hours, and we were pleased to invest nearly $560,000 into our communities through Read More 4 2023 Annual Letter to Shareholders - Continued sponsorships and charitable contributions. During the year, the Bank managed the significant transition of two key positions on its Executive Management Team. The Bank navigated these transitions without interruption to operations or results. Pam Burns, Director of Human Resources, retired December 31, 2022, and Karl Krebs, Chief Financial Officer, retired on June 30, 2023. Pam and Karl served our Executive Management Team admirably for a combined 45 years. We thank them for their service and significant contributions to the success of our Corporation. In July, Dale M. McKim III joined the Bank’s Executive Management Team as its Chief Financial Officer and Treasurer. Dale brings more than 25 years of finance and risk-management experience to the Company, most recently working as Chief Risk Officer for Evans Bank and previously as a Partner at KPMG LLP in Buffalo. A testament to our succession planning efforts, Monica L. Ridosh was promoted to Director of Human Resources and Chief Diversity Officer. Monica joins our Executive Management Team after working 18 years with the Bank, including nearly 15 years in the Human Resources Department. We congratulate Dale and Monica and look forward to their continued contributions to our Company. Going forward, we will continue to focus on our key strategies to deliver consistent and sustainable performance: revenue growth, operating efficiencies, customer experience, and supporting our colleagues and communities. We have a committed and talented staff and dedicated and capable Board of Directors to provide guidance and leadership. While 190 years of continuous operation does not provide a guarantee for our future, we will remain relevant, competitive and focused on our core principles to ensure we will be a reliable resource for our stakeholders for many years to come. We are grateful for the continued support of our shareholders, clients, employees and the communities we serve. Anders M. Tomson President & CEO David J. Dalrymple Chairman of the Board 5 WATKINS GLEN, NY COMMUNITY SUPPORT $559,000 Including $52,342 OUR 2023 GIVING IN ACTION Given in support of our communities from employee contributions 10,442 Hours Volunteered 165 Employee Volunteers Over 400 organizations supported across our county 14 footprint 6 Board of Directors The Annual Meeting of Shareholders will be held on Tuesday, June 4, 2024, 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 Crossa Sound Concepts Stephen M. Lounsberry III President Applied Technology Manufacturing Corporation Joseph 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, the impact of the COVID-19 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 President Chemung Canal Division Kathleen S. McKillip Vice President Corporate Secretary Dale M. McKim III Executive Vice President Chief Financial Officer & Treasurer Mary E. Meisner Senior Vice President Senior Risk Officer Monica L. Ridosh Senior Vice President Director of Human Resources & Chief Diversity Officer Thomas W. Wirth Executive Vice President Wealth Management Group 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. pandemic, changes in law or the regulatory environment, and changes in general business and economic trends. Information concerning these and other factors can be found in the Corporation’s 2023 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 24, 2024, 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 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 Kristina Vaselewski WMG Prestige Banking Patrick Ward WMG Prestige Banking Peter Capozzola WMG Investment Services Nathan Gage WMG Retirement Services Michael Novotny Branch Administration Cortni Wickham Commercial Credit Kevin Harrigan Commercial Lending Darick Harriger Information Technology Nino Pellegrino Business Banking Kathryn Rayne Finance Michael Hart WMG Estate Administration Jennifer Sczepanski Branch Administration James Hartle Branch Administration John Stempin Finance Tyler Wilson Compliance Marci Cartwright CFS Group, Inc. Christopher Coletta Commercial Lending Christopher Conklin Information Security Alison Conklin-Devita Regulatory Risk Joshua Cukerstein Commercial Lending Bryce Cutler Business Banking Mary Keefe Business Services James Kresge Commercial Credit Shelby Fay WMG Investment Services Danielle Krisko Commercial Lending 9 Gregory Stewart WMG Investment Services Billie Taft-Sitler Commercial Lending Schuyler Tilly Commercial Lending SOUTHERN TIER, SUSQUEHANNA RIVER Assistant Vice Presidents Christina Allen Ithaca Station & Elmira Road Kristen Henderson Digital Client Experience Kimberly Bailey Canton & Troy Tara Humphrey Loan Operations Bruce Boughton Montour Falls & Watkins Glen Tonya Johnson Regulatory Risk Kevin Brimmer WMG Investment Services Barbara Keller Indirect Lending Charolette Truxal Binghamton & Vestal Mary Beth Uebrick Real Estate Lending Heidi Wahl WMG Estate Administration Tracey Wardwell Clifton Park & Wilton Renée Wheeler Business Banking Jon Wilcox Auburn & Seneca Falls Sue Williams Owego & Waverly Sarah Williamson Business Services Zachary Knapp Municipal Banking Megan Kozdemba Real Estate Lending Heather Machmer Commercial Lending Andrea McClure WMG Tax Services Julianne Meeker Information Technology Lauren Zell WMG Retirement Services Lenora Phillips Real Estate Lending Kyle Reyell Municipal Banking Connie Sibrava WMG Administration Sara Soprano WMG Retirement Services Dena Carrigan Horseheads Pamela Colomaio Bath & Corning Joel Crimmins Commercial Lending Jennifer Cruise WMG Support Services Sarah Darling Human Resources Jebb Dennis Enterprise Project Management Austin Farrell WMG Estate Administration Deborah French Main Office Judith Frisk Arnot Road & Westside Assistant Treasurers Jacob Aquilio Finance Wendy Bixler Logistical Support Heidi Cleary Resource Recovery Kathleen Cook Assistant Corporate Secretary Tonya DeLige Account Services Erica Gaylord Branch Administration Jolie Guiles Contact Center Daniel Hoover Information Technology Carol Kane Southport Alice Kiser Regulatory Risk Lyanna Liu Regulatory Risk Jody Scott Elmira Heights Ashley Skiff Account Services Dana Stewart Business Services Andrew Stockwell Cortland SOUTHERN TIER, SUSQUEHANNA RIVER 10 Chemung Financial C o r p o r a t i o n 2023 A n n u a l R e p o r t 

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