-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, W1O8HHlGEvyyAc5e08MK5+CZqfcx/PQOtwRbiOOcchcwPms+oeOQ3p71H7rX3vlx Kt4gaHTUMqSEP+QGJQBE5w== 0000763563-00-000012.txt : 20000328 0000763563-00-000012.hdr.sgml : 20000328 ACCESSION NUMBER: 0000763563-00-000012 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHEMUNG FINANCIAL CORP CENTRAL INDEX KEY: 0000763563 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 161237038 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-13888 FILM NUMBER: 579294 BUSINESS ADDRESS: STREET 1: ONE CHEMUNG CANAL PLZ STREET 2: P O BOX 1522 CITY: ELMIRA STATE: NY ZIP: 14902 BUSINESS PHONE: 6077373711 MAIL ADDRESS: STREET 1: ONE CHEMUNG CANAL PLZ STREET 2: P O BOX 1522 CITY: ELMIRA STATE: NY ZIP: 14902 10-K 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K XX ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from _____________ to _____________ Commission File Number 0-13888 CHEMUNG FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) NEW YORK 16-123703-8 (State or other jursidiction of (I.R.S. Employer Identification incorporation or organization Number) One Chemung Canal Plaza, P.O. Box 1522 14902 Elmira, New York (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (607) 737-3711 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.01 a share (Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
The aggregate market value of Common Stock held by non-affiliates on February 29, 2000 was $45,773,116 As of February 29, 2000 there were 4,043,882 shares of Common Stock, $0.01 par value outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the year ended December 31, 1999 are incorporated by reference into Parts I, II and IV. Portions of the Proxy Statement for the Annual Shareholders meeting to be held on May 11, 2000 are incorporated by reference into Parts III and IV. PART I ITEM 1. BUSINESS (a) General development of business Chemung Financial Corporation (Corporation) was incorporated on January 2, 1985, under the laws of the State of New York. The Corporation was organized for the purpose of acquiring a majority holding of Chemung Canal Trust Company (Bank). The Bank was established in 1833 under the name Chemung Canal Bank, and was subsequently granted a New York State bank charter in 1895. In 1902, the Bank was reorganized as a New York State trust company under the name Elmira Trust Company, which name was changed to Chemung Canal Trust Company in 1903. On June 1, 1985, after the approval by the New York State Superintendent of Banks and the Board of Governors of the Federal Reserve System of the Plan of Acquisition and holding company application, the Bank became a wholly owned subsidiary of the Corporation. There have been no material changes in the mode of conducting business of either the Corporation or the Bank since the acquisition of the Bank by the Corporation. The Corporation is subject to applicable federal laws relating to bank holding companies as well as federal securities laws, State Corporation Law and State Banking Law. (b) Financial information about industry segments The Corporation and the Bank are engaged only in banking and bank-related businesses. Exhibits I through V included in the Corporation's Annual Report to Shareholders for the year ended December 31, 1999, sets forth financial information with respect to bank-related industry segments. The MD&A including Exhibits I through V are incorporated herein by reference. (c) Narrative description of business Business The Bank is a New York State chartered, independent commercial bank, which engages in full-service commercial and consumer banking and trust business. The Bank's services include accepting time, demand and savings deposits including NOW accounts, Super NOW accounts, regular savings accounts, insured money market accounts, investment certificates, fixed-rate certificates of deposit and club accounts. Its services also include making secured and unsecured commercial and consumer loans, financing commercial transactions either directly or participating with regional industrial development and community lending corporations, making commercial, residential and home equity mortgage loans, revolving credit loans with overdraft checking protection, small business loans and student loans. Additional services include renting of safe deposit facilities, selling uninsured annuity and mutual fund investment products, and the use of networked automated teller facilities. Trust services provided by the Bank include services as executor, trustee under wills and agreements, guardian and custodian and trustee and agent for pension, profit-sharing and other employee benefit trusts as well as various investment, pension, estate planning and employee benefit administrative services. For additional information, which focuses on the results of operation of the Corporation and the Bank, see Management's Discussion and Analysis of Financial Condition and Results of Operations, incorporated herein by reference. There have been no material changes in the manner of doing business by the Corporation or the Bank during the fiscal year ended December 31, 1999. Competition Six (6) of the Bank's thirteen (13) full-service branches, in addition to the main office, are located in Chemung County. The other seven (7) full- service branches are located in the adjacent counties of Schuyler, Steuben, and Tioga. All facilities are located in New York State. Within these market areas, the Bank encounters intense competition in its banking business from several other financial institutions offering comparable products. These competitors include other commercial banks (both locally based independent banks and local offices of regional and major metropolitan-based banks), as well as stock savings banks and credit unions. In addition, the Bank experiences competition in marketing some of its services from local operations of insurance companies, brokerage firms and retail financial service businesses. Dependence Upon a Single Customer Neither the Corporation nor the Bank is dependent upon a single or limited number of customers. Research and Development Expenditures for research and development were immaterial for the years 1999, 1998, and 1997. Employees As of December 31, 1999, the Bank employed 303 persons on a full-time equivalent basis. (d) Financial information about foreign and domestic operations and export sales Neither the Corporation nor the Bank relies on foreign sources of funds or income. (e) Statistical disclosure by bank holding companies The following disclosures present summarized statistical data covering the Corporation and the Bank.
Distribution of Assets, Liabilities and Shareholders' Equity, Interest Rates and Interest Differential Year Ended December 31, 1999 1998 1997 Assets Average Yield/ Average Yield Average Yield/ Balance Interes Rate Balance Interes / Balance Intere Rate t t Rate st Interest earning assets: Loans $346,550 29,446 8.50% 311,679 27,865 8.94% 291,259 26,680 9.16% Taxable securities 204,635 12,718 6.21 173,306 11,188 6.46 157,615 10,629 6.74 Tax-exempt securities 28,094 1,275 4.54 31,118 1,434 4.61 31,154 1,442 4.63 Federal funds sold 9,870 484 4.90 10,882 590 5.42 5,481 300 5.48 Interest-bearing deposits 2,412 254 10.52 4,186 328 7.83 5,380 321 5.97 Total interest earning assets 591,561 44,177 7.47% 531,171 41,405 7.80% 490,889 39,372 8.02% Non-interest earning assets: Cash and due from banks 24,868 25,184 24,396 Premises and equipment, net 10,689 10,154 9,751 Other assets 9,237 7,188 5,065 Less allowance for loan (4,620) (4,323) (4,077) losses Intangibles and AFS valuation Allowance 10,507 14,625 13,211 Total $642,242 $583,999 $539,235 Liabilities and Shareholders' Equity Interest bearing liabilities: Demand deposits $ 41,596 525 1.26% $43,456 611 1.41% $44,991 675 1.50% Savings deposits 151,262 4,342 2.87 143,065 4,284 3.00 135,146 3,894 2.88 Time deposits 202,239 10,230 5.06 190,684 10,351 5.43 185,686 10,187 5.49 Federal Home Loan Bank advances and securities sold 73,946 3,631 4.91 45,258 2,420 5.35 24,233 1,342 5.54 under agreements to repurchase Total interest earning 469,043 18,728 3.99% 422,463 17,666 4.18% 390,056 16,098 4.13% liabilities Non-interest bearing liabilities: Demand deposits 99,035 89,957 84,332 Other liabilities 7,865 7,601 6,094 575,943 520,021 480,482 Shareholders' equity 66,299 63,978 58,753 Total $642,242 $583,999 $539,235 Net interest earnings $25,449 $23,739 $23,274 Net yield on interest earning 4.30% 4.47% 4.74% assets
For the purpose of these computations, nonaccruing loans are included in the daily average loan amounts outstanding. Daily balances were used for average balance computations. Investment securities are stated at amortized cost. No tax equivalent adjustments have been made in calculating yields on obligations of states and political subdivisions. The following table sets forth for the periods indicated, a summary of the changes in interest earned and interest paid resulting from changes in volume and changes in rates (in thousands of dollars):
1999 Compared to 1998 1998 Compared to 1997 Increase (Decrease) Increase (Decrease) Due to (1) Due to (1) Volume Rate Net Volume Rate Net Interest earned on: Loans $3,004 (1,422) 1,582 1,836 (651) 1,185 Taxable securities 1,974 (444) 1,530 1,017 (458) 559 Tax-exempt securities (138) (21) (159) (2) (6) (8) Federal funds sold (52) (54) (106) 293 (3) 290 Interest-bearing (165) 91 (74) (80) 87 7 deposits Total interest earning $4,623 (1,850) 2,773 3,064 (1,031) 2,033 assets Interest paid on: Demand deposits (25) (61) (86) (23) (41) (64) Savings deposits 236 (178) 58 229 161 390 Time deposits 607 (728) (121) 272 (108) 164 Federal Home Loan Bank advances and securities sold under agreements 1,424 (213) 1,211 1,126 (48) 1,078 to repurchase Total interest bearing $2,242 (1,180) 1,062 1,604 (36) 1,568 liabilities Net interest income $2,381 (670) 1,711 1,460 (995) 465 (1) The change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.
Investment Portfolio The following table sets forth the carrying amount of investment securities at the dates indicated (in thousands of dollars):
December 31, 1999 1998 1997 U.S. Treasury and other U.S. Government $108,038 101,528 93,971 agencies Mortgage backed securities 73,747 89,593 55,603 State and political subdivisions 29,290 28,036 34,955 Corporate bonds and notes 10,180 9,762 149 Corporate stocks 14,735 13,036 9,849 Total $235,990 241,955 194,527
Included in the above table are $227,384, $235,294 and $185,303 (in thousands of dollars) of securities available for sale at December 31, 1999, 1998 and 1997, respectively. The following tables set forth the maturities of debt securities at December 31, 1999 and the weighted average yields of such securities (calculated on the basis of the cost and effective yields weighted for the scheduled maturity of each security). Federal tax equivalent adjustments have been made in calculating yields on municipal obligations (in thousands of dollars):
Maturing After One, But Within Within One Five Years Year Amount Yield Amount Yield U.S. Treasury and other U.S. Government $ 1,502 5.94% $64,143 5.84% agencies Mortgage backed securities - - 1,198 6.69 State and political subdivisions 8,464 4.11 6,958 4.30 Corporate bonds and notes - - 2,411 6.25 Total $ 9,966 4.38% $74,710 5.72% Maturing After Five, After But Within Ten Years Ten Years Amount Yield Amount Yield U.S. Treasury and other U.S. Government 42,393 7.13% - - agencies Mortgage backed securities 6,152 6.02 66,397 6.69 State and political subdivisions 10,374 4.71 3,494 5.22 Corporate bonds and notes 2,495 6.34 5,274 7.35 Total $61,414 6.58% $75,165 6.67%
Loan Portfolio The following table shows the Corporation's loan distribution at the end of each of the last five years (in thousands of dollars):
December 31, 1999 1998 1997 1996 1995 Commercial, financial and 131,043 $ 113,865 102,816 92,557 89,785 agricultural Real estate mortgages 94,580 89,544 79,753 78,400 71,870 Consumer loans 134,616 126,097 114,593 113,004 101,687 Total $360,239 329,506 297,162 283,961 263,342
The following table shows the maturity of loans (excluding real estate mortgages and consumer loans) outstanding as of December 31, 1999. Also provided are the amounts due after one year classified according to the sensitivity to changes in interest rates (in thousands of dollars):
After One Within But After One Year Within Five Total Five Years Years Commercial, financial and $ 35,953 $ 28,116 $ 66,974 $131,043 agricultural Loans maturing after one year with: Fixed interest rates 21,032 21,522 Variable interest rates 7,084 45,452 Total $ 28,116 66,974
Non-accrual and Past Due Loans The following table summarizes the Corporation's non-accrual and past due loans (in thousands of dollars):
December 31, 1999 1998 1997 1996 1995 Non-accrual loans(1) $640 4,458 930 1,494 1,119 Accruing loans past due 90 days or more $281 395 688 226 681
Information with respect to non-accrual loans at December 31, 1999, 1998 and 1997 is as follows (in thousands of dollars):
December 31, 1999 1998 1997 Non-accrual loans $640 4,458 930 Interest income that would have been recorded under original terms 318 545 286 Interest income recorded during the period 153 271 48 (1) It is the Corporation's policy that when a past due loan is referred to legal counsel, or in the case of a commercial loan which becomes 90 days delinquent, or in the case of consumer, mortgage or home equity loans not guaranteed by a government agency which becomes 120 days delinquent, the loan is placed in non-accrual and previously accrued interest is reversed unless, because of collateral or other circumstances, it is deemed to be collectible. Loans may also be placed in non-accrual if management believes such classification is warranted for other reasons.
Potential Problem Loans At December 31, 1999, the Corporation has no commercial loans for which payments are presently current but the borrowers are currently experiencing severe financial difficulties. Those loans are subject to constant management attention and their classification is reviewed by the Board of Directors at least quarterly. Loan Concentrations At December 31, 1999, the Corporation has no loan concentrations to borrowers engaged in the same or similar industries that exceed 10% of total loans. Other Interest-Bearing Assets At December 31, 1999, the Corporation has no interest-bearing assets other than loans that meet the non-accrual, past due, restructured or potential problem loan criteria. Summary of Loan Loss Experience This table summarizes the Corporation's loan loss experience for each year in the five-year period ended December 31, 1999 (in thousands of dollars):
Years Ended December 31, 1999 1998 1997 1996 1995 Allowance for loans losses at beginning $4,509 4,145 3,975 3,900 3,600 of year Charge-offs: Commercial, financial and 38 13 77 195 82 agricultural Real estate mortgages 12 16 53 1 5 Consumer loans 624 552 640 538 286 Home equity 16 13 - 20 - Total 690 594 770 754 373 Recoveries: Commercial, financial and 43 35 14 16 16 agricultural Consumer loans 130 123 76 71 93 Total 173 158 90 87 109 Net charge-offs 517 436 680 667 264 Additions charged to operations (1) 673 800 850 742 564 Allowance for loan losses at end of $4,665 4,509 4,145 3,975 3,900 year Ratio of net charge-offs during period to average loans outstanding .15% . 14% .23% .24% .11% (1) The amount charged to operations and the related balance in the allowance for loan losses is based upon periodic evaluations of the loan portfolio by management. These evaluations consider several factors including, but not limited to, general economic conditions, loan portfolio composition, prior loan loss experience, growth in the loan portfolio and management's estimation of future potential losses. The risk elements in the various portfolio categories are not considered to be any greater in 1999 than in prior years. The net charge-offs to total loans have averaged 0.17% over the last five years and the highest percentage in any of those years was 0.24%. (2) Daily balances were used to compute average outstanding loan balances.
The allocated portions of the allowance reflect management's estimates of specific known risk elements in the respective portfolios. Among the factors considered in allocating portions of the allowance by loan type are the current levels of past due, non-accrual and impaired loans. The unallocated portion of the allowance represents risk elements in the loan portfolio that have not been specifically identified. Factors considered in determining the appropriate level of unallocated allowance include historical loan loss history, current economic conditions, and expectations for loan growth. The following table summarizes the Corporation's allocation of the loan loss allowance for each year in the five-year period ended December 31, 1999:
Amount of loan loss allowance (in thousands) and Percent of Loans by Category to Total Loans Balance at end of period applicable to: 1999 % 1998 % 1997 % 1996 % 1995 % Commercial, financial and agricultural $1,227 25.4 2,081 24.0 1,402 22.5 1,472 20.8 1,042 20.9 Commercial mortgages 334 12.2 21 12.0 132 14.0 249 14.8 305 16.3 Residential mortgages 185 25.0 88 25.7 31 24.8 21 24.4 16 23.5 Consumer loans 1,416 37.4 1,007 38.3 823 38.7 503 40.0 153 39.3 Domestic: 3,162 100.0 3,197 100.0 2,388 100.0 2,245 100.0 1,516 100.0 Unallocated: 1,503 N/A 1,312 N/A 1,757 N/A 1,730 N/A 2,384 N/A Total $4,665 100.0 4,509 100.0 4,145 100.0 3,975 100.0 3,900 100.0
Deposits The average daily amounts of deposits and rates paid on such deposits is summarized for the periods indicated in the following table (in thousands of dollars):
Year Ended December 31, 1999 1998 1997 Amount Rate Amount Rate Amount Rate Noninterest-bearing demand $99,035 - % 89,957 - % 84,332 - % deposits Interest-bearing demand 41,596 1.26 43,456 1.41 44,991 1.50 deposits Savings deposits 151,262 2.87 143,065 3.00 135,146 2.88 Time deposits 202,239 5.06 190,684 5.43 185,686 5.49 $494,132 467,162 450,155
Scheduled maturities of certificates of deposit at December 31, 1999 are summarized as follows (in thousands of dollars):
Time Certificates of Deposits 2000 $159,085 2001 26,480 2002 10,514 2003 2,487 2004 4,366 2005 and thereafter 365 $203,297
Maturities of certificates of deposit in denominations of $100,000 or more outstanding at December 31, 1999 are summarized as follows (in thousands of dollars):
Time Certificates of Deposits 3 months or less $41,135 Over 3 through 12 months 13,589 Over 12 months 2,340
There were no other time deposits of $100,000 or more. Return on Equity and Assets The following table shows consolidated operating and capital ratios of the Corporation for each of the last three years:
Year Ended December 31, 1999 1998 1997 Return on average assets 1.31% 1.25% 1.27% Return on average equity 12.66 11.41 11.67 Return on beginning equity 12.70 11.84 12.22 Dividend payout ratio 36.90 37.56 36.55 Average equity to average assets ratio 10.32 10.96 10.90 Year-end equity to year-end assets ratio 10.00 10.66 11.23
Short-Term Borrowings For each of the three years in the period ended December 31, 1999, the average outstanding balance of short-term borrowings did not exceed 30% of shareholders' equity. ITEM 2. PROPERTIES The Corporation and the Bank currently conduct all their business activities from the Bank's main office, thirteen (13) branch locations situated in a four-county area, owned office space adjacent to the Bank's main office, and six (6) off-site automated teller facilities (ATMs), three (3) of which are located on leased property. The main office is a six-story structure located at One Chemung Canal Plaza, Elmira, New York, in the downtown business district. The main office consists of approximately 62,000 square feet of space entirely occupied by the Bank. The combined square footage of the thirteen (13) branch banking facilities totals approximately 46,350 square feet. The office building adjacent to the main office was acquired during 1995 and consists of approximately 18,213 square feet of which 13,711 square feet are occupied by operating departments of the Bank and 4,502 square feet are leased. The leased automated teller facility spaces total approximately 150 square feet. The Bank holds two (2) of its branch facilities (Arnot Mall Office and Bath Office) and three (3) automated teller facilities (Elmira/Corning Regional Airport, Elmira College and WalMart Store) under lease arrangements; and owns the rest of its offices including the main office and the adjacent office building. The Corporation holds no real estate in its own name. ITEM 3. LEGAL PROCEEDINGS Neither the Corporation nor its subsidiary are a party to any material pending legal proceeding required to be disclosed under this item. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS There were no matters submitted to a vote of shareholders during the fourth quarter of the fiscal year covered by this report. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The Corporation's stock is traded in the over-the-counter market. Incorporated herein by reference to portions of the Corporation's Annual Report to Shareholders for the year ended December 31, 1999, are the quarterly market price ranges for the Corporation's stock for the past three (3) years, based upon actual transactions as reported by securities brokerage firms which maintain a market or conduct trades in the Corporation's stock and other transactions known by the Corporation's management. Also incorporated herein by reference to a part of the Corporation's 1999 Annual Report are the dividends paid by the Corporation for each quarter of the last three (3) years. The number of shareholders of record on February 29, 2000 was 730. ITEM 6. SELECTED FINANCIAL DATA The Selected Financial Data Exhibit included in Management's Discussion and Analysis of Financial Condition and Results of Operations and presented in the Corporation's Annual Report to Shareholders for the year ended December 31, 1999 is incorporated herein by reference to Exhibit C of Exhibit Listing 13. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations presented in the Corporation's Annual Report to Shareholders for the year ended December 31, 1999 is incorporated herein by reference to Exhibit C of Exhibit Listing 13. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information required by item 305 of Regulation S-K is included in the Management's Discussion and Analysis of Financial Condition and Results of Operation presented in the Corporation's Annual Report to Shareholders for the year ended December 31, 1999 is incorporated herein by reference to Exhibit C of Exhibit Listing 13. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Independent Auditors' Report and consolidated financial statements as presented in the Corporation's Annual Report to Shareholders for the year ended December 31, 1999 are incorporated herein by reference to Exhibit D of Exhibit Listing 13. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE REGISTRANT The information set forth under the captions "Nominees For Election of Directors" and "Executive Officers" and the Section 16(a) disclosure set forth under the caption "Security Ownership of Management", as presented in the registrant's Proxy Statement, dated April 7, 2000, relating to the Annual Meeting of Shareholders to be held on May 11, 2000, is incorporated herein by reference to Exhibit F of Exhibit Listing 22. ITEM 11. EXECUTIVE COMPENSATION The information set forth under the captions "Directors Compensation"; "Directors' Personnel Committee Report on Executive Compensation"; "Comparative Return Performance Graph"; "Executive Compensation"; "Pension Plan"; "Profit-Sharing, Savings and Investment Plan"; "Employment Contracts"; and "Other Compensation Agreements", presented in the registrant's Proxy Statement, dated April 7, 2000, relating to the Annual Meeting of Shareholders to be held on May 11, 2000, is incorporated herein by reference to Exhibit F of Exhibit Listing 22. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth under the captions "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management", presented in the registrant's Proxy Statement, dated April 7, 2000, relating to the Annual Meeting of Shareholders to be held on May 10, 2000, is incorporated herein by reference to Exhibit F of Exhibit Listing 22. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth under the caption "Certain Transactions", presented in the registrant's Proxy Statement, dated April 7, 2000, relating to the Annual Meeting of Shareholders to be held on May 11, 2000, is incorporated herein by reference to Exhibit F of Exhibit Listing 22. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) List of Financial Statements and Independent Auditors' Report The following consolidated financial statements and Independent Auditors' Report of Chemung Financial Corporation and subsidiary, included in the Annual Report of the registrant to its shareholders as of December 31, 1999 and 1998, and for each of the years in the three-year period ended December 31, 1999 are incorporated by reference in Item 8:
- Independent Auditors' Report - Consolidated Balance Sheets - December 31, 1999 and 1998 - Consolidated Statements of Income - Years ended December 31, 1999, 1998 and 1997 - Consolidated Statements of Shareholders' Equity and Comprehensive Income - Years ended December 31, 1999, 1998 and 1997 - Consolidated Statements of Cash Flows-Years ended December 31, 1999, 1998 and 1997 - Notes to Consolidated Financial Statements - December 31, 1999 and 1998
(2) List of Financial Statement Schedules Schedules to the consolidated financial statements required by Article 9 of Regulation S-X are not required under the related instructions or are inapplicable, and therefore have been omitted.
(3) Listing of Exhibits Exhibit (3.1) Certificate of Incorporation is filed as Exhibit 3.1 to Registrant's Registration Statement on Form S-14, Registration No. 2- 95743, and is incorporated herein by reference. Certificate of Amendment to the Certificate of Incorporation, filed with the Secretary of State of New York on April 1, 1988, incorporated herein by reference to Exhibit A of the Registrant's Form 10-K for the year ended December 31, 1988, File No. 0-13888. (3.2) Bylaws of the Registrant, as amended October EXHIBIT E 13, 1999. Exhibit (13) Annual Report to Shareholders for the year ended December 31, 1999. Table of Quarterly Market Price Ranges. EXHIBIT A Table of Dividends Paid. EXHIBIT B Management's Discussion and Analysis of EXHIBIT C Financial Condition and Results of Operations including the Selected Financial Data Exhibit. Quantitative and Qualitative disclosures about Market Risk Consolidated Financial Statements and EXHIBIT D Independent Auditors' Report. Exhibit (21) Subsidiaries of the registrant. EXHIBIT F Exhibit (22) Registrant's Notice of Annual Meeting, Proxy EXHIBIT G Statement dated April 7,2000, and Proxy Form Exhibit (27) Financial Disclosure Schedule (EDGAR version only)
(b) Reports on Form 8-K There were no reports filed on Form 8-K during the three months ended December 31, 1999. (c) Exhibits The response to this portion of Item 14 is submitted as a separate section of this report. (d) Financial Statement Schedules None ANNUAL REPORT ON FORM 10-K ITEM 14(c) CERTAIN EXHIBITS YEAR ENDED DECEMBER 31, 1999 CHEMUNG FINANCIAL CORPORATION ELMIRA, NEW YORK ____________________________________
EXHIBIT EXHIBIT LISTING EXHIBIT 13 Annual Report To Shareholders For The Year Ended December 31, 1999 A Table of Quarterly Market Price Ranges B Table of Dividends Paid C Management's Discussion and Analysis of Financial Condition and Results of Operations including the Selected Financial Data Exhibit, and the Quantitative and Qualitative Disclosures about Market Risk D Consolidated Financial Statements and Independent Auditors' Report E Bylaws of the Registrant, as amended to October 13, 1999 EXHIBIT 21 F Subsidiaries of the Registrant EXHIBIT 22 G Notice of Annual Meeting, Proxy Statement dated April 7, 2000, and Proxy Form
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CHEMUNG FINANCIAL CORPORATION DATED: MARCH 8, 2000 By /s/ Jan P. Updegraff Jan P. Updegraff President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been executed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date Robert E. Agan Director Donald L. Brooks, Jr. Director /s/ David J. Dalrymple David J. Dalrymple Director March 8, 2000 /s/ Robert H. Dalrymple Robert H. Dalrymple Director March 8, 2000 /s/ Frederick Q. Falck Frederick Q. Falck Director March 8, 2000 /s/ Stephen M. Lounsberry Stephen M. Lounsberry Director March 8, 2000 /s/ Thomas K. Meier Thomas K. Meier Director March 8, 2000 /s/ Ralph H. Meyer Ralph H. Meyer Director March 8, 2000 /s/ John F. Potter John F. Potter Director March 8, 2000 /s/ Charles M. Streeter Charles M. Streeter Director March 8, 2000 /s/ Richard W. Swan Richard W. Swan Director March 8, 2000 /s/ William A. Tryon William A. Tryon Director March 8, 2000 /s/ William C. Ughetta William C. Ughetta Director March 8, 2000 Signature Title Date /s/ Nelson Moores van den Blink Nelson Mooers van den Blink Director March 8, 2000 /s/ Jan P. Updegraff Jan P. Updegraff Director, President & March 8, 2000 Chief Executive Officer Attest /s/ Donna C. Denton Donna C. Denton Secretary March 8, 2000
EX-3 2 EXHIBIT E Amended Bylaws Effective October 13, 1999 (A copy of the Bylaws exhibit filed with the Securities and Exchange Commission may be obtained upon request in writing to the registrant's Corporate Secretary.) CHEMUNG FINANCIAL CORPORATION BY-LAWS Amended to October 13, 1999 ARTICLE I Offices SECTION 1. Principal Office The principal office of the corporation shall be located in the City of Elmira, County of Chemung and State of New York. SECTION 2. Other Offices The corporation may also have such other offices, either within or without the State of New York, as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II Shareholders SECTION 1. Place of Meetings of Shareholders Meetings of shareholders may be held at such place, within or without the State of New York, as may be fixed by the Board of Directors. SECTION 2. Annual Meeting of Shareholders A meeting of shareholders shall be held annually on such date and at such place and time as may be fixed by the Board of Directors for the election of directors and the transaction of other business. SECTION 3. Special Meetings of Shareholders Special meetings of the shareholders may be called by the Board of Directors or by the chairman of the board or by the president. Such call shall state the purpose or purposes of the proposed meeting. Business transacted at any special meeting shall be confined to the purpose or purposes for which the meeting is called. SECTION 4. Fixing Record Date The Board of Directors may fix, in advance, a date as the record date for purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action. Such date shall be not more than sixty (60) nor less than ten (10) days before the date of such meeting nor more than 60 days before any other action. If no record date is fixed, the record date for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given and for all other purposes shall be at the close of business on the day on which the resolution of the Board of Directors relating thereto is adopted. SECTION 5. Notice of Meetings of Shareholders Written notice of every meeting of shareholders shall state the place, date and hour of the meeting and unless it is the annual meeting, indicate that it is being issued by or at the direction of the person or persons calling the meeting. Notice of a special meeting shall also state the purpose or purposes for which the meeting is called. If, at any meeting, action is proposed to be taken which would, if taken, entitle shareholders fulfilling the statutory requirements to receive payment for their shares, the notice of such meeting shall include a statement of that purpose and to that effect. A copy of the notice of any meeting shall be given, personally or by mail, not less than ten (10) nor more than sixty (60) days before the date of the meeting, to each shareholder entitled to vote at such meeting. If mailed, such notice shall be deemed given when deposited in the United States mail, with postage thereon prepaid, directed to the shareholder at his address as it appears on the record of shareholders or, if he shall have filed with the secretary of the corporation a written request that notices to him be mailed to some other address, then directed to him at such other address. SECTION 6. Adjourned Meetings When a determination of shareholders entitled to notice of or to vote at any meeting of shareholders has been made, such determination shall apply to any adjournment thereof, unless the Board of Directors fixes a new record date for the adjourned meeting. When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and at the adjourned meeting the corporation may transact any business that might have been transacted on the original date of the meeting. However, if after the adjournment the Board of Directors fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record on the new record date entitled to notice. SECTION 7. List of Shareholders at Meeting A list of shareholders as of the record date, certified by the secretary or by the transfer agent, shall be produced at any meeting of shareholders upon the request thereat or prior thereto of any shareholder. If the right to vote at any meeting is challenged, the inspectors of election, or person presiding thereat, shall require such list of shareholders to be produced as evidence of the right of the persons challenged to vote at such meetings, and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting. SECTION 8. Quorum of Shareholders The holders of a majority of the shares entitled to vote thereat shall constitute a quorum at a meeting of shareholders for the transaction of any business. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders. Despite the absence of a quorum, the shareholders present may adjourn the meeting. SECTION 9. Proxies Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent without a meeting may authorize another person or persons to act for him by proxy. Every proxy must be signed by the shareholder or his attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except in those cases where an irrevocable proxy is provided by law. SECTION 10. Inspectors at Shareholders Meetings The Board of Directors, in advance of any shareholders meeting, may appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at a shareholders meeting may, and on the request of any shareholder entitled to vote thereat shall, appoint inspectors. If appointed on the request of one or more shareholders, the holders of a majority of shares present and entitled to vote thereat shall determine the number of inspectors to be appointed. In case any person appointed fails to appear or act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to the result, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. On request of the person presiding at the meeting or any shareholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, question or matter determined by them and execute a certificate of any fact found by them. A report or certificate made by them shall be prima facie evidence of the facts stated and of the vote as certified by them. SECTION 11. Qualifications of Voters Every shareholder of record shall be entitled at every meeting of shareholders to one vote for every share standing in his name on the record of shareholders. Neither treasury shares nor shares held by another domestic or foreign corporation of any type or kind, if a majority of the shares entitled to vote in the election of directors of such other corporation is held by the corporation, shall be voted at any meeting or counted in determining the total number of outstanding shares. Shares held by an administrator, executor, guardian, conservator, committee, or other fiduciary, except a trustee, may be voted by him, either in person or by proxy, without transfer of such shares into his name. Shares held by a trustee may be voted by him, either in person or by proxy, only after the shares have been transferred into his name as trustee or into the name of his nominee. Shares held by or under the control of a receiver may be voted by him without the transfer thereof into his name if authority so to do is contained in an order of the court by which such received was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledgee. Shares standing in the name of another domestic or foreign corporation of any type or kind may be voted by such officer, agent or proxy as the By-Laws of such corporation may provide or, in the absence of such provision, as the Board of Directors of such corporation may determine. SECTION 12. Vote of Shareholders Directors shall, except as otherwise required by law, be elected by a plurality of the votes cast at a meeting of shareholders by the holders of shares entitled to vote in the election. Any other corporate action by vote of the shareholders shall, except as otherwise required by law, these By-Laws or the certificate of incorporation, be authorized by a majority of the votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon. SECTION 13. Conduct of Shareholders' Meetings The Officer presiding over the shareholders' meeting may establish such rules and regulations for the conduct of the meeting as the presiding Officer may deem to be reasonably necessary or desirable for the orderly and expeditious conduct of the meeting. SECTION 14. Shareholder Proposals No shareholder shall be entitled to submit a proposal to a meeting of shareholders unless at the time of submitting the proposal, the shareholder shall be a record or beneficial owner of at least 1% or $1,000 in market value of shares entitled to be voted at the meeting, and shall have held such shares for at least one year and shall continue to own such shares through the date on which the meeting is held. A shareholder meeting the above requirements shall deliver to the secretary of the corporation not later than 120 days prior to the date on which the corporation's proxy statement was mailed to stockholders in connection with the previous year's annual meeting, the text of any proposal which he intends to propose at an annual meeting of shareholders and a notice of the intention of the shareholder to present such proposal at the meeting. A proposal to be presented at any meeting of shareholders other than an annual meeting shall be delivered to the secretary a reasonable time before the mailing of the corporation's proxy material. ARTICLE III Directors SECTION 1. Board of Directors The business of the corporation shall be managed under the direction of its Board of Directors. SECTION 2. Qualifications of Directors Each director shall be at least 18 years of age and shall automatically cease to be a director on the last day of the month during which he or she attains the age of seventy-two (72) years. At the time of taking an office, each director shall be a stockholder of the corporation owning in his or her own right, free from pledge, lien or charge, the number of shares of capital stock of the corporation while each director of a New York bank or trust company is required to own in such bank or trust company or a holding company of such bank or trust company by the New York State Banking law. If a director shall cease to own the required number of shares, he or she automatically ceases to be a director of the corporation and his or her office shall be vacant, and he or she shall not be eligible for re- election as a director for a period of one year from the date of the next succeeding annual meeting of stockholders of the corporation. SECTION 3. Number of Directors The number of directors constituting the entire Board shall be fifteen (15). This number may be increased or decreased from time to time by amendment of these By- Laws, provided, however, that the number may not be decreased to less than three (3). No decrease in the number of directors shall shorten the term of any incumbent director. SECTION 4. Election and Term of Directors The directors shall be classified by the Board of Directors with respect to the time for which they severally hold office, into three classes, as nearly equal in number for a term of one (1) year, the second class shall be originally elected for a term of two (2) years, and the third class shall be originally elected for a term of three (3) years, with the directors of each class to hold office until their successors are elected and qualified. Newly created directorships resulting from an increase in the number of directors shall be classified by the Board of Directors when the directorship is created. At each annual meeting of the stockholders of the corporation, the successors of the class of directors whose terms expire at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election or until their successors are elected and have qualified. SECTION 5. Nominations for Directors Nominations of candidates for election as directors of the corporation at any meeting of stockholders called for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote at such meeting. Nominations made by the Board of Directors shall be made at a meeting of the Board of Directors, or by written consent of directors in lieu of a meeting, not later than 60 days prior to the date of any meeting of stockholders called for the election of directors. The secretary of the corporation shall request that each such proposed nominee provide the corporation with such information concerning himself as is required, under the rules of the Securities and Exchange Commission, to be included in the corporation's proxy statement soliciting proxies for his election as a director. Any stockholder who intends to make a nomination at any annual meeting of stockholders shall deliver to the secretary of the corporation not later than 120 days prior to the date on which the corporation's proxy statement was mailed to stockholders in connection with the previous year's annual meeting, or if such nomination is to be made at a meeting of shareholders other than an annual meeting, a reasonable time before the mailing of the corporation's proxy material, a notice setting forth (i) the name, age, business address and residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee, (iii) the number of shares of capital stock of the corporation which are owned of record and beneficially by each such nominee and (iv) such other information concerning each such nominee as would be required, under the rules of the Securities and Exchange Commission, in a proxy statement soliciting proxies for the election of such nominees. Such notice shall include a signed consent of such nominee to serve as a director of the corporation, if elected. In the event that a person is validly designated as a nominee in accordance with the provisions of this section and shall thereafter become unable or unwilling to stand for election to the Board of Directors, the Board of Directors or the stockholder who proposed such nominee, as the case may be, may designate a substitute nominee. If the secretary of the meeting of stockholders called for the election of directors determines that a nomination was not made in accordance with the foregoing procedures, such nomination shall be void. SECTION 6. Newly Created Directorships and Vacancies Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board of Directors for any reason may be filled by vote of a majority of the directors then in office, although less than a quorum exists. A director elected to fill a newly created directorship or a vacancy, shall be elected to hold office until the next meeting of shareholders at which the election of directors is in the regular order of business, and until his successor has been elected and qualified. SECTION 7. Removal of Directors Any director, an entire class of directors or the entire Board of Directors may be removed from office, with or without cause, only by the affirmative vote of the holders of at least 75% of the outstanding shares of stock of the corporation entitled to vote generally in the election of directors, voting together as a single class. SECTION 8. Quorum of Directors One-third (1/3) of the entire Board of Directors or seven directors, whichever number is greater, shall constitute a quorum for the transaction of business or of any specified item of business. SECTION 9. Action by the Board of Directors The vote of the majority of the directors present at a meeting of the Board of Directors at the time of the vote, if a quorum is present at such time, shall, except as otherwise provided by law, these By-Laws or the certificate of incorporation, be the act of the Board of Directors. SECTION 10. Written Consent of Directors Without A Meeting Any action required or permitted to be taken by the Board of Directors or a committee thereof may be taken without a meeting if all members of the Board or the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents thereto by the members of the board or committee shall be filed with the minutes of the proceedings of the Board or committee. SECTION 11. Place and Time of Meetings of Board of Directors Meetings of the Board of Directors, regular or special, may be held at any place, within or without the State of New York and at any time, fixed by the Board of Directors or by the person or persons calling the meeting. Such meetings may be held by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. SECTION 12. Notice of Meetings of the Board of Directors Regular meetings of the Board of Directors may be held without notice if the time and place of such meetings are fixed by the Board of Directors. Special meetings of the Board of Directors shall be held upon notice to the directors and may be called by the chairman of the board, the president, the executive vice president, or any two directors. The notice shall be given personally including by telephone or mail, telegram, cable or other public instrumentality. If given personally or by telephone, such notice shall be given not less than 48 hours before the meeting to each director. If given by mail, cable, telegram or other public instrumentality, such notice shall be given not less than five (5) days before the date of the meeting, to each director. Such notice shall be deemed given, if mailed, when deposited in the United States mail, with postage thereon prepaid or, if telegraphed, cabled or sent by other public instrumentality, when given to the telegraph company, cable company, or other public instrumentality, directed to the director at his business address or, if he shall have filed with the secretary of the corporation, a written request that notices to him be mailed or telegraphed, cabled or sent to some other address, then directed to him at such other address. The notice need not specify the purpose of any regular or special meeting of the Board of Directors. SECTION 13. Interested Directors No contract or other transaction between a corporation and one or more of its directors, or between a corporation and any other corporation, firm, association or other entity in which one or more of its directors, or officers, are directors or have a substantial financial interest, shall be either void or voidable for this reason alone or by reason alone that such director or directors are present at the meeting of the Board, or of a committee thereof, which approves such contract or transaction or that his or their votes are counted for such purpose: 1. If the material facts as to such director's interest in such contract or transaction and as to any such common directorship, officership or financial interest are disclosed in good faith or known to the Board or committee, and the Board or committee approves such contract or transaction by a vote sufficient for such purpose without counting the vote of such interested director or, if the votes of the disinterested directors are insufficient to constitute an act of the Board as defined in Section 9 of this Article, by unanimous vote of the disinterested directors; or 2. If the material facts as to such director's interest in such contract or transaction and as to any such common directorship, officership or financial interest are disclosed in good faith or known to the shareholders entitled to vote thereon, and such contract or transaction is approved by vote of such shareholders; or 3. If the contract or transaction is affirmatively established by the party or parties thereto to be fair and reasonable as to the corporation at the time it was approved by the Board, a committee thereof, or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or a committee thereof which approves such contract or transaction. The Board of Directors shall have authority to fix the compensation of directors for services in any capacity. A loan shall not be made by the corporation to any director unless it is authorized by vote of the shareholders. For this purpose, the shares of the director who would be the borrower shall not be shares entitled to vote. SECTION 14. Reimbursement and Compensation of Directors The directors may be paid their expenses of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of the executive committee or other committees may be allowed similar reimbursement and compensation for their services as such. SECTION 15. Executive Committee and Other Committees The Board of Directors by resolution adopted by a majority of the entire Board, may designate from among its members an executive committee and other committees, each consisting of three or more directors, and each of which shall have and may exercise such powers as shall be conferred or authorized by the resolution appointing it, except that no such committee shall have authority as to the following matters: 1. The submission to shareholders of any action that needs shareholders' approval; 2. The filling of vacancies in the Board of Directors or in any committee: 3. The fixing of compensation of the directors for serving on the Board of Directors or on any committee; 4. The amendment or repeal of the By-Laws or the adoption of new By-Laws; 5. The amendment or repeal or any resolution of the Board of Directors. Each such committee shall serve at the pleasure of the Board. The Board of Directors shall have the power at any time to fill vacancies in, to change the size or membership of, and to discharge any such committee. A majority of any such committee may determine its action and may fix the time and place of its meetings, unless provided otherwise by the Board of Directors. Each such committee shall keep a written record of its acts and proceedings and shall submit such record to the Board of Directors at each regular meeting thereof and at such other times as requested by the Board of Directors. Failure to submit such record, or failure of the Board to approve any action indicated therein will not, however, invalidate such action to the extent it has been carried out by the corporation prior to the time the record of such action was, or should have been, submitted to the Board of Directors as herein provided. ARTICLE IV Officers SECTION 1. Number The Board of Directors may elect a chairman of the board who shall be a member of the Board of Directors and shall elect a president, one or more vice presidents, a secretary and a treasurer, who need not be members of the Board of Directors and such other officers and assistant officers who need not be members of the Board of Directors as the Board of Directors may from time to time deem proper. Any two or more offices may be held by the same person, except the offices of president and secretary. SECTION 2. Election and Term of Office The officers of the corporation to be elected or appointed by the Board of Directors shall be elected or appointed annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the shareholders. Subject to the provisions of Section 3 of this Article, each officer shall hold office until the first meeting of the Board of Directors following the next annual meeting of shareholders and until his successor has been elected or appointed and qualified. SECTION 3. Removal Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors with or without cause, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. The election or appointment of an officer shall not of itself create contract rights. SECTION 4. New Offices and Vacancies Newly created offices and vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled from time to time by the Board of Directors for the unexpired portion of the term. SECTION 5. Chief Executive Officer The Board of Directors shall appoint either the chairman of the board, if any, or the president the chief executive officer of the corporation ("the CEO") who, subject to the control of the Board of Directors, shall direct and control all the business and affairs of the corporation. SECTION 6. Chairman of the Board The chairman of the board, if any, and if so designated by the Board of Directors, shall be the chief executive officer of the corporation and, subject to the control of the Board of Directors, shall in general perform all duties incident to the office of chief executive officer. He shall, when present, preside at all meetings of the shareholders and of the Board of Directors. He may sign, with the secretary or any other proper officer of the corporation thereunto authorized by the Board of Directors, certificates representing shares of the corporation, any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and shall perform such other duties as may be prescribed by the Board of Directors from time to time. SECTION 7. President The president shall be the chief operating officer of the corporation and, subject to the control of the Board of Directors and the chairman of the board (if he is the CEO), shall direct the conduct and operation of the business and properties of the corporation. If so designated by the Board of Directors, he shall also be the chief executive officer of the corporation and shall perform all duties incident to that office. He shall, in the absence of the chairman of the board, preside at all meetings of the shareholders and of the Board of Directors. He may sign, with the secretary or any other proper officer of the corporation thereunto authorized by the Board of Directors, certificates representing shares of the corporation, any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and shall perform such other duties as may be prescribed by the Board of Directors from time to time. SECTION 8. Vice President In the absence of the chairman of the board and the president or in the event of their death or inability to act, the executive vice president (or in the event of the death or inability to act of the executive vice president, the vice president designated by the Board of Directors, if any, or if none, the vice president having the greatest seniority) shall perform the duties of the chairman of the board and the president, and when so acting shall have the authority of and be subject to all the restrictions upon the chairman of the board and the president. Any vice president may sign, with the secretary or any other proper officer of the corporation thereunto authorized by the Board of Directors, certificates representing shares of the corporation; and shall perform such other duties as from time to time may be assigned to him by the chairman of the board (if he is the CEO) or by the president or by the Board of Directors. SECTION 9. Secretary The secretary shall: 1) keep the minutes of the proceedings of its shareholders, Board of Directors and executive committee and other committees, if any; in one or more books provided for that purpose; 2) see that all notices are duly given in accordance with the provisions of these By-Laws or as required by law; 3) be custodian of the corporate records and of the seal of the corporation and see that the seal of the corporation is affixed to all documents and execution of which on behalf of the corporation under its seal is duly authorized; 4) file each written request by a shareholder that notices to him be mailed to some address other than this address as it appears on the record of shareholders; 5) sign with the chairman of the board or the president or a vice president certificates representing shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; 6) have general charge of the record of shareholders of the corporation; and 7) in general perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him by the chairman of the board (if he is the CEO) or by the president or by the Board of Directors. SECTION 10. Treasurer If required by the Board of Directors, the treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine. He shall: 1) have charge and custody of and be responsible for all funds and securities of the corporation, receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of these By-Laws; 2) have charge and custody of and be responsible for the keeping of correct and complete books and records of account of the corporation; sign with the chairman of the board, or the president or a vice president, certificates representing shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; and 3) in general perform all of the duties incident to the office of treasurer and such other duties as from time to time may be assigned to him by the chairman of the board (if he is the CEO) or by the president or by the Board of Directors. SECTION 11. Assistant Secretaries and Assistant Treasurers The assistant secretaries, when authorized by the Board of Directors, may sign with the chairman of the board or the president or a vice president, certificates representing shares of the corporation, the issuance of which shall have been authorized by a resolution of the Board of Directors. The assistant treasurers shall, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. Assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or the treasurer, respectively, or by the chairman of the board (if he is the CEO) or the president or the Board of Directors. In the absence of the secretary or in the event of his death, inability or refusal to act, the assistant secretary (or in the event there be more than one assistant secretary, the assistant secretaries in the order of their appointment or as determined by the chairman of the board (if he is the CEO) or the president or the Board of Directors), shall perform the duties and exercise the authority of the secretary. In the absence of the treasurer or in the event of his death, inability or refusal to act, the assistant treasurer, (or in the event there be more than one assistant treasurer, the assistant treasurers in the order of their appointment or as determined by the chairman of the board (if he is the CEO) or the president or the Board of Directors) shall perform the duties and exercise the authority of the treasurer. SECTION 12. Compensation of Officers The compensation of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such compensation by reason of the fact that he is also a director of the corporation. ARTICLE V Contracts, Checks and Deposits SECTION 1. Contracts The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation and such authority may be general or confined to specific instances. SECTION 2. Checks, Drafts, etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. SECTION 3. Deposits All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositaries as the Board of Directors may select. ARTICLE VI Certificates Representing Shares, Record of Shareholders, Transfer of Shares SECTION 1. Issuance of Shares No shares of any class of the corporation or any obligations or other securities convertible into or carrying options to purchase any such shares of the corporation, or any options or rights to purchase any such shares or securities of the corporation, shall be issued or sold unless such issuance or sale is approved by the affirmative vote of at least 80% of the entire Board of Directors. SECTION 2. Certificates Representing Shares The shares of the corporation shall be represented by certificates which shall be in such form as shall be determined by the Board of Directors. All such certificates shall be consecutively numbered or otherwise identified. Such certificates shall be signed by the chairman of the board or the president or a vice president and the secretary or an assistant secretary or the treasurer or an assistant treasurer, and may, but need not, be sealed with the seal of the corporation or a facsimile thereof. The signature of the officers upon the certificate may be facsimile if the certificate is countersigned by a transfer agent or an assistant transfer agent, or registered by a registrar other than the corporation itself or its employee. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of issue. Each certificate shall state upon the face thereof; 1) that the corporation is formed under the laws of New York; 2) the name of the person or persons to whom issued; 3) the number and class of shares and the par value of each share represented by such certificate. SECTION 3. Lost, Destroyed or Wrongfully Taken Certificates The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation, alleged to have been lost, apparently destroyed or wrongfully taken upon the making of an affidavit of that fact by the person claiming the certificate to be lost, apparently destroyed or wrongfully taken. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, apparently destroyed or wrongfully taken certificate or certificates, or his legal representative to advertise the same in such manner as it shall require and/or give the corporation a bond in such sum and with such surety or sureties as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificates alleged to have been lost, apparently destroyed or wrongfully taken. SECTION 4. Record of Shareholders The corporation shall keep at its principal office, or at the office of its transfer agent in the State of New York, a record containing the names and addresses of all shareholders, the number and class of shares held by each and the dates when they respectively became the owners of record thereof. The corporation shall be protected in treating the persons in whose names shares stand on the record of shareholders as the owners thereof for all purposes. SECTION 5. Transfer of Shares Upon surrender to the corporation or the transfer agent of the corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, and cancel the old certificate. Every such transfer of shares shall be entered on the record of shareholders of the corporation. ARTICLE VII Fiscal Year The fiscal year of the corporation shall be determined by resolution of the Board of Directors. ARTICLE VIII Dividends The Board of Directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its certificate of incorporation. ARTICLE IX Seal The seal of the corporation shall be circular in form and contain the name of the corporation, the year when it was formed, and the words "New York." The corporation may use the seal causing it or a facsimile to be affixed or impressed or reproduced in any other manner. ARTICLE X Waiver of Notice SECTION 1. Waiver of Notice to Shareholders Notice of meeting need not be given to any shareholder who signed a waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of any shareholder at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by him. SECTION 2. Waiver of Notice to Director Notice of meeting need not be given to any director who signs a waiver of notice whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at the commencement, the lack of notice to him. A waiver of notice need not specify the purpose of any regular or special meeting of the Board of Directors. SECTION 3. Notice Dispensed with When Delivery Prohibited Whenever communication to any shareholder or any director is unlawful under any statute of the State of New York or of the United States or any regulation, proclamation or order issued under said statutes, the giving of any notice to such shareholder or such director shall not be required and there shall be no duty to apply for license or other permission to do so. ARTICLE XI Indemnification To the fullest extent permitted by law, either directly or by the purchase of insurance or in part directly and in part by the purchase of insurance, the corporation shall indemnify each natural person, or if deceased, his personal representative made or threatened to be made a party to any action or proceeding civil or criminal, including an appeal therein against the reasonable expenses, attorneys' fees, judgments, fines and amounts paid in settlement if such person is made or threatened to be made a party by reason of the fact that he or his testator or intestate is or was: 1) an officer, director or employee of the corporation or 2) an officer, director or employee of or served in any capacity in any other corporation, partnership, joint venture, trust or other enterprise, at the request of this corporation, provided that in the case of a person serving as an employee or in any capacity in any other corporation, that such person was at the time he was so designated to serve by this corporation, an employee of this corporation, or 3) the occupant of a position or a member of a committee or Board or a person having responsibilities under federal or state law, including but not limited to responsibilities under the Employee Retirement Income Security Act of 1974, who was appointed to such position or to such committee or Board by the Board of this corporation or by an officer of this corporation or who served in such position or on such committee or Board at the request or direction of the Board of this corporation or of an officer of this corporation or who assumed such responsibilities at the request or direction of the Board of this corporation or of any officer of this corporation, provided only that such person acted in good faith for a purpose which he reasonably believed would be in the best interest of the corporation or in the case of service for any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise, not opposed to the best interests of the corporation, and in criminal proceedings had no reasonable cause to believe that his conduct was unlawful. The corporation's obligations under this Article shall be reduced by the amount of any insurance which is available to any such person whether such insurance is purchased by the corporation or otherwise. The right of indemnity created herein shall be personal to the officer, director, employee or other person and their respective legal representatives and in no case shall any insurance carrier be entitled to be subrogated to any rights created herein. Nothing contained herein shall obligate the corporation to indemnify any person against any claim arising out of personal injuries, bodily injuries or property damage. ARTICLE XII Amendment and Repeal SECTION 1. Amendment and Repeal by the Shareholders These By-Laws may be amended or repealed by vote of the shareholders entitled to vote generally in the election of directors, provided that notice of meeting states such purpose, and provided further that the provisions of Article III may be amended or repealed only by the affirmative vote of holders of at least 75% of the outstanding shares of stock of the corporation entitled to vote generally in the election of directors. SECTION 2. Amendment and Repeal by the Board of Directors These By-Laws may also be amended or repealed by a majority of the entire Board of Directors provided that the provisions of Article III may be amended only by the affirmative vote of at least 75% of the entire Board of Directors and further provided that Section 1 of Article VI may be amended only by the affirmative vote of at least 80% of the entire Board of Directors. CHEMUNG FINANCIAL CORPORATION LEGEND FOR BY-LAWS
DATE ARTICLE SECTION DESCRIPTION 4/9/97 Article Section 3 Number of Directors changed III from twenty to nineteen. 4/8/98 Article II Sections 4 & 5 Change fifty (50) days to sixty (60) days. 12/8/98 Article Section 3 Number of Directors changed III from nineteen to seventeen. 8/11/99 Article Section 3 Number of Directors changed III from seventeen to sixteen.
EX-13 3 EXHIBIT A TABLE OF QUARTERLY MARKET PRICE RANGES
Market Prices of Chemung Financial Corporation Stock During Past Three Years (dollars) 1999 1998 1997 1st Quarter 26 1/2 - 29 21 1/2 - 25 1/2 16 13/16 - 18 2nd Quarter 24 - 27 25 3/4 - 30 16 3/4 - 17 5/8 3rd Quarter 24 - 26 26 1/4 - 30 16 13/16 - 18 3/4 4th Quarter 24 1/4 - 25 3/4 22 3/4 - 28 19 1/8 - 23 3/4
EXHIBIT B TABLE OF DIVIDENDS PAID
Dividends Paid Per Common Share by Chemung Financial Corporation During Past Three Years 1999 1998 1997 January 4 $0.170 $0.155 $0.140 April 1 0.170 0.155 0.140 July 1 0.190 0.170 0.155 October 1 0.190 0.170 0.155 $0.720 $0.650 $0.590
As of December 31, 1999 there were 747 registered holders of record of the Corporation's stock. Chemung Financial Corporation common stock is inactively traded in the over-the-counter market. The quarterly market price ranges for the Corporation's stock for the past three (3) years are based upon actual transactions as reported by brokerage firms which maintain a market or conduct trades in the Corporation's stock and other transactions known by the Corporation's management. EXHIBIT C MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INCLUDING FINANCIAL DATA EXHIBITS Management's Discussion and Analysis of Financial Condition and Results of Operations The purpose of this discussion is to focus on information about the financial condition and results of operations of Chemung Financial Corporation that is not otherwise apparent from the consolidated financial statements included in this annual report. Reference should be made to those statements and the selected financial data presented elsewhere in this report for an understanding of the following discussion and analysis. Forward-Looking Statements Statements included in this discussion and in future filings by Chemung Financial Corporation (the "Corporation") with the Securities and Exchange Commission, in Chemung Financial Corporation press releases, and in oral statements made with the approval of an authorized executive officer, which are not historical or current facts, are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Chemung Financial Corporation wishes to caution readers not to place undue reliance on any such forward- looking statements, which speak only as of the date made. The following important factors, among others, in some cases have caused and in the future could cause Chemung Financial Corporation's actual financial performance to differ materially from that expressed in any forward-looking statement: (1) credit risk, (2) interest rate risk, (3) competition, (4) changes in the regulatory environment, and (5) changes in general business and economic trends. The foregoing list should not be construed as exhaustive, and the Corporation disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events. Description of Business Chemung Financial Corporation is a one-bank holding company with its only subsidiary being Chemung Canal Trust Company (the "Bank"), a full-service community bank with full Trust powers. Therefore, the financial condition should be examined in terms of the acquisition and deployment of funds within its "market areas". Management defines the market areas of Chemung Canal Trust Company as those areas within a 25-mile radius of its branches in Chemung, Steuben, Schuyler, and Tioga counties, including the northern tier of Pennsylvania. The Bank's lending policy restricts substantially all lending efforts to these geographical regions. Management of Credit Risk - Loan Portfolio The Bank manages credit risk, while conforming to state and federal laws governing the making of loans, through written policies and procedures; loan review to identify loan problems at the earliest possible time; collection procedures (continued even after a loan is charged off); an adequate allowance for loan losses; and continuing education and training to ensure lending expertise. Diversification by loan product is maintained through offering commercial loans, 1-4 family mortgages, and a full range of consumer loans. The Loan Committee of the Board is designated to receive required loan reports, oversee loan policy, and approve loans above authorized individual and Senior Officers Loan Committee lending limits. The Senior Loan Committee, consisting of the president, two executive vice presidents, senior lending officer, mortgage officer, and consumer loan officer, implements the Board-approved loan policy. Supervision and Regulation The Corporation, as a bank holding company, is regulated under the Bank Holding Company Act of 1956, as amended (the "Act"), and is subject to the supervision of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"). Generally, the Act limits the business of bank holding companies to banking, or managing or controlling banks, performing certain servicing activities for subsidiaries, and engaging in such other activities as the Federal Reserve Board may determine to be closely related to banking and a proper incident thereto. The Bank is chartered under the laws of New York State and is supervised by the New York State Banking Department. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") was passed in order to protect depositors and taxpayers from the excesses of the S and L problems of the 1980's. There are a number of provisions in this act that significantly increase the operating costs of the Bank. These rules specifically impact the cost of external audit, the mortgage loan product (through appraisal requirements), as well as all other loan products. Competition The Bank is subject to intense competition in the lending and deposit gathering aspects of its business from commercial and thrift banking institutions, credit unions and other providers of financial services, such as brokerage firms, investment companies, insurance companies and Internet vendors. The Bank also competes with non-financial institutions, including retail stores and certain utilities that maintain their own credit programs, as well as governmental agencies that make available loans to certain borrowers. Unlike the Bank, many of these competitors are not subject to regulation as extensive as that described under the "Supervision and Regulation" section and, as a result, they may have a competitive advantage over the Corporation in certain respects. This is particularly true of credit unions, as their pricing is not encumbered by income taxes. Competition for the Bank's fiduciary services comes primarily from brokerage firms, independent investment advisors, and a non- bank trust company operating in Steuben County with newly expanded powers. This is considered to be significant competition, as these firms devote much of their considerable resources toward gaining larger positions in these markets. Trust assets under administration, however, totaled $1.5 billion at December 31, 1999, compared to $1.4 billion a year earlier and $1.2 billion at December 31, 1997. Relative to the Bank's consolidated net assets, the Trust and Investment Division is unusually large and is responsible for the largest component of non-interest revenue. During 1999, as well as 1998 and 1997, the Trust and Investment Division noted a continued increase in the competition for personal and corporate investment management services in our market areas. Early in 1998, management formed a strategic alliance with a third party administrator for the purpose of outsourcing retirement fund recordkeeping. The tradeoff in revenue and expense is not material, but the alliance contributed importantly to our efforts to bring first-rate technology to our retirement services clients. We see this strategy as extremely important in our efforts to remain in the retirement services business, while reducing the requirements for investing in related technology. Year 2000 In 1997, management advised its Board of Directors of the many issues surrounding the approach of January 1, 2000. Nearly all computer hardware and software developed during the century had been programmed with two-digit reference to each year. Such hardware and software, if not upgraded by January 1, 2000, could become useless. Beginning at that time, and continuing throughout 1998 and 1999, under the direction of the Bank's operations committee, management undertook a five-phase project to respond to the issue, with major emphasis on identifying all applications and databases supporting the Bank's mission-critical applications. The five phases included: awareness, assessment, renovation, validation and implementation, with a goal of neutralizing not only the Bank's vulnerability, but also to determine the financial capacity of its vendors, determine the need for alternate vendors, and evaluate the capacity of its customers to respond to this challenge. Additionally, a contingency plan was formulated to assure business continuation in the event of Year 2000 system failures. All of these efforts proved successful and we entered the year 2000 with all operating systems functioning normally with no disruption in service to our customers. A committee will continue to monitor and evaluate the Bank's efforts throughout 2000, as well as any possible effects of Year 2000 on borrowers and other third parties that may not be immediately apparent. Expenditures associated with Year 2000 readiness, including hardware and software upgrades, as well as expenditures of testing totaled approximately, $250,000. While some of the hardware and software expenditures may have been made even without the Year 2000 issue, the greatest opportunity cost of the Year 2000 challenge was the management time spent on this issue versus other areas, such as new product development. With the Year 2000 efforts successfully completed, we look forward to re-deploying these management resources to other opportunities available to the Corporation. Employees The Corporation and its banking subsidiary had 303 full-time equivalent employees (FTE's) on December 31, 1999, versus 291 at the beginning of the year and 281 on December 31, 1997. The employment trend is relatively stable. Consolidated Balance Sheet Comments Average earning assets for 1999 grew by $60.4 million or 11.4% to $591.6 million, compared to $531.2 million in 1998 and $490.9 million in 1997. Loan activity was strong throughout the year, with the year end 1999 balance growing $30.7 million or 9.3% to $360.0 million. Particular strength was shown in business loans, which grew by $17.2 million or 15.1%. Mortgage (both residential and commercial) and consumer loan growth was also strong throughout the year, with year end balances growing $5.0 million (5.6%) and $8.5 million (6.8%), respectively. Growth in consumer lending continues to be influenced by the volume of indirect auto financings. Average total loan balances were $346.5 million versus $311.7 million during 1998 and $291.3 million during 1997. The growth in average loans, as well as, a $25.5 million increase in average investments (at amortized cost), was funded by a $55.7 million increase in average total funding liabilities, including deposits and other borrowed funds. Average deposits for 1999 were $494.1 million, an increase of $26.9 million or 5.8% when compared to the 1998 average of $467.2 million. Average deposits in 1997 totaled $450.2 million. Period end deposit balances were up $15.7 million or 3.4%, with this growth centered in time and investment certificate balances which increased $21.6 million (107.1%) and $4.6 million (3.6%), respectively. These increases were offset primarily by lower year end 1999 demand deposit and insured money market account balances compared to year end 1998 which declined $3.6 million and $7.1 million, respectively. It should be pointed out that with year end 1998 falling on a Thursday, balances were somewhat inflated as compared to year end 1999 due to the fact that social security direct deposits, which are normally received on the 3rd of the month, were received and credited on December 31, 1998. This year, these same deposits were received and credited on January 3, 2000. Accordingly, period end 1999 deposit growth over period end 1998 is less than the growth in average deposits realized in 1999 versus the 1998 average deposits. Other borrowed funds, consisting primarily of securities sold under agreements to repurchase and Federal Home Loan Bank advances, increased on average by $28.7 million. While the Bank entered into no new leveraging transactions during 1999, the average increase is related to leveraged transactions which occurred in the later half of 1998. The increase of $22.8 million in year end 1999 Federal Home Loan Bank advances occurred primarily during November and December of 1999, and is related to both a decrease in deposits during December as well as maintaining higher cash on hand balances as it related to Year 2000 contingency planning. These cash balances were approximately $10.6 million higher than year end 1998 balances.
Exhibit I BALANCE SHEET COMPARISONS (in millions) Change Compounded Average Balance 1998 Annual Sheet 1999 1998 1997 1996 1995 1994 to Growth 5 1999 Years Total Assets $642.2 $584.0 $539.2 $516.2 $494.1 $431.2 10.0% 8.3% Earning Assets 591.6 531.2 490.9 469.5 447.1 394.7 11.4% 8.4% Loans, net of unearned income and deferred fees 346.5 311.7 291.3 273.9 249.1 221.4 11.2% 9.4% Investments (1) 245.0 219.5 199.8 195.6 198.0 173.3 11.6% 7.2% Deposits 494.1 467.2 450.2 440.9 424.4 374.6 5.8% 5.7% Wholesale funding (Advances) 66.6 37.0 13.1 2.9 N/A N/A 80.0% N/A Tier I equity (2) 57.6 52.6 51.6 46.4 41.7 38.2 9.5% 8.6% (1) Average balances for investments include securities available for sale and securities held to maturity, based on amortized cost, and federal funds sold and interest bearing deposits. (2) Average shareholders' equity less intangible assets and accumulated other comprehensive income.
Change Compounded Ending Balance 1998 Annual Sheet 1999 1998 1997 1996 1995 1994 to Growth 5 1999 Years Total Assets $653.2 $620.1 $545.5 $529.2 $499.3 $494.3 5.3% 5.7% Earning Assets 597.6 563.5 486.1 474.6 446.3 448.9 6.1% 5.9% Loans, net of unearned income and deferred fees 360.0 329.3 296.9 283.7 263.0 236.5 9.3% 8.8% Allowance for loan losses 4.7 4.5 4.1 4.0 3.9 3.6 3.5% 5.3% Investments (1) 237.1 243.3 196.8 196.3 189.6 212.1 -2.5% 2.3% Deposits 481.8 466.1 451.0 439.6 426.9 432.3 3.4% 2.2% Wholesale funding (Advances) 94.2 71.4 20.5 10.0 N/A N/A 31.9% N/A Tangible equity(2) 59.7 59.9 54.8 48.7 44.9 37.2 -0.3% 9.9% (1) Investments include both securities available for sale and securities held to maturity, at estimated fair value, and interest bearing deposits. (2) Shareholders' equity less intangible assets.
Securities The Board-approved Funds Management Policy includes an investment portfolio policy which requires that, except for local municipal obligations that are sometimes not rated or carry ratings above "Baa" but below "A" by Moody's or Standard and Poors, debt securities purchased for the bond portfolio must carry a minimum rating of "A". Marketable securities are classified as Available for Sale while local direct investment in municipal obligations are classified as Held to Maturity. The Available for Sale segment of the securities portfolio at December 31, 1999, was $227.4 million compared to $235.3 million a year earlier and $185.3 million at the end of 1997. At year-end 1999, total unrealized depreciation in the securities available for sale portfolio was $504 thousand, compared to an unrealized gain of $8.983 million a year ago. This change is reflective of the impact that higher market interest rates had on the fair value of the bond portfolio. The components of this change are set forth in the following table (in thousands):
1999 1998 Estimated Unrealized Estimated Amortized Fair Appreciation Amortized Fair Unrealized At December 31 Cost Value (Depreciation) Cost Value Appreciation U.S. Treasury Securities $ 15,507 $ 15,341 $ (166) $ 23,013 $ 29,295 $ 282 Obligations of other U.S. Government Agencies 96,004 92,697 (3,307) 77,787 78,233 446 Mortgage- backed 77,419 73,747 (3,672) 89,245 89,593 348 securities Obligations of states and Political Subdivisions 21,359 20,734 (625) 20,967 21,432 465 Corporate bonds 10,663 10,130 (533) 9,682 9,705 23 and notes Corporate Stocks 6,936 14,735 7,799 5,617 13,036 7,419 Totals $227,888 $227,384 $ (504) $226,311 $235,294 $ 8,983
Included in the above table are 44,839 shares of SLM Holding Corporation at a cost basis of approximately $4 thousand and estimated fair value of $1.894 million. These shares were acquired as preferred shares of Student Loan Marketing Association ("SALLIE MAE"), a permitted exception to the Government regulation banning bank ownership of equity securities in the original capitalization of the U.S. Government Agency. Later, the shares were converted to common stock as SALLIE MAE recapitalized. Additionally, at December 31, 1999, the Bank's portfolio held marketable equities totaling $89 thousand at cost, with a total estimated fair value of $5.964 million. The shares, other than SLM Holding Corp., were acquired prior to the enactment of the Banking Act of 1933. Non-marketable equity securities included in the Bank portfolio are 10,572 shares of Federal Reserve Bank and 52,450 shares of the Federal Home Loan Bank of New York. They are carried at their cost of $528.6 thousand and $5.245 million, respectively. The fair value of these securities is assumed to approximate their cost. The number of shares of these last two investments is regulated by regulatory policies of the respective institutions. Asset Quality Non-performing loans at year end decreased to $1.405 million versus $4.853 million at the end of 1998 and $1.617 million at the end of 1997, and represented 0.39% of total loans outstanding compared to 1.5% at the end of 1998 and 0.54% on December 31, 1997. The decrease in 1999 and the increase in 1998 relate primarily to one real estate secured commercial loan which was paid in full during the fourth quarter of 1999. Net loan charge offs were $517 thousand or 0.15% of average outstanding loans in 1999, compared to $436 thousand or 0.14% of average outstanding loans in 1998 and $680 thousand or 0.23% of average outstanding loans in 1997. The allowance for loan losses at December 31, 1999 was 1.30% of total outstandings versus 1.37% a year ago and 1.40% at December 31, 1997. Capital Resources and Dividends The Corporation continues to maintain a strong capital position. Tangible shareholders' equity at December 31, 1999, was $59.7 million or 9.13% of total assets compared to $59.9 million or 9.65% of total assets a year earlier and $54.8 million or 9.98% at December 31, 1997. While undistributed earnings (net earnings less dividends declared) increased in 1999 by $5.3 million, the decrease in tangible shareholders' equity at December 31, 1999, is primarily due to a $5.7 million decrease in accumulated other comprehensive income related to the net decrease in unrealized gains on available for sale securities, and the purchase of $1.5 million in treasury stock. The impact of the above was somewhat offset by a $587 thousand decrease in intangible assets, and a $1.1 million increase in shareholders' equity related to restricted stock units for the directors' deferred compensation plan. As of December 31, 1999, the Corporation's ratio of Total Capital to Risk Weighted Assets was 16.57% compared with 16.67% a year earlier and 17.44% at December 31, 1997. The Corporation's leverage ratio (Average Tier I Capital/Average Assets) was 9.49% during 1999 and 9.57% in 1998. Under Federal Reserve regulations (see Note 14 to the consolidated financial statements), the Bank is limited to the amount it may loan to the Corporation, unless such loans are collateralized by specific obligations. At December 31, 1999, the maximum amount available for transfer from the Bank to the Corporation in the form of loans was $1.8 million. The Bank is subject to legal limitations on the amount of dividends that can be paid to the Corporation. Dividends are limited to retained net profits, as defined by regulations, for the current year and the two preceding years. At December 31, 1999, $9.6 million was available for the declaration of dividends. Cash dividends declared amounted to $3.097 million in 1999 versus $2.741 million in 1998 and $2.506 million in 1997. Dividends declared during 1999 amounted to 36.9% of net income compared to 37.6% and 36.6% of 1998 and 1997 net income, respectively. It is management's objective to continue generating sufficient capital internally, while retaining an adequate dividend payout ratio. Treasury Shares When shares of the Corporation become available in the market, we may purchase them after careful consideration of our capital position. During 1999, 58,674 shares were purchased at a total cost of $1.465 million or an average price of $24.96 per share. In 1998, 39,383 shares were purchased at a total cost of $984 thousand or an average price of $24.99 per share, and in 1997 there were 5,370 shares purchased at a total cost of $108 thousand ($20.07 per share). Performance Summary Net income for 1999 was affected by 1) higher volumes of average earning assets and total funding liabilities, 2) lower average interest rates on both sides of the balance sheet resulting in a lower net interest margin, 3) higher non-interest income volumes, and 4) higher non-interest expenses. Consolidated net income for 1999 was $8.392 million versus $7.297 million in 1998, up $1.095 million (15.0%) or $2.03 per share versus $1.77 per share (up 14.7%). In 1997, the Corporation earned $6.857 million. Quarterly dividends declared totaled $0.76 per share versus $0.665 in 1998 and $0.605 in 1997, adjusted for the two-for-one stock split, effected in the form of a 100% stock dividend in June 1998. Net interest income in 1999 increased $1.710 million or 7.2% over 1998. Total interest and dividend income on earning assets was $44.177 million in 1999 compared to $41.405 million in 1998 and $39.372 million in 1997. While the yield on average earning assets declined to 7.47% during 1999 compared to 7.80% and 8.02% in 1998 and 1997, respectively, this was offset by a $60.4 million or 11.4% increase in average earning assets. $34.8 million of the increase in average earning assets was generated in our loan portfolio with the remainder consisting of higher average balances in the securities portfolio. Total average funding liabilities during 1999 increased by $55.7 million or 10.9%. The interest expense associated with these liabilities totaled $18.728 million in 1999 as compared to $17.666 million in 1998 and $16.098 million in 1997. The cost of funds on these average funding liabilities, including the effect of non-interest bearing funding sources (such as demand deposits), decreased to 3.30% during 1999 versus 3.45% and 3.39% during 1998 and 1997, respectively. The above yields and costs resulted in a net interest margin in 1999 of 4.30%, compared to 4.47% in 1998 and 4.74% in 1997. Non-interest income increased $1.188 million to $9.405 million, up 14.5% over 1998. Trust and Investment Services income, at $4.813 million was again the largest component and registered an increase of 6.8%. Other significant increases were realized in service charges (+ $207 thousand), income from our equity investment in Cephas Capital Partners, LP (+ $178 thousand), credit card merchant earnings (+ $139 thousand) and checkcard interchange income (+ $149 thousand). Gains realized in the Bank's investment securities portfolio were $151 thousand compared to $216 thousand in 1998 and $324 thousand in 1997. Non-interest expenses increased $1.158 million (5.7%) to $21.6 million. Non-interest expenses for 1998 were $20.5 million compared to $19.4 million in 1997. These expenses were negatively affected by a $337 thousand increase in salaries and other employee benefits, a $248 thousand increase in advertising costs, a $229 thousand increase in data processing expenses, and a $144 thousand increase in credit card processing fees. During 1999, the Bank's provision for loan losses totaled $673 thousand, down $127 thousand from $800 thousand in 1998 and $850 thousand in 1997. The change is a reflection of management's ongoing evaluation of the risk inherent in the portfolio. Income tax expense in 1999 totaled $4.159 million as compared to $3.386 million in 1998, an increase of 22.8%. In addition to the tax on 1999 pre-tax income, income tax expense in 1999 was impacted by an additional tax of $87 thousand resulting from the accounting for the effect of a phased-in New York State tax rate reduction on deferred tax assets and liabilities. Exhibit II EARNINGS FOR THE YEARS ENDED DECEMBER 31,
Change Compounded l998 Annual to Growth 5 (in thousands) 1999 1998 1997 1996 1995 1994 1999 Years Net Interest $25,449 $23,739 $23,274 $22,468 $21,849 $19,304 7.2% 5.7% Income Provision for Loan Losses 673 800 850 742 564 624 -15.9% 1.5% Net Interest Income after Provision for 24,777 22,939 22,424 21,726 21,285 18,680 8.0% 5.8% loan losses Other Operating Income: Trust and Investment 4,813 4,505 4,079 3,719 3,678 3,323 6.8% 7.7% Services Income Securities Gains, Net 151 216 324 610 531 140 -30.1% 1.5% Other Income 4,442 3,496 3,065 2,777 2,527 2,222 27.1% 14.9% Total Other Operating Income 9,405 8,217 7,468 7,106 6,736 5,685 14.5% 10.6% Other Operating Expenses 21,631 20,473 19,368 19,408 19,560 17,375 5.7% 4.5% Income before income tax 12,551 10,683 10,524 9,424 8,461 6,990 17.5% 12.4% expense Income tax expense 4,159 3,386 3,667 3,266 2,859 2,342 22.8% 12.2% Net Income $8,392 7,297 6,857 6,158 5,602 4,648 15.0% 12.5%
Exhibit III CHANGES DUE TO VOLUME AND RATE The following table demonstrates the impact on net interest income of the changes in the volume of earning assets and interest-bearing liabilities and changes in rates earned and paid by the Corporation. For purposes of constructing this table, average investment securities are at average amortized cost and earning asset averages include non- performing loans. Therefore, the impact of lower levels of non-performing loans is reflected in the change due to rate, but does not affect changes due to volume. No tax equivalent adjustments were made.
1999 vs. 1998 1998 vs. 1997 Increase/(Decrease) Increase/(Decrease) Total Due to Due to Total Due to Due to Interest income (in Change Volume Rate Change Volume Rate thousands) Loans $1,582 3,004 (1,422) $1,185 $1,836 $ (651) Taxable investment 1,530 1,974 (444) 559 1,017 (458) securities Tax-exempt investment securities (159) (138) (21) (8) (2) (6) Federal funds sold (106) (52) (54) 290 293 (3) Interest bearing deposits (74) (165) 91 7 (80) 87 Total Interest Income $2,773 4,623 (1,850) $2,033 $3,064 $(1,031) Interest Expense (in thousands) Interest Bearing Demand deposits $ (86) (25) (61) $ (64) $ (23) $ (41) Savings deposits 58 236 (178) 390 229 161 Time deposits (121) 607 (728) 164 272 (108) Federal Home Loan Bank advances and Securities sold under 1,211 1,424 (213) 1,078 1,126 (48) Agreements to repurchase Total Interest Expense $1,062 2,242 (1,180) $1,568 $1,604 $ (36) Net Interest Income $1,711 2,381 (670) $ 465 $1,460 $ (995)
Intangible Assets The Corporation's intangible assets at December 31, 1999, were $5.641 million and represented the premium paid in connection with the acquisition of three branches from the Resolution Trust Corporation ("RTC") and the acquisition of Owego National Financial Corporation during 1994. The intangible assets are amortized over 15 years for both book and tax purposes. Amortization periods are monitored to determine if events and circumstances require such periods to be reduced. With respect to each of the branches acquired from the RTC, management has determined that our purchase of these deposits constituted entrance into major new market areas and provides a basis for concluding that the purchased goodwill benefits will exist beyond a short-term period. Exhibit IV
Selected per share Change data on Common 1998 Compounded Shares (Adjusted To Annual for two-for-one 1999 1998 1997 1996 1995 1994 1999 Growth stock split) 5 Years Net income per share $2.03 $ 1.77 $ 1.66 $ 1.48 $ 1.34 $ 1.23 14.7% 10.5% Dividends declared 0.76 0.665 0.605 0.53 0.49 0.467 14.3% 10.2% Tangible book value 14.5 14.59 13.24 11.76 10.79 8.88 -0.2% 10.4% Market price at 12/31 24.50 27.50 21.00 17.00 13.88 12.75 -10.9% 14.0% Average shares outstanding (in thousands) 4,132 4,116 4,143 4,159 4,176 3,798 0.4% 1.7%
Exhibit V
Selected Ratios 1999 1998 1997 1996 1995 Return on average assets 1.31% 1.25% 1.27% 1.19% 1.13% Return on average tier I equity(1) 14.57% 13.88% 14.29% 14.08% 14.26% Dividend yield for the year ended 3.43% 2.47% 2.95% 3.29% 3.60% Dividend payout 36.90% 37.56% 36.55% 35.78% 36.52% Tier I capital to risk adjusted 15.37% 15.42% 16.19% 15.61% 15.21% assets Tier I leverage ratio 9.49% 9.57% 9.49% 8.97% 8.52% Total capital to risk adjusted 16.57% 16.67% 17.44% 16.87% 16.46% assets Loans to deposits 74.72% 70.63% 65.84% 64.53% 61.61% Allowance for loan losses to 1.30% 1.37% 1.40% 1.40% 1.48% total loans Allowance for loan losses to non- 332% 92.9% 257% 231% 217% performing loans Non-performing loans to total 0.39% 1.47% 0.54% 0.61% 0.68% loans Net interest rate spread 3.48% 3.62% 3.89% 3.99% 4.12% Net interest margin 4.30% 4.47% 4.74% 4.79% 4.89% Efficiency ratio (2) 60.09% 61.97% 60.84% 63.41% 66.12% (1) Average Tier I Equity is average shareholders' equity less intangible assets and accumulated other comprehensive income. (2) Efficiency ratio is operating expenses adjusted for amortization of intangible assets and donations divided by net interest income plus other operating income adjusted for non-taxable gains on stock donations.
Consolidated Cash Flows During 1999, cash and cash equivalents increased $3.253 million as compared to a decrease of $5.599 million in 1998 and a $2.663 million increase in 1997. In addition to cash provided by operating activities, other primary sources of cash in 1999 included proceeds from the sales and maturities of securities and student loans ($84.752 million), proceeds from Federal Home Loan Bank advances ($29.700 million), and an increase in deposits ($15.634 million). In 1998, the primary sources of cash included proceeds from the sales and maturities of securities and student loans ($108.012 million), a net increase in securities sold under agreements to repurchase ($41.140 million), Federal Home Loan Bank advances ($26.900 million), and an increase in deposits ($15.095 million). Cash generated from the above activities was used primarily to fund increases in earning assets. During 1999, the purchases of securities and the funding of loans, net of repayments, totaled $86.084 million and $33.738 million, respectively. Other significant uses of cash in 1999 included repayments of Federal Home Loan Bank advances ($6.900 million), purchases of premises and equipment ($3.506 million), payment of cash dividends ($2.945 million), and the purchase of treasury shares ($1.465 million). In 1998, the purchases of securities and funding of loans, net of repayments, totaled $151.012 million and $35.895 million, respectively. Repayments of Federal Home Loan Bank advances were $16.300 million, and the investment in premises and equipment totaled $1.325 million. Other significant uses of cash included the payment of cash dividends ($2.685 million), and the purchase of treasury shares ($984 thousand). Liquidity and Sensitivity The term "liquidity" refers primarily to the expected cash flows from assets held and secondarily to borrowings secured by assets of the Corporation. These two sources of liquidity have in the past been sufficient to fund the operations of the Bank, and the Board of Directors anticipates that they will suffice in the future. For this reason, the term "liquidity" in the Bank's policies does not refer to proceeds from the sale of assets, although the sale of assets held as available for sale is a source of liquidity available to management. Liquidity management involves the ability to meet the cash flow requirements of deposit customers, borrowers, and the operating, investing, and financing activities of the Corporation. Management of interest rate sensitivity seeks to avoid fluctuating net interest margins and to enhance consistent growth of net interest income through periods of changing interest rates. As intermediaries between borrowers and savers, commercial banks incur interest rate risk. The Bank's Asset/Liability Committee (ALCO) has the strategic responsibility for setting the policy guidelines on acceptable exposure. The ALCO is made up of the president, asset liability management officer, senior lending officer, senior marketing officer, chief financial officer and others representing key functions. The Bank is a member of the Federal Home Loan Bank of New York ("FHLB") in order to access borrowings which enhance management's ability to satisfy future liquidity needs. The Bank's $5.245 million investment in FHLB stock allowed it to maintain a $62.726 million line of credit at December 31, 1999. This compares to $56.696 million at the end of 1998. Interest rate risk is the risk that net interest income will fluctuate as a result of a change in interest rates. It is the assumption of interest rate risk, along with credit risk, that drives the net interest margin of a financial institution. For that reason, the ALCO has established tolerance limits based upon a 200 basis point change in interest rates. At December 31, 1999, it is estimated that a 200 basis point increase in interest rates would negatively impact net interest income by 7.8%, well within the Bank's established tolerance limit of 12.0%. A related component of interest rate risk is the expectation that the market value of our capital account will fluctuate with changes in interest rates. This component is a direct corollary to the earnings- impact component: an institution exposed to earnings erosion is also exposed to shrinkage in market value. During the fourth quarter of 1999, management, as part of it's Year 2000 contingency planning, took special precautions in order to assure the Bank's ability to meet any customer cash requirements. To this end, the Bank secured a $10.0 million guaranteed line of credit from the Federal Home Loan Bank. Also, the Bank carried increased cash on hand at all of its offices that in aggregate totaled $18.582 million at December 31, 1999, versus $8.142 million at December 31, 1998. This precaution distorted some of our financial and interest rate risk ratios. Specifically, management noted that the risk of interest rates rising 200 basis points would negatively impact market value of our capital account by 15.1%, slightly over the established tolerance of 15.0%. Given the special circumstances surrounding the Year 2000 precautions, management and the Board of Directors felt that no corrective action was required. The increase in cash on hand was temporary and was reduced in January 2000. In recent years core deposits (NOW accounts, Insured Money Market Accounts and Savings accounts) have not been repriced with movements of interest rates in the negotiable securities markets. Rather, the interest paid upon such funding sources during 1999, 1998 and 1997 has been quite stable, even with movements in market rates in excess of 200 basis points. Short term rates (6 month U.S. Treasury Bills) ranged between 4.41% - 5.85% during 1999 and 4.15% - 5.16% during 1998. Management does recognize the need for certain hedging strategies during periods of anticipated higher fluctuations in interest rates and the Board-approved Funds Management Policy provides for limited use of certain derivatives in asset liability management. These strategies were not employed during 1999. The ALCO is responsible for supervising the preparation and annual revisions of the financial segments of the Bank Plan, which is built upon the committee's economic and interest-rate assumptions and the Annual Budget. It is the responsibility of the ALCO to modify prudently the Corporation's asset/liability policies. Recent Accounting Pronouncements In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". This Statement establishes comprehensive accounting and reporting requirements for derivative instruments and hedging activities. The Statement requires companies (including banks) to recognize all derivatives as either assets or liabilities, including certain derivative instruments embedded in other contracts, with the instruments measured at fair value. The accounting for gains and losses resulting from changes in fair value of the derivative instrument, depends on the intended use of the derivative and the type of risk being hedged. This Statement, as amended by SFAS No. 137, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. Earlier adoption, however is permitted. Management is currently evaluating the impact, if any, of this Statement on the Corporation's Consolidated financial statements. John R. Battersby, Jr. Treasurer and Chief Financial Officer To our Shareholders: The consolidated financial statements appearing in this annual report have been prepared by the Corporation in accordance with generally accepted accounting principles. The primary responsibility for the integrity of the financial information included in this report rests with management. The opinion of KPMG LLP, the Corporation's independent accountants, on those consolidated financial statements is included herein. The Corporation and its subsidiary bank maintain a system of internal accounting controls that is designed to provide reasonable assurance that assets are safeguarded, that transactions are executed in accordance with management's authorization and are properly recorded, and that accounting records are adequate for preparation of consolidated financial statements and other financial information. The Internal Auditing Department is charged with the responsibility of verifying accounting records and reviewing internal controls. The internal auditor reports directly to the Examining Committee of the Board of Directors whose members are all non-employee directors. The Committee meets with management, the internal auditor and the independent auditors in conjunction with its review of matters relating to the consolidated financial statements and the internal audit program. The independent auditors and the internal auditor meet with the Examining Committee without the presence of management. Jan P. Updegraff President and Chief Executive Officer John R. Battersby, Jr. Treasurer and Chief Financial Officer EXHIBIT D CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT AUDITORS' Independent Auditors' Report Board of Directors and Shareholders Chemung Financial Corporation and Subsidiary: We have audited the accompanying consolidated balance sheets of Chemung Financial Corporation and subsidiary as of December 31, 1999, and 1998, and the related consolidated statements of income, shareholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Chemung Financial Corporation and subsidiary at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1999, in conformity with generally accepted accounting principles. Syracuse, New York February 2, 2000
Cash and due from banks $30,926,401 27,515,582 Interest-bearing deposits with other financial institutions 1,146,495 1,304,207 Total cash and cash equivalents 32,072,896 28,819,789 Securities available for sale, at estimated fair 227,383,641 235,293,736 value Securities held to maturity, estimated fair value of $8,606,703 at December 31, 1999 and $6,660,923 at December 31, 1998 8,606,703 6,660,923 Loans, net of unearned income and deferred fees 359,963,407 329,255,342 Allowance for loan losses (4,665,093) (4,509,185) Loans, net 355,298,314 324,746,157 Premises and equipment, net 12,121,667 10,084,608 Other assets 12,119,128 8,232,896 Intangible assets, net of accumulated amortization 5,641,025 6,228,328 Total assets $653,243,374 620,066,437 Liabilities and Shareholders' Equity Deposits: Non-interest-bearing $ 98,292,851 101,908,083 Interest-bearing 383,480,838 364,231,279 Total deposits 481,773,689 466,139,362 Securities sold under agreements to repurchase 49,946,491 50,587,369 Federal Home Loan Bank advances 49,700,000 26,900,000 Accrued interest payable 1,609,842 1,428,560 Dividends payable 849,257 697,570 Other liabilities 4,052,212 8,223,949 Total liabilities 587,931,491 553,976,810 Commitments and contingencies (note 13) Shareholders' equity: Common stock, $.01 par value per share, authorized 10,000,000 shares; issued 4,300,134 shares at December 31, 1999 and 1998 43,001 43,001 Capital surplus 21,941,629 20,851,800 Retained earnings 48,065,946 42,770,991 Treasury stock, at cost (256,054 shares at December 31, 1999; 197,380 shares at (4,435,629) (2,970,954) December 31, 1998) Accumulated other comprehensive income (loss) (303,064) 5,394,789 Total shareholders' equity 65,311,883 66,089,627 Total liabilities and shareholders' equity $653,243,374 620,066,437
See accompanying notes to consolidated financial statements.
CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARY Consolidated Statements of Income Years ended December 31 1999 1998 1997 Interest and dividend income: Loans $29,446,584 27,865,497 26,679,426 Securities 13,992,910 12,621,909 12,070,919 Federal funds sold 483,552 589,976 300,359 Interest-bearing deposits 253,724 327,927 321,265 Total interest and dividend income 44,176,770 41,405,309 39,371,969 Interest expense: Deposits 15,096,420 15,246,674 14,756,046 Borrowed funds 1,044,567 736,493 659,753 Securities sold under agreements to repurchase 2,586,552 1,683,244 682,065 Total interest expense 18,727,539 17,666,411 16,097,864 Net interest income 25,449,231 23,738,898 23,274,105 Provision for loan losses 672,669 800,000 850,100 Net interest income after provision for loan losses 24,776,562 22,938,898 22,424,005 Other operating income: Trust & investment services 4,812,723 4,504,569 4,078,880 income Service charges on deposit 2,217,859 2,010,639 1,906,931 accounts Net gain on sales of securities 150,585 215,993 323,989 Credit card merchant earnings 769,586 630,968 536,735 Other 1,454,253 854,850 621,273 Total other operating income 9,405,006 8,217,019 7,467,808 Other operating expenses: Salaries and wages 8,928,490 8,290,133 8,041,859 Pension and other employee 1,637,612 1,939,033 2,033,962 benefits Net occupancy expenses 1,838,431 1,739,063 1,562,568 Furniture and equipment expenses 1,713,266 1,655,776 1,651,675 Other 7,513,238 6,848,747 6,077,630 Total other operating expenses 21,631,037 20,472,752 19,367,694 Income before income tax expense 12,550,531 10,683,165 10,524,119 Income tax expense 4,159,030 3,386,027 3,666,899 Net income $ 8,391,501 7,297,138 6,857,220 Weighted average shares 4,132,148 4,116,405 4,143,089 outstanding Basic Earnings Per Share $2.03 $1.77 $1.66
See accompanying notes to consolidated financial statements.
CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARY Consolidated Statements of Shareholders' Equity and Comprehensive Income Accumulated Other Capital Retained Treasury Comprehensive Common Surplus Earnings Stock Income Total Stock (Loss) Balances at December 31,1996 $10,750,335 10,101,804 33,885,269 (1,925,118) 3,307,909 56,120,199 Comprehensive Income: Net Income - - 6,857,220 - - 6,857,220 Other comprehensive income - - - - 1,273,990 1,273,990 Total comprehensive income 8,131,210 Cash dividends declared ($.605 per share) - - (2,506,464) - - (2,506,464) Purchase of 5,370 shares of treasury stock - - - (107,768) - (107,768) Balances at December 31, 1997 $10,750,335 10,101,804 38,236,025 (2,032,886) 4,581,899 61,637,177 Comprehensive Income: Net income - - 7,297,138 - - 7,297,138 Other comprehensive income - - - - 812,890 812,890 Total comprehensive income 8,110,028 Reduction of par value from $5.00 to $0.01 (10,728,834) 10,728,834 - - - - per share Two-for-one stock split in the form of a 100% stock dividend 21,500 - (21,500) - - - Cash dividends declared ($.665 per share) - - (2,740,672) - - (2,740,672) Purchase of 39,383 shares of of treasury stock - - - (984,284) - (984,284) Sale of 3,079 shares of treasury stock - 21,162 - 46,216 - 67,378 Balances at December 31, 1998 $ 43,001 20,851,800 42,770,991 (2,970,954) 5,394,789 66,089,627 Comprehensive Income: Net income - - 8,391,501 - - 8,391,501 Other comprehensive loss - - - - (5,697,853)(5,697,853 Total comprehensive income 2,693,648 Restricted stock units for directors' deferred compensation plan - 1,089,829 - - - 1,089,829 Cash dividends declared ($.76 per share) - - (3,096,546) - - (3,096,546) Purchase of 58,674 shares of treasury stock - - - (1,464,675) - (1,464,675) Balances at December 31,1999 $ 43,001 21,941,629 48,065,946 (4,435,629) ( 303,064)65,311,883
See accompanying notes to consolidated financial statements.
CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARY Consolidated Statements of Cash Flows Years ended December 31 1999 1998 1997 Cash flows from operating activities: Net income $ 8,391,501 7,297,138 6,857,220 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of intangible assets 587,303 587,303 587,303 Provision for deferred tax expense 45,955 (554,345) (260,933) (benefit) Provision for loan losses 672,669 800,000 850,100 Depreciation and amortization 1,468,561 1,459,446 1,483,178 Amortization of premiums and accretion of discounts on 473,074 321,469 248,288 securities, net Gain on sales of securities, net (150,585) (215,993) (323,989) Increase in other assets (3,886,234) (1,489,386) (1,834,245) Increase in accrued interest payable 181,282 237,151 38,618 Increase (decrease) in other 661,219 2,945,355 (2,649,988) liabilities Net cash provided by operating 8,444,745 11,388,138 4,995,552 activities Cash flows from investing activities: Proceeds from sales of securities available for sale 12,239,005 19,174,487 24,071,461 Proceeds from maturities of and principal collected on securities 4,529,397 7,054,835 12,226,947 held to maturity Proceeds from maturities of and principal collected on securities 65,470,411 78,602,492 30,683,353 available for sale Purchases of securities available for (79,608,744) (146,519,981) (52,508,840) sale Purchases of securities held to (6,475,177) (4,491,731) (11,099,132) maturity Purchases of premises and equipment (3,505,619) (1,325,011) (1,989,588) Net increase in loans (33,738,401) (35,894,863) (17,235,072) Proceeds from sales of student loans 2,513,575 3,180,053 3,299,607 Net cash used in investing (38,575,553 (80,219,719) (12,551,264) activities Cash flows from financing activities: Net (decrease) increase in demand deposits, NOW accounts, savings accounts, and insured money (10,265,077) 11,498,217 11,603,559 market accounts Net increase (decrease) in certificates of deposit and 25,899,404 3,596,803 (208,560) individual retirement accounts Net (decrease) increase in securities sold under agreements to repurchase (640,878) 41,139,513 (4,923,284) Federal Home Loan Bank advances 29,700,000 26,900,000 6,300,000 Repayments of Federal Home Loan Bank advances (6,900,000) (16,300,000) - Purchase of treasury stock (1,464,675) (984,284) (107,768) Sale of treasury stock - 67,378 - Cash dividends paid (2,944,859 ) (2,684,712) (2,445,074) Net cash provided by financing 33,383,915 63,232,915 10,218,873 activities Net increase (decrease) in cash and cash equivalents 3,253,107 (5,598,666) 2,663,161 Cash and cash equivalents, beginning 28,819,789 34,418,455 31,755,294 of year Cash and cash equivalents, end of $32,072,896 28,819,789 34,418,455 year Supplemental disclosure of cash flow information: Cash paid during the year for: Income Taxes $ 7,048,403 1,201,696 3,748,867 Interest $18,546,257 17,429,260 16,059,256 Supplemental disclosure of non-cash activity: Transfer of loans to other real $ 398,667 403,317 696,914 estate owned Adjustment to securities available for sale to fair value, net of tax ($5,697,853) 812,890 1,273,990
See accompanying notes to consolidated financial statements. Chemung Financial Corporation and Subsidiary Notes to Consolidated Financial Statements December 31, 1999 and 1998 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Chemung Financial Corporation (the Corporation), through its wholly owned subsidiary, Chemung Canal Trust Company (the Bank), provides commercial banking services to its local market area. The Corporation is subject to the regulations of certain federal and state agencies and undergoes periodic examinations by those regulatory agencies. Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles and include the accounts of the Corporation and the Bank. All significant intercompany balances and transactions are eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Securities Management determines the appropriate classification of securities at the time of purchase. If management has the intent and the Corporation has the ability at the time of purchase to hold securities until maturity, they are classified as held to maturity and carried at amortized cost. Securities to be held for indefinite periods of time or not intended to be held to maturity are classified as available for sale and carried at fair value. Unrealized holding gains and losses, net of the related tax effects, on securities classified as available for sale are excluded from earnings and are reported as accumulated other comprehensive income (loss) in shareholders' equity until realized. Realized gains and losses are determined using the specific identification method. A decline in the fair value of any available for sale or held to maturity security below amortized cost that is deemed other than temporary is charged to earnings resulting in the establishment of a new cost basis for the security. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment of yield using the interest method. Dividend and interest income are recognized when earned. Loans Loans are stated at the amount of unpaid principal balance less unearned discounts and net deferred origination fees and costs. The Corporation has the ability and intent to hold its loans for the foreseeable future, except for educational loans which are sold to a third party from time to time upon reaching repayment status. Interest on loans is accrued and credited to operations on the interest method. The accrual of interest is discontinued and previously accrued interest is reversed when commercial loans become 90 days delinquent and, when consumer, mortgage and home equity loans, which are not guaranteed by government agencies, become 120 days delinquent. Loans may also be placed on non- accrual if management believes such classification is warranted for other purposes. Loan origination fees and certain direct loan origination costs are deferred and amortized over the life of the loan as an adjustment of yield, using the interest method. Allowance for Loan Losses The allowance for loan losses is maintained at a level considered adequate to provide for probable loan losses. The allowance is increased by provisions charged to earnings and recoveries of loans previously charged off, and reduced by loan charge-offs. The adequacy of the allowance is based on management's evaluation of the inherent risk of loss in the loan portfolio, which includes consideration of prevailing economic conditions, past loss experience, the level of non-performing loans, delinquency levels and other factors pertinent to estimating losses inherent in the portfolio. Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowances may be necessary based on changes in economic conditions, particularly in New York State. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation's allowance for loan losses. Such agencies may require the Corporation to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. Management, considering current information and events regarding the borrower's ability to repay their obligations, considers a loan to be impaired when it is probable that the Corporation will be unable to collect all amounts due according to the contractual terms of the loan agreement. When a loan is considered to be impaired, the amount of the impairment is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of collateral, less the estimated costs to sell if the loan is collateral dependent. Residential mortgage loans and consumer loans are evaluated collectively since they are homogeneous and generally carry smaller balances. All loans restructured in a troubled debt restructuring are also considered impaired loans. In general, interest income on impaired loans is recorded on a cash basis when collection in full is reasonably expected. If full collection is uncertain, cash receipts are applied first to principal then to interest income. Premises and Equipment Land is carried at cost, while buildings and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is charged to current operations under accelerated and straight-line methods over the estimated useful lives of the assets, which range from 15 to 50 years for buildings and from 3 to 10 years for equipment and furniture. Amortization of leasehold improvements and leased equipment is recognized on the straight-line method over the shorter of the lease term or the estimated life of the asset. Other Real Estate Real estate acquired through foreclosure or deed in lieu of foreclosure is recorded at the lower of the carrying value of the loan or estimated fair value of the property at the time of acquisition. Write downs from cost to estimated fair value which are required at the time of foreclosure are charged to the allowance for loan losses. Subsequent to acquisition, other real estate is carried at the lower of the carrying amount or fair value less estimated costs to dispose. Subsequent adjustments to the carrying values of such properties resulting from declines in fair value are charged to operations in the period in which the declines occur. Other real estate owned at December 31, 1999, amounted to $535,699 and at December 31, 1998, amounted to $651,268. Income Taxes The Corporation files a consolidated tax return on the accrual method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled, or the tax carryforwards are expected to be utilized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Trust and Investment Services Income Assets held in a fiduciary or agency capacity for customers are not included in the accompanying consolidated balance sheets, since such assets are not assets of the Corporation. Trust and Investment Services income is recognized on the accrual method based on contractual rates applied to the balances of individual trust accounts. Market value of trust assets under administration totaled $1.486 billion at December 31, 1999, and $1.401 billion at December 31, 1998. Pension Plan Pension costs, based on actuarial computations of current and future benefits for employees, are charged to current operating results. The Bank's funding policy is to contribute amounts to the plan sufficient to meet minimum regulatory funding requirements, plus such additional amounts as the Bank may determine to be appropriate from time to time. Postretirement Benefits In addition to pension benefits, the Bank provides health care and life insurance benefits for retired employees. The estimated costs of providing benefits are accrued over the years the employees render services necessary to earn those benefits. Intangible Assets Goodwill, which represents the excess of purchase price over the fair value of identifiable assets acquired in 1995, is being amortized over 15 years on the straight-line method. Deposit base intangible, resulting from the Bank's purchase of deposits from the Resolution Trust Company in 1994, is being amortized over the expected useful life of 15 years on a straight-line basis. Amortization periods are monitored to determine if events and circumstances require such periods to be reduced. Periodically, the Corporation reviews its goodwill and deposit base intangible assets for events or changes in circumstances that may indicate that the carrying amount of the asset is impaired. Basic Earnings Per Share Basic earnings per share was computed on the basis of the weighted average number of common shares outstanding, retroactively adjusted for stock splits and dividends. Issuable shares (such as those related to directors restricted stock units) are considered outstanding and are included in the computation of basic earnings per share. Cash and Cash Equivalents Cash and cash equivalents include cash and amounts due from banks, interest-bearing deposits with other financial institutions, federal funds sold, and U.S. Treasury securities with original terms to maturity of 90 days or less. Securities Sold Under Agreements to Repurchase The Corporation enters into sales of U.S. Treasury securities under agreements to repurchase. The agreements are treated as financings, and the obligations to repurchase securities sold are reflected as liabilities in the consolidated balance sheets. The amount of the securities underlying the agreements remains in the asset account. The Corporation has agreed to repurchase securities identical to those sold. The securities underlying the agreements were under the Bank's control. Other Financial Instruments The Corporation is a party to certain other financial instruments with off-balance sheet risk such as commitments under standby letters of credit, unused portions of lines of credit and commitments to fund new loans. The Corporation's policy is to record such instruments when funded. Other Comprehensive Income Comprehensive income at the Corporation represents net income plus other comprehensive income, which consists of the net change in unrealized holding gains or losses on securities available for sale, net of the related tax effect. Accumulated other comprehensive income represents the net unrealized holding gains or losses on securities available for sale as of the consolidated balance sheet dates, net of the related tax effect. Comprehensive income for the years ended December 31, 1999, 1998, and 1997 was $2,693,648, $8,110,028, and $8,131,210, respectively. The following summarizes the components of other comprehensive income:
Unrealized holding losses during the year ended December 31, 1999, net of tax (pre-tax amount of $(9,336,350)) $(5,607,412) Reclassification adjustment for gains realized in net income during the year ended December 31, 1999, net of tax (pre-tax amount of $150,585) ( 90,441) Other comprehensive income for the year ended December 31, 1999 $ (5,697,853) Unrealized holding gains during the year ended December 31, 1998, net of tax (pre-tax amount of $1,569,456) $ 942,615 Reclassification adjustment for gains realized in net income during the year ended December 31, 1998, net of tax (pre-tax amount of $215,993) ( 129,725) Other comprehensive income for the year ended December 31, 1998 $ 812,890 Unrealized holding gains during the year ended December 31, 1997, net of tax (pre-tax amount of $2,445,185) $ 1,468,578 Reclassification adjustment for gains realized in net income during the year ended December 31, 1997, net of tax (pre-tax amount of $323,989) ( 194,588) Other comprehensive income for the year ended December 31, 1997 $ 1,273,990
Segment Reporting The Corporation's operations are solely in the financial services industry and include the provision of traditional commercial banking services. The Company operates primarily in the geographical regions of Chemung, Steuben, Schuyler, and Tioga counties, including the northern tier of Pennsylvania. The Company has identified separate operating segments, however, these segments did not meet the quantitative threshold for separate disclosure. Reclassifications Amounts in the prior years' consolidated financial statements are reclassified whenever necessary to conform with the current year's presentation. Accounting Standards In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards (SFAS) No. 133, " Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. During the second quarter of 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133." SFAS No. 137 defers the effective date of SFAS No. 133 by one year from fiscal years beginning after June 15, 1999, to fiscal years beginning after June 15, 2000. Management is currently evaluating the impact, if any, of this Statement on the Corporation's consolidated financial statements. (2) RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS The Bank is required to maintain certain reserves of vault cash and/or deposits with the Federal Reserve Bank of New York. The amount of this reserve requirement is included in cash on hand of $11,350,000 at December 31, 1999. (3) SECURITIES Amortized cost and estimated fair value of securities available for sale at December 31, 1999, and 1998 are as follows:
1999 1998 Amortized Estimated Amortized Estimated Cost Fair Cost Fair Value Value U.S. Treasury securities $15,507,454 15,341,305 23,012,624 23,294,865 Obligations of other U.S. Government agencies 96,004,009 92,696,922 77,787,530 78,233,115 Mortgage backed securities 77,418,683 73,747,174 89,245,351 89,592,665 Obligations of states and political subdivisions 21,358,536 20,733,805 20,967,461 21,431,874 Corporate bonds and notes 10,663,352 10,129,626 9,681,590 9,704,695 Corporate stocks 6,936,209 14,734,809 5,616,847 13,036,522 Total $227,888,243 227,383,641 226,311,403 235,293,736
Included in corporate stocks at December 31, 1999, and 1998 is the Bank's required investment in the stock of the Federal Home Loan Bank carried at its cost basis of $5,245,000 and $3,955,600, respectively. This investment allows the Bank to maintain a $62,726,000 line of credit with the Federal Home Loan Bank at December 31, 1999, and $56,695,500 at December 31,1998. Other equities required in the Bank portfolio include 10,572 shares of Federal Reserve Bank stock valued at $528,600 at December 31, 1999, and 9,964 shares valued at $498,200 at December 31, 1998. Gross unrealized gains and gross unrealized losses on securities available for sale at December 31, 1999, and 1998 were as follows:
1999 1998 Unrealized Unrealized Unrealized Unrealized Gains Losses Gains Losses U.S. Treasury securities $1,872 168,021 282,241 - Obligations of other U.S. Government - 3,307,087 479,935 34,350 agencies Mortgage backed securities 5,511 3,677,020 506,296 158,982 Obligations of states and other 15,321 640,052 470,174 5,761 political subdivisions Corporate bonds and notes - 533,726 105,225 82,120 Corporate Stocks 7,798,600 - 7,419,675 - Total $7,821,304 8,325,906 9,263,546 281,213
Gross realized gains on sales of securities available for sale were $150,585, $215,993, and $323,989 for the years ended December 31, 1999, 1998 and 1997, respectively. There were no realized losses on sales of securities available for sale for the years ended December 31, 1999, 1998 and 1997. Securities held to maturity of $8,606,703 and $6,660,923 at December 31, 1999, and 1998, respectively, represent non-marketable obligations of political subdivisions, usually local municipalities. Fair value approximates amortized cost. There were no sales of securities held to maturity in 1999, 1998 or 1997. The contractual maturity of these securities is as follows at December 31, 1999: $5,431,077 within one year, $2,461,826 after one year but within five years and $713,800 after five years but within ten years. Interest and dividends on securities for the years ended December 31, 1999, 1998 and 1997 were as follows:
1999 1998 1997 Taxable: U. S. Treasury securities $ 1,119,844 1,920,930 2,821,733 Obligations of other U.S. Government 5,227,780 4,659,247 3,670,414 agencies Mortgage backed securities 5,201,842 3,801,800 3,727,722 Corporate bonds and notes 631,480 391,720 48,984 Corporate stocks 536,980 414,602 360,184 Exempt from federal taxation: Obligations of states and political subdivisions 1,274,984 1,433,610 1,441,882 Total $13,992,910 12,621,909 12,070,919
The amortized cost and estimated fair value by years to contractual maturity (mortgage backed securities are shown as maturing in the year of the final contractual payment) as of December 31, 1999, for securities available for sale are as follows (excluding corporate stocks):
Maturing After One, But Within One Year Within Five Years Amortized Fair Amortized Fair Cost Value Cost Value U.S. Treasury securities $1,499,901 1,501,773 14,007,553 13,839,532 Obligations of other U.S. - - 51,934,435 50,303,794 Government agencies Mortgage backed securities - - 1,206,538 1,197,625 Obligations of states and 3,026,537 3,033,485 4,506,863 4,496,040 political subdivisions Corporate bonds and notes - - 2,496,556 2,410,984 Total $4,526,438 4,535,258 74,151,945 72,247,975
Maturing After Five, But Within Ten Years After Ten Years Amortized Fair Amortized Fair Cost Value Cost Value U.S. Treasury securities $44,069,574 - - - Obligations of other U.S. 44,069,574 42,393,128 - - Government agencies Mortgage backed securities 6,394,900 6,152,249 69,817,245 66,397,300 Obligations of states and 10,078,325 9,710,396 3,746,811 3,493,884 political subdivisions Corporate bonds and notes 2,605,219 2,445,005 5,561,577 5,273,637 Total $63,148,018 60,700,778 79,125,633 75,164,821
Actual maturities may differ from contractual maturities above because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. The fair value of securities pledged to secure public funds on deposit or for other purposes as required by law was $176,737,390 at December 31, 1999, and $160,490,195 at December 31, 1998. This includes U.S. Treasury securities totaling $2,000,000 and $2,000,000 (fair value of $1,970,246 and $2,073,760), mortgage backed securities totaling $9,125,075 and $13,328,093 (fair value of $8,791,440 and $13,622,012), and obligations of other U.S. Government agencies totaling $59,689,815 and $62,023,789 (fair value of $57,457,985 and $62,965,881) pledged to secure securities sold under agreements to repurchase at December 31, 1999, and 1998, respectively. There are no securities of a single issuer (other than securities of the U.S. Government and its agencies) that exceed 10% of shareholders' equity at December 31, 1999 or 1998. In 1997, the Bank declared a special dividend payable to the Corporation for the purpose of funding equity investments in Southern Tier Business Development, LLC and Cephas Capital Partnership, LP. These small business investment companies were established for the purpose of providing financing to small businesses in areas served, including minority-owned small businesses and those that will create jobs for the low to moderate income levels in the targeted areas. These investments as of December 31, 1999 and 1998 totaled $2,175,866 and $1,800,282, respectively, and are included in other assets under the equity method of accounting. (4) LOANS AND ALLOWANCE FOR LOAN LOSSES The composition of the loan portfolio is summarized as follows:
December 31, 1999 1998 Residential mortgages $90,346,353 84,554,079 Commercial mortgages 4,233,277 4,989,429 Commercial, financial and 130,774,872 113,478,081 agricultural Leases, net 267,746 387,697 Consumer loans 134,616,556 126,096,779 Net deferred origination fees and unearned income (275,397) (250,723) $359,963,407 329,255,342
Residential mortgages totaling $82,364,702 for 1999, and $72,103,426 for 1998, were pledged as collateral for the Bank's line of credit with the Federal Home Loan Bank of New York. The Corporation's market area encompasses the New York State counties of Chemung, Steuben, Schuyler and Tioga. Substantially all of the Corporation's outstanding loans are with borrowers living or doing business within 25 miles of the Bank's branches in these counties. The Corporation's concentrations of credit risk are reflected in the preceding table. The concentrations of credit risk with standby letters of credit, committed lines of credit and commitments to originate new loans, generally follow the loan classifications in the schedule. Other than general economic risks, management is not aware of any material concentrations of credit risk to any industry or individual borrower. The principal balances of loans not accruing interest, including certain impaired loans described below, totaled $640,051 and $4,458,393 at December 31, 1999, and 1998, respectively. The decrease in 1999 relates primarily to one real estate secured commercial loan which was paid in full during the fourth quarter of 1999. Loans with restructured payment terms because of the borrowers' financial difficulties at December 31, 1999, totaled $624,861. There were no loans with restructured payment terms because of the borrowers' financial difficulties at December 31, 1998. The effect of nonaccrual loans on interest income for the years ended December 31, 1999, 1998 and 1997 was not material. Loans past due greater than 90 days and still accruing totaled $281,273, at December 31, 1999 and $394,949 at December 31, 1998. The Bank is not committed to advance additional funds to these borrowers. Transactions in the allowance for loan losses for the years ended December 31, 1999, 1998, and 1997 were as follows:
1999 1998 1997 Balances at January 1 $4,509,185 4,145,422 3,975,000 Provision charged to operations 672,669 800,000 850,100 Loans charged off (690,034) (593,704) (770,389) Recoveries 173,273 157,467 90,711 Balances at December 31 $4,665,093 4,509,185 4,145,422
At December 31, 1999, and 1998 the recorded investment in loans that are considered to be impaired totaled $761,016 and $4,569,242, respectively. Included in the 1999 amount are impaired loans of $360,689 for which the related allowance for loan losses is $149,924. The 1998 amount includes $4,321,019 of impaired loans with a related allowance for loan losses of $993,207. The average recorded investment in impaired loans during 1999, 1998 and 1997 was $3,171,533, $2,837,325 and $1,201,217, respectively. The effect on interest income for impaired loans was not material to the consolidated financial statements in 1999, 1998 or 1997. (5) PREMISES & EQUIPMENT Premises and equipment at December 31, 1999, and 1998 are as follows:
1999 1998 Land $ 2,681,408 2,106,408 Buildings 13,222,838 11,644,535 Equipment and furniture 14,927,263 13,658,373 Leasehold improvements 431,448 429,020 31,262,957 27,838,336 Less accumulated depreciation 19,141,290 17,753,728 $12,121,667 10,084,608 (6) DEPOSITS Interest-bearing deposits include certificates of deposit in denominations of $100,000 or more aggregating $57,063,792 and $32,636,701 at December 31, 1999, and 1998, respectively. Interest expense on such certificates was $2,777,298, $2,420,835 and $2,279,576 for 1999, 1998 and 1997, respectively. Scheduled maturities of certificates of deposit at December 31, 1999, are summarized as follows:
TIME CERTIFICATES OF DEPOSIT 2000 $159,084,846 2001 26,480,336 2002 10,514,425 2003 2,487,131 2004 4,366,292 2005 and thereafter 364,569 $203,297,599
(7) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE The agreements have maturities of 3 days to 9 years at December 31, 1999, and 4 days to 10 years at December 31, 1998, and a weighted average interest rate of 4.97% at December 31, 1999, and 4.80% at December 31, 1998. The maximum amounts outstanding at any one month-end and average amount under these agreements during 1999 were $53,731,116 and $51,900,947, respectively. The maximum amounts outstanding at any one month-end and average amount under these agreements during 1998 were $50,587,368 and $32,166,417, respectively. (8) FEDERAL HOME LOAN BANK ADVANCES Federal Home Loan Bank advances at December 31, 1999, consisted of a $10,000,000, 4.90%, five year advance with a maturity date of October 2, 2003, a $10,000,000, 4.41%, ten year advance with a maturity date of October 20, 2008, callable on or after October 20, 2001, and a $29,700,000, 3.60% three day advance with a maturity date of January 3, 2000. (9) INCOME TAXES For the years ended December 31, 1999, 1998, and 1997, income tax expense attributable to income from operations consists of:
1999 1998 1997 Current: State $ 481,750 449,653 871,137 Federal 3,631,325 3,490,719 3,056,695 4,113,075 3,940,372 3,927,832 Deferred Expense(Benefit) 45,955 (554,345) (260,933) $4,159,030 3,386,027 3,666,899
Income tax expense differed from the amounts computed by applying the U.S. Federal statutory income tax rate to income before income tax as follows:
1999 1998 1997 Tax computed at statutory rat e $4,267,180 3,632,276 3,578,200 Tax-exempt interest (522,865) (527,353) (499,677) Dividend exclusion (55,707) (53,988) (50,369) State taxes, net of federal 371,094 241,864 549,418 benefit Nondeductible interest expense 64,792 68,089 66,403 Other items, net 34,536 25,139 22,924 Actual tax expense $4,159,030 3,386,027 3,666,899
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1999, and 1998 are presented below:
1999 1998 Deferred tax assets: Allowance for loan losses-book $1,817,054 1,800,968 Accrual for postretirement benefits other th an 750,595 812,079 pensions Deferred loan fees 104,924 96,851 Deferred compensation and directors fees 655,745 623,570 Net unrealized losses on securities available 201,538 - for sale Accrued Pension - 96,307 Interest on non-accrual loans 50,271 119,330 Bond discount 46,586 103,624 Other 46,608 44,066 Total gross deferred tax assets 3,673,321 3,696,795 Deferred tax liabilities: Depreciation 207,048 282,044 Allowance for loan losses-tax - 133,166 Prepaid Pension 54,137 - Net unrealized gains on securities available - 3,587,543 for sale Other - 25,032 Total gross deferred tax liabilities 261,185 4,027,785 Net deferred tax asset (liability) $3,412,136 (330,990)
Realization of deferred tax assets is dependent upon the generation of future taxable income or the existence of sufficient taxable income within the loss carryback period. A valuation allowance is recognized when it is more likely than not that some portion of the deferred tax assets will not be realized. In assessing the need for a valuation allowance, management considers the scheduled reversal of the deferred tax liabilities, the level of historical taxable income and projected future taxable income over the periods in which the temporary differences comprising the deferred tax assets will be deductible. Based on its assessment, management determined that no valuation allowance is necessary. (10) PENSION PLAN AND OTHER BENEFIT PLANS The Bank has a noncontributory defined benefit pension plan covering substantially all employees. The plan's defined benefit formula generally bases payments to retired employees upon their length of service multiplied by a percentage of the average monthly pay over the last five years of employment. The following table presents (1) change in the plan's projected benefit obligation and plan assets, and (2) the plan's funded status reconciled with amounts recognized in the Corporation's consolidated balance sheet at December 31, 1999, and 1998:
1999 1998 Change in projected benefit obligation: Projected benefit obligation at beginning of $14,549,204 13,370,944 year Service cost 320,308 359,955 Interest cost 986,425 921,621 Plan amendments 384,407 - Actuarial (gain) l o ss (2,335,605) 633,329 Benefits paid (883,658) (736,645) Projected benefit obligation at end of year $13,021,081 14,549,204 Change in fair value of plan assets: Fair value of plan assets at beginning of 19,209,845 16,777,650 year Actual return on plan assets 2,135,378 3,201,812 Expenses paid (38,000) (32,972) Benefits paid (883,658) (736,645) Fair value of plan assets at end of year 20,423,565 19,209,845 Funded Status: Plan assets in excess of projected benefit obligation At end of year 7,402,484 4,660,641 Unrecognized net asset being recognized over 559,902 629,790 10 years Prior service cost not yet recognized in net periodic pension cost 796,207 470,599 Unrecongnized net actuarial gain (8,398,893) (5,804,670) Prepaid (accrued) pension costs $ 359,700 (43,640)
Net periodic pension cost (income) in 1999, 1998, and 1997 is comprised of the following:
Components of net periodic pension cost 1999 1998 1997 (income) Service cost, benefit earned during the year $ 320,308 359,955 324,126 Interest cost on projected benefit 986,425 921,621 872,423 obligation Expected return on plan assets (1,437,813 (1,395,769) (1,104,424) Net amortization and deferral (272,260) (89,848) 12,646 Net periodic pension cost (income) $ (403,340) (204,041) 104,771
The principal actuarial assumptions used in 1999, 1998 and 1997 were as follows:
1999 1998 1997 Discount rate 8.00% 6.75% 7.00% Expected long-term rate of return on 7.50% 8.50% 8.50% assets Assumed rate of future compensation 5.00% 5.00% 5.00% increase
The plan's assets at December 31, 1999, and 1998 are invested in common and preferred stocks, U.S. Government securities, corporate bonds and notes, and mutual funds. The Bank also sponsors a defined contribution profit sharing, savings and investment plan which covers all employees with a minimum of 1,000 hours of annual service. The Bank matches at the rate of 50% of the first 6% of an eligible employee's current earnings. Expense under the plan totaled $620,279, $633,019, and $591,669 for the years ended December 31, 1999, 1998 and 1997, respectively. The Bank sponsors a defined benefit health care plan that provides postretirement medical, dental and prescription drug benefits to full-time employees who meet minimum age and service requirements. Postretirement life insurance benefits are also provided to certain employees who retired prior to July 1981. The plan is contributory, with retiree contributions adjusted annually, and contains other cost sharing features such as deductibles and coinsurance. The accounting for the plan anticipates future cost-sharing changes to the written plan that are consistent with the Bank's expressed intent to increase the retiree contribution rate annually for the expected general inflation rate for that year. The following table presents (1) changes in the plan's accumulated postretirement benefit obligation and (2) the plan's funded status reconciled with amounts recognized in the Corporation's consolidated balance sheet at December 31, 1999, and 1998:
Change in accumulated postretirment benefit obligation 1999 1998 Accumulated postretirement benefit obligation at $2,214,000 1,848,000 beginning of year Service cost 42,000 42,000 Interest cost 174,000 144,000 Participant contributions 70,320 56,940 Plan amendments 422,000 - Actuarial (gain) loss (145,234) 535,405 Benefits paid (234,086) (412,345) Accumulated postretirement benefit obligation at end of $2,543,000 2,214,000 year Accrued postretirement benefit cost: Accumulated postretirement benefit obligation end of $2,543,000 2,214,000 year Unrecognized net actuarial gain (loss) 616,498 (361,732) Accrued postretirement benefit cost at end of year, included in other liabilities $1,926,502 1,852,268
The components of net periodic post-retirement benefit cost for the years ended December 31, 1999, 1998, and 1997 are as follows:
1999 1998 1997 Service cost $ 42,000 42,000 40,000 Interest cost 174,000 144,000 117,000 Net amortization and deferral 22,000 - (7,000) Net periodic postretirement cost $238,000 186,000 150,000
The postretirement benefit obligation was determined using a discount rate of 8.00% for 1999 and 6.75% for 1998. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation initially ranged from 7.3% to 8.7% in 2000, depending on the specific plan, and was decreased to 5.5% in the year 2005 and thereafter, over the projected payout of benefits. The health care cost trend rate assumption can have a significant effect on the amounts reported. If the health care cost trend rate was increased one percent, the accumulated postretirement benefit obligation as of December 31, 1999, would have increased by 4.3%, and the aggregate of service and interest cost would increase by 4.2%. If the health care cost trend rate was decreased one percent, the accumulated postretirement benefit obligation as of December 31, 1999, would have decreased by 3.9%, and the aggregate of service and interest cost would have decreased by 3.7%. However, the plan limits the increase in the Bank's annual contributions to the plan for most participants to the increase in base compensation for active employees. (11) RELATED PARTY TRANSACTIONS Members of the Board of Directors, certain Bank officers, and their immediate families directly, or through entities in which they are principal owners (more than 10% interest), were customers of, and had loans and other transactions with, the Bank in the ordinary course of business. All loans and commitments included in such transactions were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. These loans and commitments, which did not involve more than normal risk of collectibility or present other unfavorable features, are summarized as follows for the years ended December 31, 1999 and 1998:
1999 1998 Balance at beginning of year $ 7,557,687 9,078,914 Additions 24,824,104 24,545,805 Amounts collected (25,162,984) (26,067,032) Balance at end of year $ 7,218,807 7,557,687
(12) EXPENSES The following expenses, which exceeded 1% of total revenues (total interest income plus other operating income) in at least one of the years presented, are included in other operating expenses:
1999 1998 1997 Data processing services 1,979,254 1,618,091 1,358,882 Advertising 646,594 398,208 364,914 Amortization of intangible 587,303 587,303 587,303 assets
(13) COMMITMENTS AND CONTINGENCIES In the normal course of business, there are outstanding various commitments and contingent liabilities, such as commitments to extend credit, which are not reflected in the accompanying consolidated financial statements. Commitments to outside parties under standby letters of credit, unused portions of lines of credit, and commitments to fund new loans totaled $3,306,032, $118,164,973 and $8,074,147, respectively, at December 31, 1999. Commitments to outside parties under standby letters of credit, unused portions of lines of credit, and commitments to fund new loans totaled $1,439,623, $100,372,761 and $9,513,063, respectively, at December 31, 1998. Because many commitments and almost all standby letters of credit expire without being funded in whole or in part, the contract amounts are not estimates of future cash flows. Loan commitments and unused lines of credit have off balance sheet credit risk because only origination fees are recognized on the consolidated balance sheet until commitments are fulfilled or expire. The credit risk amounts are equal to the contractual amounts, assuming the amounts are fully advanced and collateral or other security is of no value. The Corporation does not anticipate losses as a result of these transactions. These commitments also have off balance sheet interest rate risk in that the interest rate at which these commitments were made may not be at market rates on the date the commitments are fulfilled. At December 31, 1999, the Corporation had outstanding commitments totaling $776,636 to fund equity investments in Small Business Investment Companies. The Bank has employment contracts with certain of its senior officers, which expire at various dates through 2002 and may be extended on a year-to-year basis. In the normal course of business, there are various outstanding legal proceedings. In the opinion of management, the aggregate amount involved in such proceedings is not material to the financial condition or results of operations of the Corporation. (14) SHAREHOLDERS' EQUITY Under Federal Reserve regulations, the Bank is limited to the amount it may loan to the Corporation, unless such loans are collaterlized by specific obligations. At December 31, 1999, the maximum amount available for transfer from the Bank to the Corporation in the form of loans was $1,769,638. The Bank is subject to legal limitations on the amount of dividends that can be paid to the Corporation. Dividends are limited to retained net profits, as defined by regulations, for the current year and the two preceding years. At December 31, 1999, $9,631,842 was available for the declaration of dividends. (15) PARENT COMPANY FINANCIAL INFORMATION Condensed parent company only financial statement information of Chemung Financial Corporation is as follows:
BALANCE SHEETS - DECEMBER 31 1999 1998 Assets: Cash on deposit with subsidiary bank $ 29,669 333,753 Investment in subsidiary bank 61,907,440 62,758,019 Dividend receivable 949,257 797,570 Securities available for sale, at estimated 1,102,481 1,099,148 fair value Other assets 2,188,718 1,800,282 Total assets $66,177,565 66,788,772 Liabilities and shareholders' equity: Dividend payable 849,257 697,570 Other liabilities 16,425 1,575 Total Liabilities 865,682 699,145 Shareholders' equity: Total shareholders' equity $65,311,883 66,089,627 Total Liabilities and shareholders' equity $66,177,565 66,788,772
STATEMENTS OF INCOME - YEARS ENDED DECEMBER 31 Income: 1999 1998 1997 Interest and dividends $ 93,060 112,375 111,341 Gain on sale of securities - - 28,981 Other income 177,530 2,533 - Dividends from subsidiary bank 4,496,546 3,137,387 5,006,464 Income before equity in undistributed Earnings of subsidiary bank 4,767,136 3,252,295 5,146,786 Equity in undistributed earnings of subsidiary bank 3,759,448 4,126,662 1,749,017 Operating Expenses 76,036 78,546 - Income before income tax expense 8,450,552 7,300,411 6,895,803 Income tax expense 59,061 3,273 38,583 Net Income $8,391,501 7,297,138 6,857,220
STATEMENTS OF CASH FLOWS - YEARS ENDED DECEMBER 31 1999 1998 1997 Cash flows from operating activities: Net Income $8,391,501 $7,297,138 6,857,220 Adjustments to reconcile net income to net cash Provided by operating activities: Equity in undistributed earnings of subsidiary bank (3,759,448) (4,126,663) (1,749,017) Increase in dividend receivable (151,687) (155,959) (61,391) Gain on sale of securities - - (28,980) Increase in other assets (388,436) (956,199) (844,875) Increase (decrease) in other liabilities 13,520 (9,685) - Net cash provided by operating 4,105,450 2,048,632 4,172,957 activities Cash flow from investing activities: Proceeds from sales of securities available for sale - - 232,022 Net cash provided by investing - - 232,022 activities Cash flow from financing activities: Cash dividends paid (2,944,859) (2,681,428) (2,445,074) Purchase of treasury stock (1,464,675) (984,284) (107,768) Sale of treasury stock - 67,378 - Net cash used in financing activities (4,409,534) (3,598,334) (2,552,842) Increase (decrease) in cash and cash equivalents (304,084) (1,549,702) 1,852,137 Cash and cash equivalents at beginning of 333,753 1,883,455 31,318 year Cash and cash equivalents at end of year $ 29,669 333,753 1,883,455
(16) FAIR VALUES OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments: Short-Term Financial Instruments For those short-term instruments that generally mature in ninety days or less, the carrying value approximates fair value. Securities Fair values for securities are based on either 1) quoted market prices, 2) dealer quotes, 3) correspondent bank pricing system, or 4) discounted cash flow to maturity. For certain securities, such as equity investments in the Federal Home Loan Bank, Federal Reserve Bank and non-marketable obligations of political subdivisions, fair value is estimated to approximate amortized cost. Loans Receivable For variable-rate loans that reprice frequently, fair values are based on carrying values. The fair values for other loans are estimated through discounted cash flow analysis using interest rates currently being offered for loans with similar terms and credit quality. Deposits The fair values disclosed for demand deposits, savings accounts and money market accounts are, by definition, equal to the amounts payable on demand at the reporting date (i.e., their carrying values). The fair value of fixed maturity certificates of deposits is estimated using a discounted cash flow approach that applies interest rates currently being offered on certificates to a schedule of weighted average expected monthly maturities on time deposits. Securities Sold Under Agreements to Repurchase (Repurchase Agreements) These instruments bear both variable and stated rates of interest. Therefore, the carrying value approximates fair value for the variable rate instruments and stated rate instruments are based on a discounted cash flow to maturity. Federal Home Loan Bank Advances These instruments bear a stated rate of interest to maturity and therefore the fair value is based on a discounted cash flow to maturity. Commitments to Extend Credit The fair value of commitments to extend credit are based on fees currently charged to enter into similar agreements, the counter party's credit standing and discounted cash flow analysis. The fair value of these commitments to extend credit approximates the recorded amounts of the related fees and is not material at December 31, 1999 and 1998. Receivables and Payables For these short term instruments the carrying value approximates fair value. The estimated fair value of the Corporation's financial instruments as of December 31, 1999 and 1998 are as follows (dollars in thousands):
1999 1998 Estimated Estimated Carrying Fair Carrying Fair Amount Value (1) Amount Value (1) Financial assets: Cash and due from banks $ 30,926 30,926 27,516 27,516 Interest-bearing deposits 1,146 1,146 1,304 1,304 Securities 235,990 235,990 241,955 241,955 Net loans 355,298 350,624 324,746 328,370 Accrued interest 4,143 4,143 3,843 3,843 receivable Financial liabilities: Deposits: Demand, savings, NOW and money market accounts $277,390 277,390 287,617 287,617 Time deposits 204,384 203,877 178,522 180,080 Repurchase agreements 49,946 49,610 50,587 50,867 Federal Home Loan Bank 49,700 49,239 26,900 26,961 advances Dividends payable 849 849 697 697 Accrued interest payable 1,610 1,610 1,429 1,429 (1) Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and, therefore, can not be determined with precision. Changes in assumptions could significantly affect the estimates.
(17) REGULATORY CAPITAL REQUIREMENT The Corporation and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory -- and possibly additional discretionary -- actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off- balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Corporation and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets (all as defined in the applicable regulations). Management believes that, as of December 31, 1999, and 1998, the Corporation and the Bank met all capital adequacy requirements to which they are subject. As of December 31, 1999, the most recent notification from the Federal Reserve Bank of New York categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below. There have been no conditions or events since that notification that management believes have changed the Bank's or the Corporation's capital category. The actual capital amounts and ratios of the Corporation and the Bank are also presented in the following table:
Required To Actual Be Required To Adequately Be Well Capitalized Capitalized Amou Rati Amou Rat Amount Rati nt o nt io o As of December 31, 1999 Total Capital(to Risk Weighted Assets): Consolidated $64,639,014 16.57% > $31,199,743 > 8.00% > $38,999,678 > 10.00% Subsidiary $61,254,697 15.84% > $30,939,128 > 8.00% > $38,673,909 > 10.00% Tier 1 Capital(to Risk Weighted Assets): Consolidated $59,973,921 15.37% > $15,599,871 > 4.00% > $23,399,807 > 6.00% Subsidiary $56,589,604 14.63% > $15,469,564 > 4.00% > $23,204,346 > 6.00% Tier 1 Capital(to Average Assets): Consolidated $59,973,921 9.49% > $18,952,047 > 3.00% > $31,586,744 > 5.00% Subsidiary $56,589,604 9.00% > $18,860,467 > 3.00% > $31,434,112 > 5.00% As of December 31, 1998 Total Capital(to Risk Weighted Assets): Consolidated $58,883,505 16.67% > $28,261,391 > 8.00% > $35,326,739 > 10.00% Subsidiary $55,534,144 15.85% > $28,028,918 > 8.00% > $35,036,147 > 10.00% Tier 1 Capital(to Risk Weighted Assets): Consolidated $54,466,510 15.42% > $14,130,696 > 4.00% > $21,196,044 > 6.00% Subsidiary $51,153,025 14.60% > $14,014,459 > 4.00% > $21,021,688 > 6.00% Tier 1 Capital(to Average Assets): Consolidated $54,466,510 9.57% > $17,081,207 > 3.00% > $28,468,678 > 5.00% Subsidiary $51,153,025 9.02% > $17,008,021 > 3.00% > $28,347,001 > 5.00%
EX-21 4 EXHIBIT F CHEMUNG FINANCIAL CORPORATION Subsidiary List
Name State of Incorporation Chemung Canal Trust Company New York
EX-22 5 EXHIBIT G NOTICE OF ANNUAL MEETING, PROXY STATEMENT DATED APRIL 7, 2000, AND PROXY FORM Notice of 2000 Annual Meeting and Proxy Statement April 7, 2000 Dear Shareholder: It is our pleasure to invite you to Chemung Financial Corporation's 2000 Annual Meeting of Shareholders to be held on Thursday, May 11, 2000, at 7:00 p.m. at the Clemens Center in Elmira, New York. Parking will be available in the Chemung Canal Trust Company main lot or in the parking garage located on Gray Street. Following the meeting, refreshments will be served. In addition to the formal items of business, we will review your company's financial performance for the past year, discuss management's plans for 2000 and answer any questions you may have. New this year is the proxy written in plain English in an effort to simplify the information presented and to increase understanding. We hope you like the format and value your feedback. It is important that you be represented at the meeting, whether or not you plan to attend, so please mark, sign and date the enclosed proxy card and return it in the envelope provided. If you plan to attend, please mark the proxy card where indicated and include the number in your group planning to attend the meeting. Your directors and management look forward to seeing you at the meeting. Sincerely yours, Jan P. Updegraff President and Chief Executive Officer NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS One Chemung Canal Plaza P.O. Box 1522 Elmira, New York 14902 Parent Company of Chemung Canal Trust Company
Date/Time:7:00 p.m. on Thursday, May 11, 2000 Place: Clemens Center 116 East Gray Street Elmira, NY 14901 Items of Business: (1) Election of four directors, and (2) Transacting other business properly brought before the meeting Who May Vote: Shareholders of record as of March 24, 2000. Annual Report & Copies of the 1999 Annual Report & Proxy Proxy Statement: Statement Are enclosed Date of Mailing: This Notice and the Proxy Statement are first being mailed to stockholders on or about April 7, 2000. BY ORDER OF THE BOARD OF DIRECTORS Donna C. Denton, Secretary April 7, 2000
TABLE OF CONTENTS
Questions About the Meeting 5 Election of Directors and Nominee Biographies 7 Standing Director Biographies 8 Security Ownership of Certain Beneficial Owners & Management 10 Personnel Committee Report on Executive Compensation 14 Executive Officers 15 Executive Compensation 16 Pension Plans & Employment Contracts 17 Performance Graph 19 Board of Directors Information 20 Other Information 21 Director Business Relationships 22 Section 16(a) Beneficial Ownership Reporting 22
QUESTIONS ABOUT THE MEETING What do I need to know about Chemung Financial Corporation and Chemung Canal Trust Company? Chemung Canal Trust Company (the "Bank") is the wholly owned banking subsidiary of Chemung Financial Corporation (the "Corporation"), and unless otherwise stated, financial and other information is presented on a consolidated basis. What am I voting on? You are voting on the re-election of four directors to the Corporation's Board of Directors. Who may vote? You may vote if you owned the Corporation's stock at the close of business on March 24, 2000. As of March 17, 2000, there were 4,043,882 shares of common stock outstanding. How do I vote? By signing, dating, and returning each proxy card you receive in the prepaid envelope. Please indicate in the space provided on the proxy card if you plan to attend the meeting. Can I change my mind after indicating my vote and returning the proxy card? Yes. You may change your vote any time before the polls close at or before the annual meeting by: (a) Signing and returning another proxy card indicating a later date; or (b) attending the annual meeting and voting in person; or (c) revoking your proxy by notifying the Corporate Secretary in writing. What if I return my proxy card but do not provide voting instructions? Properly signed proxies received without voting instructions will be voted FOR the nominee directors. How are votes counted? Each share of Common Stock is entitled to one vote. There are no cumulative voting rights. Nominees for director will be elected by a plurality of votes cast. Any other matter requires the affirmative vote of a majority of votes cast except as otherwise provided in the Corporation's Certificate of Incorporation or By- laws. Only shares voted in favor of a nominee will be counted toward the achievement of plurality. Votes withheld (including broker non-votes) and abstentions are counted as present for the purpose of determining a quorum but are not counted as votes cast. Who pays for the solicitation of proxies? The cost of soliciting proxies will be borne by the Corporation. In addition to solicitations by mail, some of the directors, officers, and regular employees of the Corporation and the Bank may conduct additional solicitations by telephone and personal contacts without additional remuneration. American Stock Transfer and Trust Company, the Corporation's transfer agent, will aid the Corporation in the solicitation of proxies and proxy vote tabulations. If you hold your stock in "street" name, the transfer agent will request the appropriate nominees, brokerage houses, custodians and fiduciaries to forward soliciting material to you at the Corporation's expense. What is the deadline for submitting shareholder proposals? Shareholders desiring to present proposals in next year's proxy statement and at the 2001 Annual Meeting of Shareholders, including a notice of intent to make a nomination at the Meeting, must submit their proposal to the Corporate Secretary on or before December 6, 2000. Each shareholder proposal must comply with the rules and regulations of the Securities and Exchange Commission in order to be included in next year's proxy statement. Who are the Corporation's independent accountants? The accounting firm of KPMG LLP has acted as the Corporation's independent auditors and accountants since 1990 and the directors expect KPMG LLP to continue in service throughout 2000. Representatives of KPMG LLP will be present at the Annual Meeting to answer your questions. Is there any other business to come before the meeting? Management knows of no other business to be presented for consideration, other than the election of four directors. If other matters are properly presented, the proxies intend to vote in accordance with their best judgment. How do I obtain an Annual Report on Form 10-K? You may obtain a copy of Chemung Financial Corporation's 1999 Annual Report on Form 10-K filed with the Securities and Exchange Commission without charge if you would like more detailed information concerning the Corporation. To obtain a copy, either write to: Donna C. Denton, Vice President & Secretary, Chemung Canal Trust Company, One Chemung Canal Plaza, P. O. Box 1522, Elmira, NY 14902, or e-mail your request to our website: www.chemungcanal.com. ELECTION OF DIRECTORS AND NOMINEE BIOGRAPHIES Who are the nominees this year? David J. Dalrymple, John F. Potter, William C. Ughetta, and Jan P. Updegraff have each been nominated for election to the Corporation's Board of Directors. If elected, each nominee will hold the office of director for three years or until a successor has been duly elected and qualified. What are the backgrounds of this year's nominees? DAVID J. DALRYMPLE, Age 46, Director since 1993 President of Dalrymple Holding Corporation, parent company for several construction materials and highway construction companies. Mr. Dalrymple is the brother of Robert H. Dalrymple, also a Director of the Corporation. JOHN F. POTTER, Age 54, Director since 1991 President of Seneca Beverage Corporation, a wholesale distributor of beer and water products. WILLIAM C. UGHETTA, Age 67, Director since 1985 Lawyer, of Counsel to the law firm of Sayles & Evans. Retired since June 1, 1998. Formerly Senior Vice President and General Counsel of Corning Incorporated, a diversified manufac- Turing company. Director of Covance, Inc. Director of GlobalLift Technologies, Inc. JAN P. UPDEGRAFF, Age 57, Director since 1996 President and Chief Executive Officer of the Corporation and Bank. Formerly Vice President and Treasurer of the Corporation and Chief Operating Officer and Executive Vice President of the Bank. STANDING DIRECTOR BIOGRAPHIES What are the backgrounds of the directors not standing for election this year?
Directors with terms expiring in Directors with terms expiring in 2001 2002 ROBERT H. DALRYMPLE, Age 49 ROBERT E. AGAN, Age 61 Director since 1995 Director since 1986 Secretary of Dalrymple Chairman of the Board, Chief Holding Corporation, a parent Executive Officer and President of company for several construction Hardinge Inc., a world-wide machine materials and highway construction tool manufacturer. companies. Mr. Dalrymple is the brother of David J. Dalrymple, also a Director of the Corporation. FREDERICK Q. FALCK, Age 51 DONALD L. BROOKS, JR., Age 71 Director since 1997 Director since 1985 President of L.M. Trading Retired physician; Director of Company, an agricultural Arnot Ogden Medical Center. investment corporation; Vice President of Arnot Realty Corporation; President and former Chairman of The Rathbone Corporation. RALPH H. MEYER, Age 60 STEPHEN M. LOUNSBERRY III, Age 46 Director since 1985 Director since 1995 Retired since August 1, 1998. President of Applied Formerly President and Chief Technology Manufacturing since Executive Officer of Guthrie July 17, 1996, a manufacturer of Healthcare System, a vertically machined industrial and railroad integrated health care delivery component parts; system. Formerly President of Moore & Steele Corp. RICHARD W. SWAN, Age 51 THOMAS K. MEIER, Age 59 Director since 1985 Director since 1988 President of Swan & Sons- President of Elmira College. Morss Co., Inc., an insurance brokerage agency.
STANDING DIRECTOR BIOGRAPHIES Directors with terms expiring in Directors with terms expiring in 2001 2002 WILLIAM A. TRYON, Age 69 CHARLES M. STREETER, JR., Age 60 Director since 1987 Director since 1985 Chairman of the Board and President of Streeter Chief Associates, Inc., a general Executive Officer of Trayer building contractor. Products, Inc., an automotive, truck and other industrial parts manufacturer; Chairman and former President of Perry & Carroll, Inc., an insurance brokerage agency; Formerly a Director of the Bank from 1964 to 1976. NELSON MOOERS VAN DEN BLINK Age 65, Director since 1985 Chairman of the Board, Chief Executive Officer and Treasurer of The Hilliard Corporation, a motion control equipment, oil reclaimer and filter manufacturer.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT The following table shows how much of the Corporation's common stock is owned by directors, named executive officers and owners of more than five percent of our outstanding stock as of February 29, 2000.
Amount & Nature of Name of Beneficial Owner Stock (and address if Ownership Exceeds Beneficially Percent of Shares 5%) Owned Outstanding* Chemung Canal Trust Company 583,5011 14.4% One Chemung Canal Plaza Elmira, NY 14902 Chemung Canal Trust Company Profit-Sharing, Savings and 399,1122 9.9% Investment Plan One Chemung Canal Plaza Elmira, NY 14902 David J. Dalrymple 274 Upper Coleman Avenue 622,4563, 5 15.4% Elmira, NY 14905 Robert H. Dalrymple 875 Upland Drive 595,3244, 5 14.7% Elmira, NY 14905 Robert E. Agan 13,1816 * Donald L. Brooks, Jr. 14,8856 * James E. Corey III 7,2617 * Jerome F. Denton 7,4067 * Frederick Q. Falck 3.2% 128,5516, 8 Stephen M. Lounsberry III * 20,8736 Thomas K. Meier * 5,9176
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT Amount & Nature of Name of Beneficial Owner Stock (and address if Ownership Exceeds Beneficially Percent of Shares 5%) Owned Outstanding* Ralph H. Meyer * 14,5096 John F. Potter * 29,7196, 9 Charles M. Streeter, Jr. * 24,6966, 10 Richard W. Swan 1.8% 71,66511 William A. Tryon * 22,85212 William C. Ughetta * 31,1796 Jan P. Updegraff * 9,2987 Nelson Mooers van den Blink 3,478 * All Directors, Nominees and Executive Officers as a group (21 1,117,81613 27.6% persons) * Unless otherwise noted, less than 1%. FOOTNOTES 1 Held by the Bank in various fiduciary capacities, either alone or with others. Includes 23,096 shares held with sole voting and dispositive powers, 560,405 shares held with shared power to vote and 351,543 shares held with shared dispositive power. Shares held in a co-fiduciary capacity by the Bank are voted by the co- fiduciary in the same manner as if the co-fiduciary were the sole fiduciary. Shares held by the Bank as sole trustee will be voted by the Bank only if the trust instrument provides for voting of the shares at the direction of the grantor or a beneficiary and the Bank actually receives voting instructions. 2 The Plan participants instruct the Bank as trustee how to vote these shares. If a participant fails to instruct the voting of the shares, the Bank votes these shares in the same proportion as it votes all of the shares for which it receives voting instructions. Plan participants have dispositive power over these shares subject to certain restrictions. 3 Includes 91,822 shares held directly, 3,808 shares held as custodian for Mr. Dalrymple's children, 448,510 shares held by the Dalrymple Family Limited Partnership of which David J. Dalrymple and Robert H. Dalrymple are sole general partners, and 78,316 shares held by Dalrymple Holding Corporation, of which David J. Dalrymple and Robert H. Dalrymple are officers, directors and principal shareholders. Excludes 7,176 shares held by Mr. Dalrymple's spouse as to which Mr. Dalrymple disclaims beneficial ownership. See footnote 5. 4 Includes 64,690 shares held directly, 3,808 shares held as custodian for Mr. Dalrymple's children, 448,510 shares held by the Dalrymple Family Limited Partnership of which David J. Dalrymple and Robert H. Dalrymple are sole general partners, and 78,316 shares held by Dalrymple Holding Corporation of which David J. Dalrymple and Robert H. Dalrymple are officers, directors and principal shareholders. Excludes 4,064 shares held by Mr. Dalrymple's spouse as to which Mr. Dalrymple disclaims beneficial ownership. See footnote 5. 5 Excludes 30,230 shares held by Susquehanna Supply Company of which David J. Dalrymple and Robert H. Dalrymple each own 23.1% of the outstanding common stock. Because of the definition of "beneficial ownership" under Section 13 of The Exchange Act, David and Robert Dalrymple are each listed as beneficial owners of 526,826 of the same shares. Without such multiple counting, David and Robert Dalrymples' aggregate beneficial ownership would equal 17% of the Corporation's outstanding shares. 6 Includes shares that Messrs. Agan (12,281), Brooks (2,385), Falck (1,609), Lounsberry (4,070), Meier (917), Meyer (9,319), Potter (9,455), Streeter (4,270), and Ughetta (6,179) have credited to their accounts in memorandum unit form under the Corporation's Deferred Directors Fee Plan. The deferred fees held in memorandum unit form will be paid solely in shares of the Corporation's Common Stock pursuant to the terms of the Plan and the election of the Plan participants. Shares held in memorandum unit form under the Plan have no voting rights. 7 Includes all shares of Common Stock of the Corporation held for the benefit of each Executive Officer by the Bank as trustee of the Bank's Profit-Sharing, Savings and Investment Plan. Messrs. Updegraff, Corey and Denton have an interest in 9,091, 4,692, and 6,186 such shares held by the Plan, respectively. 8 Includes 600 shares held directly and 126,342 shares held indirectly in Mr. Falck's capacity as a co-trustee and/or income beneficiary in various trusts. Excludes 145,968 shares owned by The Rathbone Corporation of which Mr. Falck is an officer and director. 9 Includes 12,843 shares owned by Seneca Beverage Corporation, of which corporation Mr. Potter is an officer, director and principal shareholder. 10 Includes 10,836 shares owned by Streeter Associates, Inc., of which corporation Mr. Streeter is an officer, director and principal shareholder. 11 Includes 11,700 shares owned by Swan and Sons-Morss Co., Inc., of which corporation Mr. Swan is an officer, director and one of the principal shareholders, 33,255 shares held in trusts over which Mr. Swan has voting and dispositive power, and 444 shares held by Mr. Swan as custodian for his minor children. Does not include 4,316 shares held by others as trustees for a trust of which Mr. Swan is an income beneficiary or 4,236 shares held by Mr. Swan's spouse as to which Mr. Swan disclaims beneficial ownership. 12 Excludes 6,974 shares held by Mr. Tryon's spouse as to which Mr. Tryon disclaims beneficial ownership. 13 Does not include 26,401 shares owned by spouses of certain officers and directors as to which shares such officers and directors disclaim beneficial ownership. Does not include 526,826 shares included under each of David J. and Robert H. Dalrymple (see footnote 5). Also does not include 90 shares of preferred stock owned by directors, certain officers and their spouses of CCTC Funding Corp., a subsidiary of the Bank, a Real Estate Investment Trust under the Internal Revenue Code.
PERSONNEL COMMITTEE REPORT ON EXECUTIVE COMPENSATION OF MANAGEMENT The Personnel Committee of the Board of Directors furnishes the following report on executive compensation: What is our philosophy of executive compensation? Under the supervision of the Committee (comprised entirely of outside directors), the Bank has developed and implemented compensation policies that seek to enhance the profitability of the Bank and the Corporation, thus enhancing shareholder value. The executive compensation program consists of base pay, an annual management incentive bonus, and a long-term incentive bonus. The Committee feels that this philosophy provides fair and competitive compensation that attracts and retains well- qualified executives. How is the Chief Executive Officer compensated? The Board of Directors, upon recommendation of the Committee, sets the annual compensation of the Chief Executive Officer. The recommendation of the Committee follows substantial review of comparative information including executive compensation for similarly situated banks and bank holding companies. Key criteria include Return on Average Tier I Equity, Return on Average Assets and dividend performance. The Committee determined that the performance of the Bank was well within the range reported by its peers and that the compensation paid by the Bank was appropriate in comparison to the peer group. Incentive bonus payments to the CEO, based upon performance relative to goals, are determined at year-end. The Committee approved an incentive bonus of $55,000 for Mr. Updegraff based upon 1999 performance. There is also a Board approved long-term incentive bonus to those officers who play a major role in setting and implementing long- term strategies. Currently the only participant in this plan is the Chief Executive Officer. Payment of the long-term incentive award will be deferred for three years following the accrual year and may be further deferred at the participant's election. The incentive bonus may or may not be deferred at the officer's election. No long-term incentive bonus to the CEO has yet been awarded. How are other executive officers compensated? In setting the compensation and bonuses of the executive vice presidents and auditor, the Committee reviews a recommendation by the CEO that is based on a number of factors including individual and organizational performance, merit increases and responsibility levels. Bonus recommendations are reviewed in the same way, and the Board of Directors has final approval. Based on their evaluation, the Committee believes that the executive management of the Corporation is achieving significant improvements in long-term financial performance. The compensation policies, plans and programs implemented by the Committee are contributing to this management focus.
Thomas K. Meier, Chairman Ralph H. Meyer Donald L. Brooks, Jr. Richard W. Swan David J. Dalrymple William A. Tryon Frederick Q. Falck William C. Ughetta
EXECUTIVE OFFICERS Who were the executive officers of the Corporation and the Bank during 1999?
Name Age Position (served since) Jan P. Updegraff 57 President and Chief Executive Officer of the Corporation and the Bank (1998); formerly President and Chief Operating Officer of the Corporation and the Bank (1996); and Vice President and Treasurer of the Corporation and Executive Vice President of the Bank (1990). James E. Corey III 53 Vice President of the Corporation (1993) and Executive Vice President of the Bank (1998); formerly Senior Vice President of the Bank (1993). Jerome F. Denton1 48 Vice President of the Corporation (1997); formerly Secretary (1986); Executive Vice President of the Bank (1998); formerly Senior Vice President of the Bank (1996). Thomas C. Karski 54 Vice President of the Corporation (1998) and Senior Vice President of the Bank (1998); formerly Vice President of the Bank (1987). Joseph P. Manning 61 Vice President of the Corporation (1998) and Senior Vice President of the Bank (1998); formerly Vice President of the Bank (1993). John R. Battersby, Jr. 49 Senior Vice President, Chief Financial Officer of the Bank (1998); Treasurer of the Corporation and the Bank (1995); formerly Vice President of the Bank (1995). Donna C. Denton1 44 Secretary of the Corporation (1998) and Vice President and Secretary of the Bank (1998); formerly Vice President of the Bank (1996) and Senior Pension Officer (1991). 1 Jerome F. Denton and Donna C. Denton are husband and wife.
EXECUTIVE COMPENSATION Who are the named executive officers whose compensation exceeds $100,000 for 1999?
Summary Compensation Table Annual Compensation Name and Principal All Other Position Held Year Salary($) Bonus($)1 Compensation($)2 Jan P. Updegraff 1999 192,692 55,000 10,019 President and Chief Executive Officer of 1998 175,577 40,000 10,513 the Corporation and the Bank 1997 128,846 20,000 8,463 James E. Corey III 1999 97,052 27,000 7,931 Vice President of the Corporation and 1998 91,210 12,000 8,096 Executive Vice President of the Bank 1997 85,462 11,500 7,162 Jerome F. Denton 1999 89,646 25,000 7,708 Vice President of the Corporation and 1998 81,312 10,600 7,799 Executive Vice President of the Bank 1997 72,923 9,000 6,786 Includes amounts allocated for the year indicated, whether paid or deferred, under both the Bank-Wide and Management 1 Incentive Bonus Plans. Includes amounts allocated for the year indicated under the 2 Bank's Profit-Sharing, Savings and Investment Plan. NOTE: The officers of the Corporation are not separately compensated for services rendered to the Corporation and this policy is likely to continue.
PENSION PLANS & EMPLOYMENT CONTRACTS Pension Plans The following table shows the estimated annual retirement benefits payable from the Chemung Canal Trust Company Pension and Executive Supplemental Pension Plans, based upon a straight-life annuity form of payment, payable on retirement at age 65, and assuming final average earnings as shown. Employees vest fully following 5 years of service, normal retirement age is 65, and reduced benefit payments are available for early retirement at or after age 55.
Average Annual 15 20 25 30 351 Compensation $100,000 24,527 32,702 40,878 48,053 55,229 $120,000 30,077 40,102 50,128 58,953 67,779 $150,000 38,402 51,202 64,003 75,303 86,604 $190,000 49,502 66,002 82,503 97,103 111,704 $200,000 52,277 69,702 87,128 102,553 117,979 1 Maximum number of years allowed under the terms of the Pension Plan.
The Pension Plan provides an annual benefit of 1.2% for each year of credited service to a maximum of 25 years and for each additional year to a maximum of 10 years, 1% of the above average annual compensation (exclusive of bonuses), plus for each year of credited service to a maximum of 35 years, .65% of average compensation in excess of the average of the taxable wage base in effect under Section 230 of the Social Security Act for each year in the 35-year period ending with the year in which the participant attains social security retirement age. The average taxable wage base was $33,060 for a participant attaining age 65 in 1999. The named executive officers of the Corporation and the Bank had the following credited full years of service under the Plan as of December 31, 1999: Jan P. Updegraff--29, James E. Corey III--12, and Jerome F. Denton--27. The Bank's non-qualified Executive Supplemental Pension Plan provides a benefit equal to the benefit which would have been paid under the terms of the Bank's Pension Plan without regard to limitations under the Internal Revenue Code. From time to time the Board of Directors may select executives as participants in the plan. Currently, Mr. Updegraff is the only active employee participating. Employment Contracts The Bank has employment contracts with twenty of its senior officers, all vice president level and above. The contracts provide that in the event of termination of any of these officers' employment without cause, the officer shall continue to receive his or her salary at the level then existing and the customary fringe benefits which he or she is then receiving for a period ending December 31, 2001, except for Mrs. Melinda Sartori, Mrs. Marcia Scanlin, and Messrs. Battersby, Corey, Denton, Karski, Manning, Updegraff and Ward whose guaranteed terms end December 31, 2002. The contracts further provide that they may be extended by the Board of Directors on a year-to-year basis and also may be terminated for cause upon thirty days' notice. COMPARATIVE RETURN PERFORMANCE GRAPH Comparison of Five-Year Cumulative Total Returns For Fiscal Years Ending December 31, 1995 - 1999 Among Chemung Financial Corporation, CRSP Total Returns Index for NASDAQ Stock Market (US Companies) and NASDAQ - Bank Stocks Index (OMITTED GRAPHIC MATERIAL -SEE APPENDIX)
1994 1995 1996 1997 1998 1999 Chemung Financial Corporation 100.00 112.68 142.46 181.37 246.80 231.28 CRSP NASDAQ 100.00 141.30 173.90 213.10 300.20 542.40 Composite NASDAQ - Bank Stocks 100.00 149.00 196.70 329.40 327.10 314.40
The cumulative total return includes (i) dividends paid and (ii) changes in the share price of the Corporation's Common Stock and assumes that all dividends were reinvested. The above graph assumes that the value of the investment in Chemung Financial Corporation and each index was $100 on December 31, 1994. The CRSP Total Returns Index for NASDAQ Stock Market (US Companies) and Bank Stocks indices were obtained from the Center for Research in Security Prices (CRSP), University of Chicago, Chicago, Illinois. BOARD OF DIRECTORS INFORMATION How often did the Board meet during fiscal year 1999? The Board of Directors of the Corporation held ten regularly scheduled meetings and the Board of Directors of the Bank held twelve regularly scheduled meetings and two special meetings during the year ended December 31, 1999. With the exception of Mr. Agan, who attended 50% of the Corporation's board meetings and 66% of the total Corporation's and Bank's board and committee meetings, each director of the Corporation and the Bank attended at least 75% of the board and committee meetings of which they were members. What standing Board Committees exist at the Bank? The following table shows the standing Committees, membership of each, and number of meetings held in 1999.
Name Execu- Loan Trust & Portfolio Examining/ Person- tive Employee Audit nel Benefits Agan X X X Brooks X* X X D.J.Dalrymple X* X X R.H. Dalrymple X X X Falck X X X Lounsberry X X X* Meier X X X* Meyer X X X Potter X X* X Streeter X* X X Swan X X X Tryon X X X Ughetta X X X Updegraff X X X X Van den Blink X X X # of Meetings 8 13 12 4 3 3 in 1999
*Committee Chairman The Executive Committee may, subject to limitations under applicable law and the By-Laws, act on behalf of the Board whenever the Board is not in session. Actions taken will be reported at the next regular meeting of the Board. The Loan Committee establishes policy for the Bank's lending functions as determined under applicable regulations and/or the By-Laws. The Trust and Employee Benefits Committee passes on all questions of policy bearing upon the investment of trust funds and the general conduct of the estate, agency, and fiduciary business of the Bank. The Committee also has responsibility for the Bank's own benefit plans and reviews the trust and investment policies and performance. The Portfolio Committee passes on all questions of policy relating to the oversight of the Bank's investment portfolio and internal administrative functions. The Examining Committee makes an annual examination of the Bank as a whole, reviews the Bank's internal audit and loan review procedures and recommends to the Board of Directors the engagement and dismissal of independent auditors. The Personnel Committee is responsible for the nomination of officers and makes compensation recommendations for the president, executive vice presidents and the auditor. How are Directors compensated? Each non-employee director of the Bank receives an annual retainer of $5,000 and a fee of $300 for each meeting of the Board of Directors and its committees attended. The Chairperson of each committee receives $350 for each committee meeting attended. Only one fee is paid for attendance at meetings that serve both the Corporation and the Bank. Employee directors receive no fees for their services as Directors. A Deferred Directors Fee Plan for non-employee Directors provides that Directors may elect to defer receipt of all or any part of their fees. Deferrals are credited with either interest compounded quarterly at the Applicable Federal Rate for short- term debt instruments or converted to units which appreciate or depreciate as would an actual share of the Corporation's common stock purchased on the deferral date. Cash deferrals will be paid in cash and units will be paid in shares of common stock. OTHER INFORMATION Some of the Bank's directors and officers, and entities with which they are associated, are customers of the Bank in the ordinary course of business and are indebted to the Bank. The Bank anticipates that some of these directors, officers and entities will continue to be customers of and indebted to the Bank on similar terms in the future. All loans to these individuals and entities are made in the ordinary course of business, involve no more than a normal risk of collectibility and are on substantially the same terms, including interest rates and collateral requirements, as those services provided for comparable transactions with unaffiliated persons and entities. The Bank has purchased and paid for insurance from Continental Casualty Company providing for reimbursement of directors and officers of the Corporation and the Bank for their costs and expenses for claims based on "wrongful acts" in connection with their duties as directors or officers, including actions as fiduciaries of the Bank's Pension and Profit-Sharing Plans. This insurance coverage, expiring in April 2002, has an annual cost of $11,250. Director Business Relationships The Bank retained Sayles and Evans, a law firm of which Mr. Ughetta is of counsel, for legal services during 1999 and expects to retain Sayles & Evans for legal services during the current year. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 requires the Corporation's directors, certain executive officers, and ten percent shareholders (collectively "Reporting Persons") to file with the Securities and Exchange Commission ("SEC") initial reports of ownership and changes in beneficial ownership (the "Reports"). SEC regulations require Reporting Persons to furnish the Corporation with copies of all Reports filed. Based solely on review of the Reports furnished to the Corporation and written representation from the Reporting Persons that no other reports were required for the year ended December 31, 1999, the Corporation's Reporting Persons complied with these requirements except for one report not timely filed by Mr. Potter. BY ORDER OF THE BOARD OF DIRECTORS Donna C. Denton Secretary Date:April 7, 2000 One Chemung Canal Plaza Elmira, New York 14902 www.chemungcanal.com CHEMUNG FINANCIAL CORPORATION ANNUAL MEETING OF SHAREHOLDERS - MAY 11, 2000 PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CHEMUNG FINANCIAL CORPORATION John R. Battersby, Sr. and John B. Hintz, each with power of substitution and with all powers and discretion the undersigned would have if personally present, are hereby appointed the Proxy Agents to represent the undersigned at the Annual Meeting of Shareholders of Chemung Financial Corporation, to be held on May 11, 2000 (including any adjournments or postponements thereof) and to vote all shares of Common Stock of Chemung Financial Corporation which the undersigned is entitled to vote on all matters that properly come before the meeting, subject to any directions indicated. (To be signed on Reverse Side) ***************************************************************** THIS PROXY WILL, WHEN PROPERLY EXECUTED, BE VOTED AS DIRECTED. IF NO DIRECTIONS TO THE CONTRARY ARE GIVEN, THE PROXY AGENTS INTEND TO VOTE FOR THE NOMINEES. NOMINEES: 3-year term: FOR WITHHELD
1.Election of David J. Dalrypmle Directors. John F. Potter William C. Ughetta Jan P. Updegraff For, except vote withheld from the following nominee(s): _______________________________________________________ I/We will attend the Meeting Number in group ____ ___________________DATE_____ _____________________DATE__________ Signature Signature If Held Jointly NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee, custodian or guardian, please give full title as such.
EX-27 6
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S AUDITED ANNUAL FINANCIAL STATEMENTS AND DISCLOSURES FOR THE PERIOD ENDED DECEMBER 31, 1999 AS PRESENTED IN ITS ANNUAL 1999 FORM 10-K AND IS QUALIIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND DISCLOSURES. 1,000 12-MOS DEC-31-1999 DEC-31-1999 30,926 1,146 0 0 227,384 8,607 8,607 359,963 4,665 653,243 481,774 79,646 6,511 20,000 0 0 43 65,269 653,243 29,447 13,993 737 44,177 15,096 18,728 25,449 673 151 21,631 12,551 8,392 0 0 8,392 2.03 2.03 4.30 640 281 0 0 4,509 690 173 4,665 3,162 0 1,503
-----END PRIVACY-ENHANCED MESSAGE-----