COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2011

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

(15)           COMMITMENTS AND CONTINGENCIES

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are

issued to meet customer financing needs.  These are agreements to provide credit or to support the credit of

others, as long as conditions established in the contract are met, and usually have expiration dates.  Commitments

may expire without being used.  Off-balance sheet risk to credit loss exists up to the face amount of these

instruments, although material losses are not anticipated.  The same credit policies are used to make such

commitments as are used for loans, including obtaining collateral at exercise of the commitment.

The contractual amounts of financial instruments with off-balance sheet risk at year-end were as follows:

	2011				2010
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	19,139,879	$	8,399,012	$	15,869,802	$	1,956,664
Unused lines of credit	$	471,164	$	164,489,966	$	804,826	$	134,112,181
Standby letters of credit	$	-	$	13,562,577	$	-	$	15,960,284

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.

The Corporation has issued conditional commitments in the form of standby letters of credit to guarantee payment

on behalf of a customer and guarantee the performance of a customer to a third party.  Standby letters of credit

generally arise in connection with lending relationships.  The credit risk involved in issuing these instruments is

essentially the same as that involved in extending loans to customers.  Contingent obligations under standby

letters of credit totaled $13,562,577 at December 31, 2011 and represent the maximum potential future

payments the Corporation could be required to make.  Typically, these instruments have terms of twelve months

or less and expire unused; therefore, the total amounts do not necessarily represent future cash requirements.  

Each customer is evaluated individually for creditworthiness under the same underwriting standards used for

commitments to extend credit and on-balance sheet instruments.  Corporation policies governing loan collateral

apply to standby letters of credit at the time of credit extension.  The carrying amount and fair value of the

Corporation's standby letters of credit at December 31, 2011 was not significant.

The Corporation has an executive severance agreement with its President and Chief Executive Officer.

In the normal course of business, there are various outstanding claims and legal proceedings involving the

Corporation or its subsidiaries.  On February 14 and April 14, 2011, the Bank received separate settlement

demands from representatives of beneficiaries of certain trusts for which the Bank has acted as trustee.  

The settlement demands relate to alleged claims of, among other things, breach of the Bank's fiduciary duties as

trustee, including the Bank's alleged failure to adequately diversify the relevant trust portfolios. The beneficiaries

seek aggregate damages of up to approximately $27.0 million.  On September 16, 2011, the beneficiaries objected

in the Surrogate's Court of the State of New York, County of Chemung (the “Surrogate's Court”) to accountings

with respect to the above-mentioned trusts provided by the Bank, based on allegations similar to those offered in

the settlement demands.  The matter remains pending in the Surrogate Court.  Although these matters are

inherently unpredictable, management will defend against these claims vigorously.  Management has concluded

that it is reasonably possible, but not probable, that the financial position, results of operations or cash flows of

the Corporation could be materially adversely affected in any particular period by the unfavorable resolution of

these claims, not withstanding any potential recover under applicable insurance coverage.  An amount of loss or

range of loss cannot be reasonably estimated at this time.