-----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, L/EJPLajtSKx7M8zoR14x9NCAWfQb7g8Pwy/YbFUM3UirBLws99QbICaODN83h31 D+NMZ1AuDk9RSXJYaBzXvg== 0000763563-98-000021.txt : 19980812 0000763563-98-000021.hdr.sgml : 19980812 ACCESSION NUMBER: 0000763563-98-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980811 SROS: NONE 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-Q SEC ACT: SEC FILE NUMBER: 000-13888 FILM NUMBER: 98681908 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-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly period ended June 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-13888 CHEMUNG FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) New York 16-1237038 (State or other jurisdiction of I.R.S. Employer incorporation or organization) Identification No. One Chemung Canal Plaza, Elmira, NY 14902 (Address of principal executive offices) (Zip Code) (607) 737-3711 (Registrant's telephone number, including area code) 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 XX NO Indicate the number of shares outstanding of each of the issuer's classes of common stock as of June 30, 1998: Common Stock, $.01 par value -- outstanding 4,123,476 shares CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARY INDEX PAGE PART I. FINANCIAL INFORMATION Item 1: Financial Statements Condensed Consolidated Balance Sheets 1 Condensed Consolidated Statements of Income 2 Condensed Consolidated Statement of Cash Flows 3 Notes to Condensed Consolidated Financial Statements 4 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 6 Item 3: Quantitative and Qualitative disclosures about Market Risk Information responsive to this Item is set forth in "Management's Discussion of Operations and Financial Condition" of the quarterly 10-Q for the period ended June 30, 1998 and is in- corporated herein by reference to Interest Rate Risk. 13 PART II. OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K 14 All other items required by Part II are either inapplicable or would require an answer which is negative. SIGNATURES 39 PART I. FINANCIAL INFORMATION Item 1: Financial Statements
CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS June 30, Dec. 31, 1998 1997 ASSETS Cash and due from banks $ 29,610,228 $ 32,997,157 Int.-bearing deposits with other financial institutions 1,324,634 1,421,298 Federal funds sold 500,000 - Securities held to maturity, fair value of $8,356,585 in 1998 and $9,224,028 in 1997 8,356,585 9,224,028 Securities available for sale, at fair value 210,615,766 185,302,745 Loans, net of unearned income and deferred fees318,972,061 296,976,769 Allowance for loan losses (4,315,114) (4,145,422) Loans, net 314,656,947 292,831,347 Bank premises and equipment, net 10,152,146 10,219,043 Intangible assets, net of accumulated amortization 6,521,980 6,815,631 Other assets 11,340,798 10,123,203 Total assets $593,079,084 $548,934,452 LIABILITIES Deposits: Non-interest bearing $ 87,935,935 $ 94,656,560 Interest bearing 383,826,472 356,387,782 Total deposits 471,762,407 451,044,342 Securities sold under agreement to repurchase 36,305,886 9,447,856 Federal Home Loan Bank Advances 10,000,000 16,300,000 Other liabilities 11,120,737 10,505,077 Total liabilities 529,189,030 487,297,275 SHAREHOLDERS' EQUITY Common Stock, $0.01 pv per share-1998 $5.00 pv per share 1997; authorized 10,000,000 issued: 4,300,134-1998 authorized 3,000,000 issued: 2,150,067-1997 43,001 10,750,335 Surplus 20,830,638 10,101,804 Retained earnings 40,255,071 38,236,025 Treasury stock, at cost (176,658 shares in 1998 and 161,076 in 1997*)(2,367,919) (2,032,886) Accumulated Other Comprehensive Income 5,129,263 4,581,899 Total shareholders' equity 63,890,054 61,637,177 Total liabilities & shareholders' equity $593,079,084 $548,934,452 *ADJUSTED TO REFLECT A 2-FOR-1 STOCK SPLIT IN THE FORM OF A 100% STOCK DIVIDEND EFFECTIVE 6/1/98 See Accompanying Notes to Condensed Consolidated Financial Statements
CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME 6 Months Ended 3 Months Ended June 30, June 30, INTEREST INCOME 1998 1997 1998 1997 Loans $13,503,936$13,043,587 $ 6,902,141$ 6,644,476 Securities 6,245,131 6,128,816 3,159,975 3,146,757 Federal funds sold 263,513 121,706 117,534 52,115 Interest bearing deposits 160,439 105,832 63,125 59,705 Total interest income 20,173,01919,399,941 10,242,775 9,903,053 INTEREST EXPENSE Deposits 7,598,242 7,262,102 3,864,983 3,774,074 Securities sold under agreement to repurchase and funds borrowed 952,400 669,212 516,166 329,252 Total interest expense 8,550,642 7,931,315 4,381,149 4,103,327 Net interest income 11,622,37711,468,627 5,861,626 5,799,727 Provision for loan losses 400,000 450,000 200,000 250,000 Net interest income after provision for loan losses11,222,37711,018,627 5,661,626 5,549,727 Realized gains-security trans., net 147,395 31,544 10 31,544 Other operating income 3,688,786 3,384,510 1,844,188 1,714,211 Total other operating income3,836,1813,416,054 1,844,198 1,745,755 Other operating expenses 10,114,083 9,817,646 5,182,464 4,903,212 Income before income taxes 4,944,475 4,617,035 2,323,360 2,392,270 Income taxes 1,563,800 1,577,591 690,894 830,330 Net Income $ 3,380,675$ 3,039,444 $ 1,632,466$ 1,561,940 Basic Earnings per Share $0.82 $0.73 $0.40 $0.38 *ADJUSTED TO REFLECT A 2-FOR-1 STOCK SPLIT IN THE FORM OF A 100% STOCK DIVIDEND EFFECTIVE 6/1/98 See Accompanying Notes to Condensed Consolidated Financial Statements
CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Six Months Ended June 30, 1998 1997 OPERATING ACTIVITIES Net income $ 3,380,675 $ 3,039,444 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of intangible assets 293,651 293,651 Provision for loan losses 400,000 450,000 Depreciation and amortization 751,820 760,268 Amortization and discount on securities, net 92,316 143,436 Gain on sales of securities, net (147,395) (31,544) Increase in other assets (1,217,594) (945,268) Increase (decrease) other liabilities 192,282 (1,697,905) Net cash provided by operating activities 3,745,755 2,012,082 INVESTING ACTIVITIES Proceeds from maturities of securities - AFS 26,865,482 14,551,871 Proceeds from maturities of securities -HTM 1,708,364 8,169,710 Proceeds from sales of securities - AFS 6,080,902 5,238,524 Purchases of securities - AFS (57,292,964) (21,805,261) Purchases of securities - HTM (840,920) (4,526,192) Purchases of premises and equipment, net (684,923) (535,887) Loans, net of repayments and other reductions (23,327,584) (14,753,641) Proceeds from sales of student loans 1,101,984 1,158,466 Net cash used by investing activities (46,389,659) (12,502,410) FINANCING ACTIVITIES Net increase in demand deposits, NOW, savings and insured money market accounts 486,500 8,754,053 Net increase in certificates of deposit and individual retirement accounts 20,231,564 9,087,870 Net increase (decrease) in securities sold under agreements to repurchase 26,858,030 (1,397,357) Net decrease in Federal Home Loan Bank advances(6,300,000) 0 Purchase of treasury shares (335,033) 0 Cash dividends paid (1,280,750) (1,160,440) Net cash provided by financing activities 39,660,311 15,284,126 Net increase (decrease) in cash and cash equivalents (2,983,593) 4,793,798 Cash and cash equivalents at beginning of year 34,418,455 31,755,294 Cash and cash equivalents at end of period $31,434,862 $36,549,092 See Accompanying Notes to Condensed Consolidated Financial Statements
CHEMUNG FINANCIAL CORPORATION AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Summary of Significant Accounting Policies Basis of Presentation Chemung Financial Corporation (the Company) operates as a bank holding company. Its only subsidiary is Chemung Canal Trust Company (the Bank).The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the Bank. All material intercompany accounts and transactions have been eliminated in the consolidation. 2. The condensed consolidated financial statements included herein reflect all adjustments which are, in the opinion of management, of a normal recurring nature and necessary to present fairly the Company's financial position as of June 30, 1998 and December 31, 1997, and results of operations and cash flows for the three and six month periods ended June 30, 1998 and 1997. 3. Net income per share for the periods presented have been computed by dividing net income by 4,123,479 (4,144,428) weighted average shares outstanding for the six month periods ended June 30, 1998 and 1997 and 4,123,476 (4,144,428) weighted average shares outstanding for the three month periods ended June 30, 1998 and 1997, respectively. (adjusted to reflect a 2-for 1 stock split in the form of a 100% stock dividend effective 6/1/98). 4. Goodwill, which represents the excess of purchase price over the fair value of identifiable assets acquired, 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 Company reviews its goodwill and deposit base intangible assets for events or changes in circumstances that may indicate that the carrying amount of the assets are not recoverable. 5. Effective January 1, 1998 the Company adopted the remaining provisions of SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," which relate to the accounting for securities lending, repurchase agreements, and other secured financing activities. These provisions, which were delayed for implementation by SFAS No. 127, are not expected to have a material impact on the Company. In addition, the FASB is considering certain amendments and interpretations of SFAS No. 125 which, if enacted in the future, could affect the accounting for transactions within their scope. On January 1, 1998, the Company adopted the provisions of Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income. This statement establishes standards for reporting and display of comprehensive income and its components. Comprehensive income includes the reported net income of a company adjusted for items that are currently accounted for as direct entries to equity, such as the mark to market adjustment on securities available for sale, foreign currency items and minimum pension liability adjustments. At the Company, comprehensive income represents net income plus other comprehensive income, which consists of the net change in unrealized gains or losses on securities available for sale for the period. Accumulated other comprehensive income represents the net unrealized gains or losses on securities available for sale as of the balance sheet dates. Comprehensive income for the six-month and three-month periods ended June 30, 1998 and 1997 were $3,928,040 ($2,085,764) and $3,318,240 ($3,09,865), respectively. The following summarizes the components of other comprehensive income:
Unrealized Gains or Losses on Securities: Unrealized holding gains during the six months ended June 30, 1997, net of tax (pre-tax amount of $495,739)$ 297,741 Reclassification adjustment for gains realized in net income during the six months ended June 30, 1997, net of tax (pre-tax amount of $31,544) (18,945) Other comprehensive income-six months ended June 30, 1997$ 278,796 Unrealized holding gains during the six months ended June 30, 1998, net of tax (pre-tax amount of $1,058,758)$ 635,890 Reclassification adjustment for gains realized in net income during the six months ended June 30, 1998, net of tax (pre-tax amount of $147,395) (88,525) Other comprehensive income-six months ended June 30, 1998$ 547,365
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131 requires publicly-held companies to report financial and other information about key revenue-producing segments of the entity for which such information is available and is utilized by the chief operation decision maker. Specific information to be reported for individual segments includes profit or loss, certain revenue and expense items and total assets. A reconciliation of segment financial information to amounts reported in the financial statements would be provided. SFAS No. 131 is effective for the Company in 1998 and will not have an impact on the Company's financial position or results of operation. In February, 1998 the FASB issued SFAS No. 132, Employers' Disclosure about Pensions and Other Post Retirement Benefits. This statement revises employers' disclosures about pension and other post retirement benefit plans. It does not change the measurement or recognition of these plans. The statement is effective for the Company in 1998 and will not impact the Company's financial position and results of operations. 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 or banks) to recognize all derivatives as either assets or liabilities, 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 is effective for all fiscal quarters beginning January 1, 2000 for calendar year (companies or banks). Earlier adoption, however, is permitted. At the adoption of SFAS 133 on the (Company's or Bank's) consolidated financial statements. Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operation Total assets at June 30, 1998 were $593.1 million, which represents a $44.1 million or 8.0% increase since the beginning of the year. The growth which has taken place during the first six months of this year is reflected primarily in the securities and loan portfolios which have increased $24.4 million and $22.0 million respectively. The Available for Sale segment of the securities portfolio totaled $210.6 million as compared to $185.3 million at the beginning of the year, an increase of 13.7%. At amortized cost, increases in Federal Agency Bonds ($21.4 million), Corporate Bonds ($7.5 million) and equity securities ($403 thousand) were somewhat offset by a $4.2 million decrease in Municipal Bonds. The allowance valuation for Available for Sale securities has increased $911 thousand since year end due to the strong performance of our equities portfolio. The Held to Maturity segment of the portfolio consisting primarily of Municipal Obligations totaled $8.4 million at June 30, 1998 versus $9.2 million at the beginning of the year. Amortized cost and fair value, maturity duration, and unrealized gains and losses for the components in each of the Available for Sale and Held to Maturity categories of the securities portfolio at June 30, 1998 are set forth in the following tables:
AVAILABLE FOR SALE HELD TO MATURITY Amortized Fair Amortized Fair Cost Value Cost Value U.S. Treasury and other U.S. Govt. Agencies $115,036,510$115,137,340 $ - $ - Mtg. Backed Securities 54,438,951 54,893,677 - - Obligations of states and Political subdivisions 21,117,81221,322,557 8,292,095 8,292,095 Other bonds and notes 7,620,268 7,640,625 64,490 64,490 Corporate Stocks 3,861,995 11,621,567 - - $202,075,536$210,615,766 $ 8,356,585 $ 8,356,585
The carrying value and weighted average yields based on amortized cost by years to maturity for securities available for sale as of June 30, 1998 are as follows (excluding corporate stocks):
Maturing Within One Year After One, Within Five Amount Yield Amount Yield U.S. Treasury and other U.S. Government Agencies$ 24,606,7306.47% $ 55,818,595 6.15% Mortgage Backed Securities - - 2,779,287 6.69% Obligations of states and political subdivisions 5,420,621 4.69% 7,071,429 4.71% Other bonds and notes - - 2,503,125 6.25% Total $ 30,027,351 6.15% $ 68,172,436 6.03%
Maturing After Five, Within Ten After Ten Years Amount Yield Amount Yield U.S. Treasury and other U.S. Government Agencies$ 34,712,0156.61% $ - - Mortgage Backed Securities - - 52,114,390 7.35% Obligations of states and political subdivisions 4,974,284 4.47% 3,856,223 4.94% Other bonds and notes 2,637,500 6.31% 2,500,000 6.44% Total $ 42,323,799 6.34% $ 58,470,613 7.15%
Mortgage-backed securities are expected to have shorter average lives than their contractual maturities as shown above, because borrowers may repay obligations with or without call or prepayment penalties. The amortized cost and weighted average yields by years to maturity for securities held to maturity as of June 30, 1998 are as follows:
Maturing Within One Year After One, Within Five Amount Yield Amount Yield Obligations of states and political subdivisions $ 5,635,238 3.92% $ 1,336,678 5.03% Other bonds and notes - - - - Total Bonds $ 5,635,238 3.92% $ 1,336,678 5.03%
Maturing After Five, Within Ten After Ten Years Amount Yield Amount Yield Obligations of states and political subdivisions $ 1,320,179 3.97% $ - - Other bonds and notes 64,490 8.25% - - Total $ 1,384,669 4.17% $ - -
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 June 30, 1998 in either the Available for Sale or Held to Maturity categories. Gross unrealized gains and gross unrealized losses on securities Available for Sale were as follows:
AVAILABLE FOR SALE Unrealized Unrealized Gains Losses U.S. Treasury and other U.S. Govt. Agencies $ 279,088 $ 178,258 Mtg. Backed Securities 478,192 23,466 Obligations of states and Political subdivisions 233,961 29,216 Other bonds and notes 20,357 - Corporate Stocks 7,759,572 - $ 8,771,172 $ 230,940
Realized net gains on sales of securities Available for Sale for the six-month period ended June 30, 1998 were $147,395 as compared to $31,544 through June 30, 1997. Included in the Corporate Stocks component in the above tables are 51,222 shares of SLM Holding Corp., formerly known as Student Loan Marketing Association ("Sallie Mae") at a cost basis of $4,686 and fair value of $2,509,878. These shares were acquired as preferred shares (a permitted exception to the U.S. 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 June 30, 1998, the Bank's equity portfolio held listed securities totaling $89,538 at cost with a total fair value of $5,318,192. These shares were acquired prior to the enactment of the Banking Act of 1933. Other equities included in the bank portfolio are 9,964 shares of Federal Reserve Bank and 22,006 shares of the Federal Home Loan Bank of New York valued at $498,200 and $2,200,600 respectively. Management has no current plans for selling these securities. In total, loan balances have increased $22.0 million or 7.4% since the beginning of the year as loan demand in the commercial, consumer and mortgage segments has been strong throughout the second quarter. The commercial portfolio has grown by $16.3 million or 15.9%. Included in this growth is the purchase of a $9.2 million block of loans during the second quarter. Consumer loans have increased $2.4 million or 2.1% as a result of strong demand in indirect auto financing. The total mortgage portfolio has grown by $3.3 million or 4.1% and the activity continues to be strong. Total deposits at June 30, 1998 were $471.8 million as compared to $451.0 million at the beginning of the year, an increase of $20.8 million or 4.6%. Public fund balances were up $22.4 million with personal and non- personal balances increasing by $635 thousand. The above were somewhat offset by a $2.2 million decrease in official checks outstanding. Of the $26.9 million increase in securities sold under agreements to repurchase, $24.5 million is related to term repurchase agreements with the Federal Home Loan Bank used to leverage the purchase of Federal Agency Bonds as well as a portion of the $9.2 million loan purchase made during the second quarter. Net earnings for the second quarter were $1.632 million as compared to $1.562 million for the second quarter of 1997, a 4.5% increase. Net earnings per share for the quarter increased by $0.02 or 5.3% when compared to last year. While gains were seen in both net interest income and other operating income, they were offset by a $279 thousand or 5.7% increase in operating expenses. The major factors associated with this were increased expenses related to Other Real Estate Owned (OREO) and health insurance costs. While pre-tax earnings were $69 thousand lower than last years, our income tax expense decreased by $139 thousand as a result of tax minimization strategies implemented during the quarter. Net earnings for the six month period ended June 30, 1998 were $3.381 million, a $341 thousand or 11.2% increase over last years six month results. Net earnings per share for the six month period were $0.82 versus $0.73 the prior year, an increase of 12.3% on 20,949 fewer average shares outstanding. Earnings for the first six months were enhanced by a $116 thousand increase in realized gains on securities transactions. In addition to the above, earnings for the first six months of 1998 have been positively impacted by a $204 thousand increase in net interest income, reflective of a $27.3 million increase in average earning assets, as well as a $304 thousand increase in other operating income. The primary factors influencing this increase are higher levels of fiduciary income ($209 thousand), Mastercard and Visa merchant discount fees ($47 thousand), and service charge income ($43 thousand). Operating expenses for the first six months of 1998 are $296 thousand or 3.0% higher than a year ago. As noted above, the major factors influencing this increase were higher expenses related to Other Real Estate Owned (OREO) and health insurance. While pre- tax income has improved by $327 thousand, the income tax expense for the first six months of 1998 is $14 thousand lower due to tax minimization strategies implemented during the second quarter. As indicated on the Condensed Consolidated Statement of Cash Flows, cash and cash equivalents have decreased $3.0 million since the beginning of the year. In addition to cash provided by operating activities ($3.7 million), other primary sources of cash flow during the six month period ended June 30, 1998 included proceeds from the sale and maturity of investment securities ($34.7 million), an increase in deposit accounts ($20.7 million) and an increase in securities sold under agreement to repurchase ($26.9 million). Cash proceeds generated from the above sources have been used primarily to fund the purchase of investment securities ($58.1 million), the increase in loans, net of repayments ($23.3 million), the payment of cash dividends ($1.3 million) and the repayment of overnight advances from the Federal Home Loan Bank ($6.3 million). On May 13, 1998, the shareholders of the Company approved an increase in the authorized number of shares from 3,000,000 to 10,000,000 and a reduction in par value from $5.00 to $0.01 per share. On that same date, the Board of Directors approved a 2 for 1 stock split in the form of a 100% stock dividend resulting in an increase in the number of shares issued from 2,150,067 to 4,300,134. During the six months ended June 30, 1998, the Company acquired 15,582 Treasury shares at an average price of $21.50 per share (adjusted for the above mentioned split). No treasury shares have been sold thus far in 1998. During the quarter, the Company declared a cash dividend of $0.17 per share, an increase of 9.7% over the first quarter dividend of $0.155 adjusted for the stock split. Based upon loans outstanding, past experience, as well as an ongoing review of the risk inherent in our loan portfolio, the loan loss provision for the first six months of 1998 was $400 thousand as compared to $450 thousand one year ago. At 239% of non-performing loans and 1.35% of total loans, the Allowance for Loan Loss is viewed by management as adequate relative to risk. Non-performing loans at June 30, 1998 constituted 0.57% of total loans. Changes in the allowance for loan losses for the six months ended June 30, 1998 is as follows:
June 30, 1998 Amount (000's) Balance at beginning of period $ $ 4,145 Charge-offs: Domestic: Commercial, financial and agricultural 13 Commercial mortgages 0 Residential mortgages 5 Consumer loans 284 $ 302 Recoveries: Domestic: Commercial, financial and agricultural $ 16 Commercial mortgages 0 Residential mortgages 0 Consumer loans 56 $ 72 Net charge-offs $ 230 Additions charged to operations 400 Balance at end of period $ 4,315 Ratio of net charge-offs during the period to average loans outstanding during the period .08%
Included in the allowance for loan losses at June 30, 1998 is an allowance for impaired loans of $218 thousand versus $239 thousand at the beginning of the year. The total recorded investment in these loans at June 30, 1998 and December 31,1997 was $1.084 million and $951 thousand respectively. Management distinguishes between impaired and non-accrual loans as follows: Impaired Loans - A loan would be considered impaired when it is probable that after having considered current information and events regarding the borrower's ability to repay their obligations, the corporation will be unable to collect all amounts due according to the contractual terms of the loan agreement. Non-Accrual Loans - A loan is placed on non-accrual when it becomes past due and is referred to legal counsel, or in the case of a commercial loan which becomes 90 days delinquent, or in the case of a consumer loan (not guaranteed by a government agency) or a real estate loan which becomes 120 days delinquent unless, because of collateral or other circumstances, it is deemed to be collectible. When placed on non-accrual, previously accrued interest is reversed. Loans may also be placed in non-accrual if management believes such classification is warranted for other reasons. At June 30, 1998, the allocation of the allowance for loan losses is as follows:
Reported Period June 30, 1998 Balance at end of period applicable to: Percent of Loans in each Amount Category to Total Loans Domestic: Commercial, financial and agricultural 848,605 37.24% Commercial mortgages 24,064 1.79% Residential mortgages 24,506 24.31% Consumer loans 607,872 36.66% Unallocated: 2,810,067 N/A Total $4,315,114 100.00%
For the periods ended June 30, 1998 and December 31, 1997, the following table summarized the Company's non-accrual and past due loans:
Amounts (000's) June 30, 1998 December 31, 1997 Non-accrual loans $ 854 $ 930 Accruing loans past due$ 955 $ 688 90 days or more
At June 30, 1998, the Company has no commercial loans for which payments are presently current but the borrowers are currently experiencing severe financial difficulties. At June 30, 1998, no loan concentrations to borrowers engaged in the same or similar industries exceeded 10% of total loans and the Corporation has no interest-bearing assets other than loans that meet the non-accrual, past due, restructured or potential problem loan criteria. On June 30, 1998, the Company's consolidated leverage ratio was 9.28%. The Tier I and Total Risk Adjusted Capital ratios were 15.28% and 16.53%, respectively. Significant Issue - Year 2000 During 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 current century, have been programmed with two digit reference to each year. Such hardware and software, if not upgraded by January 1, 2000, may become useless. Management is undergoing a five phase project to respond to this issue, with major emphasis upon identifying all applications and data bases supporting the Bank's mission critical applications. The five phase are awareness, assessment, renovation, validation and implementation, and will seek to neutralize not only the Bank's vulnerability, but to determine the financial capacity of its vendors, determine alternate vendors, and evaluate the capacity of its customers to respond to this challenge. A committee continues to direct the Company's Year 2000 activities under the framework of the FFIEC's Five Step Program. Testing of critical applications has begun and is expected to be substantially completed by year end 1998, with testing of other non-critical applications expected to be completed by march 31, 1999. The Company has recently begun evaluating Year 2000 readiness of its commercial loan applicants as part of the loan underwriting process and is calling upon major existing borrowers to assess their readiness and identify potential problems. It is expected that costs associated with Year 2000 readiness including hardware and software upgrades as well as costs of testing will be approximately $200,000. Interest Rate Risk The company realizes a major source of income by acting as intermediary between borrowers and savers. The differential or spread between interest earned on earning assets, primarily loans and investments, and the interest paid to depositors is affected with changes to market interest rates. Additionally, because of assumptions made to the Company's loan and investment portfolios and to its deposit base, changes in interest rates can materially affect the projected maturities of these balance sheet classes and thus alter the Company's sensitivity to future changes in interest rates. The Bank's Asset/Liability Committee (ALCO) has the strategic responsibility for setting the policy guidelines on acceptable interest rate risk exposure. The ALCO is made up of the chief executive officer, executive vice presidents, senior lending officer, senior marketing officer, financial officer and others representing key functions. All guidelines set by this committee are board approved. The ALCO's primary focus is on maintaining consistent growth in net interest income with an acceptable level of volatility as a result of changes to interest rates. As of June 30,1998 the exposure to changing interest rates is within the guidelines established by the ALCO. The Company uses an industry standard earnings simulation model as its primary method to identify and manage its interest rate risk profile. The model is based on projected cash flows using historical data for all financial instruments. Also incorporated into the model are assumptions of deposit rates and balances in relation to changes in interest rates. These assumptions are based on internal historical data. In recent years core deposits (NOW accounts, Insured Money Market Accounts and Savings accounts) have not been re-priced with movements of interest rates in the negotiable securities markets. The ALCO recognizes that the assumptions made are inherently uncertain. The ALCO uses static gap analysis as a secondary method of identifying and managing the Company's interest rate risk profile. Gap analysis measures the difference between the assets and liabilities re-pricing and maturing within specific time periods, called buckets. A positive gap indicates more rate sensitive assets are due to either re-price or mature than rate sensitive liabilities in a specific bucket. This would indicate that the Company should have rising earnings in periods of rising interest rates and falling earnings in periods of falling rates. The ALCO recognizes the limitations of static gap analysis. Primarily it does not take into account the effect of interest rate movements and the competitive market forces on the re-pricing and maturity characteristics of interest-earning assets and interest-bearing liabilities. For these reasons, and for the recent practicality of using earnings simulation models gap analysis has fallen out of favor with the risk management community. Lastly, the ALCO monitors the expected fluctuation of the Company's market value of equity with changes to interest rates. Appropriate risk limits have been established to protect the bank's shareholders in the advent of adverse changes to interest rates, and as of June 30, 1998 exposure to changing interest rates is within the risk limits established. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Applicable Exhibits (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, is 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 to April 8, 1998. EXHIBIT A (27) Financial Data Schedule (EDGAR version only) (b) Reports on Form 8-K The registrant filed one report on Form 8-K during the quarter ended June 30, 1998. The report dated May 14, 1998 filed required information relating to the shareholder approved increase in authorized number of shares from 3,000,000 to 10,000,000, a reduction in par value from $5.00 to $0.01 per share and a 2 for 1 stock split in the form of a 100% stock dividend. FORM 10 - Q QUARTERLY REPORT EXHIBIT INDEX FOR PERIOD ENDING JUNE 30, 1998 CHEMUNG FINANCIAL CORPORATION ELMIRA, NEW YORK _____________________________ EXHIBIT A Amended Bylaws Effective April 8, 1998 (A copy of the Bylaws exhibit filed with the Securities and Exchange Commission may be obtained upon request by writing to the registrant's Corporate Secretary.) CHEMUNG FINANCIAL CORPORATION BY-LAWS Amended to April 8, 1998 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 receive 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 nineteen (19). 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 transac- tion 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 share- holders entitled to vote thereon, and such contract or transaction is ap- proved 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. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned there to duly authorized. CHEMUNG FINANCIAL CORPORATION DATE: August 11, 1998 /s/ Jan P. Updegraff Jan P. Updegraff President & CEO DATE: August 11, 1998 /s/ John R. Battersby Jr. John R. Battersby Jr. Treasurer EX-27 2
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S UNAUDITED QUARTERLY FINANCIAL STATEMENTS AND DISCLOSURES FOR THE PERIOD ENDED JUNE 30, 1998 AS PRESENTED IN ITS SECOND QUARTER 1998 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND DISCLOSURES. 1,000 6-MOS DEC-31-1998 JUN-30-1998 29,610 1,325 500 0 210,616 8,357 8,357 318,972 4,315 593,079 471,762 36,306 11,121 10,000 0 0 43 63,847 593,079 13,504 6,245 424 20,173 7,598 8,551 11,622 400 147 10,114 4,944 3,381 0 0 3,381 .82 .82 4.54 854 955 0 0 4,145 302 72 4,315 1,505 0 2,810
-----END PRIVACY-ENHANCED MESSAGE-----