CHEMUNG FINANCIAL CORP
For the period ended Dec 31, 2023. Filed Mar 13, 2024.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2023 · Filed Mar 13, 2024
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
For the fiscal year ended December 31, 2023 OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|
For the transition period from _______________ to _____________
Commission File Number 001-35741
CHEMUNG FINANCIAL CORP ORATION
(Exact name of registrant as specified in its charter)
| New York | 16-1237038 |
|---|---|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| One Chemung Canal Plaza, Elmira, New York | 14901 |
| (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: | ||
|---|---|---|
| Title of each class | Trading Symbol | Name of each exchange on which registered |
| Common Stock, Par Value $0.01 Per Share | CHMG | Nasdaq Stock Market, LLC |
| Securities registered pursuant to Section 12(g) of the Act: None | ||
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐No ☒
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☒ | Non-accelerated filer | ☐ | Smaller Reporting Company | ☒ | Emerging Growth Company | ☐ |
|---|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐No ☒
Based upon the closing price of the registrant's Common Stock as of June 30, 2023, the aggregate market value of the voting stock held by non-affiliates of the registrant was $145,072,803.
As of March 1, 2024, there were 4,750,674 shares of Common Stock, $0.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on June 4, 2024 are incorporated by reference into Part III, Items 10, 11, 12, 13, and 14 of this Form 10-K.
CHEMUNG FINANCIAL CORPORATION
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2023
| PART I | 6 | |
|---|---|---|
| Item 1. | Business | 6 |
| Item 1A. | Risk Factors | 20 |
| Item 1B. | Unresolved Staff Comments | 30 |
| Item 1C. | Cybersecurity | 30 |
| Item 2. | Properties | 31 |
| Item 3. | Legal Proceedings | 33 |
| Item 4. | Mine Safety Disclosures | 33 |
| PART II | 34 | |
| Item 5. | Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 34 |
| Item 6. | Reserved | 35 |
| Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 36 |
| Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | 67 |
| Item 8. | Financial Statements and Supplementary Data | 68 |
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 69 |
| Item 9A. | Controls and Procedures | 69 |
| Item 9B. | Other Information | 69 |
| Item 9C. | Disclosure Regarding Foreign Jurisdictions That Prevent Inspections | 69 |
| PART III | 70 | |
| Item 10. | Directors, Executive Officers and Corporate Governance | 70 |
| Item 11. | Executive Compensation | 70 |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management, and Related Stockholder Matters | 70 |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 70 |
| Item 14. | Principal Accountant Fees and Services | 70 |
| PART IV | 71 | |
| Item 15. | Exhibits and Financial Statement Schedules | 71 |
| Index to Consolidated Financial Statements | 73 | |
| Report of Independent Registered Public Accounting Firm-Crowe LLP | F-1 | |
| SIGNATURES | F-59 |
Some of the information contained in this report concerning the markets and industry in which we operate is derived from publicly available information and from industry sources. Although we believe that this publicly available information and information provided by these industry sources are reliable, we have not independently verified the accuracy of any of this information.
To assist the reader, the Corporation has provided the following list of commonly used abbreviations and terms included in Parts I through IV.
Abbreviations
| ACL | Allowance for Credit Losses |
|---|---|
| AFS | Available for sale securities |
| ALCO | Asset-Liability Committee |
| AOCI | Accumulated Other Comprehensive Income |
| ASC | Accounting Standards Codification |
| ASU | Accounting Standards Update |
| Bank | Chemung Canal Trust Company |
| Basel III | The Third Basel Accord of the Basel Committee on Banking Supervision |
| BHCA | Bank Holding Company Act of 1956 |
| Board of Directors | Board of Directors of Chemung Financial Corporation |
| BOLI | Bank Owned Life Insurance |
| CAM | Common area maintenance charges |
| CARES Act | Coronavirus Aid, Relief, and Economic Security Act |
| CAPM | Capital Asset Pricing Model |
| CBLR | Community Bank Leverage Ratio |
| CDARS | Certificate of Deposit Account Registry Service |
| CDO | Collateralized Debt Obligation |
| CECL | Current Expected Credit Loss |
| CFPB | Consumer Financial Protection Bureau |
| CFS | CFS Group, Inc. |
| Corporation | Chemung Financial Corporation |
| COVID-19 | Coronavirus disease 2019 |
| CRA | Community Reinvestment Act |
| CRM | Chemung Risk Management, Inc. |
| DIF | Deposit Insurance Fund |
| Dodd-Frank Act | The Dodd-Frank Wall Street Reform and Consumer Protection Act |
| ECOA | Equal Credit Opportunity Act |
| EPS | Earnings per share |
| Exchange Act | Securities Exchange Act of 1934 |
| FACT Act | Fair and Accurate Credit Transactions Act of 2003 |
| FASB | Financial Accounting Standards Board |
| FCRA | Fair Credit Reporting Act |
| FDIA | Federal Deposit Insurance Act |
| FDIC | Federal Deposit Insurance Corporation |
| FFIEC | Federal Financial Institution Examination Council |
| FHLBNY | Federal Home Loan Bank of New York |
| FINRA | Financial Industry Regulatory Authority |
| FOFC | Fort Orange Financial Corporation |
| FRB | Board of Governors of the Federal Reserve System |
| FRBNY | Federal Reserve Bank of New York |
| Freddie Mac | Federal Home Loan Mortgage Corporation |
| FTC | Federal Trade Commission |
|---|---|
| GAAP | U.S. Generally Accepted Accounting Principles |
| GLB Act | Gramm-Leach-Bliley Act |
| HTM | Held to maturity securities |
| ICS | Insured Cash Sweep Service |
| IPS | Investment Policy Statement |
| LIBOR | London Interbank Offered Rate |
| MD&A | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| NAICS | North American Industry Classification System |
| N/M | Not meaningful |
| NYSDFS | New York State Department of Financial Services |
| OPEB | Other postemployment benefits |
| OREO | Other real estate owned |
| PCI | Purchased credit impaired |
| Regulatory Relief Act | The Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 |
| RESPA | Real Estate Settlement Procedures Act |
| Riegle-Neal Act | Riegle-Neal Interstate Banking and Branching Efficiency Act |
| ROA | Return on average assets |
| ROE | Return on average equity |
| RWA | Risk-weighted assets |
| SOFR | Secured Overnight Financing Rate |
| SBA | Small Business Administration |
| SEC | U.S. Securities and Exchange Commission |
| Security Guidelines | Interagency Guidelines Establishing Information Security Standards |
| Securities Act | Securities Act of 1933 |
| Sarbanes-Oxley | Sarbanes-Oxley Act of 2002 |
| Tax Act | Tax Cuts and Jobs Act of 2017 |
| TDRs | Troubled debt restructurings |
| USA PATRIOT Act | Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 |
| WMG | Wealth Management Group |
Terms
| Accumulated benefit obligation | An approximate measure of the pension plan liability, which is based on the assumption that the pension plan is to be terminated immediately and does not consider any future salary increases. |
|---|---|
| Allowance for Credit Losses | Replaces the Allowance for Loan and Lease Losses as the contra asset account valuating the lifetime amount the Corporation anticipates will be unrecoverable from assets with credit risk. The ACL conforms with CECL requirements as outlined in ASU 2016-13, and was implemented by the Corporation January 1, 2023. |
| Allowance for credit losses to total loans | Represents period-end allowance for credit losses divided by retained loans. |
| Assets under administration | Represents assets that are beneficially owned by clients and all investment decisions pertaining to these assets are also made by clients. |
| Assets under management | Represents assets that are managed on behalf of clients. |
| Basel III | A comprehensive set of reform measures designed to improve the regulation, supervision, and risk management within the banking sector. The reforms require banks to maintain proper leverage ratios and meet certain capital requirements. |
| Benefit obligation | Refers to the projected benefit obligation for pension plans and the accumulated postretirement benefit obligation for OPEB plans. |
| Capital Bank | Division of Chemung Canal Trust Company located in the “Capital Region” of New York State and includes the counties of Albany, Saratoga, & Schenectady. |
|---|---|
| Captive insurance company | A company that provides risk-mitigation services for its parent company. |
| CDARS | Product involving a network of financial institutions that exchange certificates of deposits among members in order to ensure FDIC insurance coverage on customer deposits above the single institution limit. Using a sophisticated matching system, funds are exchanged on a dollar-for-dollar basis, so that the equivalent of an original deposit comes back to the originating institution. |
| Collateralized debt obligation | A structured financial product that pools together cash flow-generating assets, such as mortgages, bonds, and loans. |
| Collateralized mortgage obligations | A type of mortgage-backed security with principal repayments organized according to their maturities and into different classes based on risk. The mortgages serve as collateral and are organized into classes based on their risk profile. |
| Dodd-Frank Act | The Dodd-Frank Act was enacted on July 21, 2010 and significantly changed the bank regulatory landscape and has impacted and will continue to impact the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act requires various federal agencies to adopt a broad range of new rules and regulations, and to prepare various studies and reports for Congress. |
| Economic Growth, Regulatory Relief, and Consumer Protection Act | The Economic Growth, Regulatory Relief, and Consumer Protection Act was signed on May, 24 2018 and repeals or modifies certain provisions to the Dodd-Frank Act and will ease certain regulations on all but the largest banks. |
| Fully taxable equivalent basis | Income from tax-exempt loans and investment securities that have been increased by an amount equivalent to the taxes that would have been paid if this income were taxable at statutory rates; the corresponding income tax impact related to tax-exempt items is recorded within income tax expense. |
| GAAP | Accounting principles generally accepted in the United States of America. |
| Holding company | Consists of the operations for Chemung Financial Corporation (parent only). |
| ICS | Product involving a network of financial institutions that exchange interest-bearing money market deposits among members in order to ensure FDIC insurance coverage on customer deposits above the single institution limit. Using a sophisticated matching system, funds are exchanged on a dollar-for-dollar basis, so that the equivalent of an original deposit comes back to the originating institution. |
| Loans held for sale | Residential real estate loans originated for sale on the secondary market with maturities from 15-30 years. |
| Long term lease obligation | An obligation extending beyond the current year, which is related to a long term capital lease that is considered to have the economic characteristics of asset ownership. |
| Mortgage-backed securities | A type of asset-backed security that is secured by a collection of mortgages. |
| Municipal clients | A political unit, such as a city, town, or village, incorporated for local self-government. |
| N/A | Data is not applicable or available for the period presented. |
| N/M | Data is not meaningful in the context presented. |
| Non-GAAP | A calculation not made according to GAAP. |
| Obligations of state and political subdivisions | An obligation that is guaranteed by the full faith and credit of a state or political subdivision that has the power to tax. |
| Obligations of U.S. Government | A federally guaranteed obligation backed by the full power of the U.S. government, including Treasury bills, Treasury notes and Treasury bonds. |
| Obligations of U.S. Government sponsored enterprise obligations | Obligations of agencies originally established or chartered by the U.S. government to serve public purposes as specified by the U.S. Congress; these obligations are not explicitly guaranteed as to the timely payment of principal and interest by the full faith and credit of the U.S. government. |
| OREO | Represents real property owned by the Corporation, which is not directly related to its business and is most frequently the result of a foreclosure on real property. |
| Political subdivision | A county, city, town, or other municipal corporation, a public authority, or a publicly-owned entity that is an instrumentality of a state or a municipal corporation. |
| Pre-provision profit/(loss) | Represents total net revenue less non-interest expense, before income tax expense (benefit). The Corporation believes that this financial measure is useful in assessing the ability of a bank to generate income in excess of its provision for credit losses. |
|---|---|
| Projected benefit obligation | An approximate measure of the pension plan liability, which is based on the assumption that the plan will not terminate in the near future and that employees will continue to work and receive future salary increases. |
| Regulatory Relief Act | The Regulatory Relief Act was signed on May, 24 2018 and repeals or modifies certain provisions to the Dodd-Frank Act and will ease certain regulations on all but the largest banks. |
| RWA | Risk-weighted assets, which is used to calculate regulatory capital ratios, consist of on- and off-balance sheet assets that are assigned to one of several broad risk categories and weighted by factors representing their risk and potential for default. On-balance sheet assets are risk-weighted based on the perceived credit risk associated with the obligor or counterparty, the nature of any collateral, and the guarantor, if any. Off-balance sheet assets such as lending-related commitments, guarantees, derivatives and other applicable off-balance sheet positions are risk-weighted by multiplying the contractual amount by the appropriate credit conversion factor to determine the on-balance sheet credit equivalent amount, which is then risk-weighted based on the same factors used for on-balance sheet assets. Risk-weighted assets also incorporate a measure for market risk related to applicable trading assets-debt and equity instruments. The resulting risk-weighted values for each of the risk categories are then aggregated to determine total risk-weighted assets. |
| SBA loan pools | Business loans partially guaranteed by the SBA. |
| Securities sold under agreements to repurchase | Sale of securities together with an agreement for the seller to buy back the securities at a later date. |
| Tax Act | The Tax Act was enacted on December 22, 2017 and amended the Internal Revenue Code of 1986. The legislation reduced the U.S. federal corporate income tax rate from 35 percent to 21 percent, with some related business deductions and credits being either reduced or eliminated. |
| TDR | A TDR was deemed to have occured when the Corporation modified the original terms of a loan agreement by granting a concession to a borrower that is experiencing financial difficulty. TDR accounting guidance was superseded by ASU 2022-02, effective January 1, 2023. The Corporation discloses and accounts for loan modifications that have a direct impact on contractual cash flows made to borrowers experiencing financial difficulty in accordance with ASU 2022-02. |
| Trust preferred securities | A hybrid security with characteristics of both subordinated debt and preferred stock which allows for early redemption by the issuer, makes fixed or variable payments, and matures at face value. |
| Unaudited | Financial statements and information that have not been subjected to auditing procedures sufficient to permit an independent certified public accountant to express an opinion. |
| WMG | Provides services as executor and trustee under wills and agreements, and guardian, custodian, trustee and agent for pension, profit-sharing and other employee benefit trusts, as well as various investment, financial planning, pension, estate planning and employee benefit administration services. |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.