Good day, ladies and gentlemen, and welcome to the Chemung Financial Corporation Annual Meeting of Shareholders Conference Call. All lines have been placed on a listen-only mode. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Dave Dalrymple, Chairman of the Board of Directors. Sir, the floor is yours.
Thank you. Welcome to our 190th annual stockholders meeting of Chemung Financial Corporation. I'm Dave Dalrymple, chairman of your board of directors. We appreciate you joining us today. We're happy to report on another very successful year for the company. We continue to offer a wide array of products and services that provide value to our customers in a way that demonstrates our respect and appreciation of their business. We recognize that providing a positive, rewarding work environment for our employees will be reflected in providing a positive experience for our customers. We live where we do business and provide significant contributions to help maintain and enhance the quality of life in the communities we serve. We are also very confident that the community banking model is necessary for a free and vital economy to function.
I now would like to turn the meeting over to our President and Chief Executive Officer, Anders Tomson.
Thank you, Dave. This afternoon, in addition to the formal business matters upon which shareholder action is required, I am pleased to report on our 2022 financial results. We appreciate your investment and support of our company, and hope that our discussions today meet your expectations. If you're attending today's meeting by phone and wish to view the slides, the formal presentation can be found on our website at chemungcanal.com. I'd like to remind you that some of the remarks made today contain forward-looking information and are therefore subject to the risks and uncertainties described in our SEC filings. First, I would like to introduce you to my fellow directors, identified on Slide 5 . In September, we welcomed the new directors to the Chemung Financial and Chemung Canal Trust Company boards. Mr. Joseph F.
Meade IV, President and CEO of Mercury Aircraft, headquartered in Hammondsport, New York, joined the board. Mr. Meade's strong executive leadership has been impactful in the boardroom, and I look forward to his continuing contributions. I personally appreciate all the directors' incredible efforts and steadfast support of our company. The official parties for today's meeting are proxies, Tom Whitaker and Jacob Aquilio. Inspectors of Elections, Katharine Rien and Monica Redosh, SEC Counsel, Ben Azoff, Luse Gorman. External auditors, Crowe LLP. The principal business of this annual meeting of shareholders is to elect four Directors for a term of three years each, to approve on a non-binding advisory basis the compensation of the named executive officers, also known as say on pay.
To ratify the appointment of Crowe LLP as the company's independent registered public accounting firm for the fiscal year ending December 31st, 2023. The board of directors set April 10th, 2023, as the date of record for this shareholders meeting. Pursuant to the bylaws, the board of directors has appointed Monica L. Redosh and Katharine S. Rien as the inspectors of election to serve at this meeting of shareholders. The oath of inspectors has been executed by the inspectors and received by the secretary. Therefore, I direct the oath of inspectors be affixed to the minutes of the meeting. At this time, I would ask the Corporate Secretary of Chemung Financial Corporation, Kathleen S. McKillip, to present the affidavit of mailing of the notice of availability and to report on the existence of a quorum for the meeting.
I present the affidavit of mailing, which states that the notice of availability was mailed beginning April 27th, to shareholders of record as of April 10th, 2023, which is the record date for shareholders entitled to notice of this meeting. In addition, I also present a list of the holders of record of the company's common stock as of the close of business on April 10th, 2023. Finally, I have been advised by the inspectors of election that at least a majority of the company's outstanding shares entitled to vote, are represented in person or by proxy at today's meeting. Since a majority of the company's shares are represented here today, a quorum is present and the meeting is duly convened.
Thank you. The report of the secretary on the existence of a quorum is accepted. I direct that the affidavit of mailing and the list of holders of record be filed with the records of the meeting. As in the past, the proxies will make, and second, a series of motions. I will entertain a motion to dispense with the reading of the minutes of the last meeting of shareholders held on June 7th, 2022.
I move to dispense with the reading of the minutes of the meeting of shareholders held June 7, 2022.
I second the motion.
You have heard the motion to dispense with the reading of the minutes. All in favor, please say aye.
Aye.
Aye.
Aye.
Any opposed, please say nay. Any abstentions? Motion is carried. The first item of business is the election of four Directors for a three-year term. A plurality of votes cast is required to elect each director nominee. Four of the Directors elected today will hold office until the 2026 annual meeting of shareholders, or until their successors are elected and qualified. As indicated in the company's proxy statement, the board of directors has nominated the following individuals for a three-year term: Richard E. Forrestel Jr., Stephen M. Lounsberry III, Anders M. Tomson, and G. Thomas Tranter Jr. The second item of business is to approve the compensation of the named executive officers, also known as the say on pay proposal.
The third item of business is the ratification of the appointment by the board of directors of Crowe LLP, as the company's independent registered public accounting firm for 2023. Is there anyone who has not voted, who wishes to, or whose proxy has not been collected? If you need a ballot, please let us know at this time, and we will provide you with one. We will now hear the inspector's reports of voting results. Mrs. Rien.
With respect to proposal 1, election of directors, each nominee received at least 2,578,937 votes.
Therefore, each nominee named in the proxy statement has been duly elected a director of the company.
With respect to proposal 2, approval of the compensation of the named executive officers and say on pay proposal, the voting results are as follows: for, 2,926,711, against, 15,826, and 15,890 abstained.
Therefore, proposal two has been approved.
With respect to proposal 3, the ratification of the appointment of Crowe LLP as the company's independent registered public accounting firm for 2023, the voting results are as follows: for, 3,715,963; against, 14,037; and 13,340 abstained.
Therefore, proposal 3 has been ratified. The business portion of this meeting is now concluded. I will now present a summary of the corporation's 2022 results. 2022 was a dynamic year. As a renewed sense of normalcy was emerging and the pandemic continued fading into the past, we proudly executed our community banking model and delivered record results for our shareholders. As of December 31st, 2022, our company's balance sheet had grown to $2.6 billion, as evidenced on Slide 7, while total loans and total deposits increased over 2021 to $1.8 billion and $2.3 billion, respectively. Total shareholder equity was $166.4 million at year-end 2022.
The company also received strong earnings in 2022, with net income of $28.8 million, or $6.13 a share. This represents the highest annual earnings and highest earnings per share in the bank's 190-year history, a year-over-year increase of 8.9% and 8.7%, respectively. The chart on Slide 9 not only illustrates these results, but it also illuminates an impressive pattern of EPS growth for the bank since 2019. Slides 10 and 11 depict another important upward trend as it relates to return on average assets and return on average equity. ROA of 1.15% and ROE of 15.93% both continue their positive trends.
As you can see on Slide 12, the corporation's earning assets continue their consistent upward trajectory over the past five years, increasing by 9.4% over 2021, to total $2.646 billion at year-end 2022. As mentioned previously, 2022 was a record year for earnings and earnings per share. Continued momentum in earnings has been a material component in total capital growth from 2018 to 2022. Total capital is composed of a combination of additional paid-in capital, treasury stock, retained earnings, and accumulated other comprehensive income or loss, commonly referred to as AOCI.
The material change in 2022 total capital was driven by 2022 earnings of $28.8 million, net of $5.8 million in dividends, adding $23 million to capital growth, offset by a $68.7 million decrease in AOCI. This reflects the impact of rising interest rates on the bank's Available-for-Sale securities portfolio fair value, a component of AOCI. The graph on Slide 14 highlights our key capital ratios. Our capital ratios continue to exceed regulatory standards, and our banking regulators consistently recognize us as a well-capitalized institution. average shares outstanding have continued to decline since 2019 due to the execution of our share repurchase plans and remain consistent through 2022.
Now, as I referenced at past annual meetings, despite being impacted by the pandemic, as were the broader market indices in financial sector, Chemung Financial stock regained its momentum in 2021, with a significant increase in stock price, well above that of peers' performance, and was able to continue that improvement going into 2022. Along with the renewed sense of positivity, 2022 also brought with it a new set of challenges. Budding inflation, increasing food and energy costs, the beginnings of an aggressive interest rate strategy by the FRB, and the Russian invasion of the Ukraine were just a few of the significant factors that created an uncertain outlook for our industry.
In spite of these various dynamics and pressures, supported by strong earnings, our stock performed consistently against peers, producing a total shareholder return of 1.42% in 2022. In 2022, the corporation continued its tradition of uninterrupted dividend payments, paying out approximately $5.8 million, or $1.24 per share. Going into 2022, there was much uncertainty around what challenges would emerge from the waning pandemic, especially as it pertained to the potential impact in the bank's lending and deposit arenas. I am pleased to say that despite the Paycheck Protection Program ending, lending was strong, and total loan originations increased slightly more than $200 million net of PPP loans over 2021. This represents another record for our corporation.
Lending increased 20% in 2022 across all business lines. Commercial lending led the majority of the growth, with indirect and residential lending close behind. Home equity and direct lending held steady. Residential mortgage production through year-end 2022 was down 32.2%, reflecting the discontinuation of the stimulus money and the impact of the increases to interest rates by the Fed. Despite the decrease, mortgage activity remains above that of pre-pandemic levels. Conversely, commercial loan balances grew to $1.25 billion by the end of 2022, an increase of 17.9%. As mentioned previously, organic loan production growth filled the space created by the slow disappearance of the PPP loan funds.
Both commercial and industrial and commercial real estate lending performed at record levels, accounting for most of the $200 million of growth in the portfolio over 2021, shown on Slide 27. I mentioned previously, 2022 marked the end of the Paycheck Protection Program, and although I speak of it in this past tense, I believe it is important to provide you with a final look at the significant level of assistance we were able to provide our communities during that unprecedented year. The bank funded 2,148 PPP loans over three rounds, disbursing a total of $273 million to businesses across our footprint. 60% of these loans were less than $50,000, and the median loan size was $20,833.
These dollars protected over 20,000 jobs locally and were crucial to keeping shuttered and hindered businesses alive. The PPP loans were made to customers and non-customers alike, and I can proudly say they've led to the addition of many new bank clients stemming from the positive experience with Chemung Canal and the PPP program. As you can see on Slide 29, non-performing assets rose 1.8% in 2022. The bank's long-term focus on reducing NPAs to total assets has resulted in continued improvement year-over-year to the credit quality metrics of the portfolio, bringing the percentage of NPAs to total assets at year-end to 0.32%. In 2022, we continued our focus on our core depository relationships. This strategy has yielded an important service model that permeates throughout our deposit franchise.
Deposit balances grew $171.8 million, an increase of 8%, to bring total deposits to just more than $2.3 billion. This organic deposit growth was key in helping to fund the record levels of loan originations in 2022, along with the bank's CDs and money market accounts that comprise the majority of the bank's deposit base. Our traditionally low-cost deposits were not immune to 2022's market forces. The corporation's cost of deposits rose to 0.3%. While consistent with peers, the bank's Cost of Funds accelerated through 2022, and a combination of deposits, Brokered CDs, and overnight borrowings was necessary to fund the aforementioned loan growth. Net interest margin increased in 2022 to 3.05%.
As predicted, the Fed's rate hikes had a positive impact on our 2022 net interest income. Asset sensitivity, in combination with a lag in the impact on deposit costs, prudent balance sheet management, and disciplined interest rate management, resulted in an increase of 13.1% over 2021. Yet another new record for the corporation at $74.2 million. Despite the market downturn experienced in 2022, the bank's wealth management group completed a very successful year. With $2.1 billion in assets under management, the established reputation of our wealth management group continues to contribute to the corporation's bottom line, with $10.3 million in fee income and many significant growth opportunities in the pipeline. Non-interest expense increased slightly in 2022.
Despite the increase, the bank's meticulous focus on efficiency has helped hold our key ratio of non-interest expense to average assets to a relatively stable level. Management remains very disciplined in maintaining the company's salary and related costs. Even under the current market pressures on the bank and the ever-increasing regulatory demands, we remain steadfast in managing our headcount, increasing in 2022 only by 3 FTEs, with an eye to filling the most vital and revenue-generating positions at the bank. Notably, through cost containment, balance sheet, and revenue growth, the corporation was able to maintain its record low efficiency ratio of 61.7% in 2022. I'm pleased to report that 2023 has started the new year strong, despite the continued rate increases by the Fed and the looming recessionary pressures.
First quarter earnings totaled $7.3 million or $1.54 per share. Loan production is on the rise yet again, with quarter one increase of 2.4%. Net interest income was up 19.6%. Most noticeably, non-performing loans have decreased 5.5%, speaking directly to the bank's strong credit quality. 2023 is likely to see more rate increases by the Fed, although how many more remain unknown. Elevated levels of inflation are unlikely to ebb in the near term. The bank will continue to execute its traditional community banking model and prepare itself to react swiftly and nimbly to any new market changes. We continue to refine our service and distribution platforms to meet the ever-changing needs of our customers.
Investments in our digital products in 2022 targeted the creation of a secure and frictionless customer experience that will help our clients better control, manage, invest, and protect their personal and business monies. As client demand for digital services evolve, our traditional branches remain relevant to our community bank approach. Our Clarence, New York branch completed its second year of operation in 2022. Total loans in Western New York have now surpassed $80 million, contributing significantly to the corporation's net interest income. The bank is committed to building a solid presence in this very important market. We look forward to exploring new options to make our products and services available there in 2023. Our commitment to our communities and stakeholders, as outlined in our corporate responsibility statement, evidences the company's strong commitment of support in our communities.
Measurable and long-term impacts across our footprint are key, and we will continue to be at the forefront of these efforts. Whether through corporate sponsorships and donations or through individual participation, our colleagues commit so much of their time enhancing the quality of life for their fellow citizens. Our employees have spent impactful hours volunteering and providing services in diverse organizations across our footprint. The bank continues to support those organizations that are essential within our communities. The impact of this effort is amazing, and I'm proud of our company -- that our company embraces this very important responsibility. Over our long history, the corporation has adapted to changes in the economy, regulatory environment, customer trends, and technology. We continue to evolve and remain an important resource for our clients and communities.
Our company has a strong capital base and a solid foundation for 2023. None of these results would have been possible without the contributions of our executive management team. These individuals, seen on Slide 53, have reliably stepped up to the challenge and delivered for our shareholders. They manage our major lines of business and functional operating areas. They not only oversee critical components of the Corporation, they also provide guidance and leadership across the entire franchise on a daily basis. They are broadly responsible for managing risk and ensuring the profitability of the Corporation. Their enthusiasm and professionalism is fundamental to our success, and we are very appreciative of their expertise. I'd also like to acknowledge the bank employees who retired during this past year, appearing on Slides 54 and 55.
Their dedication to our company has helped strengthen our past and prepare us for the future. We thank all of them and extend our best wishes for a happy and healthy retirement. Notably, on Slide 56, the executive management team is experiencing two significant retirements this year. In March of 2023, Pam Burns, former Director of Human Resources and our Chief Diversity Officer, retired after 30-plus outstanding years with the company. Pam held several different positions within the bank during her tenure and was promoted to Senior Vice President in 2013. Pam was succeeded by Monica Redosh. On June 30th, 2023, Karl Krebs, Executive Vice President, Chief Financial Officer, and Treasurer of the bank and the holding company, will officially trade in his abacus for a boat on a lake and begin his retirement.
Karl joined the bank in 2013 and has been a prudent manager of the corporation's finances for the last 10 years. Karl's successor has been selected and announced just last week, and he will begin in the CFO role on July 1st of this year. I heartily wish my two colleagues a most fulfilling and rewarding retirement. In our 190-year history, we have stood strong for our communities and served our constituents with pride and purpose. We remain confident in our business model and its ability to provide growth and value for all our stakeholders in 2023 and beyond. Our continued development of strategies and initiatives that will support the bank, our clients, and our communities will keep us prepared to react and pivot swiftly under any circumstances.
As we close out this year's annual meeting, 2022 was a year of tremendous activity and positive results. Our success was a direct result of the hard work and commitment of our colleagues, supported by the expert guidance and the dedication of the board of directors. On behalf of the board, management, and staff, thank you all for your continued investment and confidence in our great company. Thank you. I will now ask for a motion to adjourn this meeting.
I move that this meeting be adjourned.
I second the motion.
You have heard the motion to adjourn the meeting. All in favor, please say aye.
Aye.
Aye.
Any opposed, please say nay. Any abstentions? That motion is carried. The annual meeting of the corporation is now adjourned. Thank you all.
Thank you. This conference is now ended. We appreciate your participation. You may disconnect your lines at this time, and have a wonderful day.