Elmira Savings Bank
Annual Report 2012

Plain-text annual report

Elmira West Elmira Southport Horseheads Bi Big Flats Elmira Heights Corning Erwin Ithac Ithaca Commons South Meadow Triphamm Moravia Montour Falls Cortland Elmira West West Elmira Southport Horseheads Big Flats Elmira Heights Corning Erwin Ithaca Comm South Meadow Triphammer Moravia Monto Cortland Elmira West Elmira Southport Hors Big Flats Elmira Heights Corning Erwin Ithac Commons South Meadow Triphammer Mor Moravia Montour Falls Cortland Elmira West Elmira Heights Corning Erwin Ithaca Comm South Meadow Triphammer Moravia Monto Cortland Elmira West Elmira Southport Hors Big Flats Elmira Heights Corning Erwin Ithac 2012 Moravia Montour Falls Cortland Elmira West Annual Report Elmira Heights Corning Erwin Ithaca Comm Growing, Growing Strong! South Meadow Triphammer Moravia Monto Cortland Elmira West Elmira Southport Hors Our MissiOn The MissiOn Of elMira savings Bank is to provide above average returns to our shareholders while providing a broad range of financial services that meet the needs of the individuals, businesses, and organizations of our community. We will achieve this through our commitment to: • Consistent and superior quality service for our customers. • A culture that incents employees to excel personally and professionally. • Leadership in and support for our community. • Independence as a local community bank. The People’s Bank Growing, Growing Strong! Design PS Graphic Design, Elmira, NY Portrait PhotograPhy Tom Mike Photography selecTed financial daTa (in thousands, except for per share amounts) financial sTaTeMenT highlighTs 2012 2011 Assets $ 536,936 523,358 Loans (including loans held for sale) 381,275 348,824 $3,018 net income ($000) $5,029 $5,213 $4,833 $4,526 Allowance for loan losses Deposits Shareholders’ equity Net interest income Provision for loan losses Non-interest income Non-interest expense 3,740 3,299 409,565 381,729 66,909 15,089 463 6,050 12,944 Net income attributable to Elmira Savings Bank 5,213 Per share infOrM aTiOn Basic earnings per share $ Diluted earnings per share Book value per share Cash dividend per share selecTed raTiOs Return on average assets Return on average equity Shareholders’ equity to assets Dividend payout ratio Efficiency ratio 1.58 1.51 18.50 0.84 0.99% 7.92% 12.46% 53.16% 61.23% 64,615 15,550 668 4,727 12,202 5,029 1.45 1.41 17.92 0.71 1.00% 8.40% 12.35% 49.34% 60.18% 2008 2009 2010 2011 2012 Total assets ($000) $536,936 $523,358 $498,983 $499,839 $480,600 2008 2009 2010 2011 2012 Total net loans (including loans held for sale) ($000) $332,092 $307,616 $310,477 $381,275 $348,824 OTher selecTed daTa Number of offices Number of automated teller machines 15 13 13 10 Weighted average shares outstanding 2,277,545 2,253,452 Weighted average diluted shares outstanding 2,389,217 2,315,109 2008 2009 2010 2011 2012 Share and per share data have been adjusted to reflect the 5% stock dividend distributed December 28, 2012 and a 10% stock dividend paid on December 28, 2011. Elmira Savings Bank : 2012 AnnuAl RepoRt : Page 3 deposit growth ($000) dear sharehOlders, Non Interest Bearing Deposits Interest Bearing Deposits (other than CDs) Certificates of Deposit (CDs) $167,412 $170,332 $185,457 $192,823 $147,299 $148,163 $143,631 $155,298 $146,603 $136,469 $36,804 $37,880 $38,126 $52,641 $61,444 2008 2009 2010 2011 2012 efficiency ratio 73.26% 64.25% 60.78% 60.18% 61.23% 2008 2009 2010 2011 2012 nonperforming loans ($000) noncurrent loans & Ore1 to Total loans & Ore Peer comparison at december 31, 2012 $3,672 $3,861 3.19% 1.04% 2011 2012 Elmira Savings Bank Peers* 1 Noncurrent loans & ORE includes loans past due 90 days or more, nonaccrual loans, and other real estate owned * Peer group is FDIC-insured banks with assets of $300 million to $1 billion We are pleased to report another successful year for Elmira Savings Bank. For the year ended December 31, 2012, we reported $5.2 million of net income or $1.51 per diluted share. This represents the fifth consecutive year of record earnings. Our achievements are a direct reflection of the dedication of our Elmira Savings Bank team of employees and their desire to provide outstanding service to our entire customer base. Many of these individuals devote personal time and resources to many deserving organizations and causes throughout our region. We are proud of them and grateful for their earnest effort. An improvement in capital levels was accomplished primarily through earnings after cash dividends of $1.6 million. We achieved balance sheet growth by replacing $15 million of investment securities with $32 million of loan growth, and we replaced $16 million of borrowed funds with $28 million of deposits including $9 million of noninterest- bearing deposits. This strategic shift continues to improve the composition and strength of our balance sheet. Our disciplined approach to managing the overhead of the bank has enabled us to maintain an efficiency ratio in the 60% range from 2010 through 2012. We have accomplished this efficiency while continuing to invest in expanding convenient locations for our customers, training for employees, upgraded technology, and in new staff who will focus solely on risk management and consumer compliance. The stellar performance of our branch personnel is highlighted on the deposit growth chart. This chart demonstrates their competency to generate deposit growth against the headwinds of a prolonged low rate environment. Branch loan originations increased 77% from 2011 to 2012. Our branches are revenue generators, as well as deposit gatherers. In addition, two new locations were established during 2012. In the first quarter Page 4 : Elmira Savings Bank : 2012 AnnuAl RepoRt we opened a new location at 971 County Route 64, Big Flats, NY. This location is on one of the most highly trafficked roads in our market area. During 2012, 180 loans were originated out of this location. We closed our branch located in the nearby Arnot Mall and successfully transferred $24 million of deposits to this new location. In the third quarter of 2012 we opened a new branch on Lake Road in Elmira Heights, NY. This is the only key location in our home market of Chemung County where we did not have a branch. The existing bank branch building and renovation was acquired for an almost unbelievably low cost of less than $125,000. The added convenience including a drive- up window and ATM will be meaningful to existing customers who live or work in the Heights, and should help us draw new customers as well. In addition to these two new locations opened in 2012, we have leased an office in Erwin, NY, in Steuben County that will open in the first quarter of 2013. This township is home to Corning Inc.’s Sullivan Park Research and Development Center and is the planned location for future commercial and residential development by Steuben County economic development agencies. Our first Steuben County branch on Market Street in Corning reached critical mass of $35 million of deposits during 2012. The new Erwin branch will be a great extension of our existing presence in this market. Residential mortgage volume during 2012 totaled $162 million, an increase of 44% over record 2011 originations of $113 million. We continued to improve the infrastructure and product mix of this key line of business during the year. The results of this effort speak for themselves. We continue to anticipate that New York State will allow the permitting NEW Elmira Heights office NEW Erwin office of natural gas wells located in the Marcellus Shale. This action will create increased business potential across most of our footprint, which is ideally aligned with future drilling sites. Shareholders received a 5% stock dividend as well as dividends of $0.84 per share. With share price reaching $22.74 per common share at year’s end, total return for the year including price appreciation and dividends amounted to 51%. We are very enthusiastic about the prospects for Elmira Savings Bank in the years ahead and we remain committed to driving shareholder return through our focus on service to our customers, community, and employees. I would like to take this opportunity to extend my sincerest thanks to you, the shareholders, for your continued support of this wonderful organization. We are pleased to provide you with this report of progress and look forward to a successful 2013. Michael P. Hosey Vice Chairman of the Board President Chief Executive Officer george L. howell Chairman Emeritus F.M. Howell & Company We would like to recognize George L. Howell for his 20 years as a Director, of which he served eleven years as Chairman of the Board before his 2012 retirement. During his tenure the bank experienced significant balance sheet and market growth. Mr. Howell played a key role in the expansion of insider ownership to over 30%. We are pleased that Mr. Howell remains involved in his capacity as Chairman Emeritus. Elmira Savings Bank : 2012 AnnuAl RepoRt : Page 5 consolidated Balance sheets Elmira Savings Bank and Subsidiaries (in thousands, except for share and per share data) asseTs Cash and due from banks Federal funds sold and other short-term investments Total cash and equivalents Securities available for sale, at fair value Securities held to maturity - fair value of $5,853 at December 31, 2012 and $4,923 at December 31, 2011 Federal Reserve and Federal Home Loan Bank (FHLB) stock, at cost Loans held for sale Loans receivable Less: allowance for loan losses Net loans Premises and equipment, net Bank-owned life insurance Accrued interest receivable Intangible assets, net Goodwill Other real estate owned Other assets total assets liaBiliTies and sharehOlders’ eQuiTY Deposits Borrowings Other liabilities total liabilities sharehOlders’ eQuiTY Preferred stock, $1,000 liquidation value per issued share; 5,000,000 shares authorized; 24,063 shares issued at December 31, 2012 and at December 31, 2011 Common stock, $1 par value; authorized 5,000,000 shares; 2,454,840 shares issued at December 31, 2012 and 2,292,656 at December 31, 2011 Additional paid-in capital Retained earnings Treasury stock, at cost - 125,865 shares at December 31, 2012 and December 31, 2011 Accumulated other comprehensive income Total Elmira Savings Bank shareholders’ equity Noncontrolling interest total shareholders’ equity December 31, 2012 December 31, 2011 $ 39,641 684 40,325 66,875 5,521 9,178 3,167 378,108 3,740 374,368 7,947 11,988 1,529 316 12,320 125 3,277 $ 47,456 740 48,196 86,536 4,621 5,295 2,842 345,982 3,299 342,683 5,392 10,100 1,615 444 12,320 202 3,112 $ 536,936 $ 523,358 $ 409,565 54,000 6,462 470,027 $ 381,729 70,019 6,995 458,743 23,763 2,455 41,448 868 (3,548) 1,872 66,858 51 66,909 23,763 2,293 38,402 1,735 (3,548) 1,918 64,563 52 64,615 total liabilities and shareholders’ equity $ 536,936 $ 523,358 Page 6 : Elmira Savings Bank : 2012 AnnuAl RepoRt consolidated statements of income Elmira Savings Bank and Subsidiaries (in thousands, except for per share amounts) inTeresT and dividend incOMe Interest and fees on loans Interest and dividends on securities Taxable Non-taxable total interest and dividend income inTeresT eXPense Interest on deposits Interest on borrowings total interest expense Net interest income Provision for loan losses Years Ended December 31 2011 2010 2012 $ 18,114 $ 18,140 $ 18,185 2,111 760 3,140 820 3,681 822 20,985 22,100 22,688 3,712 2,184 5,896 15,089 463 3,850 2,700 6,550 15,550 668 4,564 3,205 7,769 14,919 515 net interest income after provision for loan losses 14,626 14,882 14,404 nOninTeresT incOMe Service fees Gain on sale of loans held for sale Net gain on sale of securities Other service fees Earnings on bank-owned life insurance Other total noninterest income nOninTeresT eXPense Salaries and benefits Net occupancy Equipment Marketing and public relations Professional fees Regulatory assessments Other total noninterest expense Income before income taxes Income taxes Net income Less: Net income attributable to noncontrolling interest 1,242 3,561 75 677 388 107 1,236 1,836 448 634 369 204 6,050 4,727 6,770 1,130 946 722 643 360 2,373 6,491 1,154 854 636 513 462 2,092 1,409 1,450 474 620 353 287 4,593 6,007 1,102 924 483 654 574 2,115 12,944 12,202 11,859 7,732 2,514 5,218 5 7,407 2,373 5,034 5 7,138 2,300 4,838 5 net income attributable to elmira savings Bank $ 5,213 $ 5,029 $ 4,833 Dividend on preferred stock Accretion of preferred stock discount 1,609 - 1,512 252 1,367 84 income available to common shareholders $ 3,604 $ 3,265 $ 3,382 Basic earnings per common share Diluted earnings per common share $ $ 1.58 1.51 $ $ 1.45 1.41 $ $ 1.51 1.49 Per share data has been restated to reflect a 5% stock dividend paid on December 28, 2012 and a 10% stock dividend paid on December 28, 2011. Elmira Savings Bank : 2012 AnnuAl RepoRt : Page 7 consolidated statements of comprehensive income Elmira Savings Bank and Subsidiaries (in thousands) net income OTher cOMPrehensive incOMe (lOss) Net unrealized holding gains (losses) on securities available for sale Tax benefit (expense) Realized securities gains included in net income Tax expense Years Ended December 31, 2012 2011 2010 $ 5,218 $ 5,034 $ 4,838 - - - (75 ) 29 (46 ) 2,014 (779 ) 1,235 (448 ) 173 (275 ) (184 ) 72 (112 ) (474 ) 183 (291 ) (403 ) other comprehensive income (loss), net of tax (46 ) 960 Comprehensive income $ 5,172 $ 5,994 $ 4,435 consolidated statements of shareholders’ equity Elmira Savings Bank and Subsidiaries (in thousands, except for share and per share amounts) Preferred Stock Common Stock Additional Paid-in Capital Retained earnings Treasury Stock Accumulated other comprehensive income (loss) Noncontrolling Interest Total Balance at December 31, 2011 $ 23,763 2,293 38,402 1,735 (3,548) 1,918 52 64,615 Net income Other comprehensive loss 5% stock dividend (110,417 shares) Cash in lieu of fractional shares resulting from a 5% stock dividend Stock based compensation expense Issuance of common shares (12,321 shares) Exercise of stock options, net (39,446 shares) Preferred stock repurchased - noncontrolling interest Cash dividend on preferred stock Cash dividend on common stock ($.84 per share) - - - - - - - - - - - - 110 - - 12 40 - - - - - 2,387 - 340 (12) 331 5,213 - (2,497) (7) - - - - - - - (1,609) (1,967) - - - - - - - - - - - (46) - - - - - - - - 5 - - - - - - 5,218 (46) - (7) 340 - 371 (1) (5) (1) (1,614) - (1,967) Balance at December 31, 2012 $ 23,763 2,455 41,448 868 (3,548) 1,872 51 66,909 Per share data has been restated to reflect the 5% stock dividend paid on December 28, 2012 and a 10% stock dividend paid on December 28, 2011. To the Board of directors and shareholders of elmira savings Bank and subsidiaries We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Elmira Savings Bank and subsidiaries (the “Bank”) as of December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows (not presented herein), for each of the three years in the period ended December 31, 2012, and in our report dated March 13, 2013, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated financial statements is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived. Wexford, Pennsylvania March 13, 2013 Page 8 : Elmira Savings Bank : 2012 AnnuAl RepoRt elMira savings Bank BO ard Of direc TOrs John r. alexander Corporate Secretary of the Board Sayles & Evans John Brand, iii Chairman of the Board Arnot Realty Corporation anthony J. Cooper President Arnot Health george L. howell Chairman Emeritus F.M. Howell & Company a. scott Welliver Chairman Chief Executive Officer Welliver McGuire, Inc. Kristin a. swain Executive Director Rockwell Museum of Western Art Michael P. hosey Vice Chairman of the Board President Chief Executive Officer Elmira Savings Bank Donald g. Quick, Jr. Retired Partner Mengel, Metzger, Barr & Co. LLP thomas M. Carr Executive Vice President Chief Operating Officer Elmira Savings Bank Katherine h. roehlke President Chief Executive Officer F.M. Howell & Company arie J. van den Blink Chairman Chief Executive Officer The Hilliard Corporation Marianne W. young President Market Street Trust Company The People’s Bank Elmira Savings Bank : 2012 AnnuAl RepoRt : Page 9 elMira savings Bank Officers MarkeT Price infOrM aTiOn eXecuTive Michael P. hosey President Chief Executive Officer thomas M. Carr Executive Vice President Chief Operating Officer shirley a. Weigand Assistant Secretary audiT and cOnTrOl edith B. Keebler Assistant Treasurer Joseph P. Klaiber Compliance Officer Jill M. McConnell Assistant Secretary cOllecTiOns tricia rennells Assistant Vice President finance Jason t. sanford Senior Vice President Chief Financial Officer John J. stempin Assistant Secretary Judy a. Woodruff Assistant Secretary huMan resOurces Bradley V. serva Vice President lending Kevin J. Berkley Senior Vice President gary o. short Senior Vice President tamara s. Pabis Vice President susan M. Cook Assistant Vice President Christopher Mekos Vice President Jennifer M. Murphy Assistant Secretary Carrie L. spencer Assistant Secretary amy Ward Assistant Vice President ManageMenT infOrMaTiOn sYsTeMs Joseph L. Walker Vice President Phillip J. Collins Assistant Vice President OPeraTiOns Margaret a. Phillips Vice President Frank P. spena, Jr. Assistant Secretary reTail services Donna J. tangorre Vice President Deborah L. adams Assistant Vice President Kimberly a. elliott Assistant Vice President Janette allen Assistant Treasurer ashley a. Case Assistant Treasurer Patricia L. Cobb Assistant Treasurer theresa a. emo Assistant Treasurer Lorenda D. gneo Assistant Treasurer Phylis a. Jensen Assistant Treasurer Debra s. Knowles Assistant Treasurer sara J. Meisner Assistant Treasurer advisOrY services, inc. Vincent Mazzarella Vice President The bank’s common stock was first offered in March 1985, and is now listed on the NASDAQ exchange under the symbol ESBK. The table below summarizes the high and low market price for the bank’s stock during 2012 and 2011. Quarters 2012 2011 High Low First 20.82 15.45 Second 20.46 16.83 Third 19.04 17.50 Fourth 23.65 18.48 High 16.02 14.93 15.29 16.19 Low 14.36 12.25 11.38 13.05 annuaL sharehoLDers’ Meeting The Annual Shareholders’ Meeting will be held at 10 a.m. on April 23, 2013 at the Clemens Center 207 Clemens Center Parkway Elmira, NY sharehoLDer inQuiries The bank’s transfer agent is: Registrar and Transfer Company 10 Commerce Drive Cranford, NJ 07016 (800) 525-7686 The bank’s Annual Report on Form 10-K will be furnished without charge upon written request to: Thomas M. Carr Executive Vice President Chief Operating Officer Elmira Savings Bank 333 E. Water Street Elmira, NY 14901 Page 10 : Elmira Savings Bank : 2012 AnnuAl RepoRt Elmira Savings Bank Offices in the Finger Lakes Region Finger Lakes region Moravia Cortland Loan Center Commons Ithaca Loan Center Triphammer South Meadow Montour Falls Erwin Big Flats Corning Horseheads Elmira Heights West Elmira Elmira Southport New York Pennsylvania The People’s Bank Main Office 333 East Water Street Elmira, NY 14902-9967 607-734-3374 hOrseheads 2149 Grand Central Avenue Horseheads, NY 14845 607-734-3374 Big flaTs 971 County Route 64 Big Flats, NY 14841 607-734-3374 elMira heighTs 2075 Lake Road Elmira, NY 14903 607-734-3374 iThaca lOan cenTer 301 East State Street Ithaca, NY 14850 607-257-3584 MOravia 142 Main Street Moravia, NY 13118 315-497-1300 cOMMOns 301 East State Street Ithaca, NY 14850 607-272-1111 MOnTOur falls* 401 West Main Street, Suite 110 Montour Falls, NY 14865 607-535-4026 sOuThPOrT 1136 Pennsylvania Avenue Elmira, NY 14904 607-734-3374 cOrning 19 East Market Street, Suite 101 Corning, NY 14830 607-962-0812 sOuTh MeadOW 702 South Meadow Street Ithaca, NY 14850 607-272-2211 cOrTland lOan cenTer* 77 South West Street Homer, NY 13077 607-749-7251 WesT elMira 930 West Church Street Elmira, NY 14905 607-734-3374 erWin 404 S. Hamilton Street Painted Post, NY 14870 607-936-1806 TriPhaMMer 2300 North Triphammer Road Ithaca, NY 14850 607-257-8808 arnOT Mall aTM Entrance 4 - Center Court Horseheads, NY 14845 607-734-3374 *ATM available at all locations except for the Montour Falls Office and Cortland Loan Center. Elmira Savings Bank : 2012 AnnuAl RepoRt : Page 11 The People’s Bank www.elmirasavingsbank.com Member FDIC | Equal Housing Lender 

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