Elmira Savings Bank
Annual Report 2013

Plain-text annual report

Windows of Opportunity Shareholders • Customers • Employees The People’s Bank 2013 Annual Report 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 DESIGN PS Graphic Design BOARD OF DIRECTORS PHOTOGRAPHY Tom Mike Photography BUSINESS PROFILES/COVER PHOTOGRAPHY Frank Borkowski VESTAL BRANCH PHOTO Frank Spena SELECTED FINANCIAL DATA (in thousands, except share and per share amounts) FINANCIAL STATEMENT HIGHLIGHTS 2013 2012 Net Income ($000) Assets $ 514,325 536,936 Loans (including loans held for sale) 390,976 381,275 Allowance for loan losses Deposits Shareholders’ equity Net interest income Provision for loan losses Non-interest income Non-interest expense 3,834 3,740 397,733 409,565 54,025 15,053 315 5,557 13,862 Net income attributable to Elmira Savings Bank 5,054 PER SHARE INFORMATION 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 $ 1.47 1.40 16.64 0.84 0.97% 8.51% 10.50% 57.14% 67.26% 66,909 15,089 463 6,050 12,944 5,213 1.44 1.37 16.76 0.77 0.99% 7.92% 12.46% 53.16% 61.23% OTHER SELECTED DATA Number of offices Number of automated teller machines 15 13 14 12 Weighted average shares outstanding 2,617,073 2,505,300 Weighted average diluted shares outstanding 2,745,934 2,628,139 Share and per share data have been adjusted to reflect the 10% stock dividend distributed December 27, 2013. Net Income ($000) Available to Common Shareholders $4,833 $5,029 $5,213 $5,054 $4,526 $3,116 $3,382 $3,265 $3,604 $3,839 2009 2010 2011 2012 2013 Total Assets ($000) $498,983 $523,358 $514,325 $453,687 $333,322 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total Net Loans (including loans held for sale) ($000) $381,275 $390,976 $348,824 $307,616 $310,477 2009 2010 2011 2012 2013 Elmira Savings Bank : 2013 ANNUAL REPORT : Page 3 Total Return Performance LETTER TO SHAREHOLDERS, 350 300 250 200 150 100 50 2008 Elmira Savings Bank NASDAQ Composite SNL Thrift NASDAQ SNL Mid-Atlantic Thrift SNL Bank NASDAQ SNL Bank $500M-$1B SNL Mid-Atlantic Bank 2009 2010 2011 2012 2013 Per Share Data Diluted Earnings Per Common Share Cash Dividends Per Common Share 1.25 1.35 1.28 1.37 1.40 0.64 0.64 0.65 0.77 0.84 2009 2010 2011 2012 2013 Nonperforming Loans ($000) Noncurrent Loans & ORE1 to Total Loans and ORE Peer Comparison accomplishments of the past year to you, our It is with great pleasure that we report on our loyal shareholders. During 2013, your Bank achieved net income of $5.1 million and earnings per share of $1.40 for the year. We expanded our full-service branch network into Erwin, New York, and expanded our loan origination offices into Broome County, New York. Through prudent capital management practices, we were able to retire $14.1 million of preferred stock shares that were issued through the Small Business Lending Fund. Our asset quality remained exceptionally strong. Our mortgage loan production exceeded $125 million and our total loan production exceeded $165 million. Lastly, and perhaps most rewarding, our Bank was named as the 19th “Best Bank to Work For” in The American Banker’s annual survey. Net income for 2013 was $5.1 million, slightly below 2012 net income of $5.2 million. Due to our retirement of $14.1 million of preferred shares, our net income to common shareholders and diluted earnings per common share increased to $3.8 million and $1.40 in 2013, from $3.6 million and $1.37 in 2012. Our net interest income was stable at $15.1 million; our noninterest income was $5.6 million versus $6.1 million in 2012 due to lower mortgage loan sales. Our operations expenses were $1.0 million above last year’s level totaling $13.9 million in 2013. This increase is primarily attributable to our branch 2.31% network and loan production office expansion, $3,861 $3,494 0.92% 2012 2013 Elmira Savings Bank Peers* 1 Noncurrent loans and 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 combined with increasing our resources dedicated to regulatory compliance. These unfavorable variances were largely offset by a decrease in income taxes of $1.1 million and a decrease in our provision for loan losses of $148,000. We are very pleased with the market performance of our common stock. We ended 2012 with a per share price of $20.68. During 2013, we paid $.84 per share in cash dividends which equals a dividend yield of 4%. We also issued a 10% stock dividend in Page 4 : Elmira Savings Bank : 2013 ANNUAL REPORT December and ended the year trading location, bringing our Steuben County at $25.20, resulting in a total return of deposits to over $43 million. 26% for our shareholders. In the third quarter of 2013, we The retirement of the preferred shares opened a loan production office on issued through the Small Business the Vestal Parkway in Vestal, New Lending Fund was accomplished York. This location will primarily focus by accumulating earnings, net of on residential mortgages, but will dividends, over the past five years also provide us access to commercial of $8.3 million, while controlling lending customers as well. In 2012, our balance sheet growth through Broome County, New York, had over replacing investments with loans $250 million of recorded mortgages. and replacing borrowed funds with Our new location provides us with deposits. These two factors allowed us access to business in Broome County, to reduce our preferred equity by $14.1 as well as surrounding markets in New million during the year and associated York and Pennsylvania. annual dividends by $700,000, while maintaining a core capital ratio of 8.39% and a risk-based capital ratio of 14.50% as of December 31, 2013. At the annual meeting in April of last year, the Bank began a leadership transition with Michael P. Hosey assuming the role of Vice Chairman Our asset quality has remained of the Board of Directors, while consistently strong throughout the last maintaining the role of Chief Executive several years of economic recession. Officer. The role of President was Our nonperforming loans totaled assumed by Thomas M. Carr while he $3.5 million or .9% of total loans at maintained his responsibilities as Chief December 31, 2013 compared to $3.9 Operating Officer. million or 1.02% at December 31, 2012. Our delinquent loans were .26% of total loans on December 31, 2013 compared to .21% on December 31, 2012, well below our peers. Additionally during 2013, we realigned responsibilities of two senior officers of the Bank, while adding a vice president responsible for overall bank compliance. These In January 2013, we opened our changes have strengthened our second full-service branch in Steuben organization and provided additional County, New York. Our new facility resources that will allow us to is located in Erwin, New York, a continue to grow in the future. that is welcoming, caring, but results-oriented, and has been a primary driver of our financial and organizational success. As we look forward into 2014 and beyond, we are focused on growing our core customer base in our new markets, continuing to create new customer relationships in all of our markets, maintenance of our net interest margin, asset quality, capital levels, and efficiency, all of which will allow us to provide consistent returns to our loyal shareholders. neighboring community of Corning, New York. We are very pleased with our progress in Steuben County and are especially proud of being able to expand into a growing community with a convenient location which includes a drive-thru facility. During 2013, we accumulated over $5.0 million of deposits in our Erwin In September 2013, the Bank was honored by being named the 19th “Best Bank to Work For” in the The Thomas M. Carr President American Banker’s annual assessment Chief Operating Officer of the nation’s community banks. This award is a credit to Bank leadership, management, and most importantly, Michael P. Hosey the staff of Elmira Savings Bank, who Vice Chairman of the Board collectively create an environment Chief Executive Officer Elmira Savings Bank : 2013 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 $8,302 at December 31, 2013, and $5,853 at December 31, 2012 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 assets December 31, 2013 December 31, 2012 $ 7,077 564 7,641 63,464 7,805 10,417 1,847 389,129 3,834 385,295 8,620 12,387 1,454 210 12,320 2,865 $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 3,402 Total assets $ 514,325 $ 536,936 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; 10,000 shares issued at December 31, 2013 and 24,063 shares issued at December 31, 2012 Common stock, $1 par value; authorized 5,000,000 shares; 2,776,240 shares issued at December 31, 2013 and 2,454,840 at December 31, 2012 Additional paid-in capital Retained earnings Treasury stock, at cost - 116,268 shares at December 31, 2013 and 125,865 shares at December 31, 2012 Accumulated other comprehensive income Total Elmira Savings Bank shareholders’ equity Noncontrolling interest Total shareholders’ equity $ 397,733 56,500 6,067 460,300 $ 409,565 54,000 6,462 470,027 9,700 2,776 41,693 2,485 (3,327) 644 53,971 54 54,025 23,763 2,455 41,448 868 (3,548) 1,872 66,858 51 66,909 Total liabilities and shareholders’ equity $ 514,325 $ 536,936 Page 6 : Elmira Savings Bank : 2013 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 Years Ended December 31 2012 2011 2013 $ 17,733 $ 18,114 $ 18,140 1,744 776 2,111 760 3,140 820 Total interest and dividend income 20,253 20,985 22,100 INTEREST EXPENSE Interest on deposits Interest on borrowings Total interest expense Net interest income Provision for loan losses 3,224 1,976 3,712 2,184 5,200 5,896 15,053 315 15,089 463 3,850 2,700 6,550 15,550 668 Net interest income after provision for loan losses 14,738 14,626 14,882 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 Other 1,357 3,007 61 660 399 73 5,557 7,382 1,259 1,022 676 674 2,849 1,242 3,561 75 677 388 107 6,050 6,770 1,130 946 722 643 2,733 1,236 1,836 448 634 369 204 4,727 6,491 1,154 854 636 513 2,554 Total noninterest expense 13,862 12,944 12,202 Income before income taxes Income taxes Net income Less: Net income attributable to noncontrolling interest 6,433 1,374 5,059 5 7,732 2,514 5,218 5 7,407 2,373 5,034 5 Net income attributable to Elmira Savings Bank $ 5,054 $ 5,213 $ 5,029 Dividend on preferred stock Accretion of preferred stock discount 1,215 - 1,609 - 1,512 252 Income available to common shareholders $ 3,839 $ 3,604 $ 3,265 Basic earnings per common share Diluted earnings per common share $ $ 1.47 1.40 $ $ 1.44 1.37 $ $ 1.32 1.28 Per share data has been restated to reflect a 10% stock dividend paid on December 27, 2013 and a 5% stock dividend paid on December 28, 2012. Elmira Savings Bank : 2013 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, 2013 2012 2011 $ 5,054 $ 5,213 $ 5,029 (1,943) 753 (1,190) (61) 23 (38) - - - (75 ) 29 (46 ) 2,014 (779) 1,235 (448) 173 (275) 960 Other comprehensive income (loss), net of tax (1,228) (46 ) Comprehensive income $ 3,826 $ 5,167 $ 5,989 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 Noncontrolling Interest Total Balance at December 31, 2012 $ 23,763 2,455 41,448 868 (3,548) 1,872 51 66,909 Net income Other comprehensive loss 10% stock dividend (241,493 shares) Cash in lieu of fractional shares resulting from a 10% stock dividend Stock based compensation expense Issuance of common shares (6,382 shares) Exercise of stock options, net (73,525 shares) Preferred stock redemption (14,063 shares) Issuance of treasury stock (9,597 shares) Preferred stock repurchased noncontrolling interest Preferred stock issued noncontrolling interest Cash dividend on preferred stock Cash dividend on common stock ($.84 per share) - - - - - - - (14,063) - - - - - - - 242 - - 6 73 - - - - - - - - (242) - 301 (6) 196 - (4) - - - - 5,054 - - (9) - - - - - - - (1,215) (2,213) - - - - - - - - 221 - - - - - (1,228) - - - - - - - - - - - 5 - - - - - - - - (2) 5 (5) 5,059 (1,228) - (9) 301 - 269 (14,063) 217 (2) 5 (1,220) - (2,213) Balance at December 31, 2013 $ 9,700 2,776 41,693 2,485 (3,327) 644 54 54,025 Per share data has been restated to reflect the 10% stock dividend paid on December 27, 2013. Page 8 : Elmira Savings Bank : 2013 ANNUAL REPORT 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 as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows (not presented herein), for each of the three years in the period ended December 31, 2013, and in our report dated March 18, 2014, 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 18, 2014 Elmira Savings Bank was listed among American Banker Magazine’s top best banks to work for in 2013. “The best of them, as determined by the rankings compiled by American Banker Magazine, offer competitive pay and benefits, but also strive to engage and motivate employees in less tangible ways.” With 124 employees, ESB offers many windows of opportunity to its staff in terms of advancement, professional development and a rewarding environment in which to work. Elmira Savings Bank opens a new loan center in Vestal, NY. The People’s Bank Elmira Savings Bank : 2013 ANNUAL REPORT : Page 9 The Centerway Commerce building, located at 5 East Market Street, Corning, NY, is a historic 4-story, 17,000 square foot office building that is owned by George and Elizabeth Welch. The Bank partnered with the Welch’s in 2013 to fully renovate and modernize the entire building, while maintaining the building’s historical nature. The project was completed utilizing traditional financing, as well as historic tax credits. The Timemon Office Park, an 8,100 square foot professional office building, was constructed at 2430 North Triphammer Road, Lansing, NY, in 2013 by Robert R. Colbert, Jr. The Bank was relied upon to provide construction financing for this modern office complex. In July 2013, John Mills Electric, Inc., led by President Lindsay T. Mills, erected a 1,600 square foot building at 1836 Grand Central Avenue, Elmira Heights, NY, that is used to fabricate and house electrical conduit used on their job sites. The Bank was pleased to be able to provide the financing for this facility that allows the company to maintain a competitive advantage. ELMIRA SAVINGS BANK BOARD OF DIRECTORS John R. Alexander Corporate Secretary of the Board Managing Partner, Sayles & Evans John Brand, III Chairman of the Board Chairman, Arnot Realty Corporation Anthony J. Cooper Retired President Arnot Health 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 Chief Executive Officer Elmira Savings Bank Donald G. Quick, Jr. Retired Partner Mengel, Metzger, Barr & Co. LLP Thomas M. Carr 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 Robert K. Lambert President Chief Executive Officer Arnot Health The People’s Bank Elmira Savings Bank : 2013 ANNUAL REPORT : Page 13 ELMIRA SAVINGS BANK OFFICERS EXECUTIVE Michael P. Hosey Vice Chairman Chief Executive Officer Thomas M. Carr President Chief Operating Officer Shirley A. Weigand Assistant Secretary AUDIT AND CONTROL Joseph P. Klaiber Vice President Compliance Officer John J. Stempin Assistant Secretary Judy A. Woodruff Assistant Secretary HUMAN RESOURCES Bradley V. Serva Vice President Stacy Ward Assistant Secretary LENDING Kevin J. Berkley Executive Vice President Edith B. Keebler Assistant Vice President Gary O. Short Senior Vice President Jill M. McConnell Assistant Secretary COLLECTIONS Tricia Rennells Assistant Vice President FINANCE Jason T. Sanford Senior Vice President Chief Financial Officer Tamara S. Pabis Vice President Christopher Mekos Vice President Susan M. Cook Assistant Vice President Carrie L. Spencer Assistant Vice President MARKET PRICE INFORMATION 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 2013 and 2012. Quarters 2013 2012 High Low First 23.05 20.67 Second 23.93 18.18 Third 22.73 19.30 Fourth 28.45 20.15 High 18.93 18.60 17.31 21.50 Low 14.05 15.30 15.91 16.80 Amy Ward Assistant Vice President John Strong Assistant Vice President Jennifer M. Murphy Assistant Secretary 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 Vice President RETAIL SERVICES Donna J. Tangorre Senior Vice President Deborah L. Adams Assistant Vice President Kimberly A. Elliott Assistant Vice President Janette Allen 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 Renee A. Wheeler Assistant Secretary ADVISORY SERVICES, INC. Vincent Mazzarella Vice President ANNUAL SHAREHOLDERS’ MEETING The Annual Shareholders’ Meeting will be held at 10 a.m. on April 22, 2014 at the Clemens Center 207 Clemens Center Parkway, Elmira, NY 14901 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 President/Chief Operating Officer Elmira Savings Bank 333 E. Water Street, Elmira, NY 14901 Page 14 : Elmira Savings Bank : 2013 ANNUAL REPORT ELMIRA SAVINGS BANK LOCATIONS MAIN OFFICE 333 East Water Street Elmira, NY 14902-9967 607-734-3374 COMMONS 301 East State Street Ithaca, NY 14850 607-272-1111 HORSEHEADS 2149 Grand Central Avenue Horseheads, NY 14845 607-734-3374 SOUTH MEADOW 702 South Meadow Street Ithaca, NY 14850 607-272-2211 SOUTHPORT 1136 Pennsylvania Avenue Elmira, NY 14904 607-734-3374 TRIPHAMMER 2300 North Triphammer Road Ithaca, NY 14850 607-257-8808 WEST ELMIRA 930 West Church Street Elmira, NY 14905 607-734-3374 MORAVIA 142 Main Street Moravia, NY 13118 315-497-1300 BIG FLATS 971 County Route 64 Big Flats, NY 14841 607-734-3374 MONTOUR FALLS* 401 West Main Street, Suite 110 Montour Falls, NY 14865 607-535-4026 ELMIRA HEIGHTS 2075 Lake Road Elmira Heights, NY 14903 607-734-3374 CORTLAND LOAN CENTER* 77 South West Street Homer, NY 13077 607-749-7251 CORNING 19 East Market Street, Suite 101 Corning, NY 14830 607-962-0812 VESTAL LOAN CENTER 3439 Vestal Parkway E. Vestal, NY 13850 607-729-0386 ERWIN 404 S. Hamilton Street Painted Post, NY 14870 607-936-1806 ITHACA LOAN CENTER 301 East State Street Ithaca, NY 14850 607-257-3584 ARNOT MALL ATM Entrance 4 - Center Court Horseheads, NY 14845 607-734-3374 *ATM available at all locations except for the Montour Falls Office, Cortland Loan Center and Vestal Loan Center. Elmira Savings Bank Offices in the Finger Lakes Region The People’s Bank Moravia Cortland Loan Center Commons Ithaca Loan Center Triphammer South Meadow Montour Falls Erwin Big Flats Corning Horseheads Elmira Heights West Elmira Elmira Southport Vestal Loan Center New York Pennsylvania Finger Lakes Region Elmira Savings Bank : 2013 ANNUAL REPORT : Page 15 The People’s Bank www.elmirasavingsbank.com Member FDIC | Equal Housing Lender 

Continue reading text version or see original annual report in PDF format above