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