Elmira Savings Bank
Annual Report 2019

Plain-text annual report

ANNUAL REPORT 2019 ELMIRA SAVINGS BANK Board of Directors (Front row l-r) John R. Alexander, Vice Chairman and Corporate Secretary of the Board & Managing Partner, Sayles & Evans; Thomas J. Gough, President, Gough Holding Corporation; Katherine H. Roehlke, President & Chief Executive Officer, F.M. Howell & Company; Donald G. Quick, Jr., Retired Partner, Mengel, Metzger, Barr & Co. LLP.; Kristin A. Swain, Retired Executive Director, The Rockwell Museum. (Back row l-r) Arie J. van den Blink, Chairman & Chief Executive Officer, The Hilliard Corporation; Michael P. Hosey, Chairman of the Board; Marianne W. Young, Retired President & Chief Executive Officer, Market Street Trust Company ; Jodi J. Edger, President, Edger Enterprises, Incorporated; Thomas M. Carr, President & Chief Executive Officer; A. Scott Welliver, Chairman & Chief Executive Officer, Welliver. Page 2 : Elmira Savings Bank : 2019 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. ELMIRA SAVINGS BANK Senior Officers (Left to right): Jason T. Sanford, Senior Vice President & Chief Financial Officer Thomas M. Carr, President & Chief Executive Officer Donna J. Tangorre, Senior Vice President & Retail Banking Manager Kevin J. Berkley, Executive Vice President & Senior Loan Officer Elmira Savings Bank : 2019 ANNUAL REPORT : Page 3 raise of $9.5 million, the repurchase of the preferred stock which totaled $9.4 million and the difference between net income and dividends. Our common shares outstanding had a book value per share of $17.07 at December 31, 2017, an increase of $0.33 per share from December 31, 2016. We invested in our branch network in 2017 by completing our new full- service branch located at 602 West State Street in Ithaca in May. This historic rehabilitation was a major management focus for the last half of 2016 and the first five months of 2017. The completed facility, showcased in this report, is the centerpiece of our franchise in Tompkins County. The branch consists of a full-service Bank Branch of 2,100 square feet with two Thomas M. Carr drive-through lanes, one of which President & Chief Executive Officer includes a state of the art ATM. In addition to the Bank Branch, we have leasable space on the second floor. TO OUR We also maintain control of several SHAREHOLDERS vacant parcels surrounding the State Street Branch that we look forward to developing in the future. I am pleased to report that the Bank had many accomplishments in During 2017 we restructured our capital, 2019. Several of these achievements first in April with the successful private represent the first time we have placement of 548,430 shares of common reached certain milestones. Total assets stock. These shares were placed with were $607 million, total deposits were select investors with no single investor $512 million, and total loans were $519 acquiring more than 5% of total million as of December 31, 2019. This outstanding shares. The proceeds from was the first time the Bank exceeded this issuance totaled $9.5 million. $600 million in total assets and $500 In December, the Bank repurchased all million in total deposits and total loans. of its shares of preferred stock that were Assets increased by $17 million, or outstanding. The liquidation value of 3%, year to year, while total deposits these shares was $10.0 million. They increased by 4%, or $21 million. Total also had a dividend rate of 9.00%. The loans increased by $37 million, or 8%. shares were repurchased at a discount Commercial loan originations totaled of $600,000 with the total purchase $40.5 million for 2019, a record level price being $9.4 million. of commercial originations. This was We were able to repurchase these shares with the capital raised in the private placement of common stock. After this transaction, the Bank an increase of $5.6 million, or 16%. maintained a core capital ratio of 8.5% This origination level increased our as of December 31, 2017, significantly commercial loan portfolio by $10.1 above the well-capitalized level million to total $143 million as of established by Bank regulators. December 31, 2019. The anticipated effect of retiring Our mortgage loan originations totaled preferred shares will be to reduce the $112 million for 2019, an increase of $31 overall dividends paid out of earnings, million, or 38%, over the previous year. increase the net income available to This increase in originations was due, in common shareholders, and improve part, to a Bank-wide effort to increase the Bank’s tangible common equity production. The residential mortgage ratio. We were pleased to execute this portfolio increased by $21.9 million repurchase and complete the second year over year due to the success of our step of our capital strategy during 2017. Bank-wide effort. As mentioned, we continue to We are pleased with our deposit growth work on improving operations and of $21 million, or 4%, which is the processes and are pleased to have second consecutive year we achieved implemented a mortgage loan process deposit growth at a higher pace than management system to improve the many of our peers. time it takes us to process a mortgage This past year was a challenging year loan from application to closing. This for the Bank as earnings and share effort began with an analysis of our price trended lower. Net income was 2016 mortgage originations which $3.5 million for 2019, 18% lower than provided us with key information to the previous year. This reduction is standardize our process and establish attributable to higher provision expense benchmarks. The implementation of and an increase in operating expense this system has produced early results from the previous year. that are encouraging. In the first half of 2017, our mortgage turn time was Provision expense was $744,000 for approximately 60 days. By the 4th 2019 as compared to the prior year quarter of 2017, the average turn time level of $367,000. This increase in was 44 days, an improvement of 16 days provision expense is attributable from application to closing. primarily to the increase in the loan portfolio, combined with an increase in Finally, we continued to invest in net charge offs for the year. technology. We recently continued expansion of our Electronic Banking Operating expense totaled $16.3 million Services through an upgrade to our Bill in 2019, an increase of $788,000 from Pay Services, as well as expansion of the the prior year. This increase is due to Touch ID and Passcode access within a $449,000 increase in salaries and Mobile Banking. Bill Pay allows users benefits and a $324,000 increase in to pay all of their bills through Online marketing and public relations expense. or Mobile Banking rather than setting The increases in salary and benefit up payments on multiple websites or paying by check. The latest version of Bill Pay features an updated look and streamlined efficiencies within Online expense are due, in part, to high loan Banking, as well as expanded abilities volumes, which resulted in higher offered through Mobile Banking. compensation expense. In addition, Additionally, the Elmira Savings Bank the Bank experienced an increase in Mobile Banking App was recently healthcare expense. updated to allow users to access all During the second half of 2019, functionalities of the App using a Management implemented several fingerprint or six-digit Passcode of strategies to enhance profitability in their choice. 2019 and into the future. We continue to As we look forward to 2018, we are be focused on improving our profitability dedicated to organically growing our in 2020 and are continuing to make business. We are fortunate to have changes to increase our earnings. strong and expanding economies in our In 2019, we commemorated the 150th geographic footprint and will continue anniversary of the Bank’s charter by to focus on increasing our market share hosting events in each market with the in these regions. 150th anniversary as the theme. Our We will continue to invest in our staff marketing message accentuated the and in technology to keep improving 150th anniversary and we published the quality and convenience of every a historical account of the Bank’s first customer interaction with our institution. 150 years. We have, and going forward will, benefit We welcomed two new members financially from changes in the federal to our Board of Directors during tax code. These changes have reduced the year. Joining the Board were our tax burden and will benefit our Thomas J. Gough, President of Gough shareholders, customers and employees. Holding Corporation and Jodi J. Edger, President, Edger Enterprises Inc. We are We remain optimistic that regulatory proud to have Mr. Gough and Mr. Edger relief will occur in a meaningful way as part of our team and look forward to and provide us with reductions in their contributions. compliance-related burden. As we continue to look forward, We are determined to provide excellent we are committed to fulfilling our service for our customers and strong mission as a regional community bank. financial results for shareholders. We appreciate our many loyal and dedicated shareholders. We are focused We appreciate your loyal support as on improving profitability and creating shareholders and look forward to shareholder value. continuing to build our business. Thomas M. Carr Thomas M. Carr President and President and Chief Executive Officer Chief Executive Officer Elmira Savings Bank : 2017 ANNUAL REPORT : Page 5 Page 4 : Elmira Savings Bank : 2019 ANNUAL REPORT ELMIRA SAVINGS BANK EMPLOYEES Christina Allen Nicholas Antczak Shannon Bailey Dwayne Balcom Kathleen Bange Nicole Battin Blair Beavers Mary Becker Joyelle Briggs Marilynne Burchard Kadison Byrnes-Shaver Kimberly Card Rebecca Cartwright Janet Caswell Jennifer Catron Jacqueline Cecce Craig Charron Brenda Cimakasky Mandie Close Jessica Coates Brianna Cochran Eugenia Cole Phillip Collins Linda Confer Ashley Congdon Susan Cook Michele Corby Kristie Cummings Eric Dejesus Keri Disidoro Tina Dittler Stacy Doane Pamela Donovan Nicholas Dutcher Cory Eddy April Eggleston-Branston JoAnn Eldred Kimberly Elliott Kelly Ewanyk Shanna Flint Deborah French Valerie Friedrich Amy Frisbie Patricia Frisbie Shawna Fullmer Christopher Giammichele Ilene Girardi Lorenda Gneo Mario Gonzalez-Ayon Meggie Hall Kristin Haner Robert Hazelton Brittany Hernandez Brooke Hockeborn Malissa Hootman Rachel Houseknecht Margaret Hurd Danielle Kehoe William Klinko Joshua Knoll Debra Knowles Theresa Laney Anne Lavancher Ellaminda Leader Shaina Leister Christina Losey Trisha Luchaco Colleen Manuel Aimee Marshall Julie May Jill McConnell Lindsey McCutcheon Cherry Merrill Kala Mitchell Kassandra Moore Katie Mosher Haley Mullins Katie Murphy Jennifer Murphy Jessica Ober Kimberly O’Dell Leah O’Neil Sarah Parker Eileen Payne Margaret Phillips James Pollen Michael Price Jacob Queener Laura Reynolds April Roberts Deborah Rockwell Sharla Root Denise Sarro Youngmi Schickel Bethany Schroeder Ashley Schultz Meredith Schutt Taryn Schwartz BriAnn Schweitzer Brad Serva Gary Short Dawn Siglin Mark Simon Karen Slusser Christine Snyder Frank Spena Carrie Spencer John Stempin John Strong Desirea Sullivan Ashley Tallarida Erin Thomas-Allen Jenara Towner Joseph Walker Suzanne Walsh Stacy Ward Olivia West Renee Wheeler Tracy Wiles Jennifer Wood Judy Woodruff Stacy Woodworth Elmira Savings Bank : 2019 ANNUAL REPORT : Page 5 Assets, Deposits, and Loans ($000) Total Assets Total Deposits Total Loans $561,344 $573,450 $554,560 $440,472 $454,998 $469,547 $459,528 $456,762 $460,628 $590,040 $606,829 $491,517 $483,664 $512,215 $520,225 SELECTED FINANCIAL DATA (in thousands, except share and per share amounts) FINANCIAL STATEMENT HIGHLIGHTS 2019 2018 Assets $ 606,829 590,040 $2,765 Loans (including loans held for sale) 520,225 483,664 2015 2016 2017 2018 2019 Per Share Data Diluted Earnings Per Common Share Cash Dividends Per Common Share 1.11 1.19 1.21 1.21 0.88 0.88 0.88 1.00 0.92 0.92 2015 2016 2017 2018 2019 Net Income ($000) Net Income ($000) Available to Common Shareholders $4,851 $4,122 $4,337 $4,006 $4,239 $4,239 $3,222 $3,437 $3,486 $3,486 Allowance for loan losses Deposits Shareholders’ equity Net interest income Provision for loan losses Non-interest income Non-interest expense Net income 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 OTHER SELECTED DATA Number of offices Number of automated teller machines 4,576 4,372 512,215 491,517 58,611 16,428 744 4,773 16,277 3,486 $ 1.00 1.00 16.67 0.92 0.57% 5.93% 9.66% 57,949 16,570 367 4,518 15,489 4,239 1.22 1.21 16.52 0.92 0.75% 7.36% 9.82% 92.00% 75.41% 76.77% 73.45% 12 13 14 14 Weighted average shares outstanding 3,495,089 3,479,916 Weighted average diluted shares outstanding 3,500,123 3,494,218 Share and per share data have been adjusted to reflect the 5% stock dividend paid on June 15, 2018. 2015 2016 2017 2018 2019 Page 6 : Elmira Savings Bank : 2019 ANNUAL REPORT 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 $7,233 at December 31, 2019 and $7,638 at December 31, 2018 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 Goodwill Other assets Total assets LIABILITIES AND SHAREHOLDERS’ EQUITY Deposits Borrowings Other liabilities Total liabilities SHAREHOLDERS’ EQUITY: Preferred stock, $1 par value; $1,000 liquidation value per issued share; 5,000,000 shares authorized; 10,000 shares issued at December 31, 2019 and December 31, 2018 Common stock, $1 par value; authorized 5,000,000 shares; 3,606,089 shares issued at December 31, 2019 and 3,597,605 at December 31, 2018 Additional paid-in capital Retained earnings Treasury stock, at cost - 93,883 common shares and 10,000 preferred shares at December 31, 2019 and December 31, 2018 Accumulated other comprehensive income (loss) Total Elmira Savings Bank shareholders’ equity Noncontrolling interest December 31, 2019 December 31, 2018 $ 11,954 92 $ 19,429 94 12,046 11,802 7,018 9,944 1,354 518,871 4,576 19,523 25,051 7,518 9,462 1,392 482,272 4,372 514,295 477,900 16,210 14,919 1,625 12,320 5,296 16,846 14,444 1,566 12,320 4,018 $ 606,829 $ 590,040 $ 512,215 29,000 7,003 $ 491,517 31,000 9,574 548,218 532,091 9,700 3,606 53,993 3,432 (12,202) 32 58,561 50 9,700 3,598 53,784 3,176 (12,202) (158) 57,898 51 Total shareholders’ equity 58,611 57,949 Total liabilities and shareholders’ equity $ 606,829 $ 590,040 Elmira Savings Bank : 2019 ANNUAL REPORT : Page 7 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 2018 2017 2019 $ 21,857 $ 19,569 $ 18,971 977 427 1,037 472 965 610 Total interest and dividend income 23,261 21,078 20,546 INTEREST EXPENSE Interest on deposits Interest on borrowings Total interest expense Net interest income Provision for loan losses 5,992 841 3,565 943 6,833 4,508 2,951 1,047 3,998 16,428 744 16,570 367 16,548 895 Net interest income after provision for loan losses 15,684 16,203 15,653 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 1,399 1,830 90 865 385 204 1,456 1,588 - 813 384 277 1,485 2,701 - 739 390 122 4,773 4,518 5,437 8,537 1,562 1,517 1,060 574 3,027 8,088 1,596 1,392 736 541 3,136 8,183 1,499 1,278 884 720 3,320 Total noninterest expense 16,277 15,489 15,884 Income before income taxes Income taxes Net income Less: Net income attributable to noncontrolling interest 4,180 689 3,491 5 5,232 988 4,244 5 5,206 350 4,856 5 Net income attributable to Elmira Savings Bank $ 3,486 $ 4,239 $ 4,851 Dividend on preferred stock - - 845 Income available to common shareholders $ 3,486 $ 4,239 $ 4,006 Basic earnings per common share Diluted earnings per common share $ $ 1.00 1.00 $ $ 1.22 1.21 $ $ 1.22 1.21 Per share data has been restated to reflect a 5% stock dividend paid on June 15, 2018. Page 8 : Elmira Savings Bank : 2019 ANNUAL REPORT 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 (expense) benefit Realized securities gains included in net income Tax expense Other comprehensive income (loss), net of tax Comprehensive income Years Ended December 31, 2019 2018 2017 $ 3,486 $ 4,239 $ 4,851 347 (90) 257 (90) 23 (67) 190 (163) 42 (121) - - - (121) (20) 8 (12) - - - (12) $ 3,676 $ 4,118 $ 4,839 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 (Loss) Income Noncontrolling Interest Total Balance at December 31, 2018 $9,700 3,598 53,784 3,176 (12,202) (158) 51 57,949 Net income Other comprehensive income Stock based compensation expense Restricted stock grants (7,680 shares) Exercise of stock options, net (804 shares) Preferred stock repurchased - noncontrolling interest Cash dividend on preferred stock Cash dividend on common stock ($.92 per share) - - - - - - - - - - - 7 1 - - - - - 216 (7) - - - - 3,486 - - - - - - (3,230) - - - - - - - - - 190 - - - - - - 5 3,491 - - - - (1) (5) 190 216 - 1 (1) (5) - (3,230) Balance at December 31, 2019 $ 9,700 3,606 53,993 3,432 (12,202) 32 50 58,611 Per share data has been restated to reflect the 5% stock dividend paid on June 15, 2018. Elmira Savings Bank : 2019 ANNUAL REPORT : Page 9 To the Board of Directors and Shareholders of Elmira Savings Bank 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, 2019 and 2018, and the related 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, 2019, and in our report dated March 16, 2020, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed financial statements is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived. Cranberry Township, Pennsylvania March 16, 2020 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. This table summarizes the high and low market price for the Bank’s stock during 2019 and 2018. Quarters 2019 2018 High Low High Low First 19.09 16.32 19.95 19.19 Second 17.40 15.69 20.60 19.29 Third 16.40 13.97 21.00 20.10 Fourth 15.99 13.97 20.47 15.77 ANNUAL SHAREHOLDERS’ MEETING The Annual Shareholders’ Meeting will be held at 10:00 a.m. on April 28, 2020 at the Clemens Center, 207 Clemens Center Parkway, Elmira, NY 14901 SHAREHOLDER INQUIRIES The Bank’s transfer agent is: Computershare, Inc. Computershare Investor Services PO Box 30170, College Station, TX 77842 (800) 368-5948 • The Bank’s Annual Report on Form 10-K will be furnished without charge upon written request to: Thomas M. Carr President & Chief Executive Officer Elmira Savings Bank 333 E. Water Street, Elmira, NY 14901 Page 10 : Elmira Savings Bank : 2019 ANNUAL REPORT ELMIRA SAVINGS BANK LOCATIONS MAIN OFFICE 333 East Water Street Elmira, NY 14902-9967 607-734-3374 STATE STREET 602 West 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 Suite 5 Ithaca, NY 14850 607-257-8808 BINGHAMTON LOAN CENTER 84 Court Street Binghamton, NY 13901 607-729-0386 WATKINS GLEN 712 North Franklin Street Watkins Glen, NY 14891 607-535-4108 ARNOT MALL ATM Entrance 4 - Center Court Horseheads, NY 14845 607-734-3374 MORAVIA 142 Main Street Moravia, NY 13118 315-497-1300 Finger Lakes Region WEST ELMIRA 930 West Church Street Elmira, NY 14905 607-734-3374 BIG FLATS 971 County Route 64 Elmira, NY 14903 607-734-3374 CORNING 19 East Market Street, Suite 101 Corning, NY 14830 607-962-0812 ERWIN 404 South Hamilton Street Painted Post, NY 14870 607-936-1806 Elmira Savings Bank : 2019 ANNUAL REPORT : Page 11 www.elmirasavingsbank.com Member FDIC | Equal Housing Lender Design: PS Graphic Design Photography: Foto Forum; Tom Mike Photographer 001CSN417A 

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