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Evans Bancorp Reports First Quarter 2007 Financial Results

Evans Bancorp, Inc. (NASDAQ: EVBN), today reported its results of operations for the quarter ended March 31, 2007.

Diluted earnings per share for the first quarter of 2007 were $0.47 compared with $0.52 in the corresponding period for 2006. First quarter 2007 net income was $1.29 million, down 8.5% from $1.41 million in the year earlier period.

David J. Nasca, President and CEO of Evans Bancorp, noted, Like other financial institutions, we are experiencing strong headwinds in this current interest rate environment. We continue to work to improve our earnings power and maintain a tight cost discipline. We are assertively creating change within the organization as we rationalize each line of business, increase the sophistication of our accountability system and enhance our incentive programs. Although we recognize that change will not occur overnight, we are building momentum to ensure we are well positioned to capitalize on opportunities as markets improve or maintain a strong position if conditions remain difficult.

Revenue and Expenses

Net interest income of $3.87 million for the first quarter of 2007 was up $0.24 million, or 6.5%, from the first quarter 2006. Total interest income for the first quarter of 2007 was $7.14 million, up $0.94 million, or 15.1%, from the same period last year, primarily due to higher interest income from loans and leases which increased $0.99 million, or 21.3%, to $5.60 million on a larger loan and lease base. Higher interest income was somewhat offset by a $0.70 million, or 27.3%, increase in interest expense to $3.27 million from $2.57 million in the first quarter of last year. Higher interest expense reflects elevated rates paid on deposits.

The Companys net interest margin for the quarter was 3.60%, up 11 basis points from last years first quarter net interest margin of 3.49%. A primary contributing factor to the improved margin was the growth of interest free funds, as Evans National Bank continues to have success in penetrating its market area with core transactional accounts.

Net interest income after the provision for loan and lease losses was $3.56 million in the first quarter 2007, up $0.2 million from $3.35 million in the same period of 2006. A higher provision for loan and lease losses reflects loan growth.

Total non-interest income for the first quarter of 2007 was $3.15 million, or approximately 44.8% of total revenue, and relatively unchanged from the first quarter of 2006. Higher other income, which was primarily volume driven fee revenue related to lending, offset lower service charges and insurance fees.

Non-interest expense for the first quarter of 2007 increased to $4.93 million from $4.49 million in the first quarter of 2006. Salaries and employee benefits increased $0.17 million during the quarter. Approximately $0.09 million of that increase are non-recurring expenses as executive management succession is completed and the roles of President and CEO are once again reunited. Higher professional services expenses were the result of additional non-recurring items including market analysis for the Companys distribution network, executive search, and investor relations consulting. Occupancy expenses increased in the first quarter of 2007 compared with the same period for the prior year due to the addition of our eleventh bank branch, which opened in December 2006. Additionally, the Company experienced a $0.15 million loss related to a branch operational error in processing checks.

Balance Sheet Trends and Asset Quality

At March 31, 2007, total assets were $497.4 million compared with $460.3 million at March 31, 2006 and $473.9 million at December 31, 2006. Net loans increased 12.5% to $290.5 million from $258.1 million at March 31, 2006, and increased from $285.4 million at December 31, 2006.

Asset growth was primarily related to commercial loan and lease originations mitigated somewhat by softness in consumer loan growth.

Deposits increased 3.2% and 6.8% to $379.9 million when compared with the first quarter last year and December 31, 2006, respectively. The growth in deposits during the recent quarter was attributed to increases in operating and municipal accounts. The Company continues to focus on core deposit growth to manage its funding costs.

The allowance for loan and lease losses to total loans and leases was 1.32% compared with 1.29% at March 31, 2006. Additionally, nonperforming loans and leases to total loans and leases decreased to 0.22%, a 16 basis point improvement over March 31, 2006.

Stockholders equity was $40.1 million as of March 31, 2007, up from $39.5 million at the end of the first quarter last year.

Outlook

Mr. Nasca concluded, Our strategy is to build a profitable, dynamic, growth-oriented, community-based financial services company to fully meet the need for relationship-based financial services by small and middle market customers. The differentiator in banking is people and relationships. As we move forward, we are evaluating our staffing, processes, and customer experience and will aggressively execute our plans to deepen relationships with our customers.

We believe we can profitably grow our market share over the next 3-5 years to provide competitive scale and meet the continuing demands of leveraging technology and addressing regulatory requirements.

About Evans Bancorp, Inc.

Evans Bancorp, Inc., a registered financial holding company under the Bank Holding Company Act of 1956, is the parent company of Evans National Bank, a commercial bank with $497 million in assets and $380 million in deposits at March 31, 2007. The Bank has 11 branches located in Western New York. Evans National Leasing, Inc., an indirect wholly-owned subsidiary of Evans National Bank is a general business equipment leasing company with customers throughout the U.S. ENB Insurance Agency, Inc. is an indirect, wholly-owned subsidiary of Evans Bancorp and provides retail and commercial property and casualty insurance through 12 agencies in the Western New York region. ENB Associates Inc., a wholly-owned subsidiary of ENB Insurance Agency, provides non-deposit investment products such as annuities and mutual funds. More information on Evans Bancorp, Inc and Evans National Bank can be found at: www.evansbancorp.com and www.evansnationalonline.com.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements concerning future business, revenues and earnings. These statements are not historical facts or guarantees of future performance, events or results. There are risks, uncertainties and other factors that could cause the actual results of Evans Bancorp to differ materially from the results expressed or implied by such statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements, include competitive pressures among financial services companies, interest rate trends, general economic conditions, changes in legislation or regulatory requirements, effectiveness at achieving stated goals and strategies, difficulties in achieving operating efficiencies and difficulties in integrating acquired companies businesses. These risks and uncertainties are more fully described in Evans Bancorps Annual and Quarterly Reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. Evans Bancorp undertakes no obligation to publicly update or revise forward-looking information, whether as a result of new, updated information, future events or otherwise.

EVANS BANCORP, INC. AND SUBSIDIARIES

FINANCIAL HIGHLIGHTS

(In thousands except share and per share data)

Three Months Ended
March 31,
2007  2006 
Performance ratios, annualized
Return on average total assets 1.07% 1.21%
Return on average stockholders equity 12.85% 15.04%
Common dividend payout ratio (TTM) 38.9% 37.0%
Efficiency ratio 68.26% 64.15%
Yield on average earning assets 6.65% 5.95%
Cost of interest-bearing liabilities 3.65% 2.89%
Net interest rate spread 3.00% 3.06%
Contribution of interest-free funds 0.60% 0.43%
Net interest margin 3.60% 3.49%
Asset quality data
Past due over 90 days and accruing loans and leases $68  $111 
Non-accrual loans and leases $591  $893 
Total non-performing loans and leases $659  $1,004 
Other real estate owned (ORE) $40  $40 
Total non-performing assets $699  $1,044 
Net loan and lease charge-offs $169  $129 
Net charge-offs to average total loans and leases 0.23% 0.20%
Asset quality ratios
Non-performing loans and leases to total loans and leases 0.22% 0.38%
Non-performing assets to total assets 0.14% 0.23%
Allowance for loan and lease losses to total loans and leases 1.32% 1.29%
Allowance for loan and lease losses to non- performing loans and leases 589.41% 335.1%
Capital ratios
Average common equity to average total assets 8.36% 8.03%
Leverage ratio 8.68% 8.10%
Tier 1 risk-based capital ratio 12.34% 12.86%
Risk-based capital ratio 13.48% 14.11%
Book value per share $14.71  $13.41 
Common shares outstanding
Average-diluted 2,731,925  2,724,583 
Period-end basic 2,729,556  2,719,636 

EVANS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands except share and per share data)

March 31, December 31,
2007  2006 
ASSETS
Cash and cash equivalents:
Cash and due from banks $14,340  $12,592 
Securities:
Available for sale, at fair value 149,957  133,519 
Held to maturity, at amortized cost 4,142  4,211 
Loans and leases, net of allowance for loan and lease losses of $3,885
in 2007 and $3,739 in 2006 290,467  285,367 
Properties and equipment, net 8,695  8,743 
Goodwill 10,003  10,003 
Intangible assets 2,154  2,298 
Bank-owned life insurance 10,280  10,140 
Other assets 7,354  7,021 
TOTAL ASSETS $497,392  $473,894 
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $70,830  $72,125 
NOW 12,929  11,253 
Regular savings 86,637  85,084 
Muni-vest 46,745  31,240 
Time 162,797  156,047 
Total deposits 379,938  355,749 
Securities Sold Under Agreement to Repurchase 6,281  8,954 
Other short-term borrowings 26,350  24,753 
Other liabilities 11,063  9,089 
Junior subordinated debentures 11,330  11,330 
Long-term borrowings 22,285  24,476 
Total liabilities 457,247  434,351 

CONTINGENT LIABILITIES AND COMMITMENTS

STOCKHOLDERS' EQUITY:
Common stock, $.50 par value; 10,000,000 shares authorized;
2,745,338 and 2,745,338 shares issued, respectively, and
2,729,556 and 2,733,056 shares outstanding, respectively 1,373  1,373 
Capital surplus 26,184  26,160 
Retained earnings 14,555  14,196 
Accumulated other comprehensive loss, net of tax (1,625) (1,917)
Less: Treasury stock, at cost (15,782 and 12,282 shares, respectively) (342) (269)
Total stockholders' equity 40,145  39,543 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $497,392  $473,894 

EVANS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands except share and per share data)

Three Months Ended
March 31,
2007  2006 
INTEREST INCOME
Loans and leases $5,600  $4,615 
Federal funds sold/Interest bearing deposits at other banks 87  11 
Securities:
Taxable 1,012  1,104 
Non-taxable 443  474 
Total interest income 7,142  6,204 
INTEREST EXPENSE
Deposits 2,704  1,895 
Other borrowings 350  483 
Junior subordinated debentures 218  192 
Total interest expense 3,272  2,570 
NET INTEREST INCOME 3,870  3,634 
PROVISION FOR LOAN AND LEASE LOSSES 315  282 
NET INTEREST INCOME AFTER
PROVISION FOR LOAN AND LEASE LOSSES 3,555  3,352 
NON-INTEREST INCOME:
Bank charges 471  498 
Insurance service and fees 2,129  2,177 
Net loss on sales of securities (1)
Premium on loans sold
Bank-owned life insurance 140  105 
Other 405  373 
Total non-interest income 3,145  3,156 
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,668  2,501 
Occupancy 603  532 
Supplies 78  85 
Repairs and maintenance 139  137 
Advertising and public relations 88  71 
Professional services 252  144 
Amortization of intangibles 144  130 
Other Insurance 90  87 
Other 870  799 
Total non-interest expense 4,932  4,486 
INCOME BEFORE INCOME TAXES 1,768  2,022 
INCOME TAXES 481  616 
NET INCOME $1,287  $1,406 
Net income per common share-basic $0.47  $0.52 
Net income per common share-diluted $0.47  $0.52 
Cash dividends per common share $0.34  $0.34 
Weighted average number of common shares 2,730,499  2,722,950 
Weighted average number of diluted shares 2,731,925  2,724,583 

EVANS BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED AVERAGE BALANCE SHEETS AND ANNUALIZED RATES

(In thousands except share and per share data)

Three Months EndedThree Months Ended
March 31, 2007March 31, 2006
AverageInterestAverageInterest
OutstandingEarned/Yield/OutstandingEarned/Yield/
BalancePaidRateBalancePaidRate
(dollars in thousands) (dollars in thousands)
ASSETS
Interest-earning assets:
Loans and leases, net $286,986  $5,600  7.81% $257,874  $4,615  7.16%
Taxable securities 94,387  1,011  4.28% 112,352  1,104  3.93%
Tax-exempt securities 41,241  443  4.30% 45,479  474  4.17%
Federal funds sold 7,062  87  4.93% 1,162  11  3.79%
Total interest-earning assets 429,676  7,141  6.65% 416,867  6,204  5.95%
Non interest-earning assets:
Cash and due from banks 10,987  12,642 
Premises and equipment, net 8,708  8,156 
Other assets 29,558  28,146 
Total Assets $478,929  $465,811 
LIABILITIES & STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW $12,057  $6  0.20% $11,562  $5  0.17%
Regular savings 88,254  252  1.14% 89,628  188  0.84%
Muni-Vest savings 47,927  518  4.32% 34,125  330  3.87%
Time deposits 157,473  1,927  4.89% 149,397  1,372  3.67%
Other borrowed funds 34,000  336  3.95% 51,495  466  3.62%
Junior subordinated debentures 11,330  218  7.70% 11,330  192  6.78%
Securities sold U/A to repurchase 7,445  14  0.75% 8,068  17  0.84%
Total interest-bearing liabilities 358,486  $3,271  3.65% 355,605  $2,570  2.89%
Noninterest-bearing liabilities:
Demand deposits 70,935  65,806 
Other 9,451  7,006 
Total liabilities $438,872  $428,417 
Stockholders' equity 40,057  37,394 
Total Liabilities and Equity $478,929  $465,811 
Net interest earnings $3,870  $3,634 
Net yield on interest earning assets 3.60% 3.49%
Interest rate spread 3.00% 3.06%
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