Evans Bancorp Net Income Increases 8% to a Record $5.2 Million in the 2019 Third Quarter

Evans Bancorp, Inc. (the “Company” or “Evans”) (NYSE American: EVBN), a community financial services company serving Western New York since 1920, today reported its results of operations for the third quarter ended September 30, 2019.

THIRD QUARTER 2019 HIGHLIGHTS (compared with prior-year period unless otherwise noted)

  • Achieved record net income of $5.2 million; Earnings per diluted share grew $0.07 to $1.04
  • Net interest income increased 13% to $13.6 million
  • Non-interest income of $5.2 million increased 8%
  • Loan portfolio of $1.2 billion up 6% since the end of last year’s third quarter
  • Total deposits grew $43 million year-over-year, including 15% growth of average core demand deposits
  • Efficiency ratio improvement to 64.8% from 66.9%

Net income was $5.2 million, or $1.04 per diluted share, in the third quarter of 2019, compared with $4.4 million, or $0.88 per diluted share, in the second quarter of 2019 and $4.8 million, or $0.97 per diluted share, in last year’s third quarter. The increase over comparative periods reflects higher net interest income due to loan growth and a decrease in loan loss provision, partially offset by an increase in non-interest expense. Return on average equity was 14.29% for the third quarter of 2019, compared with 12.71% in the second quarter of 2019 and 15.35% in the third quarter of 2018.

“The Company achieved another solid quarter of growth and record earnings reflecting the success of our community focus and relationship business model,” said David J. Nasca, President and CEO of Evans Bancorp, Inc. “We achieved material year-over-year results, highlighted by record performance, while continuing to invest in Evans’ future. Importantly, these results were achieved against increasing headwinds related to interest rates and strong competition. These results and our strong momentum continue to support our positive outlook for the remainder of this year.”

Net Interest Income

($ in thousands)

3Q 2019

2Q 2019

3Q 2018

Interest income

$

16,845

$

16,325

$

14,690

Interest expense

3,224

3,191

2,604

Net interest income

13,621

13,134

12,086

(Credit) provision for loan losses

(431)

90

252

Net interest income after provision

$

14,052

$

13,044

$

11,834

Net interest income increased $0.5 million, or 4%, from the second quarter of 2019, and $1.5 million, or 13%, from the prior-year third quarter. The increases were driven by growth in the commercial loan portfolio, partially offset by an increase in interest expense. Average commercial loans, including commercial real estate and commercial and industrial loans, were $983 million, up $18 million from the 2019 second quarter and $65 million from the 2018 third quarter. The third quarter of 2019 also included $0.2 million of interest related to the recovery of a single commercial loan that was written-off in a previous period.

Third quarter net interest margin was 3.94%. When excluding the interest related to the recovery, net interest margin was 3.89%, an increase of 2 basis points from the 2019 second quarter and 16 basis points from the third quarter of 2018. The modest increase from the linked quarter resulted from a change in the mix of interest earning assets reflecting the utilization of cash to achieve loan growth, while the change from the prior year reflects increased yields on loans, offset by higher funding costs, reflecting higher interest rates and competitive deposit market pricing. Excluding the interest related to the recovery, the yield on loans increased 30 basis points when compared with the third quarter of 2018. The cost of interest-bearing liabilities was 1.24% compared with 1.04% in the third quarter of 2018.

The $0.4 million release of allowance for loan losses for the third quarter of 2019 reflects a decrease in net loan charge-offs due to the single commercial loan recovery of $0.7 million, partially offset by an increase in non-performing loans.

Asset Quality

($ in thousands)

3Q 2019

2Q 2019

3Q 2018

Total non-performing loans

$

13,839

$

11,020

$

23,090

Total net loan charge-offs (recoveries)

(565)

49

274

Non-performing loans/ Total loans

1.13

%

0.91

%

2.00

%

Net loan charge-offs (recoveries)/ Average loans

(0.19)

%

0.02

%

0.10

%

Allowance for loan losses/ Total loans

1.26

%

1.26

%

1.32

%

“We continue to build a very high quality balance sheet, highlighted by strong and stable asset quality and a well-managed liquidity position,” stated John Connerton, Chief Financial Officer of Evans Bank.

Non-Interest Income

($ in thousands)

3Q 2019

2Q 2019

3Q 2018

Deposit service charges

$

687

$

602

$

571

Insurance service and fee revenue

3,225

2,901

3,215

Bank-owned life insurance

160

173

165

Loss on tax credit investment

-

-

(165)

Refundable NY state historic tax credit

-

-

150

Other income

1,092

1,054

828

Total non-interest income

$

5,164

$

4,730

$

4,764

The increase in deposit service charges compared with the prior periods reflects new service offerings, including overdraft protection for small business customers. Seasonally higher insurance revenue was reflected in the increase over the linked quarter. The increase in other income was due to $0.2 million of insurance proceeds related to legal and professional fees incurred to respond to a data security incident and related matters.

Non-Interest Expense

($ in thousands)

3Q 2019

2Q 2019

3Q 2018

Salaries and employee benefits

$

7,644

$

7,469

$

7,090

Occupancy

853

872

795

Advertising and public relations

231

214

258

Professional services

1,009

929

588

Technology and communications

1,057

1,099

874

Amortization of intangibles

112

112

112

FDIC insurance

-

150

295

Other expenses

1,370

1,304

1,445

Total non-interest expenses

$

12,276

$

12,149

$

11,457

 

Third quarter non-interest expense increased 7% from the prior-year period and 1% from the second quarter of 2019. Salaries and employee benefits increased $0.6 million, or 8%, from the third quarter of 2018 as a result of severance and the addition of strategic personnel hires to support the Company’s continued growth.

The increase in professional service fees includes $0.2 million related to legal and professional fees incurred to respond to a data security incident and related matters, plus incremental project costs designed to enhance technology and continue to be prepared to respond to future threats which impact the banking industry at large. The increase from the prior year period also includes $0.1 million of broker commissions related to our employee benefits insurance business, and generally higher legal and accounting expenses.

The increase in technology and communications when compared with the third quarter of 2018 was due to higher software costs and volume related ATM card fees and online banking activity.

The third quarter of 2019 FDIC insurance expense was offset by the application of the FDIC’s small bank assessment credit.

The Company’s efficiency ratio improved to 64.8% compared with 67.5% in the second quarter of 2019 and 66.9% in last year’s third quarter.

Income tax expense was $1.8 million, or an effective tax rate of 25.6%, for the third quarter of 2019 compared with 22.1% in the second quarter of 2019 and 6.7% in the third quarter of 2018. Last year’s third quarter income taxes were reduced by $0.7 million due to a change in estimate of when certain state historic tax credits will be taxable for federal purposes. Historic tax credit transactions lowered the effective tax rate by 13.8% in the third quarter of 2018.

Balance Sheet Highlights

Total assets were $1.46 billion at quarter-end, a slight decrease from the linked second quarter, but up 5% from $1.38 billion at September 30, 2018, reflecting the Company’s strong loan growth. Loans were up $64 million, or 6%, to $1.22 billion since the end of last year’s third quarter, and the growth was predominantly in the commercial and industrial loan portfolio.

Investment securities were $137 million at the end of the third quarter, relatively consistent with the linked quarter and prior-year period. The primary objectives of the Company’s investment portfolio are to provide liquidity, secure municipal deposits, and maximize income while preserving safety of principal. With the flattened yield curve, there is a reduced advantage to purchasing longer-term investment securities.

Total deposits of $1.26 billion were up $43 million, or 4%, from the end of last year’s third quarter, and reflects growth of $36 million in demand deposits and $31 million in NOW deposits, offset by decreases of $17 million in time deposits and $6 million in savings deposits. The total deposit decrease of $24 million from the linked second quarter reflects a decline in total savings of $35 million, primarily resulting from cyclical fluctuations of a limited number of commercial and municipal savings customers, and a decrease in time deposits of $13 million, including $6 million of brokered deposits. Those decreases were offset by higher demand deposits of $28 million.

Capital Management

The Company consistently maintains regulatory capital ratios measurably above the Federal “well capitalized” standard, including a Tier 1 leverage ratio of 10.11% at September 30, 2019 compared with 9.99% at June 30, 2019 and 9.60% at September 30, 2018. Book value per share increased to $29.44 at quarter-end compared with $28.74 at June 30, 2019 and $26.03 at September 30, 2018.

In October 2019, the Company paid a semi-annual cash dividend of $0.52 per common share. For the full year 2019, cash dividends totaled $1.04, up 13% over 2018.

Outlook

Mr. Nasca concluded, “Evans is a strong and growing bank intent on being a preeminent community financial institution in the markets we serve. We are confident in the ability of our business model to drive growth and gain meaningful scale. As we enter our 100th year, we are transitioning to a new strategic plan that will guide us through 2023. Our strategic objectives include; leading with an intentional consistent culture and solid values, a keen focus on performance to deepen customer relationships and turn clients into loyal promoters, diversifying income streams, building operational effectiveness and driving funding to support continued asset growth. We will do this while continuing our position as an integral and valuable community partner.”

Webcast and Conference Call

The Company will host a conference call and webcast on Thursday, October 24, 2019 at 4:45 p.m. ET. Management will review the financial and operating results for the third quarter of 2019, as well as the Company’s strategy and outlook. A question and answer session will follow the formal presentation.

The conference call can be accessed by calling (201) 689-8471. Alternatively, the webcast can be monitored at www.evansbancorp.com.

A telephonic replay will be available from 7:45 p.m. ET on the day of the teleconference until Thursday, October 31, 2019. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13694760, or access the webcast replay at www.evansbancorp.com, where a transcript will be posted once available.

About Evans Bancorp, Inc.

Evans Bancorp, Inc. is a financial holding company and the parent company of Evans Bank, N.A., a commercial bank with $1.5 billion in assets and $1.3 billion in deposits at September 30, 2019. Evans is a full-service community bank, with 15 financial centers providing comprehensive financial services to consumer, business and municipal customers throughout Western New York. Evans Bancorp's wholly owned insurance subsidiary, The Evans Agency, LLC, provides life insurance, employee benefits, and property and casualty insurance through ten insurance offices in the Western New York region. Evans Investment Services provides non-deposit investment products, such as annuities and mutual funds.

Evans Bancorp, Inc. and Evans Bank routinely post news and other important information on their websites, at www.evansbancorp.com and www.evansbank.com.

Safe Harbor Statement: This news 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, revenue 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, and difficulties in achieving operating efficiencies. These risks and uncertainties are more fully described in Evans Bancorp’s 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

SELECTED FINANCIAL DATA (UNAUDITED)

(in thousands, except shares and per share data)

9/30/2019

6/30/2019

3/31/2019

12/31/2018

9/30/2018

ASSETS

Investment Securities

$

136,977

$

137,438

$

140,731

$

133,788

$

137,909

Loans

1,219,792

1,212,699

1,185,429

1,155,930

1,155,566

Allowance for loan losses

(15,382)

(15,248)

(15,207)

(14,784)

(15,213)

Goodwill and intangible assets

12,657

12,768

12,880

12,992

13,104

Operating lease right-of-use asset

3,862

4,003

4,142

-

-

All other assets

97,826

119,460

128,206

100,281

89,557

Total assets

$

1,455,732

$

1,471,120

$

1,456,181

$

1,388,207

$

1,380,923

LIABILITIES AND STOCKHOLDERS'

EQUITY

Demand deposits

271,633

243,860

242,156

231,902

236,079

NOW deposits

141,384

145,620

122,204

110,450

110,768

Savings deposits

568,156

603,180

618,471

571,479

574,262

Time deposits

277,633

290,251

292,892

301,227

294,514

Total deposits

1,258,806

1,282,911

1,275,723

1,215,058

1,215,623

Borrowings

28,748

25,298

23,812

24,472

24,309

Operating lease liability

4,302

4,449

4,594

-

-

Other liabilities

19,007

17,175

17,617

17,031

15,331

Total stockholders' equity

144,869

141,287

134,435

131,646

125,660

SHARES AND CAPITAL RATIOS

Common shares outstanding

4,920,381

4,915,678

4,860,316

4,852,868

4,827,701

Book value per share

$

29.44

$

28.74

$

27.66

$

27.13

$

26.03

Tier 1 leverage ratio

10.11

%

9.99

%

9.74

%

9.73

%

9.60

%

Tier 1 risk-based capital ratio

11.87

%

11.86

%

11.68

%

11.84

%

11.34

%

Total risk-based capital ratio

13.11

%

13.11

%

12.93

%

13.09

%

12.59

%

ASSET QUALITY DATA

Total non-performing loans

$

13,839

$

11,020

$

19,987

$

18,991

$

23,090

Total net loan charge-offs (recoveries)

(565)

49

115

153

274

Non-performing loans/Total loans

1.13

%

0.91

%

1.69

%

1.64

%

2.00

%

Net loan charge-offs (recoveries)/Average loans

(0.19)

%

0.02

%

0.04

%

0.05

%

0.10

%

Allowance for loans losses/Total loans

1.26

%

1.26

%

1.28

%

1.28

%

1.32

%

EVANS BANCORP, INC AND SUBSIDIARIES

SELECTED OPERATIONS DATA (UNAUDITED)

(in thousands, except share and per share data)

2019

2019

2019

2018

2018

Third Quarter

Second Quarter

First Quarter

Fourth Quarter

Third Quarter

Interest income

$

16,845

$

16,325

$

15,542

$

15,309

$

14,690

Interest expense

3,224

3,191

3,034

2,936

2,604

Net interest income

13,621

13,134

12,508

12,373

12,086

Provision (credit) for loan losses

(431)

90

538

(276)

252

Net interest income after provision

14,052

13,044

11,970

12,649

11,834

Deposit service charges

687

602

533

571

571

Insurance service and fee revenue

3,225

2,901

2,442

2,233

3,215

Bank-owned life insurance

160

173

159

166

165

Loss on tax credit investment

-

-

-

(2,705)

(165)

Refundable NY state historic tax credit

-

-

-

1,832

150

Other income

1,092

1,054

1,061

941

828

Total non-interest income

5,164

4,730

4,195

3,038

4,764

Salaries and employee benefits

7,644

7,469

7,160

7,220

7,090

Occupancy

853

872

836

855

795

Advertising and public relations

231

214

167

362

258

Professional services

1,009

929

745

599

588

Technology and communications

1,057

1,099

893

909

874

Amortization of intangibles

112

112

112

112

112

FDIC insurance

-

150

207

251

295

Other expenses

1,370

1,304

1,104

1,124

1,445

Total non-interest expenses

12,276

12,149

11,224

11,432

11,457

Income before income taxes

6,940

5,625

4,941

4,255

5,141

Income tax provision (benefit)

1,776

1,243

1,221

(196)

346

Net income

5,164

4,382

3,720

4,451

4,795

PER SHARE DATA

Net income per common share-diluted

$

1.04

$

0.88

$

0.75

$

0.90

$

0.97

Cash dividends per common share

$

0.52

$

-

$

0.52

$

-

$

0.46

Weighted average number of diluted shares

4,976,639

4,953,072

4,932,451

4,928,551

4,940,822

PERFORMANCE RATIOS

Return on average total assets

1.41

%

1.21

%

1.04

%

1.26

%

1.40

%

Return on average stockholders' equity

14.29

%

12.71

%

11.19

%

13.86

%

15.35

%

Efficiency ratio

64.75

%

67.54

%

66.53

%

69.52

%

66.88

%

EVANS BANCORP, INC AND SUBSIDIARIES

SELECTED AVERAGE BALANCES AND YIELDS/RATES (UNAUDITED)

(in thousands)

2019

2019

2019

2018

2018

Third Quarter

Second Quarter

First Quarter

Fourth Quarter

Third Quarter

AVERAGE BALANCES

Loans, net

$

1,202,634

$

1,183,379

$

1,153,067

$

1,128,015

$

1,127,173

Investment securities

143,731

148,465

141,249

137,175

145,122

Interest-bearing deposits at banks

24,661

28,132

44,024

60,061

12,641

Total interest-earning assets

1,371,026

1,359,976

1,338,340

1,325,251

1,284,936

Non interest-earning assets

89,513

85,720

86,386

83,482

87,402

Total Assets

$

1,460,539

$

1,445,696

$

1,424,726

$

1,408,733

$

1,372,338

NOW

134,008

123,515

112,571

110,612

115,417

Savings

591,585

605,524

591,641

581,048

581,484

Time deposits

281,798

289,794

298,586

301,957

274,275

Total interest-bearing deposits

1,007,391

1,018,833

1,002,798

993,617

971,176

Borrowings

25,234

24,231

25,746

25,340

25,749

Total interest-bearing liabilities

1,032,625

1,043,064

1,028,544

1,018,957

996,925

Demand deposits

261,089

244,142

242,030

247,619

233,393

Other non-interest bearing liabilities

22,231

20,609

21,219

13,689

17,045

Stockholders' equity

144,594

137,881

132,933

128,468

124,975

Total Liabilities and Equity

$

1,460,539

$

1,445,696

$

1,424,726

$

1,408,733

$

1,372,338

YIELD/RATE

Loans, net

5.16

%

5.13

%

5.05

%

4.94

%

4.81

%

Investment securities

2.87

%

2.77

%

2.67

%

2.68

%

2.60

%

Interest-bearing deposits at banks

2.56

%

2.22

%

2.29

%

2.24

%

1.98

%

Total interest-earning assets

4.87

%

4.81

%

4.71

%

4.58

%

4.54

%

NOW

0.45

%

0.37

%

0.30

%

0.30

%

0.27

%

Savings

0.90

%

0.87

%

0.80

%

0.74

%

0.70

%

Time deposits

2.17

%

2.18

%

2.16

%

2.07

%

1.89

%

Total interest-bearing deposits

1.20

%

1.18

%

1.15

%

1.10

%

0.99

%

Borrowings

2.92

%

3.13

%

3.01

%

2.97

%

2.96

%

Total interest-bearing liabilities

1.24

%

1.23

%

1.20

%

1.14

%

1.04

%

Interest rate spread

3.63

%

3.58

%

3.51

%

3.44

%

3.50

%

Contribution of interest-free funds

0.31

%

0.29

%

0.28

%

0.26

%

0.23

%

Net interest margin

3.94

%

3.87

%

3.79

%

3.70

%

3.73

%

Contacts:

John B. Connerton
Executive Vice President and Chief Financial Officer
Phone: (716) 926-2000
Email: jconner@evansbank.com

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