Toggle SGML Header (+)


Section 1: 8-K (8-K)

Q4 2018evbn 8-K Earnings

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



FORM 8-K



CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



 

 

Date of report (Date of earliest event reported):

 

                     January 31, 2019



Evans Bancorp, Inc.
_______________________________________
(Exact Name of Registrant as Specified in Charter)



 

 



 

 

New York

0-18539

161332767

______________________________
(State or Other  Jurisdiction

_______________
(Commission

___________________
(I.R.S. Employer

of Incorporation)

File Number)

Identification No.)



 

 



 

 

One Grimsby Drive, Hamburg, New York

 

14075

_____________________________________________
(Address of Principal Executive Offices)

 

____________
(Zip Code)





 

 



 

 

Registrant’s Telephone Number, Including Area Code:

 

716-926-2000



Not Applicable
____________________________________________________
Former Name or Former Address, if Changed Since Last Report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)  
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)  
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


 

Item 2.02 Results of Operations and Financial Condition.



On January 31, 2019, Evans Bancorp, Inc. (“the Company”) issued a press release setting forth its results of operations and financial condition for the fourth quarter of 2018.  A copy of that press release is attached hereto as Exhibit 99.1.







Item 9.01 Financial Statements and Exhibits.



(d) Exhibits

Exhibit 99.1 – Press Release of Evans Bancorp, Inc. dated January 31, 2019



Exhibit Index





 

Exhibit No.

Description

99.1

Press Release of Evans Bancorp, Inc. dated January 31,2019























































The information in Item 2.02 of this Form 8-K and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.  Neither the filing or furnishing of any exhibit to this report nor the inclusion in such exhibits of a reference to the Company’s Internet address shall, under any circumstances, be deemed to incorporate the information available at such address into this report.  Information available at the Company’s Internet address is not part of this report.



 

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.





 

 

 

 



 

 

   

 



 

Evans Bancorp, Inc.



 

 

   

 

February 1, 2019

 

By:

   

/s/ David J. Nasca



 

 

   




 

 

   

Name: David J. Nasca



 

 

   

Title: President and Chief Executive Officer







 

 


(Back To Top)

Section 2: EX-99.1 (EX-99.1)

20190131 EVBN Q4 2018 Earnings FINAL

News Release



Evans Bancorp, Inc. One Grimsby Drive Hamburg, NY 14075



FOR IMMEDIATE RELEASE



Evans Bancorp Reports Record Net Income for 2018



HAMBURG, NY, January 31, 2019  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 fourth quarter and year ended December 31, 2018.



FOURTH QUARTER  AND FULL YEAR 2018 HIGHLIGHTS (compared with prior-year period unless otherwise noted)



·

Record annual net income of $16.4 million compared with $10.5 million in 2017, a 56% increase  Excluding the prior year impact of a $2.1 million write-down of deferred tax asset related to Tax Cuts and Jobs  Act (TCJA), 2018 net income increased $3.8 million or 30%



·

Achieved fourth quarter net income of $4.5 million, or $0.90 per diluted share, compared with

$1.0 million, or $0.20 per diluted share

Excluding the 2017 TCJA write-down of deferred tax asset, net income was up $1.4 million or 44%



·

Net interest income in the fourth quarter increased 11% to $12.4 million driven by higher average loans



·

Average demand deposits in the fourth quarter grew  13%



·

Acquisition of Richardson & Stout Insurance Agency (“R&S”) contributed to total insurance revenue of $9.4 million, an increase of 19%



·

2018 efficiency ratio improved to 66.87% from 68.50%



·

Opened new Financial Center in downtown Buffalo during fourth quarter 2018



For the full year 2018, net income increased 56% to $16.4 million, or $3.32 per diluted share, from

$10.5 million, or $2.16 per diluted share, in 2017. Excluding the impact of TCJA, net income  was up

$3.8 million, or 30%. The return on average equity was 13.20% for 2018 compared  with 9.11% in 2017.



Net income was $4.5 million, or $0.90 per diluted share, in the fourth quarter of 2018, compared with $4.8 million, or

$0.97 per diluted share, in the trailing third quarter of 2018 and $1.0 million, or $0.20 per diluted share, in last years  fourth quarter. The decrease from the linked quarter reflects lower insurance fee revenue due to typically higher

seasonal commercial lines revenue in the third quarter. The increase over prior-year period reflects higher interest

income due to loan growth, a decrease in loan loss provision, and lower income tax expense related to the impacof TCJA. Return on average equity was 13.86% for the fourth quarter of 2018, compared with 15.35% in the trailing

third quarter of 2018 and 3.32% in the fourth quarter of 2017.



In the fourth quarter we extended the very strong results experienced through 2018, including growth across the board in deposits, loans and fee income, culminating in an outstanding year for earnings with net income up 56%, said David J. Nasca, President and CEO of Evans Bancorp, Inc. Initiatives and investments remain aimed at enhancing the client experience and building relationships, scaling our growth from an operational and  cost perspective, bolstering our fee-based businesses, and investing back into the communities in which we operate.

 


 

Evans Bancorp Reports Record Net Income for 2018 January 31, 2019

Page 2 of 10





Net Interest Income

($ in thousands)



 4Q 2018 

 3Q 2018 

 

 4Q 2017 

Interest income

$15,309

$14,690

$12,794

Interest expense

2,936 

2,604

1,634

Net interest income

12,373

12,086

11,160

(Credit) provision for loan losses

 (276)

 

252

 602

Net interest income after provision

$12,649

$11,834

$10,558



Net interest income increased $0.3 million, or 2%, from the third quarter of 2018,  and $1.2 million, or 11%, from the prior-year fourth quarter. The increase was driven by average interest-earning asset growth, particularly loans, partially offset by an increase in interest expense. The increase in interest income reflects growth in the commercial loan portfolio as well as the benefit from the re-pricing of  variable rate loans tied to the  Companys prime rate. Average commercial loans, including commercial real estate and commercial and industrial loans, were $913 million, up $91 million from the 2017 fourth quarter. The increase in net interest income from the linked quarter was mainly due to prime rate movements.



Fourth quarter net interest margin of 3.70% decreased 3 basis points from the 2018 third quarter and 9 basis  points from the fourth quarter of 2017. The margin has been impacted by rising funding costs due to increases in  short-term interest rates, along with very competitive deposit market pricing. The cost of interest-bearing  liabilities  was 1.14% compared with 1.04% in the third quarter of 2018 and 0.73% in the fourth quarter of 2017.  The Company has experienced a shift in deposit mix as consumers in low-cost legacy savings products have migrated to higher-rate time deposits consistent with the industry. Average time deposits comprised 24% of  average total deposits during the fourth quarter of 2018, compared with 23% and 17% in the third quarter of  2018 and the fourth quarter of 2017, respectively.



The $0.3 million release of allowance for loan losses for the fourth quarter of 2018 reflects a decrease in non-  performing loans and marginal loan growth in the quarter.



Asset Quality

($ in thousands)



 4Q 20183Q 20184Q 2017 



Total non-performing loans

$18,991

$23,090

$13,715

Total net loan charge-offs (recoveries)

153

274

765

Non-performing loans/ Total loans

1.64 %

2.00 %

1.29 %

Net loan charge-offs (recoveries)/ Average loans

0.05 %

0.10 %

0.30 %

Allowance for loan losses/ Total loans

1.28 %

1.32 %

1.32 %



Our loan production remains  focused upon originating within our consistent and prudent risk appetite, which is  reflected in our strong credit quality, stated John Connerton, Chief Financial Officer of Evans Bank. While many  of our credit quality metrics improved during the quarter, we continue to make progress with a small number of  larger commercial credits that make up our non-performing loans.”

 


 

Evans Bancorp Reports Record Net Income for 2018 January 31, 2019

Page 3 of 10





 

Non-Interest Income

($ in thousands)





 4Q 20183Q 20184Q 2017 

 



Deposit service charges

$571

$571

$481

Insurance service and fee revenue

2,233

3,215

1,649

Bank-owned life insurance

166  165  464 

Loss on tax credit investment

(2,705)

(165)

(1,740)

Refundable NY state historic tax credit

1,832

150 

1,224

Other income

 941

 828

 949

Total non-interest income

$3,038

$4,764

$3,027

The increase in deposit service charges from last years fourth quarter reflects higher fees related to overdrafts as the Company and its clients continue to benefit from a new product that provides overdraft protection to small businesses.



Insurance revenue decreased $1.0 million from the trailing third quarter due to the seasonal decrease in commercial lines insurance commissions and a decrease in profit sharing revenue. The increase in insurance revenue from the fourth quarter of 2017 primarily relates to the R&S acquisition, which added incremental commercial and personal lines revenue of $0.5 million.



The fourth quarter of 2018 included a $0.9 million net reduction of non-interest income related to an investment  in an historic rehabilitation tax credit compared with $0.5 million in the prior-year period. There were no significant historic tax credit transactions in the third quarter of 2018.



In last years fourth quarter the Company realized a $0.3 million gain on bank-owned life insurance claim, while there were no claims in the current or linked quarters.



 

Non-Interest Expense

($ in thousands)





 4Q 20183Q 20184Q 2017 

 



Salaries and employee benefits

$7,220

$7,090

$6,248

Occupancy

855  795  844 

Advertising and public relations

362  258  378 

Professional services

599  588  594 

Technology and communications

909  874  740 

Amortization of intangibles

112  112  29 

FDIC insurance

251  295  189 

Other expenses

 1,124

 1,445

 1,364

Total non-interest expenses

$11,432

$11,457

$10,386



Fourth quarter salaries and benefits costs increased 16% from the prior-year period, and reflect the R&S acquisition and the addition of  strategic personnel hires to support the Companys continued growth. The increase in salaries and employee benefits from the linked quarter was due to year-end incentive adjustments based on the Companys performance.



The linked quarter increase in advertising and public relations expense reflects additional promotional campaigns for the Companys lending and insurance products. The increase in technology and communications  was due to higher ATM card fees, online banking activity and software costs. The amortization of intangible assets was higher due to the acquisition of R&S.

 


 

Evans Bancorp Reports Record Net Income for 2018 January 31, 2019

Page 4 of 10



The decrease in other expense in the fourth quarter  of 2018 reflects a $0.3 million contribution to the Evans  Bank Foundation Fund (the Foundation”) made during the fourth quarter of 2017, and a community contribution accrual of $0.4 million recorded in the third quarter of 2018. Evans contributes to, and invests in, community organizations that provide positive, meaningful impact to the Western New York region. Evans has elevated its resource commitment to the community as a function of our continued growth and performance.



The Companys efficiency ratio in the fourth quarter of 2018  was 69.5% compared with 66.9% in the third quarter of 2018 and 70.4% in last  years fourth quarter.



During fourth quarter 2018  the Company recognized an  income tax benefit  of $0.2 million. Excluding  the impact of historic tax credit  transactions, the fourth quarter 2018 effective tax rate  was 23.1%. In the third quarter 2018  income tax expense was $0.3 million, or an effective tax rate of 6.7%. Income taxes were reduced  by $0.7 million in the third quarter of 2018 due to a change in estimate of when certain state historic tax credits  will be taxable for federal purposes. Excluding this adjustment, the third quarter 2018 effective tax rate  was 20.5%. Fourth quarter 2017  income tax expense was $2.2 million, or an  effective  tax rate of 69.0%. The effective tax rate in the  fourth quarter of 2017, excluding TCJA and historic tax credit impact,  was 29.8%.



2018 Year-end Balance Sheet Highlights



Total assets were $1.39 billion as  of December 31, 2018, up $7 million, or 1%, from September 30, 2018 and

$93 million, or 7%, higher than year-end 2017. The Company had strong loan growth as the portfolio increased

$91 million, or  9%, to $1.16 billion during 2018 with the increase predominantly in commercial real estate.



Investment securities were $134 million at December 31, 2018, $4 million lower than the third quarter of 2018,  and $16 million lower than at the end of 2017. The primary objectives of the Companys investment portfolio are to provide liquidity, secure municipal deposits, and maximize income while preserving safety of principal.  With the yield curve continuing to flatten, there is a reduced advantage to purchasing longer-term investment securities.



Deposit growth was strong in 2018, increasing 16% to $1.22 billion at December 31, 2018. The year-over- year increase was across all of the Companys product categories, including demand deposit growth of  6%, NOW account growth of 1%, savings deposit growth of 7%, and time deposit growth of 62%. The largest components of deposit growth during 2018 were time deposits of $115 million, of which $41 million  were brokered, and municipal saving deposits of $53 million. Total average demand deposits were $248 million for  the 2018 fourth quarter, an increase of $28 million from the fourth quarter of 2017, which was mostly attributable to growth in commercial demand deposits.



The deposit mix has changed industry wide as consumer preferences move toward term products with higher rates. Consumer savings deposits declined $52 million year-over-year, while consumer time deposits increased

$74 million.



2018 Year in Review



Net interest income for 2018  was $48.1 million, up 14%, primarily due to strong growth in the Companys  commercial loan portfolio, partially offset by an increase in deposit interest expense and a compressed net interest margin. Net interest margin was 3.77% in 2018, a decrease of 3 basis points.



The Companys provision for loan losses of $1.4 million  was up from $0.7 million due to loan growth, an increase in criticized loans, and an increase in non-performing loans. The ratio of  non-performing loans to total loans was 1.64% at December 31, 2018 compared with 1.29%  at the end of 2017.



Non-interest income was up $2.2 million,  or 17%, to $15.2 million, mainly due to the increase in insurance service and fee revenue of $1.5 million, reflecting the R&S acquisition and commercial lines organic  growth.



Non-interest expense increased $4.7 million, or 12%, to $43.3 million. The increase reflects higher salarieand employee benefits of $3.0 million, or 12%, due to the R&S acquisition, merit increases, higher incentive compensation and the addition of new employees as part of the Companys planned growth strategy.  Technology expenses were up 18%, or $0.5 million, to $3.4 million largely due to increased  ATM card fees, online banking activity and software costs. FDIC insurance expense increased $0.3 million, or 38%, as a result  of higher average assets due to loan growth. Amortization of  intangibles increased $0.2 million due to the

 


 

Evans Bancorp Reports Record Net Income for 2018 January 31, 2019

Page 5 of 10



acquisition of R&S.



The efficiency ratio for 2018 improved to 66.87% from 68.50%.



Income tax expense for the year was $2.3 million, representing an effective tax rate of 12.2% compared  with an effective tax rate of 33.2% in 2017. The decrease in the effective tax rate was due to the $2.1 million charge relating to TCJA in 2017, the lowering of the Companys federal tax rate from 35% to 21% effective

January 1, 2018, and historic tax credit transactions.



Capital Management



The Company consistently maintains regulatory capital ratios measurably above the Federal well  capitalized”  standard, including a Tier 1 leverage ratio of  9.73%  at December 31, 2018 compared  with 9.60%  at  September 30, 2018 and 10.11%  at December 31, 2017. Book value per share increased to $27.13 at December 31, 2018 compared with $26.03 at September 30, 2018 and $24.74 at December 31, 2017.



In 2018, the Company paid cash dividends of $0.92 per common share, up 15%.



Outlook



Mr. Nasca concluded,  “We are especially pleased that our strategic focus on acquiring  and retaining top talent, building client relationships, and adding value to  those relationships continues  to produce strong financial performance. This performance allows us  to grow and deliver for our clients while reinvesting in the community and strengthening the economic and social fabric of our markets.



We are approaching a century of serving Western New York, and we firmly believe that our long-term success reflects our commitment  to continuing  to perform,  as shown  by our record earnings  in  2018 and over the last several years. We believe we can further build on this momentum.



Webcast and Conference Call



The Company will host a conference call and webcast on Thursday, January 31, 2019 at 4:45 p.m. ET.  Management will review the financial and operating results for the fourth quarter and full year of 2018, as well  as the Companys 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, February 7, 2019. To listen to the archived call, dial (412) 317-6671 and enter conference ID number  13686188, 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 $1.4 billion in assets and $1.2 billion in deposits at December 31, 2018. 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.

 


 

Evans Bancorp Reports Record Net Income for 2018 January 31, 2019

Page 6 of 10



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.





For more information  contact:-OR-

 

John B. Connerton

Executive Vice President and Chief Financial  Officer Phone: (716) 926-2000

Email: jconner@evansbank.com

Deborah K.  Pawlowski Kei Advisors LLC  Phone: (716) 843-3908

Email: dpawlowski@keiadvisors.com

 


 

Evans Bancorp Reports Record Net Income for 2018 January 31, 2019

Page 7 of 10









EVANS BANCORP, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA (UNAUDITED)

(in thousands, except shares and per share data)







 

ASSETS

 

Investment Securities

 12/31/2018  

 

 

$133,788

 9/30/2018  

 

 

$137,909

 6/30/2018  

 

 

$148,628

 3/31/2018  

 

 

$164,471

 12/31/2017  

 

 

$149,732

Loans

1,155,930

1,155,566

1,125,895

1,109,961

1,065,315

Allowance for loan losses

(14,784)

(15,213)

(15,235)

(14,693)

(14,019)

Goodwill and intangible assets

12,992

13,104

8,496

8,525

8,553

All other assets

100,281

89,557

78,307

85,434

86,052

Total assets

$1,388,207

$1,380,923

$1,346,091

$1,353,698

$1,295,633



LIABILITIES AND STOCKHOLDERS' EQUITY

Demand deposits

 

 

 

 

231,902

 

 

 

 

236,079

 

 

 

 

224,373

 

 

 

 

238,827

 

 

 

 

219,664

NOW deposits

110,450

110,768

121,170

124,997

109,378

Savings deposits

571,479

574,262

595,500

566,314

535,730

Time deposits

301,227

294,514

241,425

204,295

186,457

Total deposits

1,215,058

1,215,623

1,182,468

1,134,433

1,051,229

Borrowings

24,472

24,309

25,348

83,114

108,869

Other liabilities

17,031

15,331

14,700

16,278

17,193

Total stockholders' equity

131,646

125,660

123,575

119,873

118,342



SHARES AND CAPITAL RATIOS

 

Common shares outstanding

 

 

4,852,868

 

 

4,827,701

 

 

4,821,381

 

 

4,803,334

 

 

4,782,505

Book value per share

$27.13

$26.03

$25.63

$24.96

$24.74

Tier 1 leverage ratio

9.73 %

9.60 %

9.94 %

9.81 %

10.11 %

Tier 1 risk-based capital ratio

11.84 %

11.34 %

11.63 %

11.48 %

11.72 %

Total risk-based capital ratio

13.09 %

12.59 %

12.88 %

12.73 %

12.97 %



ASSET QUALITY DATA

 

Total non-performing loans

 

 

$18,991

 

 

$23,090

 

 

$23,210

 

 

$14,771

 

 

$13,715

Total net loan charge-offs (recoveries)

153

274

117

93 

765



Non-performing loans/Total loans

 

1.64 %

 

2.00 %

 

2.06 %

 

1.33 %

 

1.29 %

Net loan charge-offs (recoveries)/Average loans

0.05 %

0.10 %

0.04 %

0.03 %

0.30 %

Allowance for loans losses/Total loans

1.28 %

1.32 %

1.35 %

1.32 %

1.32 %

 


 

Evans Bancorp Reports Record Net Income for 2018 January 31, 2019

Page 8 of 10







EVANS BANCORP, INC AND SUBSIDIARIES SELECTED OPERATIONS DATA (UNAUDITED)

(in thousands, except share and per share data)







 

 

Interest income

 2018  

 

     Fourth Quarter  

 

$15,309

 2018  

 

 Third Quarter  

 

$14,690

 2018  

 

    Second Quarter  

 

$14,247

 2018  

 

 First Quarter  

 

$13,366

 2017  

 

     Fourth Quarter  

 

$12,794

Interest expense

2,936

2,604

2,051

1,914

1,634

Net interest income

12,373

12,086

12,196

11,452

11,160

Provision for loan losses

(276)

252

659

767

602

Net interest income after provision

12,649

11,834

11,537

10,685

10,558



Deposit service charges

 

571

 

571

 

525

 

509

 

481

Insurance service and fee revenue

2,233

3,215

1,952

1,965

1,649

Bank-owned life insurance

166

165

178

171

464

Loss on tax credit investment

(2,705)

(165)

-

-

(1,740)

Refundable NY state historic tax credit

1,832

150