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Section 1: 10-Q (10-Q)

evbn 20190630 Q2

Table of Contents



United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For quarterly period ended June 30, 2019



TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from             to ______



Commission file number    001-35021



EVANS BANCORP, INC.

(Exact name of registrant as specified in its charter)



          New York                            16-1332767

(State or other jurisdiction of         (I.R.S. Employer

incorporation or organization)       Identification No.)



One Grimsby Drive, Hamburg, NY        14075

(Address of principal executive offices)  (Zip Code)



(716) 926-2000

(Registrant's telephone number, including area code)



Not Applicable

 (Former name, former address and former fiscal year, if changed

 since last report)



Securities registered pursuant to Section 12(b) of the Act:



 

 



 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.50 par value

EVBN

NYSE American



 

 



Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No



Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes No



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.





 

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 



If an emerging growth company, indicate by checkmark 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. 



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes   No 



Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock, $.50 par value, 4,919,682 shares as of July 31, 2019.

 


 

Table of Contents





INDEX





EVANS BANCORP, INC. AND SUBSIDIARIES







 

 



 

 

PART 1.  FINANCIAL INFORMATION

PAGE



 

 

Item 1.

Financial Statements

 



 

 



Unaudited Consolidated Balance Sheets – June 30, 2019 and December 31, 2018



 

 



Unaudited Consolidated Statements of Income – Three months ended June 30, 2019 and 2018



 

 



Unaudited Consolidated Statements of Income – Six months ended June 30, 2019 and 2018



 

 



Unaudited Consolidated Statements of Comprehensive Income – Three months ended June 30, 2019 and 2018



 

 



Unaudited Consolidated Statements of Comprehensive Income – Six months ended June 30, 2019 and 2018



 

 



Unaudited Consolidated Statements of Changes in Stockholders’ Equity – Six months ended June 30, 2019 and 2018



 

 



Unaudited Consolidated Statements of Cash Flows - Six months ended June 30, 2019 and 2018



 

 



Notes to Unaudited Consolidated Financial Statements



 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

37 



 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

46 



 

 

Item 4.

Controls and Procedures

47 



 

 

PART II.  OTHER INFORMATION

 

 



 

 

Item 1.

Legal Proceedings

48 



 

 

Item 1A.

Risk Factors

48 



 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

48 



 

 

Item 3.

Defaults Upon Senior Securities

48 



 

 

Item 4.

Mine Safety Disclosure

48 



 

 

Item 5.

Other Information

48 



 

 

Item 6.

Exhibits

49 



 

 



Signatures

50 



 

 



 

 







 

 


 

Table of Contents













 

 

 

 

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

ITEM 1 - FINANCIAL STATEMENTS

 

 

 

 

 

 

EVANS BANCORP, INC. AND SUBSIDIARIES

 

 

 

 

 

 

UNAUDITED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

JUNE 30, 2019 AND DECEMBER 31, 2018

 

 

 

 

 

 

(in thousands, except share and per share amounts)

 

 

 

 

 

 



 

June 30,

 

December 31,



 

2019

 

2018

ASSETS

 

 

 

 

 

 

Cash and due from banks

 

$

13,961 

 

$

13,997 

Interest-bearing deposits at banks

 

 

45,678 

 

 

25,918 

Securities:

 

 

 

 

 

 

Available for sale, at fair value (amortized cost: $135,001 at June, 2019;

 

 

135,576 

 

 

132,104 

$135,274 at December 31, 2018)

 

 

 

 

 

 

Held to maturity, at amortized cost (fair value: $1,885 at June 30, 2019;

 

 

1,862 

 

 

1,685 

$1,674 at December 31, 2018)

 

 

 

 

 

 

Federal Home Loan Bank common stock, at cost

 

 

1,588 

 

 

1,474 

Federal Reserve Bank common stock, at cost

 

 

1,944 

 

 

1,929 

Loans, net of allowance for loan losses of $15,248 at June 30, 2019

 

 

 

 

 

 

and $14,784 at December 31, 2018

 

 

1,197,451 

 

 

1,141,146 

Properties and equipment, net of accumulated depreciation of $20,040 at June 30, 2019

 

 

 

 

 

 

and $19,416 at December 31, 2018

 

 

10,446 

 

 

10,485 

Goodwill and intangible assets

 

 

12,768 

 

 

12,992 

Bank-owned life insurance

 

 

29,094 

 

 

28,403 

Operating lease right-of-use asset (see Note 1)

 

 

4,003 

 

 

-    

Other assets

 

 

16,749 

 

 

18,074 



 

 

 

 

 

 

TOTAL ASSETS

 

$

1,471,120 

 

$

1,388,207 



 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Demand

 

$

243,860 

 

$

231,902 

NOW

 

 

145,620 

 

 

110,450 

Savings

 

 

603,180 

 

 

571,479 

Time

 

 

290,251 

 

 

301,227 

Total deposits

 

 

1,282,911 

 

 

1,215,058 



 

 

 

 

 

 

Securities sold under agreement to repurchase

 

 

3,968 

 

 

3,142 

Other borrowings

 

 

10,000 

 

 

10,000 

Operating lease liability (see Note 1)

 

 

4,449 

 

 

-    

Other liabilities

 

 

17,175 

 

 

17,031 

Junior subordinated debentures

 

 

11,330 

 

 

11,330 

Total liabilities

 

 

1,329,833 

 

 

1,256,561 



 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

Common stock, $.50 par value, 10,000,000 shares authorized; 4,915,678

 

 

 

 

 

 

and 4,852,868 shares issued at June 30, 2019 and December 31, 2018,

 

 

 

 

 

 

respectively, and 4,914,595 and 4,852,868 outstanding at June 30, 2019

 

 

 

 

 

 

and December 31, 2018, respectively

 

 

2,460 

 

 

2,429 

Capital surplus

 

 

62,353 

 

 

61,225 

Treasury stock, at cost, 1,083 and 0 shares at June 30, 2019 and

 

 

 

 

 

 

December 31, 2018, respectively

 

 

-    

 

 

-    

Retained earnings

 

 

78,919 

 

 

73,345 

Accumulated other comprehensive loss, net of tax

 

 

(2,445)

 

 

(5,353)

Total stockholders' equity

 

 

141,287 

 

 

131,646 



 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

1,471,120 

 

$

1,388,207 



 

 

 

 

 

 

See Notes to Unaudited Consolidated Financial Statements

 

 

 

 

 

 













1

 


 

Table of Contents









 

 

 

 

 

 

EVANS BANCORP, INC. AND SUBSIDIARIES

 

 

 

 

 

 

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

 

 

 

 

 

 

THREE MONTHS ENDED JUNE 30, 2019 AND 2018

 

 

 

 

 

 

(in thousands, except share and per share amounts)

 

 

 

 

 

 



 

Three Months Ended June 30,



 

2019

 

2018

INTEREST INCOME

 

 

 

 

 

 

Loans

 

$

15,142 

 

$

13,199 

Interest-bearing deposits at banks

 

 

156 

 

 

15 

Securities:

 

 

 

 

 

 

Taxable

 

 

942 

 

 

863 

Non-taxable

 

 

85 

 

 

170 

Total interest income

 

 

16,325 

 

 

14,247 

INTEREST EXPENSE

 

 

 

 

 

 

Deposits

 

 

3,002 

 

 

1,759 

Other borrowings

 

 

45 

 

 

160 

Junior subordinated debentures

 

 

144 

 

 

132 

Total interest expense

 

 

3,191 

 

 

2,051 

NET INTEREST INCOME  

 

 

13,134 

 

 

12,196 

PROVISION FOR LOAN LOSSES

 

 

90 

 

 

659 

NET INTEREST INCOME AFTER

 

 

 

 

 

 

PROVISION FOR LOAN LOSSES

 

 

13,044 

 

 

11,537 

NON-INTEREST INCOME

 

 

 

 

 

 

Deposit service charges

 

 

602 

 

 

525 

Insurance service and fees

 

 

2,901 

 

 

1,952 

Gain on loans sold

 

 

36 

 

 

-    

Bank-owned life insurance

 

 

173 

 

 

178 

Interchange fee income

 

 

440 

 

 

420 

Other

 

 

578 

 

 

564 

Total non-interest income

 

 

4,730 

 

 

3,639 

NON-INTEREST EXPENSE

 

 

 

 

 

 

Salaries and employee benefits

 

 

7,469 

 

 

6,475 

Occupancy

 

 

872 

 

 

727 

Advertising and public relations

 

 

214 

 

 

326 

Professional services

 

 

929 

 

 

626 

Technology and communications

 

 

1,099 

 

 

847 

Amortization of intangibles

 

 

112 

 

 

28 

FDIC insurance

 

 

150 

 

 

246 

Other

 

 

1,304 

 

 

958 

Total non-interest expense

 

 

12,149 

 

 

10,233 

INCOME BEFORE INCOME TAXES

 

 

5,625 

 

 

4,943 

INCOME TAX PROVISION

 

 

1,243 

 

 

1,152 

NET INCOME

 

$

4,382 

 

$

3,791 



 

 

 

 

 

 

Net income per common share-basic

 

$

0.90 

 

$

0.79 

Net income per common share-diluted

 

$

0.88 

 

$

0.77 

Cash dividends per common share

 

$

 -

 

$

 -

Weighted average number of common shares outstanding

 

 

4,891,841 

 

 

4,810,487 

Weighted average number of diluted shares outstanding

 

 

4,953,072 

 

 

4,933,522 



 

 

 

 

 

 

See Notes to Unaudited Consolidated Financial Statements

 

 

 

 

 

 



2

 


 

Table of Contents





 

 

 

 

 

EVANS BANCORP, INC. AND SUBSIDIARIES

 

 

 

 

 

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

 

 

 

 

 

SIX MONTHS ENDED JUNE 30, 2019 AND 2018

 

 

 

 

 

(in thousands, except share and per share amounts)

 

 

 

 

 



Six Months Ended June 30,



2019

 

2018

INTEREST INCOME

 

 

 

 

 

Loans

$

29,504 

 

$

25,562 

Interest-bearing deposits at banks

 

405 

 

 

25 

Securities:

 

 

 

 

 

Taxable

 

1,743 

 

 

1,660 

Non-taxable

 

215 

 

 

366 

Total interest income

 

31,867 

 

 

27,613 

INTEREST EXPENSE

 

 

 

 

 

Deposits

 

5,845 

 

 

3,257 

Other borrowings

 

90 

 

 

458 

Junior subordinated debentures

 

290 

 

 

250 

Total interest expense

 

6,225 

 

 

3,965 

NET INTEREST INCOME  

 

25,642 

 

 

23,648 

PROVISION FOR LOAN LOSSES

 

628 

 

 

1,426 

NET INTEREST INCOME AFTER

 

 

 

 

 

PROVISION FOR LOAN LOSSES

 

25,014 

 

 

22,222 

NON-INTEREST INCOME

 

 

 

 

 

Deposit service charges

 

1,135 

 

 

1,034 

Insurance service and fees

 

5,343 

 

 

3,917 

Gain on loans sold

 

62 

 

 

-    

Bank-owned life insurance

 

332 

 

 

349 

Interchange fee income

 

861 

 

 

912 

Other

 

1,192 

 

 

1,213 

Total non-interest income

 

8,925 

 

 

7,425 

NON-INTEREST EXPENSE

 

 

 

 

 

Salaries and employee benefits

 

14,629 

 

 

13,102 

Occupancy

 

1,708 

 

 

1,485 

Advertising and public relations

 

381 

 

 

450 

Professional services

 

1,674 

 

 

1,279 

Technology and communications

 

1,992 

 

 

1,611 

Amortization of intangibles

 

224 

 

 

56 

FDIC insurance

 

357 

 

 

478 

Other

 

2,408 

 

 

1,943 

Total non-interest expense

 

23,373 

 

 

20,404 

INCOME BEFORE INCOME TAXES

 

10,566 

 

 

9,243 

INCOME TAX PROVISION

 

2,464 

 

 

2,133 

NET INCOME

$

8,102 

 

$

7,110 



 

 

 

 

 

Net income per common share-basic

$

1.66 

 

$

1.48 

Net income per common share-diluted

$

1.64 

 

$

1.44 

Cash dividends per common share

$

0.52 

 

$

0.46 

Weighted average number of common shares outstanding

 

4,873,928 

 

 

4,799,229 

Weighted average number of diluted shares outstanding

 

4,943,249 

 

 

4,926,385 



 

 

 

 

 

See Notes to Unaudited Consolidated Financial Statements

 

 

 

 

 





3

 


 

Table of Contents











 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

EVANS BANCORP, INC. AND SUBSIDIARIES

UNAUDITED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

THREE MONTHS ENDED JUNE 30, 2019 AND 2018

(in thousands)

 

 

 

 

 

 

 

 

 

 

 



 

 

Three Months Ended June 30,



 

 

 

2019

 

 

 

 

2018



 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

 

 

$

4,382 

 

 

 

 

$

3,791 



 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:

 

 

 

 

 

 

Unrealized gain (loss) on available-for-sale securities

 

 

 

 

1,471 

 

 

 

 

 

(684)



 

 

 

 

 

 

 

 

 

 

 

Defined benefit pension plans:

 

 

 

 

 

 

 

 

 

 

 

Amortization of prior service cost

 

 

 

 

 

 

 

 

 

Amortization of actuarial loss

 

 

 

 

62 

 

 

 

 

 

31 



 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

67 

 

 

 

 

 

36 



 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX

 

 

1,538 

 

 

 

 

 

(648)



 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME

 

 

 

$

5,920 

 

 

 

 

$

3,143 



 

 

 

 

 

 

 

 

 

 

 

See Notes to Unaudited Consolidated Financial Statements

 

 

 

 

 

 

 

 

 

 

 







 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

EVANS BANCORP, INC. AND SUBSIDIARIES

UNAUDITED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(in thousands)

 

 

 

 

 

 

 

 

 

 

 



 

 

 

Six Month Ended June 30,



 

 

 

2019

 

 

 

 

2018



 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

 

 

$

8,102 

 

 

 

 

$

7,110 



 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:

 

 

 

 

 

 

Unrealized gain (loss) on available-for-sale securities

 

 

 

 

2,774 

 

 

 

 

 

(2,044)

Defined benefit pension plans:

 

 

 

 

 

 

 

 

 

 

 

Amortization of prior service cost

 

 

 

 

11 

 

 

 

 

 

11 

Amortization of actuarial loss

 

 

 

 

123 

 

 

 

 

 

67 

Total

 

 

 

 

134 

 

 

 

 

 

78 



 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX

 

 

2,908 

 

 

 

 

 

(1,966)



 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME

 

 

 

$

11,010 

 

 

 

 

$

5,144 



 

 

 

 

 

 

 

 

 

 

 

See Notes to Unaudited Consolidated Financial Statements

 

 

 

 

 

 

 

 

 

 

 













4

 


 

Table of Contents









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

EVANS BANCORP, INC. AND SUBSIDIARIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

 

 

SIX MONTHS ENDED JUNE 30, 2019 AND 2018

 

 

 

 

 

(in thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 



 

 

 

 

 

 

 

 

 

 

Other

 

 

 



 

Common

 

Capital

 

Retained

 

Comprehensive

 

 

 



 

Stock

 

Surplus

 

Earnings

 

Loss

 

Total

Balance, December 31, 2017

 

$

2,394 

 

$

59,444 

 

$

59,921 

 

$

(3,417)

 

$

118,342 

Cumulative-effect adjustment due to change in accounting principle

 

 

 

 

 

 

 

 

1,496 

 

 

 

 

 

1,496 

Net Income

 

 

 

 

 

 

 

 

7,110 

 

 

 

 

 

7,110 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

(1,966)

 

 

(1,966)

Cash dividends ($0.46 per common share)

 

 

 

 

 

 

 

 

(2,202)

 

 

 

 

 

(2,202)

Stock compensation expense

 

 

 

 

 

399 

 

 

 

 

 

 

 

 

399 

Reissued 1,057 restricted shares

 

 

 

 

 

-    

 

 

 

 

 

 

 

 

-    

Issued 16,816 restricted shares

 

 

 

 

(8)

 

 

 

 

 

 

 

 

-    

Issued 3,205 shares under Dividend Reinvestment Plan

 

 

 

 

142 

 

 

 

 

 

 

 

 

144 

Issued 3,898 shares in Employee Stock Purchase Plan

 

 

 

 

151 

 

 

 

 

 

 

 

 

153 

Issued 13,900 shares in stock option exercises

 

 

 

 

92 

 

 

 

 

 

 

 

 

99 

Balance, June 30, 2018

 

$

2,413 

 

$

60,220 

 

$

66,325 

 

$

(5,383)

 

$

123,575 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2018

 

$

2,429 

 

$

61,225 

 

$

73,345 

 

$

(5,353)

 

$

131,646 

Net Income

 

 

 

 

 

 

 

 

8,102 

 

 

 

 

 

8,102 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

2,908 

 

 

2,908 

Cash dividends ($0.52 per common share)

 

 

 

 

 

 

 

 

(2,528)

 

 

 

 

 

(2,528)

Stock compensation expense

 

 

 

 

 

449 

 

 

 

 

 

 

 

 

449 

Reissued 500 restricted shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-    

Issued 22,120 restricted shares, net of forfeitures

 

 

12 

 

 

(12)

 

 

 

 

 

 

 

 

-    

Issued 3,866 shares under Dividend Reinvestment Plan

 

 

 

 

137 

 

 

 

 

 

 

 

 

139 

Issued 6,183 shares in Employee Stock Purchase Plan

 

 

 

 

195 

 

 

 

 

 

 

 

 

198 

Issued 29,058 shares in stock option exercises

 

 

14 

 

 

359 

 

 

 

 

 

 

 

 

373 

Balance, June 30, 2019

 

$

2,460 

 

$

62,353 

 

$

78,919 

 

$

(2,445)

 

$

141,287 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Unaudited Consolidated Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

















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EVANS BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(in thousands)



 

Six Months Ended June 30,



 

 

2019

 

 

2018

OPERATING ACTIVITIES:

 

 

 

 

 

 

Interest received

 

$

31,860 

 

$

27,645 

Fees received

 

 

8,032 

 

 

6,931 

Interest paid

 

 

(6,000)

 

 

(3,828)

Cash paid to employees and vendors

 

 

(23,836)

 

 

(21,009)

Income taxes paid

 

 

(385)

 

 

(576)

Proceeds from sale of loans held for resale

 

 

4,693 

 

 

-    

Originations of loans held for resale

 

 

(4,279)

 

 

-    



 

 

 

 

 

 

Net cash provided by operating activities

 

 

10,085 

 

 

9,163 



 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

Available for sales securities:

 

 

 

 

 

 

Purchases

 

 

(32,631)

 

 

(47,863)

Proceeds from sales, maturities, calls, and payments

 

 

32,694 

 

 

50,169 

Held to maturity securities:

 

 

 

 

 

 

Purchases

 

 

(224)

 

 

-    

Proceeds from maturities, calls, and payments

 

 

48 

 

 

697 

Cash paid for bank-owned life insurance

 

 

(360)

 

 

-    

Proceeds from bank-owned life insurance claims

 

 

-    

 

 

675 

Additions to properties and equipment

 

 

(615)

 

 

(367)

Purchase of tax credit investment

 

 

-    

 

 

(676)

Net increase in loans

 

 

(56,134)

 

 

(62,275)



 

 

 

 

 

 

Net cash used in investing activities

 

 

(57,222)

 

 

(59,640)



 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds (repayments) from short-term borrowings, net

 

 

826 

 

 

(83,521)

Net increase in deposits

 

 

67,853 

 

 

131,239 

Dividends paid

 

 

(2,528)

 

 

(2,202)

Issuance of common stock

 

 

710 

 

 

396 



 

 

 

 

 

 

Net cash provided by financing activities

 

 

66,861 

 

 

45,912 



 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

19,724 

 

 

(4,565)



 

 

 

 

 

 

CASH AND CASH EQUIVALENTS:

 

 

 

 

 

 

Beginning of period

 

 

39,915 

 

 

21,330 



 

 

 

 

 

 

End of period

 

$

59,639 

 

$

16,765 



 

 

 

 

 

 

See Notes to Unaudited Consolidated Financial Statements

 

 

 

 

 

 



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EVANS BANCORP, INC. AND SUBSIDIARIES

 

 

 

 

 

 

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

SIX MONTHS ENDED JUNE 30, 2019 AND 2018

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 



 

Six Months Ended June 30,



 

 

2019

 

 

2018



 

 

 

 

 

 

RECONCILIATION OF NET INCOME TO NET CASH

 

 

 

 

 

 

PROVIDED BY OPERATING ACTIVITIES:

 

 

 

 

 

 



 

 

 

 

 

 

Net income

 

$

8,102 

 

$

7,110 



 

 

 

 

 

 

Adjustments to reconcile net income to net cash

 

 

 

 

 

 

provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

999 

 

 

857 

Deferred tax (benefit) expense

 

 

(45)

 

 

280 

Provision for loan losses

 

 

628 

 

 

1,426 

Gain on sales of securities

 

 

(42)

 

 

-    

Gain on loans sold

 

 

(62)

 

 

-    

Change in fair value of equity securities

 

 

-    

 

 

(245)

Stock compensation expense

 

 

449 

 

 

399 

Proceeds from sale of loans held for resale

 

 

4,693 

 

 

-    

Originations of loans held for resale

 

 

(4,279)

 

 

-    

Changes in assets and liabilities affecting cash flow:

 

 

 

 

 

 

Other assets

 

 

(5,186)

 

 

(1,442)

Other liabilities

 

 

4,828 

 

 

778 



 

 

 

 

 

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

$

10,085 

 

$

9,163 



 

 

 

 

 

 

See Notes to Unaudited Consolidated Financial Statements

 

 

 

 

 

 















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EVANS BANCORP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2019 AND 2018



1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



The accounting and reporting policies followed by Evans Bancorp, Inc. (the “Company”), a financial holding company, and its two direct, wholly-owned subsidiaries: (i) Evans Bank, National Association (the “Bank”), and the Bank’s subsidiaries, Evans National Leasing, Inc. (“ENL”), and Evans National Holding Corp. (“ENHC”); and (ii) Evans National Financial Services, LLC (“ENFS”), and ENFS’s subsidiary, The Evans Agency, LLC (“TEA”), and TEA’s subsidiaries, Frontier Claims Services, Inc. (“FCS”) and ENB Associates Inc. (“ENBA”), in the preparation of the accompanying interim unaudited consolidated financial statements conform with U.S. generally accepted accounting principles (“GAAP”) and with general practice within the industries in which it operates.  Except as the context otherwise requires, the Company and its direct and indirect subsidiaries are collectively referred to in this report as the “Company.”



The results of operations for the three and six month periods ended June 30, 2019 are not necessarily indicative of the results to be expected for the full year.  The accompanying unaudited consolidated financial statements should be read in conjunction with the Audited Consolidated Financial Statements and the Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018 (“10-K”).  The Company’s significant accounting policies are disclosed in Note 1 to the 10-K.



The Financial Accounting Standards Board (“FASB”) establishes changes to U.S. GAAP in the form of accounting standards updates (“ASUs”) to the FASB Accounting Standards Codification.  The Company considers the applicability and impact of all ASUs when they are issued by FASB.  ASUs listed below were adopted by the Company during its current fiscal year.  ASUs not listed below did not have a material impact on the Company’s consolidated financial position, results of operations, cash flows or disclosures.



On January 1, 2019, the Company adopted ASU 2016-02 Leases and all subsequent amendments (collectively, “ASU 2016-02”). The objective of this ASU is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements to meet that objective.  The main difference between previous GAAP and this ASU is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP.  Under this new guidance, a lessee should recognize in the statement of financial position a liability to make lease payments and a right-of-use (“ROU”) asset representing its right to use the underlying asset for the lease term.  The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. 



ASU 2016-02 required a modified retrospective transition approach, applying the new standard to all leases existing at the date of initial application. The Company elected to use the effective date, January 1, 2019, as our date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019.  In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification.



Under ASU 2016-02, leases are classified as finance or operating, with the classification affecting the pattern and classification of expense recognition in the income statement. The Company’s leases, consisting of property leases for certain of our bank branches and insurance agency offices, are classified as operating leases. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As these leases do not provide an implicit rate, we use our incremental borrowing rate in determining the present value of lease payments. Our lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

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ASU 2016-02 had an impact on the Company’s consolidated balance sheets, but did not have an impact on the consolidated statements of income or the consolidated statements of cash flows. The most significant impacts upon adoption on January 1, 2019 were the recognition of $4.3 million of ROU assets and $4.7 million of lease liabilities, including $0.4 million of liabilities that were reported in other liabilities in the Company’s December 31, 2018 consolidated balance sheet. ROU assets and lease liability were $4.0 million and $4.4 million, respectively, at June 30, 2019.  Operating lease expenses during the three and six month periods ended June 30, 2019 were $179 thousand and $357 thousand, respectively, and are included in other non-interest expense on the consolidated statement of income. Cash paid for amounts included in the measurement of lease liabilities during the three and six month periods ended June 30, 2019 were $184 thousand and $368 thousand, respectively, and are included in cash flows from operating activities on the consolidated statement of cash flows. The weighted average discount rate related to the Company’s leases was 3.5% as of June 30, 2019.  The weighted average remaining lease term related to the Company’s leases was 8.8 years as of June 30, 2019.  Future minimum lease payments under non-cancellable leases as of June 30, 2019 were as follows:





 



 



Year Ending December 31,

2019 (excluding the six months ended June 30, 2019)

368 
2020  749 
2021  682 
2022  694 
2023  589 

Thereafter

2,092 

Total future minimum lease payments

5,174 

Less imputed interest

725 

Total

4,449 



 

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2. SECURITIES



The amortized cost of securities and their approximate fair value at June 30, 2019 and December 31, 2018 were as follows:





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

June 30, 2019



 

(in thousands)



 

 

 

 

 

 

 

 



 

Amortized

 

Unrealized

 

Fair



 

Cost

 

Gains

 

Losses

 

Value



 

 

 

 

 

 

 

 

 

 

 

 

Available for Sale:

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agencies

 

$

35,144 

 

$

363 

 

$

(23)

 

$

35,484 

States and political subdivisions

 

 

3,726 

 

 

67 

 

 

(8)

 

 

3,785 

Total debt securities

 

$

38,870 

 

$

430 

 

$

(31)

 

$

39,269 



 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

FNMA

 

$

34,788 

 

$

244 

 

$

(142)

 

$

34,890 

FHLMC

 

 

17,533 

 

 

76 

 

 

(62)

 

 

17,547 

GNMA

 

 

1,538 

 

 

15 

 

 

(14)