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Evans Bancorp Reaches $1 Billion in Assets and Reports Second Quarter Net Income Growth of 20%

Company Release - 7/28/2016 4:15 PM ET

HAMBURG, N.Y., July 28, 2016 (GLOBE NEWSWIRE) -- Evans Bancorp, Inc. (the “Company” or “Evans”) (NYSE MKT:EVBN), a community financial services company serving Western New York since 1920, today reported its results of operations for the second quarter ended June 30, 2016.

HIGHLIGHTS OF THE 2016 SECOND QUARTER

  • Total assets reached $1.0 billion as of June 30, 2016
  • Net income was $2.0 million, or $0.46 per diluted share, a 20% increase from prior year
  • Record loan growth: loan portfolio of $853 million up 20% year over year
  • Strong annual deposit growth across all product categories: deposit portfolio of $870 million, up 12%
  • Net interest income increased 11% from last year’s second quarter to $8.5 million

Net income was $2.0 million, or $0.46 per diluted share, in the second quarter of 2016, compared with $1.7 million or $0.40 per diluted share in the first quarter of 2016 and $1.7 million or $0.39 per diluted share in last year’s second quarter.  The increase reflects improved net interest income and a reduction in the Company’s allowance for loan loss, partially offset by lower non-interest income and higher non-interest expenses.  Return on average equity was 8.56% for the second quarter of 2016 compared with 7.43% in the previous quarter and 7.62% in the second quarter of 2015.

“Record loan growth in the quarter put us over the $1 billion in assets mark, an important milestone that underscores our success at establishing Evans as Western New York’s leading, locally-based community bank,” said David J. Nasca, President and CEO of Evans Bancorp.  “Results were very positive across the board with 20% growth in our loan portfolio and 12% growth in deposits producing 11% growth in net interest income year-over-year.  These results demonstrate success at organically growing the business and our ability to capitalize on the market disruption opportunity occurring with KeyCorp’s acquisition of First Niagara as well as the benefits from Western New York’s economic expansion.”

Net Interest Income
 

($ in thousands)2Q 2016 1Q 2016 2Q 2015
Interest income 9,694   9,356   8,636   
Interest expense 1,178   1,096   988   
Net interest income 8,516    8,260   7,648   
Provision for loan losses (376)   208   415   
Net interest income after provision 8,892    8,052   7,233   


Net interest income increased $0.3 million, or 3%, from the first quarter of 2016 and $0.9 million, or 11%, from the prior-year second quarter, reflecting strong loan and demand deposit growth.  The Company’s commercial loan portfolio continues to grow at significant rates as average commercial loans, including both commercial and industrial and commercial real estate loans, were $642 million in the second quarter, up 4% from $616 million in the first quarter of 2016 and 18% from $543 million in the second quarter of 2015.  Net interest margin of 3.65% declined 4 basis points from the 2016 first quarter, but improved 4 basis points from the second quarter of last year.  The margin contraction from the trailing quarter reflects a continued decrease in loan yields as market rates remain historically low in a highly competitive market.  The margin improvement from last year was due to a shift in interest-earning assets mix as average loans grew 16% and comprised 86% of average interest-earning assets compared with 82% in the second quarter of 2015.  Loans have earned higher yields than investment securities and short-term interest-earning cash over the past two years.

The Company released $0.4 million in allowance for loan losses compared with a provision for loan loss in the 2016 first quarter and in last year’s second quarter.  The loan loss provision reversal reflects favorable credit quality trends in the loan portfolio as well as improvement in specific loan relationships. 

John B. Connerton, Executive Vice President and Chief Financial Officer, noted, “We have had excellent loan growth while maintaining our conservative culture and consistent underwriting standards.  This provides confidence in the quality of our loan assets.  There were several factors that led to the release of reserves, including an improved collateral position on an impaired loan, a sustained period of low charge-offs, and the upgrade of several large criticized loan relationships.”

Asset Quality

              
($ in thousands) 2Q 2016 1Q 2016  2Q 2015 
Total non-performing loans $ 16,076   $ 17,941    $10,994 
Total net loan charge-offs (recoveries)   (30)    (28)    83 
Non-performing loans/Total loans   1.88%   2.25%   1.55%
Net loan charge-offs/Average loans   (0.01)%   (0.02)%   0.05%
Allowance for loans losses/Total loans   1.50%   1.65%   1.84%


The ratio of the allowance for loan losses to total loans declined due to strong loan growth and a sustained level of low historical charge-offs.  Non-performing loans decreased during the quarter due to a lower balance of loans that are 90 days past due and accruing.

Non-interest Income

($ in thousands) 2Q 2016 1Q 2016  2Q 2015
Deposit service charges   403    443  411 
Insurance service and fee revenue   1,572    1,748  1,821 
Bank-owned life insurance   141    136  152 
Loss on tax credit investment   (2,139)   -  - 
Refundable NY state historic tax credit   1,508    -   - 
Other income   795    667   1,092 
Total non-interest income   2,280    2,994   3,476 


Evans is actively engaged in the community by financing historic rehabilitation projects in Buffalo and enhances its yield by investing in related tax credits.  When a project is completed, Evans begins to recognize tax benefits with a related reduction in the investment.  In the current quarter, a $1.5 million refundable New York State tax credit was recorded in non-interest income and a corresponding $0.6 million tax benefit was realized in income tax expense, offset by a $2.1 million write-off on the investment.  The Company will recognize additional tax benefits of approximately $280 thousand in each of the next two quarters related to this current project.   

Insurance agency revenue was down $0.2 million from the 2016 first quarter due to a seasonal decrease in profit sharing revenue.  The $0.2 million decline from the 2015 second quarter reflects the benefits realized from the high level of claims adjustment fees earned for services provided to assess damages of local properties impacted by the previous year’s severe winter.  Other non-interest income was down from the prior-year period due to lower mortgage servicing rights and the planned run-off of data center income.

Non-interest Expense

($ in thousands) 2Q 2016 1Q 2016  2Q 2015
Salaries and employee benefits  5,467    5,514     5,066 
Occupancy  740    699     697 
Repairs and maintenance  212    176     215 
Advertising and public relations  190    285     231 
Professional services  656    580     670 
Technology and communications  339    422     262 
FDIC insurance  182    159     148 
Litigation Expense  -    (100)    - 
Other expenses  933    793     952 
Total non-interest expenses  8,719    8,528     8,241 


Total non-interest expense increased $0.2 million, or 2%, from the first quarter of 2016 and $0.5 million, or 6%, from the prior-year period.  Salaries and benefits costs were relatively flat from the first quarter of 2016, reflecting stabilization in the number of employees at the Company during the second quarter.  The increase from last year’s second quarter reflects annual merit increases and strategic hires to support the Company’s continued growth.  Evans has expanded its commercial team with new commercial loan officers, business development officers and related support staff. 

Income tax expense of $0.5 million was recognized for the second quarter of 2016, compared with an income tax expense of $0.8 million in each of the first quarter of 2016 and the second quarter of 2015.  The effective tax rate for the quarter was 18.3%, compared with 31.9% in the first quarter of 2016 and 32.1% in the second quarter of 2015.   The decrease in the effective tax rate reflects the impact of the historic tax credit transaction.  The Company expects the effective tax rate for the remainder of 2016 to more closely reflect the year-to-date effective tax rate of 25.2%.

Balance Sheet Highlights

Total assets reached $1.0 billion as of June 30, 2016, a 3% increase from $990 million at March 31, 2016 and a 12% increase over $909 million in assets at June 30, 2015.  The Company experienced the highest loan growth in its history this quarter as the loan portfolio increased $57 million, or 7%, to $853 million.  Loan growth from the end of last year’s second quarter was $142 million, or 20%, and was predominantly in the commercial real estate and commercial and industrial loan portfolios.

Total deposits of $870 million were 2% higher than $849 million at the end of this year’s first quarter and 12% higher than the 2015 second quarter-end.  The year-over-year growth was across all of the Company’s product categories, including demand deposit growth of 15%, NOW account growth of 12%, savings deposit growth of 11%, and time deposit growth of 13%.

Capital Management

The Company consistently maintains regulatory capital ratios measurably above the Federal “well capitalized” standard, including a Tier 1 leverage ratio of 10.06% at June 30, 2016.  Book value per share increased to $22.11 at June 30, 2016 compared with $21.54 at March 31, 2016 and $20.80 at June 30, 2015.  Tangible book value per share was $20.22 at June 30, 2016, compared with $19.64 at the end of the first quarter of 2016 and $18.89 at the end of last year’s second quarter.

Outlook

Mr. Nasca commented, “We have refined our focus with our 2020 strategic plan.  It provides a road map for the next stage of our development and growth.  We believe that the investments we have made in talent and infrastructure for the last several years establishes a solid platform to launch Evans to the next level and strengthen our earnings power.  Over the next couple years, we believe our performance and execution will allow us to maintain significant asset growth and drive accelerated earnings growth.”

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 $1.0 billion in assets and $870 million in deposits at June 30, 2016.  Evans is a full-service community bank, with 14 branches, 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 property and casualty insurance through seven 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.

TABLES FOLLOW


                     
                     
EVANS BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA (UNAUDITED)
(in thousands, except shares and per share data)
                     
  6/30/2016 3/31/2016 12/31/2015 9/30/2015 6/30/2015
ASSETS                    
Investment Securities $ 110,629   $ 116,294   $ 98,758   $ 106,651   $ 106,734  
Loans   853,306     796,773     773,984     731,239     710,832  
Allowance for loan losses   (12,773)    (13,119)    (12,883)    (13,456)    (13,110) 
Goodwill and intangible assets   8,101     8,101     8,101     8,101     8,101  
All other assets   62,335     81,866     71,147     88,356     95,990  
Total assets $ 1,021,598   $ 989,915   $ 939,107   $ 920,891   $ 908,547  
                     
LIABILITIES AND STOCKHOLDERS'                    
EQUITY                    
Demand deposits   187,774     174,276     183,098     170,022     163,862  
NOW deposits   88,993     95,622     83,674     79,983     79,266  
Regular savings deposits   480,290     463,672     439,993     436,331     431,555  
Time deposits   112,828     115,479     96,217     95,967     99,482  
Total deposits   869,885     849,049     802,982     782,303     774,165  
Borrowings   41,841     34,224     32,151     32,640     32,339  
Other liabilities   15,083     14,482     12,718     16,275     13,848  
Total stockholders' equity   94,789     92,160     91,256     89,673     88,195  
                     
SHARES AND CAPITAL RATIOS                    
Common shares outstanding   4,286,939     4,279,296     4,257,179     4,238,448     4,239,929  
Book value per share $ 22.11   $ 21.54   $ 21.44   $ 21.16   $ 20.80  
Tangible book value per share $ 20.22   $ 19.64   $ 19.53   $ 19.25   $ 18.89  
Tier 1 leverage ratio   10.06 %   10.18 %   10.45 %   10.32 %   10.23 %
Tier 1 risk-based capital ratio   11.23 %   11.94 %   11.82 %   12.03 %   12.63 %
Total risk-based capital ratio   12.48 %   13.20 %   13.07 %   13.29 %   13.89 %
                     
ASSET QUALITY DATA                    
Total non-performing loans $ 16,076   $ 17,941   $ 16,042   $ 8,170   $ 10,994  
Total net loan charge-offs (recoveries)   (30)    (28)    776     50     83  
                     
Non-performing loans/Total loans   1.88 %   2.25 %   2.07 %   1.12 %   1.55 %
Net loan charge-offs/Average loans   (0.01)%   (0.02)%   0.42 %   0.03 %   0.05 %
Allowance for loans losses/Total loans   1.50 %   1.65 %   1.66 %   1.84 %   1.84 %
                     

 

                     
                     
EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED OPERATIONS DATA  (UNAUDITED)
(in thousands, except share and per share data)
                     
  2016 2016 2015 2015 2015
  Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter
Interest income   9,694     9,356    9,437    9,099    8,636 
Interest expense   1,178     1,096    1,001    960    988 
Net interest income   8,516     8,260    8,436    8,139    7,648 
Provision for loan losses (credit)   (376)    208    204    396    415 
Net interest income after provision   8,892     8,052    8,232    7,743    7,233 
                     
Deposit service charges   403     443    461    455    411 
Insurance service and fee revenue   1,572     1,748    1,572    1,972    1,821 
Bank-owned life insurance   141     136    140    134    152 
Loss on tax credit investment   (2,139)    -    -    -    - 
Refundable NY state historic tax credit   1,508     -    -    -    - 
Gain on insurance proceeds   -     -    -    734    - 
Other income   795     667    748    962    1,092 
Total non-interest income   2,280     2,994    2,921    4,257    3,476 
                     
Salaries and employee benefits   5,467     5,514    5,365    5,253    5,066 
Occupancy   740     699    722    675    697 
Repairs and maintenance   212     176    204    230    215 
Advertising and public relations   190     285    227    188    231 
Professional services   656     580    499    674    670 
Technology and communications   339     422    308    354    262 
FDIC insurance   182     159    161    151    148 
Litigation Expense   -     (100)   -    (175)   - 
Other expenses   933     793    1,179    930    952 
Total non-interest expenses   8,719     8,528    8,665    8,280    8,241 
                     
Income before income taxes   2,453     2,518    2,488    3,720    2,468 
Income tax provision   450     804    734    1,211    793 
Net income   2,003     1,714    1,754    2,509    1,675 
                     
PER SHARE DATA                    
Net income per common share-diluted $ 0.46   $ 0.40   $0.41  $ 0.58   $0.39 
Cash dividends per common share $ -   $ 0.38   $-  $ 0.36   $- 
Weighted average number of diluted shares   4,346,599     4,328,034    4,315,489    4,312,275    4,309,688 
                     
PERFORMANCE RATIOS                    
Return on average total assets   0.80 %   0.71 %  0.75%   1.10 %  0.74%
Return on average stockholders' equity   8.56 %   7.43 %  7.72%   11.20 %  7.62%
Efficiency ratio   76.30 %   75.78 %  76.30%   66.79 %  74.08%
                     


                     
                     
EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED AVERAGE BALANCES AND YIELDS/RATES  (UNAUDITED)
(in thousands)
  2016 2016 2015 2015 2015
  Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter
AVERAGE BALANCES                    
                     
Loans, net $801,115  $772,672  $740,337  $706,568  $691,608 
Investment securities  115,610   103,094   103,940   112,339   103,641 
Interest bearing deposits at banks  15,916   18,862   19,185   27,501   51,094 
Total interest-earning assets  932,641   894,628   863,462   846,408   846,343 
Non interest-earning assets  65,539   66,375   66,115   66,102   64,396 
Total Assets $998,180  $961,003  $929,577  $912,510  $910,739 
                     
NOW  88,966   88,220   80,810   78,335   78,979 
Regular savings  473,791   447,318   439,108   431,127   430,930 
Time deposits  114,545   108,954   96,478   97,321   105,051 
Total interest-bearing deposits  677,302   644,492   616,396   606,783   614,960 
Other borrowings  36,031   34,250   32,443   32,113   31,533 
Total interest-bearing liabilities  713,333   678,742   648,839   638,896   646,493 
                     
Demand deposits  178,106   176,074   175,362   168,883   162,632 
Other non-interest bearing liabilities  13,142   13,879   14,549   15,122   13,665 
Stockholders' equity  93,599   92,308   90,827   89,609   87,949 
                     
Total Liabilities and Equity $998,180  $961,003  $929,577  $912,510  $910,739 
                     
YIELD/RATE                    
                     
Loans, net  4.43%  4.52%  4.59%  4.76%  4.59%
Investment securities  2.71%  2.39%  3.59%  2.42%  2.58%
Interest bearing deposits at banks  0.83%  0.23%  0.29%  0.23%  0.26%
Total interest-earning assets  4.16%  4.18%  4.37%  4.30%  4.08%
                     
NOW  0.35%  0.39%  0.40%  0.40%  0.43%
Regular savings  0.51%  0.47%  0.43%  0.41%  0.38%
Time deposits  1.23%  1.26%  1.29%  1.27%  1.42%
Total interest-bearing deposits  0.61%  0.60%  0.56%  0.55%  0.56%
Other borrowings  1.57%  1.60%  1.64%  1.64%  1.62%
Total interest-bearing liabilities  0.66%  0.65%  0.62%  0.60%  0.61%
                     
Interest rate spread  3.50%  3.53%  3.75%  3.70%  3.47%
Contribution of interest-free funds  0.15%  0.16%  0.16%  0.15%  0.14%
Net interest margin  3.65%  3.69%  3.91%  3.85%  3.61%
                     

 

For more information contact:
John B. Connerton
Senior Vice President and Chief Financial Officer
Phone: (716) 926-2000
Email: jconner@evansbank.com
-OR-
Deborah K. PawlowskiKei Advisors LLC
Phone:  (716) 843-3908
Email:  dpawlowski@keiadvisors.com

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Source: Evans Bancorp, Inc.