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Evans Bancorp Reports Net Income Growth of 15% to $2.4 Million in the Third Quarter of 2013

Evans Bancorp, Inc. logo

HAMBURG, N.Y., Oct. 24, 2013 (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 third quarter ended September 30, 2013.

HIGHLIGHTS OF THE 2013 THIRD QUARTER

  • Third quarter net income increased 14.7% to $2.4 million, or $0.58 per diluted share, from $2.1 million, or $0.51 per diluted share, in the third quarter of 2012.
  • Third quarter net interest income of $7.2 million increased 3.3% over the prior-year period.
  • Loans increased 4.9% over the prior-year period and 3.0% from the trailing second quarter to $625.6 million; Annualized loan growth rate was 12.0%.
  • Total non-interest expense of $7.3 million in the quarter was down slightly from the prior-year period as a result of continued emphasis on expense management.
  • Total deposits increased $29.9 million, or 4.4%, over the 2012 third quarter, driven by growth in savings and transactional deposits.

Net income was $2.4 million in the third quarter of 2013, a 14.7% increase from $2.1 million in the third quarter of 2012. The improvement in net income reflects a combination of higher net interest income, lower non-interest expense and increased fee income, partially offset by an increase in the provision for loan and lease losses. Return on average equity increased to 12.50% for the third quarter of 2013, compared with 11.60% in the third quarter of 2012.

For the nine months ended September 30, 2013, Evans recorded net income of $6.2 million, or $1.47 per diluted share, a 3.0% increase from net income of $6.0 million, or $1.45 per diluted share, in the same period in 2012. The return on average equity was 10.65% for the nine-month period ended September 30, 2013, compared with 11.15% for the same period in 2012.

"The Company delivered strong operational results reflecting ongoing success in expanding our client base, deepening relationships with existing customers, and disciplined expense management. Loan balances are up almost five percent from the prior year, while we maintain strong attention to credit quality, and recurring fee income increased significantly. We are leveraging this growth into increased bottom line performance as we posted robust net income expansion of nearly 15 percent," commented David J. Nasca, Evans Bancorp President and & CEO. "Despite uneven loan demand, intense competition, and expanding regulatory requirements, the Company remains committed to driving organic growth by delivering enhanced products and tailored solutions that meet client needs and strengthen the customer experience. We believe this approach will provide a platform for long term profitability and performance."

Net Interest Income

Net interest income was $7.2 million for the 2013 third quarter, up 3.3% from the 2012 third quarter and up 2.5% from the trailing second quarter of 2013. Growth in interest-earning assets drove the increase from the prior-year period, while growing loans and non-interest bearing demand deposits impacted the increase over the trailing quarter.

Net interest margin improved 11 basis points in the 2013 third quarter to 3.79% compared with 3.68% in the trailing second quarter. Net interest margin was also up from the 2012 third quarter rate of 3.76%. The increase in net interest margin from the prior-year period was due to a 27 basis point decrease in pricing on Evans' interest bearing liabilities, partially offset by a 19 basis point decrease in the yield on interest-earning assets.

The provision for loan and lease losses increased in the 2013 third quarter by $0.7 million from the trailing second quarter to $0.8 million, largely due to the termination of the FDIC loss share agreement during the quarter. In the third quarter of 2009, the Company engaged in a FDIC-assisted acquisition of Waterford Village Bank subject to FDIC indemnification for 80% of future losses relating to the acquired, or covered, loan portfolio. In the current quarter, the Company accepted an offer from the FDIC to settle the indemnification on the remaining covered loans. As a result of the termination of the loss share agreement, a $0.6 million loan loss provision was realized related to the 80% FDIC guarantee of estimated losses on covered loans, and a corresponding gain of $0.7 million with the settlement of the indemnification asset. The prior-year period had a provision of $9 thousand and the trailing second quarter of 2013 had a provision of $80 thousand.

Non-Interest Income

Non-interest income of $2.6 million was 26.7% of total revenue in the third quarter of 2013, down $0.6 million, or 18.6%, from the prior-year period. Other income decreased by $0.8 million due mainly to a $1.6 million loss on a tax credit investment in a community-based project in the current quarter, partially offset by a $0.7 million gain realized from the termination of the FDIC loss sharing agreement, as discussed above. The loss on the tax credit investment represents a write-off of an investment, with the recognition of an offsetting tax credit benefit realized in the quarter, included in current income tax provision. Insurance agency revenue of $1.9 million was up $132 thousand, or 7.4%, from the 2012 third quarter, due mostly to increases in profit sharing. Service charges on deposits increased 10.9% to $540 thousand from the prior-year period as a result of growing commercial deposit transactional relationships which have historically higher fees. Compared with the trailing second quarter of 2013, total non-interest income decreased by 18.5% mostly due to the loss on tax credit investment.

Non-Interest Expense

Total non-interest expense was $7.3 million in the third quarter of 2013, a decrease of 0.1% from the third quarter of 2012. Overall strong expense control drove these results. Personnel expenses, the largest expense item for the Company, were down 3.0% from the prior-year period. Also helping to reduce expenses were lower maintenance and technology expenses. Maintenance was down $41 thousand, or 19.5%, compared with the third quarter of 2012 and technology expenses were $21 thousand, or 6.6%, lower than the prior-year period.

As a result, the Company's third quarter efficiency ratio improved to 68.59% compared with 71.64% during the prior-year period. The efficiency ratio excludes the one-time $0.7 million gain on termination of the FDIC loss share agreement and the $1.6 million loss on tax credit investment.

An income tax benefit of $779 thousand was recognized for the quarter ended September 30, 2013, compared to an income tax expense of $660 thousand in the prior-year period. The difference is driven by a $1.8 million tax credit benefit realized in the third quarter of 2013 relating to a historic tax credit investment in a community project, as discussed above. Excluding the impact of the historic tax credit and the write-off of the tax credit investment recognized in non-interest income, the current quarter effective tax rate was 31.8%, compared with an effective tax rate of 23.6% in the third quarter of 2012. The tax rate variance from the prior-year period was due to the release of a reserve previously recorded for the 2008 tax year and resolved in the third quarter of 2012.

Balance Sheet Highlights

Total assets grew 3.5% to $827.0 million at September 30, 2013 from $799.3 million on September 30, 2012, and up 1.3% from $816.3 million at the end of the 2013 second quarter. Loans were $625.6 million at September 30, 2013, an increase of 4.9% from $596.2 million at September 30, 2012, and up 3.0% from $607.4 million at June 30, 2013.

Investment securities were $99.2 million at the end of the recent quarter, down 0.2% from the 2013 second quarter and up 3.4% as of the end of third quarter of 2012.

Total deposits increased $29.9 million, or 4.4%, to $702.6 million at September 30, 2013, from $672.7 million at September 30, 2012, and increased $10.2 million, or 1.5%, from the 2013 second quarter-end. The year-over-year growth was attributable to deposit increases in commercial demand deposits and consumer savings deposits. The Company's Better Checking product (included in the NOW category), along with its complementary Better Savings product, continues to be successful in acquiring new customers, deepening existing relationships and increasing fee income. The increase from the 2013 second quarter was the result of demand deposit growth.

Asset Quality

Net charge-offs (recoveries) to average total loans and leases ratio was 0.09% for the third quarter of 2013, down from 0.31% in the third quarter of 2012 and up from (0.02%) in the second quarter of 2013.

The ratio of non-performing loans and leases to total loans and leases increased to 2.29% at September 30, 2013, from 2.21% and 1.53% at June 30, 2013, and September 30, 2012, respectively. During the third quarter of 2013, there was a $0.9 million increase in non-performing loans and leases. Of the $14.3 million in non-performing loans and leases as of September 30, 2013, approximately
$8 million was due to one well-collateralized commercial real estate loan, which has been successfully restructured with a new borrower.

The ratio of the allowance for loan and lease losses to total loans and leases was 1.74% at September 30, 2013, compared with 1.69% at June 30, 2013, and 1.71% at the end of 2012 third quarter. Both the allowance and level of non-performing loans and leases increased, resulting in a coverage ratio of 76.1% at September 30, 2013, compared with 76.2% at June 30, 2013 and 108.4% at September 30, 2012.

Gary A. Kajtoch, Executive Vice President and CFO commented, "We have been successful in growing our loan portfolio and, importantly, have maintained strong credit fundamentals during our growth. Our charge-off percentage remains below industry standards. We are also being prudent with expenses and believe our productivity efforts are on track. In the face of a growing set of regulatory and compliance requirements, we are particularly proud of the achievements to date."

Capital Management

The Company consistently maintains regulatory capital ratios measurably above the federal "well capitalized" standard, including a Tier 1 leverage ratio of 10.27% at September 30, 2013. Book value per share was $18.72 at September 30, 2013, compared with $18.41 at June 30, 2013, and $17.82 at September 30, 2012. Tangible book value per share at September 30, 2013 was $16.76, up 6.2% from the end of the third quarter of 2012 and up 2.0% from the second quarter of 2013.

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 $827 million in assets and $703 million in deposits at September 30, 2013. Evans is a full-service community bank, with 13 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 Web sites, 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)
9/30/2013 6/30/2013 3/31/2013 12/31/2012 9/30/2012
ASSETS
Investment Securities $99,175 $99,329 $98,220 $95,807 $95,912
Loans 625,555 607,442 587,157 581,283 596,176
Leases -- 337 929 1,612 2,440
Allowance for loan and lease losses (10,890) (10,259) (10,154) (9,732) (10,208)
Goodwill and intangible assets 8,249 8,305 8,367 8,429 8,492
All other assets 104,871 111,120 139,195 132,277 106,496
Total assets $826,960 $816,274 $823,714 $809,676 $799,308
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits 140,423 132,820 123,084 123,405 126,251
NOW deposits 66,095 67,736 73,016 65,753 62,946
Regular savings deposits 383,766 379,782 391,739 380,924 375,859
Time deposits 112,341 112,076 110,461 108,910 107,674
Total deposits 702,625 692,414 698,300 678,992 672,730
Borrowings 34,509 34,872 37,113 42,441 39,411
Other liabilities 11,191 11,703 11,806 13,416 13,185
Total stockholders' equity $78,635 $77,285 $76,495 $74,827 $73,982
SHARES AND CAPITAL RATIOS
Common shares outstanding 4,200,207 4,198,596 4,190,257 4,171,473 4,151,985
Book value per share $18.72 $18.41 $18.26 $17.94 $17.82
Tangible book value per share $16.76 $16.43 $16.26 $15.92 $15.77
Tier 1 leverage ratio 10.27% 10.06% 9.87% 9.69% 9.71%
Tier 1 risk-based capital ratio 13.84% 14.17% 14.02% 13.41% 12.96%
Total risk-based capital ratio 15.10% 15.42% 15.28% 14.67% 14.22%
ASSET QUALITY DATA
Total non-performing loans and leases $14,311 $13,456 $8,036 $8,229 $9,415
Total net loan and lease charge-offs 143 (25) 28 346 459
Non-performing loans and leases/Total loans and leases 2.29% 2.21% 1.37% 1.38% 1.53%
Net loan and lease charge-offs/Average loans and leases 0.09% -0.02% 0.02% 0.24% 0.31%
Allowance for loans and leases to total loans and leases 1.74% 1.69% 1.73% 1.67% 1.71%
EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED OPERATIONS DATA (UNAUDITED)
(in thousands except share and per share data)
2013 2013 2013 2012 2012
Third
Quarter
Second
Quarter
First
Quarter
Fourth
Quarter
Third
Quarter
Interest income 8,149 7,993 7,956 8,409 8,309
Interest expense 975 991 1,130 1,309 1,364
Net interest income 7,174 7,002 6,826 7,100 6,945
Provision for loan and lease losses 774 80 450 (129) 9
Net interest income after provision 6,400 6,922 6,376 7,229 6,936
Deposit service charges 540 506 482 498 487
Insurance service and fee revenue 1,906 1,726 1,999 1,604 1,774
Bank-owned life insurance 108 129 113 120 118
Other income 64 853 716 1,060 837
Total non-interest income 2,618 3,214 3,310 3,282 3,216
Salaries and employee benefits 4,637 4,225 4,289 4,083 4,778
Occupancy 695 738 816 776 679
Repairs and maintenance 169 187 178 213 210
Advertising and public relations 158 236 124 214 119
Professional services 480 480 454 463 356
Technology and communications 299 340 291 337 320
Amortization of intangibles 55 62 62 63 77
FDIC insurance 147 165 138 130 118
Other expenses 708 824 724 926 699
Total non-interest expenses 7,348 7,257 7,076 7,204 7,356
Income before income taxes 1,670 2,879 2,610 3,307 2,796
Income tax (benefit) provision (779) 956 794 1,185 660
Net income $2,449 $1,923 $1,816 $2,122 $2,136
PER SHARE DATA
Net income per common share-diluted $0.58 $0.46 $0.43 $0.51 $0.51
Cash dividends per common share $0.26 $0.00 $0.00 $0.24 $0.22
Weighted average number of diluted shares 4,232,961 4,219,428 4,210,595 4,180,578 4,177,567
PERFORMANCE RATIOS
Return on average total assets 1.20% 0.94% 0.89% 1.05% 1.07%
Return on average stockholders' equity 12.50% 9.86% 9.55% 11.33% 11.60%
Efficiency ratio 68.59% 70.43% 69.20% 68.78% 71.64%
EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED AVERAGE BALANCES AND YIELDS/RATES (UNAUDITED)
(in thousands)
2013 2013 2013 2012 2012
Third
Quarter
Second
Quarter
First
Quarter
Fourth
Quarter
Third
Quarter
AVERAGE BALANCES
(dollars in thousands)
Loans and leases, net $604,283 $585,431 $575,953 $585,453 $590,200
Investment securities 97,049 100,027 98,120 101,135 99,347
Interest bearing deposits at banks 55,102 74,617 78,426 63,797 48,619
Total interest-earning assets 756,434 760,075 752,499 750,385 738,166
Non interest-earning assets 62,461 60,814 61,314 58,617 57,776
Total Assets $818,895 $820,889 $813,813 $809,002 $795,942
NOW 66,926 69,698 67,836 62,245 62,283
Regular savings 356,939 356,616 359,434 355,327 352,378
Muni-Vest savings 22,367 28,916 21,348 28,991 21,792
Time deposits 111,774 111,615 110,209 108,447 108,179
Total interest-bearing deposits 558,006 566,845 558,827 555,010 544,632
Other borrowings 34,690 36,704 43,693 41,948 39,883
Total interest-bearing liabilities 592,696 603,549 602,520 596,958 584,515
Demand deposits 135,491 128,369 122,359 124,741 124,590
Other non-interest bearing liabilities 12,323 10,991 12,857 12,408 13,186
Stockholders' equity 78,385 77,980 76,077 74,895 73,651
Total Liabilities and Equity $818,895 $820,889 $813,813 $809,002 $795,942
YIELD/RATE
Loans and leases, net 4.93% 4.97% 5.04% 5.26% 5.13%
Investment securities 2.75% 2.68% 2.80% 2.74% 2.93%
Interest bearing deposits at banks 0.28% 0.24% 0.09% 0.09% 0.12%
Total interest-earning assets 4.31% 4.21% 4.23% 4.48% 4.50%
NOW 0.48% 0.49% 0.67% 1.05% 1.03%
Regular savings 0.30% 0.29% 0.35% 0.46% 0.54%
Muni-Vest savings 0.21% 0.22% 0.28% 0.30% 0.29%
Time deposits 1.59% 1.62% 1.63% 1.70% 1.67%
Total interest-bearing deposits 0.58% 0.57% 0.64% 0.76% 0.81%
Other borrowings 1.95% 1.97% 2.20% 2.45% 2.59%
Total interest-bearing liabilities 0.66% 0.66% 0.75% 0.88% 0.93%
Interest rate spread 3.65% 3.55% 3.48% 3.60% 3.57%
Contribution of interest-free funds 0.14% 0.13% 0.15% 0.18% 0.19%
Net interest margin 3.79% 3.68% 3.63% 3.78% 3.76%

CONTACT: For more information contact: Gary A. Kajtoch Executive Vice President and Chief Financial Officer Phone: (716) 926-2000 Email: gkajtoch@evansbank.com -OR- Deborah K. Pawlowski Kei Advisors LLC Phone: (716) 843-3908 Email: dpawlowski@keiadvisors.com

Source:Evans Bancorp, Inc.