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Evans Bancorp Announces Near Record Net Income in 2013; Driven by Strong Loan and Deposit Growth

Evans Bancorp, Inc. logo

HAMBURG, N.Y., Feb. 6, 2014 (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 fourth quarter and year ended December 31, 2013.

HIGHLIGHTS OF THE 2013 FOURTH QUARTER AND YEAR-END

  • Net income for 2013 was $7.9 million compared with a record $8.1 million in 2012.
  • Loans increased 11.3% for the year to $647.0 million.
  • Total deposits increased $27.6 million, or 4.1%, over 2012, driven by 13.4% growth in demand deposits.
  • Fourth quarter net interest income of $7.3 million increased 3.4% over the prior-year period on strong loan and non-interest bearing demand deposit growth.
  • Fourth quarter net income was $1.7 million, or $0.39 per diluted share, compared with
    $2.1 million, or $0.51 per diluted share, in the fourth quarter of 2012.

Net income was $1.7 million in the fourth quarter of 2013, down from $2.1 million in the fourth quarter of 2012, primarily as a result of a $0.4 million increase in the provision for loan and lease losses in the current quarter. The prior-year period benefitted from a $129 thousand release of loan and lease loss reserves as the Company's leasing portfolio credit quality continued to improve. As a result, return on average equity was 8.35% for the fourth quarter of 2013 compared with 11.33% in the fourth quarter of 2012.

For the full year 2013, Evans had net income of $7.9 million, or $1.85 per diluted share, down slightly from net income of $8.1 million, or $1.95 per diluted share, in the prior year. The return on average equity for 2013 was 10.06% compared with 11.20% for 2012.

"Our strong performance in 2013, which approached last year's record earnings, clearly demonstrates the sustainability of our community banking model, our niche in the marketplace, and the performance we are attaining through our growth," commented David J. Nasca, Evans Bancorp President and CEO. "With our focus on being a full-service advisor to our customers, we expanded our customer base and continued to strengthen our balance sheet with strong loan and core deposit growth."

Fourth Quarter 2013 Net Interest Income

Net interest income was $7.3 million for the fourth quarter, an increase of 3.4% from the prior-year period, and up 2.4% from the trailing third quarter of 2013. Growth in loans and non-interest bearing demand deposits drove the increase over both the prior-year period and the trailing quarter.

Net interest margin improved 6 basis points to 3.85% compared with 3.79% in the trailing third quarter, and primarily reflects an increase in interest-earning assets. Net interest margin also improved over the 2012 fourth quarter rate of 3.78%. The increase in net interest margin from the prior-year period was due to a 24 basis point decrease in pricing on Evans' interest bearing liabilities, partially offset by a 13 basis point decrease in the yield on interest-earning assets.

The provision for loan and lease losses was $0.2 million in the reported quarter, up $0.4 million from the prior-year period, during which a release of loss reserves was recorded as a result of improvement in the leasing portfolio's credit quality. When compared with the trailing third quarter of 2013, the provision decreased by $0.5 million. In the prior quarter, the termination of the FDIC loss share agreement related to the Company's 2009 acquisition of Waterford Village Bank resulted in a $0.6 million loan loss provision and a corresponding gain of $0.7 million in non-interest income.

Fourth Quarter 2013 Non-Interest Income

Non-interest income was $3.0 million, or 29.1% of total revenue, in the quarter, down $0.3 million, or 8.0%, from the prior-year period. Service charges on deposits increased 2.4% to $510 thousand from the prior-year period as a result of growing commercial deposit transactional relationships which have historically higher fees. This was off-set by a $0.3 million decrease in other income, mostly as a result of a reduction in premiums on sales of residential mortgages. The Company has booked originated residential mortgages in 2013 rather than selling the mortgages to FNMA as was done in 2012. Insurance agency revenue of $1.6 million was down $25 thousand, or 1.6%, from the 2012 fourth quarter, due mostly to decreases in commercial lines revenue. Compared with the trailing third quarter of 2013, total non-interest income increased by 15.3%, mostly related to the loss on a tax credit investment in the third quarter of 2013.

Fourth Quarter 2013 Non-Interest Expense

Total non-interest expense was $7.7 million, an increase of 6.9% from the prior-year period. Personnel expenses, the largest expense item for the Company, were up $521 thousand, or 12.8%, from the prior-year period, and reflect merit increases and personnel hires to support the Company's growth strategy. These strategic additions impacted the current quarter; however, the Company has efficiently managed the full year's non-interest expense as compared with prior year, as discussed below.

Income tax expense for the quarter was $0.8 million, representing an effective tax rate of 31.3% compared with an effective tax rate of 35.8% in the fourth quarter of 2012. The decrease in tax rate was primarily due to higher tax exempt income as a percentage of total income.

2013 Year-end Balance Sheet Highlights

Total assets grew 2.9% to $833.5 million at December 31, 2013, from $809.7 million on December 31, 2012, and were up 0.8% from $827.0 million at the end of the 2013 third quarter. Loans grew 11.3% in the year to end at $647.0 million from $581.3 million at December 31, 2012. Loans also grew in the fourth quarter and were up 3.4% from $625.6 million at September 30, 2013.

Investment securities were $104.9 million at the end of the year, up 5.9% from the end of 2012 and up 5.8% from the trailing 2013 third quarter.

Total deposits increased $27.6 million, or 4.1%, to $706.6 million at December 31, 2013, from $679.0 million at December 31, 2012, and increased $4.0 million, or 0.6%, from the 2013 third quarter-end. The year-over-year growth was attributable to deposit increases in commercial demand deposits and consumer savings deposits. The increase from the 2013 third quarter was the result of savings deposit growth.

Asset Quality

There were net recoveries from two prior-year charged off loans in the fourth quarter, resulting in a (0.15%) ratio of net charge offs to average total loans and leases. This was an improvement from net charge offs of 0.24% in the fourth quarter of 2012 and 0.09% in the third quarter of 2013.

The ratio of non-performing loans and leases to total loans and leases increased to 2.12% at the end of 2013, from 1.38% at year-end 2012, but decreased from 2.29% at September 30, 2013. Of the $13.7 million in non-performing loans and leases at the end of 2013, approximately $8.0 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 1.78% at December 31, 2013 compared with 1.74% at September 30, 2013 and 1.67% at December 31, 2012. The coverage ratio was 83.8% at year-end 2013 compared with 76.1% at the end of the trailing third quarter and 118.3% at year-end 2012.

Gary A. Kajtoch, Executive Vice President and CFO commented, "During the year we took actions to position the bank for long-term, sustainable growth. Of note, our year-long efficiency and office consolidation initiative is now complete. The Company relocated three corporate facilities into two existing and one new office. We expect there to be some savings in occupancy costs and are clearly seeing improved collaboration within our organization, which was the primary objective. This quarter was rewarding because of the strong growth in our loan portfolio, also all the while maintaining solid credit fundamentals."

2013 Year in Review

Net interest income for 2013 was $28.3 million, an increase of $0.6 million, or 2.0%, over 2012, primarily due to strong growth in the Company's commercial loan portfolio. Although still historically strong, the decreased interest rate environment resulted in a compression of the net interest margin to 3.74% in 2013 from 3.84% in 2012.

The Company's provision for loan and lease losses increased to $1.5 million in 2013 from a release of $68 thousand in 2012. The year-over-year change was mainly attributable to the release of $0.9 million in the leasing provision after continued improvement in the portfolio's performance in 2012 and the $0.6 million in provision realized in the third quarter of 2013 due to the termination of the FDIC loss share agreement. Non-performing loans and leases increased by $5.4 million to $13.7 million in 2013, from $8.2 million in 2012, due to the addition of the restructured commercial loan discussed above.

Non-interest income was $12.2 million for 2013, down $0.7 million from 2012. This decrease was mainly attributable to a $1.6 million impairment on a tax credit investment in a community-based project in the current year, which had a related $1.8 million tax credit, as discussed below. The loss was partially offset by a $0.7 million gain realized in the third quarter from the termination of the FDIC loss sharing agreement, which had a corresponding $0.6 million increase in provision for loan and lease losses, as detailed above. Positively impacting non-interest income were year-over-year increases in bank service charges of $0.2 million, insurance revenue of $0.2 million, and interchange fees of $0.1 million.

Non-interest expense increased $0.6 million, or 2.0%, to $29.4 million in 2013. The increase reflects higher salaries and employee benefits of $0.5 million due to merit increases, rising health care costs, and the addition of new employees as part of the Company's planned growth strategy. Also contributing to the increase were occupancy expenses related to a new Williamsville branch and software write-offs from discontinued projects. Those increases were partially offset by lower amortization expense related to intangible assets, a reduction in professional services expense, and a decrease in maintenance expense.

Income tax expense for the year was $1.7 million, representing an effective tax rate of 18.0% compared with an effective tax rate of 31.5% in 2012. The difference is driven by a $1.8 million tax credit benefit realized in 2013 relating to a historic tax credit investment in a community project. Excluding the impact of the historic tax credit and the write-off of the tax credit investment recognized in non-interest income, the current year effective tax rate was 31.5%.

Capital Management

The Company consistently maintains regulatory capital ratios measurably above the federal "well capitalized" standard, including a Tier 1 leverage ratio of 10.36% at December 31, 2013. Book value per share was $19.21 at December 31, 2013 compared with $18.72 at September 30, 2013 and $17.94 at December 31, 2012. Tangible book value per share at December 31, 2013 was $17.26, up 8.4% from the end of the fourth quarter of 2012 and up 3.0% from the trailing third quarter of 2013.

Mr. Nasca concluded, "2013 was an outstanding year for the Company; however, we expect continuing challenges for the financial services industry, such as strong competition, and interest rate and regulatory pressures, to continue into 2014 and beyond. We are confident our leading community banking franchise will continue to succeed in strategically addressing these challenges. Our efforts are expanding to include alternative distribution channels, allowing us to capture and serve a larger customer base whose interactions with banks are changing. Our focus on the customers and the communities we serve is vital to our ongoing success."

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 $833 million in assets and $707 million in deposits at December 31, 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)
12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012
ASSETS
Investment Securities $104,880 $99,175 $99,329 $98,220 $99,056
Loans 646,996 625,555 607,442 587,157 581,283
Leases -- -- 337 929 1,612
Allowance for loan and lease losses (11,503) (10,890) (10,259) (10,154) (9,732)
Goodwill and intangible assets 8,209 8,249 8,305 8,367 8,429
All other assets 84,916 104,871 111,120 139,195 129,028
Total assets $833,498 $826,960 $816,274 $823,714 $809,676
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits 139,973 140,423 132,820 123,084 123,405
NOW deposits 65,927 66,095 67,736 73,016 65,753
Regular savings deposits 390,575 383,766 379,782 391,739 380,924
Time deposits 110,137 112,341 112,076 110,461 108,910
Total deposits 706,612 702,625 692,414 698,300 678,992
Borrowings 33,680 34,509 34,872 37,113 42,441
Other liabilities 12,495 11,191 11,703 11,806 13,416
Total stockholders' equity $80,711 $78,635 $77,285 $76,495 $74,827
SHARES AND CAPITAL RATIOS
Common shares outstanding 4,201,362 4,200,207 4,198,596 4,190,257 4,171,473
Book value per share $19.21 $18.72 $18.41 $18.26 $17.94
Tangible book value per share $17.26 $16.76 $16.43 $16.26 $15.92
Tier 1 leverage ratio 10.36% 10.27% 10.06% 9.87% 9.69%
Tier 1 risk-based capital ratio 13.64% 13.84% 14.17% 14.02% 13.41%
Total risk-based capital ratio 14.90% 15.10% 15.42% 15.28% 14.67%
ASSET QUALITY DATA
Total non-performing loans and leases $13,733 $14,311 $13,456 $8,036 8,229
Total net loan and lease charge-offs (recoveries) (231) 143 (25) 28 346
Non-performing loans and leases/Total loans and leases 2.12% 2.29% 2.21% 1.37% 1.38%
Net loan and lease charge-offs/Average loans and leases -0.15% 0.09% -0.02% 0.02% 0.24%
Allowance for loans and leases to total loans and leases 1.78% 1.74% 1.69% 1.73% 1.67%
EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED OPERATIONS DATA (UNAUDITED)
(in thousands except share and per share data)
2013 2013 2013 2013 2012
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Fourth
Quarter
Interest income 8,305 8,149 7,993 7,956 8,409
Interest expense 961 975 991 1,130 1,309
Net interest income 7,344 7,174 7,002 6,826 7,100
Provision for loan and lease losses 236 774 80 450 (129)
Net interest income after provision 7,108 6,400 6,922 6,376 7,229
Deposit service charges 510 540 506 482 498
Insurance service and fee revenue 1,579 1,906 1,726 1,999 1,604
Bank-owned life insurance 158 108 129 113 120
Other income 771 64 853 716 1,060
Total non-interest income 3,018 2,618 3,214 3,310 3,282
Salaries and employee benefits 4,604 4,637 4,225 4,289 4,083
Occupancy 761 695 738 816 776
Repairs and maintenance 189 169 187 178 213
Advertising and public relations 268 158 236 124 214
Professional services 478 480 480 454 463
Technology and communications 353 299 340 291 337
Amortization of intangibles 41 55 62 62 63
FDIC insurance 126 147 165 138 130
Other expenses 879 708 824 724 925
Total non-interest expenses 7,699 7,348 7,257 7,076 7,204
Income before income taxes 2,427 1,670 2,879 2,610 3,307
Income tax provision 760 (779) 956 794 1,185
Net income 1,667 2,449 1,923 1,816 2,122
PER SHARE DATA
Net income per common share-diluted $0.39 $0.58 $0.46 $0.43 $0.51
Cash dividends per common share $0.00 $0.26 $0.00 $0.00 $0.24
Weighted average number of diluted shares 4,265,655 4,232,961 4,219,428 4,210,595 4,180,578
PERFORMANCE RATIOS
Return on average total assets 0.80% 1.20% 0.94% 0.89% 1.05%
Return on average stockholders' equity 8.35% 12.50% 9.86% 9.55% 11.33%
Efficiency ratio 73.90% 68.59% 70.43% 69.20% 68.78%
EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED AVERAGE BALANCES AND YIELDS/RATES
(UNAUDITED)
(in thousands)
2013 2013 2013 2013 2012
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Fourth
Quarter
AVERAGE BALANCES
(dollars in thousands)
Loans and leases, net $620,936 $604,283 $585,431 $575,953 $585,453
Investment securities 101,343 97,049 100,027 98,120 101,135
Interest bearing deposits at banks 41,414 55,102 74,617 78,426 63,797
Total interest-earning assets 763,693 756,434 760,075 752,499 750,385
Non interest-earning assets 65,143 62,461 60,814 61,314 58,617
Total Assets $828,836 $818,895 $820,889 $813,813 809,002
NOW 65,764 66,926 69,698 67,836 62,245
Regular savings 355,426 356,939 356,616 359,434 355,327
Muni-Vest savings 31,508 22,367 28,916 21,348 28,991
Time deposits 111,042 111,774 111,615 110,209 108,447
Total interest-bearing deposits 563,740 558,006 566,845 558,827 555,010
Other borrowings 35,806 34,690 36,704 43,693 41,948
Total interest-bearing liabilities 599,546 592,696 603,549 602,520 596,958
Demand deposits 137,731 135,491 128,369 122,359 124,741
Other non-interest bearing liabilities 11,740 12,323 10,991 12,857 12,408
Stockholders' equity 79,819 78,385 77,980 76,077 74,895
Total Liabilities and Equity $828,836 $818,895 $820,889 $813,813 $809,002
YIELD/RATE
Loans and leases, net 4.88% 4.93% 4.97% 5.04% 5.26%
Investment securities 2.77% 2.75% 2.68% 2.80% 2.74%
Interest bearing deposits at banks 0.29% 0.28% 0.24% 0.09% 0.09%
Total interest-earning assets 4.35% 4.31% 4.21% 4.23% 4.48%
NOW 0.48% 0.48% 0.49% 0.67% 1.05%
Regular savings 0.29% 0.30% 0.29% 0.35% 0.46%
Muni-Vest savings 0.22% 0.21% 0.22% 0.28% 0.30%
Time deposits 1.58% 1.59% 1.62% 1.63% 1.70%
Total interest-bearing deposits 0.56% 0.58% 0.57% 0.64% 0.76%
Other borrowings 1.90% 1.95% 1.97% 2.20% 2.45%
Total interest-bearing liabilities 0.64% 0.66% 0.66% 0.75% 0.88%
Interest rate spread 3.71% 3.65% 3.55% 3.48% 3.60%
Contribution of interest-free funds 0.14% 0.14% 0.13% 0.15% 0.18%
Net interest margin 3.85% 3.79% 3.68% 3.63% 3.78%
EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED OPERATIONS DATA (Unaudited)
(in thousands except share and per share data)
2013 2012
Year to Date Year to Date Change
Interest income $32,404 $33,377 -2.9%
Interest expense 4,057 5,597 -27.5%
Net interest income 28,347 27,780 2.0%
Provision for loan and lease losses 1,540 (68) -2364.7%
Net interest income after provision 26,807 27,848 -3.7%
Deposit service charges 2,038 1,858 9.7%
Insurance service and fee revenue 7,211 6,966 3.5%
Bank-owned life insurance 508 489 3.9%
Other income 2,404 3,510 -31.5%
Total non-interest income 12,161 12,823 -5.2%
Salaries and employee benefits 17,755 17,304 2.6%
Occupancy 3,010 2,785 8.1%
Repairs and maintenance 723 769 -6.0%
Advertising and public relations 786 814 -3.4%
Professional services 1,892 1,925 -1.7%
Technology and communications 1,283 1,197 7.2%
Amortization of intangibles 221 349 -36.7%
FDIC insurance 576 521 10.6%
Other expense 3,134 3,128 0.2%
Total non-interest expense 29,380 28,792 2.0%
Income before income taxes 9,588 11,879 -19.3%
Income tax provision 1,731 3,747 -53.8%
Net income $7,857 $8,132 -3.4%
PER SHARE DATA
Net income per common share-diluted $1.85 $1.95 -5.2%
Cash dividends per common share $0.26 $0.68
Weighted average number of diluted shares 4,240,144 4,159,690
PERFORMANCE RATIOS
Return on average total assets 0.96% 1.04%
Return on average stockholders' equity 10.06% 11.20%
Efficiency ratio 71.98% 70.05%

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.