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

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. Pawlowski Kei Advisors LLC Phone: (716) 843-3908 Email: dpawlowski@keiadvisors.com

Source:Evans Bancorp, Inc.