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Evans Bancorp Reports Record Loan Growth in 2016 Third Quarter

HAMBURG, N.Y., Oct. 27, 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 third quarter ended September 30, 2016.

THIRD QUARTER 2016 HIGHLIGHTS

  • Record loan growth: Loan portfolio of $913 million, up 25% year-over-year and 7% from the trailing second quarter
  • Net interest income increased 11% from last year’s third quarter to $9.1 million
  • Strong year-over-year deposit growth across all product categories; Total deposits up 15% to $898 million
  • New account openings up 32% compared with the second quarter
  • Net income was $2.2 million, or $0.51 per diluted share

Net income was $2.2 million, or $0.51 per diluted share, in the third quarter of 2016 compared with $2.0 million, or $0.46 per diluted share, in the trailing second quarter of 2016 and $2.5 million, or $0.58 per diluted share, in last year’s third quarter. The increase from the 2016 trailing second quarter reflects higher net interest income and noninterest income, partially offset by higher provision for loan loss. The decline from the third quarter of 2015 reflects the after-tax gain of $0.5 million, or $0.11 per diluted share, last year from an insurance settlement related to a fire sustained at a branch location. Return on average equity was 9.23% for the third quarter of 2016 compared with 8.56% in the trailing second quarter and 11.20% in the third quarter of 2015.

“We continue to deliver strong growth and increasing revenue as both our loan and deposit portfolios have been expanding at a very healthy pace. This has driven a double-digit increase in net interest income, even as we face continued headwinds from interest rates and a very competitive market environment,” said David J. Nasca, President and CEO of Evans Bancorp. “Over the last year, we have organically grown loans by 25% and deposits by 15%. New account openings were 32% higher in the third quarter. We believe these are an excellent indicator of the strong customer response to Evans’ value proposition as a full service, locally-based community bank and our ability to execute our strategy and acquire new clients in a market going through transition.”

Mr. Nasca added, “Our significant investments over the last few years in talent, technology and infrastructure have enabled us to capitalize on opportunities from the area’s economic expansion, the market disruption related to KeyCorp’s recent acquisition of First Niagara, and our enhanced competitive positioning.”

Net Interest Income
($ in thousands)
3Q 2016 2Q 2016 3Q 2015
Interest income $ 10,241 $ 9,694 $ 9,099
Interest expense 1,172 1,178 960
Net interest income 9,069 8,516 8,139
Provision (credit) for loan losses 1,006 (376) 396
Net interest income after provision (credit) $ 8,063 $ 8,892 $ 7,743

Net interest income increased $0.6 million, or 6%, from the second quarter of 2016 and $0.9 million, or 11%, from the prior-year third quarter, reflecting strong loan and demand deposit growth. The Company’s commercial loan portfolio continued to grow at a significant rate as average commercial loans, including both commercial real estate and commercial and industrial loans, were $712 million in the third quarter, up 11% from $642 million in the trailing second quarter and up 28% from $557 million in the 2015 third quarter.

Net interest margin of 3.67% declined 18 basis points from the 2015 third quarter, but improved 2 basis points from the second quarter of 2016. The margin contraction from last year reflects a continued decrease in loan yields as market rates remain historically low in a highly competitive market. The margin improvement from the trailing second quarter was due to a decrease in the cost of interest-bearing liabilities as interest-bearing deposit rates declined 4 basis points. This improvement in deposit pricing was somewhat offset by a decrease in loan yields.

The increase in loan loss provision reflects the Company’s significant loan growth and a small increase of commercial loan relationships to criticized status, partially offset by favorable credit quality trends including lower non-performing loans at September 30, 2016 compared with June 30, 2016 and a sustained charge-off ratio that is historically low. The increase in non-performing loans at the end of the recent quarter when compared with the end of the third quarter of 2015 was primarily due to the downgrade of a single loan relationship in the fourth quarter of 2015.

Asset Quality
($ in thousands)
3Q 2016 2Q 2016 3Q 2015
Total non-performing loans $ 15,279 $ 16,076 $ 8,170
Total net loan charge-offs (recoveries) 67 (30) 50
Non-performing loans/ Total loans 1.67 % 1.88 % 1.12 %
Net loan charge-offs/ Average loans 0.03 % (0.01)% 0.03 %
Allowance for loan losses/ Total loans 1.50 % 1.50 % 1.84 %

John B. Connerton, Executive Vice President and Chief Financial Officer, noted, “Asset quality remains very strong. We have grown our loan portfolio without compromising our disciplined underwriting standards. Our overall favorable credit fundamentals are reflected by continued low charge-off rates and strong reserve levels in comparison to peers.”

Non-Interest Income
($ in thousands)
3Q 2016 2Q 2016 3Q 2015
Deposit service charges $ 475 $ 403 $ 455
Insurance service and fee revenue 1,855 1,572 1,972
Bank-owned life insurance 144 141 134
Loss on tax credit investment - (2,139) -
Refundable NY state historic tax credit - 1,508 -
Gain on insurance proceeds - - 734
Other income 861 795 962
Total non-interest income $ 3,335 $ 2,280 $ 4,257

Previous quarters included the impact of large transactions, such as a net reduction of noninterest income of $0.6 million related to an investment in a historic rehabilitation tax credit in the second quarter of 2016 and a $0.7 million gain in the third quarter of 2015 from an insurance settlement related to a fire sustained at a branch location. There were no comparable transactions in the third quarter of 2016.

Insurance revenue increased $0.3 million from the trailing second quarter due to the seasonal increase in commercial lines insurance commissions. The $0.1 million decline from the previous year’s third quarter was due to a decrease in personal lines insurance commissions and financial services sales revenue, partially offset by strong commercial lines insurance revenue growth.

Non-Interest Expense
($ in thousands)
3Q 2016 2Q 2016 3Q 2015
Salaries and employee benefits $ 5,402 $ 5,467 $ 5,253
Occupancy 732 740 675
Repairs and maintenance 200 212 230
Advertising and public relations 232 190 188
Professional services 535 656 674
Technology and communications 304 339 354
FDIC insurance 201 182 151
Litigation expense - - (175)
Other expenses 1,105 933 930
Total non-interest expenses $ 8,711 $ 8,719 $ 8,280

The Company experienced stability across most expense categories when compared with the second quarter of 2016 as efforts continue to optimize returns from the investments management has made during a rapid growth phase in recent years. The third quarter of 2015 included a $0.2 million reversal of the Company’s litigation reserve after settling a legal matter during the period.

Salaries and benefits costs decreased $0.1 million in the recent third quarter when compared with the second quarter of 2016, reflecting stabilization in the number of employees at the Company. The modest increase from last year’s third quarter reflects annual merit increases and strategic hires to support the Company’s continued growth, most notably in the expansion of its commercial banking team with new commercial loan officers, business development officers and related support staff.

Income tax expense of $0.5 million was recorded for the third quarter of 2016, roughly flat to the second quarter of 2016, but $0.7 million less than the $1.2 million income tax provision recognized in last year’s third quarter. The effective tax rate for the quarter was 17.5% compared with 18.3% in the second quarter of 2016 and 32.6% in the third quarter of 2015. The lower effective tax rate over the two most recent quarters reflects the impact of the tax credit investment transaction in the second quarter of 2016.

Balance Sheet Highlights

Total assets reached $1.1 billion as of September 30, 2016, a 6% increase from $1.0 billion at June 30, 2016 and 18% higher than $921 million at September 30, 2015. The Company experienced the highest loan growth in its history this quarter as the loan portfolio increased from the 2016 second-quarter end by $60 million, or 7%, to $913 million. Loan growth from the end of last year’s third quarter was $182 million, or 25%, and was predominantly in the commercial real estate and commercial and industrial loan portfolios.

Total deposits of $898 million were 3% higher than $870 million at the end of this year’s second quarter and 15% higher than the 2015 third 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 9%, savings deposit growth of 14%, and time deposit growth of 23%.

Capital Management

The Company consistently maintains regulatory capital ratios measurably above the Federal “well capitalized” standard, including a Tier 1 leverage ratio of 9.55% at September 30, 2016. Book value per share increased to $22.20 at September 30, 2016 compared with $22.11 at June 30, 2016 and $21.16 at September 30, 2015. Tangible book value per share was $20.31 at September 30, 2016, compared with $20.22 at the end of the second quarter of 2016 and $19.25 at the end of last year’s third quarter.

Outlook

Mr. Nasca concluded, “2016 has been a year of great momentum as Evans’ business and franchise have grown, most notably passing the $1 billion in assets milestone at mid-year. Our strategies to benefit from market disruption have delivered excellent results to date, and we see continued opportunity going forward. Our track record of successful execution gives us confidence as we move into the next phase of our 2020 strategic plan focused on leveraging a stronger platform and significant investments made in talent and infrastructure to drive continued growth in our business with greater earnings power and returns.”

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 $1.1 billion in assets and $898 million in deposits at September 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)
9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015
ASSETS
Investment Securities $ 104,859 $ 110,629 $ 116,294 $ 98,758 $ 106,651
Loans 912,852 853,306 796,773 773,984 731,239
Allowance for loan losses (13,712) (12,773) (13,119) (12,883) (13,456)
Goodwill and intangible assets 8,101 8,101 8,101 8,101 8,101
All other assets 72,563 62,335 81,866 71,147 88,356
Total assets $ 1,084,663 $ 1,021,598 $ 989,915 $ 939,107 $ 920,891
LIABILITIES AND STOCKHOLDERS'
EQUITY
Demand deposits 195,869 187,774 174,276 183,098 170,022
NOW deposits 87,047 88,993 95,622 83,674 79,983
Regular savings deposits 496,926 480,290 463,672 439,993 436,331
Time deposits 118,123 112,828 115,479 96,217 95,967
Total deposits 897,965 869,885 849,049 802,982 782,303
Borrowings 74,136 41,841 34,224 32,151 32,640
Other liabilities 17,364 15,083 14,482 12,718 16,275
Total stockholders' equity 95,198 94,789 92,160 91,256 89,673
SHARES AND CAPITAL RATIOS
Common shares outstanding 4,287,400 4,286,939 4,279,296 4,257,179 4,238,448
Book value per share $ 22.20 $ 22.11 $ 21.54 $ 21.44 $ 21.16
Tangible book value per share $ 20.31 $ 20.22 $ 19.64 $ 19.53 $ 19.25
Tier 1 leverage ratio 9.55 % 10.06 % 10.18 % 10.45 % 10.32 %
Tier 1 risk-based capital ratio 10.82 % 11.45 % 11.94 % 11.82 % 12.03 %
Total risk-based capital ratio 12.07 % 12.70 % 13.20 % 13.07 % 13.29 %
ASSET QUALITY DATA
Total non-performing loans $ 15,279 $ 16,076 $ 17,941 $ 16,042 $ 8,170
Total net loan charge-offs (recoveries) 67 (30) (28) 776 50
Non-performing loans/Total loans 1.67 % 1.88 % 2.25 % 2.07 % 1.12 %
Net loan charge-offs/Average loans 0.03 % (0.01)% (0.02)% 0.42 % 0.03 %
Allowance for loans losses/Total loans 1.50 % 1.50 % 1.65 % 1.66 % 1.84 %


EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED OPERATIONS DATA (UNAUDITED)
(in thousands, except share and per share data)
2016 2016 2016 2015 2015
Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter
Interest income 10,241 9,694 9,356 9,437 9,099
Interest expense 1,172 1,178 1,096 1,001 960
Net interest income 9,069 8,516 8,260 8,436 8,139
Provision for loan losses (credit) 1,006 (376) 208 204 396
Net interest income after provision 8,063 8,892 8,052 8,232 7,743
Deposit service charges 475 403 443 461 455
Insurance service and fee revenue 1,855 1,572 1,748 1,572 1,972
Bank-owned life insurance 144 141 136 140 134
Loss on tax credit investment - (2,139) - - -
Refundable NY state historic tax credit - 1,508 - - -
Gain on insurance proceeds - - - - 734
Other income 861 795 667 748 962
Total non-interest income 3,335 2,280 2,994 2,921 4,257
Salaries and employee benefits 5,402 5,467 5,514 5,365 5,253
Occupancy 732 740 699 722 675
Repairs and maintenance 200 212 176 204 230
Advertising and public relations 232 190 285 227 188
Professional services 535 656 580 499 674
Technology and communications 304 339 422 308 354
FDIC insurance 201 182 159 161 151
Litigation expense - - (100) - (175)
Other expenses 1,105 933 793 1,179 930
Total non-interest expenses 8,711 8,719 8,528 8,665 8,280
Income before income taxes 2,687 2,453 2,518 2,488 3,720
Income tax provision 471 450 804 734 1,211
Net income 2,216 2,003 1,714 1,754 2,509
PER SHARE DATA
Net income per common share-diluted $0.51 $ 0.46 $ 0.40 $0.41 $ 0.58
Cash dividends per common share $0.38 $ - $ 0.38 $- $ 0.36
Weighted average number of diluted shares 4,362,479 4,346,599 4,328,034 4,315,489 4,312,275
PERFORMANCE RATIOS
Return on average total assets 0.84% 0.80 % 0.71 % 0.75% 1.10 %
Return on average stockholders' equity 9.23% 8.56 % 7.43 % 7.72% 11.20 %
Efficiency ratio 70.23% 76.30 % 75.78 % 76.30% 66.79 %


EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED AVERAGE BALANCES AND YIELDS/RATES (UNAUDITED)
(in thousands)
2016 2016 2016 2015 2015
Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter
AVERAGE BALANCES
Loans, net $875,999 $801,115 $772,672 $740,337 $706,568
Investment securities 112,025 115,610 103,094 103,940 112,339
Interest bearing deposits at banks 1,162 15,916 18,862 19,185 27,501
Total interest-earning assets 989,186 932,641 894,628 863,462 846,408
Non interest-earning assets 69,489 65,539 66,375 66,115 66,102
Total Assets $1,058,675 $998,180 $961,003 $929,577 $912,510
NOW 86,428 88,966 88,220 80,810 78,335
Regular savings 487,168 473,791 447,318 439,108 431,127
Time deposits 115,644 114,545 108,954 96,478 97,321
Total interest-bearing deposits 689,240 677,302 644,492 616,396 606,783
Other borrowings 69,307 36,031 34,250 32,443 32,113
Total interest-bearing liabilities 758,547 713,333 678,742 648,839 638,896
Demand deposits 187,201 178,106 176,074 175,362 168,883
Other non-interest bearing liabilities 16,860 13,142 13,879 14,549 15,122
Stockholders' equity 96,067 93,599 92,308 90,827 89,609
Total Liabilities and Equity $1,058,675 $998,180 $961,003 $929,577 $912,510
YIELD/RATE
Loans, net 4.39% 4.43% 4.52% 4.59% 4.76%
Investment securities 2.21% 2.71% 2.39% 3.59% 2.42%
Interest bearing deposits at banks 0.34% 0.83% 0.23% 0.29% 0.23%
Total interest-earning assets 4.14% 4.16% 4.18% 4.37% 4.30%
NOW 0.23% 0.35% 0.39% 0.40% 0.40%
Regular savings 0.47% 0.51% 0.47% 0.43% 0.41%
Time deposits 1.22% 1.23% 1.26% 1.29% 1.27%
Total interest-bearing deposits 0.57% 0.61% 0.60% 0.56% 0.55%
Other borrowings 1.13% 1.57% 1.60% 1.64% 1.64%
Total interest-bearing liabilities 0.62% 0.66% 0.65% 0.62% 0.60%
Interest rate spread 3.52% 3.50% 3.53% 3.75% 3.70%
Contribution of interest-free funds 0.15% 0.15% 0.16% 0.16% 0.15%
Net interest margin 3.67% 3.65% 3.69% 3.91% 3.85%

For more information contact: John B. Connerton Executive 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.