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Evans Bancorp Reports Second Quarter 2013 Net Income up 28.7%

HAMBURG, N.Y., July 25, 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 second quarter ended June 30, 2013.

HIGHLIGHTS OF THE 2013 SECOND QUARTER

  • Net income increased 28.7% to $1.9 million in the 2013 second quarter, or $0.46 per diluted share, from $1.5 million, or $0.36 per diluted share, in the second quarter of 2012.
  • Second quarter net interest income of $7.0 million increased 1.8% over the prior year period; Non-interest income grew 5.8% to $3.2 million, and represented 31.5% of total revenue.
  • Expense management drove 0.9% decrease in total non-interest expense from prior year period.
  • Loans increased 2.2% over the prior-year period and 3.5% from the trailing first quarter to $607.4 million; Annualized loan growth rate was 13.8%.
  • Return on average equity improved to 9.86% in the second quarter of 2013 compared with 8.33% in the prior year period.

Net income was $1.9 million in the second quarter of 2013, up 28.7% from net income of $1.5 million in the second quarter of 2012. The improvement in net income reflected a combination of higher net interest income, which resulted from growing interest earning assets, higher non-interest income, lower non-interest expense, and a $0.2 million year-over-year reduction in the provision for loan and lease losses. Return on average equity was 9.86% for the second quarter of 2013, compared with 8.33% in the second quarter of 2012.

For the six months ended June 30, 2013, Evans recorded net income of $3.7 million, or $0.89 per diluted share, a 3.5% decrease from net income of $3.9 million, or $0.94 per diluted share, in the same period in 2012. The return on average equity was 9.71% for the six-month period ended June 30, 2013, compared with 10.93% in the same period in 2012.

"We are off to a very strong start through the first half of the year, with results very close to last year, in which we had all-time record earnings. Loan balances have grown in the second quarter as we realized closings from the strong loan pipeline built earlier in the year," said David J. Nasca, Evans Bank President & CEO. "Additionally, the company continues to benefit from increasing business activity, strong asset quality, and focused expense management."

Net Interest Income

Net interest income was $7.0 million for the 2013 second quarter, up 1.8% when compared with the second quarter of 2012 and up 2.6% from the trailing first quarter of 2013. Growth in interest-earning assets drove the increase from the second quarter of 2012 and offset net interest margin contraction relative to the same period in prior year.

Net interest margin in the 2013 second quarter increased to 3.68%, compared with 3.63% in the trailing first quarter. Net interest margin was down from the 2012 second quarter rate of 3.85%. The reduction in net interest margin from prior year period is due to a 43 basis point decrease in the yield on interest-earning assets, offset by a 32 basis point decrease in pricing on Evans' interest bearing liabilities.

The provision for loan and lease losses in the second quarter of 2013 was $80 thousand. The prior-year period had a provision of $301 thousand, and the trailing first quarter of 2013 had a provision of $450 thousand. The lower provision in the quarter was the result of a reduction in reserve on one commercial real estate loan and improved historical charge-off performance.

Non-Interest Income

Non-interest income of $3.2 million was 31.5% of total revenue in the second quarter of 2013, up 5.8% compared with the prior-year period. Insurance agency revenue of $1.7 million was up $83 thousand, or 5.0%, from the 2012 second quarter, due mostly to increases in profit sharing. Service charges on deposits increased 15.8% to $506 thousand from the prior-year period as a result of growing commercial deposit transactional relationships which have historically higher fees. Compared with the first quarter of 2013, total non-interest income decreased by 2.9% mostly due to seasonal decreases in insurance revenue.

Non-Interest Expense

Total non-interest expense was $7.3 million in the second quarter of 2013, a decrease of 0.9% from the second quarter of 2012. Overall strong expense control drove these results. Personnel expenses, the largest expense item for the Company, was unchanged from the prior-year period. Also helping to reduce expenses were lower advertising and professional services expenses. Advertising was down $100 thousand, or 29.8%, compared with the second quarter of 2012 and professional services were
$87 thousand, or 15.3%, lower than the prior-year period.

As a result, the Company's second quarter efficiency ratio decreased to 70.43% compared with 72.75% during the prior-year period.

Income tax expense for the quarter ended June 30, 2013, was $1.0 million, representing an effective tax rate of 33.2%, compared with an effective tax rate of 34.9% in the second quarter of 2012.

Balance Sheet Highlights

Total assets grew to $816.3 million at June 30, 2013, up 4.9% from $778.1 million on June 30, 2012, and down 0.9% from $823.7 million at the end of the 2013 first quarter. Loans were $607.4 million at June 30, 2013, an increase of 2.2% from $594.6 million at June 30, 2012, and up 3.5% from $587.2 million at March 31, 2013.

Investment securities were $99.3 million at June 30, 2013, up 1.1% from the end of the first quarter of 2013 and up 2.6% from $96.8 million as of the end of second quarter of 2012. Other assets increased $25.6 million over last year's second quarter, the majority of which was in Fed Funds balances due to deposit growth outpacing loan growth.

Total deposits increased $38.5 million, or 5.9%, to $692.4 million at June 30, 2013, from $653.9 million at June 30, 2012, and decreased $5.9 million, or 0.8%, from the 2013 first 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 decline from the first quarter of 2013 was due to seasonal outflows of municipal deposits.

Asset Quality

Net charge-offs (recoveries) to average total loans and leases ratio was (0.02%) for the second quarter of 2013, down from 0.30% in the second quarter of 2012 and down from 0.02% in the first quarter of 2013. The improved charge-off percentage remains below industry standards and reflects the Bank's focus on maintaining strong credit fundamentals.

The ratio of non-performing loans and leases to total loans and leases increased to 2.21% at June 30, 2013, from 1.37% and 1.77% at March 31, 2013, and June 30, 2012, respectively. During the second quarter of 2013, there was a $5.4 million increase in non-performing loans and leases due mainly to one commercial real estate loan. The loan is well collateralized, and the Bank has active interest from other third parties.

The ratio of the allowance for loan and lease losses to total loans and leases was 1.69% at June 30, 2013, compared with 1.73% at March 31, 2013, and 1.78% at the end of 2012 second quarter. The level of non-performing loans and leases increased, resulting in a decreased coverage ratio of 76.2% at June 30, 2013, compared with 126.4% at March 31, 2013 and 96.8% at June 30, 2012.

Gary A. Kajtoch, Executive Vice President and CFO, commented, "Our non-performing loan balance went up significantly this quarter almost exclusively due to one commercial real estate loan which we had been monitoring. We are confident in the fundamentals of this credit and believe we have appropriate coverage."

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, 2013. Book value per share was $18.41 at June 30, 2013, compared with $18.26 at March 31, 2013, and $17.40 at June 30, 2012. Tangible book value per share at June 30, 2013 was $16.43, up 7.1% from the end of the second quarter of 2012 and up 1.0% from the first quarter of 2013.

Outlook

Mr. Nasca concluded, "Per our plans, net interest income growth continues to be complemented with a focus on growth in non-interest income revenue streams resulting from expanded business relationships with customers and prospects. Evans is able to expand these relationships by providing a customized set of services and solutions to uniquely meet customers' needs and drive shareholder value."

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 $816 million in assets and $692 million in deposits at June 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 7 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)
6/30/2013 3/31/2013 12/31/2012 9/30/2012 6/30/2012
ASSETS
Investment Securities $99,329 $98,220 $95,807 $95,912 $96,802
Loans 607,442 587,157 581,283 596,176 594,569
Leases 337 929 1,612 2,440 3,355
Allowance for loan and lease losses (10,259) (10,154) (9,732) (10,208) (10,658)
Goodwill and intangible assets 8,305 8,367 8,429 8,492 8,569
All other assets 111,120 139,195 132,277 106,496 85,486
Total assets $816,274 $823,714 $809,676 $799,308 $778,122
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits $132,820 $123,084 $123,405 $126,251 $116,231
NOW deposits 67,736 73,016 65,753 62,946 63,535
Regular savings deposits 379,782 391,739 380,924 375,859 365,875
Time deposits 112,076 110,461 108,910 107,674 108,279
Total deposits 692,414 698,300 678,992 672,730 653,920
Borrowings 34,872 37,113 42,441 39,411 40,185
Other liabilities 11,703 11,806 13,416 13,185 11,736
Total stockholders' equity $77,285 $76,495 $74,827 $73,982 $72,281
SHARES AND CAPITAL RATIOS
Common shares outstanding 4,198,596 4,190,257 4,171,473 4,151,985 4,153,332
Book value per share $18.41 $18.26 $17.94 $17.82 $17.40
Tangible book value per share $16.43 $16.26 $15.92 $15.77 $15.34
Tier 1 leverage ratio 10.06% 9.87% 9.69% 9.71% 9.77%
Tier 1 risk-based capital ratio 14.17% 14.02% 13.41% 12.96% 12.92%
Total risk-based capital ratio 15.42% 15.28% 14.67% 14.22% 14.18%
ASSET QUALITY DATA
Total non-performing loans and leases $13,456 $8,036 $8,229 $9,415 $11,008
Total net loan and lease charge-offs (25) 28 346 459 433
Non-performing loans and leases/Total loans and leases 2.21% 1.37% 1.38% 1.53% 1.77%
Net loan and lease charge-offs (recoveries) /Average loans and leases (0.02%) 0.02% 0.24% 0.31% 0.30%
Allowance for loans and leases to total loans and leases 1.69% 1.73% 1.67% 1.71% 1.78%
EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED OPERATIONS DATA (UNAUDITED)
(in thousands except share and per share data)
2013 2013 2012 2012 2012
Second
Quarter
First
Quarter
Fourth
Quarter
Third
Quarter
Second
Quarter
Interest income 7,993 7,956 8,409 8,309 8,289
Interest expense 991 1,130 1,309 1,364 1,408
Net interest income 7,002 6,826 7,100 6,945 6,881
Provision for loan and lease losses 80 450 (129) 9 301
Net interest income after provision 6,922 6,376 7,229 6,936 6,580
Deposit service charges 506 482 498 487 437
Insurance service and fee revenue 1,726 1,999 1,604 1,774 1,643
Bank-owned life insurance 129 113 120 118 134
Other income 853 716 1,060 837 824
Total non-interest income 3,214 3,310 3,282 3,216 3,038
Salaries and employee benefits 4,225 4,289 4,083 4,778 4,229
Occupancy 738 816 776 679 645
Repairs and maintenance 187 178 213 210 177
Advertising and public relations 236 124 214 119 336
Professional services 480 454 463 356 567
Technology and communications 340 291 337 320 276
Amortization of intangibles 62 62 63 77 105
FDIC insurance 165 138 130 118 139
Other expenses 824 724 926 699 848
Total non-interest expenses 7,257 7,076 7,204 7,356 7,323
Income before income taxes 2,879 2,610 3,307 2,796 2,295
Income tax provision 956 794 1,185 660 800
Net income $1,923 $1,816 $2,122 $2,136 $1,495
PER SHARE DATA
Net income per common share-diluted $0.46 $0.43 $0.51 $0.51 $0.36
Cash dividends per common share $0.00 $0.00 $0.24 $0.22 $0.00
Weighted average number of diluted shares 4,219,428 4,210,595 4,180,578 4,177,567 4,156,868
PERFORMANCE RATIOS
Return on average total assets 0.94% 0.89% 1.05% 1.07% 0.77%
Return on average stockholders' equity 9.86% 9.55% 11.33% 11.60% 8.33%
Efficiency ratio 70.43% 69.20% 68.78% 71.64% 72.75%
EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED AVERAGE BALANCES AND YIELDS/RATES (UNAUDITED)
(in thousands)
2013 2013 2012 2012 2012
Second
Quarter
First
Quarter
Fourth
Quarter
Third
Quarter
Second
Quarter
AVERAGE BALANCES
(dollars in thousands)
Loans and leases, net $585,431 $575,953 $585,453 $590,200 $574,639
Investment securities 100,027 98,120 101,135 99,347 101,053
Interest bearing deposits at banks 74,617 78,426 63,797 48,619 39,198
Total interest-earning assets 760,075 752,499 750,385 738,166 714,890
Non interest-earning assets 60,814 61,314 58,617 57,776 58,261
Total Assets $820,889 $813,813 $809,002 $795,942 $773,151
NOW 69,698 67,836 62,245 62,283 60,472
Regular savings 356,616 359,434 355,327 352,378 336,798
Muni-Vest savings 28,916 21,348 28,991 21,792 26,821
Time deposits 111,615 110,209 108,447 108,179 109,170
Total interest-bearing deposits 566,845 558,827 555,010 544,632 533,261
Other borrowings 36,704 43,693 41,948 39,883 40,619
Total interest-bearing liabilities 603,549 602,520 596,958 584,515 573,880
Demand deposits 128,369 122,359 124,741 124,590 115,033
Other non-interest bearing liabilities 10,991 12,857 12,408 13,186 12,471
Stockholders' equity 77,980 76,077 74,895 73,651 71,766
Total Liabilities and Equity $820,889 $813,813 $809,002 $795,942 $773,151
YIELD/RATE
Loans and leases, net 4.97% 5.04% 5.26% 5.13% 5.23%
Investment securities 2.68% 2.80% 2.74% 2.93% 2.98%
Interest bearing deposits at banks 0.24% 0.09% 0.09% 0.12% 0.15%
Total interest-earning assets 4.21% 4.23% 4.48% 4.50% 4.64%
NOW 0.49% 0.67% 1.05% 1.03% 0.99%
Regular savings 0.29% 0.35% 0.46% 0.54% 0.57%
Muni-Vest savings 0.22% 0.28% 0.30% 0.29% 0.30%
Time deposits 1.62% 1.63% 1.70% 1.67% 1.80%
Total interest-bearing deposits 0.57% 0.64% 0.76% 0.81% 0.86%
Other borrowings 1.97% 2.20% 2.45% 2.59% 2.58%
Total interest-bearing liabilities 0.66% 0.75% 0.88% 0.93% 0.98%
Interest rate spread 3.55% 3.48% 3.60% 3.57% 3.66%
Contribution of interest-free funds 0.13% 0.15% 0.18% 0.19% 0.19%
Net interest margin 3.68% 3.63% 3.78% 3.76% 3.85%

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.