News Column

Evans Bancorp Reports Second Quarter 2014 Net Income of $1.6 Million, or $0.37 Per Diluted Share

August 4, 2014

HAMBURG, N.Y., Aug. 4, 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 second quarter ended June 30, 2014.

HIGHLIGHTS OF THE 2014 SECOND QUARTER

Second quarter net income of $1.6 million, or $0.37 per diluted share, was down from $1.9 million, or $0.46 per diluted share in second quarter 2013, primarily resulting from $1.0 million ($0.6 million after tax), or approximately $0.14 per share (after tax), set aside for litigation expense.Growth in loans and non-interest bearing demand deposits drove net interest income increase of 9.7% to $7.7 million.Strong loan growth of 9.2% over the prior-year period resulted in total loans of $663.4 million at June 30, 2014. Total deposits were up 2.1% or $14.8 million, over the second quarter of 2013, driven by 11.8% growth in demand deposits.The ratio of non-performing loans and leases to total loans and leases improved from 2.21% to 0.82% year-over-year.

Net income was $1.6 million in the second quarter of 2014, down from $1.9 million in the second quarter of 2013, primarily due to litigation expense of $1.0 million ($0.6 million after tax), or approximately $0.14 per share in the current quarter. Excluding the litigation expense, net income was $2.2 million, a 15.8% increase over net income of $1.9 million in the prior year period. The litigation accrual is related to the New York State (NYS) Attorney General's allegations regarding the Bank's residential mortgage fair lending practices, as previously disclosed in the Company's filings with the Securities and Exchange Commission (SEC). Although the Company has not incurred actual payments related to the investigation to date, the Company has recorded a reserve based on estimated outcomes from legal proceedings. As a result of the litigation accrual, return on average equity was 7.52% for the second quarter of 2014 compared with 9.86% in the second quarter of 2013.

For the six months ended June 30, 2014, Evans recorded net income of $3.6 million, or $0.84 per diluted share, a 3.9% decrease from net income of $3.7 million, or $0.89 per diluted share, in the same period in 2013. The return on average equity was 8.74% for the six-month period ended June 30, 2014, compared with 9.71% for the same period in 2013. The decrease for the six-month period was also attributable to the litigation accrual recorded during the second quarter.

"We are disappointed that we have thus far been unable to reach agreement with the State Attorney General. Our Bank has a long, demonstrated history of community involvement and positive reports regarding our banking practices from our primary federal regulator, The Office of the Controller of the Currency, more commonly known as the OCC," said David J. Nasca, President and CEO of Evans Bank and its holding company. "As a local community-oriented financial institution, Evans has built a culture that encourages and supports community involvement. We remain fully committed to the Western New York community we serve and will continue to reach out with financial literacy programs, specialized loan product offerings and accessible ATMs, as well as partnering with community development groups."

Mr. Nasca added, "Despite the disappointment, we have not lost sight of the strong performance we had in the quarter. Excluding this unusual item, net income grew nearly 16%. We experienced healthy growth in our income producing businesses, especially in loans and net interest income, due to the continued success in expanding our customer base."

Net Interest Income

Net interest income was $7.7 million for the second quarter, an increase of 9.7% from the prior-year period, and up 5.3% from the trailing first quarter of 2014. Growth in loans and non-interest bearing demand deposits drove the increase over both periods.

Net interest margin increased 19 basis points to 3.98% from 3.79% in the trailing first quarter, primarily driven by an increase in the yield on interest-earning assets. Net interest margin improved 30 basis points over the 2013 second quarter rate of 3.68%. The increase in net interest margin from the prior-year period was due to a 5 basis point decrease in pricing on Evans' interest bearing liabilities, combined with a 25 basis point increase in the yield on interest-earning assets due to utilization of lower interest-earning fed funds into higher yielding loans.

The provision for loan and lease losses was $0.2 million in the 2014 second quarter, up from $0.1 million in the prior-year period. When compared with the trailing first quarter of 2014, the provision increased by only $23 thousand due to offsetting changes in specific reserves held on individually evaluated loans.  

Non-Interest Income

Non-interest income was $3.1 million, or 28.4% of total revenue, in the quarter, down $0.2 million, or 5.0%, from the prior-year period. Insurance agency revenue of $1.6 million was down 8.1% from the 2013 second quarter, due mostly to decreases in profit sharing revenue. Compared with the trailing first quarter of 2014, total non-interest income decreased by 10.1%, mostly due to a decrease of $0.5 million, or 25.6%, in insurance agency revenue as a result of seasonal profit sharing.

Non-Interest Expense

Total non-interest expense was $8.3 million, an increase of 14.8% from the prior-year period. Excluding $1.0 million in litigation expense, total non-interest expense was $7.3 million, an increase of 1.0% from the prior-year period. Personnel expenses, the largest expense item for the Company, were up $0.4 million, or 8.0%, from last year's second quarter, and reflect annual merit increases and personnel hires to support the Company's growth strategy. Disciplined expense management resulted in an aggregated decrease in all other expense categories of $265 thousand compared with the 2013 second quarter.

Income tax expense for the quarter was $0.7 million, representing an effective tax rate of 29.2%, compared with an effective tax rate of 33.2% in the second quarter of 2013. The effective tax rate decreased as a result of tax-exempt income comprising a larger percentage of total income in the second quarter of 2014, as compared with the second quarter of 2013. 

Balance Sheet Highlights

Total assets grew 1.7% to $830.6 million at June 30, 2014, from $816.3 million on June 30, 2013, though were down 2.0% from $846.9 million at the end of the 2014 first quarter. Loans of $663.4 million grew 9.2% from $607.4 million at June 30, 2013 and were up 0.4% from $660.7 million at March 31, 2014. The increase was mostly due to growth in both commercial real estate and commercial and industrial loan portfolios for both periods.

Investment securities were $107.3 million at June 30, 2014, up 8.0% from the end of the second quarter of 2013, and up 7.5% from the trailing 2014 first quarter. 

Total deposits increased $14.8 million, or 2.1%, to $707.2 million at June 30, 2014, from $692.4 million at June 30, 2013, but decreased $14.8 million, or 2.0%, from the 2014 first quarter-end. The year-over-year growth was mainly attributable to deposit increases in commercial demand deposits. The decrease from the 2014 first quarter was mainly the result of outflows of seasonal municipal savings deposits.

Asset Quality

Net charge offs in the second quarter resulted in a 0.24% ratio of net charge offs to average total loans and leases. This was up from net recoveries of (0.02%) in the second quarter of 2013, and from net recoveries of (0.05%) in the first quarter of 2014.

The ratio of non-performing loans and leases to total loans and leases improved to 0.82% at June 30, 2014, from 2.21% at June 30, 2013, and increased slightly from 0.79% at March 31, 2014. During the second quarter of 2014, there was a $0.3 million increase in non-performing loans and leases.

The ratio of the allowance for loan and lease losses to total loans and leases was 1.74% at June 30, 2014 compared with 1.78% at March 31, 2014 and 1.69% at June 30, 2013. The coverage ratio was 211.6% at June 30, 2014 compared with 224.7% at the end of the trailing first quarter and 76.2% at June 30, 2013.

Gary A. Kajtoch, Executive Vice President and CFO commented, "Excellent loan growth, coupled with our strong credit quality, as evidenced by low non-performing loans and leases, resulted in another quarter of solid operating results."

Capital Management

The Company consistently maintains regulatory capital ratios measurably above the federal "well capitalized" standard, including a Tier 1 leverage ratio of 10.04% at June 30, 2014. Book value per share was $19.84 at June 30, 2014 compared with $19.41 at March 31, 2014 and $18.41 at June 30, 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 $831 million in assets and $707 million in deposits at June 30, 2014. 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)
           
 6/30/20143/31/201412/31/20139/30/20136/30/2013
ASSETS          
Investment Securities$107,290$99,812$104,880$99,175$99,329
Loans 663,399 660,695 646,996 625,555 607,442
Leases  --   --   --   --  337
Allowance for loan and lease losses (11,522) (11,734) (11,503) (10,890) (10,259)
Goodwill and intangible assets 8,128 8,168 8,209 8,249 8,305
All other assets 63,261 89,935 84,916 104,871 111,120
Total assets$830,556$846,876$833,498$826,960$816,274
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Demand deposits 148,559 139,975 139,973 140,423 132,820
NOW deposits 73,645 79,531 65,927 66,095 67,736
Regular savings deposits 376,759 393,735 390,575 383,766 379,782
Time deposits 108,207 108,702 110,137 112,341 112,076
Total deposits 707,170 721,943 706,612 702,625 692,414
Borrowings 30,450 31,704 33,680 34,509 34,872
Other liabilities 9,987 12,712 12,495 11,191 11,703
Total stockholders' equity$82,949$80,517$80,711$78,635$77,285
           
SHARES AND CAPITAL RATIOS          
Common shares outstanding 4,179,758 4,147,666 4,201,362 4,200,207 4,198,596
Book value per share$19.84$19.41$19.21$18.72$18.41
Tangible book value per share$17.90$17.44$17.26$16.76$16.43
Tier 1 leverage ratio 10.04% 10.20% 10.36% 10.27% 10.06%
Tier 1 risk-based capital ratio 13.10% 13.44% 13.64% 13.84% 14.17%
Total risk-based capital ratio 14.35% 14.70% 14.90% 15.10% 15.42%
           
ASSET QUALITY DATA          
Total non-performing loans and leases$5,445$5,221$13,733$14,311$13,456
Total net loan and lease charge-offs (recoveries) 388 (79) (231) 143 (25)
           
Non-performing loans and leases/Total loans and leases 0.82% 0.79% 2.12% 2.29% 2.21%
Net loan and lease charge-offs/Average loans and leases 0.24% -0.05% -0.15% 0.09% -0.02%
Allowance for loans and leases to total loans and leases 1.74% 1.78% 1.78% 1.74% 1.69%
 
EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED OPERATIONS DATA (UNAUDITED)
(in thousands except share and per share data)
           
  2014 2014 2013 2013 2013
  Second  First  Fourth  Third  Second 
  Quarter Quarter Quarter Quarter Quarter
Interest income 8,592 8,219 8,305 8,149 7,993
Interest expense 910 921 961 975 991
Net interest income 7,682 7,298 7,344 7,174 7,002
Provision for loan and lease losses 176 153 236 774 80
Net interest income after provision 7,506 7,145 7,108 6,400 6,922
           
Deposit service charges 464 461 510 540 506
Insurance service and fee revenue 1,586 2,131 1,579 1,906 1,726
Bank-owned life insurance 151 145 158 108 129
Other income 854 658 771 64 853
Total non-interest income 3,055 3,395 3,018 2,618 3,214
           
Salaries and employee benefits 4,564 4,695 4,604 4,637 4,225
Occupancy 685 743 761 695 738
Repairs and maintenance 180 176 189 169 187
Advertising and public relations 281 222 268 158 236
Professional services 418 518 478 480 480
Technology and communications 278 300 353 299 340
Amortization of intangibles 40 41 41 55 62
FDIC insurance 112 162 126 147 165
Litigation Expense 1,000 -- -- -- --
Other expenses 774 761 879 708 824
Total non-interest expenses 8,332 7,618 7,699 7,348 7,257
           
Income before income taxes 2,229 2,922 2,427 1,670 2,879
Income tax provision 650 909 760 (779) 956
Net income 1,579 2,013 1,667 2,449 1,923
           
PER SHARE DATA          
Net income per common share-diluted$0.37$0.47$0.39$0.58$0.46
Cash dividends per common share$0.00$0.31$0.00$0.26$0.00
Weighted average number of diluted shares 4,248,249 4,284,016 4,265,655 4,232,961 4,219,428
           
PERFORMANCE RATIOS          
Return on average total assets 0.76% 0.96% 0.80% 1.20% 0.94%
Return on average stockholders' equity 7.52% 10.01% 8.35% 12.50% 9.86%
Efficiency ratio 77.23% 70.86% 73.90% 68.59% 70.43%
 
EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED AVERAGE BALANCES AND YIELDS/RATES (UNAUDITED)
(in thousands)
  2014 2014 2013 2013 2013
  Second  First  Fourth  Third  Second 
  Quarter Quarter Quarter Quarter Quarter
AVERAGE BALANCES          
(dollars in thousands)          
           
Loans and leases, net$647,169$641,265$620,936$604,283$585,431
Investment securities 105,380 103,491 101,343 97,049 100,027
Interest bearing deposits at banks 18,625 26,238 41,414 55,102 74,617
Total interest-earning assets 771,174 770,994 763,693 756,434 760,075
Non interest-earning assets 64,943 65,919 65,143 62,461 60,814
Total Assets$836,118$836,913$828,836$818,895$820,889
           
NOW 73,873 71,190 65,764 66,926 69,698
Regular savings 345,620 357,471 355,426 356,939 356,616
Muni-Vest savings 38,255 31,419 31,508 22,367 28,916
Time deposits 108,699 109,549 111,042 111,774 111,615
Total interest-bearing deposits 566,447 569,629 563,740 558,006 566,845
Other borrowings 32,410 35,213 35,806 34,690 36,704
Total interest-bearing liabilities 598,857 604,842 599,546 592,696 603,549
           
Demand deposits 145,018 139,503 137,731 135,491 128,369
Other non-interest bearing liabilities 10,101 12,090 11,740 12,323 10,991
Stockholders' equity 82,142 80,478 79,819 78,385 77,980
           
Total Liabilities and Equity$836,118$836,913$828,836$818,895$820,889
           
YIELD/RATE          
           
Loans and leases, net 4.87% 4.68% 4.88% 4.93% 4.97%
Investment securities 2.65% 2.68% 2.77% 2.75% 2.68%
Interest bearing deposits at banks 0.32% 0.23% 0.29% 0.28% 0.24%
Total interest-earning assets 4.46% 4.26% 4.35% 4.31% 4.21%
           
NOW 0.44% 0.42% 0.48% 0.48% 0.49%
Regular savings 0.27% 0.28% 0.29% 0.30% 0.29%
Muni-Vest savings 0.22% 0.22% 0.22% 0.21% 0.22%
Time deposits 1.55% 1.52% 1.58% 1.59% 1.62%
Total interest-bearing deposits 0.53% 0.53% 0.56% 0.58% 0.57%
Other borrowings 1.89% 1.87% 1.90% 1.95% 1.97%
Total interest-bearing liabilities 0.61% 0.61% 0.64% 0.66% 0.66%
           
Interest rate spread 3.85% 3.65% 3.71% 3.65% 3.55%
Contribution of interest-free funds 0.13% 0.14% 0.14% 0.14% 0.13%
Net interest margin 3.98% 3.79% 3.85% 3.79% 3.68%

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



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Source: Evans Bancorp, Inc.


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