Evans Bancorp Reports Net Income Growth of 11% to $2.1 Million in the Third Quarter of 2012
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, 2012.
HIGHLIGHTS OF THE 2012 THIRD QUARTER
Net income increased to $2.1 million in the 2012 third quarter, or
$0.51 per diluted share, from
$1.9 million, or $0.47 per diluted share in the third quarter of 2011.
- Third quarter net interest income increased 6.6% compared with the prior-year period as a result of continued growth in interest earning assets and lower deposit costs.
- Core deposits increased at an annualized rate of 13.8%, with demand, NOW and savings deposit products increasing $18.0 million, or 3.5%, during the third quarter of 2012.
- The third quarter ratio of non-performing loans and leases to total loans and leases decreased for the fourth consecutive quarter to 1.57% due to continued improvement in credit quality trends.
- Strong capital position with Total Risk-Based Capital ratio of 14.22% at September 30, 2012.
Net income grew to $2.1 million in the third quarter of 2012, up 10.9% from net income of $1.9 million in the third quarter of 2011. The improvement in net income reflects a combination of higher net interest income, which resulted from growing interest earning assets, lower interest expense and a $0.2 million year-over-year reduction in the provision for loan and lease losses. Return on average equity was 11.60% for the third quarter of 2012 compared with 11.37% in the third quarter of 2011.
For the nine months ended September 30, 2012, Evans recorded net income of $6.0 million, or $1.45 per diluted share, a 26% increase over net income of $4.8 million, or $1.16 per diluted share, in the same period in 2011. The return on average equity was 11.15% for the nine-month period ended September 30, 2012, compared with 9.66% in the same period in 2011.
David J. Nasca, President and CEO of Evans Bancorp, stated, “Our performance for the year has been strong, reflecting our continued ability to profitably grow and add business despite economic weaknesses and intense competition in our marketplace. Brand recognition is expanding and our customer-centric approach has been well received. We have continued to develop our capabilities and add products and enhancements, enabling us to expand existing relationships and capture new business.”
Net Interest Income
Net interest income was $6.9 million for the 2012 third quarter, up 6.6% when compared with the third quarter of 2011 and comparable with the second quarter of 2012.
The Company's net interest margin was 3.76% for the third quarter of 2012, down from the second quarter rate of 3.85% and down from 3.97% in the third quarter of 2011. As compared with last year's third quarter, the decrease in the net interest margin was due to the continued declining interest rate environment. The Company has been able to partially off-set the 47 basis point decrease from third quarter 2011 in yield on interest-earning assets through re-pricing its interest bearing liabilities by 33 basis points. The contribution of interest-free funds declined by 7 basis points compared with the third quarter 2011.
The Company's loan and investment portfolios continue to re-price into lower yields, as evidenced by a decrease in yield on interest-earning assets of 14 basis points from the second quarter of 2012.
The provision for loan and lease losses decreased to $9 thousand in the third quarter of 2012 and reflects the benefit from a release of $0.13 million in leasing reserve after continued improvement in the portfolio's performance. The prior-year period had a provision of $0.2 million, while the linked second quarter of 2012 had $0.3 million.
Non-interest income, which represented 31.7% of total revenue in the third quarter of 2012, increased slightly to $3.2 million when compared with the third quarter of 2011. Insurance agency revenue of $1.8 million was down $75 thousand, or 4.0%, from the 2011 third quarter, due mostly to decreases in personal lines revenue. Other income was up $117 thousand from third quarter of 2011, partly due to premiums on residential mortgages sold to Fannie Mae. Service charges on deposits decreased 2.2% to $487 thousand from the prior-year period. Compared with the second quarter of 2012, total non-interest income was up $0.2 million, due mainly to insurance agency increases in revenue of $0.1 million, reflecting the typical revenue cycle seasonality.
Total non-interest expense was $7.4 million in the third quarter of 2012, an increase of 8.1% from $6.8 million in the third quarter of 2011. The largest component of the increase was salaries and employee benefits, which was up $0.7 million, or 17.3%, compared with the third quarter of 2011. This rise reflects $0.5 million in onetime expense related to the severance costs incurred due to the departure of an executive from the Company. Also contributing was merit increases, higher health care costs and increased staff.
As a result of the increase in non-interest expense, the efficiency ratio increased to 71.64% for the third quarter of 2012 from 69.10% for the third quarter of 2011.
Income tax expense for the quarter ended September 30, 2012, was $0.7 million, representing an effective tax rate of 23.6% compared with an effective tax rate of 29.6% in the third quarter of 2011. The decrease in tax rate in the third quarter was primarily due to a tax benefit of $220 thousand related to the release of a reserve previously recorded for the 2008 tax year and resolved in the current quarter.
Balance Sheet Highlights
Core loans, which are defined as total loans and leases less national direct financing leases, were $596.2 million at September 30, 2012, an increase of 6.3% from $560.8 million at September 30, 2011, and up 0.3% (1.1% annualized) from $594.6 million at June 30, 2012. The majority of the loan growth since the third quarter of 2011 was in the commercial mortgage loan portfolio.
Investment securities were $95.9 million at September 30, 2012, down 0.9% from $96.8 million at the end of the second quarter of 2012 and up 1.8% from $94.2 million as of the end of third quarter of 2011.
Total deposits were $672.7 million at September 30, 2012, up $59.5 million, or 9.7%, from $613.2 million at September 30, 2011, and up $18.8 million, or 2.9%, from $653.9 million at June 30, 2012. The sequential quarter and year-over-year growth was attributable to strong core deposit increases in both commercial and consumer products. The Company's Better Checking product (included in the NOW category), along with its complementary Better Savings product, have been successful in acquiring new customers and deepening relationships. Strong growth has also been evident in the commercial checking portfolio, as the Company continues to emphasize offering a diverse set of services and products to commercial customers.
Gary J. Kajtoch, Executive Vice President and CFO, commented, “We continued to execute well this past quarter as we increased our customer base, resulting in revenue, loan and deposit growth. We also remained focused on credit quality, which continued to improve as our non-performing loans and leases decreased again for the fourth consecutive quarter and our charge-offs remained well below industry averages. We are focused on expense control as we make investments for the future while managing risk and our capital levels.”
There were net charge-offs to average total loans and leases of 0.31% in the third quarter of 2012, flat with the second quarter of 2012 and up from the 0.09% in the third quarter of 2011. The charge-off percentage remains below industry standards and is indicative of the Bank's historical credit diligence.
The ratio of non-performing loans and leases to total loans and leases decreased to 1.57% at September 30, 2012, from 1.84% and 2.70% at June 30, 2012, and September 30, 2011, respectively. During the third quarter of 2012, there was a $1.6 million decrease in non-performing loans and leases, due mainly to commercial loan charge-offs ($0.4 million), the continued run-off of the leasing portfolio ($0.2 million) and commercial pay downs ($0.8 million).
As a result of the growth in loans and the charge-offs during the third quarter of 2012, the ratio for the allowance for loan and lease losses to total loans and leases decreased to 1.71% at September 30, 2012, compared with 1.78% at June 30, 2012, and 1.88% at September 30, 2011. While the ratio decreased, the level of non-performing loans and leases decreased even further, resulting in an improved coverage ratio of 108.4% at September 30, 2012, compared with 96.8% at June 30, 2012.
The FDIC assisted acquisition of Waterford Village Bank in July 2009 accounted for $1.9 million, or approximately 20.7% of the Company's $9.2 million in non-performing loans at September 30, 2012. These loans are included in a loss-sharing agreement with the FDIC, in which the FDIC bears at least 80% of the losses on these loans. On an adjusted basis, Evans' coverage ratio for non-performing loans and leases was 131.3% at September 30, 2012, which excludes all of the FDIC-guaranteed Waterford loans.
The Company consistently maintains regulatory capital ratios measurably above the federal “well capitalized” standard, including a Tier 1 leverage ratio of 9.71% at September 30, 2012. Book value per share was $17.82 at September 30, 2012, compared with $17.40 at June 30, 2012, and $16.61 at September 30, 2011. Tangible book value per share at September 30, 2012, was $15.77, up 2.8% from the end of the second quarter of 2012 and up 9.2% from the third quarter 2011.
The Company increased its annual dividend, which was paid out semi-annually, by 10% from $0.40 per share in 2011 to $0.44 per share in 2012.
Mr. Nasca concluded, “The Company remains focused on growth, albeit at a more moderate pace, due to economic conditions, business cautiousness and decreasing market disruption as the impact of the HSBC divestiture is largely behind us. The introduction of our new mobile banking application and the opening of our 14th full-service banking office on Main Street in Williamsville will provide expansion of our delivery channels to reach new customers and prospects going forward.”
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 $799 million in assets, 14 branches and $673 million in deposits at September 30, 2012. Evans is a full-service community bank, 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, Inc., a wholly-owned subsidiary of Evans Bank, provides non-deposit investment products, such as annuities and mutual funds.
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.
|EVANS BANCORP, INC. AND SUBSIDIARIES|
|SELECTED FINANCIAL DATA|
|(in thousands except shares and per share data)||2012||2012||2012||2011||2011|
|Allowance for loan and lease losses||(10,208)||(10,658)||(10,790)||(11,495)||(10,708)|
|Goodwill and intangible assets||8,492||8,569||8,675||8,779||8,893|
|All other assets||106,496||85,486||85,716||56,430||72,073|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Regular savings deposits||351,603||342,992||334,010||313,777||301,610|
|Total stockholders' equity||$73,982||$72,281||$70,455||$68,988||$68,199|
|SHARES AND CAPITAL RATIOS|
|Common shares outstanding||4,151,985||4,153,332||4,128,905||4,124,892||4,106,933|
|Book value per share||$17.82||$17.40||$17.06||$16.72||$16.61|
|Tangible book value per share||$15.77||$15.34||$14.96||$14.60||$14.44|
|Tier 1 leverage ratio||9.71%||9.77%||9.74%||9.71%||9.81%|
|Tier 1 risk-based capital ratio||12.96%||12.92%||12.96%||12.77%||12.65%|
|Total risk-based capital ratio||14.22%||14.18%||14.22%||14.03%||13.90%|
|ASSET QUALITY DATA|
|Total non-performing loans and leases||9,415||11,008||13,041||15,176||15,331|
|Total net loan and lease charge-offs||459||433||456||41||118|
|Non-performing loans/Total loans and leases||1.53%||1.77%||2.09%||2.40%||2.42%|
|Non-performing leases/Total loans and leases||0.04%||0.07%||0.16%||0.20%||0.27%|
|Non-performing loans and leases/Total loans and leases||1.57%||1.84%||2.25%||2.60%||2.70%|
|Net loan and lease charge-offs/Average loans and leases||0.31%||0.30%||0.32%||0.03%||0.09%|
|Allowance for loans and leases to total loans and leases||1.71%||1.78%||1.86%||1.97%||1.88%|
EVANS BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
|(in thousands except share and per share data)||2012||2012||2012||2011||2011|
|Net interest income||6,945||6,881||6,853||6,891||6,514|
|Provision for loan and lease losses||9||301||(249)||828||159|
|Net interest income after provision||6,936||6,580||7,102||6,063||6,355|
|Deposit service charges||487||437||436||482||498|
|Insurance service and fee revenue||1,774||1,643||1,945||1,363||1,849|
|Bank-owned life insurance||118||134||117||123||117|
|Total non-interest income||3,216||3,038||3,288||2,862||3,184|
|Salaries and employee benefits||4,778||4,229||4,214||3,931||4,073|
|Repairs and maintenance||210||177||169||191||184|
|Advertising and public relations||119||336||145||247||188|
|Technology and communications||320||276||263||273||212|
|Amortization of intangibles||77||106||104||114||120|
|Total non-interest expenses||7,356||7,323||6,909||7,073||6,803|
|Income before income taxes||2,796||2,295||3,481||1,852||2,736|
|Income tax provision||660||800||1,102||514||810|
|PER SHARE DATA|
|Net income per common share-diluted||$0.51||$0.36||$0.58||$0.33||$0.47|
|Cash dividends per common share||$0.22||$0.00||$0.22||$0.00||$0.20|
|Weighted average number of diluted shares||4,177,567||4,156,868||4,131,330||4,115,061||4,109,181|
|Return on average total assets||1.07%||0.77%||1.26%||0.72%||1.08%|
|Return on average stockholders' equity||11.60%||8.34%||13.59%||7.77%||11.37%|
EVANS BANCORP, INC. AND SUBSIDIARIES
SELECTED AVERAGE BALANCES AND YIELDS/RATES
|(dollars in thousands)|
|Loans and leases, net||$590,200||$574,639||$568,863||$557,875||$541,357|
|Interest bearing deposits at banks||48,619||39,198||23,271||22,928||17,200|
|Total interest-earning assets||738,166||714,890||697,473||683,479||657,083|
|Non interest-earning assets||57,776||58,261||58,607||58,078||59,647|
|Total interest-bearing deposits||544,632||533,261||515,361||503,711||486,128|
|Total interest-bearing liabilities||584,515||573,880||557,873||545,136||525,672|
|Other non-interest bearing liabilities||13,186||12,472||13,418||12,219||12,273|
|Total Liabilities and Equity||$795,942||$773,151||$756,080||$741,557||$716,730|
|Loans and leases, net||5.13%||5.23%||5.28%||5.49%||5.36%|
|Interest bearing deposits at banks||0.12%||0.15%||0.15%||0.14%||0.16%|
|Total interest-earning assets||4.50%||4.64%||4.80%||4.99%||4.97%|
|Total interest-bearing deposits||0.81%||0.86%||0.96%||1.07%||1.14%|
|Total interest-bearing liabilities||0.93%||0.98%||1.09%||1.19%||1.26%|
|Interest rate spread||3.57%||3.66%||3.71%||3.80%||3.71%|
|Contribution of interest-free funds||0.19%||0.19%||0.22%||0.23%||0.26%|
|Net interest margin||3.76%||3.85%||3.93%||4.03%||3.97%|