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Evans Bancorp Reports Net Income Growth of 11% to $2.1 Million in the Third Quarter of 2012

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HAMBURG, N.Y.--(BUSINESS WIRE)--

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

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.

Non-Interest Expense

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.”

Asset Quality

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.

Capital Management

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.

Outlook

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.

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.

             
EVANS BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(Unaudited)
(in thousands except shares and per share data) 2012 2012 2012 2011 2011
Third Second First Fourth Third
Quarter Quarter Quarter Quarter Quarter
ASSETS
Investment Securities $95,912 $96,802 $112,492 $103,783 $94,182
Loans 596,176 594,569 575,188 577,383 560,792
Leases 2,440 3,355 4,512 6,022 7,783
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
Total assets 799,308 778,122 775,793 740,902 733,015
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits 126,251 116,231 114,423 118,037 116,036
NOW deposits 62,946 63,535 62,077 50,761 48,924
Regular savings deposits 351,603 342,992 334,010 313,777 301,610
Muni-vest deposits 24,256 22,883 29,542 20,161 26,241
Time deposits 107,674 108,279 109,629 113,467 120,427
Total deposits 672,730 653,920 649,681 616,203 613,238
Borrowings 39,411 40,185 42,010 42,340 39,161
Other liabilities 13,185 11,736 13,647 13,371 12,417
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
Non-performing loans $9,160 $10,578 $12,091 $14,016 $13,782
Non-performing leases 255 430 950 1,160 1,549
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

(Unaudited)

 
(in thousands except share and per share data) 2012 2012 2012 2011 2011

Third
Quarter

Second
Quarter

First
Quarter

Fourth
Quarter

Third
Quarter

Interest income 8,309 8,289 $8,369 $8,518 $8,169
Interest expense 1,364 1,408 1,516 1,627 1,655
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
Other income 837 824 790 894 720
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
Occupancy 679 645 685 750 777
Repairs and maintenance 210 177 169 191 184
Advertising and public relations 119 336 145 247 188
Professional services 356 567 539 456 510
Technology and communications 320 276 263 273 212
Amortization of intangibles 77 106 104 114 120
FDIC insurance 118 139 134 153 135
Other expenses 699 848 656 958 604
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
Net income $2,136 $1,495 $2,379 $1,338 $1,926
 
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
 
PERFORMANCE RATIOS
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%
Efficiency ratio 71.64% 72.75% 67.10% 71.35% 69.10%
 
             

EVANS BANCORP, INC. AND SUBSIDIARIES

SELECTED AVERAGE BALANCES AND YIELDS/RATES

(Unaudited)

 
2012 2012 2012 2011 2011

Third
Quarter

Second
Quarter

First
Quarter

Fourth
Quarter

Third
Quarter

AVERAGE BALANCES
(dollars in thousands)
Loans and leases, net $590,200 $574,639 $568,863 $557,875 $541,357
Investment securities 99,347 101,053 105,339 102,676 98,526
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 Assets 795,942 773,151 756,080 741,557 716,730
 
NOW 62,283 60,472 55,116 49,665 45,604
Regular savings 352,378 336,798 326,090 307,164 290,310
Muni-Vest savings 21,792 26,821 22,076 29,808 25,177
Time deposits 108,179 109,170 112,079 117,074 125,037
Total interest-bearing deposits 544,632 533,261 515,361 503,711 486,128
Other borrowings 39,883 40,619 42,512 41,425 39,544
Total interest-bearing liabilities 584,515 573,880 557,873 545,136 525,672
 
Demand deposits 124,590 115,033 114,783 115,342 111,044
Other non-interest bearing liabilities 13,186 12,472 13,418 12,219 12,273
Stockholders' equity 73,651 71,766 70,006 68,860 67,741
 
Total Liabilities and Equity $795,942 $773,151 $756,080 $741,557 $716,730
 
YIELD/RATE
 
Loans and leases, net 5.13% 5.23% 5.28% 5.49% 5.36%
Investment securities 2.93% 2.98% 3.23% 3.33% 3.69%
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%
 
NOW 1.03% 0.99% 1.01% 1.29% 1.32%
Regular savings 0.54% 0.57% 0.69% 0.77% 0.77%
Muni-Vest savings 0.29% 0.30% 0.38% 0.46% 0.51%
Time deposits 1.67% 1.80% 1.85% 1.94% 2.07%
Total interest-bearing deposits 0.81% 0.86% 0.96% 1.07% 1.14%
Other borrowings 2.59% 2.58% 2.58% 2.65% 2.72%
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%

Evans Bancorp, Inc.
Gary A. Kajtoch, (716) 926-2000
Executive Vice President and Chief Financial Officer
gkajtoch@evansbank.com
-or-
Kei Advisors LLC
Deborah K. Pawlowski, (716) 843-3908
dpawlowski@keiadvisors.com






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