HAMBURG, NY, July 28, 2011 – Evans Bancorp, Inc. (the “Company” or “Evans”) (NYSE Amex: 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, 2011.
HIGHLIGHTS OF THE 2011 SECOND QUARTER
•
Core deposit growth continued in the second quarter with Demand, NOW and Savings deposit products gaining 4.9% (a 19.5% annualized growth rate), or $19.8 million.
•
Core loans (defined as total loans and leases less national direct financing leases) increased 2.6% in the second quarter of 2011, or 10.3% annualized, to $532.5 million.
•
Net income decreased to $1.0 million in the 2011 second quarter from $1.6 million in the second quarter of 2010, mostly due to a $0.7 million increase in the provision for loan and lease losses.
•
Strong capital position with Total Risk-Based Capital ratio of 14.26% at June 30, 2011.
Net income was $1.0 million in the second quarter of 2011, down from net income of $1.6 million in the second quarter of 2010. The decrease in net income reflects a provision for loan and lease losses of $1.0 million in the second quarter of 2011, up $0.7 million from the provision recorded in the second quarter of 2010. The increase in provision is a result of new loan growth and newly identified deterioration in two commercial loans. Return on average equity was 5.90% for the second quarter of 2011, compared with 11.79% in the second quarter of 2010. Net income was $0.24 per diluted share in the 2011 second quarter and reflects a 0.65 million increase in weighted average outstanding shares when compared to the second quarter of 2010 as a result of the Company’s successful registered offering of common stock in May 2010. Net income was $0.47 per diluted share in the prior-year second quarter.
For the six months ended June 30, 2011, Evans recorded net income of $2.8 million, or $0.69 per diluted share, compared with a net income of $3.1 million, or $0.98 per diluted share, in the same period in 2010. The return on average equity was 8.8% for the six-month period ended June 30, 2011, compared with 12.01% in the same period in 2010.
David J. Nasca, President and CEO of Evans Bancorp, stated, “In the face of the prolonged economic downturn and depressed interest rates, the Bank continued to experience improved loan growth and robust deposit acquisition. We have remained focused on our core community banking model, which has led to notable gains across a variety of products. We believe this growth reflects customer confidence in the stability and financial strength of the Evans franchise and demonstrates that our customer-centric approach can gain market share.”
Net Interest Income Net interest income was $6.3 million for the 2011 second quarter, up 3.1% from the second quarter of 2010 and flat compared with the first quarter of 2011. Growth in net interest-earning assets drove the increase from the second quarter of 2010 and more than offset net interest margin contraction relative to the 2010 second quarter. Core loans, which are defined as total loans and leases less national direct financing leases, were $532.5 million at June 30, 2011, an increase of 10.9% from $480.3 million at June 30, 2010, and up 2.6% (10.3% annualized) from $519.2 million at March 31, 2011. The growth from the linked first quarter reflects higher commercial loans of $13.7 million, or 3.5%, to $405.3 million.
The national direct financing lease portfolio declined $2.5 million during the second quarter of 2011 to $10.0 million. The Company ceased commercial lease originations in the second quarter of 2009 and has since been winding down the portfolio and exiting the business line. At June 30, 2011, the national direct financing lease portfolio comprised 1.8% of the Company’s total loans and leases portfolio, down from 2.3% at March 31, 2011 and 4.5% at June 30, 2010.
Average interest bearing deposits at banks increased $8.5 million during the second quarter to $17.0 million. The higher balance reflected a faster pace of deposit growth relative to loan growth during the 2011 second quarter.
Total deposits at June 30, 2011 were $586.8 million, up slightly from March 31, 2011, and up $51.2 million, or 9.6%, since June 30, 2010. Growth for the quarter and year-over-year period was attributable to strong core deposit increases across a variety of products, including the Company’s Better Checking product (included in the NOW category) along with its complementary Better Savings product. These products have been successful in garnering new customers, rewarding existing customers for doing more business with the Bank, and ultimately developing deeper customer relationships. Partially offsetting those gains was an $8.5 million decrease, since the end of the linked quarter, in muni-vest deposits, which is the Bank’s primary municipal customer savings account. There is typically seasonal reduction in municipal deposits in the second quarter of the year due to school district utilization of funds for their year-end expenditures. An additional decrease in deposits of $9.7 million during the second quarter occurred in time deposits due to the roll-off of a higher rate promotional CD offer and decreased brokered time deposits.
Commercial deposit gathering is an important part of the Company’s strategic growth. Most of the Company’s $5.4 million increase in demand deposits during the second quarter of 2011 came from commercial customers. The results are due in part to our success in expanding to full relationships with our commercial loan customers.
The Bank’s net interest margin decreased 13 basis points to 3.92% for the second quarter of 2011 compared with 4.05% in the 2011 first quarter and 4.21% in the 2010 second quarter. The drop in net interest margin in the current quarter compared to the first quarter of 2011 was partially a result of higher-than-typical prepayment fees of $0.2 million recorded in the first quarter of 2011 and which did not occur in the second quarter of 2011. The fees, recorded as interest income, were a result of the refinancing or payoffs of several large commercial loans. When adjusted for the prepayments, net interest margin would have compressed by 2 basis points for 2011’s second quarter compared with the first quarter of 2011. When compared with the 2010 second quarter, the largest contributing factor to the compression of net interest margin was declining interest rates. As the low interest rate environment continues, the Company’s loan and investment portfolios continue to re-price into lower yields as evidenced by the 40 basis point decline in yield on interest-earning assets during the second quarter compared with the prior-year period.
Allowance for Loan and Lease Losses and Asset Quality
Provision:The provision for loan and lease losses increased to $1.0 million in the second quarter of 2011 from $0.5 million in the first quarter of 2011 and $0.3 million in the second quarter of 2010. The higher provision in the second quarter of 2011 was largely due to provision recorded for loan growth and for the deterioration in two commercial loans.
Net charge-offs:There were net charge-offs to average total loans and leases of 0.63% in the second quarter of 2011 compared with 0.33% in the first quarter of 2011, and 0.14% in the second quarter of 2010. Most of these charge-offs pertain to impaired assets that had been fully reserved for in prior periods.
Gary A. Kajtoch, Executive Vice President and CFO, noted, “The allowance for loan and lease losses increased to address two problem credits identified in the quarter. We have confidence in the overall quality of our loan portfolio considering its historical charge-off performance and the current level of our allowance for loan and lease losses to total loans and leases.”
The higher provision in the second quarter of 2011 was off-set by higher charge-offs, resulting in a flat ratio for the allowance for loan and lease losses to total loans and leases at 1.97% at June 30, 2011 and March 31, 2011, compared with 1.65% at June 30, 2010.
Non-performing loans and leases:The ratio of non-performing loans and leases to total loans and leases decreased to 2.36% at June 30, 2011, from 2.53% at March 31, 2011, up however from 2.20% at June 30, 2010. During the second quarter of 2011, one commercial real estate loan valued at $0.5 million was moved into non-accrual. This was off-set by a $0.4 million decrease in non-accruing leases and charge-offs of $0.8 million. The total coverage ratio for non-performing loans and leases was 83.48% at June 30, 2011 compared with 77.94% at March 31, 2011.
During the second quarter of 2011, management deemed $0.1 million in direct financing leases as uncollectible compared with $0.6 million in the first quarter of 2011 and $0.6 million in the second quarter of 2010. At the end of the 2011 second quarter, the carrying value of the commercial leases was $10.0 million, reflecting the principal balance of $10.8 million, net of the remaining mark of $0.8 million.
The FDIC-assisted acquisition of Waterford Village Bank in July of 2009 accounted for $2.7 million, or approximately 25%, of the Company’s $11.0 million in non-performing loans at June 30, 2011. 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 110.3% at June 30, 2011 which includes the leasing portfolio mark of $0.8 million while excluding all the FDIC-guaranteed Waterford loans.
Non-Interest Income
Non-interest income, which represented 31.8% of total revenue in the second quarter of 2011, declined 1.8%, or $0.1 million, to $2.9 million when compared with the second quarter of 2010 reflecting lower service charges and insurance agency revenue. Service charges on deposits decreased $64 thousand, or 13.3%, compared with the second quarter 2010, primarily due to amendments to Regulation E pertaining to overdraft fees that became effective in 2010. Insurance agency revenue of $1.6 million was down $28 thousand, or 1.7%, when compared with the 2010 second quarter as the soft insurance market and macro-economic conditions continue to put downward pressure on personal and commercial property and casualty insurance commissions despite our strong retention rates. Compared with the first quarter of 2011, The Evans Agency’s revenue was down $0.5 million, reflecting the typical revenue cycle seasonality.
Non-Interest Expense
Total non-interest expense was $6.8 million in the second quarter of 2011, an increase of $0.2 million, or 3.3%, from $6.5 million in the second quarter of 2010. The largest component of the increase was salaries and employee benefits, which increased $0.2 million, or 5.0%, to $3.9 million in the second quarter of 2011 compared with the prior-year second quarter. This increase reflected merit awards for 2010 performance paid in 2011 and increased staff, including commercial loan officers and other business-generating positions. This was partially off-set by lower amortization expense related to intangible assets acquired in the 2008 purchase of Suchak Data Systems, Inc., which were fully amortized at the end of 2010 and a reduction in FDIC insurance expense due to changes in the premium calculation adopted in the second quarter by the FDIC.
The efficiency ratio, excluding intangible amortization increased to 72.04% for the second quarter of 2011, from 69.72% for the second quarter of 2010, as a result of the increase in non-interest expense and the decrease in non-interest income.
Income tax expense for the quarter ended June 30, 2011 was $0.5 million, representing an effective tax rate of 32.5%, compared with an effective tax rate of 26.56% in the second quarter of 2010. The higher effective tax rate reflects a lower percentage of tax-exempt income in 2011, mainly due to a decrease balance of tax-exempt municipal bonds.
Capital Management
The Company consistently maintains regulatory capital ratios measurably above the federal “well capitalized” standard, including a Tier 1 leverage ratio of 9.8% at June 30, 2011. Book value per share was $16.14 at June 30, 2011, compared with $15.71 at March 31, 2011, and $15.46 at June 30, 2010. Tangible book value per share at June 30, 2011 was $13.95, up 3.5% from March 31, 2011 and up 6.7% from the same period in 2010.
Conclusion
Mr. Nasca concluded, “We believe our intense focus on being a premier community bank for our customers has resulted in strong business growth, and that our continued investments in people, systems and infrastructure will be the impetus that positions the Company for future success. This includes beginning construction on our 14th branch in Williamsville later this year. We expect it will take additional growth in branches to fill out our distribution network in Western New York and we will look to add one to two additional sites over the next 12 to 18 months. Importantly, given the disruption in the Western New York market with the departure of HSBC, we expect we can accelerate organic capture of new deposits and loans from customers looking for stability and service.”
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 $703 million in assets, 13 branches and $587 million in deposits at June 30, 2011. Evans Bank 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 14 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, atwww.evansbancorp.com andwww.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.
For more information contact:
-OR-
Gary A. Kajtoch Executive Vice President and Chief Financial Officer
EVANS BANCORP, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA (Unaudited)
(in thousands except shares and per share data)
2011
2011
2010
2010
2010
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
ASSETS
Investment Securities
97,739
100,868
93,332
99,247
97,174
Loans
532,537
519,180
512,503
485,843
480,333
Leases
9,957
12,449
15,475
18,745
22,673
Allowance for loan and lease losses
(10,667
)
(10,482
)
(10,424
)
(9,099
)
(8,305
)
Goodwill and intangible assets
9,013
9,139
9,269
9,490
9,711
All other assets
64,253
68,557
51,368
54,654
56,427
Total assets
702,832
699,711
671,523
658,880
658,013
LIABILITIES AND STOCKHOLDERS’ EQUITY
Demand deposits
$
104,814
$
99,444
$
98,016
$
94,809
$
95,908
NOW deposits
44,193
43,457
32,683
30,386
25,674
Regular savings deposits
277,564
263,854
249,410
242,897
239,275
Muni-vest deposits
26,333
34,804
22,000
22,753
27,708
Time deposits
133,863
143,588
142,348
144,441
147,011
Total deposits
586,767
585,147
544,457
535,286
535,576
Borrowings
38,921
38,176
52,226
47,527
49,672
Other liabilities
10,831
12,055
11,776
12,138
9,872
Total stockholders’ equity
66,313
64,333
63,064
63,929
62,893
SHARES AND CAPITAL RATIOS
Common shares outstanding
4,108,103
4,094,147
4,081,960
4,067,044
4,067,044
Book value per share
16.14
15.71
15.45
15.72
15.46
Tangible book value per share
13.95
13.48
13.18
13.39
13.08
Tier 1 leverage ratio
9.80
%
9.89
%
9.93
%
9.99
%
10.18
%
Tier 1 risk-based capital ratio
13.00
%
12.95
%
13.05
%
13.28
%
13.10
%
Total risk-based capital ratio
14.26
%
14.21
%
14.31
%
14.54
%
14.36
%
ASSET QUALITY DATA
Non-performing loans
11,031
11,322
10,996
7,531
8,607
Non-performing leases
1,747
2,127
2,931
2,373
2,445
Total non-performing loans and leases
12,778
13,449
13,927
9,904
11,052
Net loan (recoveries) charge-offs
824
430
82
218
175
Net lease charge-offs
-
-
-
-
-
Total net loan and lease (recoveries) charge-offs
824
430
82
218
175
Non-performing loans/Total loans and leases
2.03
%
2.13
%
2.08
%
1.49
%
1.71
%
Non-performing leases/Total loans and leases
0.32
%
0.40
%
0.56
%
0.47
%
0.49
%
Non-performing loans and leases/Total loans and leases
2.36
%
2.53
%
2.64
%
1.96
%
2.20
%
Net loan charge-offs/Average loans and leases
0.63
%
0.33
%
0.06
%
0.18
%
0.14
%
Net lease charge-offs/Average loans and leases
0.00
%
0.00
%
0.00
%
0.00
%
0.00
%
Net loan and lease charge-offs/Average loans and leases
0.63
%
0.33
%
0.06
%
0.18
%
0.14
%
Allowance to loans and leases
1.97
%
1.97
%
1.97
%
1.80
%
1.65
%
EVANS BANCORP, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA (Unaudited)
(in thousands except share and per share data)
2011
2011
2010
2010
2010
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
Interest income
8,015
8,013
7,844
7,992
7,836
Interest expense
1,728
1,716
1,759
1,759
1,737
Net interest income
6,287
6,297
6,085
6,233
6,099
Provision for loan and lease losses
1,009
488
1,407
1,012
309
Net interest income after provision
5,278
5,809
4,678
5,221
5,790
Deposit service charges
416
386
435
471
480
Insurance service and fee revenue
1,601
2,089
1,341
1,775
1,629
Bank-owned life insurance
110
103
109
117
133
Other income
798
883
944
760
737
Total non-interest income
2,925
3,461
2,829
3,123
2,979
Salaries and employee benefits
3,912
3,904
3,778
3,708
3,727
Occupancy
816
777
752
707
710
Repairs and maintenance
155
159
164
148
179
Advertising and public relations
247
130
180
88
257
Professional services
407
402
376
355
388
Technology and communications
220
235
259
265
163
Amortization of intangibles
126
130
221
221
228
FDIC insurance
135
229
268
312
217
Other expenses
744
639
661
645
679
Total non-interest expenses
6,762
6,605
6,659
6,449
6,548
Income before income taxes
1,441
2,665
848
1,895
2,221
Income tax provision
469
790
364
617
590
Net income
$
972
$
1,875
$
484
$
1,278
$
1,631
PER SHARE DATA
Net income per common share-diluted
$
0.24
$
0.46
$
0.12
$
0.31
$
0.47
Cash dividends per common share
-
$
0.20
-
$
0.20
-
Weighted average number of diluted shares
4,106,371
4,096,170
4,079,388
4,068,301
3,460,225
PERFORMANCE RATIOS
Return on average total assets
0.55
%
1.10
%
0.29
%
0.78
%
1.02
%
Return on average stockholders’ equity
5.90
%
11.71
%
3.00
%
7.93
%
11.79
%
Efficiency ratio
72.04
%
66.36
%
72.23
%
66.57
%
69.72
%
EVANS BANCORP, INC. AND SUBSIDIARIES SELECTED AVERAGE BALANCES AND YIELDS/RATES (Unaudited)
(in thousands)
2011
2011
2010
2010
2010
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
AVERAGE BALANCES
(dollars in thousands)
Loans and leases, net
$
524,178
$
518,246
$
504,704
$
496,037
$
492,243
Investment securities
100,639
95,978
96,575
98,606
81,118
Interest bearing deposits at banks
16,952
8,456
7,347
2,189
6,678
Total interest-earning assets
641,769
622,680
608,626
596,832
580,039
Non interest-earning assets
62,517
62,148
60,808
59,403
57,560
Total Assets
704,286
684,828
669,434
656,235
637,599
NOW
44,707
38,469
31,086
26,684
22,388
Regular savings
268,220
256,158
245,511
240,424
233,926
Muni-Vest savings
29,483
24,616
28,906
25,162
35,076
Time deposits
139,727
143,177
142,794
145,202
140,952
Total interest-bearing deposits
482,137
462,420
448,297
437,472
432,342
Other borrowings
39,381
44,846
47,054
46,568
49,707
Total interest-bearing liabilities
521,518
507,266
495,351
484,040
482,049
Demand deposits
105,725
101,798
97,879
96,669
89,550
Other non-interest bearing liabilities
11,144
11,737
11,582
11,099
10,652
Stockholders’ equity
65,899
64,027
64,622
64,427
55,348
Total Liabilities and Equity
704,286
684,828
669,434
656,235
637,599
YIELD/RATE
Loans and leases, net
5.40
%
5.52
%
5.55
%
5.73
%
5.73
%
Investment securities
3.68
%
3.57
%
3.47
%
3.57
%
3.87
%
Interest bearing deposits at banks
0.17
%
0.19
%
0.27
%
0.18
%
0.18
%
Total interest-earning assets
5.00
%
5.15
%
5.16
%
5.36
%
5.40
%
NOW
1.17
%
1.10
%
1.13
%
1.05
%
1.00
%
Regular savings
0.69
%
0.64
%
0.69
%
0.70
%
0.69
%
Muni-Vest savings
0.47
%
0.47
%
0.48
%
0.46
%
0.46
%
Time deposits
2.38
%
2.44
%
2.53
%
2.55
%
2.61
%
Total interest-bearing deposits
1.21
%
1.23
%
1.29
%
1.32
%
1.31
%
Other borrowings
2.71
%
2.64
%
2.65
%
2.71
%
2.55
%
Total interest-bearing liabilities
1.33
%
1.35
%
1.42
%
1.45
%
1.44
%
Interest rate spread
3.67
%
3.80
%
3.74
%
3.91
%
3.96
%
Contribution of interest-free funds
0.25
%
0.25
%
0.26
%
0.27
%
0.25
%
Net interest margin
3.92
%
4.05
%
4.00
%
4.18
%
4.21
%
2
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