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EXHIBIT 13.1
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Annual Report
1997
Evans Bancorp, Inc.
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Contents
Profile
1
President's
Message
2
Selected
Financial
Information
4
Management
Discussion
and Analysis
5
Independent
Auditor's Report
11
Consolidated
Financial
Statements
12
Corporate
Information
29
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PROFILE
Evans Bancorp, Inc. is a bank holding company headquartered in Angola, New York
and conducts its business through its wholly-owned subsidiary, Evans National
Bank. The Bank is a FDIC full-service commercial bank and as of December 31,
1997 had total assets of $158,542,163, total deposits of $138,391,327 and total
stockholders' equity of $17,039,300. The Bank's primary market area is located
in Western New York State and specifically in southern Erie County, northern
Chautauqua County and northwestern Cattaraugus County.
The principal business of the Bank is commercial banking and consists of,
among other things, attracting deposits from the general public and using these
funds to extend credit and to invest in securities. The Bank offers a variety of
loan products to its customers including commercial loans, commercial and
residential mortgage loans, and consumer loans. In addition, the Bank offers
deposit products to include checking and NOW accounts, passbook and statement
savings, and certificates of deposits.
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PRESIDENT'S MESSAGE
It gives me great pleasure to report that 1997 was a year of excellent
performance, profitability, and growth for Evans Bancorp, Inc. and its
subsidiary, Evans National Bank.
Record earnings of $1.8 million for 1997 resulted in an increase in
earnings per share of $.11 to $1.06, for a gain of 11.6%. The increase in net
income was $187,633, or 11.6% over 1996. Other key performance indicators were a
1.19% return on average assets as compared to 1.20% in 1996, and an 11.06%
return on average equity as compared to 10.72% the previous year. Total capital
increased from $15.5 million to $17.0 million, or 9.7%. The Tier I capital ratio
of 16.33%, total capital ratio of 16.93%, and leveraged ratio of 10.84%
substantially exceeded the regulatory requirements of 8.0%, 4.0%, and 4.0%
respectively.
There was excellent news on the common stock front as well. On April 29,
1997, the shareholders approved a common stock split, changing each issued share
of common stock, par value $2.50, into five shares of common stock with a par
value of $.50 per share. The shareholders also increased the number of shares of
common stock the Company is authorized to issue from 1,000,000 shares, par value
$2.50 per share, to 10,000,000 shares with a par value of $.50 per share. The
market value of the stock was $136.00 per share before the split and $27.20
following the split. On December 31, 1997, the market value was $38.00 per
share, an increase of $10.80, or 39.7%. The Board of Directors declared a cash
dividend of $.30 per share in August 1997.
A major contributing factor in our gain in net income was a $9.5 million
increase, or 10.3% in our loan portfolio. A record year, 1997 saw total loans
surpass the $100 million level, increasing from $92.1 million to $101.6 million.
In addition, loan charge-offs were down for 1997 as we continue to ensure that
appropriate credit standards are consistently maintained. Charge-offs totalled
$47,000, or .05% of outstanding loans, compared to $77,000, or .08%, in 1996.
Our strong loan portfolio growth was funded by a $14.9 million increase in
deposits, a 12.09% increase, from $123.4 million to $138.3 million. Higher
yielding certificates of deposit accounted for the majority of the growth in
deposits, with our new premium savings account also playing a role.
Technological enhancements initiated in 1996 and completed in 1997 will, I
am confident, help keep the Bank on track and growing as we approach the year
2000. These important and exciting improvements included the replacement of our
mainframe computer and upgrading to a Unix-based operating system last February,
followed by installation of a state-of-the-art archival system. This system
provides the Bank with a highly efficient record storage and retrieval network.
In July, the final phase of our new check-processing technology was completed,
which provides our customers with laser-printed images of their cancelled
checks, allowing improved record keeping and more efficient check storage, as
well as reducing the Bank's paper and postage costs.
Providing our customers with the most convenient methods of banking
possible in order for the Bank to remain competitive in our marketplace is of
prime importance to us. Toward that aim, we have been evaluating systems for
banking by telephone or personal computer. Our evaluation is now completed, and
we anticipate making these innovative services available to our customers in the
PROVIDING
OUR CUSTOMERS
WITH THE MOST
CONVENIENT
METHODS OF
BANKING
POSSIBLE
IN ORDER FOR
THE BANK TO
REMAIN
COMPETITIVE
IN OUR
MARKETPLACE
IS OF PRIME
IMPORTANCE
TO US.
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second quarter of 1998. Shortly thereafter, our ATM network will be upgraded to
provide on-line capability at our automated teller machines. Lastly, in order to
increase flexibility to our customers for access to their funds at points of
sale, introduction of a debit card product is planned.
As we approach the new Millennium, I want to assure you that the Bank is
aggressively planning and preparing for the year 2000. We have appointed a
project team with senior management and vendor participation that is tasked with
ensuring all internal systems and procedures are compliant with year 2000
requirements. Our plan is comprehensive and mission-critical. Testing is
scheduled to complete by year-end 1998.
Our heartfelt thanks go to Carl F. Ulmer for his wise advice, constant
support, and innumerable contributions during his 32 years of service to the
Company and the Bank. Mr. Ulmer's retirement as Chairman of the Board of
Directors was effective December 31, 1997. He has been elected a Director
Emeritus of the Board. Thomas H. Waring, Jr. was appointed by the Board as a
Board member effective January 1, 1998 to fill Mr. Ulmer's unexpired term. At
that time, I was also elected Chairman of the Board.
In other personnel matters, I am pleased to report the following officer
promotions during 1997: Susan J. Herold, Assistant Vice President; Howard M.
Martin, Jr., Assistant Vice President; and Mary K. Nytz, Banking Officer. We
recognized the following employees during 1997 for their years of service as
noted: Antoinette Pinter, Nancy Ferraro, Cathy Rohrich, Michelle Bress (20
years); Susan Eberhardt, Beverly Iskra (15 years); Paula Kramer, Pamela
Marchant, Barbara Page (10 years); Melissa Brooks, Jennifer Warnes (5 years).
In September 1997, I was elected to a one-year term as President of the
Independent Bankers Association of New York State. My responsibilities in this
position include representing the interests of community banks across the state
which support legislation for the betterment of community banking, as well as
the communities they serve.
The management and employees of Evans National Bank remain committed to
actively support the communities served by the Bank through credit extensions,
diverse volunteer work, service to local municipalities and school districts,
and association with a wide range of community, charitable, and philanthropic
organizations and groups.
I wish to express my sincere appreciation to our Board of Directors and
employees, as well as to our shareholders and customers, for their support
during the past year. We pledge to continue our efforts to seek out
opportunities for further growth, market presence, professional development, and
improved technology as we strive to address the challenges that lie ahead.
/s/ Richard M. Craig
Richard M. Craig / Chairman of the Board, President and Chief Executive Officer
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SELECTED FINANCIAL INFORMATION
For the Year Ended December 31 1997 1996 1995 1994 1993
RESULTS OF OPERATIONS
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Interest Income $ 11,072,851 $ 9,799,815 $ 9,226,500 $ 8,206,596 $ 7,989,392
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Interest Expense 4,588,056 3,912,761 3,418,782 2,747,297 2,680,003
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Net Interest Income 6,484,795 5,887,054 5,807,718 5,459,299 5,309,389
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Non-Interest Income 950,662 930,986 763,054 785,551 672,015
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Non-Interest Expense 4,849,182 4,555,398 4,228,922 3,981,801 3,581,929
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Net Income 1,802,275 1,614,642 1,664,783 1,617,049 1,612,392
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BALANCE SHEET DATA
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Total Assets $158,542,163 $140,898,057 $125,308,204 $114,565,971 $112,465,797
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Loans - Net 101,627,427 92,087,902 75,468,504 71,998,929 67,754,002
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Allowance for Loan Losses 609,539 546,954 557,961 628,957 612,921
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Securities 40,400,374 36,054,324 38,954,494 32,341,350 33,371,944
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Total Deposits 138,391,327 123,461,379 109,020,551 100,532,031 99,860,851
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Stockholders' Equity 17,039,300 15,510,083 14,485,510 12,723,940 11,489,412
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PER SHARE DATA
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Net Income $ 1.06 $ 0.95 $ 0.97 $ 0.95 $ 0.95
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Cash Dividend $ 0.30 $ 0.22 $ 0.14 $ 0.09 $ 0.07
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Book Value at Year End $ 10.03 $ 9.13 $ 8.53 $ 7.49 $ 6.76
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Market Value $ 38.00 $ 27.20 $ 22.00 $ 14.00 $ 13.10
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Shares Outstanding 1,698,950 339,790 317,481 296,613 277,170
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Weighted Average Shares 1,698,950 1,698,950 1,698,950 1,698,950 1,698,950
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(Retroactively adjusted for stock dividends and stock split)
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MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Evans National Bank (the "Bank"), a wholly-owned subsidiary of Evans Bancorp,
Inc. (the "Company"), is a nationally chartered bank founded in 1920 which is
headquartered in Angola, New York. The Bank's principal business is to provide
full banking services to consumer and commercial customers in Erie, Chautauqua
and Cattaraugus Counties of Western New York. The Bank serves its market through
six banking offices located in Angola, Derby, Evans, Forestville, Hamburg and
North Boston, New York. The Bank's principal source of funding is through
deposits which it reinvests in the community in the form of loans and
investments. Deposits are insured to the applicable limit by the Bank Insurance
Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC"). The Bank is
regulated by the Office of the Comptroller of the Currency.
The following discussion of financial conditions and results of operations
of the Company and the Bank should be read in conjunction with the consolidated
financial statements and accompanying notes.
RESULTS OF OPERATIONS
Net income in 1997 of $1,802,275 resulted in earnings per share of $1.06, which
compares with net income of $1,614,642, or $.95 per share, in 1996 and
$1,664,783, or $.97 per share, in 1995. The increase of 11.6% in net income in
1997 over 1996 illustrates the income benefit of the Bank's increased presence
in the Western New York area. Net income had declined 3% from 1995 to 1996 due
to increased overhead related to the Bank's $2.2 million expansion plan
implemented over those two years. In 1997, new business attributable to the
operation of two additional locations, a branch office in Hamburg, NY, which
opened in October, 1995, and the Evans, NY branch, which opened in May, 1996,
contributed to the Bank's asset growth and improved earnings.
NET INCOME ($ Millions)
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1993 1.6
1994 1.6
1995 1.7
1996 1.6
1997 1.8
Net interest income, the difference between interest income and fees on
earning assets, such as loans and securities, and interest expense on deposits,
provides the basis for the Bank's results of operations. These results are also
affected by non-interest income, the provision for credit losses, non-interest
expense, and income taxes.
NET INTEREST INCOME
Net interest income, before the provision for credit losses, increased 10.2%
from 1996 to 1997, compared to an increase of 1.4% from 1995 to 1996. Average
earning assets increased $15.8 million or 12.7% in 1997. The tax-equivalent
yield earned on those assets was 8.31% compared to 8.27% in 1996. The increase
in both rate and volume was sufficient to offset an increase of $13.3 million,
or 13.6%, in average interest-bearing liabilities in 1997 over 1996 and an
increase in the average cost of funds of 12 basis points, from 3.99% in 1996 to
4.11% in 1997. In 1997, the Bank's net interest margin was 4.59% compared to
4.64% in 1996.
The increase of only 1.4% in net interest income in 1996 over 1995 was
largely the result of an increase in the average cost of funds versus virtually
no change in the tax-equivalent yield on earning assets. The average cost of
funds increased 22 basis points from 3.77% in 1995 to 3.99% in 1996. The
tax-equivalent yield on earning assets changed only one basis point over that
time period, declining from 8.28% in 1995 to 8.27% in 1996. Average earning
assets increased 7.7% in 1996 over 1995 versus a volume increase of 8.2% in
interest-bearing liabilities. The net interest margin was 4.64% compared to
4.99% in 1995.
The Federal Reserve Board increased the federal funds rate a quarter of a
percent at its March 26, 1997 meeting. This was the only move in rates in 1997,
and only the second in two years. The Federal Reserve Board had reduced the
federal funds rate a quarter of a percent in January of 1996.
The Bank constantly monitors its exposure to interest rate risk. The proper
management of interest-sensitive funds will help protect the Bank's earnings
against extreme changes in interest rates. In 1995, the Bank established an
Asset/Liability
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Management Committee ("ALCO") for the purpose of evaluating the Bank's
short-range and long-range liquidity position and the potential impact on
capital and earnings as a result of sudden changes in interest rates. The Bank
adopted an asset/liability policy which specifies minimum limits for liquidity
and capital ratios. Maximum limits have been set for the negative impact
acceptable on net interest income and the market value of assets as a result of
a shift in interest rates. The asset/liability policy also includes guidelines
for investment activities and funds management. The ALCO meets monthly to review
the Bank's status and formulate its strategy based on current economic
conditions, interest rate forecasts, loan demand, deposit volatility, and the
Bank's earnings objectives.
PROVISION FOR CREDIT LOSSES
Credit losses represent the amount charged against earnings to establish a
reserve of allowance sufficient to absorb expected loan losses based on
management's evaluation of the loan portfolio. In 1997, $60,000 was charged
against earnings for credit losses. This amount was also charged against
earnings in 1996. In 1995, the Bank updated the methodology it uses to calculate
the reserve amount for credit losses. After considering loan concentrations,
charge-off history, delinquent loan percentages and general economic conditions,
the Bank reversed $86,933 of its provision for credit losses in 1995. The
following table summarizes the Bank's actual credit losses, total of
non-performing loans and total allowance for credit losses for 1997, 1996 and
1995, both in dollars and as a percentage of total loans outstanding:
1997 1996 1995
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Actual Credit
Losses $ 47,000 0.05% $ 77,000 0.08% $ 11,000 0.014%
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Non-Performing
Loans $987,000 0.96% $230,000 0.20% $312,000 0.470%
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Allowance for
Credit Losses $609,539 0.59% $546,954 0.59% $557,961 0.730%
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Although, during 1997, nonperforming loans increased over the unusually low
level of the prior year, all loans in this category are considered
well-collateralized and in the process of collection. As a result, no
significant losses are anticipated.
NON-INTEREST INCOME
Total non-interest income increased approximately $20,000 in 1997 from 1996
compared with an increase of approximately $168,000 in 1996 from 1995. In 1997,
service charge income was $670,366 compared to $667,839 in 1996. Service charge
income had increased approximately $106,000 in 1996 over the prior year as the
result of an increase in the Bank's service charges which was implemented in
September of 1995.
Other non-interest income decreased approximately $6,000 in 1997 from
1996. In 1996, the Bank received $15,000 in state and federal tax refunds for
the 1994 tax year and the Bank's loan activity resulted in a high level of
loan-related income. In 1997, the increase in the cash surrender value of life
insurance policies carried on certain bank officers was approximately $64,000
versus an increase in value of approximately $45,000 in 1996.
Gains realized on the sale of assets increased $23,000 in 1997 from 1996.
Net losses on the sales of securities were $2,000 in 1997 whereas in 1996 net
losses totalled $23,000. In 1996, the Bank experienced a loss of $61,000 on a
residual bond that was called for redemption in full. This loss was partially
offset by net gains on planned sales of securities of $38,000 that year.
Premiums received on sales of student loans to the Student Loan Marketing
Association ("SLMA") were $28,000 in both 1996 and 1997 and premiums received on
sales of mortgages to the Federal National Mortgage Association ("FNMA") were
$8,000 in 1997 as compared to $6,000 in 1996. The Bank became affiliated with
both SLMA and FNMA in 1995.
NON-INTEREST EXPENSE
In 1997, the ratio of non-interest expense to average assets was 3.18% compared
to 3.37% in 1996 and 3.40% in 1995. Non-interest expense categories include
salaries, occupancy expenses, repairs and maintenance, advertising and
professional services , among others. Occupancy expenses increased 19.5% in 1997
over 1996. This increase included a full year of depreciation on the Town of
Evans office and additional depreciation costs resulting from capital
expenditures in 1997. A new mainframe computer system, a new telephone system,
check imaging hardware and software and additional personal computers and
printers were all purchased during the course of the year. Changes in check
processing and computer operations which resulted from these purchases have also
reduced staffing requirements in these areas, and through staffing
reassignments, attrition and the use of part-time employees, the Bank has been
able to control salary and benefit expenses. These expenses declined $11,000
from 1996 to 1997. The cost of professional services increased $96,000 in 1997
over 1996. The Bank incurred additional fees due to work done by its accountants
and attorneys in reference to the five-for-one stock split in 1997
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STOCKHOLDERS' EQUITY ($ Millions)
1993 11.5
1994 12.7
1995 14.5
1996 15.5
1997 17.0
and the implementation of the dividend reinvestment plan for shareholders. The
Bank also hired a consultant in 1997 to study the Bank's daily operating
procedures to identify areas where efficiencies could be improved.
Recommendations resulting from this study are in the process of being
implemented. The income benefit is expected to be ongoing and is expected to
surpass the cost of the study in the first year.
In 1997, the Bank's FDIC insurance assessment increased from $2,000 to
$15,328. In 1996, as a well-capitalized institution, the Bank was assessed the
minimum $2,000 premium. This minimum is no longer required by law. However,
starting January 2, 1997 as a Bank Insurance Fund ("BIF") member, the Bank is
being assessed for FICO interest payments at a rate of 1.28 cents per $100 in
deposits annually. In 1996, the Bank's insurance assessment had dropped to
$2,000 from $120,231 in 1995 as the FDIC responded to the full funding of the
BIF by decreasing premiums. In 1995, the premium was reduced from $.23 per $100
of deposits to $.04 per $100 of deposits. In 1996, the rate was reduced to zero
with a minimum charge of $500 per quarter for well capitalized banks. The Bank
was assessed at the minimum rate, and it remains well above the regulatory
minimums for the key measures of capital adequacies as disclosed in note 12 of
the financial statements.
TAXES
The provision for taxes in 1997 of $724,000 reflects an effective tax rate of
28%. This compares to $588,000 and 26% in 1996 and $764,000 and 31% in 1995. In
1997, the Bank increased its holdings of tax-advantaged municipal bonds by 38%,
benefitting its overall tax position. Additionally, $75,000 in income recorded
in 1997 as the result of the increase in the cash surrender value of life
insurance policies held on certain bank officers and directors is non-taxable.
In 1996, there was a change in the composition of the deferred tax calculation,
resulting in an overall decrease in the effective tax rate from 1995. This
decrease was over and above that which was expected due to tax-exempt securities
income, untaxed CSVLI income and tax refunds received, which are not taxable.
FINANCIAL CONDITION
The Bank had total assets of $158.5 million at December 31, 1997, increasing
$17.6 million or 12.5% over December 31, 1996. Net loans increased $9.5 million
or 10.3% in 1997 over 1996. Loan growth was funded by an increase of $14.9
million in deposits, or 12.1%. Excess funds were invested in securities
resulting in an increase of $4.3 million, or 12.1% in the securities portfolio.
Capital increased $1.5 million or 9.7%, basically due to the retention of
earnings.
LOANS
Loans comprised 68.7% of the Bank's total average earning assets in 1997. For
the first time, the Bank surpassed the $100 million mark in net loans, reaching
$101.6 million by year-end. The increase of 10.4% in actual year-end balances in
1997 over 1996 compares to an increase of 22% in 1996 over 1995. The Federal
Reserve lowered rates in July and December of 1995 and again in January of 1996
contributing to increased loan demand throughout 1996. The Federal Reserve
raised rates 25 basis points in early 1997, but despite this increase, loan
demand remained strong through 1997. The expansion of the Bank's trade area
since 1995 has also had a positive impact on loan activity.
NET LOANS ($ Millions)
1993 67.8
1994 72.0
1995 75.5
1996 92.1
1997 101.6
The Bank continues to focus its lending on commercial and residential
mortgages, small commercial loans and home equity loans. Commercial mortgages
make up the largest segment of the portfolio at 43.8%. Residential mortgages
comprise 23.4% of the portfolio and commercial loans total 12.6%. Home equity
loans make up 15.5% of total loans.
The Bank currently retains the servicing rights to $2.7 million in
long-term mortgages sold to the Federal National
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Mortgage Association ("FNMA") since becoming a member in 1995. This arrangement
allows the Bank to offer long-term mortgages without exposure to the associated
risks, while retaining customer account relationships.
The Bank continues its contractual arrangement with the Student Loan
Marketing Association ("SLMA") whereby SLMA services the Bank's loans to
students who are still in school and subsequently purchases those loans when the
student goes into repayment. In 1997, student loan balances increased 2.3% over
1996. Student loan balances had decreased 13.4% in 1996 from 1995 and decreased
60% in 1995 from 1994 levels, due to the sale of loans to SLMA.
At December 31, 1997, the Bank had a loan-to-deposit ratio of 73.9%, and
estimated its unloaned core deposits at $4.6 million. The Bank monitors the
level of its unloaned core deposits to ensure that it is sufficient to fund
anticipated loan growth as it expands its market area and develops new products.
SECURITIES
Securities and federal funds sold made up the remaining 31.3% of the Bank's
earning assets at December 31, 1997.
SECURITIES ($ Millions)
1993 33.4
1994 32.3
1995 39.0
1996 36.1
1997 40.4
Since deposit growth exceeded the volume necessary to fund loan demand, an
additional $4.3 million was directed into the securities portfolio in 1997. In
1996, deposit growth was insufficient to support loan growth. Proceeds from
matured and sold securities were used to provide the additional funding
necessary. As a result, the securities portfolio decreased $2.9 million from
1995 to 1996. The portfolio remains concentrated in US government and government
agency securities and tax-exempt municipal bonds of varied maturity. By
increasing the percentage of tax-advantaged municipal bonds in the portfolio and
reducing the average balance maintained in federal funds sold, the
tax-equivalent yield on securities and federal funds sold improved to 6.57% in
1997 from 6.51% in 1996.
In 1994, the Bank adopted Financial Accounting Standard No. 115 which
outlines accounting and reporting procedures for investment securities. At that
time, all securities in the Bank's portfolio were designated as either "held to
maturity" or "available for sale", as were all subsequent purchases. Securities
which the Bank designates as held to maturity are stated on the balance sheet
at amortized cost, and those designated as available for sale are reported at
fair market value. The unrealized gains and losses on available for sale
securities are recorded, net of taxes, as a separate component of shareholders'
equity. Transferring a security from one category to another results in certain
accounting consequences. In 1995, Financial Accounting Standards Board allowed
a one-time reclassification of securities without penalty. As a result of this
one-time window of opportunity, the Bank reclassified the majority of its bonds
in the held to maturity category as available for sale. This reclassification
was made after careful consideration of the Bank's anticipated liquidity needs
and the present and future impact of such a transfer on the Bank's earnings and
capital.
DEPOSITS
Total deposits increased $14.9 million in 1997 over 1996. All categories of
deposits increased, with the most significant growth occurring in demand
deposits and time accounts with balances in excess of $100,000. Actual year-end
balances of $21.7 million in demand deposits reflect an increase of 7.6% over
1996 levels. Time accounts over $100,000 increased 62% in 1997 over 1996.
Although large time accounts have traditionally been obtained from municipal
depositors through the competitive bidding process, new accounts have been
attracted from commercial and retail customers over the past two years as a
result of the Bank's broadened market.
TOTAL DEPOSITS ($ Millions)
1993 99.9
1994 100.5
1995 109.0
1996 123.5
1997 138.4
The Bank continues to evaluate ways to improve its existing deposit
products to meet customer needs, as well as
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develop new products which will keep the Bank competitive in the marketplace.
With both of these goals in mind, the Bank introduced the Premium Savings, a
tiered rate retail savings product, in May of 1997. This product is designed to
provide an option for high balance customers who prefer the liquidity and safety
of an insured savings product, but are looking for a competitive rate. At
December 31, 1997, Premium Savings balances totalled $5.5 million. About half of
the initial deposits made have been identified as new money, with the remainder
transferring into the Premium from other Bank deposit accounts.
LIQUIDITY
The Bank seeks to manage its liquidity so that it is able to meet day to day
loan demand and deposit fluctuations, while attempting to maximize the amount of
net interest income on earning assets. Traditionally, the Bank has utilized its
federal funds balances and cash flows from the investment portfolio to fulfill
its liquidity requirements. In 1997, overnight federal funds balances averaged
$2.3 million. The maturities of the Bank's investments are laddered in such a
way as to provide runoff at times that a liquidity need may arise. At December
31, 1997, approximately 11.6% of the Bank's securities had contractual
maturities of one year or less and 40.1% had maturity dates of five years or
less. At December 31, 1997, the Bank had net short-term liquidity of $5.9
million compared to $8.1 million at December 31, 1996. Available assets of $44.4
million less public and purchased liabilities of $29.7 million resulted in a
long-term liquidity ratio of 149% compared to 204% at December 31, 1996.
Although the Bank believes it has sufficient resources in its securities
portfolio to meet its short-term and long-term liquidity needs, the Bank also
has the option to purchase up to $4,000,000 in federal funds from one of its
correspondents.
The Bank is a member and shareholder of the Federal Home Loan Bank ("FHLB")
which will make cash advances of various terms at competitive rates to its
members. Advances of up to $7.7 million can be drawn on the FHLB, via the
Overnight Line of Credit Agreement, and an amount equal to 25% of the Bank's
total assets could be borrowed through the advance programs under certain
qualifying circumstances.
Liquidity needs can also be met by aggressively pursuing municipal
deposits, which are normally awarded on the basis of competitive bidding. The
Bank maintains a sufficient amount of US government and US government agency
securities and New York State municipal bonds that can be pledged as collateral
for these deposits.
INTEREST RATE RISK
Interest rate risk occurs when interest-earning assets and interest-bearing
liabilities mature or reprice at different times or on a different basis. The
Bank's ALCO analyzes the gap position on a monthly basis to determine the Bank's
exposure to interest rate risk. The gap position is the difference between the
total of the Bank's rate sensitive assets and rate sensitive liabilities
maturing or repricing during a given time frame. A "positive" gap results when
more assets than liabilities reprice and a "negative" gap results when more
liabilities than assets reprice in a given time period. Because assets
historically reprice faster than liabilities, a slightly negative gap position
is considered preferable. At December 31, 1997, the Bank was in a negative gap
position, with $12.5 million more in rate-sensitive liabilities repricing over
the next year than in rate sensitive assets. The Bank's asset/liability limit,
as defined in its asset/liability policy, is a difference of +/- 15% of the
Bank's total assets which amounted to +/- $23.8 million at December 31, 1997.
Therefore, the Bank's negative gap position was well within its policy limits.
The gap ratio (rate sensitive assets/rate sensitive liabilities) at that date
was 82%.
MARKET RISK
When rates rise or fall, the market value of the Bank's assets and liabilities
will increase or decrease. As part of the Bank's asset/liability policy, the
Bank has set limitations on the negative impact to the market value of its
balance sheet that would be accepted. The Bank's securities portfolio is priced
monthly and adjustments are made on the balance sheet to reflect the market
value of the available for sale portfolio per Financial Accounting Standard No.
115. A limitation of a negative ten percent of total capital before FAS 115
(after tax) has been set forth in the asset/liability policy as the maximum
impact to equity that would be acceptable. At year end, the impact to equity as
a result of marking available for sale securities to market was an unrealized
gain of approximately $214,000. On a quarterly basis, the available for sale
portfolio is shocked for immediate rate increases of 100 and 200 basis points.
At December 31, 1997, the Bank determined that it would take an immediate
increase in excess of 200 basis points to eliminate the current capital cushion.
The Bank also reviews the Bank's capital ratios on a quarterly basis. Unrealized
gains or losses on available for sale securities are not included in the
calculation of these ratios.
9
13
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The following table provides information about the Bank's on-balance sheet
financial instruments that are sensitive to changes in interest rates. Expected
maturity date values for interest-earning assets were calculated by adjusting
the contractual maturity date for expectations of prepayments. Expected maturity
date values for interest-bearing core deposits were calculated based upon
estimates of the period over which the deposits would be outstanding.
Off-balance sheet financial instruments at December 31, 1997 included
$6,537,000 in undisbursed lines of credit at an average interest rate of 9.48%,
$1,030,000 in fixed rate loan origination commitments at 12.23%, $8,383,000 in
adjustable rate loan origination commitments at 9.85%, and $551,000 in
adjustable rate letters of credit at an average rate of 10.50%.
Expected maturity date-
year ended December 31, 1998 1999 2000 2001 2002 Thereafter Total Fair Value
INTEREST-EARNING
ASSETS ($000S)
- ---------------------------------------------------------------------------------------------------------------------------
Loans Receivable, Fixed Rate 7,953 4,536 5,115 3,591 3,184 15,514 39,893 39,944
Average Interest Rate 8.87% 9.16% 9.24% 8.88% 8.75% 8.71%
- ---------------------------------------------------------------------------------------------------------------------------
Loans Receivable, Adj. Rate 13,341 3,642 3,711 4,618 3,422 33,538 62,344 62,425
Average Interest Rate 9.65% 9.28% 9.33% 9.05% 9.12% 8.92%
- ---------------------------------------------------------------------------------------------------------------------------
Investments 4,938 2,544 5,128 1,182 4,665 21,943 40,400 40,437
Average Interest Rate 6.51% 6.52% 5.99% 6.92% 6.87% 7.04%
- ---------------------------------------------------------------------------------------------------------------------------
INTEREST-BEARING
LIABILITIES ($000S)
- ---------------------------------------------------------------------------------------------------------------------------
Deposits 64,596 22,431 12,827 12,024 4,822 10 116,710 117,053
Average Interest Rate 4.80% 3.92% 2.67% 2.51% 2.99% 7.75%
- ---------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement 1,059 0 0 0 0 0 1,059 1,059
Average Interest Rate 3.00%
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Large capital expenditures scheduled for 1998 include the equipment and software
necessary to provide our customers with the option of conducting banking
transactions by telephone or via a personal home computer. This project is
expected to cost approximately $240,000. In 1997, the Bank purchased statement
imaging equipment and upgraded its mainframe and archiving systems. This kind of
expenditure enable the Bank to continue to provide quality customer service
despite increased work volumes. The Bank believes that it has a sufficiently
strong capital base to support these capital expenditures with current assets
and retained earnings.
IMPACT OF INFLATION AND
CHANGING PRICES
There will always be economic events, such as changes in the economic policies
of the Federal Reserve Board, that will have an impact on the profitability of
the Company. Inflation may result in impaired asset growth, reduced earnings and
substandard capital ratios. The net interest margin can be adversely impacted by
the volatility of interest rates throughout the year. Since these factors are
unknown, management attempts to structure the balance sheet and the repricing
frequency of its interest-sensitive assets and liabilities to avoid a
significant concentration that could result in a material negative impact on
earnings.
THE NEW MILLENNIUM
The Year 2000 poses serious challenges to all industries, including banking. An
action plan has been formulated and accompanying timetable established for Year
2000 compliance. Representatives from each area of the Bank and the computer
systems and programming analyst meet monthly to discuss Year 2000 issues and
track the Bank's progress. At present, the Bank is on schedule in completing its
Year 2000 initiatives. Since the Bank is continually upgrading and improving its
technology, it is not anticipated these initiatives will materially impact
normal budgeted software costs.
10
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors EVANS BANCORP, INC.
We have audited the accompanying consolidated balance sheets of Evans Bancorp,
Inc. and subsidiary as of December 31, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Evans Bancorp, Inc. and subsidiary as of
December 31, 1997 and 1996 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Buffalo, New York
January 23, 1998
11
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EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996 1997 1996
ASSETS
Cash and due from banks $ 5,821,532 $ 5,662,231
Federal funds sold 4,515,000 1,450,000
------------ ------------
Cash and cash equivalents 10,336,532 7,112,231
Securities:
Available for sale, at fair value 33,822,334 30,201,120
Held to maturity, at amortized cost (fair value of
$6,614,369 and $5,868,386, respectively) 6,578,040 5,853,204
Loans receivable, net of allowance for loan losses of
$609,539 and $546,954, respectively 101,627,427 92,087,902
Properties and equipment, net 3,827,672 3,748,663
Other assets 2,350,158 1,894,937
------------ ------------
TOTAL ASSETS $158,542,163 $140,898,057
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand $ 21,680,839 $ 20,149,152
NOW and money market 7,093,959 6,437,613
Regular savings 44,264,697 42,136,290
Time ($100,000 and over) 22,873,379 14,096,821
Other time 42,478,453 40,641,503
------------ ------------
Total deposits 138,391,327 123,461,379
Other liabilities 3,111,536 1,926,595
------------ ------------
Total liabilities 141,502,863 125,387,974
CONTINGENT LIABILITIES AND COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value, 10,000,000 shares authorized and $2.50 par value,
1,000,000 shares authorized, respectively;
1,698,950 and 339,790 shares issued and outstanding, respectively 849,475 849,475
Capital surplus 10,990,720 10,990,720
Retained earnings 4,985,249 3,692,659
Unrealized gain (loss) on available for sale securities, net
of deferred taxes of $101,000 and $11,000, respectively 213,856 (22,771)
------------ ------------
Total stockholders' equity 17,039,300 15,510,083
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $158,542,163 $140,898,057
============ ============
See notes to consolidated financial statements.
12
16
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EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1997, 1996 and 1995 1997 1996 1995
INTEREST INCOME
Loans $ 8,632,716 $ 7,381,871 $ 6,760,511
Federal funds sold 122,516 201,831 276,698
Securities:
Taxable 1,372,883 1,427,890 1,381,740
Non-taxable 944,736 765,123 761,741
Deposits with banks 0 23,100 45,810
------------ ------------ ------------
Total interest income 11,072,851 9,799,815 9,226,500
INTEREST EXPENSE ON DEPOSITS AND BORROWINGS 4,588,056 3,912,761 3,418,782
------------ ------------ ------------
NET INTEREST INCOME 6,484,795 5,887,054 5,807,718
PROVISION FOR LOAN LOSSES 60,000 60,000 (86,933)
------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 6,424,795 5,827,054 5,894,651
NON-INTEREST INCOME
Service charges 670,366 667,839 561,525
Gains on sales of assets, net 33,809 11,103 55,477
Other 246,487 252,044 146,052
------------ ------------ ------------
Total non-interest income 950,662 930,986 763,054
NON-INTEREST EXPENSE
Salaries and employee benefits 2,592,120 2,602,752 2,389,838
Occupancy 761,383 637,007 504,648
Supplies 101,534 118,740 109,226
Repairs and maintenance 163,189 147,383 132,620
Advertising and public relations 127,127 131,753 97,116
Professional services 308,617 212,601 224,269
FDIC assessments 15,328 2,000 120,231
Other 779,884 703,162 650,974
------------ ------------ ------------
Total non-interest expense 4,849,182 4,555,398 4,228,922
------------ ------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,526,275 2,202,642 2,428,783
PROVISION FOR INCOME TAXES 724,000 588,000 764,000
NET INCOME $ 1,802,275 $ 1,614,642 $ 1,664,783
============ ============ ============
Net income per common share - basic $ 1.06 $ 0.95 $ 0.97
============ ============ ============
Weighted average number of common shares 1,698,950 1,698,950 1,698,950
============ ============ ============
See notes to consolidated financial statements.
13
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EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, Common Stock Unrealized
1997, 1996 and 1995 --------------------- (Loss) Gain
on Available
No. of Capital Retained Treasury for Sale
Shares Amount Surplus Earnings Stock Securities, Net Total
Balance, January 1, 1995 296,613 $ 741,533 $ 7,183,912 $ 5,009,467 $ 0 $ (210,972) $12,723,940
1995 Net Income 1,664,783 1,664,783
Stock dividends, with
fractional shares
redeemed for cash 20,868 52,170 1,408,590 (1,483,065) (22,305)
Cash dividends ($.14 per
common share) (238,110) (238,110)
Change in unrealized gain
(loss) on available for sale
securities, net of deferred
taxes of $266,000 357,202 357,202
--------- ----------- ----------- ----------- ----------- ----------- -----------
Balance,
December 31, 1995 317,481 793,703 8,592,502 4,953,075 146,230 14,485,510
1996 Net Income 1,614,642 1,614,642
Stock dividends, with
fractional shares
redeemed for cash 22,309 55,772 2,398,218 (2,494,493) (40,503)
Cash dividends ($.22 per
common share) (380,565) (380,565)
Change in unrealized (loss)
gain on available for sale
securities, net of deferred
taxes of $120,000 (169,001) (169,001)
--------- ----------- ----------- ----------- ----------- ----------- -----------
Balance,
December 31, 1996 339,790 849,475 10,990,720 3,692,659 (22,771) 15,510,083
1997 Net Income 1,802,275 1,802,275
Five-for-one stock split 1,359,160
Purchase of 3,966 shares
for treasury (3,966) (130,878) (130,878)
Cash dividends ($.30 per
common share) (509,685) (509,685)
Sale of 3,966 shares
from treasury 3,966 130,878 130,878
Change in unrealized gain
(loss) on available for sale
securities, net of deferred
taxes of $101,000 236,627 236,627
--------- ----------- ----------- ----------- ----------- ----------- -----------
Balance,
December 31, 1997 1,698,950 $ 849,475 $10,990,720 $ 4,985,249 $ 0 $ 213,856 $17,039,300
========= =========== =========== =========== =========== =========== ===========
See notes to consolidated financial statements.
14
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EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1997, 1996 and 1995 1997 1996 1995
OPERATING ACTIVITIES
Interest received $ 11,027,381 $ 10,047,637 $ 9,172,841
Fees received 968,072 1,025,437 856,806
Interest paid (4,543,895) (3,847,407) (3,261,153)
Cash paid to employees and suppliers (4,680,322) (4,443,431) (4,207,102)
Income taxes paid (786,000) (743,444) (790,017)
------------ ------------ ------------
Net cash provided by operating activities 1,985,236 2,038,792 1,771,375
INVESTING ACTIVITIES
Available for sale securities:
Purchases (26,075,499) (16,562,178) (15,256,737)
Proceeds from sales 22,306,088 14,414,736 4,019,578
Proceeds from maturities 686,306 4,597,881 3,090,254
Held to maturity securities:
Purchases (2,618,319) (1,177,002) (4,650,173)
Proceeds from maturities 1,736,862 1,314,873 7,154,605
Additions to properties and equipment (466,472) (1,482,935) (1,344,741)
Increase in loans, net of repayments (12,236,511) (19,258,136) (7,671,007)
Proceeds from sales of loans 2,597,162 2,593,290 4,179,236
------------ ------------ ------------
Net cash used in investing activities (14,070,383) (15,559,471) (10,478,985)
FINANCING ACTIVITIES
Proceeds from repurchase agreement 1,059,080 0 0
Increase in deposits 14,929,948 14,440,828 8,488,520
Dividends paid (679,580) (251,173) (260,415)
------------ ------------ ------------
Net cash provided by financing activities 15,309,448 14,189,655 8,228,105
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 3,224,301 668,976 (479,505)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 7,112,231 6,443,255 6,922,760
------------ ------------ ------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 10,336,532 $ 7,112,231 $ 6,443,255
============ ============ ============
(Continued)
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EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1997, 1996 and 1995 1997 1996 1995
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income $ 1,802,275 $ 1,614,642 $ 1,664,783
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 356,663 344,086 221,359
Provision for loan losses 60,000 60,000 (86,933)
Gains on sales of assets (33,809) (11,103) (55,477)
Changes in assets and liabilities affecting cash flow:
Other assets (367,243) 96,609 (177,558)
Other liabilities 167,350 (65,442) 205,201
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,985,236 $ 2,038,792 $ 1,771,375
============ ============ ============
(Concluded)
See notes to consolidated financial statements.
16
20
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EVANS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1997, 1996 and 1995
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and General - Evans Bancorp, Inc. (the "Company") was organized in
October 1988, under the Business Corporation Law of the State of New York as a
bank holding company. In January 1989, the shareholders of the Evans National
Bank (the "Bank") approved an Agreement and Plan of Reorganization (the
"Reorganization") whereby the Bank effectively became a wholly-owned subsidiary
of the Company. The Bank is in the commercial banking business, attracting
deposits from and making loans to the general public in its immediate
geographical area. The Bank's main office is located in Angola, New York and it
has branches in Derby, Evans, Forestville, Hamburg and North Boston.
Regulatory Requirements - The Bank is subject to the rules, regulations, and
reporting requirements of various regulatory bodies, including the New York
State Banking Department ("NYSBD") and the Federal Deposit Insurance Corporation
("FDIC").
Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and the Bank. All material intercompany accounts and
transactions are eliminated in consolidation.
Accounting Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Securities - Securities for which the Bank has the positive intent and ability
to hold to maturity are stated at cost, adjusted for discounts and premiums that
are recognized in interest income over the period to the earlier of call date or
maturity using a method that approximates level yield. Securities held to
maturity have been designated as unavailable to be sold as part of the Bank's
asset-liability management activities.
Securities classified as available for sale are stated at fair value, with
unrealized gains and losses excluded from earnings and reported, net of deferred
income taxes, in stockholders' equity. Gains and losses on sales of securities
are computed using the specific identification method.
Securities which have experienced an other than temporary decline in fair value
are written down to a new cost basis with the amount of the writedown included
in earnings as a realized loss. The new cost basis is not changed for subsequent
recoveries in fair value. Factors which management considers in determining
whether an impairment in value of an investment is other than temporary include
the issuer's financial performance and near term prospects, the financial
condition and prospects for the issuer's geographic region and industry, and
recoveries in fair value subsequent to the balance sheet date.
The Bank does not engage in securities trading activities.
Allowance for Loan Losses - The allowance for loan losses is established through
a provision for loan losses. Recoveries on loans previously charged off are
credited directly to the allowance for loan losses. The allowance is an amount
that management believes adequate to absorb losses on existing loans that may
become uncollectible. Management's periodic evaluation of the adequacy of the
allowance is based on the Bank's past loan-loss experience, known and inherent
risks in the portfolio, adverse situations that may affect the borrowers'
ability to repay, estimated value of any underlying collateral, and current
economic conditions.
In addition, various regulatory agencies, as part of their examination process,
periodically review the Bank's allowance for loan losses. Such agencies may
require the Bank to recognize additions to the allowance based on their
judgments of information available to them at the time of their examination.
Foreclosed Real Estate - Foreclosed real estate is initially recorded at the
lower of book or fair value (net of costs of disposal) at the date of
foreclosure. Costs relating to development and improvement of property are
capitalized, whereas costs relating to the holding
17
21
- 76 -
of property are expenses. Valuations are periodically performed by management,
and an allowance for potential additional losses is established by a charge to
operations if the carrying value of a property exceeds fair value. Foreclosed
real estate is classified as other assets on the consolidated balance sheets.
Properties and Equipment - Properties and equipment are stated at cost less
accumulated depreciation. Depreciation is provided using the straight-line
method over the estimated useful lives of the assets which range from 3 to 31
years.
The Bank regularly assesses all of its long-lived assets for impairment and
recognizes a loss when the carrying value of an asset exceeds its fair value.
The Bank determined that no impairment loss needs to be recognized for
applicable assets in 1997 or 1996.
Interest Income on Loans - Interest on loans is accrued and credited to income
based on the principal amount outstanding. The accrual of interest on loans is
discontinued when, in the opinion of management, there is an indication that the
borrower may be unable to meet payments as they become due. Upon such
discontinuance, all unpaid accrued interest is reversed and any cash received is
credited to the outstanding principal balance. Such loans are returned to
accrual status when they are made current and, in the opinion of management, the
borrower has the ability to continue making timely payments. Loan origination
and commitment fees and certain direct loan origination costs are deferred and
recognized over the lives of the related assets as an adjustment of the loans'
yields using the level yield method.
Income Taxes - Deferred tax assets and liabilities are recorded for temporary
differences between the financial statement and tax bases of assets and
liabilities using the tax rate expected to be in effect when the taxes are
actually paid or recovered.
Net Income per Common Share - Net income per common share is based on the
weighted average number of shares outstanding during each year, retroactively
adjusted for stock dividends. The Company adopted Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share," during the fourth
quarter of 1997. Only basic earnings per share is disclosed because the Company
does not have any dilutive securities or other contracts to issue common stock
or convert to common stock.
Dividend Reinvestment Plan - During 1997, the Board of Directors approved a
Dividend Reinvestment Plan (the "Plan") which provides each holder of record of
the Bank's common stock the opportunity to reinvest automatically the cash
dividends they receive on shares of the Bank's common stock. Stockholders who do
not wish to participate in the Plan will continue to receive cash dividends, as
declared, in the usual manner. American Stock Transfer and Trust Company (the
"Agent") is the administrator of the Plan. Shares purchased under the Plan are
held in safekeeping by the Agent until the stockholder terminates his/her
participation in the Plan. The Agent also acts as transfer agent and registrar
for the Bank's common stock.
Employee Benefits and Deferred Compensation Plan - Costs are charged to salaries
and employee benefits expense in the periods in which the services are rendered.
Pension costs are funded on a current basis in compliance with the Employee
Retirement Income Security Act and are accounted for in compliance with SFAS No.
87, "Employers' Accounting for Pensions".
Off Balance Sheet Financial Instruments - In the ordinary course of business the
Bank has entered into off balance sheet financial instruments consisting of
commitments to extend credit and standby letters of credit. Such financial
instruments are recorded in the financial statements when the transactions are
executed.
Cash and Cash Equivalents - For purposes of reporting cash flows, cash and cash
equivalents include cash and due from banks, interest bearing deposits in other
banks and federal funds sold. Generally, federal funds sold are purchased for
one-day periods.
Cash and due from banks includes reserve balances that the Bank is required to
maintain with Federal Reserve Banks. The required reserves are based upon
deposits outstanding and were approximately $657,000 and $591,000 at December
31, 1997 and 1996, respectively.
New Accounting Standards Pronouncement - In June 1997, the Financial Accounting
Standards Board issued SFAS No. 130, "Reporting Comprehensive Income". SFAS No.
130 establishes standards for reporting and disclosure of comprehensive income
and its components in financial statement format and is effective for financial
statements for fiscal years beginning after December 15, 1997. Comprehensive
income is defined as the change in equity of a business enterprise during a
period from transactions and other events and circumstances from non-owner
sources. Items considered comprehensive income include foreign currency items,
minimum pension liability adjustments and unrealized gains and losses on certain
investments in debt and equity securities.
18
22
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2. SECURITIES
The amortized cost of securities and their approximate fair value at December 31
were as follows:
1997
----------------------------------------------------------
Unrealized
Amortized ---------------------------- Fair
Cost Gains Losses Value
Available for Sale:
U.S. Government and Agency Securities $ 11,618,094 $ 23,843 $ (67,225) $ 11,574,712
Mortgage Backed Securities 1,419,658 30,799 0 1,450,457
State and Municipal Securities 19,477,751 402,202 (13,238) 19,866,715
Other Securities 930,450 0 0 930,450
------------ ------------ ------------ ------------
Total $ 33,445,953 $ 456,844 $ (80,463) $ 33,822,334
============ ============ ============ ============
Held to Maturity:
U.S. Government and Agency Securities $ 3,483,199 $ 36,333 $ 0 $ 3,519,532
State and Municipal Securities 3,094,841 0 (4) 3,094,837
------------ ------------ ------------ ------------
Total $ 6,578,040 $ 36,333 $ (4) $ 6,614,369
============ ============ ============ ============
1996
----------------------------------------------------------
Unrealized
Amortized ---------------------------- Fair
Cost Gains Losses Value
Available for Sale:
U.S. Government and Agency Securities $ 12,976,948 $ 25,450 $ (167,765) $ 12,834,633
Mortgage Backed Securities 1,694,066 41,553 0 1,735,619
State and Municipal Securities 14,638,658 183,826 (14,466) 14,808,018
Other Securities 822,850 0 0 822,850
------------ ------------ ------------ ------------
Total $ 30,132,522 $ 250,829 $ (182,231) $ 30,201,120
============ ============ ============ ============
Held to Maturity:
U.S. Government and Agency Securities $ 3,948,322 $ 15,194 $ 0 $ 3,963,516
State and Municipal Securities 1,904,882 0 (12) 1,904,870
------------ ------------ ------------ ------------
Total $ 5,853,204 $ 15,194 $ (12) $ 5,868,386
============ ============ ============ ============
Assets, principally securities, with an amortized cost of $3,413,142 for held to
maturity securities and a fair value of $19,782,680 for available for sale
securities at December 31, 1997 were pledged as collateral to secure public
deposits and for other purposes required or permitted by law.
19
23
- 78 -
The scheduled maturities of debt securities at December 31, 1997 are summarized
below. Actual maturities may differ from contractual maturities because certain
issuers have the right to call or prepay obligations with or without call
premiums.
Available for Held to Maturity
Sale Securities Securities
--------------------------- ---------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------------------------- ---------------------------
Due in one year or less $ 2,063,259 $ 2,068,197 $ 2,606,485 $ 2,606,485
Due after year one through five years 12,307,228 12,312,896 215,718 215,714
Due after five years through ten years 14,105,037 14,393,969 63,330 63,330
Due after ten years 4,970,429 5,047,272 3,692,507 3,728,840
------------ ------------ ------------ ------------
Total $ 33,445,953 $ 33,822,334 $ 6,578,040 $ 6,614,369
============ ============ ============ ============
Gains and losses from sales of securities for the years ended December 31, 1997,
1996 and 1995 are summarized as follows:
1997 1996 1995
Gross gains $ 65,150 $ 103,865 $ 22,705
Gross losses (67,145) (127,595) (13,266)
------------ ----------- ------------
Net (loss) gain $ (1,995) $ (23,730) $ 9,439
============ =========== ============
3. LOANS RECEIVABLE, NET
Major categories of loans at December 31, 1997 and 1996 are summarized as
follows:
1997 1996
Real estate - mortgages $ 85,367,123 $ 78,706,052
Real estate - construction 2,770,719 1,404,290
Commercial 8,938,560 6,993,852
Installment 2,517,892 2,646,246
Student loans 1,731,492 1,692,334
Other 509,935 769,322
Net deferred loan origination costs 401,245 422,760
------------ ------------
102,236,966 92,634,856
Allowance for loan losses (609,539) (546,954)
------------ ------------
Loans, net $101,627,427 $ 92,087,902
============ ============
Changes in the allowance for loan losses for the years ended December 31, 1997,
1996 and 1995 were as follows:
1997 1996 1995
Balance, beginning of year $ 546,954 $ 557,961 $ 628,957
Provision for loan losses 60,000 60,000 (86,933)
Recoveries 49,443 5,597 23,281
Loans charged off (46,858) (76,604) (7,344)
------------ ------------ ------------
Balance, end of year $ 609,539 $ 546,954 $ 557,961
============ ============ ============
20
24
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Loans evaluated for impairment totaled approximately $627,000 and $180,000 at
December 31, 1997 and 1996, respectively. However, an allowance for loan
impairment was not required under SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," due to the adequacy of related collateral values. If such
loans had been in an accruing status, the Bank would have recorded additional
interest income of approximately $58,000, $19,000 and $29,000 in 1997, 1996 and
1995, respectively.
The Bank had no loan commitments to borrowers with impaired loans at December
31, 1997.
As of December 31, 1997 and 1996, the Bank had no other loans which were
impaired as defined by SFAS No. 114.
4. PROPERTIES AND EQUIPMENT
Properties and equipment at December 31 were as follows:
1997 1996
Land $ 268,485 $ 268,485
Buildings and improvements 3,313,404 3,310,902
Equipment 2,828,996 2,365,026
------------ ------------
6,410,885 5,944,413
Less accumulated depreciation (2,583,213) (2,195,750)
------------ ------------
Properties and equipment, net $ 3,827,672 $ 3,748,663
============ ============
Depreciation expense totaled $423,564 in 1997, $348,671 in 1996 and $271,507 in
1995.
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value.
Cash and Cash Equivalents - For these short-term instruments, the carrying
amount is a reasonable estimate of fair value.
Securities - For securities, fair value equals quoted market price, if
available. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar securities.
Loans Receivable - The fair value fixed rate loans is estimated by discounting
the future cash flows using the current rates at which similar loans would be
made to borrowers with similar credit ratings and for the same remaining
maturities, net of the appropriate portion of the allowance for loan losses. For
variable rate loans, the carrying amount is a reasonable estimate of fair value.
Deposits - The fair value demand deposits, NOW and money market accounts and
regular savings accounts is the amount payable on demand at the reporting date.
The fair value of time deposits is estimated using the rates currently offered
for deposits of similar remaining maturities.
Repurchase Agreement - For these short-term instruments, the carrying amount is
a reasonable estimate of fair value.
Commitments to extend credit and standby letters of credit - As described in
Note 9, the Company was a party to financial instruments with off-balance sheet
risk at December 31, 1997. Such financial instruments consist of commitments to
extend permanent financing and letters of credit. If the options are exercised
by the propective borrowers, these financial instruments will become
interest-earning assets of the Company. If the options expire, the Company
retains any fees paid by the counterparty in order to obtain the commitment or
guarantee. The fair value of commitments is estimated based upon fees currently
charged to enter into similar agreements, taking into account the remaining
terms of the agreements and the present creditworthiness of the counterparties.
For fixed-rate commitments, the fair value estimation takes into consideration
an interest risk factor. The fair value of guarantees and letters of credit is
based on fees currently charged for similar agreements. The fair value of these
off-balance sheet items at December 31, 1997 approximates the recorded amounts
of the related fees, which are not material.
21
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At December 31, 1997 and 1996, the estimated fair values of the Company's
financial instruments were as follows:
1997 1996
--------------------------- ---------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial Assets:
Cash and cash equivalents $ 10,336,532 $ 10,336,532 $ 7,112,231 $ 7,112,231
============ ============ ============ ============
Securities $ 40,400,374 $ 40,436,703 $ 36,054,324 $ 36,069,506
============ ============ ============ ============
Loans $102,236,966 $ 92,634,856
Less: allowance for loan losses (609,539) (546,954)
------------ ------------
Loans, net $101,627,427 $102,368,624 $ 92,087,902 $ 92,056,134
============ ============ ============ ============
Financial Liabilities:
Deposits $138,391,327 $138,734,550 $123,461,379 $123,863,439
============ ============ ============ ============
Repurchase agreement $ 1,059,081 $ 1,059,081 $ 0 $ 0
============ ============ ============ ============
6. Employee Benefits and Deferred Compensation Plan
The Bank has a defined benefit pension plan covering substantially all
employees. The plan provides benefits that are based on the employees'
compensation and years of service. The Bank uses an actuarial method of
amortizing prior service cost and unrecognized net gains or losses which result
from actual experience and assumptions being different than those that are
projected. The amortization method the Bank is using recognizes the prior
service cost and net gains or losses over the average remaining service period
of active employees which exceeds the required amortization. The amount charged
to expense for this plan totaled $33,699 in 1997, $35,335 in 1996 and $52,201 in
1995. The components of the pension cost charged to expense for 1997, 1996 and
1995 consisted of the following:
1997 1996 1995
Service cost $ 51,817 $ 44,615 $ 46,891
Interest cost on projected benefit obligation 104,601 94,565 85,948
Actual return on plan assets (106,550) (87,676) (67,352)
Net amortization and deferral (16,169) (16,169) (13,286)
------------ ------------ ------------
Total $ 33,699 $ 35,335 $ 52,201
============ ============ ============
The following table sets forth the Plan's funded status as of October 1, 1997
and 1996, the end of the Plan's fiscal year, and the amounts recognized in the
accompanying consolidated financial statements as of December 31, 1997 and 1996:
1997 1996
Vested benefits $ 1,068,423 $ 1,002,977
============ ============
Accumulated benefit obligation $ 1,086,205 $ 1,012,721
============ ============
Projected benefit obligation $ 1,518,858 $ 1,354,390
Plan assets available for benefits at fair value 1,686,230 1,373,109
------------ ------------
Plan assets in excess of projected benefit obligations 167,372 18,719
Unrecognized net (gain) loss (41,212) 71,556
Unrecognized net obligation (16,081) (17,543)
Unrecognized prior service cost (256,524) (271,231)
------------ ------------
Amount included in other liabilities $ (146,445) $ (198,499)
============ ============
22
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The Plan's assets are primarily invested in a money market fund, stocks, and
bonds. Valuations of the pension plan as shown above were conducted as of
October 1, 1997 and 1996. Assumptions used by the Bank in both years in the
determination of pension plan information consisted of the following:
Weighted-average discount rate 7.50 %
Rate of increase in compensation levels 4.75 %
Expected long-term rate of return on plan assets 7.50 %
During the year ended December 31, 1995, the Bank adopted nonqualified
supplemental executive retirement plans covering certain members of senior
management. The plans provide a fixed benefit which is specific to the
participant. The obligations related to these plans are indirectly funded by
life insurance contracts (naming the Bank as beneficiary) with aggregate cash
surrender values of approximately $72,000 and $45,000 at December 31, 1997 and
1996, respectively. The face values of these policies at both dates was
approximately $1,650,000. The Bank uses an actuarial method of amortizing
unrecognized net gains or losses which result from actual experience and
assumptions being different than those that are projected. The amortization
method the Bank is using recognizes the net gains or losses over the average
remaining service period of active employees which exceeds the required
amortization. The amount charged to expense for these plans totaled $96,309,
$97,633, and $87,058 in 1997, 1996 and 1995, respectively. The components of the
pension cost charged to expense consisted of the following:
1997 1996 1995
Service cost $ 39,900 $ 50,138 $ 44,562
Interest cost on projected benefit obligation 34,194 25,280 20,281
Net amortization and deferral 22,215 22,215 22,215
------------ ------------ ------------
Total $ 96,309 $ 97,633 $ 87,058
============ ============ ============
The following table sets forth the Plans' funded status as of October 1, 1997
and 1996, and the amount recognized in the accompanying consolidated financial
statements as of December 31, 1997 and 1996:
1997 1996
Vested benefits $ 468,709 $ 356,685
============ ============
Accumulated benefit obligation $ 468,709 $ 356,685
============ ============
Projected benefit obligation $ 468,709 $ 356,685
Plan assets available for benefits at fair value 0 0
------------ ------------
Projected benefit obligation in excess of plan assets (468,709) (356,685)
Unrecognized net loss (gain) 28,499 (9,432)
Unrecognized net obligation 159,211 181,426
------------ ------------
Accrued pension cost (280,999) (184,691)
Adjustment required to recognize minimum liability (187,710) (171,994)
------------ ------------
Amount included in other liabilities $ (468,709) $ (356,685)
============ ============
Valuations of the pension plans as shown above were conducted as of October 1,
1997 and 1996. Assumptions used by the Bank in both years in the determination
of pension plan information consisted of the following:
Weighted-average discount rate 7.50 %
The Bank also maintains a non-qualified deferred compensation plan for certain
directors. Accrued costs under this plan were approximately $67,000, $64,000 and
$64,000 in 1997, 1996 and 1995, respectively. The estimated present value of the
benefit obligation, included in other liabilities, was $700,000 and $671,000 at
December 31, 1997 and 1996, respectively. This obligation is
23
27
- 82 -
indirectly funded by life insurance contracts (naming the Bank as beneficiary)
with aggregate cash surrender values of approximately $140,000 and $130,000
December 31, 1997 and 1996, respectively. The face values of these policies at
both dates was approximately $1,036,000. Premiums on the aforementioned life
insurance contracts were paid by the Bank in lieu of payment of directors' fees.
The Bank also has a deferred contribution Retirement and Thrift 401(k) Plan for
its employees who meet certain length of service and age requirements. The
provisions of the 401(k) Plan allow eligible employees to contribute between 1%
and 15% of their annual salary, with a matching contribution by the Bank equal
to 25% of the employees contribution up to 4% of their annual salary. The Bank
can also make discretionary contributions to the Plan. The Bank's expense under
this Plan was $35,395, $34,209 and $47,701 for the years ended December 31,
1997, 1996 and 1995, respectively.
7. Stock Split and Cash Dividends
On April 29, 1997, the stockholders approved a split of the Company's common
stock by changing each issued share of common stock, par value $2.50 per share,
into five shares of common stock, par value $.50 per share. At that time, the
stockholders also approved the increase in the number of shares of common stock
which the Company is authorized to issue from 1,000,000 shares, par value $2.50
per share to 10,000,000 shares, par value $.50 per share.
On October 21, 1997, the Company purchased 3,966 of its common shares to fund
the Dividend Reinvestment Plan for the cash dividend issued on October 21, 1997.
A cash dividend of $.30 per common share was declared on August 19, 1997, and
paid on October 21, 1997 to stockholders of record on October 1, 1997.
Stockholders elected to fully or partially reinvest their dividend in 3,966 of
the Company's common shares at a market value of $33.00 per share on October 21,
1997.
Cash dividends of prior years have been restated to show the effects of the
five-for-one stock split that occurred during 1997.
8. Income Taxes
The components of the provision for income taxes were as follows:
1997 1996 1995
Income taxes currently payable $ 798,000 $ 728,000 $ 741,000
Deferred (benefit) income taxes (74,000) (140,000) 23,000
------------ ------------ ------------
Net provision $ 724,000 $ 588,000 $ 764,000
============ ============ ============
At December 31, 1997 and 1996 the components of the net deferred tax asset were
as follows:
1997 1996
Deferred Tax Assets:
Allowance for loan losses $ 173,000 $ 148,000
Pension premiums 171,000 153,000
Deferred compensation 280,000 268,000
SFAS No. 115 0 11,000
Other 32,000 22,000
------------ ------------
Gross deferred tax assets 656,000 602,000
Deferred Tax Liabilities:
Depreciation 25,000 25,000
Prepaid expenses 160,000 169,000
SFAS No. 115 101,000 0
------------ ------------
Gross deferred tax liabilities 286,000 194,000
------------ ------------
Net deferred tax assets $ 370,000 $ 408,000
============ ============
The net deferred tax asset at December 31, 1997 and 1996 was included in other
assets in the accompanying consolidated financial statements.
24
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- 83 -
The Company's provision for income taxes differs from the amounts computed by
applying the Federal income tax statutory rates to income before income taxes. A
reconciliation of the differences is as follows:
December 31,
---------------------------------------------------------------------------------------
1997 1996 1995
Amount Percent Amount Percent Amount Percent
-------------------------- ------------------------- -------------------------
Tax provision at
statutory rate $ 859,000 34 % $ 749,000 34 % $ 826,000 34 %
Increase (decrease) in
taxes resulting from:
Tax-exempt income (321,000) (13) (260,000) (12) (259,000) (11)
State taxes, net of
federal benefit 136,000 5 110,000 5 154,000 6
Other items, net 50,000 2 (11,000) (1) 43,000 2
Provision for ------------ ---- ------------ ---- ------------ ----
income taxes $ 724,000 28 % $ 588,000 26 % $ 764,000 31 %
============ ==== ============ ==== ============ ====
9. Related Party Transactions
The Bank has entered into loan transactions with its directors, significant
shareholders and their affiliates (related parties). The aggregate amount of
loans to such related parties at December 31, 1997 and 1996 was $3,526,206 and
$2,247,931, respectively. During 1997 and 1996, new loans to such related
parties amounted to $3,366,701 and $746,980, respectively, and repayments
amounted to $2,088,427 and $1,867,538.
10. CONTINGENT LIABILITIES AND COMMITMENTS
The consolidated financial statements do not reflect various commitments and
contingent liabilities which arise in the normal course of business and which
involve elements of credit risk, interest rate risk and liquidity risk. These
commitments and contingent liabilities are commitments to extend credit and
standby letters of credit. A summary of the Bank's commitments and contingent
liabilities at December 31, 1997 and 1996 is as follows:
1997 1996
Commitments to extend credit $ 15,770,264 $ 15,115,000
Standby letters of credit 551,218 515,000
------------ ------------
Total $ 16,321,482 $ 15,630,000
============ ============
Commitments to extend credit and standby letters of credit all include exposure
to some credit loss in the event of nonperformance of the customer. The Bank's
credit policies and procedures for credit commitments and financial guarantees
are the same as those for extensions of credit that are recorded on the
consolidated balance sheets. Because these instruments have fixed maturity
dates, and because they may expire without being drawn upon, they do not
necessarily represent cash requirements to the Bank. The Bank has not incurred
any losses on its commitments during the past three years.
11. CONCENTRATIONS OF CREDIT
All of the Bank's loans, commitments and standby letters of credit have been
granted to customers in the Bank's market area. Investments in state and
municipal securities also involve governmental entities within the Bank's market
area. The concentrations of
25
29
- 84 -
credit by type of loan are set forth in Note 3. The distribution of commitments
to extend credit approximates the distribution of loans outstanding. Standby
letters of credit were granted primarily to commercial borrowers. The Bank, as a
matter of policy, does not extend credit to any single borrower or group in
excess of 15% of capital.
12. REGULATORY MATTERS
The Bank is subject to the dividend restrictions set forth by the Comptroller of
the Currency. Under such restrictions, the Bank may not, without the prior
approval of the Comptroller of the Currency, declare dividends in excess of the
sum of the current year's earnings (as defined) plus the retained earnings (as
defined) from the prior two years.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1997 and 1996, that
the Bank met all capital adequacy requirements to which it is subject.
As of December 31, 1997, the most recent notification from its regulators
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized the Bank must
maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios
as set forth in the table. There are no conditions or events since that
notification that management believes have changed the Bank's category.
The Bank's actual capital amounts and ratios were as follows:
1997
---------------------------------------------------------------------------------------
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
-------------------------- ------------------------- -------------------------
Amount Percent Amount Percent Amount Percent
-------------------------- ------------------------- -------------------------
Total Capital (to Risk
Weighted Assets) $ 17,422,000 16.9 % $ 8,234,000 8.0 % $ 10,292,000 10.0 %
============ ==== ============ === ============ ====
Tier I Capital (to Risk
Weighted Assets) $ 16,812,000 16.3 % $ 4,117,000 4.0 % $ 6,175,000 6.0 %
============ ==== ============ === ============ ===
Tier I Capital
(to Average Assets) $ 16,812,000 10.8 % $ 6,366,080 4.0 % $ 7,958,000 5.0 %
============ ==== ============ === ============ ===
1996
---------------------------------------------------------------------------------------
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
-------------------------- ------------------------- -------------------------
Amount Percent Amount Percent Amount Percent
-------------------------- ------------------------- -------------------------
Total Capital (to Risk
Weighted Assets) $ 16,063,000 17.7 % $ 7,250,000 8.0 % $ 9,065,000 10.0 %
============ ==== ============ === ============ ====
Tier I Capital (to Risk
Weighted Assets) $ 15,516,000 17.1 % $ 3,625,000 4.0 % $ 5,438,000 6.0 %
============ ==== ============ === ============ ===
Tier I Capital
(to Average Assets) $ 15,516,000 11.1 % $ 5,581,000 4.0 % $ 6,976,000 5.0 %
============ ==== ============ === ============ ===
26
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13. PARENT COMPANY ONLY FINANCIAL INFORMATION
Parent company (Evans Bancorp, Inc.) only condensed financial information is as
follows:
CONDENSED BALANCE SHEETS
Years ended December 31, 1997 and 1996 1997 1996
ASSETS
Cash $ 6,648 $ 6,897
Dividends receivable 0 169,895
Investment in subsidiary 17,032,652 15,503,186
------------ ------------
Total assets $ 17,039,300 $ 15,679,978
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Dividends payable $ 0 $ 169,895
Stockholders' Equity:
Common stock 849,475 849,475
Capital surplus 10,990,720 10,990,720
Retained earnings 4,985,249 3,692,659
Unrealized gain (loss) on available for sale securities, net 213,856 (22,771)
------------ ------------
Total stockholders' equity 17,039,300 15,510,083
------------ ------------
Total liabilities and stockholders' equity $ 17,039,300 $ 15,679,978
============ ============
CONDENSED STATEMENTS OF INCOME
Years ended December 31, 1997, 1996 and 1995 1997 1996 1995
Dividends from subsidiary $ 509,685 $ 421,068 $ 260,415
Other revenue 50,000 0 0
Expenses (50,249) (30,831) (17,542)
------------ ------------ ------------
Income before equity in undistributed earnings of subsidiary 509,436 390,237 242,873
Equity in undistributed earnings of subsidiary 1,292,839 1,224,405 1,421,910
------------ ------------ ------------
Net income $ 1,802,275 $ 1,614,642 $ 1,664,783
============ ============ ============
CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31, 1997, 1996 and 1995 1997 1996 1995
Operating Activities:
Net income $ 1,802,275 $ 1,614,642 $ 1,664,783
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed earnings of subsidiary (1,292,839) (1,224,405) (1,421,910)
Increase in dividends receivable 0 (169,895) 0
------------ ------------ ------------
Net cash provided by operating activities 509,436 220,342 242,873
Financing Activities - Cash dividends paid (509,685) (251,173) (260,415)
------------ ------------ ------------
Net decrease in cash (249) (30,831) (17,542)
Cash, beginning 6,897 37,728 55,270
------------ ------------ ------------
Cash, ending $ 6,648 $ 6,897 $ 37,728
============ ============ ============
27
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BOARD OF DIRECTORS
EVANS BANCORP, INC. AND EVANS NATIONAL BANK
[photo]
BOARD OF DIRECTORS
(from left to right)
David M. Taylor
President - Concord Nurseries, Inc.
David C. Koch
Chairman and CEO
New Era Cap Co., Inc.
Carl F. Ulmer
Retired
Richard M. Craig
President and CEO
Evans National Bank
LaVerne G. Hall
Former Chairman - L.G. Hall Building
Contractors, Inc.
Richard C. Stevenson
Chairman - Evans Land Corp.
William F. Barrett
Property and Investment Manager
Phillip Brothman
Partner - Hurst, Brothman & Yusick
Robert W. Allen
Secretary
Retired
Thomas H. Waring, Jr.
Principal - Waring Financial Group
(not pictured)
DIRECTORS EMERITUS
Floyd H. Hurst
Carl F. Ulmer
OFFICERS
Evans Bancorp, Inc.
Richard M. Craig,
Chairman of the Board,
President and CEO
Robert W. Allen
Secretary
James Tilley
Assistant Secretary
William R. Glass
Treasurer
ADVISORY BOARDS
Derby
Richard A. Gradl
Raymond S. Hazard
[PHOTO]
MANAGEMENT TEAM
(front center) Richard M. Craig, Chairman
of the Board, President and CEO;
(left) William R. Glass, Senior Vice President - Loan Division and
(right) James Tilley, Senior Vice
President - Administration
28
32
- 87 -
EVANS NATIONAL BANK OFFICERS
CHAIRMAN OF THE BOARD PRESIDENT AND CHIEF EXECUTIVE OFFICER
Richard M. Craig
SENIOR VICE PRESIDENT
William R. Glass
James Tilley
VICE PRESIDENT
George L. Catalano
Mary E. Doeing
John S. Eagleton
William J. Gray
Jeffrey L. White
ASSISTANT VICE PRESIDENT
Katherine M. Allen
Ramon Gallardo, Jr.
Susan J. Herold
Rose Marie Hinckley
Elizabeth A. Mac
Howard M. Martin, Jr.
Cathy E. Rohrich
BANK OFFICER
Rita A. Boyland
Karen M. Blecha
Michelle A. Bress
Nancy A. Ferraro
M. Jane Gonzalez
Nadine G. Houghton
Mary K. Nytz
Mary D. Philbin
CORPORATE INFORMATION
There has never been an organized public trading market for the Company's
outstanding common stock. The following table represents the highest and lowest
per share prices known to management at which the Company's stock has actually
been transferred in private transactions during the periods indicated. In each
period for which prices are shown, management has price information for the
transaction. The prices do not include any retail markup, markdown or
commission.
1997 1996
---------------------------- ---------------------------
QUARTER High Low High Low
------------ ------------- ------------ ------------
First $ 27.20 $ 27.20 $ 23.00 $ 22.00
Second $ 32.00 $ 27.20* $ 27.00 $ 23.00
Third $ 33.00 $ 32.00 $ 27.20 $ 27.00
Fourth $ 38.00 $ 33.00 $ 27.20 $ 27.20
* Adjusted for five for one stock split
As a result of the stock split on May 1, 1997, total shares outstanding were
increased to 1,698,950 as of December 31, 1997. There were 1,049 shareholders of
record on December 31, 1997.
Upon written request of any shareholder, a copy of the Company's report on Form
10-K for its fiscal year ended December 31, 1997, including the financial
statements and the schedules thereto, required to be filed with the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended,
may be obtained, without charge, from Michelle A. Baumgarden, Evans Bancorp,
Inc., 14-16 N. Main Street, Angola, N.Y. 14006.
THE ANNUAL MEETING
The Annual Meeting of the Shareholders of the Company will be held on Wednesday,
April 29, 1998 at 12:30 p.m. at Romanello's South, 5793 South Park Avenue,
Hamburg, NY.
INQUIRIES
For information or assistance regarding individual stock records, transactions,
dividend reinvestment accounts, dividend checks, or stock certificates, contact:
Corporate Trust Services, Fifth Third Bank, 38 Fountain Square Plaza, Mail Drop
1090F5-4129, Cincinnati, OH 45263.