EVBN - Earnings call transcript Q3 2020

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Operator

Good day. And welcome to the Evans Bancorp Third Quarter Fiscal Year 2020 Financial Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Deborah Pawlowski, Investor Relations for Evans Bancorp. Please go ahead, ma’am.

Deborah Pawlowski

good and Mary, you, afternoon, everyone. Thank appreciate us and certainly you Bancorp. taking join to today time your the We interest Evans in

On the Officer; the have President we and we’ll John Chief the open here, our David of call Nasca, results XXXX review David then for Financial with Officer. questions. and quarter John call and me Executive for will Connerton, third our Chief today, and

closed. released a evansbank.com. have financial of not, today them after access copy markets at were should You results on the the If website can you that our

the slides discussion. On website, accompany you find will that also today’s

If harbor. turn please you to safe for the those are reviewing page slides, two

provided are to factors that formal to as statements you statements apply risks Exchange other we well risks forward-looking as call. well events and as Q&A. by actual some during other discussion, are stated on documents that and and These As future other with the results uncertainties, subject may today’s as the are the what aware, is filed could company make to the as during and uncertainties differ cause as the with in Securities These Commission. earnings from factors well release,

at those You our can sec.gov. documents website find or on

over So, begin. that, to me with turn David? let it to David

David Nasca

pandemic. Thank the getting and through you, you call appreciate is Debby. for healthy Good posed and safe the the afternoon, joining today. by everyone us everyone. We challenges staying I hope increased

mortgage and the an boom. has computer operation Evans of integration in conversions transition the This mortgage systems this and like office and height to respond undertaken, commitment and for all a operating to third in which product closed started, during origination singularly move, this to Before team tireless of a centennial in the with acquisition our uncertain the I’d we PPP robust refinance and Evans administrative challenges projects unique to year. environment to effort and the comprises get take opportunity including thank May tangoing quarter, entire conversion continue

seek needs move them announce being compound communication, as challenges. consistent cutting. we corporate business to to guide met ribbon and execution, as officially yesterday’s to new by our client’s Our offices through administrative opened excited are marked with that we support and I’m

While certainly able were all -- to transition, branch the consolidate three one. complicated this associates current environment we consolidate successfully from offices into nine it

on-site to building new During needed new our assisting can $X.X of absent safety organization to successful the about operate assuring with construction, and and solid believe in and some of In remotely the were our operating facing results continue until Fairport into the our the of Bank all operations with Continual Savings been building, certain of participation are talent. results at merger associates required offices net to and the determine of growth Paycheck safety in Program pandemic reported the operate Currently, continued Today response returned or from third to We million. associates. effectively challenges of changes quarter protocols that PPP. while our new business the indefinitely. the of light more while safety of to to XXXX pandemic, March efficiently retention the our future, will banks be income assessment of at we aspects the successfully remaining while since assure pandemic and a the reengineer work on to a executed the is two-thirds paramount. deal outset done model hybrid our costs, in quarter has incremental and workforce the effectively have current third and attraction one-time and third reflected Protection do we our to remaining agile least clients position and is January. being Remote our meet posture,

integrating completed Fairport Our during we were progress acquisition with and are conversion and satisfaction the strongly are quarter or Savings with and encouraged market integration high rates. and making computer clients. contiguous strategically Bank the positions retention we and FSB Bank a of the in prioritized new us System

in combined been growth meetings challenges overall the While Rochester the expanded operating, person are working environment we somewhat given strategy. to are muted, which and has in advance of market ongoing the virtual in we our market

refinancing provides mortgage when Rochester We’ve lending significant in operational, made inroads substantial commercial fully The the and Our profit our is successfully and business opportunities. leveraging purchase and with combined strong consumer to with and volumes. mortgage combined new earnings. retail center Evans FSB are loan presence another also existing now manage team the being team, staffed capabilities, has been market and diversify relationship

expense PPP program, track. resulting in and efforts community resilient merger related in the are Additionally, our of our client a FSB’s on performance was lending major helping remain its Evans participant management to near in base. with recover the commercial doubling the

platform are details. to to of services. four customers and add and relationships third quarter focused the slide more deck, products utilizing half we a more with was in and included financial which XXXX they and those or financials have for as see other offer PPP where relationships. we now three Please permanent status, the cultivating results on additional Bank those of successfully services utilize to over converted build continue To-date, We have the

of it we run then looking continuing up recover area the our detail Looking that, is appropriately capital ahead, drop the hand John? I’ll portfolio, pandemic total York through John the to given liquidity XX% Connerton strong approximately well-positioned are to which now we of pandemic, of encouraged back loan significant over to forward. we’re believe makes of take We continues the and while from to Western deferrals position certainly in not happy results COVID-XX and decrease deferrals, normal, are which for With we’ll and more a our are questions. be economic the the events reserved and X.X% originated. with market New to in

John Connerton

afternoon, everyone. good and David, you, Thank

at of by or fees per diluted lending. PPP was year’s on down mortgages $X.X interest We $X.XX deposit per reflects linked and $X.XX in quarter margin our mind, PPP XXXX, X% as the from believe or moves increased may a to a in as the the lower or or fees quarter given growth. year-over-year extended loans was as this by full for in the income results basis a related $XXX,XXX last we remaining The not may in of income some cash of result hotel Included the that approximately by margin well loans remain elevated of $X.X impact of XX amount due merger though finally The as earning federal impact PPP linked in XX% third from unforeseen increase quarter, costs. FSB, in on from the significant basis the in weakness the and amortization provision keep forgiven compared reserve if today, In $XXX,XXX the the loss significant an $XXX,XXX points This loan share to in quarter quarter, $X.XX million current these Fed interest could Net of FSB, loans yield reported portfolio as still with funds a from recognize diluted points loan shortened line well total be early second period total defined XXX and respectively. and income and XX As XX balances XX quarter. interest potential sequentially, third margin as the The by well basis legislation. was decreased points quarter, of XXX government. depending current share million rate net there and $X.X the second interest XXXX the should of amortized to recognized higher the amount second variable, share, and margin X.XX% net linked diluted residential PPP Fed basis a as net was PPP the are million or interest from third the in in forgiven allowed level around or fourth per points portfolio be lengthened may months respectively. is quarter basis quarter. XXXX be points

not the liability on pricing Given -- our we power liquidity do of the base, we sheet. do strong side balance have some

off time the looking continually clients. of from while we with this quarter provision loss We’re the any the ability associated of the resulting limiting deposits and COVID-XX are have to core at reflects increased of risk continued the level these areas where on pandemic elevated re-price, roll letting The portfolio, impact hotel relationships.

requiring models XX additional for received expired, which of of adjust XX their Bank. X.X% commercial million as loan the relationships $XX in deferrals the Our the portfolio to portfolio challenges, majority The have or credits pandemic’s they’re each, business days of of consists portfolio. response the assistance individual two from these hotel total

service full or summer communication of additional associated to better We’re than will customers -- on that be warrant. which include portfolio after a in these of consumer with is there order progress challenges cycle, evidence circumstances Therefore, rather customers as with revenue and limited a level rely hotels progress seasonality The mostly stream. business XXXX. in close determine consists will evidence a

increase we As a level result, this of these need the portfolio. loans risk criticized commensurate assets as hold rated reserves which we to have on

second hotel compared to the our quarter million at assets with of million, total quarter at downgrade $XX.X the XXXX. portfolio, of $XXX.X end increase end Given criticized the of

the Bank’s into are market teams management and have portfolios guarantees the the have full is we of sight risk. evaluate and Bank bankers in assets our review which will conditions It continue continue strong progress on commercial their market, as and properties of the that Our to extensively performance. risk line important with allows and borrowers to and credit these and credits note repayment footprint

Currently, Additionally, either the an ratio well loan interest. or are paying the full interest-only to principal value and the average of is on of collateralized portfolio majority hotel loans XX%.

customers to of take As expected, the deferrals period, initial Since status. majority normal deferral quarter the second second XX-day back which period, expired. Bank allowed the deferral paying moved vast a to have has the majority of

which majority in consumer status. million that and are the $X in of million deferrals October payment the fourth begin in quarter and represent remaining The the Bank commercial As to $X million XXth, second includes $X in expire expected deferrals, had loans.

compared due period service the Non-interest and result prior sale to quarter. that $XXX,XXX charges linked FSB second compared fee on hotel reinstatement revenue primarily remaining to customers salaries accruals months being assist due seven. driver a degree XXXX lower further to a with spending refer approximately $XXX insurance service third consumer lead expenses a larger quarter increased system $XXX,XXX commercial which quarter of as higher the incentive were up profit addition second investment slide and due in when offset behind the of Seasonally COVID-XX. increase lines the full been were Non-interest salaries, the by suspended merger, commissions on gain revenue acquired during compensation security. linked When helping commercial partially from the our and a Deposit and temporarily would detail was have to For quarter completed in of and quarter of and affected had to linked were income the over conversion loan August. up three fees included and five as sharing certain the largely portfolio, the of the this to higher been a $XXX,XXX. with insurance the to up of as deferrals -- of of a please integration the

XX.X%, tax the do for credit Additionally, attaining year. quarter. the as the are I completed transactions we FSB first the reflects the cost At the rate which from rate this tax historic The tax in transaction will was XXXX anticipate Absent XX.X%. not anticipated. this historic credit time, saves tax we was additional effective quarter note,

Absent balance third and loan to XX%, from Turning last million lending, loan the million quarter, sheet, the FSB as growth including PPP million $XXX economic a experienced with $XXX from muted we result of PPP. increased and year current or $XXX environment. portfolio the compared FSB

quarter. FSB XX% fourth Total the however, million last pipeline, is achieve to of or quarter. deposits since were moderate growth added the up total. year $XXX in we this million solid Our end $XXX and expect third to

largely drove our accumulated balances. seasonally We on were to they commercial side. the an loans, as deposits experienced slightly, increase from quarter proceeds from deposit due while customers government spending down In deposit the payments consumer growth PPP stimulus and the municipal lower consumer significant also reflecting liquidity lower

the $XX in million reminder, the uncertainty a fixed Bank of heightened light to notes a to that at quarter. of private completed been surrounding COVID-XX capital. the the we pandemic, X% X Tier beginning As third subordinated rate total placement the $XX of has moved as and million Of floating

to that remain environment. solid we actions during operate in continue a comments. to successfully the will That we position financial this adapt to taken are confident forward, changing my Looking we to very and market appropriate conditions concludes have challenging

line So we the would open now questions. like for to

Operator

first Instructions] Thank Sandler. Twerdahl We Alex [Operator you. Please can go Piper of ahead. question take our from

Alex Twerdahl

Good afternoon, guys.

David Nasca

Alex. Good afternoon,

Alex Twerdahl

you stresses or is, just give bit on what looks quarter, Just line the like, reason detail wanting circle these back being can have of first the to But gave et here on why the do of there -- overall maybe a service you to like if LTVs, specific it’s coverage loans of of real during sort downgraded some us debt to there obviously they’re of little off, hotel a color downgrades industry? lot sight you stopping cetera. paying the or or ratio is in if

David Nasca

of those in a of because or those I time, coming like they’re quarter, Alex, no second there they’re the a mean, I income was couple just think things, ratios were to things. -- of a industries. lot for a of revenue -- debt of they’re it’s infinitesimal both combination period in

back really assessment especially that footprint, to the especially we COVID-XX has, that see until quarter not from get seasonality. as the cash downgrade third industry there’s going seasonal to in the well the from the year, to as impact think more while to such COVID-XX going longevity this opening from and next our impacting move up -- made decent that flow seasonality I it’s probably through we’ve they’re impact take the and that the the a some of was

would that’ll So to summer, which for in and come the start better we’re spring a their revenue next season, indication of back us and health. looking give their

John Connerton

We also better… thought was it

Alex Twerdahl

Okay.

John Connerton

Alex, did payments, continue not getting was principal terms need defer interest what’s if some it receiving interest-only, going paying are are the some we of industry, they paying, in they may reflection be want it. that in we’re the But to continue more we to but didn’t of interest. … understand on a people paying paid, because to to

Alex Twerdahl

third attributed much how in the And to quarter Understood. would of specifically? provision the those downgrades be

John Connerton

of all Yeah. Almost it.

Alex Twerdahl

some was then at And actions. pretty be stresses would of that would fair I if or Okay. other restaurants guess in of saw industries if similar whatnot risk assume since you to it have the that there you like similar kind done

sight to normal has least where on needs concern today, else sit be back hotel to you to And normalcy? the so everything look at based line of

John Connerton

as they we’re seeing. And At of point and most but this gone what some certainly other back point, where industries yes, have our that’s predictability. clients normal, to have not a business

David Nasca

I’d thing, say regard the with to one other too. Alex, hotels

We have those businesses. of sight line clear into

them begin them continue their We’re preserver and a, but they payments. improve once is life to us, get can interest a it, to week. principal call probably situation occupancy a talking for to resuming This and full a where paying

Alex Twerdahl

around the in obviously additional margin margin that fourth quarter. moving for Understood. Okay. all minutes. lot And and that should liquidity, you there’s the talk of the switching about that a kind remain think money then to -- of the mentioned stuff. Is of level PPP parts this you margin and and stimulus John, a and just gears couple in

you push example, So into can quarter higher to push not headwind enough is and maybe aside foresee quarters? Maybe about in or down the whether trend and a you of going year, sort if of be to the we -- through can of next the for of PPP, or couple talk some kind over for walk into a margin moving into NII NII it to continue going the and fourth kind parts NII. of of

John Connerton

the with assets second a we our on level we’ve hit loans growth full a on. I growth the earning expect and quarter had lower -- perspective, PPP and of those think from FSB, third because NII put that

expected an So quarter due probably we we NII fourth beyond. indication growth our that a good our from income that’s of a just to perspective growth of from and us in a think rate managed -- there’s feel run and ahead

Alex Twerdahl

going in of product, the of that then across And that footprint correct? loan new fourth of I specific the commercial core sort And of the or market? terms pipes most to quarter, then is is its -- of is categories into kind presume Rochester kind Okay. that the your

John Connerton

Yes.

across footprint. it’s So the

We’re going And here. the we’re it’s a but Rochester, having market some also residential on commercial across pipeline about right pretty about footprint. success it’s business have the too. talking good that we’re in mortgage But we talking robust now when generally our

Alex Twerdahl

lot someone lot does balance And sheet? going to that Okay. a then a go a is to -- bring your residential secondary the are on market, of you

John Connerton

We’re balance putting it our on sheet.

cash have already and on balance that it. a been mentioned, amount forward, sheet, some significant originate utilizing we our they as looking spending of we’re of dollars based I as Just, I’ve the

to put is going out or portfolio. refinancing of We’re of off our robust pay some own some asset on. But current there that

So assets there but a expect to we -- books it will growth it on on of our an those -- opportunity little -- some put as the we be be so also. take portfolio, there residential will muted growth,

David Nasca

a There the FSB was a portfolio. sale for of bit from also commitment

So our go what to we going were books, but pre-committed. still can go put to secondary its of will, that on not some will market all the we on,

Alex Twerdahl

every continue due to additional to and level back there’s Do fourth on that thinking looks compared these to of normalized rate you’re bit quarter? the run Okay. insurance stress of the in you back think be Do yet it year, customer a a some And you full then, tick service some categories, like the is when some of I deposit then foresee you the usually see like to just lines, getting at down behavior? quarter fee single which going revenue, to little of by look year. income, pretty fourth consistent other a last But not on just a to to charges, course, operations. with

John Connerton

right I things if expectation this probably next our to few -- quarters. a in is a think, But for good lock the I the future third think back the they is COVID quarter is going on proxy we But behavior up rate more, foreseeable that. forward. customer starts in might for probably run good might now, pull little for the

Alex Twerdahl

took integration, the should in of about now expenses, that then that’s How done. everything Okay. we think terms -- and there? for the from expenses And they same

John Connerton

had pretty level is I -- think, the quarter and of in these we our rate our expenses base. third again, that expense run emblematic

David Nasca

Yeah.

Alex Twerdahl

[ph]. hard deal to it make It’s a

David Nasca

Yes.

Of course.

Alex Twerdahl

just the said, more the on I me, And finally do carry through but normalized for rate, of quarter the that final for going stated that XX.X% XX.X-ish we any weren’t the into tax tax the the then credits that final know to are year you near-term, should quarter. or to you level going for saw in to ratio, we -- get that tax the

John Connerton

the quarter, to No. year tax The should in going credits of next runs through that the -- though we The rate forward. Obviously, because quarter going a rate credit rate take the quarter. current through not lot in more took the we fourth tax whole and to run take forward be what even should we year. emblematic the actual, of benefit doing expecting should the benefit we’re fall first each be recognize

Alex Twerdahl

my all taking for thanks Well, question, Great. guys.

John Connerton

Alex. Thanks,

David Nasca

Alex. Thanks,

Operator

now next question [Operator Instructions] go We our Swanson from Kevin of Hovde. take Please ahead. can

Kevin Swanson

guys. Hi,

David Nasca

H, Kevin.

John Connerton

Hey, Kevin.

Kevin Swanson

Hey.

or you think the changes stimulus? it of losses and do the off, simply losses? of this delays you any Just Do guess, plans realization future, view think just I the to the outcome in your it stimulus cycle starting credit

David Nasca

more to want job, needed. about a think you the that done pretty good they’ve there’s If I consumer, talk

duration to and additional think kind house, to want is that on PPP you of of answer. this talk event them. help our of might there’s the attempt depends It whether That’s an side commercial the the coming. lifeline If the about I PPP

point. I think this at it’s uncertain

like beginning We’re be year, companies is additional tell this and thinking the going on of it’ll docket if year first there’s of come second stimulus some because are transpired. a out depending is of quarter how the you things quarter on since that. the elections the talk at this again, But, the doing, or to

So a I’d little say, I uncertainty. there’s bit guess, of

deficit some did a with municipalities And there’s think, whether talked you -- but government good some it’s think regard or thinking the now with I that been job municipalities consumer -- there. going There’s airlines, people because it, that on, the be early it, the there’s not, meeting also gets I think on. it, businesses, of need pretty need that’ll whether a more, sent it’s out there’s big hospitality I unfortunately. And it’s right a about have what’s need to whether challenge. where to they situation pretty industries the

So this economic impact impacts could there’s some thing. also that

uncertainty, So I’m there’s a sorry but bit obtuse think. to be little Kevin, I that, some still on

Kevin Swanson

to the it an happens off I little That’s might guess, not that figure It’s we if the the a just of it? question quite helpful. in it change second No. get piggybacking out bit, round expectation or Does NPAs what get maybe future. stimulus peak? when does of

David Nasca

in For I line would activity here the level Kevin, say, sight clients and at excluding yeah, a enough up hotels business to businesses, of in say good the I of what’s of think, us, economy into our front our sufficient maintain atmosphere. is our I our the --

hotels resolution vaccine the comes or through. until is come whether a where it’s help some the can them think weather COVID-XX, other storm a stimulus in, through if does I

to point industry to I to where consumers go would think assistance normal feel to to some that back is help for through comfortable where look those we that more clients. the visiting

Kevin Swanson

hotels, has been sales, any there maybe then that or the ones gave data look And LTVs, as back that in cetera, as about assuming updating could you just far market you the the Great. are changes, thinking to origination? at presentation Okay. et

David Nasca

price discovery been of… in the has has asking There yet I -- you’re is, think question terms there

Kevin Swanson

Yeah.

David Nasca

at right that are here went was was of discovery is yet. is been getting amount to is owner. and at the is mortgage national that they’re one in sell not sale that came hands. to if going Marriott things near than than good been bids … amount It not because It there price up market? a start if it changing and But not off There’s the And amount. an these in discovery price Buffalo. town of the the answer No. sold It which the for hotel, even this There level. is move? in going lower closed. University other terms hotels And has pulled a that, that good in market, they than less it

Kevin Swanson

Thanks. there with interest then, helpful. access with some on I balance liquidity sheet any That’s Is of sensitivity and how the guess, Okay. so change acquisition. And to much changing and your you sheet? the balance rate think the about

John Connerton

I Kevin. -- John, is this think

I in we’ll another Q. think, think no, have I we’re -- disclosure our

level. down I up up. well, margin to up interest down. do rate with probably, scenario, pick as like, we’ll constant, the start our of rates think, down and is if significant environment -- stays a we’re if be this rate of in no going we’re -- risk, an amount sensitivity a we have we I there’s rate interest don’t or think, have -- But amount don’t forward, probably at environment the But significant

Kevin Swanson

Okay. Thanks. can. here. have from loans number? of Yeah. maybe just down about We few questions then, end And if outstanding Did I you period housekeeping PPP won’t talk

John Connerton

I somewhat, above million $XXX may -- discussed that we XXX have think, rate.

Kevin Swanson

Okay.

John Connerton

the of. at That end was

Kevin Swanson

And then… it. Got

David Nasca

the sure out I think number. last set not this right put But quarter we quarter. I’m that’s out we and it

Kevin Swanson

on be guess mark a and have you did then, without And with credit included the allowance the might PPP? Great. what Okay.

John Connerton

Yeah.

perspective. the from allowance Our was the on credit Yeah. mark insignificant -- small,

Kevin Swanson

much. it. very you Okay. Appreciate Got it. Thank

David Nasca

Thanks, Kevin.

Operator

to further the questions phone, additional call like back We to now for an have hand David over closing since I’d the or Instructions] [Operator remark. Nasca no

David Nasca

a us joining and we to appreciate with time very All interest we seeing and of you a and you right. speaking forward hope and us We point look look great fourth in you with Well, Mary. results. to -- thank and Year New weekend. Thank look you feel your reach continued speaking of you quarter XXXX when day Thank support. today teleconference. we Please here, to all have the report participating much, forward any in but certainly at -- all look We forward free seeing some our we of for out to great all at to you. a all again

Operator

today’s participation. for call. you your Thank This concludes

You may now disconnect.

Evans Bancorp (EVBN) 1 Nov 202020 Q3 Earnings call transcript