EVBN - Earnings call transcript Q4 2020

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Operator

Greetings, and welcome to Evans Bancorp Fourth Quarter and Full Year 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host and Investor Relations for Evans Bancorp, Deborah Pawlowski.

Deborah Pawlowski

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

On and Connerton, up questions. David Executive have review will the David the open President the will XXXX call, Chief fourth and of and we quarter and Nasca, John for Officer; year Chief the our our John call results Financial full Officer. and we then

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

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

to that, You website or with on can well turn let begin. to our me those it And sec.gov. find David? at documents over David as

David Nasca

everyone. for appreciate us you, Debbie. Thank Good afternoon, call the We today. you joining

to the pandemic. proud tested saying, to rapidly clients our disruption, goes what of At protect work challenges responded businesses that resiliency the the other, fortitude by the our any we achieved. a I'm the of upheaval community. many without team and XXXX posture monumental remote and this region most associates, and to navigate outset them new As our our was in people quickly support a adjusted help unlike the singular presented entire with year to We of Evans organization.

nonbranch of In remotely. over fact, staff March, end our of we the XX% by working last had

will stance in this through predominantly While office the environment, are we remote we have a spring. had some and operating at reintroduction to least

Protection and processes Given significant changes being number to were for operating to drive-through, the guidelines with also retail fully a signing tools seen rates interest as system alternating put was to safely, address document technologies to To on new result and shutdowns employed commercial lowered impact, an Paycheck clients, to pressure new platform branches Fed to with ATM-only to as Program the bank of to tools, redeploy open being Liquidity protocols near the the intense software, X% business due equipment. flooded such pandemic. has continue platforms facilitate appointments-only a the as open were and multiple there between a the few and being delivery perspective, then and margins net opportunities and application few. channel and as secured name lending serve occurring submission profitably. throughout to PPP, challenges safety communication well and From business bulk industry customer-facing online mobile of as

concerns in In the significant seen. including never in to macroeconomic levels unemployment, material reserves to by industry-wide negatively and of spending holding was slowing response impacted trends income addition, business reduced and a way before

platforms committed During execution and to the pursue through of fee complementary business financing extended during by acquisition December of the hottest one a to Employee closing on our and the Savings significantly Rochester York production in This integration of growth. markets included The successfully company insurance number strengthening million acquisition were significant asset, The we team the bolstered presence New agency. our long-term market financial Fairport the helps flexible will quadrupling in market able the home Western the of XX, history. the occurred for our for achievements. scale year, year volumes and mortgage closing early of provide Bank. We industry operation after to in position and by and $XXX integrating Brokers while operations, income XXXX. our COVID of operating and strategy of impacted efforts very Benefits This our

days. million, new-to-bank closed Subordinated we midyear with and provide year, X,XXX a the the source in business size resulted PPP add nonclients against of to the loans accepted was year. during During totaling opportunistically this borrowing raised additional approximately pause. in the doubling closed originated effectively in the all approximately only as clients debt were lower which after FSB and transacting prospects, bank strength $XXX without bank market that our XXX cost Evans commercial portfolio This uncertainties. acquisition from was and capital the XX applications

new headquarters. administrative sold was facilities assist conduit in construction served of administrative The our our combining ever-changing a needed of provided three as the to occupants income borrowing enhancements And curriculum completed virtual Equally mortgage our that to funds on one. charter two accomplished school actions Several to community regulation. suspended were deferrals Evans area to move our addition core given, as to and former services respond was into a Buffalo governmental supports. including We incorporated. for or assisted schools originators Technology Additionally, their to was gain. part-time support changes facility rent nurse These possible to while support. in of and flow holidays. COVID-XX, important cash consumer including address stimulus were address fee trying clients SBA-guaranteed values. commercial government a and and PPP Payment were grants loans were of

Board enhance market A in to we enhanced amidst serve. office equity was financed in in and our Additional and facilitate chaotic bank's and made outstanding incredibly is in donations DEI grit credit and of the resilience. and security, discussions year, was A Directors open our of wrap associates Evans' partnerships our established first racial racial branch that bank a unrest within project challenging economic recommendations and to the dialogue communities senior Commons, brought goes and to in showcased were financial forward and through and A in unrest, who new was Tremendous as low-income inclusion we and food a with to fallout these an fitness impossibly agility solidify in XXXX and fighting needs and To all steering to showed as in and help is path national along in issues. it refocused and up, proficiency charities and underserved launched committee leading. our our bank associates but pandemic around A political concerns half the was related a communities the soldiered were XXXX. diversity, the initiative consultant footprint, inequity to also an by expected located the approved Westminster housing our insights position an And with community division well environment. communities. on new financial management, as by review the exacerbated difficult participant assessment completed for efforts.

pockets within continue a the to strengthen, we markets As the building to and look normal with will that developments vaccinations the new of year, to country optimistic state. recovery return are more our the we can

I'll advantage John? we'll our positioned changed operate in opportunities world to With hand to happy Even then through that, the to it and results, run environment, are we drastically to of to over John continues any and as questions. be assist ahead. take a our take

John Connerton

portfolio XXX approximately by X.XX% positive reduced the to of fourth macroeconomic or trends the merger-related per fourth per over as interest third fourth over million the from interest from also to interest a The allowance quarter. loan This up we The increase interest-earning The income response increased PPP interest rates year's such connection in $X.XX from $XXX,XXX afternoon, elevated Reserve's costs. quarter, funds reduce rate we higher the did the greater resulted changes Net an XX% due year's to the increased Federal period expense in quarter. on basis an of in and largely basis the compared quarter, and points PPP the the quarter current David, XX loans to million loan acceleration for to income early from sequential diluted XXXX XXXX quarter additional Net $X.X residential and net decline the year be amortization well-defined and remaining good contain reflected cash release and lending. PPP of $XXX,XXX the the cash interest-earning with of in income PPP due the and million was reserve as as or XX acquisition, points continue federal as interest-earning including We or basis loans reflects balances, share quarter in Net improved decrease quarter period. federal income $X provision government. in by fee during mortgages FSB the of in third to you, income, quarter acceleration – the in last third from certain mix last margin FSB. recognize everyone. to diluted assets, the unemployment. amortization resulted from largely or of with in largely share of loss the fourth and as forgiven weakness the Thank hotel deposits. X% $X.X earned $X.XX $XXX,XXX fees Net fees period, increase had points trailing first accelerated linked PPP prior the

amounting today, our of first additionally, quarter cash into next $XX approximately is of couple assets. to X a of million. result XXX these of have and, over basis X excess applications in We between deployed pipeline points have sources the strong originations margin commercial as expansion PPP continued interest-earning received in of should higher quarters and second-round the XXXX Both as

may forgiveness first slow the variability loans, on margin of related can fees. for amortization will the the of However, or which be PPP accelerate dependent round there the some the of be as speed

insurance of quarter, be merger-related insurance from advertising Non-interest last to the technology line. benefits, for tax also impacted due and including salaries Of The The business. to the prior made recognize number XXXX. year applicable other increased fourth recognized. assets non-interest which addition adjustments application contributions no the XXXX. the in our in a of gain PPP year. FDIC's bank is within historic credit in expense first during million the due and completed XX% can $X.X to the challenging million of additional result was note, the the of and down about from time, of on $X.X was of former of this the tax $XXX,XXX small for tax growth a not tax of headquarters, environment largely the the the was income in we fees $XXX,XXX, costs. in period, increased higher remaining seasonality do XXXX. found was had largely the accruals expect transaction FDIC company the was our Absent associates incentive effective transactions line be the by in XXXX. income quarter, We not as the credit, Non-interest after driven to in expenses expenses rate reduction approximately this which we FSB in this items The as of credit amortized anticipate income of quarter for XX%, At quarter quarter million administrative $X.X year's assessment rate historic XX.X%. deferred credit, expense linked forgiveness reflects and quarter which sale year's the this

slightly third quarter, to or XX% with Compared to fourth from quarter, FSB with from year's loans XXXX increased – $XXX third loan due XXXX mostly declined last PPP million the linked forgiveness. which The quarter, Turning million slightly, linked sheet. with reflects loan the loans PPP. the $XXX sorry, $XXX compared balance declined and million mostly portfolio compared

of allowance We pick our quality basis in centered was which credit overall hotel have portfolio was continue X did point, to our confidence quarterly on X.XX%. non-performing to credits. loans were We two and charge-offs loan as see ratio up, the

hotel has the focus As to all moved which was portfolio, discussed status. our quarter, criticized we last been on

beyond credits of While as principal Since completed having the pay those typical either issues our identify been into environment. full a loans. these reviews, during for interest, to the continue the longer-term and as the portfolio did two Recent seasonality. ongoing interest-only majority third or part appraisals declined current market have moving in hotel majority new criticized valuations quarter, have of assets economic we

grew of an with that However, XX%, The increase well-collateralized FSB, deposits or $X.X driven we million and billion Total are XX% reserved. added of loan-to-value end appropriately believe the year. since the hotel the $XXX be for of portfolio by and PPP decline which linked deposits spending. was last continues to we third including commercial well the of million loans, to account customers, $XXX government deposit since slight stimulus levels lowered in of heightened related increases deposits consumer Seasonally, payments deposits liquidity from quarter. slower deposits municipal as average consumer

capitalized any comments. to believe a in financial have near-term well flexibility ahead, sheet position future strong while growth. weather that fund Looking being balance potential to That headwinds my we are and concludes we

line will the So we now open for questions.

Operator

our [Operator question Piper state Alex Twerdahl first Instructions] Sandler. from with Please your And comes question.

Alex Twerdahl

guys. afternoon good Hey,

David Nasca

Good afternoon, Alex.

Alex Twerdahl

sense know wanted expense acquisition off, First to But just I get compensation just stuff some you'd quarter. us there's help – – the the starting in for for line higher that be maybe what about for talk very and Thanks. FSB minute. some for from incentive fourth higher been is a the right of the might inflated cited fourth get point expenses us some sort helpful? would incentive of much have the a how by quarter of comp and the XXXX

John Connerton

Sure.

to linked determined so the quarter, quarter, salaries. because it's we that weren't the period fourth fourth the in that third is calculated. or what I evident incentive make fourth working it the Board impact the really – management year; its of it then we think quarter up. down And would went we more $X efforts quarter for depressed through And $X was third the the as benefit comparing were the adjust was with as the But big because line the typical versus in there incentive. we expense is we the had the back our made, the million with from bonus quarter actually quarter took in quarter that going – in million, the we in was by did the on the is a third the then impact adjusting

a timing there was So – frame. time

of rate more the $X So rate of is quarter run the run million. fourth around the of appropriate

Alex Twerdahl

and then point they all else reflected anything that might of expense there expenses Is And wouldn't like the in the in terms that cost also are into in fourth that XXXX? at run and recur obvious just Understood. this from and things saves either not the in super quarter synergies rate? be transaction, recognized

John Connerton

Yes.

due in have we'll are saves in expenses mean, I I is obviously, going rate the our fourth typically increases increases quarter, some think I mean, to forward. to – But be think first remaining the the year. have that cost and going there'll – run run the be the baked. merit every rate that quarter I indicative we of that's have think we operating pretty I

Alex Twerdahl

here, then in PPP, Can actually release. Understood. saw just was? press for amount forgiven Thank of I'm the fourth that you. notes that tell in that was And you in the I us my quarter, terms what the the just not sure

John Connerton

Sure. in It was forgiven the was quarter. $XX fourth million

Alex Twerdahl

you would you then are loan that the you can in I Do in the normally put bit pipelines have ex-PPP? translate of first year? of of that PPP Or And the little to of pipelines. seeing earlier you and net commercial were quarter commercial the talk, growth the some cannibalize the loan strong David, first growth to about maybe quarters into you year. couple going on Okay. know mentioned expect a that loan the the

David Nasca

we optimistic say think growth. is indicative year, Let it the on. that I'm started, the was When talking – the one last all forward. that that year well. of day going I job was me this better to going of things as will the that regular was way. got This lending cannibalize growth of girls, PPP one on guys, was don't that PPP going they pipeline when and said our I

shutdown there. to So think that's that I going cannibalization happen don't there's or

their and held I can, a off business long have as to going people here think as forward. there's do that there's need they

John Connerton

of would might pipeline pipeline see be to that said. somewhat that, on we be rate be originations to growth, David in-house. of originations caveating muting indicative roll-off continue we that I Obviously, would as it think – historical the year, would our the think indicative But are have Alex, – if refis we growth. last So that growth the and themselves based that just on add just from

Alex Twerdahl

then Great. question final me. just And for

do expansion you fees you of cited the all liabilities, points of inclusive of the up to On the that still margin, think the and of set the quarters, is quarters, kind loan basis lower is next NII deposits the accelerated X then seeing if And and like take things you and of how to over X margin, can that away, forgiveness, you're all-in of PPP of forgiveness in next that? cetera? if kind acceleration opportunities margin you rates – of couple just sort given and et PPP cost new couple the the just what on

John Connerton

acceleration But that it into of due core is excluding of that the that say slightly where – PPP I half we is be to going half half – of than benefit – half up. net or think – is is say otherwise, accelerated estimate margin, would – our of think baked that I'd more my we're to to probably stabilized those is I fees. is is going. fees are interest

Alex Twerdahl

my Great. for Thanks questions. taking

David Nasca

Alex. right, All

Operator

Instructions] [Operator Rowe Bryce And comes next from with our Hovde. question

Bryce Rowe

Good to good you. you. to It's talk afternoon. Thank

David Nasca

Hey, Bryce.

Bryce Rowe

Hi.

maybe wanted of more certainly you Just some talk around to and that. the little appreciate the a bit PPP commentary gave about

here forgiveness faster forgiveness there of, be that of give so pace? bit So of year. XX% sense you the us XXXX may to for Can And potentially far in you a than said round that chance you you terms recur I expect one, forecasted this guess, what some that is what in the you've kind a of seen here? pace

David Nasca

amortize those the to going the this. too of and loans. life don't to fees Nasca, John expected I'm want over I technical. and more wonky, income we Dave is going I'm This with to get let Bryce, be but start

are What those fairly we've expectation – acceleration in February the first in now are in those for of quarter we've well, their X there. at is here. coming the seen of a a there example. we're bit as rate, level little But what of coming back an first on quarter, in So for and round a far hold people was PPP, thus seen right second

their or attention on diminished their maybe time folks they to has now, say. to have attention that, So our draw forgiven getting to been getting to as focused do right when they second

of if provide So that's John – the that. I'll high-end let detail, can it. more you more wanted a little wonkiness on

John Connerton

point, halt to David's focused for that I of of of say would because some their add are request focused little our customers' on I – them the a forgiveness would I just lot Yes, bit to a a been only think round, is, there's second second PPP. on thing round their they're on of

probably would And the so the quarter probably quarter where that of in is latter fully XX% time quarter first done. then certainly the then second that we third would part expect and and be

Bryce Rowe

helpful. that's Okay,

season sense And round, for, so of highlighted – taken might that in to the much we've of the know, second right and is other here? I deploy for the the XX% relative about I terms heard apps that all? from of number balances. banks XX% first you don't somewhere feel that Does you throughout any earnings you round think range round, the you've first between, how

John Connerton

in it of we is will probably couple a sort Well, of XX% average statistics. and there, feel you the that's I give is. then And where

probably depends. where first we'll would XX% is, know and I we we $XX that, going. it But targeted the loans be maybe million. is amount have and last If so will that round, applications XXX, applications number thumbnail probably the don't did dollar we at accepted Thus XXX that of you X,XXX a of we look We sketch we think half that we – good and be. what that year, But think did the continue $XXX million. – X,XXX far, it, maybe

Bryce Rowe

now. helpful. funding to things the Okay, I okay. to shift side That’s deposit wanted of

maybe on Alex' question. Just follow-up a

deposit there's the You've seen to if wondering – some continue portfolio from or just away opportunities CDs to deposits. remix time

deposits? transactional-type deposit of kind broker-type within a Just that deposits and where there's level in as any are well terms the if as what the time kind feel the level so, of rates to get if then portfolio, rates, that of wanted for today of funding is. in And the wholesale

John Connerton

guess a couple I in kind would of So, take of it I pieces.

on between single a look to those at. CDs. point. First, our retention the when been But and and accounts, products of going have CD accounts, probably X lower on CD bank we basis minimis happening into down points ability a down XX still are a at, we portfolio, savings is but our basis out digits what of which XX% more our that experiencing we continue that to funds liquid transactional de brokered NOW at see most rate, project and somewhere some do rate we've have it's portfolio. points what's then and on we price it’s not – portfolio, rates coming offering amount the that we is at that obviously, And much And leaving – is this those are again into with we're do

Bryce Rowe

that's Okay, stability okay. of funding the you some what And to this seeing then it margin goes maybe able cost, along terms in was are here "guidance" reduce good. with if

John Connerton

Yes.

I Bryce. obviously side I'm think of the sorry, – other that

The other are continuing to down. assets, obviously, is reprice our side

hoping the on those that perspective. hitting side from us the expectation rates will cost the other, on funds. loan on yields two the one benefit our we're of And – each unfortunately, So offset is are

So but…

Bryce Rowe

in Yes, the press tied hotel I release the the looks increase then in comments? was cited to in criticized And you the of primarily terms like and get that totally it. loans loans, two just it your

John Connerton

and problems, decided now. And are into that we we – more nonperforming. two really the about put it's been watching we those credits – individual portfolio we've that probably the of operators Yes, into them had a We And out longer-term that, had feel the shown going these are that our issues have the think pandemic, probably to exactly. and portfolio. evident probably We've systemic operators.

Bryce Rowe

credits reserve a there point? specific is this against And at two those Okay.

John Connerton

market on I in I those, appraised. commented, No, have they're would good current, to what say as values so recently loan current they're the we and currently appraised,

is still that specific different ago. than, say any value we that collateral, don't certainly months So have which good XX in reserves. level, have those We and – at even let's

David Nasca

loans on And And I which agency would guarantees. one as suggest supports agency well, of those significant guarantees it they're has credit. the

So…

Bryce Rowe

Okay.

Okay. Thank you. out. all Thank step will I questions. for comments And the and you back

David Nasca

Nice you. to talk you to Bryce. Thank

Operator

the to CEO, have we gentlemen, over Nasca, And call and closing and back of session. the President the Ladies end reached David to now I'd for like question-and-answer remarks. turn

David Nasca

right, at All results. Please and when for you we appreciative thanks you teleconference thanks, reach Thank our free we Omar. all great any all our us certainly quarter your of of interest have We're support. talking XXXX today. time, out with again participating continued We and report to again. day feel first in to look hope forward and to a you

Operator

concludes you. This conference. Thank tonight's

for disconnect this your you may have lines participation You a great time. Thank at evening. your and

Evans Bancorp (EVBN) 5 Feb 212020 Q4 Earnings call transcript