EVBN - Earnings call transcript Q3 2021

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Operator

Greetings. Welcome to the Evans Bancorp Third Quarter Fiscal Year 2021 Financial Results. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Deborah Pawlowski, Investor Relations for EVBN.

You may now begin.

Deborah Pawlowski

afternoon, good and you, everyone. Thank time We the joining for and quarter appreciate XXXX your third Bancorp. earnings us Evans today call for

on the Third Connerton, have Executive On John will me I President results and today, Chief for our market and the questions. our find here. David David Officer; financial results our of then will we released can Financial evansbank.com. 'XX, Chief Nasca, John at you open review after Officer, Quarter website We closed the and that and release joining the call and for call today, just

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

can All at our found website be sec.gov. or on of this

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

David Nasca

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

improvements, of our in resulting proactive fee The XX% and realization upgrades the million quarter credit second portfolio, or been reflecting third $X.XX loan quality period diluted throughout million PPP, Paycheck by what or in quarter per risk year, this This year's Protection highlighted produced has by with $X.X $X record up million $X.X supported results in credit in and $X.XX hotel of Program, relationships. of share. ratings measures earnings underwriting for strength Evans, were compared several per strong Results year. diluted with and from production share the last

to of year to relief increased assist As with criticized its the a bank classified improved the operators in last recognition and entire of impacts as hotel worked the of until the third conditions portfolio the quarter the due in pandemic, reminder, hotel in risk. providing

those majority high nature, an these year's the through great coinciding interest-only summer, of with hotels end but last paid a this demand of third have are As deferred quarter, have one season. bank in the and point in the interest begun the interest. quarter - recent the seasonal those period provided principal of At of properties from and all paying relationships in all

upgraded results, and scheduled million payment resume determined As $XX a operational one that the was that criticized relationship current loan and category of portfolio would result out the be we be downgraded to the to $X.X nonperforming. performance unable of million of $XX would million for payments only

detail. recapture of the remaining in paid, during is is provide portfolio of million the and more amounts the the to on sustained shown bank our which has credits I performance on these to occupancy loan performance, John loans. and establish Although specific the of one growth, period touch have was $X.X rates provision all improvement the briefly to been want decrease upgrading. due in drivers before looking commercial Approximately will criticized related half

headwinds We and this environment forgiveness overall PPP portfolio in this historically are loan to payoffs to low year, strong generating higher-than-typical continue production rate loan provide but growth. our

end occur payoffs we the XX% remaining active and forgiven, continued to loans have of end, - round PPP And third PPP through for loan the The majority total be forgiveness. about X the quarters. during very X next to the of quarter quarter expect through the been

today of industrial client With lending usage, signs are commercial opportunities, We more have though lower and approximately businesses, tremendous including the liquidity XX% capture with which continued lagged, there return by of momentum our commercial regain up pipeline. estate. to has and line make encouraging C&I demand consumer in loan lending real

priority Our utilization be of liquidity. excess continues to

new market strategically legacy talent in supplement within market both early been adding are efforts our loan to We Rochester, area have and positive. and indications

good spent build our out deal efficiency. flexibility effort of year As part next as a and speed, we initiatives solutions focused of for we refining and more on operating on strategy, have client centered

be long enhancements in can overall efficiency early with believe process, engagement, and we around over operational While the pilot are efficiency an enhance we scale distribution greater returns encouraging. improvement term. channel scenarios operating client Ultimately, the and can and had,

branch to low-income few look housing I'll supporting Niagara John? take a Side bank. This new financed XXth and be Lastly, known on grand results, a to Westminster was we held the opening of neighborhoods the XXst that, the neighborhood, as happy of senior of the then majority marking ago, run our the by branch minority weeks John a questions. and We of to Side Buffalo Buffalo, part region renaissance larger the the a as to our With East overall. forward over in turn we'll our development anticipated any project on East of Common, through it Buffalo. branch

John Connerton

good third PPP net income by was Net of lower down fees, interest PPP the income deceleration largely fees. the due increased expense and prepayment quarter fees. When approximately compared X% interest and with interest sequential of the second from you, prepayment higher to driven Thank afternoon, David, commercial a XX% everyone. and quarter, prior level year

life forgiven, were company loan. are that is amortized original loans the being PPP accelerating the recognition As of fees over the the of

first fees to with realized in quarter $X.X PPP million from of original income. quarter, $X.X the XXXX. the of in During compared deferred million the been million Nearly all second the booked fees round PPP we have $X.X in

received $X.X from payments loan one from $X.X in hotel of decrease in round million originations losses the commercial to recognized specific been of million reserves of income. the fees, for At million release loans million $X.X end related customer remain. portfolio current PPP of has in additional quarter, produced allowance criticized included $X.X which third $X.X relationship. the of second The in in a quarter million resulting The million $X.X fees and reduction

interest The growth and commercial continued company income. third prepayment XX quarter second points PPP interest-earning decreased last higher rates margin point year's X.XX% the reduced Third net XX prepayment lower income and PPP amortization, fee the expense on as quarter assets, align to interest fee commercial basis reflecting from of basis quarter, reflects recognition from deposits.

Excluding the PPP impact, net was margin X.XX%. interest

from these PPP in loans investments. cash the to are assets, bank is round including funds As they of adding programmatic second are liquidity. forgiven, redeploying The into

of market which We the period of are extend advantage taking deployment. opportunities

year's commercial XX on in attributable these up of from insurance net Noninterest interest is points profit-sharing quarter higher. that prior margin a improve redeployed, As linked $X.X third income are primarily it of to funds $XXX,XXX decreased $XXX,XXX level recorded last securities sale to basis Noninterest gain year expected a investment due the will to revenue. period. and seasonally higher from the largely commissions income lines period was million

continue were in charges, which service increase around also see an deposit X%. We up to

from our While with million accruals million A normal quarter change during incentives expense third the large more compared are last costs $X.X focus second from incentive year's total was year's $X.X and accruals reduction employee of Salaries increased to return XXXX quarter. up were the XXXX, as the of quarter. prudently $X.X area, a noninterest of $XXX,XXX third quarter expenses, in quarter of being increased or driver last third XX% benefits second which sequential million or from managed. the and are we believe X%

second with businesses, like the was in are with labor growth. a in we, support tax compared XX.X% effective many XXXX XX.X% we last as of of third quarter rate number continued quarter. Additionally, inflation for and strategic XX.X% quarter in made contending year's have our hires The the of

historic a tax quarter credit of impact tax XX.X% in the effective the rate was the Excluding of transaction, third XXXX.

items balance the we have decreased year. the strong are XXXX. commercial Total forgiveness. generated loans, period specifically the million of decreased the David to and to mentioned, second so far sheet originations $XX The from primarily PPP million there portfolio loans due Turning prior $XX loan as quarter from masking some this

an average million previous loans, first new X through of basis, the of PPP, of commercial compares second originations This $XXX the origination months decreased the years. net refinances existing On $XX million loans, X the an net million Excluding annualized loans average bank's $XXX of was with quarter. excludes which commercial for XXXX. from

experiencing and with nonrecourse real mostly our the of a commercial to environment year fourth the rates. banks. average quarterly including solid quarter other due interest quarters. the commercial agencies loan financing government terms with remains building which This payoffs. $XX customers longer with which relaxing pipeline, typical structure $XX previous funding to to its bank these commercial competitor respect and the Although rate has is was over loans, than credit conduits sources, not estate payoff year the production double disciplined standards in million. strong not Current The more or has been a payoffs million maturities, bank The chase driven elevated of is are XX average, aggressive

spending. some We $XXX balance forgiven X/X customers, Total and deceleration stimulus of The total September about in PPP to the million by balance forgiven these of loans, in $XXX subside. of loans heightened government levels deposits The are seeing bringing increases period deposits million. XXXX including last since as the $XX.X they levels related date from of was XX originated. quarter the and anticipate deposits $X.X $XX will of grew second approximately of loans consumer slower payoff commercial in year's X% of liquidity or loans of million, million was payments to to driven gradually PPP all remaining million PPP consumer

total line share, we X% comments, which During of a prior year. the share, dividend the the $X.XX now for paid bringing would was dividend the we to open third my quarter, concludes XXXX That $X.XX during questions. semiannual up to per like and cash paid from per cash

Operator

first from with Please Sandler. Our your Instructions] Twerdahl Alex [Operator question. proceed is with question Piper

Alexander Twerdahl

that - prior is say new certainly, on the higher lending year-to-date level some Would team? want good attributable you so the of far about John, sort really years? on originations think there. asking that loan you of had driving for do commentary, the versus to the trends production what start year to you of the I off the a that's Or of originations. augmentation And some of and

John Connerton

acquired I there think - have also, this of this both put side, talent especially projects both year I on But we we've with go are we credits activity has that our for interest in lower - adds to underwriting Buffalo they we've of after, Rochester the away the projects for on volume. to real more that business that in we've there taking And been lot a that's meet those again here. and and those - earlier And talent think loan also, - it's some is profile, in been are estate that twofold. and the and are markets, starting. feel the commercial And had to It up, have have banks. that we opening to refinancing credits those some and is year. commercial group, a both historically rate - that then environment, added other from going testament talent the us

Alexander Twerdahl

Okay.

can that, through pandemic head you as looking the on team bit year. you in to hire out size those into you - to the so some wrench don't progression there, and trying elaborate number we kind last would if If year, And lending of linear. say of it opportunities kind of it you if talent I a the bit know to the know forward of little But if the I to don't originations. grow? next sure it's of and should threw of a correlate think of continue additional a that were sort sort that as of it's for - I'm more

John Connerton

Yes.

from based specifically expectation this our year, is put that and talent that next we've on it's production on. year will Our the grow

Alexander Twerdahl

Right.

what's what basis said. just if there? And basis NIM. would I could XX going a repeat add exactly what points, comment liquidity if would missed points. Okay. And from redeployed think then assumptions said then are of was PPP, you you hoping exactly be, it you I about that I the you on you that on kind that was it the made about and XX what

John Connerton

we we're investments, mean cash in cash or And it the on I comes from plan we our of - back lot put work those payoffs. to Sure. dollars or loans - it's have work, as plan to to a sitting putting investments. either a of purchasing started PPP in

ex period the when our So in our And we into X.XX taking time. bit as buying current cash work, to coming a little even the of investment, how medium to assets of our out the elevate a around margin those we're to one our the expectation investments benefit. of not in as - deploy cash, all interest-earning point time, at as should is put into take advantage our in all of advantage move opportunities expectation over mid-X.XXs. we different of market those, into PPP rates we that of We're

rate. So a on X.XX that's about run

Alexander Twerdahl

Okay. makes sense. That

John Connerton

Okay.

Alexander Twerdahl

Yes.

Okay. prepared remarks, talking operating programs. And bit then, David, pilot in efficiency you're some your a about

I repeat of was of wondering that sort So if and could some little elaborate bit you just programs. a of those on sort

David Nasca

looking here. operational efficiencies tenets opportunities at to increase and We've been Yes. utilize to technology

where highly disputes at we But found could effort that We out - robotic are with cut looking because were at do things manage manual it. Reg the XX process do. we did the to that also people hours programs in pretty pilot pathway an we E intense several brought like some you some this And automation of to looking I'll and some give have on. we opportunities But as expense you disputes, out example, our We which technology other there, standard really we processing are like year there for hours, solutions the base operations. always did we that reduce some asked research at. background, the not we're looked they

things like or are that opportunity that, there's prospects. showing good So good

saves and laid fully of of that we're really hopeful kind that testing process. digitization expense but We these will increase haven't and the all of we're in, efforts those manual some reduce our help some things,

Alexander Twerdahl

those, today? to - think be implemented of would that programs you And something standpoint? you to is and in that to And the they is just some are of you reduce? should you'd platforms will as in example technology that with keep objectives some it Are if just we where these mean how prove and through effective say be the of associated they - the Okay. implementing from laid of out? kind objective flat from you frame time think sort be looking that to those I expenses as the just kind modeling XXXX? about of a What's that

David Nasca

back we've harken to lot going time. talked of I'm to Well, for Okay. something a about

scale the organizations be issue think now. I to right for continues

talent continue So human if forward to we continuing we're I have, $X whether that. we look to it's to or resources utilize to billion, when it's ask expenses. us we're opportunities whatever continue push with would reducing whether at you for say digitization scalable

talent. us of model from lot So build standpoint. expenses, when a you there's still an expense headwinds coming added We've at

They're So to just in looking it's operationally, not it. offset terms regular in of lot implementing that, process-driven, we're terms of of those we're it's on whether one it's It's - whether basis. client-facing technologies. a piece software. And not a

- at when way are ameliorated this in still we expense build are of there's margins us. way. the think let you're year. challenge coming don't we expenses decline So - terms to We from We a us model it at we - But looking bases at that the of you it, expense the should pressures next think expect next kind the don't have. me coming when say are standpoint under think continue asking, base an so the always to year the for in you're during

with We as about. had some have John inflation labor, talked

managing every to those. So think try of work we global model will I to will have to but that on continue don't down, opportunity we we crash of basis a bit a expenses continue

Operator

your our And with Bryce next from proceed question Hovde question. Please Rowe with Group. is

Bryce Rowe

you're fourth the year ability at I pipeline, in if pressure loan from prepayments. grow the seeing let - here the bit you're level your as basis, prepayments levels your Maybe what discussion of just on continue potential - net a some early look the around up in if to loan be and and Curious you're kind the you the production to seeing wanted might elevated prepayments. we're thoughts of of as a on next quarter that portfolio of the if

John Connerton

So Bryce, John. is this

back going next expectation until to I think to of was to latter to think back it's normal year. our part is a get get not the year we're - high don't point. We going normal or this

We over period some in of time in $XX quarters our long So or where about we've kind for been the payoffs a - but until particular million to getting the back through gradually quarter normal of I that years, of see year. there fourth That's year. and X doubled and second this decelerating next typical at year. first a numbers gave not part XX

Bryce Rowe

That's and helpful. okay. ask Okay, components then to And allowance wanted within that about allowance. the different

that quarter. some the well being and laid release and guys exposure that upgrades this here out had So a the of driver you the big for you've reserve hotel

can a portfolio - at the or XXX looking we're terms as to? as where heading at of than percentage now I take, we're a basis were basis a we're in if percentage outlook the or your that loan down loan portfolio mean were think point of give lower percentage on at COVID. even a get that I PPP allowance the we points, ex So into what's

trend So think of way you the the about allowance going might here. how kind forward curious just

John Connerton

think of going still I particular - So level, those what's there, expectation We $XX they million to and on - to think allowance and their some another is we more - right? to going determine in hotel. the remaining I are Criticized, a remaining analyze it's P&I group we're time continue, to have that in our continue to currently ability give pay P&I. to group little the paying even though improve, this needed

needed time. they So a little more

after dampen benefit that bit those far taking done. noise the as provision be - I as total that some will be expect little as itch as the back overall still do But our So think will there. we'll a there improve, it'll we is allowance,

one would typically sit. XXX the expect provision where the our in we is I think - that

David Nasca

we on on be - growth, will as say be that. that always based it Bryce, And based will

Bryce Rowe

Right.

Okay. Great.

questions a appreciate you. Thank were have answers. asked ahead we think your We I time.

John Connerton

you. Thank

David Nasca

you. Thank

Operator

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

David Nasca

like at We I'd any when we you thank quarter time, XXXX interest again results, support. to certainly you to great everybody And and us and to John you. have Thank to our reach feel talking free all We day. teleconference please hope report we in today. of for a appreciate or forward with your the participating continued myself. look out fourth

thank So you all.

Operator

this this And your today's disconnect lines conference, and may concludes you time. at

Deborah Pawlowski	IR
David Nasca	President and CEO
John Connerton	CFO
Alex Twerdahl	Piper Sandler
Bryce Rowe	Hovde Group

Evans Bancorp (EVBN) 31 Oct 212021 Q3 Earnings call transcript