EVBN - Earnings call transcript Q1 2022

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Operator

Greetings, and welcome to Evans Bancorp First Quarter Fiscal Year 2022 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, Deborah Pawlowski, Investor Relations for Evans Bancorp. ahead. go Please

Deborah Pawlowski

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

after update Officer; progress have call the our we Chief Q&A. and our which John David with XXXX Financial I will and results an and On first David review quarter Connerton, John it of on our me, open President strategic up Nasca, and Officer. outlook, the and Company’s Chief Executive will for provide the for

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

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

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

David Nasca

We joining to and a organization. for the to streams and commercial its us such off everyone. of you in discuss further the talent I customer appreciate efficiency then revenue Good the experience loan of review amplifying with to results scale afternoon, insurance continues past The emphasizing perform driving towards strategy the will to while today. company as residential Thank start mortgage operational you, growth, quarter focus Debbie. John detail. hand call and

XX% million During grew the annualized. portfolio the or total excluding quarter, $XX first loan PPP

well leveraged almost Credit production which X% Over up were evenly business and loan CRE. further in resulted muting to realized $XX respect the balances as or a are and stable, nearing part across and This performing of associates commercial $XXX quarter of allowing footprint drive record effect will PPP in results. production the PPP efforts excluding end. the of clients has quarter related year, out and commercial recently just C&I as to the at results market that our and million This and million split in hotel Overall, closings first reported restrictions is quality reduced commercial especially solid been portfolio. its was traction, we our prospects. market $XX last of between pandemic efforts the during added in because been left meet pipeline of our our total more end loans with future has be to talent million Rochester fully with our get to gaining our assistance

still – the and of are to this response in portfolio We pandemic. the monitoring impact evaluating actively economic effect

history. time, to of on end XXXX, hotel approximately on $XX off is hospitality criticized. first quarter. dependent remaining or positive the paid one-third criticized within the upgrading is during a of As that XXXX for The classified the the reminder, industry at credits upgraded million continued criticized Since in loans we was status of performance portfolio $XX million clients leaving the payment

than a customer well a Buffalo remodels online our at a been new and and evolution accomplished to how review, desired on responding of continued branch needs how initiative account this the have ATM network business updates East accounts number upgraded have channels new stronger banking online and initiatives. of branch continuing to business preferences, amplified platform. and Ultimately, way shifting Residential of efficiency facilities. At years that side trends result has which clients, and our Throughout prides with listening will our towards led rebounding customer locations. the three existing base changes of we These result technology we and clients To preferences to lending, rate back $XX since been make online, XX retail deposit extent, opening and as a in supplement made a that analysis Downtown the past the Due capabilities, two COVID We’ve to needs clients of significant to several end the shifting of and on to embarked office of interact has new to the pre-pandemic other as at business. and signs commercial to doing for consumer years of customer cultivation focus small of transactions buy core no center included consumer our as with the a in appointment well and Evans needs. we the experience in And have show our as we past clients’ business one. at solid in-person an an performed opening a the gathering a as mortgages year. March, also forefront which has our mobile we best of and analysis network, production checking digital a quarter to Westminster acquiring increased of investments and Buffalo’s balances to last first and converted business Commons itself improvements to this including meet in XXXX. million levels. communities. was of over the us. branch, declined. keeping Side, while relationship change the pandemic And grow as on loan branch commercial Evans both our priority conceived business continues trends, grew Evans lending, While of these The and of efforts in-depth over with primary meeting are

smooth location sufficient or existing locations fully of are into leases rate $XXX,XXX. of be business. expected savings to expected of we patterns branch is be one that the their market consolidating also positive – will expectation annual the a summer, transition overlap sold, upcoming branches of subleased date, that this employees in other closing is One that our job been branches the important Southern is run locations. approximately is being the it loss with note non-renewed, literally It usage where losing executed Once down feedback. with two To and has cost have road. to and no no and Erie County the any with Over material has is accomplished changed Rochester

quarter X.XX% annual announce our in this share, XX-month We $X.XX increase representing per about to trailing shareholders cash of dividend are to of yield also X.XX%. to proud a

and what competition believe for strategic our for talent. differentiator like Lastly, is performers. a environment, been any for associate area critical top We desires Evans the we by business businesses all and is focus challenged have

client to people results, With a in and our success I’ll supported community of and to over being collaborative, field through this indicative that, and John culture, it talented, these be then turn had our development their our in of goals. have happy commitment We their career overall. to We recruitment our we’ll questions. key believe a reflection run to associates any performers organization’s of as retention and caring of success John? is and reputation

John Connerton

quarter compared diluted Net fees was income in year’s sequential share XXXX. or reduced $X.XX $X.X million XXXX share afternoon, Net fourth the change diluted everyone. $X.X in quarter PPP fourth first last quarter. Thank per you, diluted was largely or quarter interest share net $X.XX during by lower earned David, first of $X.X income in million of or from the first million quarter The income $X.XX XXXX. with per the per the good was of due to trailing and impacted

FSB XX% fourth decreased included fourth rate the conclusion. XXXX. deceleration PPP loan approaches the of changed quarter, was million or little decrease program quarter a acquisition. value higher loan in forgiveness loans fees recognized The on obtained from in higher remaining on the amortization quarter in the of of the addition, XXXX reflects Net from of interest income In its income sequential marks first as payoffs $X.X and but fair interest non-accrual the

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

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

reserves. specific of The due million be of additional which $X.X originations produced of loans, approximately in to $XXX,XXX been fees million reduction losses by yet quarter performing to in growth $XXX,XXX of the has income, of offset loan provision for current fees booked. leaving recognized second in The round was the PPP $X.X

a First was X.XX% acceleration PPP as points mark quarter quarter, the of fourth net and interest impact. margin XX recognized result of basis decreased amortization, fee of which loan higher from non-accrued interest elevated

items, down year-over-year those NIM was up driver profit insurance interest $X.X this was was to claims the net I in quarter end revenue. business our quarter. from to $XXX,XXX sequential due decreased revenue sharing higher primarily to at margin for Insurance, which fourth our was Non-interest expectations income the talk my X.XX%. is of million will remarks. Excluding the the profit within revenue. On sharing insurance due category, operations the discontinued service basis, a from linked and main quarter

supports this its insurance our business increased team line plan. line strength, quarter The department about recently that commercial and how spoken of XXXX. We bench was strategic improved retention best have first reorganized premium and it since the insurance – efficiency and for importance experienced

less year benefits sales largely increase decreased was XXXX. Salaries and salaries origination from we year-over-year and cost technologies as XX% efforts. increased developments our Total commercial incentives inflation. or focus X% enhanced non-interest related supplement insurance, we employee As succeed. utilizing our investments of the to in during PPP quarter, from basis sequential million due $X.X performance our as quarter record than decreased fourth XXXX and are fourth the on prior our $XXX,XXX on employee benefits of the in the as efficiency to program for professional, we due labor to around for to tools was continue period merit X% well strategic expense primarily loan or The first in accrual move forward, the to new increases will areas and and work deferment from up implement to balanced have technology quarter to a

from first The the XXXX with philanthropic linked quarter fourth fourth in during other expense XX.X% line the rate contributions quarter XX.X% tax XX% quarter of effective The in for XXXX. of last year’s quarter with that half was quarter. down of more reflecting $XXX,XXX compared approximately and the made was than the

continue $XXX first those balances last and we securities the sheet, balance up quarter. deploy the to year’s to are investment since liquidity in Turning excess million

first XXXX. remaining was million approximately total $XXX $XX commercial $XX which about PPP to and increased We’re $XXX to liquidity bank’s million quarter also payoffs loans to-date expect excludes of the to million forgiven of quarter. of existing growth million. refinancing of the normalize. loan loans with of March million healthy the solid excluding net during all X% as the loan during of periods million in compares loans, forgiven The originated. the commercial million PPP average XXXX balance million or impact of using The pipeline first loan of This $XX was continue $XX of new commercial $XXX loans We million for fund balance quarter net XX origination year of during a origination still loans loan this XXXX was the refinances The forgiveness. quarterly an first the as loans as growth, have or $XX PPP bringing and $XX of

in by the last period. to modest were and quarter accumulation less is the The customers was X% the change billion in primarily a estate just reflected sequentially change of year’s which in loans, linked accrue the and municipal Asset X% quality well that despite collateralized. deposits increase remains grew of to real response consumer from commercial relationship deposits, and seasonal one liquidity increase Total non-performing to due commercial pandemic. strong, year-over-year continues $X.XX since while in reflected up

income positioned and Our progress and rates for as do interest fed we actions, notable year. is rising anticipate recent seeing interest well the expected we balance sheet through net a lift given to

increases the positive XX XX not a increase, current months any the include expand fed XX points. we further would impact. their does by basis over Assuming moves beyond March to fed expect curve, additional by yield to This the rate any NIM next have

portfolio. annually the $X With As for that variable a million impact to increases XX basis the due questions. things moved income by reminder, held would other of net points now interest fed, our from the operator, to rate like constant, all line open we

Operator

from be first conducting we Alex Thank question sir. this Our Piper session. Twerdahl go [Operator Sandler. Instructions] of time, At with ahead, is a question-and-answer Please you. will line

Alex Twerdahl

afternoon. good Hey,

David Nasca

Good afternoon, Alex.

Alex Twerdahl

last core margin to? follow just John to margin to off, made, XX First that off wanted XX the Is up that X.XX% points. on basis comment on that that you alluded of you

John Connerton

was in this fourth would first X.XX% that two So relative same X.XX% the there for be three the excluding quarter quarter. pieces,

So it’d X.XX%. the be of off

Alex Twerdahl

of get also something first year. hikes curve like equal And for eight for basis goes – XX the if fed is then just $X equals million points Is the was or just year short kind four of couple? looking up, I less, to great. that of million the the the think – look assumes we just right, $X per And hike hike. end it Okay, eight I curve the NII. this Is it

John Connerton

nuanced of in would with rate included $X Well, is XX straight point it’s reprice we basis XX earn variable of deposit the a XX to then and just movements move amount are basis the the points. on originations what on that reprice. little our Obviously, in any longer new end we million have up my that

Alex Twerdahl

Okay.

we… if So

John Connerton

Alex, only just includes and only that the XX, to – first a that sorry, of movement But, XX XX. includes

Alex Twerdahl

Okay.

the today, again else look rest as at in XX. we the the we nothing year, does XX fed So to of

on to rate paying we’re get deposits. curve million whatever Assuming the higher to going wind per what less fed sticks forward up the annual says, income for you of per hike, $X

John Connerton

Yes.

deposits. that just point a And than a well last own balance of would on reference, probably had our less liquidity cycle, on sheet, amount the just other our about from XX% we banks. beta time, as We as expect so this as with of

probably end, see is start So our short that to XXX least in happen basis probably XX%. points, expectation the wouldn’t probably we until that, that see at – beta then on until after we the

of XX% benefit would movement any after that. we So

Alex Twerdahl

the for putting loan bit on you’re actually color little then Okay. relative can new the yield the about a Thanks on that how book NII and of maybe that could talk also? sort And some of you today that. yields to

John Connerton

well Sure. are our the and over portfolio current side that coming rates on closer residential I are commercial mean, on on X% side. X% the to

XX% term the So excluding, offering movement new a we’re XX% the is big that year. again, we’re going impact positively that chunk is is that that have no other the short volume that origination to rates included in on going that movement, to for of of getting the to the remainder

Alex Twerdahl

portfolio see Okay. And hotel timeframe then that for need what’s histories, the are of the you you over. see need kind histories of to payment payment remaining to part the the that

those anticipate seeing And sort to maybe fair was when additional would that released? reserves of impacting or maybe

John Connerton

We like cyclical So lot I season. this think a mean, first in up normal another a be New here season. were is York, our piece will of and big we’d Western not summer the see to

we of third the probably be So on determinations or it’ll can book. end those fourth make that – it’ll really be quarter before

Alex Twerdahl

about a good start be quarter. looking year. just positions. parts. in every lines. couple Okay. higher of points guess, with low level at other fill expenses due bank is we starting of the you are we primarily – year? expenses coming the Or at, overall the two you’re the the expenses, thinking down other a and there running And talked kind Should be, of of know charitable I I the how salaries talked of I about was there like mean, to as to comp we pretty moving guess, those for on as should the I which those out from the vacancies, half incentive result contributions then less about of And dropping look then you fourth

John Connerton

Sorry, line Alex. Yes. on They’re items. those good start points of both

and fills the onto much the remainder first is is, think of not where first higher. in in The the with other to I increases line move comparing some should will I that quarters would there salaries, quarter quarter. item X% like more vacancy X% it will we it merit be from that the expect

Alex Twerdahl

questions. my Okay. Thanks taking for

John Connerton

Thanks Alex.

Operator

Chris Our [Operator next Thank ahead, is sir. question with Instructions] Please KBW. you. from O’Connell go

Chris O’Connell

I Thanks. NIM core details any income? get if Good some there or there was on What accretion non-accrual, hoping just was afternoon. to was quarter. the recapture this

John Connerton

at down our X.XX% mentioned be mark we’re would earlier any the that to core X.XX% have really and We excluding So I going credit the PPP. and non-accrual. that NIM, amortization didn’t significant

David Nasca

saying the the for Chris, is X.XX% that So the quarter. for this fourth was net quarter, we’re X.XX% core

Chris O’Connell

And to million movement as out of far get your course next going of year? it. $XX still securities is as there $XX to million sheet do it goes, substantial or the you’ll cash is –there’s Got And the liquidity this quarter target target over Okay. is cash? and think quarter your through balance this then at for to you deployment level come the

David Nasca

It’ll be over the course Chris. of the year,

Chris O’Connell

it. Is Got basis core further NIM of kind Okay. expansion The built no of the hikes rate to in? the majority that liquidity points deployment? with XX XX

John Connerton

includes our Yes. growth. Yes. – is that That

David Nasca

Yes. to going And There’s you’re growth was there’s piece is two loan – is that’s I the what that. pieces not securities, the other if in just the significant The say, to so asking. securities, that. it’s

Chris O’Connell

amount do of Okay. floating? have Perfect. variable portfolio then the And that’s or loan guys you the

John Connerton

yes. on It’s XX%. – it’s percentage right. a Hold wise, second, We have,

Chris O’Connell

was the year. in out initiatives branch coming And circling great. X% related inclusive the of to cost OpEx back Okay, middle efficiency just the then to to the the discussion the saves of X%

John Connerton

of kind most Chris. saves that or positions going won’t branches, the redeployed close those a period X% that time cost of on the we’ve those to include And we of got about that individuals branches them, half, which facilities will the the was we officially recognized cost salary facilities the the have and – saves or line to quarter. have and over until since are the repurpose those second X% quarter salary as some item, but exit the It of from been third be saves that’s

Sorry.

David Nasca

Third quarter. Yes.

Chris O’Connell

capital during or Okay. do to drop would that regulatory guys, start terms held steady TCA Got here? ratios least I How in you level there X you it. levels, to even hold regulatory know Is of were to absolute guys about pretty down concern at the ratios Tier that like quarter. an And if the the ratio? in the think steady that

John Connerton

We regulatory usually a on from what based down at We our X%. asset and just growth, to I within to book, from saying. perspective. most be assets a to growth from Yes. to that, kind The the do ratios common restrictive equity AOCI like us and or reiterate of our our our be most should from we attention of net tangible you’re Yes. under reduction has to that expectations of a least the we pay the be year. growth just income back but our put like

Chris O’Connell

can hotel Okay. your does Got year end allowance? the to helpful. kind That’s criticize, much that toward of progresses us it and of of its the here book, it. so you off And impact coming as the if how all then like remind that

John Connerton

there’s We million a as shared $XX in about typical. additional So quarters. in versus criticize, asset X% past and an we’ve this hold criticized

Chris O’Connell

on this additional row was any of got Okay, quarter? in outside increase And color lease it. what color or the NPL the

John Connerton

close lift was so – our that’s – second got in in – was really difference quarter. early the only closing, loan that’ll our a delayed Yes, expectation there. and And is that a second in actually performing just it loan, the that

Chris O’Connell

my great. taking that’s Okay, in I have. Thanks And all for questions.

John Connerton

Chris. Thanks,

Operator

call would to turn closing Thank comments. back Instructions] no questions. for now I you. like management to the the further There are [Operator

David Nasca

today. for teleconference certainly support. appreciate thank you, Thank We and and Peter, continued all in your the you interest participating

Deborah Pawlowski

PL on that Excuse sorry. noticed Capital me, questions. I for I’m with Richard the line Lashley just

David Nasca

okay. Oh,

Deborah Pawlowski

you… can Peter, So

Operator

proceed your Yes, you line question has certainly. Mr. can Richard unmuted. Lashley, as the been with

Richard Lashley

Yes. Thank you. Thanks for doing the call.

what you betas, about or deposits? deposit hold which of dollars, re-pricing is onto can the time. mentioned being this have you it? better you flow do actually absolutely grow you think The the You think absolute What the

David Nasca

Yes.

It’ll grow that we the and going with activity in is on commercial the expectation consumer have the we’re side. single-digit. probably the be to that Our

sensitive more portfolio, is portfolio. Excluding which our – probably around municipal a our

higher some be but expect And that XX% but there’s a going which So that, to is we around that that, we probably not – to sensitivity than those but at that there feel currently other are those core some may book, grow probably million, customers. a we’re most, runoff $XXX of lot there of significant on deposits. that continue most

John Connerton

commercial Yes, Richard, checking. has a of been in our to this growth point lot core checking

So did currently to that’s built and onto but what of in and sensitive we’re the early commercial liquidity checking now, their consumer generate in checking a thing. there, pretty have space. up on And price pandemic some whatever did the continuing percentage we deposits the deposits is holding heavy the we’re runoff

doing that’s So with business commercial related those clients. the to we’re that

David Nasca

then asked around And like some We levels. especially liquidity in that our the level our of in was do our those. assumption, projection about and have liquidity movements is projections, on it some municipal dollars

John Connerton

Tapering, yes.

Richard Lashley

Okay.

it’s So cash you a about so, up think where now do now? your given percentage flows, or total XX% year and from those securities ends

John Connerton

not here mean from be we’ll I’d less those those those million a percentage, category. about two on as say probably added – two I – $XX forward, but

Richard Lashley

current and if In are you loan, other are you plus spread. you do you the or the might as have getting were maintain Are before? at that getting to moved price a fixed treasury words, out And you from rate Okay. five-year then that spread maintain now to loans, even it same rates a you able off today able fixed that spreads treasury rate go price up customers? pushback you loans, closing five-year fully the

David Nasca

XXX, bit. to as we’re home as curved to but The we’re loan XXX seeing a are some XXX have getting to the bit price We in off pushback. spreads treasuries, were. but in We come ranges now. where we a the little at XXX the opposed from pressured spreads have think they well might been bank get probably I previously federal

Richard Lashley

side FinTech Which Anything makes sense. Yes. digital noting? or side the worth the that’s on

David Nasca

migrating will over I we worth couple online years. platforms not just last – of been the say noting, two have I

we doing that where true slice FinTech a have. different that partnership those currently providers in providers with to doing that partnership Nothing special We’re with FinTech is we’re in providers. FinTech, of business

However, we some. to have talked

We – at straight opportunities in progress the we have moment. investment in keep we – are don’t aware of funds terms FinTech there. of But a FinTech – forward investments to of making that at us looking investments space haven’t ton this

Richard Lashley

Did you recruited of that those Okay. banks? were participate those in up set various partnerships, lot that any by players a funds of

David Nasca

that We’re working on currently.

Richard Lashley

into Can I – the two Okay. give guess you acquisition of think years what Fairport. you us an update went? how on that

David Nasca

to I’ll qualitatively. little bit a give it you

the think of and of announced really lot offices, doing. It I well. really brand recognition those under at highly it’s the we and of wasn’t was closing that they related not a has it old transition that. what and regime opened lot there transactions very are gone we’re because one a We there was wasn’t because consumer aimed didn’t have

of we’ve the We though for there in terms pretty market the even traction starting side, get commercial in to Rochester been significant years. are

to commercial out year our of expect or there of We probably XX% next production come so. the in

COVID we that traction now beginning restrictions we’re have get able out the and is that think So lifted that the in market. to

pretty our COVID sort there beginnings if of penetration we’re what seeing the you from optimistic about we’re hiatus, So will. after

Richard Lashley

you right. All very Thank much. Okay.

David Nasca

You’re welcome. Thank you.

Operator

And I of Ladies the to closing the Thank the like have end question-and-answer turn and back the remarks. reached you. call session. would management to gentlemen, we for

David Nasca

if Have and us with and again forward day report We have you day. we joining you to talking us for quarter reach any can All out the know results, second feel a Please of all great all free we to right. look a XXXX we thank when today. you questions I’ll to say us please anytime. Again, let hope great going forward. answer

Operator

conference. concludes today’s you. Thank This

You your your participation. disconnect this lines at time. Thank for you may

Evans Bancorp (EVBN) 28 Apr 222022 Q1 Earnings call transcript