EVBN - Earnings call transcript Q2 2022

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Operator

Greetings. Welcome to Evans Bancorp Second Quarter 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] Please note, this conference is being recorded. conference Evans your Bancorp. the Investor Deborah turn for Relations now over host, to Pawlowski, I’ll

You begin. may

Deborah Pawlowski

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

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

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

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

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

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

David Nasca

a call lending, and continued today, savings, were hand past going John Good everyone. the Results it share and currently. joining attraction growth team the expense strategy, I'm interest second new driven management our afternoon, a for focus business that especially checking margins in rapidly net institutions with We to and on a relationship margins by rising Debbie. the environment and to forward. resulting the consistent financial very you, of driven rate The the results execute start drive and centers diligent core the growth continues is higher It you on detail. going traction, off operate in Thank all that market then market review with appreciate despite quarter discuss changing income to the customer. will and dynamics, in deposit quarter to in and commercial community of a our expectation us interest business strengthening solid, for focus

in slightly substantial income commercial the quarter, led the closings, which this by was we with particularly new number and well effectively quarter, as and quarter the performing up footprint of commitments of second year's we second and loan industrial million been trend positive growth loans. net during strong commercial while real pleased closings current in And received was teams in first were performance the estate year's in across fees $X.X the experienced net demand have covered hitting not down as period. see quarter, market. our are we production another We we X% robust progress the loan in in PPP to encouraging During and last comparatively, $XXX quarter loan from last although million by was significant

balances We in deposits, past this also was continue on while And due to deposit seasonality core to of there a slight quarter our focus growth. deposit positively. dip to municipal trend continue

will of engagement and experience processing the in a performance that be branch, effectiveness. balances highlight throughout strong. the during commercial An and areas quarter exceeded continued was underwriting, provide project, technology a security our customer and targeted was features as well of operating management. to managing core the offerings, data and new lending collection teller which booking to new kickoff maintaining area and from implemented portfolio have to Notable digital enhance efficiency achievements checking of commercial all included and an including deposit continues with as investments touch the commercial expectations to while simultaneously system expenses, acquisition drive efficiencies, with efficiency core consumer upgrade We our system operational to

facilitate workflow Our documentation production digital, integrated that in can controls expectation and experience. accountable an better and with commercial customer an we is enhanced and streamlined

are branches last see components three past run we new a in locations. of of in resulted positive embarking has closure these with quarter. benefits approximately The the feedback. expect starting $XXX,XXX, or be discussed quarter. in project the on on changes third fourth To-date, initiative, annual We is rate efficiency been which smooth or network initial repurposing branch cost of We to the from these the transition to expected late this already rollout early non-interest call, and the of our savings earnings in

labor recruitment and Another in is of we had and associates. our performers businesses associate We've the culture retention a critical be our believe pillar to is a our believe challenged and for talent differentiator strategy, like success cost for which and to inflation. rapid We of by commitment culture. this continue Evans competition top associates, for and is key all reflection market

are suggestions on that culture communication to working where can continue recently to drive continuously talent work. to a employee culture completed to employee and survey that we attitudes and wants focusing We and apply fairness, a evolving, recommendations that pulse to top enhance experience. we is collaboration in A place aware and the perspectives are determine inviting are was

and the Community during continue diversity, Commercial quarter inclusion, will are our also and our Royce momentum cultural the as evolution two non-profit Advisory the are about the taking help diversity Development WMBE of this we will recent at Woods, toward who as There as a that with served previously and be promotion an awareness. President us takes equity are to newly collaborating We approach areas excited career Vice was organization as strategic desires focused work, associates' implementation cultural the for company's ties inclusive of for needs. the influencing he intersection to of and communication on development of Community asset has responsible City Royce passion Banking, organization's and community throughout is and Evans. development the with deep boards. other coming He overall interfacing created and the Development all-important and Inclusion Officer. development, several Diversity, role market plan. work Chief Buffalo position and from well of a local promoted His

and First, influence processes our technologies account of formalized account sourcing was of recently enhanced to at leads, and process focusing new building assist cold insurance sales executive with existing development on and existing with program for centers a data. calling sales utilization winning executives,

and internal management of system. our our within to thus of internal prepare will the pipeline. built utilize learning Phase consisted program, We development development talent commercial candidates talent also detailed online project banking phase the X building completed which commercial banking of on-boarding initial promotion, courses an multi-month toolkits for training

Lastly, the institution, ways. in multitude community associates the assist part as community in organization, and our a try of a positioned play to a financial be to

Buffalo is. together As city lives resilience was shooting XX, our tragedy taking prominent to East XX occurred know, The of store you recently in core injuring this and motivated the may the and important by on Buffalo its rocked grocery most community mass May its to that within in community good coming resolve true area, showed as response it unspeakable a in neighbors as the and three others.

ensure or justice. be housing, a to actively everyone As to assisting platforms over a the the it With fully turn positive community aligning John difference is that any already to fund community is, to our equity with it treated develop in public-private change commitment questions. with significant and every for our run be and community recovery for to through help equitably to able steward support city evidence assess and opportunity with values and and that, to make take infill to associates influence in results, working be to then Whether our community along other and happy donating to a we'll their institutions, potential. I'll assist, systemic providing realize our a John? associated expanding many involvement, money partnership

John Connerton

interest point per diluted was Net taken in net has to last the the from quarter point balances March. last or quarter largely share given or was share, in million, David, compared loan increase and or credit rates to as $X.X the competitive lower The share rate decrease and second program as both Thank loan quarter diluted quarter PPP in rate of conclusion. interest forgiveness challenging to average in period. have sequential $X.X the being that the since afternoon, prior of of a The Deposit XXX fees quarter, since due first fees loan trailing XXXX. higher year's the sequential the with higher year's income $X.XX change was betas with year reflected the good sizable change and landscape not PPP accelerated everyone. from reflected this income Fed's income. year's million, quarter slight prior interest per first losses X% from the above $X.X the second its driving net The million, last remaining largely the been loan per offering basis income and you, increase or $X.XX deceleration $X.X decrease largely yet. nears due as $X.XX million, and not in diluted Net in for provision first increased

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

quarter credit income, $XX,XXX driven $X.X be in effect as of weakness. $X.X pandemic last fees, had of $XXX,XXX the provision sequential The produced to of in year's reflects is by The The was unwinding second loan due first PPP showing quarter fees second which some recognized the while current quarter round qualitative a of losses approximately growth, loan for GDP million strong additional of economic the factors benefit provision leaving originations economy. to the million been booked. has of

the renewals we balance quarter Our net interest million period. institutional down was the a positioned I $XXX,XXX, due non-interest XX driver debit will Fed our less our changes have of policy value Total quarter rates, fair main category Non-interest lift business. over largely is mostly mortgage to this in my basis On $XXX,XXX over for from X.XX%. strategic point utilizing line the as the the discontinued the interest The year-over-year due end is and to X% to a quarter charges linked sequential service technology clients. period focus Insurance, primarily net and within sequential the in remarks. higher rights. year sheet seasonally year, card insurance recent given to from a comparable rising the to income to than was increased servicing each last first have around and supplement down as actions, services basis, efficiency other the margin of a from up saw our and in areas which to up efforts. to second claims expectations basis was prior well income operations movements was our $X.X usage. due we of steady higher revenue to interest seen on talk expected, at rise insurance balance X% the year-over-year quarter, about are expense margin was investments due Deposit continued for in

increased expense The due in the seasonal last year's $XXX,XXX employee and period. of from the largely initial XX.X% total benefits quarter an are XXXX since company's points rationalization. branch which marketing unchanged Advertising second of of Salaries We comprised XXX see the XXXX. sequential second of improvement of ratio campaigns. remain quarter, was XX% the efficiency and first to basis from expenses to also quarter the non-interest quarter beginning benefits,

at to Turning up quarter. to to investment approximately This left the using forgiven. end. excess those end the compared we quarter. over at impact as the PPP $XX also $XXX of balance excluding fund we $XXX of million and loans second last at total quarter had million loan year's March growth last with sheet, increased XXst the $X.X of million last but We're originated, year's year the $XXX $XX million, liquidity million liquidity million loan balances into since Of deploy just continue securities, PPP loans second

sales in than quarter $X grew That at originations average the originations. loans growth unfunded bit we Payoffs originations real estate million high. linked net lack will $XX and were XX% loan originations to or have $XX of loan that running generate reflects construction continue expect that pipeline construction well of prices to the also the the normalize. typical of to but remain higher with million. $XX We as of some $XX healthy payoffs much year's a continuing Looking the commercial due still quarter specifically, which net second million of and during a as ramps The last and quarter businesses commercial commercial still customer loans, compares higher million were from commercial refinances asset fund up. growth than are as million, largely

a is of decreased Our commercial credit deposits sequential increase well despite addition non-performing seasonality to the that municipal modest of metrics reflected due remain which the billion client loans sound one quarter loan first $X.XX X% real estate Total the from collateralized. balances. in in

net during deposit $XX total demand deposits basis, X% million or categories deposits. were hikes we the across points year-over-year our deposits, reflected to municipal total interest in of million exception in quarter, the On Excluding of mostly up up At were $XX the quarter. growth all and further deposits a basis XX time in no this third margin rate with point, approximately Fed expansion expect see assuming further deposits.

deposit We have seen further quarter. have but competition positive in some impact. Any third a today's to rates the for including late not expect movement increases increase Fed, would rise, begin by

As all things With would Fed, the increase the that, other portfolio. margin points reminder, a or annually by variable four move our now rate net total $X million like basis basis would income constant, interest open in questions. to to we operator, from due line for a point XX held

Operator

we Alexander with session. Our will question Piper a time, question. Instructions] [Operator Please comes this with conducting at And proceed be the question-and-answer line your Sandler. from of Twerdahl first

Alexander Twerdahl

afternoon. Good

David Nasca

Alex. afternoon, Good

John Connerton

Alex. afternoon, Good

Alexander Twerdahl

on to going set keep that wanted you the John. of NIM, on last comments Just

in think expected I the third include quarter, the basis hike does not basis point XX you and today? from points said that XX

John Connerton

That's correct.

Alexander Twerdahl

sheet in that assets account? be now going And I the you into -- like normalized cash second has to actually kind the earning sort to that's grow still of would average looks going gotten growth? mean, what is to kind quarter, of Or done? some it there loan you're -- balance levels, closer asset expectation for to do of take think fund the that transitioning have to

John Connerton

So be some into I interest-earning our think, there'll assets. cash movement in

single whole what's think we is the it X%. growth do going for I X% to higher digits be to in loan year still expect drive between the and

-- would we're really looking grow earning assets. that So interest where to our that's

Alexander Twerdahl

balance the sheet and growth, be position today? done expand to just from But you loan the Or Okay. fund flows given would sort of need it cash cash actually to liquidity the can securities? with

John Connerton

with those We're liquidity, approximately putting we It sitting still on cash. can million $XX done be -- into in in and excess plan driving use. on that

Alexander Twerdahl

the then kind points take XX Great. And think million that million-- annually -- Or deposit from each the do into think account -- of betas? that X does that basis that you is $X you do

John Connerton

Yeah.

-- everything that's Yeah, Alex. held constant. Sorry,

So we haven't betas our seen move.

move. to We expect start betas to

down So move well, for that up. would -- $X to and bring million points every basis that XX betas if start when when

Alexander Twerdahl

Okay.

John Connerton

XX moved last -- time we around it about cycle whole last think between points last for the betas cycle. talked We XX time and talked our I about basis

cycle. We proactive rates deposit that the and as we than that the strategy particular last to excess here, Or recently, is we be be feel better able core customers to well with that And adjust our our the customers. that? better we to expect as be that do we've probability than our do we'll going excess those our do with have we that have liquidity some most from there gathering likely should liquidity with had

Alexander Twerdahl

David, Okay. the just prepared remarks. that talking color the gears efficiency in efficiency, your on you're that. That's good then switching commercial And process about, to

David Nasca

Yeah.

Alexander Twerdahl

more growth more maybe operating I for in to kind getting the Or to sort a just is mean, or it? higher-level process century? I for up of the of what's a to -- rationale putting higher-level to systems of kind -- Is to Or goal little reduce leverage loan talk it and the or expenses? the this place, drive is the behind catch-up XXst on thought that bit guess create what's the is reduce

David Nasca

I'll Okay. that. do

and it we've all loan mean, of I sort above we things. need three a also and us efficiencies time. the Alex, for underwriting, top affects organization, will to period the faster volume position but with booking, our we're of have and laughing, You good scale to affects We're century. been what will -- areas. controls with that all got portfolio questions, up because that of asked it because some effectively that, organization management and it's provide grow systems, enhance of making will maybe scaling in not well processes I'm of XXst diligent it control. it about is, what -- There is It create the but to the to allow for this continued long a sure growing of as trend continue growing address do operation. It is you'd around those say on to our us it operating, we're will kind will

think those it's I it's three it's environment. and a So, things. scalability control It's efficiency, all of

making going investments and and to So, -- bigger. we're be we're get better to stronger

Alexander Twerdahl

the just Great. expense of of the XXX,XXX, with the impacting program, land -- started see just to remind to And beginning does very when the see we then [ph]? think sort you really mentioned started branch the quarter. us in you that can second efficiency But that that? And have you I

John Connerton

should component an begun. of But It's of really has that annual start expense by be to perspective. from occurring it those that -- quarter, all will which Alex beginning is the and fourth there largest the salaries already saves

Alexander Twerdahl

my taking Thanks Great. question. for

John Connerton

Thanks, Alex.

Operator

[Operator Instructions].

of Next with question. with Please question Chris comes your KBW. proceed O'Connell from line the

Chris O'Connell

if I may coming with would pipeline great? loan Hey, on coming just what the be have go afternoon. heard origination Wanted missed the start guys could but to books? the yields the But are, that it. yields you on through good numbers, off I

John Connerton

between funding and off we anywhere XXX yields between anywhere usually The get of XXX source, Sure. yields, and which X.X% our X%

Chris O'Connell

portfolio? that's the on funded And whole

John Connerton

new No, mean, on X.X% Yes. I going -- that's on forward. the originations

Chris O'Connell

yes. Yes,

Got Sorry. you.

then initiatives are flowing the branch savings as and of through kind seeing into efficiency putting all here? it expense as of bottom line year And Great. for back numbers well you how Okay. together, of the kind half the operating the

John Connerton

be rate I move quarters the So exception good the as a run we the only rate Chris, is I the the -- end of run we here year, towards of, think through the think going until current with our know the don't do that's and look to quarter. how we impact at our going into we is won't which our bottom usually -- then what -- line third incentives, to

So, if you can you see doing adjust prior quarters, at well, we'll look incentive calculation we third year's if the are then.

So that forward. going where would to in if the the -- an incentives performance in up performance be got yet current really of bring the But comfortable the rate that to year booking we impact run point that full part. additional haven't kind the year we're

Chris O'Connell

branch Got a do the it. XXXX? are -- outside plan, little and rate the investments these And a there? bit of higher expense growth Or offsets these the of technology run into create there ahead

David Nasca

answer XXXX, have other sides managing we'll think of it's is expense we're expense, but the rate also other whether to some that run that things. I into personnel, some

rate So forward. appropriate we the think run you've going seen is that

going up see down. to at good level here. think not we're or You're We a big bumps

puts there. be to and going there's So takes

Chris O’Connell

most come third for back And think will the the being flows Okay. this it Got muni quarter? decline, in how of the do much by you it. that of deposit driven quarter,

David Nasca

good that going that. And in seasonality It's prior had we've chunk a Yes. usually, probably of the follow to years.

we high again, quarter. fourth then in somewhere third quarter, are the the high beginning same that of of end kind meets first at point of quarter points So and it

those losing we're those we So customers, that back high expect been come we so that balances haven't should points. -- we expect would not on any

John Connerton

have State, for this taxes, is to Let me then you our taxes. What Chris. York property of New and add here on Texas kind obviously, School February/March and they're just in that, school October

But come they the levels. So in accounts frame. they they March, frame, come out build get they of the the They back April up to coming accounts build their and out point, -- paid municipalities. November those by to at time October, time that of

Chris O’Connell

know TCE about Obviously, with range. you then difficult this And back eventually That to I were X% quarter. build marks back there regulatory makes versus sense. the looking terms think guys you the do AOCI the Okay. How to Xs high or guys and is get line want goal time towards Yes. capital a levels a or to X%. that guys TCA back you of in

David Nasca

portfolio, and there, we're think for cognizant significantly of at we'll But think of want the the adjusting are are of based investment we where you levels ratios from if pretty where AOCI -- point, our that from portfolio, and kind excluding where this we're the capital at around our not our it. I our good Well, impact we that. concerned were of on we are the makeup impact the we point this to of AOCI AOCI with capital sufficient, be. kind perspective adjust manage And are

Chris O’Connell

in it. you'll Alex's looking going Got touch Or that moving more as you to that Do off ahead, expect grow? to flat flows And they continue you on grew again. guys questions, quarter to the you just do think forward? kind come this loans portfolio, piggyback be of keeping the investment the or that

John Connerton

and pretty have, for any flowing We think, growth going deposit here, accepted we level We'll impacts our at excess loan a out, we're pricing. stay to on staying as disciplined funding because cash from that consistent. probably Alex our do utilize from that's we're

Chris O’Connell

it's book. how lastly, tail end $XX for then, have you this been there criticized the you great. there on progressing course Okay, on see the of a Any million while, year? And the update I left guys hospitality over that and know of the

John Connerton

Yes. consistent couple the we've of for been last quarters. kind of with It's saying what

end going we're of of kind the up on end to area. pretty assets. the look business Most season will we'll the our make be assessment hard of Just -- our seasonal at third those of quarter, are properties geographic the it in which at to And around -- here. be

a in far, so is And their understanding our the positive of headed direction. activity performance and

David Nasca

Yes. Improving.

Chris O’Connell

Great. All for right. questions. my Thanks Nice taking quarter.

David Nasca

you. Thank

John Connerton

Chris. Thanks,

Operator

Hovde Group. question. Please your Zwick the from comes question next proceed of with line with Erik Our

Erik Zwick

evening, Thanks. guys. Good

David Nasca

Good evening.

John Connerton

Erik. Hi,

Erik Zwick

understanding commercial points future potential I variable Just suggest XXX rate hikes trying of of loans borrowers by the the and the now guess, would We've them. with got, your to guess, just basis belt to our a curve maybe and XX I impact another year. end on question, under

stressed? going lot on loans, these guess withstand underwrite a Or bars cushion they potential offset? a uptick in maybe little kind ongoing, from still you than could updated? any cash have cash service rate the continue did seeing Are hiking Or them cash debt that borrowers of get to pre-pandemic. As a your credit to goes that But their are to hand, of do you to a borrowers become developments I start certainly, result enough more interest help does lot build monitor often they the up, of how cycle. in it there for point? that Are these curious can flows as just flows bit about could this? the like those And those that they more

David Nasca

address. is, Dave is this you Couple of Erik, -- there that stress like borrowers, levels. underwriting when One first, these that things we them to increased for asked that answer we Nasca. I'd I'll Okay. we're

that put in the through several loans have we So stressors we underwriting.

of my from terms, see not the damaged rates do So them a perspective ours. up, we by being

stomach see be loans of that, have the certainly, we In to these the to industry able inflation rising terms but by challenged of we level this. underwritten

but to cushion, little understand where you is So I'd with there? it a of respect a are we stress. they cushion if I in certainly there don't asked, bit call know a

will regular And get these we're look where get at at are with we loans statements, concerned, these relationship make do sure intervals. certainly we in borrowers. and we and that we flow we cash Secondly,

their they are. businesses So where and we understand

institution a really the that's is is with us that think I difference community relationship-focused.

if we're they difficulties to and first We that. working working usually experience with on know them are do

not it burden. significant So certainly, that don't continuing collateral. that here, we've And we I'll yet, not strong impactors but damage we of, -- but level seen it's written have it, a hope expect we call tremendous there's

have We guarantees.

debt side. service coverage the have reasonable, conservative if on are ratios not We that

we cushions about, we question think the believe I have you do. there, So do

Erik Zwick

Dave. great. detailed I That's all answer today. you. there. Thanks, Thank appreciate had I That's the

David Nasca

other right. All questions Thanks there, Awesome. there. any Are Shamali? there

Operator

is today. That the No. questions all for

David Nasca

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

Operator

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

Evans Bancorp (EVBN) 28 Jul 222022 Q2 Earnings call transcript