Earnings call transcript Q4 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings. Welcome to the Evans Bancorp's Fourth Quarter Fiscal Year 2022 Financial Results. 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.

the to turn Mychajluk. host, now will conference your over Craig I

may You begin.

Craig Mychajluk

good appreciate interest everyone. time you, afternoon, Thank and Certainly us well Bancorp. to as you as Evans your in join the taking

the year the for an results and and strategic David for we'll quarter President company's and the I Nasca, Financial going update are full our CEO; with here the fourth John me open On outlook. David questions. of call, and to provide our After John Chief on Connerton, XXXX and Officer. have progress review and the that, call

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

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

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

David Nasca

today. you, We Craig. us you Thank Good everyone. afternoon, joining appreciate

of the to a year review John detail. discuss it start I'll in to then results with past and hand our off

to and during net commercial performance and successfully the provision approach economic in X% for significant loan the million strong efforts teams received report results solid Paycheck proud responsiveness again year XXXX income outstanding to participation which adapting losses in conditions XXXX. loan Program. ex-PPP of in of million results income our rapidly in fourth swing million delivered in to nearly $XX.X added for These $X $X Protection quarter once despite to annualized I'm Evans replace with prior shifting commercial fee XX% growth, earnings and and full environments having the and in our growth loans. extensive loan record a from year on

the stimulus financial tremendous very this XXXX with liquidity know, remaining opportunity you an interest economy at to government little institutions rate from liquidity As in and extremely low environment. opened invest

ramping embarked interest inflationary unprecedented an actions from Fed rates supply points labor, of to historic inputs invasion housing as has taken tightening December. the potential curve seven which building indicated well an Given supplies resulted oil, and macroeconomic as March on the level inverted tightening interest that pressures such as basis and XXX raised Russian yield challenges Ukraine, in historically short-term from This rate level recession. of in of

stayed quarter. match deposit increased money to late third pressure the that rates or costs modest mirrored higher in flow expanded point, and investments for on alternative At Margins as deposits putting and funding. loans rate U.S. increases competitive began such to treasuries and options banks lose as to until rate

and outstripped rose levels until projects for challenged the and quarters couple On a the a CRE of that mortgages. reached yields balance rates sheet, deposit the side of of level loan residential asset increases interest

for originations the the yield weathered X.XX%. environment delivering driving earning rates, in portfolio and at loan successfully by record million to loan bank the performed ex-PPP Overall, improved this commercial $XX significantly on of assets

price attraction. the of new revenue level our was hardening account growth good year our from saw a it business income, insurance in lines of service growth, X% a offsetting operations insurance the solid non-interest insurance to strong We commercial business loss of X% relation discontinued claims personal In and with retention, and business.

enhance returns. and to worked we hard to efficiencies the management throughout also deliver pursue we While areas, year to continue strategic focus in disciplined make investments expense

the our technology to This footprint, along speed, of downtown branch branch which greater the southern Rochester closing and project refine a solutions completed branches a further Buffalo customer-facing office. area in in a and consolidating in processes utilization our quarter included efficiency. loan converting optimization to We on of flexibility third with centered production included back-office two location

the employee savings the is team anticipated attrition. morale The merger were through normal more The realized larger very excellent amongst branches the branch successful has been efficient. of as two with combined

Importantly, customer a result changes. defection there material as of been no has these

closed our the result more is in Additionally, we XX seen our have fourth of in net can quarter, than in efficiency offer a years. the The the purchase ratio, be lowest received efforts location was level Derby. XX.X% which for in which

This philanthropy to Response the past Community collaboration $XXX,XXX XX organizations, members Buffalo. XXX national people funding contributions. with and community the made the Buffalo local killing year of innocent charitable and included and local a we as in mass X,XXX corporations, Fund foundations after racist attack was East over in in also on X/XX side in This established our $XXX,XXX Together largest total yet

fund and investment to created The organizations issues color. of nearly our low and serving contributions underserved harmed of and total income lack year, last was racism and communities was residents. XX% a moderate systemic related towards Of structural to communities address that directed

and for Inclusion strides commitment of responsible diversity, development, a Development implementation inclusion, appointed overall and and and the bank communication made plan. our awareness. driving Diversity, Community our Chief Officer area Another and this focus inclusive past strategic towards year The of where were were equity efforts

was a recruitment through minority associates Overall, increase efforts. in concentrated XX% realized ethnic

backgrounds. we between our inclusive as across parity achieve who those culture, to As identify male part of and and pay for or female genders continue race ethnic

initiatives. program expanding our businesses from Evans also bidding our business minority women-owned securing all have and to of and ensure are X-year goals ahead We in in supplier on were that and diversity successful been

continued The to shareholder shareholders to bank of capital return. has its on focus total return and

was a For to X.X%. over X% of up the year, which and XXXX dividends $X.XX, yield totaled equated

rising expense management in the model, caused customer-centric competition, pricing pressure grow play expected acquisition by potential in and to which and of XXXX, customers. efficiency our enter and deliver customer be to the will to against allows impacting on economic headwinds relationship and us growth, economy and community-based recessionary returns. our optimizing effects and our we our continue interest with This value support, loan base along margin all serve will operational We As management, believe focus rates out customer environments. lies

that, any turn it to With our we'll results in I'll over John? to happy then John take and run detail, to through be questions.

John Connerton

Thank you, good everyone. and afternoon, David,

share, of last expenses, XXXX up change from from the million third due we quarter, lower quarter $X.XX was the year non-interest provisions. The a partially partially quarter year's (sic) per provision was reflected reduced The income. by which the to from earnings [$X.XX] an the lower increase largely offset X% non-interest diluted sequential by expenses, For and third prior in $X lower increase quarter. delivered and fourth non-interest or offset

Full level the income $XX.X set or per year net XXXX. reached record share compared million $X.XX in with diluted

considering the As were PPP strong higher with release mentioned, year prior results our compared annual significant David the level during fees with allowance of the of provision period. during along the XXXX

on of basis income to was up slightly interest-bearing largely from sequential federal expense XXX pricing given cost to increase an interest offset income the higher by interest increases Net the of increase deposits. liabilities due of competitive due rate as was third funds points quarter interest

increase largely fourth interest from a loans marks increase interest of PPP $X.X non-accrual commercial amortization in in specific loans payoff criticized Those included the benefits income strong fees, fair was million value decrease on Also in year-over-year the reflected reflected previously $XXX,XXX year's the and in non-performing. year. The since last in of that net $XXX,XXX of an increase an recognized The loan and acquired of loans. quarter provisions for prior impacted due growth. smaller reserve a to was loan of

expectations saw Fed X net the basis fourth rates, interest point Our I lift in will and quarter we talk my to our balance remarks. rising sheet a to actions, the at from benefited of margin interest end X.XX%. the given recent NIM in

acquisition other was an quarter, and the income each in down (bank-owned year. insurance) agency insurance the due in in claim line, $X.X from Non-interest primarily a quarter, of from BOLI year approximately reversal life prior a small X% income million to an prior relating insurance earnout fourth to recognized the

which Insurance insurance new to premiums was largely in Insurance, the quarter seasonality linked within contributor higher up X% the clients. typical commissions. from and category, lines commercial down is the to largest commercial was due year-over-year due

forefront last As resulted year we for landscape to are they is quarter, $XXX,XXX. overdraft the reduction mentioned how in the estimated the of We in approximately of quarter, the impact what and full changes which implement fees fourth at competitive terms assessed to in at did have at environment changes during and XXXX The levels. and $XXX,XXX. fees brought regulatory handled

driver primary incentive million salaries benefits, lower X% or accruals. $XXX,XXX over was from was decreased prudent the periods efforts, year's last It comparable expense efficiency reflects $X.X our quarter. quarter. non-interest and sequential expense fourth and The initiatives Total third or X% management both employee which lower down from

Our rate is expectation the year for run between X% expenses and full for X%.

to balances In since $XXX balance million or X%. loans million year up last end, the security increased investment were Turning comparing sheet. and total $XX

million end. in X%. than included at loans year PPP which less current loans, increased or Excluding are loan $X were the the PPP million industrial decline loans commercial total balances, in $XX and commercial

quarter, of That Of $XX of $XX at to continues which originations the in last than increased Looking be net X.X% than PPP, total fourth the that, net or quarter, loans and commercial million. $XX originations. million. net year's linked $XX recent loans originations with million grew more higher million were average compares

rate on given at We estate side year of and commercial industrial strengthened which $XX rising a commercial bulk at up environment, million the have stood the has pipeline, seen real is our slowdown making whereas end.

be commercial total loan expect We XXXX. X% X% between in growth and to

quarter. in in our of status a with upgraded Almost of at metrics credit the has low $XX a sound the in current criticized on been end remained portfolio or XXXX. decrease million sequential paid-off, loans basis leaving and non-performing XX% hotel slight charge-offs Our

hotel a industry status for positive this remaining performance. credits continued dependent for trends is While on the payment have criticized change improved, in

$XXX our and began sophisticated to some decreased Deposit clients with have year-over-year to accelerate billion during other commercial investment $X.XX funds X% excess from million moved down their of of quarter, third betas deposits balances were quarter Total sequential municipal and larger on X%. a the basis the and more options. or

treasuries. XX decline continue Of excess clients funds the to These be commercial and moved less municipal deposits, have to but customers XX% due than of bank the customers. in to approximately operating was

pricing consumer maintained funding the with term use balances competitive of our have of We products.

proactive maintain in will our with markets. and pricing competitive rates be We

market margin pressures in in year. for the and the and quarter an our have first We point impact expect was will conditions next fourth to approximately high cycle, XX current period basis this first quarter quarter interest rate compression full year of expect of our NIM we a experience on pricing these and points The XXXX.

maturities the of These and The bank million benefit expected repricing loan portfolio XXXX $XXX variable on additional the yesterday's Fed, in of point expects million loans approximately have X X margins are to at to of including from an stabilize XXXX. from remainder XX $XXX and the and meeting. for basis does increases additional the investments

would With we line that, for questions. now to operator, open like the

Operator

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

Alex Twerdahl

quarter, start, on "at to just risk" first John, extent comments, of guess just for quarter customers different attributed can in ways some if that around the in kind that's wanted support I I loan you kind or where the seeing the are chunkier you I'm your funding think larger the sense you the of your ending thoughts to curious, the customers, you declines if what growth. saw us after the and fourth give of that to larger you're

John Connerton

And pricing larger the kind quarter, in kind that kind of out seen We of consumer Yes. is the seeing. the That's keeping went of And we're latter probably of our a flow flow fourth the that out. first with quarter. what stabilization through part of for side. of we've more obviously,

On moved the think the have we side, away. most commercial sensitive

we've the a handful seen there that towns that we very tax as as small And there side, their first we'll of of the of back we've come as think kind those the some them. in only a receipts. ring-fenced larger, some seasonality and was municipal again, is receive quarter far see customers, But on the

Alex Twerdahl

average your increase? Would guess, Okay. see total your or, borrowings in you to I expect the quarter first borrowings

John Connerton

in, that'll Our total Alex. municipal actually the come borrowings little a with come should dollars down

expect So down to it we would come slightly.

Alex Twerdahl

is little about And that seeing of can a paper bit you that you're new talk some pipeline? the Okay. on that the pricing C&I in

John Connerton

our Yes, most C&I our at coming of plus of funds cost or paper XXX is so.

which keeping is we're this anywhere So above. spreads, our X.X at point and

Alex Twerdahl

historically, I'm Or read might be whether parts revenue. moving have things that's snowstorms that impacted in could thoughts I your Buffalo of not continue market. least, the see Okay. or from that types something I'm about income. of terms to we any in the just At in year-over-year large curious, of insurance I know some if we into prepared pretty that in just around other growth where the XXXX some fee those are, guess X% the up you think see curious or we in XXXX. new year? saw we

John Connerton

Yes.

of So our claim’s the some you that away with claims adjustment last to we referred adjusting from of went kind company year. that we have

year. So growth do don't issues. market's and perspective, see that we to be should premium But due do new spikes still of to weather-related expect a we that see with consistent experienced any we this hardening we the our what the business kind expect from

Alex Twerdahl

the I around effect on Okay. the total said Great. And $XXX,XXX. year you think last be quarter would then, overdraft,

you're -- $XXX,XXX. $XXX,XXX that's around Or saying than So is it now what more

John Connerton

the year versus It's XXXX XXXX. full for $XXX,XXX

So --

David Nasca

had last $XXX,XXX We Yes. year.

John Connerton

hit $XXX,XXX the so in between quarter, that, this difference We just it's yes.

Alex Twerdahl

Okay.

are maybe if So full $XXX,XXX? quarter's be to impact, you we a around it would a ago, going year be to compared

John Connerton

Yes.

Alex Twerdahl

you questions. Great. Thank for taking Okay. my

Operator

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

Chris O'Connell

over to that there your in seems talk putting and quarters? It of the on current like what in new you the are out are flows pricing customers starting see first customers guys Can deposit deposit you you circle couple discussion. quarter. margin next gain keep back to order stabilize about So and to how progressing wanted the to the

John Connerton

term, to accounts where the our and kind a between some utilize market footprint we're from high savings what the talking we're commercial X.X% aggressive depending in. savings, bit business. don't business, business side, geographic we as perspective be and CDs as that on promotions Then I be consumer on have on some more new could so anywhere Chris, that's on we about our attract think with can X.X% of go X% a can little little where

Chris O'Connell

Got it.

the bps margin guidance in then the down stable. Given XX quarter first and

the I that like basis should thereafter of deposits those given not your then deposit are loan Can the at margin there XX where just portfolio new occur? points may next Given and I should would first after to you costs throughout be quarter. continue outlook year, repricing think, deposits the quarter that now the amount are impact deposits variable and where least first goes the the like what get and the be pressure repriced. as about And why talk guess into trajectory and

John Connerton

the between difference in deposits that just clients. where And the out, fourth had dollars quarter the during categories and quarter. quarter fourth the mean I our the the that of Sure. move the first we some of we borrowings at fourth or move particular, it's level some had spiked larger demand of had end is some so out, the

fourth stabilization. So impact expect that's from an and do to we then kind first going to oversized that have of quarter,

XX we had last past, the So expect still about we've beta, cycle, that. a we in the and said XX to

get and the through, liabilities calculate average through to with goes So as here, year year. an of during kind we'll cost the X.XX% X% a interest-bearing closer if of between somewhere you X.XX% that

Chris O'Connell

flattening most Okay. given part, for is stop be And the not a the guess are quarter going that deposits repricing quarter I variable the the throughout and the the that trajectory? to portfolio with first just repricing but does to after in fit still, going first year, how

John Connerton

Well, stick I first to going mean, we in have some that's come quarter around. funding the and

low expect quarter and a shrink is point, So reduce. borrowings point our so quarter and first of fourth low beginning the we the is a to

oversized is so And first compression. of NIM from that quarter kind the

Chris O'Connell

at pretty how of there low or here is far Okay. Got million -- you as over as just $X so, cash couple balances that And progressing the see do quarters? still guys like it. next

John Connerton

any think cash will short pay because borrowings point. opportunity can, our balances I this are we'll towards tight which stay our end down we on at more fairly the

Chris O'Connell

is you the outlook of maybe first Can rate? remainder where in assessment I expenses, versus was that about for costs the given quarter first quarter. and start the And Okay. expect higher talk year quarter Got in the last any you will off your just FDIC little the where it. bit better, the it a think the seasonality

John Connerton

Yes.

the does year of that we holding and that goals our expenses have impact assumed. that on biggest prior of expected are incentive So our relation in payout the is a expected salaries just our The X% include kind our pay levels were on down rate. to higher will that FDIC in expectation that based out and

impact moving of move linked quarter. the So quarter is that quarters X% linked a on the with fourth X% and actually then good quarter to kind as rate of run kind to from forward

Chris O'Connell

what's Okay. tax good And year? a next rate Great. for

John Connerton

a is tax rate. good XX.X% About

Chris O'Connell

Great. around this within and and the activity, just guys seeing seemed back hotel areas to all your year? the And in portfolio coming where well maybe you given on factors criticized and quarter. or course critical then, see what kind additional the lastly, the Can as market what credit rates about, of great portfolio as over talk down moving overall keep of economic pulling metrics you are are your next risk you're

David Nasca

that Mortgage, terms credit, of seeing things. Chris. manufacturing the the of and slowed estate and is, obviously, down marketplace, has slowing Couple we're C&I One real side. especially has the still in increase tightened answer Commercial I'll good strength really down. in the rates. up in with one, in

impacts estate activity in if this are industry, our We're there. into what year. with We've here, when a head that. that's an offset expectation seeing. you it's C&I be last we're whether that manufacturing, of from we growth kind So there commercial real standpoint or offset service We've could Obviously, watching year. recession

feeling the way. fairly are seeing We're credits that point, the industry same this we're across benign. and At

here. your that, I'm sure, are You across hearing discussions all

if worked on customers, because in any trying demand to of issues deterioration close at a least is get that and people are moment actually we environment, into We're the the have our going they that seeing had, to is to not credit through supply improving. this matter. Most chain a very recessionary manufacturing stay though, side the at resulting side. We

I terms earlier. not We talk loosening going margins the We're standards. those. always pretty about not credit John We're that. chasing So feeling of it. our into in we think we're about Certainly, constructively maintained talked positive this.

the margin much We are not risk We're shrinking getting paid the taking. for we're here. on too

feeling okay right So we're we're it. I overall, into watching and think, we're going now seeing what

John Connerton

just, we're be to CECL going would to on thing the provision with The only Chris, kind consider. the will of And year. I at little on be add risk that's in forecast something economy, so the upcoming more a

David Nasca

asked since also go the criticized we of out back hotels the them. you I'll question have guess I hotels. come that. XX% about to the originally

at those, probably have we one are are $XX will prime themselves performance it, cycles, out don't and come They to from performing. over The see rest period million periods. still their Of million them to preclude for You watch the repair different will time. $XX of those, given there, stay continuing We of of in that left. to them call $X million. next anything continuing

Chris O'Connell

And the that estimate yet? CECL you impact, Great. guys for have an for

John Connerton

March. comes our We'll yes. when Well, beginning the of disclosures have K out some in in it

Chris O'Connell

my Appreciate Okay. taking questions. Got it. Makes sense. you

Operator

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

David Nasca

you free XXXX years. we for us at first a Please feel and have talking again quarter appreciate interest go we as to you our We reach like your report through in time. certainly of with any the to look day. when hope to Shamaly. We all today. teleconference And participating results. great to continued out forward support thank everyone Thanks, our I'd we

Operator

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

Evans Bancorp (EVBN) 2 Feb 232022 Q4 Earnings call transcript