Evans Bancorp, Inc. (the “Company” or “Evans”) (NYSE MKT:EVBN), a community financial services company serving Western New York since 1920, today reported its results of operations for the first quarter ended March 31, 2016.
HIGHLIGHTS OF THE 2016 FIRST QUARTER
- Net income for the first quarter was $1.7 million, or $0.40 per diluted share
- Loans increased $95.0 million, or 13.5%, to $796.8 million from the prior-year period
- Strong low-cost deposit growth drove total deposit balances to $849.0 million, up $68.7 million, or 8.8%, from the prior-year period
- Net interest income for the quarter increased 9.0% to $8.3 million
- Total assets were $989.9 million, up 9% from the prior year
Net income was $1.7 million, or $0.40 per diluted share, in the first quarter of 2016 compared with $1.9 million, or $0.44 per diluted share, in the first quarter of 2015. The decline reflects increases in personnel expenses related to strategic hires made to support the Company’s continued growth, as well as technology expenses for the Company’s recent core banking system conversion. Return on average equity was 7.43% for the first quarter of 2016 compared with 8.74% in the first quarter of 2015.
“We continue to be successful at organically growing Evans’ franchise as both business loans and core deposits were up significantly over last year, producing robust expansion of net interest income,” said David J. Nasca, President and CEO of Evans Bancorp. “Expenditures incurred to drive positive top line net interest income growth of 9% muted bottom line performance in the near term, but are expected to drive significant results and increase earnings power into the future. We are building a strong platform to support continued growth and capitalize on opportunities from market disruption resulting when KeyCorp and First Niagara, with almost 35% deposit market share, combine. Given our current success at growing the business, we believe this transformative change in our marketplace creates the opportunity for us to win a larger share of the market with our broadened network, outstanding customer satisfaction ratings, increased brand awareness, as well as personalized, tailored solutions which provide a community banking alternative to big banking.”
Net Interest Income
Net interest income was $8.3 million in the first quarter, an increase of $0.7 million, or 9.0%, from the prior-year period, reflecting strong loan and demand deposit growth. The interest earned on the prepayment of a large investment security in the trailing quarter caused net interest income to be down $0.2 million, or 2.1%, from the fourth quarter of 2015, despite strong loan growth.
Net interest margin of 3.69% declined 15 basis points from the 2015 first quarter and 22 basis points from the trailing 2015 fourth quarter, reflecting a decrease in the yield on interest-earning assets and an increase in the cost of interest-bearing deposits. The additional decrease from the trailing quarter was mostly due to interest earned on the payoff of a large investment referenced above.
The provision for loan losses was $0.2 million in the 2016 first quarter, essentially flat with both the prior-year period and the trailing fourth quarter of 2015, as the overall credit quality of the Company’s loan portfolio remained strong.
The ratio of the allowance for loan losses to total loans was 1.65% at March 31, 2016 compared with 1.66% at December 31, 2015 and 1.82% at March 31, 2015. The ratio declined from the previous year primarily due to the charge-off of one loan in the fourth quarter of 2015.
The ratio of non-performing loans to total loans increased to 2.25% at March 31, 2016 from 2.07% at December 31, 2015 and from 1.68% at March 31, 2015. Non-performing loans increased with the movement of a large commercial loan relationship to 90 days past due and accruing. The loan is considered well secured and in the process of collection.
Non-interest income was $3.0 million, or 26.6% of total revenue, in the quarter, down $0.1 million from the prior-year period. Insurance agency revenue of $1.7 million was down $0.1 million from the 2015 first quarter due to financial services and profit sharing revenue decreases. Core insurance revenue lines such as property and casualty insurance and employee benefits have increased over the prior-year period however. Compared with the trailing fourth quarter of 2015, total non-interest income increased by $0.1 million, primarily due to seasonal increases in insurance revenue.
Total non-interest expense was $8.5 million in the first quarter, an increase of 13.5%, or $1.0 million, from the prior-year period. Personnel expenses, the largest expense category for the Company, were up $0.7 million, or 15.0%, from last year’s first quarter, and reflect annual merit increases and strategic hires to support the Company’s continued growth, including new commercial loan officers, business development officers and related support staff. The 2016 first quarter included $0.3 million in technology expenses related to the Company’s recent core conversion.
Compared with the trailing fourth quarter of 2015, total non-interest expense was down $0.1 million, or 1.6%, and primarily reflects lower loan expenses for the 2016 first quarter.
Income tax expense for the quarter was $0.8 million, representing an effective tax rate of 31.9% compared with an effective tax rate of 35.1% in the first quarter of 2015. The decrease was due to one-time adjustments to deferred tax assets in the previous year’s first quarter as a result of statutory changes made by New York State legislation in 2014 that went into effect on January 1, 2015.
Balance Sheet Highlights
Total assets were $989.9 million at March 31, 2016, up 9%, or $85.6 million, from March 31, 2015 and 5.4%, or $50.8 million, higher than the end of the trailing 2015 fourth quarter. Loans of $796.8 million increased 13.5% from $701.7 million at March 31, 2015 and were up 2.9% from $774.0 million at December 31, 2015. The improvement over both periods was primarily due to growth in the commercial real estate and commercial and industrial loan portfolios.
Investment securities were $116.3 million at March 31, 2016, up 16.3% from March 31, 2015 and 17.8% from the trailing 2015 fourth quarter.
Total deposits increased $68.7 million, or 8.8%, to $849.0 million at March 31, 2016 from $780.4 million at the same time last year, and were up $46.1 million, or 5.7%, from the trailing 2015 fourth quarter-end. The year-over-year growth was mainly attributable to increases in NOW accounts and savings deposits, which increased $12.7 million, or 15.3%, and $47.4 million, or 11.4%, respectively. In the first quarter of 2015, the Bank introduced a new money market account that has been successful in acquiring new customer deposit relationships and providing cross-sell opportunities.
The Company consistently maintains regulatory capital ratios measurably above the Federal “well capitalized” standard, including a Tier 1 leverage ratio of 10.18% at March 31, 2016. Book value per share increased to $21.54 at March 31, 2016 compared with $21.44 at December 31, 2015 and $20.49 at March 31, 2015. Tangible book value per share at March 31, 2016 was $19.64, up 5.7% from the end of the first quarter of 2015 and 1.0% higher than the trailing fourth quarter of 2015.
Mr. Nasca commented, “We expect to leverage a stronger platform to accelerate franchise expansion and earnings into the future. We also expect to make additional investments in business development in 2016 and, along with our successfully completed core banking system conversion, we plan enhancements in digital distribution and service capabilities. We recently relocated our Lockport insurance office to a larger, better location with plans for a new interactive, full service financial center to broaden our presence in Niagara County. These investments enhance our ability to maintain loan and deposit development at a vigorous pace, while associated costs are expected to result in comparable earnings to last year, but drive higher earnings in future years.”
About Evans Bancorp, Inc.
Evans Bancorp, Inc. is a financial holding company and the parent company of Evans Bank, N.A., a commercial bank with $990 million in assets and $849 million in deposits at March 31, 2016. Evans is a full-service community bank, with 13 branches, providing comprehensive financial services to consumer, business and municipal customers throughout Western New York. Evans Bancorp’s wholly-owned insurance subsidiary, The Evans Agency, LLC, provides property and casualty insurance through seven insurance offices in the Western New York region. Evans Investment Services provides non-deposit investment products, such as annuities and mutual funds.
Safe Harbor Statement
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements concerning future business, revenue and earnings. These statements are not historical facts or guarantees of future performance, events or results. There are risks, uncertainties and other factors that could cause the actual results of Evans Bancorp to differ materially from the results expressed or implied by such statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include competitive pressures among financial services companies, interest rate trends, general economic conditions, changes in legislation or regulatory requirements, effectiveness at achieving stated goals and strategies, and difficulties in achieving operating efficiencies. These risks and uncertainties are more fully described in Evans Bancorp’s Annual and Quarterly Reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. Evans Bancorp undertakes no obligation to publicly update or revise forward-looking information, whether as a result of new, updated information, future events or otherwise.
|EVANS BANCORP, INC. AND SUBSIDIARIES|
|SELECTED FINANCIAL DATA (UNAUDITED)|
|(in thousands, except shares and per share data)|
|Allowance for loan losses||(13,119)||(12,883)||(13,456)||(13,110)||(12,777)|
|Goodwill and intangible assets||8,101||8,101||8,101||8,101||8,101|
|All other assets||81,866||71,147||88,356||95,990||107,309|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Regular savings deposits||463,672||439,993||436,331||431,555||416,317|
|Total stockholders’ equity||92,160||$91,256||$89,673||$88,195||$86,701|
SHARES AND CAPITAL RATIOS
|Common shares outstanding||4,279,296||4,257,179||4,238,448||4,239,929||4,230,895|
|Book value per share||$21.54||$21.44||$21.16||$20.80||$20.49|
|Tangible book value per share||$19.64||$19.53||$19.25||$18.89||$18.58|
|Tier 1 leverage ratio||10.18%||10.45%||10.32%||10.23%||10.81%|
|Tier 1 risk-based capital ratio||11.94%||11.82%||12.03%||12.63%||13.34%|
|Total risk-based capital ratio||13.20%||13.07%||13.29%||13.89%||14.54%|
ASSET QUALITY DATA
|Total non-performing loans||$17,941||$16,042||$8,170||$10,994||$11,803|
|Total net loan charge-offs (recoveries)||(29)||776||50||83||(43)|
|Non-performing loans/Total loans||2.25%||2.07%||1.12%||1.55%||1.68%|
|Net loan charge-offs/Average loans||(0.02)%||0.42%||0.03%||0.05%||(0.03)%|
|Allowance for loans losses/Total loans||1.65%||1.66%||1.84%||1.84%||1.82%|
|Net interest income||8,260||8,436||8,139||7,648||7,581|
|Provision for loan losses||208||204||396||415||201|
|Net interest income after provision||8,052||8,232||7,743||7,233||7,380|
Deposit service charges
|Insurance service and fee revenue||1,748||1,572||1,972||1,821||1,829|
|Bank-owned life insurance||136||140||134||152||137|
|Gain on insurance proceeds||–||–||734||–||–|
|Total non-interest income||2,994||2,921||4,257||3,476||3,066|
Salaries and employee benefits
|Repairs and maintenance||176||204||230||215||173|
|Advertising and public relations||285||227||188||231||211|
|Technology and communications||422||308||354||262||259|
|Total non-interest expenses||8,528||8,665||8,280||8,241||7,512|
Income before income taxes
|Income tax provision||804||734||1,211||793||1,029|
PER SHARE DATA
|Net income per common share-diluted||$0.40||$0.41||$0.58||$0.39||$0.44|
|Cash dividends per common share||$0.38||$0.00||$0.36||$0.00||$0.36|
|Weighted average number of diluted shares||4,328,034||4,315,489||4,312,275||4,309,688||4,291,676|
|Return on average total assets||0.71%||0.75%||1.10%||0.74%||0.89%|
|Return on average stockholders’ equity||7.43%||7.72%||11.20%||7.62%||8.74%|
|Interest bearing deposits at banks||18,862||19,185||27,501||51,094||6,624|
|Total interest-earning assets||894,628||863,462||846,408||846,343||790,163|
|Non interest-earning assets||66,375||66,115||66,102||64,396||64,372|
|Total interest-bearing deposits||644,492||616,396||606,783||614,960||559,313|
|Total interest-bearing liabilities||678,742||648,839||638,896||646,493||593,165|
|Other non-interest bearing liabilities||13,879||14,549||15,122||13,665||14,785|
|Total Liabilities and Equity||$961,003||$929,577||$912,510||$910,739||$854,535|
|Interest bearing deposits at banks||0.23%||0.29%||0.23%||0.26%||0.06%|
|Total interest-earning assets||4.18%||4.37%||4.30%||4.08%||4.28%|
|Total interest-bearing deposits||0.60%||0.56%||0.55%||0.56%||0.56%|
|Total interest-bearing liabilities||0.65%||0.62%||0.60%||0.61%||0.59%|
|Interest rate spread||3.53%||3.75%||3.70%||3.47%||3.69%|
|Contribution of interest-free funds||0.16%||0.16%||0.15%||0.14%||0.15%|
|Net interest margin||3.69%||3.91%||3.85%||3.61%||3.84%|