6% Rise in Net Interest Income Driven by 10% Deposit and 7% Loan Growth
Company Release – 11/5/2015 6:55 AM ET
HAMBURG, N.Y., Nov. 5, 2015 (GLOBE NEWSWIRE) — 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 third quarter ended September 30, 2015.
HIGHLIGHTS OF THE 2015 THIRD QUARTER
- Net income increased 9.6% to $2.5 million, or $0.58 per diluted share, from $2.3 million, or $0.54 per diluted share, in the third quarter of 2014
- Loans increased $45.9 million, or 6.7%, to $731.2 million from September 30, 2014
- Strong low-cost deposit growth drove total deposit balances to $782.3 million, up $72.5 million, or 10.2%, from the prior-year period
- Net interest income for the quarter increased 6.0% to $8.1 million, primarily driven by growth in loans and non-interest bearing demand deposits
Net income was $2.5 million, or $0.58 per diluted share, in the third quarter of 2015, up from $2.3 million, or $0.54 per diluted share, in the third quarter of 2014, primarily due to increased net interest income and a $0.7 million gain from an insurance settlement related to a fire sustained at a branch location. A state-of-the-art branch has since been rebuilt which utilizes interactive customer technology. Return on average equity was 11.20% for the third quarter of 2015 compared with 10.84% in the third quarter of 2014. Excluding the insurance settlement, net income would have been $2.1 million, or $0.48 per diluted share, for the current quarter.
For the nine months ended September 30, 2015, Evans recorded net income of $6.1 million, or $1.41 per diluted share, compared with net income of $5.9 million, or $1.38 per diluted share, in the same period in 2014, which included a $1.0 million pre-tax litigation expense in the second quarter.
“We continue to grow our business as commercial loans and low cost core deposits were both up measurably in the quarter,” said David J. Nasca, President and CEO of Evans Bank and its holding company. “We are gaining additional visibility and share throughout the Western New York market as our presence grows, electronic distribution capabilities are enhanced, new products are introduced, and as we continue to expand our team of seasoned commercial lenders. Core earnings, however, do not fully reflect the positive effect of our loan and deposit growth on net interest income due to margin pressure and our continued investments in people and technology.”
Net Interest Income
Net interest income was $8.1 million in the third quarter, up $0.5 million from the prior-year period and the trailing second quarter. Growth in loans and non-interest bearing demand deposits drove the increase over both periods.
Net interest margin of 3.85% decreased 12 basis points from 3.97% in the 2014 third quarter, driven by decreases in the yield of investment securities. When compared with net interest margin of 3.61% in the trailing second quarter, net interest margin was up 24 basis points, mostly due to interest earned on the payoff of a large non-accrual loan and growth of the loan portfolio.
The provision for loan losses was $396 thousand in the 2015 third quarter, up from $326 thousand in the prior-year period due to loan growth, but down $19 thousand from the trailing second quarter of 2015.
Non-interest income was $4.3 million, or 34.3% of total revenue, in the quarter, up $0.7 million, or 21.3%, from the prior-year period. This increase reflects a $0.7 million gain from an insurance settlement. Insurance agency revenue of $2.0 million was up $0.1 million, or 4.5%, from the 2014 third quarter, due mostly to increases in financial services and employee benefits revenue. Compared with the trailing second quarter of 2015, total non-interest income increased by $0.7 million, primarily due to the insurance settlement gain.
Total non-interest expense was $8.3 million in the third quarter, an increase of 10.6%, or $0.8 million, from the prior-year period. Personnel expenses, the largest expense category for the Company, were up $0.5 million, or 9.6%, from last year’s third quarter, and reflect annual merit increases and personnel hires to support the Company’s continued growth. Professional services were $0.7 million, up $0.2 million, or nearly 54% year-over-year, due mostly to higher legal expenses related to the New York State Attorney General suit that was settled in the quarter. As a result of the legal settlement, Evans recorded a $175 thousand reversal of a previously established litigation reserve in the quarter.
Compared with the trailing second quarter of 2015, total non-interest expense was up $39 thousand, or 0.5%. The slight increase reflects higher personnel expenses partially offset by the $175 thousand litigation reserve reversal.
Income tax expense for the quarter was $1.2 million, representing an effective tax rate of 32.6% compared with an effective tax rate of 32.2% in the third quarter of 2014.
Balance Sheet Highlights
Total assets were $920.9 million at September 30, 2015, up 9.5%, or $79.5 million, from the 2014 third quarter and up 1.4%, or $12.3 million, from the trailing 2015 second quarter. Loans of $731.2 million grew 6.7% from $685.3 million at September 30, 2014 and were up 2.9% from $710.8 million at June 30, 2015. The increase over both periods was primarily due to growth in the commercial real estate and commercial and industrial loan portfolios.
Investment securities were $109.4 million at September 30, 2015, up 5.0% from the end of the 2014 third quarter and flat with the trailing 2015 second quarter.
Total deposits increased $72.5 million, or 10.2%, to $782.3 million at September 30, 2015 from $709.8 million at the same time last year, and were up $8.1 million, or 1.1%, from the trailing 2015 second quarter-end. The year-over-year growth was mainly attributable to increases in demand deposits and savings accounts, which increased $17.0 million, or 11.1%, and $69.1 million, or 18.8%, respectively. In the first quarter of this year, the Bank introduced a new money market account that has been successful in acquiring new customer deposit relationships and providing cross sell opportunities.
The ratio of non-performing loans to total loans increased to 1.12% at September 30, 2015 from 0.79% at September 30, 2014, though decreased from 1.55% at June 30, 2015. The decrease from the trailing quarter was due to the payoff of a large non-accrual loan.
Net charge-offs in the third quarter resulted in a 0.03% ratio of net charge-offs to average total loans. This compares with net recoveries of (0.06%) in the third quarter of 2014, and with net charge-offs of 0.05% in the second quarter of 2015.
The ratio of the allowance for loan losses to total loans was 1.84% at September 30, 2015 compared with 1.84% at June 30, 2015 and 1.74% at September 30, 2014. The coverage ratio was 164.7% at September 30, 2015 compared with 119.2% at the end of the trailing second quarter and 221.7% at the end of the 2014 third quarter.
The Company consistently maintains regulatory capital ratios measurably above the federal “well capitalized” standard, including a Tier 1 leverage ratio of 10.32% at September 30, 2015. Book value per share continues to grow and was $21.16 at September 30, 2015 compared with $20.80 at June 30, 2015 and $20.04 at September 30, 2014. Tangible book value per share at September 30, 2015 was $19.25, up 6.3% from the end of the third quarter of 2014 and up 1.9% from the trailing second quarter of 2015.
Mr. Nasca concluded, “Margins remain within a narrow band as current rates and the competitive environment are pressuring expansion. Importantly, the shift we have made in our loan and deposit mix positions us well for margin growth when the rate environment improves. There are many opportunities for us to grow and win additional share in our market on several fronts, including the economic resurgence that continues to gain momentum in Western New York, as well as the prospective changes in the competitive environment. Our balance sheet remains strong with asset quality and capital ratios at superior levels. Overall, Evans is on track for another strong year.”
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 $921 million in assets and $782 million in deposits at September 30, 2015. 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||(13,456)||(13,110)||(12,777)||(12,533)||(11,955)|
|Goodwill and intangible assets||8,101||8,101||8,101||8,101||8,101|
|All other assets||85,573||93,216||105,001||55,520||55,643|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Regular savings deposits||436,331||431,555||416,317||363,542||367,277|
|Total stockholders’ equity||$89,673||$88,195||$86,701||$85,788||$83,974|
|SHARES AND CAPITAL RATIOS|
|Common shares outstanding||4,238,448||4,239,929||4,230,895||4,203,684||4,190,195|
|Book value per share||$21.16||$20.80||$20.49||$20.41||$20.04|
|Tangible book value per share||$19.25||$18.89||$18.58||$18.48||$18.11|
|Tier 1 leverage ratio||10.32%||10.23%||10.81%||10.84%||10.56%|
|Tier 1 risk-based capital ratio||12.03%||12.63%||13.34%||13.60%||13.42%|
|Total risk-based capital ratio||13.29%||13.89%||14.54%||14.85%||14.67%|
|ASSET QUALITY DATA|
|Total non-performing loans||$8,170||$10,994||$11,803||$10,591||$5,392|
|Total net loan (recoveries) charge-offs||50||83||(43)||(5)||(106)|
|Non-performing loans/Total loans||1.12%||1.55%||1.68%||1.52%||0.79%|
|Net loan charge-offs/Average loans||0.03%||0.05%||-0.03%||0.00%||-0.06%|
|Allowance for loans/Total loans||1.84%||1.84%||1.82%||1.80%||1.74%|
|EVANS BANCORP, INC AND SUBSIDIARIES|
|SELECTED OPERATIONS DATA (UNAUDITED)|
|(in thousands except share and per share data)|
|Third Quarter||Second Quarter||First Quarter||Fourth Quarter||Third Quarter|
|Net interest income||8,139||7,648||7,581||8,440||7,677|
|Provision for loan losses||396||415||201||574||326|
|Net interest income after provision||7,743||7,233||7,380||7,866||7,351|
|Deposit service charges||455||411||409||432||482|
|Insurance service and fee revenue||1,972||1,821||1,829||1,526||1,888|
|Bank-owned life insurance||134||152||137||140||138|
|Loss on tax credit investment||—||—||—||(2,596)||—|
|Gain on Insurance Proceeds||734||—||—||—||—|
|Total non-interest income||4,257||3,476||3,066||314||3,510|
|Salaries and employee benefits||5,253||5,066||4,794||4,792||4,792|
|Repairs and maintenance||230||215||173||186||190|
|Advertising and public relations||188||231||211||218||146|
|Technology and communications||354||262||259||304||247|
|Amortization of intangibles||—||—||—||—||27|
|Total non-interest expenses||8,280||8,241||7,512||7,815||7,485|
|Income before income taxes||3,720||2,468||2,934||365||3,376|
|Income tax provision||1,211||793||1,029||(1,941)||1,086|
|PER SHARE DATA|
|Net income per common share-diluted||$0.58||$0.39||$0.44||$0.54||$0.54|
|Cash dividends per common share||$0.36||$0.00||$0.36||$0.00||$0.34|
|Weighted average number of diluted shares||4,312,275||4,309,688||4,291,676||4,268,069||4,260,759|
|Return on average total assets||1.10%||0.74%||0.89%||1.09%||1.09%|
|Return on average stockholders’ equity||11.20%||7.62%||8.74%||10.79%||10.84%|
|EVANS BANCORP, INC AND SUBSIDIARIES|
|SELECTED AVERAGE BALANCES AND YIELDS/RATES (UNAUDITED)|
|Third Quarter||Second Quarter||First Quarter||Fourth Quarter||Third Quarter|
|Interest bearing deposits at banks||27,501||51,094||6,624||4,582||2,134|
|Total interest-earning assets||846,407||846,343||790,163||781,832||774,249|
|Non interest-earning assets||66,103||64,396||64,372||62,961||64,729|
|Total interest-bearing deposits||606,782||614,960||559,313||559,455||551,899|
|Total interest-bearing liabilities||638,896||646,493||593,165||591,745||587,491|
|Other non-interest bearing liabilities||15,122||13,665||14,785||12,467||11,465|
|Total Liabilities and Equity||$912,510||$910,739||$854,535||$844,793||$838,978|
|Interest bearing deposits at banks||0.23%||0.26%||0.06%||0.17%||0.19%|
|Total interest-earning assets||4.30%||4.08%||4.28%||4.77%||4.43%|
|Total interest-bearing deposits||0.55%||0.56%||0.56%||0.57%||0.55%|
|Total interest-bearing liabilities||0.60%||0.61%||0.59%||0.60%||0.61%|
|Interest rate spread||3.70%||3.47%||3.69%||4.17%||3.82%|
|Contribution of interest-free funds||0.15%||0.14%||0.15%||0.15%||0.15%|
|Net interest margin||3.85%||3.61%||3.84%||4.32%||3.97%|