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 second quarter ended June 30, 2015.
HIGHLIGHTS OF THE 2015 SECOND QUARTER
- Generated net income of $1.7 million, or $0.39 per diluted share
- Loans increased $47.4 million, or 7.2%, to $710.8 million from June 30, 2014
- Strong low-cost deposit growth drove total deposit balances to $774.2 million, up $67.0 million, or 9.5%, from the prior-year period
Net income was $1.7 million, or $0.39 per diluted share, in the second quarter of 2015 compared with $1.6 million, or $0.37 per diluted share, in the second quarter of 2014. The Company’s results are flat compared with the second quarter of 2014, when $1.0 million in litigation expense was incurred, due to planned investments in people and systems that support the Company’s growth strategy. These strategic investments have resulted in an increase in loans from the prior year period and trailing quarter, which had a positive impact in offsetting margin compression in the challenging interest rate environment.
For the six months ended June 30, 2015, Evans recorded net income of $3.6 million, or $0.83 per diluted share, flat to net income of $3.6 million, or $0.84 per diluted share, in the same period in 2014, which included the litigation expense referred to above.
“Our second quarter results were solid, highlighted by the continued expansion of our customer base, particularly with business loans,” said David J. Nasca, President and CEO of Evans Bank and its holding company. “Our growing low cost deposit base continues to be put to work to support lending in our communities. Evans is poised for sustained profitable growth, while we continue to make investments in people and technology.”
Mr. Nasca added, “While the current rate and competitive environments are putting downward pressure on margins, we continue to work towards a positive year for Evans as we are on pace with last year’s record performance. We have grown our market presence and mobile distribution channels, added seasoned lenders to broaden our commercial loan business, and continued to gain traction and visibility as a leading community bank in our market.”
Net Interest Income
Net interest income was $7.6 million in the second quarter, consistent with the prior-year period and the trailing first quarter. Strong commercial loan growth helped offset the impact of a declining net interest margin.
Net interest margin of 3.61% decreased 37 basis points from the 2014 second quarter rate of 3.98%, and was impacted by two major items. The current interest rate and competitive environments have negatively impacted pricing on Evans’ loans which is evident in a 28 basis points decline in loan yield compared with prior year second quarter. Additionally, as a result of a successful introduction of a new money market account, the bank gathered and placed funds into lower yielding interest bearing deposits at banks, which the Bank will deploy into loans and other business products in future quarters. When compared with the trailing first quarter rate of 3.84%, second quarter net interest margin was down 23 basis points, mostly due to the increased level of interest bearing deposits at banks.
Gary A. Kajtoch, Executive Vice President and CFO, commented, “As expected, our yield on interest-earning assets declined, primarily due to lower loan rates reflecting increased competition. Importantly, we offset margin pressure with strong in-market commercial loan growth while maintaining superior credit quality. Margin headwinds are expected to continue throughout 2015; however, we believe we are well positioned to drive expansion of our net interest margin if the interest rate environment improves.”
The provision for loan losses was $415 thousand in the 2015 second quarter, up from $176 thousand in the prior-year period. When compared with the trailing first quarter of 2015, the provision increased by $214 thousand due to an increase in commercial loans classified as criticized assets.
Non-interest income was $3.5 million, or 31.2% of total revenue, in the quarter, up $0.4 million, or 13.8%, from the prior-year period. Insurance agency revenue of $1.8 million was up $0.2 million, or 14.8%, from the 2014 second quarter, due mostly to a high level of claims adjustment fees earned for services provided to assess damages of local properties impacted by the severe winter. Compared with the trailing first quarter of 2015, total non-interest income increased by $0.4 million due mainly to commercial loan fees, mortgage servicing rights income, and data center income.
Total non-interest expense was $8.2 million in the second quarter, a decrease of 1.1% from the prior-year period. The prior-year period included a $1.0 million litigation expense related to the NYS Attorney General’s allegations regarding the Bank’s residential mortgage fair lending practices. Personnel expenses, the largest expense category for the Company, were up $0.5 million, or 11.0%, from last year’s second quarter, and reflect annual merit increases and personnel hires to support the Company’s continued growth.
Compared with the trailing first quarter of 2015, total non-interest expense was up $0.7 million, or 9.7%. The increase was a result of increases in salaries, professional services, and other expenses. Salaries increased as a result of hiring to support the Company’s growth. Professional services increases are related to both continued dialogue with the NYS Attorney General and consulting fees associated with the Company’s core banking system conversion. The Company incurred expenses related to successful loan growth in second quarter such as appraisal and underwriting expenses, which was reflected in an increase in other expenses.
Income tax expense for the quarter was $0.8 million, representing an effective tax rate of 32.1% compared with an effective tax rate of 29.2% in the second quarter of 2014. The increase was due to a lower expected percentage of tax exempt income to total income for 2015, compared with the expectation in last year’s second quarter for the full year 2014 period.
Balance Sheet Highlights
Total assets were $908.5 million at June 30, 2015, up 9.4%, or $78.0 million, from the 2014 second quarter and up 0.5%, or $4.2 million, from the trailing 2015 first quarter. Loans of $710.8 million grew 7.2% from $663.4 million at June 30, 2014 and were up 1.3% from $701.7 million at March 31, 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 $109.5 million at June 30, 2015, up 2.1% from the end of second quarter 2014, and up 7.1% from the trailing 2015 first quarter.
Total deposits increased $67.0 million, or 9.5%, to $774.2 million at June 30, 2015, from $707.2 million at June 30, 2014, but decreased $6.2 million, or 0.8%, from the 2015 first quarter-end. The year-over-year growth was mainly attributable to increases in demand deposits and savings accounts, which increased $15.3 million, or 10.3%, and $54.8 million, or 14.5%, respectively. In the first quarter 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 1.55% at June 30, 2015, from 0.82% at June 30, 2014, though decreased from 1.68% at March 31, 2015. The increase over the second quarter of 2014 was due to an increase in non-performing loans related primarily to a single commercial loan.
Net charge offs in the second quarter resulted in a 0.05% ratio of net charge offs to average total loans and leases. This compares with net charge offs of 0.24% in the second quarter of 2014, and from net recoveries of (0.03%) in the first quarter of 2015.
The ratio of the allowance for loan losses to total loans was 1.84% at June 30, 2015, compared with 1.82% at March 31, 2015, and 1.74% at June 30, 2014. The coverage ratio was 119.2% at June 30, 2015 compared with 108.3% at the end of the trailing first quarter and 211.6% at the end of the 2014 second quarter. The decrease in coverage ratio from the end of the 2014 second quarter was due to the single commercial loan mentioned above.
The Company consistently maintains regulatory capital ratios measurably above the federal “well capitalized” standard, including a Tier 1 leverage ratio of 10.23% at June 30, 2015. Book value per share continues to grow and was $20.80 at June 30, 2015 compared with $20.49 at March 31, 2015 and $19.84 at June 30, 2014. Tangible book value per share at June 30, 2015 was $18.89, up 5.5% from the end of the second quarter of 2014 and up 1.7% from the trailing first quarter of 2015.
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 $909 million in assets and $774 million in deposits at June 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)|
|Investment Securities||$ 109,508||$ 102,289||$ 100,057||$ 104,223||$ 107,290|
|Allowance for loan and lease losses||(13,110)||(12,777)||(12,533)||(11,955)||(11,522)|
|Goodwill and intangible assets||8,101||8,101||8,101||8,101||8,128|
|All other assets||93,216||105,001||55,520||55,643||63,261|
|Total assets||$ 908,547||$ 904,352||$ 846,809||$ 841,352||$ 830,556|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Regular savings deposits||431,555||416,317||363,542||367,277||376,759|
|Total stockholders’ equity||$ 88,195||$ 86,701||$ 85,788||$ 83,974||$ 82,949|
|SHARES AND CAPITAL RATIOS|
|Common shares outstanding||4,239,929||4,230,895||4,203,684||4,190,195||4,179,758|
|Book value per share||$ 20.80||$ 20.49||$ 20.41||$ 20.04||$ 19.84|
|Tangible book value per share||$ 18.89||$ 18.58||$ 18.48||$ 18.11||$ 17.90|
|Tier 1 leverage ratio||10.23%||10.81%||10.84%||10.56%||10.04%|
|Tier 1 risk-based capital ratio||12.63%||13.34%||13.60%||13.42%||13.10%|
|Total risk-based capital ratio||13.89%||14.54%||14.85%||14.67%||14.35%|
|ASSET QUALITY DATA|
|Total non-performing loans and leases||$ 10,994||$ 11,803||$ 10,591||$ 5,392||$ 5,445|
|Total net loan and lease (recoveries) charge-offs||83||(43)||(5)||(106)||388|
|Non-performing loans and leases/Total loans and leases||1.55%||1.68%||1.52%||0.79%||0.82%|
|Net loan and lease charge-offs/Average loans and leases||0.05%||-0.03%||0.00%||-0.06%||0.24%|
|Allowance for loans and leases to total loans and leases||1.84%||1.82%||1.80%||1.74%||1.74%|
|EVANS BANCORP, INC AND SUBSIDIARIES|
|SELECTED OPERATIONS DATA (UNAUDITED)|
|(in thousands except share and per share data)|
|Net interest income||7,648||7,581||8,440||7,677||7,682|
|Provision for loan and lease losses||415||201||574||326||176|
|Net interest income after provision||7,233||7,380||7,866||7,351||7,506|
|Deposit service charges||411||409||432||482||464|
|Insurance service and fee revenue||1,821||1,829||1,526||1,888||1,586|
|Bank-owned life insurance||152||137||140||138||151|
|Loss on tax credit investment||—||—||(2,596)||—||—|
|Total non-interest income||3,476||3,066||314||3,510||3,055|
|Salaries and employee benefits||5,066||4,794||4,792||4,792||4,564|
|Repairs and maintenance||215||173||186||190||180|
|Advertising and public relations||231||211||218||146||281|
|Technology and communications||262||259||304||247||278|
|Amortization of intangibles||—||—||—||27||40|
|Total non-interest expenses||8,241||7,512||7,815||7,485||8,332|
|Income before income taxes||2,468||2,934||365||3,376||2,229|
|Income tax provision||793||1,029||(1,941)||1,086||650|
|PER SHARE DATA|
|Net income per common share-diluted||$ 0.39||$ 0.44||$ 0.54||$ 0.54||$ 0.37|
|Cash dividends per common share||$ 0.00||$ 0.36||$ 0.00||$ 0.34||$ 0.00|
|Weighted average number of diluted shares||4,309,688||4,291,676||4,268,069||4,260,759||4,248,249|
|Return on average total assets||0.74%||0.89%||1.09%||1.09%||0.76%|
|Return on average stockholders’ equity||7.62%||8.74%||10.79%||10.84%||7.69%|
|EVANS BANCORP, INC AND SUBSIDIARIES|
|SELECTED AVERAGE BALANCES AND YIELDS/RATES (UNAUDITED)|
|(dollars in thousands)|
|Loans and leases, net||$ 691,608||$ 682,653||$ 675,144||$ 666,029||$ 647,169|
|Interest bearing deposits at banks||51,094||6,624||4,582||2,134||18,625|
|Total interest-earning assets||846,343||790,163||781,832||774,249||771,174|
|Non interest-earning assets||64,396||64,372||62,961||64,729||64,944|
|Total Assets||$ 910,739||$ 854,535||$ 844,793||$ 838,978||$ 836,118|
|Total interest-bearing deposits||614,960||559,313||559,455||551,899||566,447|
|Total interest-bearing liabilities||646,493||593,165||591,745||587,491||598,857|
|Other non-interest bearing liabilities||13,665||14,785||12,467||11,465||10,101|
|Total Liabilities and Equity||$ 910,739||$ 854,535||$ 844,793||$ 838,978||$ 836,118|
|Loans and leases, net||4.59%||4.58%||5.12%||4.72%||4.87%|
|Interest bearing deposits at banks||0.26%||0.06%||0.17%||0.19%||0.32%|
|Total interest-earning assets||4.08%||4.28%||4.77%||4.43%||4.46%|
|Total interest-bearing deposits||0.56%||0.56%||0.57%||0.55%||0.53%|
|Total interest-bearing liabilities||0.61%||0.59%||0.60%||0.61%||0.61%|
|Interest rate spread||3.47%||3.69%||4.17%||3.82%||3.85%|
|Contribution of interest-free funds||0.14%||0.15%||0.15%||0.15%||0.13%|
|Net interest margin||3.61%||3.84%||4.32%||3.97%||3.98%|