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, 2015.
HIGHLIGHTS OF THE 2015 FIRST QUARTER
- Generated net income of $1.9 million, or $0.44 per diluted share
- Loans increased $41.0 million, or 6.2%, to $701.7 million from March 31, 2014
- Strong low-cost deposit growth drove total deposit balances to $780.4 million, up $58.4 million, or 8.1%, from the prior-year period
- Net interest income for the quarter increased 3.9% to $7.6 million, primarily driven by growth in loans and non-interest bearing demand deposits
- Bank assets exceed $900 million
Net income was $1.9 million, or $0.44 per diluted share, in the first quarter of 2015 compared with $2.0 million, or $0.47 per diluted share, in the first quarter of 2014. On a pre-tax basis, net income in the first quarter of 2015 surpassed the prior year period by $12 thousand. Return on average equity was 8.74% for the first quarter of 2015 compared with 10.01% in the first quarter of 2014.
“The first quarter of 2015 was another period of solid performance in growth and profitability. This puts us on pace with the first quarter of 2014, which was the start of a record earnings year. Lending activity, particularly commercial lending, was robust, along with significant deposit growth as demand balances grew 21% year over year,” said David J. Nasca, President and CEO of Evans Bank and its holding company. “In addition to notable net interest income growth, the Bank has shown strong expense discipline, successfully managing operating expenses lower to offset the impact of higher than usual damage and losses experienced by our insurance operations due to a historic snow storm late in 2014. We continue to deliver results despite a difficult environment facing all banks, with pressure on margins due to low rates and intense competition lowering loan yields.”
Net Interest Income
Net interest income was $7.6 million in the first quarter, an increase of $0.3 million, or 3.9%, from the prior-year period, reflecting strong loan growth. First quarter net interest income was down $0.9 million, or 10.2%, from the trailing fourth quarter of 2014, which benefited from approximately $0.6 million of accelerated fee income due to two commercial loan payoffs.
Net interest margin of 3.84% improved 5 basis points over the 2014 first quarter rate of 3.79%, and was primarily impacted by a 2 basis point decrease in pricing on Evans’ interest bearing liabilities, combined with a 2 basis point increase in the yield on interest-earning assets as lower interest-earning fed funds were invested into higher yielding loans. When compared with the trailing fourth quarter rate of 4.32%, first quarter net interest margin was down 48 basis points. Excluding the accelerated loan fees of $0.6 million mentioned previously, the adjusted fourth quarter net interest margin was 4.03%. The 19 basis point decrease from the adjusted fourth quarter margin was primarily due to a decrease in the yield on interest-earning assets.
The provision for loan losses was $201 thousand in the 2015 first quarter, up slightly from $153 thousand in the prior-year period. When compared with the trailing fourth quarter of 2014, the provision decreased by $373 thousand as a result of significant pay-downs on impaired loans.
Non-interest income was $3.1 million, or 28.8% of total revenue, in the quarter, down $0.3 million, or 9.7%, from the prior-year period. Insurance agency revenue of $1.8 million was down $0.3 million, or 14.2%, from the 2014 first quarter, due mostly to decreases in personal property and casualty and profit sharing revenue. The profit sharing decrease was driven by damage and losses sustained by customers during a historic snow storm in November 2014. Compared with the trailing fourth quarter of 2014, total non-interest income increased by $2.8 million, due mainly to the loss on a tax credit investment, which had a corresponding tax benefit in the fourth quarter of 2014.
Total non-interest expense was $7.5 million in the first quarter, a decrease of 1.4% from the prior-year period. Personnel expenses, the largest expense category for the Company, were up $0.1 million, or 2.1%, from last year’s first quarter, and reflect annual merit increases and personnel hires to support the Company’s growth strategy. Disciplined expense management resulted in an aggregated decrease in all other expense categories of $205 thousand compared with the 2014 first quarter. Compared with the trailing fourth quarter of 2014, total non-interest expense was down $0.3 million, or 3.9%.
Income tax expense for the quarter was $1.0 million, representing an effective tax rate of 35.1% compared with an effective tax rate of 31.1% in the first quarter of 2014. The increase was due to one-time adjustments to deferred tax assets as a result of statutory changes made by New York State legislation in 2014 that came into effect on January 1, 2015.
Balance Sheet Highlights
Total assets were $904.4 million at March 31, 2015, up 6.8% over the end of the first and fourth quarter periods of 2014. Loans of $701.7 million grew 6.2% from $660.7 million at March 31, 2014 and were up 0.9% from $695.7 million at December 31, 2014. The increase over both periods was primarily due to growth in the commercial real estate and commercial and industrial loan portfolios.
Gary A. Kajtoch, Executive Vice President and CFO, commented, “We continued to successfully execute our financial strategies. We are capturing high quality in-market commercial loans and funding them with strong core deposit growth. Though margin headwinds are expected in 2015 given low rates and competitive pressures, we believe we are well positioned with a strong balance sheet and loan pipeline.”
Investment securities were $102.3 million at March 31, 2015, up 2.5% from the end of first quarter 2014 and up 2.2% from the trailing 2014 fourth quarter.
Total deposits increased $58.4 million, or 8.1%, to $780.4 million at March 31, 2015 from $721.9 million at March 31, 2014, and increased $72.7 million, or 10.3%, from the 2014 fourth quarter-end. The year-over-year growth was mainly attributable to increases in demand deposits and savings accounts, which increased $30.0 million, or 21.4%, and $22.6 million, or 5.7%, respectively. The growth over the fourth quarter was due to increases in savings deposits, NOW accounts, and demand deposits. 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 1.68% at March 31, 2015 from 0.79% at March 31, 2014 and from 1.52% at December 31, 2014. The increase over the first quarter of 2014 was due to a $6.6 million increase in non-performing loans related primarily to a single commercial loan.
There were net recoveries in the first quarter, resulting in a (0.03%) ratio of net charge offs to average total loans. This was a change from net recoveries of (0.05%) in the first quarter of 2014 and from negligible net recoveries in the fourth quarter of 2014.
The ratio of the allowance for loan losses to total loans was 1.82% at March 31, 2015 compared with 1.80% at December 31, 2014 and 1.78% at March 31, 2014. The coverage ratio was 108.3% at March 31, 2015 compared with 118.3% at the end of the trailing fourth quarter and 224.7% at the end of the 2014 first quarter. The decrease in coverage ratio from the end of the 2014 first 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 10.81% at March 31, 2015. Book value per share was $20.49 at March 31, 2015 compared with $20.41 at December 31, 2014 and $19.41 at March 31, 2014. Tangible book value per share at March 31, 2015 was $18.58, up 6.5% from the end of the first quarter of 2014 and up 0.5% from the trailing fourth quarter of 2014.
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 $904 million in assets and $780 million in deposits at March 31, 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||(12,777)||(12,533)||(11,955)||(11,522)||(11,734)|
|Goodwill and intangible assets||8,101||8,101||8,101||8,128||8,168|
|All other assets||105,001||55,520||55,643||63,261||89,935|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Regular savings deposits||416,317||363,542||367,277||376,759||393,735|
|Total stockholders’ equity||$86,701||$85,788||$83,974||$82,949||$80,517|
|SHARES AND CAPITAL RATIOS|
|Common shares outstanding||4,230,895||4,203,684||4,190,195||4,179,758||4,147,666|
|Book value per share||$20.49||$20.41||$20.04||$19.84||$19.41|
|Tangible book value per share||$18.58||$18.48||$18.11||$17.90||$17.44|
|Tier 1 leverage ratio||10.81%||10.84%||10.56%||10.04%||10.20%|
|Tier 1 risk-based capital ratio||13.34%||13.60%||13.42%||13.10%||13.44%|
|Total risk-based capital ratio||14.54%||14.85%||14.67%||14.35%||14.70%|
|ASSET QUALITY DATA|
|Total non-performing loans||$11,803||$10,591||$5,392||$5,445||$5,221|
|Total net loan (recoveries) charge-offs||(43)||(5)||(106)||388||(79)|
|Non-performing loans/Total loans||1.68%||1.52%||0.79%||0.82%||0.79%|
|Net loan charge-offs/Average loans||-0.03%||0.00%||-0.06%||0.24%||-0.05%|
|Allowance for loans to total loans||1.82%||1.80%||1.74%||1.74%||1.78%|
|EVANS BANCORP, INC AND SUBSIDIARIES|
|SELECTED OPERATIONS DATA (UNAUDITED)|
|(in thousands except share and per share data)|
|Net interest income||7,581||8,440||7,677||7,682||7,298|
|Provision for loan losses||201||574||326||176||153|
|Net interest income after provision||7,380||7,866||7,351||7,506||7,145|
|Deposit service charges||409||432||482||464||461|
|Insurance service and fee revenue||1,829||1,526||1,888||1,586||2,131|
|Bank-owned life insurance||137||140||138||151||145|
|Loss on tax credit investment||—||(2,596)||—||—||—|
|Total non-interest income||3,066||314||3,510||3,055||3,395|
|Salaries and employee benefits||4,794||4,792||4,792||4,564||4,695|
|Repairs and maintenance||173||186||190||180||176|
|Advertising and public relations||211||218||146||281||222|
|Technology and communications||259||304||247||278||300|
|Amortization of intangibles||—||—||27||40||41|
|Total non-interest expenses||7,512||7,815||7,485||8,332||7,618|
|Income before income taxes||2,934||365||3,376||2,229||2,922|
|Income tax provision (benefit)||1,029||(1,941)||1,086||650||909|
|PER SHARE DATA|
|Net income per common share-diluted||$0.44||$0.54||$0.54||$0.37||$0.47|
|Cash dividends per common share||$0.36||$0.00||$0.34||$0.00||$0.31|
|Weighted average number of diluted shares||4,291,676||4,268,069||4,260,759||4,248,249||4,284,016|
|Return on average total assets||0.89%||1.09%||1.09%||0.76%||0.96%|
|Return on average stockholders’ equity||8.74%||10.79%||10.84%||7.69%||10.01%|
|EVANS BANCORP, INC AND SUBSIDIARIES|
|SELECTED AVERAGE BALANCES AND YIELDS/RATES (UNAUDITED)|
|(dollars in thousands)|
|Interest bearing deposits at banks||6,624||4,582||2,134||18,625||26,238|
|Total interest-earning assets||790,163||781,832||774,249||771,174||770,994|
|Non interest-earning assets||64,372||62,961||64,729||64,944||65,919|
|Total interest-bearing deposits||559,313||559,455||551,899||566,447||569,629|
|Total interest-bearing liabilities||593,165||591,745||587,491||598,857||604,842|
|Other non-interest bearing liabilities||14,785||12,467||11,465||10,101||12,090|
|Total Liabilities and Equity||$854,535||$844,793||$838,978||$836,118||$836,913|
|Interest bearing deposits at banks||0.06%||0.17%||0.19%||0.32%||0.23%|
|Total interest-earning assets||4.28%||4.77%||4.43%||4.46%||4.26%|
|Total interest-bearing deposits||0.56%||0.57%||0.55%||0.53%||0.53%|
|Total interest-bearing liabilities||0.59%||0.60%||0.61%||0.61%||0.61%|
|Interest rate spread||3.69%||4.17%||3.82%||3.85%||3.65%|
|Contribution of interest-free funds||0.15%||0.15%||0.15%||0.13%||0.14%|
|Net interest margin||3.84%||4.32%||3.97%||3.98%||3.79%|
For more information on Evans Bancorp, Inc., visit the Investor Relations site.