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, 2012. HIGHLIGHTS OF THE 2012 SECOND QUARTER
- Net income increased to $1.5 million in the 2012 second quarter, or $0.36 per diluted share, from$1.0 million, or $0.24 per diluted share, in the second quarter of 2011.
- Net interest income increased 9.4% in the second quarter of 2012, when compared with the second quarter of 2011 as a result of continued growth in interest earning assets and lower deposit costs.
- Core loans (defined as total loans and leases less direct financing leases) increased 3.4% in the second quarter of 2012, or 13.5% annualized, to $594.6 million from March 31, 2012.
- Core deposits increased in the second quarter at an annualized rate of 9.6%. Demand, NOW and Savings deposit products increased 2.4%, or $12.3 million during the second quarter of 2012.
- The second quarter provision for loan and lease losses declined $0.7 million year-over-year reflecting the positive impact of the release in provision from the direct financing lease portfolio and improving credit quality trends.
- Return on average equity improved to 8.34% in the second quarter of 2012 compared with 5.90% in the prior year period.
- Strong capital position with Total Risk-Based Capital ratio of 14.18% at June 30, 2012.
For the six months ended June 30, 2012, Evans recorded net income of $3.9 million, or $0.94 per diluted share, a 34% increase over net income of $2.8 million, or $0.69 per diluted share, in the same period in 2011. The return on average equity was 10.93% for the six-month period ended June 30, 2012, compared with 8.80% in the same period in 2011.David J. Nasca, President and CEO of Evans Bancorp, stated, “The strong results in the second quarter reflect a pattern of continued performance, a robust start to the year, and an expanding awareness of our brand of community banking. Retail and business clients in Western New York have rediscovered the value of a local, solutions-based financial institution whose products, services, and lending capacity can meet their financial needs. We remain confident in our ability to aggressively and profitably grow in this highly competitive marketplace.” Net Interest Income Net interest income was $6.9 million for the 2012 second quarter, up 9.4% when compared with the second quarter of 2011 and comparable with the first quarter of 2012. Growth in interest-earning assets drove the increase from the second quarter of 2011 and offset net interest margin contraction relative to the same period. Core loans, which are defined as total loans and leases less national direct financing leases, were $594.6 million at June 30, 2012, an increase of 11.6% from $532.5 million at June 30, 2011, and up 3.4% (13.5% annualized) from $575.2 million at March 31, 2012. The majority of the loan growth since the second quarter of 2011 was in the commercial mortgage loan portfolio. Investment securities were $96.8 million at June 30, 2012, down 13.9% from $112.5 million at the end of the first quarter of 2012 and up 2.4% from $94.5 million as of the end of second quarter of 2011. The reduction in the investment securities portfolio, from the first quarter of 2012, reflects the deployment of excess liquidity, which was garnered in the first quarter of 2012, to fund robust loan growth during the second quarter of 2012. The large growth in securities in the first quarter 2012 was primarily in very short duration U.S. treasuries with the expectation of deployment into higher yielding loans in the second quarter of 2012.
Total deposits were $653.9 million at June 30, 2012, up $67.2 million, or 11.4%, from $586.8 million at June 30, 2011, and relatively consistent with $649.7 million at March 31, 2012. The sequential quarter and year-over-year growth was attributable to strong core consumer deposit increases lead by the Company’s Better Checking product (included in the NOW category) along with its complementary Better Savings product. These products have been successful in gaining new customers and reward existing customers that engage in more business with the Bank. It is anticipated these deepened relationships will further improve an already stable deposit customer base. Partially offsetting these gains was a decrease in time deposit balances with the maturing of higher rate CD’s and a planned decrease in brokered time deposits.The Company’s net interest margin decreased slightly to 3.85% for the second quarter of 2012, down from the first quarter rate of 3.93% and down from 3.92% in the second quarter of 2011. As compared with last year’s second quarter the decrease in the net interest margin is a result of the continued declining interest rate environment. The Company has been able to off-set the 36 basis point decrease in yield on interest-earning assets through re-pricing its interest bearing liabilities by 35 basis points. The contribution of interest-free funds declined by 6 basis points when compared with the second quarter 2011. The Company’s loan and investment portfolios continue to re-price into lower yields, as evidenced by a decrease in yield on interest-earning assets of 16 basis points from the first quarter of 2012. Allowance for Loan and Lease Losses and Asset Quality Provision: The provision for loan and lease losses decreased to $0.3 million in the second quarter of 2012 from a provision of $1.0 million in the prior year’s second quarter, but increased from a release of provision of $(0.25) million in the linked first quarter of 2012. The second quarter of 2012 benefited from a release of $0.22 million in leasing provision after continued improvement in the leasing portfolio’s performance. This benefit was off-set by the formula-based provision for the solid growth in loans in the second quarter 2012 and the charge-off of $0.23 million beyond the pre-existing reserve on an impaired commercial loan. Net charge-offs: There were net charge-offs to average total loans and leases of 0.30% in the second quarter of 2012 compared with 0.32% in the first quarter of 2012 and 0.63% in the second quarter of 2011. The charge-off percentage remains below industry standards and is indicative of the Bank’s historical credit diligence. Gary A. Kajtoch, Executive Vice President and CFO commented: “We continue to experience improved credit quality as our non-performing loans and leases were reduced by over $2 million during the quarter, and are at their lowest level in recent years, as a percentage of total loans. Our charge-off ratio, which is below industry average, continue to reflect the Bank’s conservative underwriting standards.”
Non-performing loans and leases: The ratio of non-performing loans and leases to total loans and leases decreased to 1.84% at June 30, 2012, from 2.25% and 2.36% at March 31, 2012, and June 30, 2011, respectively.During the second quarter of 2012, there was a $2.0 million decrease in non-performing loans and leases due to pay-offs ($0.6 million), upgrades on commercial loans to accruing ($0.5 million), commercial charge-offs ($0.4 million), and continued run-off of the leasing portfolio ($0.5 million). As a result of the growth in loans and the charge-offs during the second quarter of 2012, the ratio for the allowance for loan and lease losses to total loans and leases decreased to 1.78% at June 30, 2012, compared with 1.86% at March 31, 2012, and 1.97% at June 30, 2011. While the ratio decreased, the level of non-performing loans and leases decreased even further, resulting in an improved coverage ratio of 96.8% at June 30, 2012, compared with 82.7% at March 31, 2012. The FDIC assisted acquisition of Waterford Village Bank in July of 2009 accounted for $2.0 million, or approximately 18.2%, of the Company’s $11.0 million in non-performing loans at June 30, 2012. These loans are included in a loss-sharing agreement with the FDIC, in which the FDIC bears at least 80% of the losses on these loans. On an adjusted basis, Evans’ coverage ratio for non-performing loans and leases was 117.9% at June 30, 2012 which includes the leasing portfolio mark of $0.1 million while excluding all of the FDIC-guaranteed Waterford loans. Non-Interest Income Non-interest income, which represented 30.6% of total revenue in the second quarter of 2012, increased 3.9%, or $0.1 million, to $3.0 million when compared with the second quarter of 2011, reflecting positive performance in all categories. Service charges on deposits increased $21 thousand, or 5.0%, compared with the second quarter 2011, primarily due to increases in fee rates to be more in-line with market competition. Insurance agency revenue of $1.6 million was up $42 thousand, or 2.6%, when compared with the 2011 second quarter due mostly to an increase in profit sharing revenue from the insurance carriers. The higher quarterly profit sharing revenue was driven by the timing of payouts from insurance carriers; as profit sharing trends remain down year over year. Other income was up $26 thousand from second quarter of 2011 partly from higher merchant services fees due to a more beneficial contract with the Company’s provider. Compared with the first quarter of 2012, total non-interest income was down $0.2 million due mainly to TEA’s decrease in revenue of $0.3 million, reflecting the typical revenue cycle seasonality.
Non-Interest ExpenseTotal non-interest expense was $7.3 million in the second quarter of 2012, an increase of 8.3%, from $6.8 million in the second quarter of 2011. The largest component of the increase was salaries and employee benefits, which was up $0.3 million, or 8.1%, when compared with the second quarter of 2011. This rise reflected merit increases awarded for 2011 performance, higher health care costs and increased staff. Additionally, advertising expense was higher by $89 thousand in the second quarter of 2012 from the prior year second quarter as the Company looked to capitalize on disruption in the marketplace from the HSBC sale of its WNY branch network. Professional services expense also increased during the quarter due mainly to increased legal expenses related to efforts of resolving and collecting impaired loans. These increases were partially offset by lower occupancy costs, mostly related to fully depreciated assets lowering depreciation expense. As a result of the increase in non-interest expense, the efficiency ratio slightly increased to 72.75% for the second quarter of 2012 from 72.04% for the second quarter of 2011. Income tax expense for the quarter ended June 30, 2012, was $0.8 million, representing an effective tax rate of 34.9% compared with an effective tax rate of 32.5% in the second quarter of 2011. Capital Management The Company consistently maintains regulatory capital ratios measurably above the federal “well capitalized” standard, including a Tier 1 leverage ratio of 9.77% at June 30, 2012. Book value per share was $17.40 at June 30, 2012, compared with $17.06 at March 31, 2011, and $16.14 at June 30, 2011. Tangible book value per share at June 30, 2012, was $15.34, up 2.5% from the end of the first quarter of 2012 and up 10.0% from the same period in 2011. Outlook Mr. Nasca concluded, “Evans is optimistic we can expand our market position as the banking landscape in Western New York undergoes significant change and disruption. We will continue to broaden relationships with existing customers by adding value and attract new customers by being responsive to their needs. While the economic and regulatory environment persists in presenting significant challenges to our industry, our capital strength and customer focused business engine positions us well to maintain solid earnings into the future.”
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 $778 million in assets, 13 branches and $654 million in deposits at June 30, 2012. Evans is a full-service community bank 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 8 insurance offices in the Western New York region. Evans Investment Services, Inc., a wholly-owned subsidiary of Evans Bank, provides non-deposit investment products, such as annuities and mutual funds. Evans Bancorp, Inc. and Evans Bank routinely post news and other important information on their Web sites, at www.evansbancorp.com and www.evansbank.com. 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)||2012||2012||2011||2011||2011|
|Allowance for loan and lease losses||(10,658)||(10,790)||(11,495)||(10,708)||(10,667)|
|Goodwill and intangible assets||8,569||8,675||8,779||8,893||9,013|
|All other assets||85,485||85,716||56,430||72,073||67,498|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Regular savings deposits||342,992||334,010||313,777||301,610||277,564|
|Total stockholders' equity||$72,281||$70,455||$68,988||$68,199||$66,313|
|SHARES AND CAPITAL RATIOS|
|Common shares outstanding||4,153,332||4,128,905||4,124,892||4,106,933||4,108,103|
|Book value per share||$17.40||$17.06||$16.72||$16.61||$16.14|
|Tangible book value per share||$15.34||$14.96||$14.60||$14.44||$13.95|
|Tier 1 leverage ratio||9.77%||9.74%||9.71%||9.81%||9.80%|
|Tier 1 risk-based capital ratio||12.92%||12.96%||12.77%||12.65%||13.00%|
|Total risk-based capital ratio||14.18%||14.22%||14.03%||13.90%||14.26%|
|ASSET QUALITY DATA|
|Total non-performing loans and leases||11,008||13,041||15,176||15,331||12,778|
|Net loan and lease (recoveries) charge-offs||433||456||41||118||824|
|Non-performing loans/Total loans and leases||1.77%||2.09%||2.40%||2.42%||2.03%|
|Non-performing leases/Total loans and leases||0.07%||0.16%||0.20%||0.27%||0.32%|
|Non-performing loans and leases/Total loans and leases||1.84%||2.25%||2.60%||2.70%||2.36%|
|Net loan and lease charge-offs/Average loans and leases||0.30%||0.32%||0.03%||0.09%||0.63%|
|Allowance to loans and leases||1.78%||1.86%||1.97%||1.88%||1.97%|
|EVANS BANCORP, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA (Unaudited)|
|(in thousands, except share and per share data)||2012||2012||2011||2011||2011|
|Net interest income||6,881||6,853||6,891||6,514||6,287|
|Provision for loan and lease losses||301||(249)||828||159||1,009|
|Net interest income after provision||6,580||7,102||6,063||6,355||5,278|
|Deposit service charges||437||436||482||498||416|
|Insurance service and fee revenue||1,643||1,945||1,363||1,849||1,601|
|Bank-owned life insurance||134||117||123||117||110|
|Total non-interest income||3,038||3,288||2,862||3,184||2,925|
|Salaries and employee benefits||4,229||4,214||3,931||4,073||3,912|
|Repairs and maintenance||177||169||191||184||155|
|Advertising and public relations||336||145||247||188||247|
|Technology and communications||269||248||248||177||220|
|Amortization of intangibles||106||104||114||120||126|
|Total non-interest expenses||7,323||6,909||7,073||6,803||6,762|
|Income before income taxes||2,295||3,481||1,852||2,736||1,441|
|Income tax provision||800||1,102||514||810||469|
|PER SHARE DATA|
|Net income per common share-diluted||$0.36||$0.58||$0.33||$0.47||$0.24|
|Cash dividends per common share||-||$0.22||-||$0.20||-|
|Weighted average number of diluted shares||4,156,868||4,131,330||4,115,061||4,109,181||4,106,371|
|Return on average total assets||0.77%||1.26%||0.72%||1.08%||0.55%|
|Return on average stockholders' equity||8.34%||13.59%||7.77%||11.37%||5.90%|
|EVANS BANCORP, INC. AND SUBSIDIARIES SELECTED AVERAGE BALANCES AND YIELDS/RATES (Unaudited)|
|(dollars in thousands)|
|Loans and leases, net||$574,639||$568,863||$557,875||$541,357||$524,178|
|Interest bearing deposits at banks||39,198||23,271||22,928||17,200||16,952|
|Total interest-earning assets||714,890||697,473||683,479||657,083||641,769|
|Non interest-earning assets||58,261||58,607||58,078||59,647||62,517|
|Total interest-bearing deposits||533,261||515,361||503,711||486,128||482,137|
|Total interest-bearing liabilities||573,880||557,873||545,136||525,672||521,518|
|Other non-interest bearing liabilities||12,472||13,418||12,219||12,273||11,144|
|Total Liabilities and Equity||$773,151||$756,080||$741,557||$716,730||$704,286|
|Loans and leases, net||5.23%||5.28%||5.49%||5.36%||5.40%|
|Interest bearing deposits at banks||0.15%||0.15%||0.14%||0.16%||0.17%|
|Total interest-earning assets||4.64%||4.80%||4.99%||4.97%||5.00%|
|Total interest-bearing deposits||0.86%||0.96%||1.07%||1.14%||1.21%|
|Total interest-bearing liabilities||0.98%||1.09%||1.19%||1.26%||1.33%|
|Interest rate spread||3.66%||3.71%||3.80%||3.71%||3.67%|
|Contribution of interest-free funds||0.19%||0.22%||0.23%||0.26%||0.25%|
|Net interest margin||3.85%||3.93%||4.03%||3.97%||3.92%|