Evans Bancorp Reports 59% Increase In Net Income For The 2012 Fourth Quarter And Record Results For The Year

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 fourth quarter and year ended December 31, 2012.

HIGHLIGHTS OF THE 2012 FOURTH QUARTER AND YEAR-END
  • Fourth quarter net income increased sharply to $2.1 million, or $0.51 per diluted share, from $1.3 million, or $0.33 per diluted share, in the fourth quarter of 2011.
  • Achieved record annual net income of $8.1 million in 2012, an increase of 33% from $6.1 million in 2011. On a per diluted share basis, net income was $1.95 compared with $1.49 in the prior year period.
  • Net interest income increased 6.9% in 2012 over 2011.
  • Return on average equity improved to 11.20% in 2012 compared with 9.17% in 2011.
  • Credit quality continued to improve in the fourth quarter. The ratio of non-performing loans and leases to total loans and leases decreased from 2.60% to 1.41% year over year.

Net income grew to $2.1 million in the fourth quarter of 2012, up 58.5% from net income of $1.3 million in the fourth quarter of 2011. The improvement in net income reflects higher net interest income, due to growth in interest earning assets and lower interest expense, stronger non-interest income performance and a reduction in the provision for loan and lease losses as credit quality trends strengthened. Return on average equity was 11.33% for the fourth quarter of 2012 compared with 7.77% in the fourth quarter of 2011.

For the twelve months ended December 31, 2012, Evans recorded net income of $8.1 million, or $1.95 per diluted share, a 33% increase over net income of $6.1 million, or $1.49 per diluted share, in the same period in 2011. The return on average equity was 11.20% for the twelve-month period ended December 31, 2012, compared with 9.17% in the same period in 2011.

“Our annual results reflect the steady growth we have achieved in a number of key areas, including loans, deposits and customer relationships, and is a reflection of the hard work of our employees," stated David J. Nasca, President and CEO of Evans Bancorp. “2012 is the second consecutive year of record earnings, which is impressive given the challenging economy and current regulatory environment. The favorable earnings trends clearly indicate that our community-based, customer-centric banking model is valued and successful.”

Net Interest Income

Net interest income was $7.1 million for the 2012 fourth quarter, up 3.0% when compared with the fourth quarter of 2011 and up 2.2% from the trailing third quarter of 2012.

The Company’s net interest margin stabilized in the fourth quarter at 3.78%, reflecting a higher yield on loans and continued re-pricing of interest bearing liabilities. The third quarter net interest margin rate was 3.76%, while the 2011 fourth quarter rate was 4.03%. When compared with last year’s fourth quarter, the Company has been able to partially offset the 51 basis point decrease in the yield on interest-earning assets through re-pricing its interest bearing liabilities by 31 basis points and improving its deposit mix.

Evans released $129 thousand in provision for loan and lease losses in the fourth quarter of 2012 as it benefited from a release of $190 thousand in leasing reserve after continued improvement in the portfolio’s performance. The prior-year period had a provision of $0.8 million, while the trailing third quarter of 2012 had a provision of $9 thousand.

Non-Interest Income Strengthens

Non-interest income increased to $3.3 million, or 31.6% of total revenue, in the fourth quarter of 2012 from $2.9 million in the fourth quarter of 2011. Insurance agency revenue of $1.6 million was up $241 thousand, or 17.7%, from the 2011 fourth quarter, due mostly to increases in profit sharing and commercial lines revenue. Other income was up $166 thousand from fourth quarter of 2011, mostly due to premiums on residential mortgages sold to Fannie Mae (servicing retained). Service charges on deposits increased 3.3% to $498 thousand from the prior-year period. Compared with the third quarter of 2012, total non-interest income was up 2.1%, due mainly to premiums on residential mortgages sold to Fannie Mae.

Non-Interest Expense Increases to Support Growth

Total non-interest expense was $7.2 million in the fourth quarter of 2012, an increase of 1.9% from $7.1 million in the fourth quarter of 2011. The largest component of the increase was salaries and employee benefits, which were up $0.2 million, or 3.9%, compared with the fourth quarter of 2011. This was due mainly to merit increases, higher health care costs and increased staff to support the Company’s growth.

The Company’s fourth quarter efficiency ratio improved to 68.78% from 71.35% during the prior-year period on stronger revenue growth coupled with expense control.

Income tax expense for the quarter ended December 31, 2012, was $1.2 million, representing an effective tax rate of 35.8% compared with an effective tax rate of 27.8% in the fourth quarter of 2011. The change in tax rate reflects a decrease in tax exempt income as a percentage of total income.

Balance Sheet Highlights

Total assets grew to $809.7 million at December 31, 2012, up 9.3% from $740.9 million December 31, 2011 and up 1.3% from $799.3 million at the end of the third quarter of 2012. Core loans, which are defined as total loans and leases less national direct financing leases, were $581.3 million at December 31, 2012, an increase of 0.7% from $577.4 million at December 31, 2011, and down 2.5% from $596.2 million at September 30, 2012. The decrease in loans during the fourth quarter was due mainly to the prepayment of several large commercial loans, despite origination activity remaining strong throughout 2012. The annual average outstanding balance of the loan portfolio increased $44.0 million, or 8.2%, in 2012 compared with 2011.

Investment securities were $95.8 million at December 31, 2012, down 0.1% from $95.9 million at the end of the third quarter of 2012 and down 7.7% from $103.8 million as of the end of the fourth quarter of 2011. Other assets increased $75.8 million over last year’s fourth quarter. The majority of this increase was in Fed Funds sold balances due to deposit growth outpacing loan growth.

Total deposits were $679.0 million at December 31, 2012, up $62.8 million, or 10.2%, from $616.2 million at December 31, 2011, and up $6.3 million, or 0.9%, from $672.7 million at September 30, 2012. The sequential quarter and year-over-year growth was attributable to strong core deposit increases in both commercial and consumer products. The Company’s Better Checking product (included in the NOW category), along with its complementary Better Savings product, have been successful in acquiring new customers, deepening existing relationships and increasing fee income.

Asset Quality Continues to Improve

Net charge-offs to average total loans and leases ratio were 0.24% for the fourth quarter of 2012, down from 0.31% in the third quarter of 2012 and up from 0.03% in the fourth quarter of 2011. The charge-off percentage remains below industry standards and reflects the Bank’s focus on strong credit standards.

The ratio of non-performing loans and leases to total loans and leases improved to 1.41% at December 31, 2012, from 1.57% and 2.60% at September 30, 2012, and December 31, 2011, respectively. During the fourth quarter of 2012, there was a $1.2 million decrease in non-performing loans and leases, due mainly to commercial loan charge-offs ($0.4 million), the continued run-off of the leasing portfolio ($0.1 million) and commercial loan pay downs ($0.5 million).

As a result of growth in charge-offs during the fourth quarter of 2012, the ratio for the allowance for loan and lease losses to total loans and leases decreased to 1.67% at December 31, 2012 compared with 1.71% at September 30, 2012 and 1.97% at December 31, 2011. While the ratio decreased, the level of non-performing loans and leases decreased to a greater extent, resulting in an improved coverage ratio of 118.3% at December 31, 2012 compared with 108.4% at September 30, 2012 and 75.7 % at December 31, 2011.

Gary J. Kajtoch, Executive Vice President and CFO, commented, “We want to grow in a prudent and profitable manner by fostering relationships with our customers and taking market share from our competitors. While we have grown earnings significantly, and realized continued decline in non-performing assets, the credit quality of our portfolios remains a priority. We believe that a sound credit culture, along with a concerted effort to improve efficiency, will result in a solid platform for future growth.”

Record Earnings Highlight Strong 2012

Net interest income for 2012 was $27.8 million, an increase of $1.8 million, or 6.9%, over 2011, primarily due to strong growth in the Company’s commercial loan portfolio. Although still strong by industry standards, the falling interest rate environment has resulted in a compression of the net interest margin to 3.84% in 2012 from 3.99% in 2011.

The Company released $68 thousand in provision in 2012, a measurable improvement from a provision for loan and lease losses of $2.5 million in 2011. The year-over-year change was mainly attributable to improved credit quality trends within the commercial loan and leasing portfolios resulting in lower provision levels during 2012. Non-performing loans and leases decreased by 45.8% to $8.2 million in 2012 from $15.2 million in 2011.

Non-interest income was $12.8 million for 2012, up $0.4 million from 2011. Positively impacting non-interest income were year-over-year increases in bank service charges ($0.1 million), insurance revenue ($0.1 million), and residential mortgages sold to Fannie Mae ($0.3 million).

Non-interest expense increased $1.6 million, or 5.7%, to $28.8 million in 2012. The increase reflects higher salaries and employee benefits of $1.5 million, due to severance costs incurred as a result of the departure of an executive from the Company, merit increases, and the addition of new employees as part of the Company’s planned growth strategy. Also contributing to the increase were professional services expenses related to the workout of criticized loans and the technology and communications line, which was due mostly to an increase in customer electronic transactions. Those increases were partially offset by lower amortization expense related to intangible assets acquired in the 2007 purchase of an insurance agency, a reduction in FDIC insurance expense and a decrease in occupancy expense driven by consolidation of retail insurance locations.

Capital Management

The Company consistently maintains regulatory capital ratios measurably above the federal “well capitalized” standard, including a Tier 1 leverage ratio of 9.69% at December 31, 2012. Book value per share was $17.94 at December 31, 2012 compared with $17.82 at September 30, 2012 and $16.72 at December 31, 2011. Tangible book value per share at December 31, 2012 was $15.92, up 0.9% from the end of the third quarter of 2012 and up 9.0% from the fourth quarter 2011.

The Company increased its annual dividend, which was paid out semi-annually, by 10% from $0.40 per share in 2011 to $0.44 per share in 2012. Evans then accelerated payment of its semi-annual dividend scheduled to be paid in April 2013 to December 2012. The December dividend of $0.24 per share was a 9% increase from the previous $0.22 per share dividend paid on October 9, 2012.

Outlook

Mr. Nasca concluded, “We believe our full-service, community banking approach, coupled with our commitment to exceeding customers’ expectations, is a competitive advantage and enables us to win new business and deepen relationships with our customers. As we enter 2013, current headwinds, including intense competition, historically low interest rates, an uneven economy and an onerous regulatory environment, are expected to persist. We believe maintaining our focus on customers by providing superior service and a comprehensive suite of personal and business products, as well as upholding conservative credit standards, will translate into our continued success.”

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 $810 million in assets, 13 branches and $679 million in deposits at December 31, 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 7 insurance offices in the Western New York region. Evans Investment Services 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)
         
12/31/2012 9/30/2012 6/30/2012 3/31/2012 12/31/2011

ASSETS
Investment Securities $95,807 $95,912 $96,802 $112,492 $103,783
Loans 581,283 596,176 594,569 575,188 577,383
Leases 1,612 2,440 3,355 4,512 6,022
Allowance for loan and lease losses (9,732) (10,208) (10,658) (10,790) (11,495)
Goodwill and intangible assets 8,429 8,492 8,569 8,675 8,779
All other assets 132,277 106,496 85,486 85,716 56,430
Total assets 809,676 799,308 778,122 775,793 740,902
 

LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits 123,405 126,251 116,231 114,423 118,037
NOW deposits 65,753 62,946 63,535 62,077 50,761
Regular savings deposits 380,924 375,859 365,875 363,552 333,938
Time deposits 108,910 107,674 108,279 109,629 113,467
Total deposits 678,992 672,730 653,920 649,681 616,203
Borrowings 42,441 39,411 40,185 42,010 42,340
Other liabilities 13,416 13,185 11,736 13,647 13,371
Total stockholders' equity $74,827 $73,982 $72,281 $70,455 $68,988
 

SHARES AND CAPITAL RATIOS
Common shares outstanding 4,171,473 4,151,985 4,153,332 4,128,905 4,124,892
Book value per share $17.94 $17.82 $17.40 $17.06 $16.72
Tangible book value per share $15.92 $15.77 $15.34 $14.96 $14.60
Tier 1 leverage ratio 9.69% 9.71% 9.77% 9.74% 9.71%
Tier 1 risk-based capital ratio 13.41% 12.96% 12.92% 12.96% 12.77%
Total risk-based capital ratio 14.67% 14.22% 14.18% 14.22% 14.03%
 

ASSET QUALITY DATA
Non-performing loans $8,058 $9,160 $10,578 $12,091 $14,016
Non-performing leases 171 255 430 950 1,160
Total non-performing loans and leases 8,229 9,415 11,008 13,041 15,176
Net loan charge-offs 346 459 433 456 41
Net lease charge-offs - - - - -
Total net loan and lease charge-offs 346 459 433 456 41
 
Non-performing loans/Total loans and leases 1.38% 1.53% 1.77% 2.09% 2.40%
Non-performing leases/Total loans and leases 0.03% 0.04% 0.07% 0.16% 0.20%
Non-performing loans and leases/Total loans and leases 1.41% 1.57% 1.84% 2.25% 2.60%
Net loan and lease charge-offs/Average loans and leases 0.24% 0.31% 0.30% 0.32% 0.03%
Allowance for loans and leases to total loans and leases 1.67% 1.71% 1.78% 1.86% 1.97%
 
 

EVANS BANCORP, INC AND SUBSIDIARIES

SELECTED OPERATIONS DATA (UNAUDITED)

(in thousands except share and per share data)
         
2012 2012 2012 2012 2011
Fourth Quarter Third Quarter Second Quarter First Quarter Fourth Quarter
Interest income 8,409 8,309 8,289 $8,369 $8,518
Interest expense 1,309 1,364 1,408 1,516 1,627
Net interest income 7,100 6,945 6,881 6,853 6,891
Provision for loan and lease losses (129) 9 301 (249) 828
Net interest income after provision 7,229 6,936 6,580 7,102 6,063
 
Deposit service charges 498 487 437 436 482
Insurance service and fee revenue 1,604 1774 1,643 1,945 1,363
Bank-owned life insurance 120 118 134 117 123
Other income 1,060 837 824 790 894
Total non-interest income 3,282 3,216 3,038 3,288 2,862
 
Salaries and employee benefits 4,083 4,778 4,229 4,214 3,931
Occupancy 776 679 645 685 750
Repairs and maintenance 213 210 177 169 191
Advertising and public relations 214 119 336 145 247
Professional services 463 356 567 539 456
Technology and communications 337 320 276 263 273
Amortization of intangibles 63 77 105 104 114
FDIC insurance 130 118 139 134 153
Other expenses 926 699 848 656 958
Total non-interest expenses 7,204 7,356 7,323 6,909 7,073
 
Income before income taxes 3,307 2,796 2,295 3,481 1,852
Income tax provision 1,185 660 800 1,102 514
Net income 2,122 $2,136 $1,495 $2,379 $1,338
 

PER SHARE DATA
Net income per common share-diluted $0.51 $0.51 $0.36 $0.58 $0.33
Cash dividends per common share $0.24 $0.22 $0.00 $0.22 $0.00
Weighted average number of diluted shares 4,180,578 4,177,567 4,156,868 4,131,330 4,115,061
 

PERFORMANCE RATIOS
Return on average total assets

1.05%
1.07% 0.77% 1.26% 0.72%
Return on average stockholders' equity

11.33%
11.60% 8.33% 13.59% 7.77%
Efficiency ratio 68.78% 71.64% 72.75% 67.10% 71.35%
 
 

EVANS BANCORP, INC AND SUBSIDIARIES

SELECTED AVERAGE BALANCES AND YIELDS/RATES (UNAUDITED)

(in thousands)
         
2012 2012 2012 2012 2011
Fourth Quarter Third Quarter Second Quarter First Quarter Fourth Quarter

AVERAGE BALANCES
(dollars in thousands)
 
Loans and leases, net $585,453 $590,200 $574,639 $568,863 $557,875
Investment securities 101,135 99,347 101,053 105,339 102,676
Interest bearing deposits at banks 63,797 48,619 39,198 23,271 22,928
Total interest-earning assets 750,385 738,166 714,890 697,473 683,479
Non interest-earning assets 58,617 57,776 58,261 58,607 58,078
Total Assets 809,002 795,942 773,151 756,080 741,557
 
NOW 62,245 62,283 60,472 55,116 49,665
Regular savings 355,327 352,378 336,798 326,090 307,164
Muni-Vest savings 28,991 21,792 26,821 22,076 29,808
Time deposits 108,447 108,179 109,170 112,079 117,074
Total interest-bearing deposits 555,010 544,632 533,261 515,361 503,711
Other borrowings 41,948 39,883 40,619 42,512 41,425
Total interest-bearing liabilities 596,958 584,515 573,880 557,873 545,136
 
Demand deposits 124,741 124,590 115,033 114,783 115,342
Other non-interest bearing liabilities 12,408 13,186 12,471 13,418 12,219
Stockholders' equity 74,895 73,651 71,766 70,006 68,860
Total interest-free funds 212,044 211,427 199,271 198,207 196,421
 
Total Liabilities and Equity $809,002 $795,942 $773,151 $756,080 $741,557
 

YIELD/RATE
 
Loans and leases, net 5.26% 5.13% 5.23% 5.28% 5.49%
Investment securities 2.74% 2.93% 2.98% 3.23% 3.33%
Interest bearing deposits at banks 0.09% 0.12% 0.15% 0.15% 0.14%
Total interest-earning assets 4.48% 4.50% 4.64% 4.80% 4.99%
 
NOW 1.05% 1.03% 0.99% 1.01% 1.29%
Regular savings 0.46% 0.54% 0.57% 0.69% 0.77%
Muni-Vest savings 0.30% 0.29% 0.30% 0.38% 0.46%
Time deposits 1.70% 1.67% 1.80% 1.85% 1.94%
Total interest-bearing deposits 0.76% 0.81% 0.86% 0.96% 1.07%
Other borrowings 2.45% 2.59% 2.58% 2.58% 2.65%
Total interest-bearing liabilities 0.88% 0.93% 0.98% 1.09% 1.19%
 
Interest rate spread 3.60% 3.57% 3.66% 3.71% 3.80%
Contribution of interest-free funds 0.18% 0.19% 0.19% 0.22% 0.23%
Net interest margin 3.78% 3.76% 3.85% 3.93% 4.03%
 
     
EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED OPERATIONS DATA (Unaudited)
(in thousands except share and per share data)
 
2012 2011
Year to Date Year to Date Change
Interest income $33,376 $32,715 2.0%
Interest expense 5,597 6,727 -16.8%
Net interest income 27,779 25,988 6.9%
Provision for loan and lease losses (68) 2,484 -102.7%
Net interest income after provision 27,847 23,504 18.5%
 
Deposit service charges 1,858 1,783 4.2%
Insurance service and fee revenue 6,966 6,902 0.9%
Bank-owned life insurance 489 454 7.7%
Other income 3,511 3,293 6.6%
Total non-interest income 12,824 12,432 3.2%
 
Salaries and employee benefits 17,304 15,820 9.4%
Occupancy 2,785 3,119 -10.7%
Repairs and maintenance 769 689 11.6%
Advertising and public relations 814 812 0.2%
Professional services 1,925 1,776 8.4%
Technology and communications 1,196 982 21.8%
Amortization of intangibles 349 490 -28.8%
FDIC insurance 521 652 -20.1%
Other expense 3,129 2,901 7.9%
Total non-interest expense 28,792 27,241 5.7%
 
Income before income taxes 11,879 8,695 36.6%
Income tax provision (benefit) 3,747 2,583 45.1%
Net income $8,132 $6,112 33.0%
 
PER SHARE DATA
Net income per common share-diluted $1.95 $1.49 30.9%
Cash dividends per common share $0.68 $0.40
Weighted average number of diluted shares 4,159,690 4,104,533
 
PERFORMANCE RATIOS
Return on average total assets 1.04% 0.86%
Return on average stockholders' equity 11.20% 9.17%
Efficiency ratio 70.05% 69.68%

Copyright Business Wire 2010

More from Press Releases

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

21st Century Fox Scoops Up Local News Stations

21st Century Fox Scoops Up Local News Stations

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Three-Part FREE Webinar Series

Three-Part FREE Webinar Series

March 24 Full-Day Course Offering: Professional Approach to Trading SPX

March 24 Full-Day Course Offering: Professional Approach to Trading SPX