Evans Bancorp Reports Net Income of $5.9 Million in Third Quarter 2022

Rhea-AI Summary

Evans Bancorp reported third quarter 2022 results, achieving net income of $5.9 million or $1.06 per diluted share. This reflects a 6% increase in net interest income, despite a decline in Paycheck Protection Program (PPP) fees. Total loans increased by $87 million or 5%, while total deposits remained stable at $1.87 billion. The company faced a higher loan loss provision of $1.3 million due to a charged-off commercial loan. Efficiency improved, with a ratio of 63.3%. The company continues to show optimism about its local economy despite ongoing challenges.

Positive

• Net income increased sequentially to $5.9 million, or $1.06 per diluted share.
• Net interest income rose by $1.1 million, or 6%, compared to the prior quarter.
• Total loan balances increased by $87 million, or 5%, excluding PPP loans.
• Efficiency ratio improved by 270 basis points to 63.3%.

Negative

• Higher provision for loan losses of $1.3 million due to a $1.5 million charged-off loan.
• Non-performing loans increased to $25.961 million, with a charge-off rate of 0.38%.
• Total assets decreased by 4% from the prior quarter to $2.13 billion.

WILLIAMSVILLE, N.Y.--(BUSINESS WIRE)-- Evans Bancorp, Inc. (the “Company” or “Evans”) (NYSE American: EVBN), a community financial services company serving Western New York since 1920, today reported results of operations for the third quarter ended September 30, 2022.

THIRD QUARTER 2022 HIGHLIGHTS (compared with prior-year period unless otherwise noted)

• Achieved third quarter net income of $5.9 million, or $1.06 per diluted share; earnings reflect higher than typical loan loss provision compared with a credit to provision last year
• Generated net interest income growth of 6% overcoming a $2 million decrease in PPP fees as the program nears conclusion
• Total loan balances increased $87 million, or 5%, excluding PPP loans
• Total deposits of $1.87 billion were flat with last year as strong demand deposit growth offset noncore interest rate sensitive balances
• Driving operational efficiency as ratio improved 270 basis points to 63.3% while continuing to invest in people and technology

Net income was $5.9 million, or $1.06 per diluted share, in the third quarter of 2022, compared with $5.7 million, or $1.03 per diluted share, in the second quarter of 2022 and $7.0 million, or $1.27 per diluted share, in last year’s third quarter. The increase from the sequential second quarter was largely due to higher net interest income. The change from prior year reflected an increase in provision for loan losses compared with a sizable credit to provision for loan losses in the third quarter of 2021, partially offset by higher net interest income during the quarter. Return on average equity was 14.15% for the third quarter of 2022, compared with 13.77% in the second quarter of 2022 and 15.58% in the third quarter of 2021.

“Third quarter results were solid and up from the prior quarter, with strong revenue, a strengthened net interest margin, and a lower efficiency ratio. On a year-over-year basis, earnings reflected a single charged-off credit that resulted in a higher than typical provision. Overall lending performance continues to be positive considering higher rates that have slowed Commercial Real Estate activity. Of note, Commercial & Industrial lending has been more robust in these challenging economic conditions, strengthening a solid pipeline as we approach the end of the year,” said David J. Nasca, President and CEO of Evans Bancorp, Inc. “We remain positive on our local economy and believe our strong and diversified portfolio is well positioned to enable us to navigate the continuing headwinds.”

Net Interest Income
($ in thousands)
		3Q 2022				2Q 2022				3Q 2021
Interest income		$	20,487			$	19,097			$	19,302
Interest expense			1,299				1,045				1,139
Net interest income			19,188				18,052				18,163
Provision (credit) for loan losses			1,328				267				(1,459)
Net interest income after provision		$	17,860			$	17,785			$	19,622

Net interest income increased $1.1 million, or 6%, from the sequential second quarter and $1.0 million, or 6%, when compared with prior-year third quarter. The increase from the sequential quarter primarily reflected higher rates on a relatively similar base of interest earning assets. Rate changes reflected the 300 basis point increase in the federal funds rate since the beginning of 2022. Partially offsetting the improvement in interest income was a $0.3 million increase in interest expense related to competitive pricing on deposits. The increase from prior year reflected higher interest income on investment securities of $1.1 million. A $1.9 million increase in interest income on loans resulting from the fed funds rate increases and higher average loan balances offset lower Paycheck Protection Program loan fees.

Third quarter net interest margin of 3.72% improved 27 basis points over the trailing second quarter and 24 basis points from the prior-year period. The yield on loans also improved both sequentially and year-over year, up 23 basis points and 11 basis points, respectively. The cost of interest-bearing liabilities was 0.36% compared with 0.28% in the second quarter of 2022 and 0.31% in the third quarter of 2021.

As a result of the COVID-19 pandemic, the Company classified $81 million of loans to clients within the hotel industry as criticized in 2020. Subsequently, more than half of this portfolio has been upgraded or paid off. Currently, $38 million of the hotel portfolio remains in criticized status at the end of the 2022 third quarter. The improvement of the remaining criticized hotel credits is dependent on continued positive payment performance. Given released travel restrictions and improvements in tourism and business travel, trends for this industry have improved.

The higher than average provision for loan losses of $1.3 million in the current quarter was primarily due to the $1.5 million charge-off of a single government agency guaranteed commercial loan. During the quarter, the Company was notified that its claim for reimbursement of the guarantee was denied. Management has evaluated the remaining government guaranteed portfolio and determined that the above loan had unique characteristics.

Evans has deferred the adoption of the Current Expected Credit Loss Impairment Model (CECL) until January 2023, as permitted by its classification as a Smaller Reporting Company by the Securities and Exchange Commission.

Asset Quality
($ in thousands)
		3Q 2022				2Q 2022				3Q 2021
Total non-performing loans		$	25,961			$	22,010			$	25,463
Total net loan charge-offs			1,518				66				431
Non-performing loans / Total loans			1.60	%			1.36	%			1.58	%
Net loan charge-offs / Average loans			0.38	%			0.02	%			0.10	%
Allowance for loan losses / Total loans			1.15	%			1.17	%			1.12	%

“During the quarter, we were notified that the government denied the guarantee on a single loan that had been in our nonperforming category since late 2019. As a result, we charged-off the $1.5 million loan in the quarter. Although disappointed with the agency’s decision concerning the guarantee, the characteristics of this particular loan were unique and are not indicative of other commercial credits in our portfolio or specifically other loans with a government guarantee,” stated John Connerton, Chief Financial Officer of Evans Bank. “Our return on average assets (ROA) for the quarter was 1.08%, demonstrating the strength of our performance especially considering this one credit negatively impacted the ratio by 20 basis points.”

Non-Interest Income
($ in thousands)
		3Q 2022				2Q 2022				3Q 2021
Deposit service charges		$	782			$	703			$	664
Insurance service and fee revenue			3,383				2,567				3,191
Bank-owned life insurance			161				171				158
Other income			1,441				1,171				1,144
Total non-interest income		$	5,767			$	4,612			$	5,157

Higher debit card usage drove deposit service charges up 18% over last year’s third quarter.

The increase in insurance service and fee revenue from the sequential second quarter reflects seasonally higher commercial lines insurance commissions and profit-sharing revenue. The increase from the prior year was primarily due to increased commissions resulting from higher premiums and new commercial lines insurance business.

The increases in other income over both prior periods was largely due to a $0.2 million final payment in connection with a historic tax credit investment and movements in the fair value of mortgage servicing rights.

Non-Interest Expense
($ in thousands)
		3Q 2022				2Q 2022				3Q 2021
Salaries and employee benefits		$	10,450			$	9,436			$	9,930
Occupancy			1,118				1,131				1,126
Advertising and public relations			417				438				434
Professional services			839				843				840
Technology and communications			1,339				1,237				1,327
Amortization of intangibles			100				100				135
FDIC insurance			255				250				285
Other expenses			1,273				1,349				1,316
Total non-interest expenses		$	15,791			$	14,784			$	15,393

Total non-interest expense increased $1.0 million, or 7%, from the second quarter of 2022, and $0.4 million, or 3%, from last year’s third quarter.

Salaries and employee benefits increased $1.0 million, or 11%, from the sequential second quarter, which reflected a $0.7 million increase in incentive accruals. The $0.5 million, or 5%, increase over last year’s third quarter was mainly due to annual merit increases.

Technology and communications increased $0.1 million from prior quarter due to higher ATM card activity and software costs.

The Company’s GAAP efficiency ratio, or noninterest expenses divided by the sum of net interest income and noninterest income, was 63.3% in the third quarter of 2022, 65.2% in the second quarter of 2022, and 66.0% in the third quarter of 2021.

Income tax expense was $2.0 million, for an effective tax rate of 25.2%, in the third quarter of 2022 compared with 24.7% in the second quarter of 2022 and 25.6% in last year’s third quarter.

Balance Sheet Highlights

Total assets were $2.13 billion as of September 30, 2022, down 4% from the end of the trailing quarter and down 1% compared with balances at September 30, 2021. The change from the sequential quarter was due to an $81 million decline in interest-bearing deposits at banks and a $27 million decrease in investment securities which was partially offset by a $13 million increase in total loans. Since last year’s third quarter, while interest-bearing deposits decreased $172 million, investment securities increased $118 million and total loans increased $12 million. PPP loan balances, which are included in commercial and industrial loans, were down $75 million year-over-year. Excluding the decline in PPP loans, commercial and industrial loans increased $28 million, or 14%, from the third quarter of 2021. Residential mortgages and commercial real estate loans increased $27 million and $26 million, respectively, since the third quarter of 2021.

Investment securities were $377 million at September 30, 2022, $27 million lower than the end of the second quarter of 2022, but $118 million higher than at the end of last year’s third quarter. The decrease from the sequential quarter reflects changes in unrealized gains and losses on investment securities. The increase from prior year reflects the use of excess cash balances. The primary objectives of the Company’s investment portfolio are to provide liquidity, secure municipal deposits, and maximize income while preserving the safety of principal.

Total deposits of $1.87 billion decreased $95 million, or 5%, from June 30, 2022, and $2 million, or less than 1%, from the end of last year’s third quarter. The decrease from the sequential quarter primarily reflects seasonal municipal deposit outflows and a large component of one product, interest rate sensitive customers that the Bank determined to be noncore. From a product line perspective, there were decreases in consumer savings deposits of $50 million, commercial savings of $26 million, municipal savings deposits of $25 million and NOW deposits of $2 million, partially offset by an increase in demand deposits of $9 million.

Capital Management

The Company has consistently maintained regulatory capital ratios measurably above the Federal “well capitalized” standard, including a Tier 1 leverage ratio of 9.00% at September 30, 2022 compared with 8.73% at June 30, 2022 and 8.34% at September 30, 2021.

Book value per share was $27.20 at September 30, 2022 compared with $29.53 at June 30, 2022 and $32.73 at September 30, 2021. Reflected in the book value changes are the Federal Reserve’s aggressive interest rate hikes that have resulted in significant changes in unrealized gains and losses on investment securities, which reduced book value per share at September 30, 2022 by $2.83 when compared with the sequential second quarter and $8.38 from last year’s third quarter. Such unrealized gains and losses are generally due to changes in interest rates and represent the difference, net of applicable income tax effect, between the estimated fair value and amortized cost of investment securities classified as available-for-sale. The Company had no other-than-temporary impairment charges in its investment portfolio in 2022 or 2021.

Tangible book value per share was $24.65 at September 30, 2022 compared with $26.97 at June 30, 2022 and $30.07 at September 30, 2021.

In October 2022, the Company paid a semi-annual cash dividend of $0.64 per common share. Cash dividends totaled $1.26 per common share during 2022, up 5% over 2021.

Webcast and Conference Call

The Company will host a conference call and webcast on Wednesday, October 26, 2022 at 4:45 p.m. ET. Management will review the financial and operating results for the third quarter of 2022, as well as the Company’s strategy and outlook. A question and answer session will follow the formal presentation.

The conference call can be accessed by calling (201) 689-8471. Alternatively, the webcast can be monitored at www.evansbancorp.com.

A telephonic replay will be available from 7:45 p.m. ET on the day of the teleconference until Wednesday, November 2, 2022. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13733202, or access the webcast replay at www.evansbancorp.com, where a transcript will be posted once available.

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 $2.1 billion in assets and $1.9 billion in deposits at September 30, 2022. Evans is a full-service community bank with 18 financial centers providing comprehensive financial services to consumer, business and municipal customers throughout Western New York. Evans Insurance Agency, a wholly owned subsidiary, provides life insurance, employee benefits, and property and casualty insurance through ten 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 websites, 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 the impacts from COVID-19, 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)
			9/30/2022				6/30/2022				3/31/2022				12/31/2021				9/30/2021
ASSETS
Interest-bearing deposits at banks		$	6,813			$	88,190			$	147,277			$	234,929			$	179,231
Investment Securities			376,713				403,322				388,953				309,124				258,221
Loans			1,626,457				1,613,834				1,604,079				1,571,905				1,614,162
Allowance for loan losses			(18,630)				(18,819)				(18,618)				(18,438)				(18,051)
Goodwill and intangible assets			14,029				14,129				14,229				14,329				14,546
All other assets			124,323				107,698				104,814				98,791				103,949
Total assets		$	2,129,705			$	2,208,354			$	2,240,734			$	2,210,640			$	2,152,058
LIABILITIES AND STOCKHOLDERS'
EQUITY
Demand deposits			558,805				550,079				528,962				492,864				502,689
NOW deposits			263,648				265,181				257,475				259,908				253,124
Savings deposits			913,383				1,015,511				1,051,136				1,019,925				942,147
Time deposits			137,910				137,561				149,243				164,340				178,083
Total deposits			1,873,746				1,968,332				1,986,816				1,937,037				1,876,043
Borrowings			83,456				59,028				64,322				67,965				71,564
Other liabilities			22,652				18,319				20,393				21,746				25,617
Total stockholders' equity			149,850				162,675				169,203				183,892				178,834
SHARES AND CAPITAL RATIOS
Common shares outstanding			5,509,917				5,508,663				5,519,831				5,482,756				5,463,141
Book value per share		$	27.20			$	29.53			$	30.65			$	33.54			$	32.73
Tangible book value per share		$	24.65			$	26.97			$	28.08			$	30.93			$	30.07
Tier 1 leverage ratio			9.00	%			8.73	%			8.57	%			8.57	%			8.34	%
Tier 1 risk-based capital ratio			12.40	%			12.47	%			12.55	%			12.76	%			12.34	%
Total risk-based capital ratio			13.57	%			13.68	%			13.78	%			14.02	%			13.57	%
ASSET QUALITY DATA
Total non-performing loans		$	25,961			$	22,010			$	20,659			$	18,415			$	25,463
Total net loan charge-offs			1,518				66				41				6				431
Non-performing loans/Total loans			1.60	%			1.36	%			1.29	%			1.17	%			1.58	%
Net loan charge-offs /Average loans			0.38	%			0.02	%			0.01	%			-	%			0.10	%
Allowance for loans losses/Total loans			1.15	%			1.17	%			1.16	%			1.17	%			1.12	%

EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED OPERATIONS DATA (UNAUDITED)
(in thousands, except share and per share data)
			2022				2022				2022				2021				2021
			Third Quarter				Second Quarter				First Quarter				Fourth Quarter				Third Quarter
Interest income		$	20,487			$	19,097			$	17,517			$	20,732			$	19,302
Interest expense			1,299				1,045				1,016				1,057				1,139
Net interest income			19,188				18,052				16,501				19,675				18,163
Provision (credit) for loan losses			1,328				267				221				393				(1,459)
Net interest income after provision (credit) for loan losses			17,860				17,785				16,280				19,282				19,622
Deposit service charges			782				703				692				688				664
Insurance service and fee revenue			3,383				2,567				2,299				2,107				3,191
Bank-owned life insurance			161				171				154				360				158
Loss on tax credit investment			-				-				-				(30)				-
Refundable NY state historic tax credit			-				-				-				21				-
Other income			1,441				1,171				1,286				1,560				1,144
Total non-interest income			5,767				4,612				4,431				4,706				5,157
Salaries and employee benefits			10,450				9,436				9,470				10,273				9,930
Occupancy			1,118				1,131				1,180				1,208				1,126
Advertising and public relations			417				438				179				325				434
Professional services			839				843				872				799				840
Technology and communications			1,339				1,237				1,174				1,353				1,327
Amortization of intangibles			100				100				100				132				135
FDIC insurance			255				250				270				269				285
Other expenses			1,273				1,349				1,215				1,926				1,316
Total non-interest expenses			15,791				14,784				14,460				16,285				15,393
Income before income taxes			7,836				7,613				6,251				7,703				9,386
Income tax provision			1,972				1,879				1,503				1,804				2,407
Net income			5,864				5,734				4,748				5,899				6,979
PER SHARE DATA
Net income per common share-diluted		$	1.06			$	1.03			$	0.86			$	1.06			$	1.27
Cash dividends per common share		$	0.64			$	-			$	0.62			$	-			$	0.60
Weighted average number of diluted shares			5,546,764				5,550,436				5,547,548				5,540,924				5,516,781
PERFORMANCE RATIOS
Return on average total assets			1.08	%			1.04	%			0.86	%			1.07	%			1.28	%
Return on average stockholders' equity			14.15	%			13.77	%			10.46	%			12.98	%			15.58	%
Return on average tangible common stockholders' equity*			15.46	%			15.06	%			11.35	%			14.11	%			16.96	%
Efficiency ratio			63.28	%			65.23	%			69.08	%			66.79	%			66.01	%
Efficiency ratio (Non-GAAP)**			62.88	%			64.79	%			68.60	%			66.23	%			65.43	%
* The calculation of the average tangible common stockholders' equity ratio excludes goodwill and intangible assets from average stockholders equity.
** The calculation of the non-GAAP efficiency ratio excludes amortization of intangibles, gains and losses from investment securities, merger-related expenses and the impact of historic tax credit transactions.

EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED AVERAGE BALANCES AND YIELDS/RATES (UNAUDITED)
(in thousands)
			2022				2022				2022				2021				2021
			Third Quarter				Second Quarter				First Quarter				Fourth Quarter				Third Quarter
AVERAGE BALANCES
Loans, net		$	1,597,382			$	1,591,971			$	1,566,716			$	1,573,608			$	1,647,395
Investment securities			406,703				392,371				357,930				283,216				248,690
Interest-bearing deposits at banks			42,788				111,457				178,729				229,658				174,296
Total interest-earning assets			2,046,873				2,095,799				2,103,375				2,086,482				2,070,381
Non interest-earning assets			122,321				116,202				110,316				110,315				109,601
Total Assets		$	2,169,194			$	2,212,001			$	2,213,691			$	2,196,797			$	2,179,982
NOW			269,359				258,197				252,965				254,059				262,105
Savings			964,051				1,020,004				1,024,447				983,403				949,956
Time deposits			132,319				143,677				156,534				170,318				186,126
Total interest-bearing deposits			1,365,729				1,421,878				1,433,946				1,407,780				1,398,187
Borrowings			65,990				63,203				65,154				69,847				74,326
Total interest-bearing liabilities			1,431,719				1,485,081				1,499,100				1,477,627				1,472,513
Demand deposits			549,625				542,827				512,118				515,204				503,006
Other non-interest bearing liabilities			22,073				17,562				20,897				22,223				25,250
Stockholders' equity			165,777				166,531				181,576				181,743				179,213
Total Liabilities and Equity		$	2,169,194			$	2,212,001			$	2,213,691			$	2,196,797			$	2,179,982
Average tangible common stockholders' equity*			151,690				152,345				167,287				167,285				164,588
YIELD/RATE
Loans, net			4.47	%			4.24	%			4.07	%			4.86	%			4.36	%
Investment securities			2.23	%			2.09	%			1.95	%			1.91	%			1.82	%
Interest-bearing deposits at banks			2.01	%			0.81	%			0.16	%			0.15	%			0.14	%
Total interest-earning assets			3.97	%			3.65	%			3.38	%			3.94	%			3.70	%
NOW			0.10	%			0.09	%			0.09	%			0.09	%			0.10	%
Savings			0.19	%			0.14	%			0.14	%			0.14	%			0.15	%
Time deposits			0.64	%			0.49	%			0.44	%			0.44	%			0.49	%
Total interest-bearing deposits			0.22	%			0.16	%			0.16	%			0.17	%			0.18	%
Borrowings			3.27	%			2.95	%			2.79	%			2.64	%			2.62	%
Total interest-bearing liabilities			0.36	%			0.28	%			0.27	%			0.28	%			0.31	%
Interest rate spread			3.61	%			3.37	%			3.11	%			3.66	%			3.39	%
Contribution of interest-free funds			0.11	%			0.08	%			0.07	%			0.08	%			0.09	%
Net interest margin			3.72	%			3.45	%			3.18	%			3.74	%			3.48	%
* Average tangible common stockholders' equity excludes goodwill and intangible assets from average stockholders equity.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20221026006011/en/

For more information contact:

John B. Connerton

Executive Vice President and Chief Financial Officer

(716) 926-2000

jconnerton@evansbank.com

-OR-

Deborah K. Pawlowski

Kei Advisors LLC

(716) 843-3908

dpawlowski@keiadvisors.com



Media Contact:

Kathleen Rizzo Young

Public & Community Relations Manager

716-343-5562

krizzoyoung@evansbank.com

Source: Evans Bancorp, Inc.

FAQ

What were Evans Bancorp's Q3 2022 net income results?

Evans Bancorp reported a net income of $5.9 million, or $1.06 per diluted share for Q3 2022.

How much did Evans Bancorp's net interest income grow in Q3 2022?

Net interest income grew by 6%, increasing by $1.1 million compared to the previous quarter.

What were the total loan balances for Evans Bancorp in Q3 2022?

Total loan balances increased by $87 million, or 5%, excluding PPP loans.

What was the efficiency ratio for Evans Bancorp in Q3 2022?

The efficiency ratio improved to 63.3% in Q3 2022.

Did Evans Bancorp experience any loan charge-offs in Q3 2022?

Yes, there was a charge-off of $1.5 million on a single commercial loan.