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
second quarter ended June 30, 2021. Results include the acquisition
of Fairport Savings Bank (“FSB”), effective May 1, 2020.
SECOND QUARTER 2021 HIGHLIGHTS (compared with prior-year
period unless otherwise noted)
- Net interest income increased 23% to $18.4 million reflecting
higher interest-earning assets and accelerated amortization of
Paycheck Protection Program (“PPP”) fees
- Loan portfolio increased 4%, excluding PPP loans, on solid
commercial real estate and residential mortgage originations
- Results include $0.8 million release of allowance for loan
losses due to improved credit quality across the portfolio and
continued positive macroeconomic trends
- Total deposits of $1.88 billion, increased 4%
Net income was $6.3 million, or $1.15 per diluted share, in the
second quarter of 2021, compared with $4.9 million, or $0.89 per
diluted share, in the first quarter of 2021 and $0.5 million, or
$0.09 per diluted share, in last year’s second quarter. The
increase from the prior-year period included higher net interest
income of $3.4 million reflecting higher interest-earning assets
and fees earned in connection with PPP, along with a $1.4 million
decrease in provision for loan loss reflecting improved economic
trends and conditions related to the Coronavirus pandemic
(“COVID-19”). Also incurred in the prior-year period was $2.8
million of higher non-interest expenses, largely related to the FSB
merger. The change in net income from the sequential quarter
reflected a $1.8 million increase in net interest income primarily
from fees earned in connection with PPP loans and commercial
prepayment fees recognized during the quarter. In addition,
provision for loan loss decreased $1.1 million from the first
quarter of 2021.
Return on average equity was 14.72% for the second quarter of
2021, compared with 11.48% in the first quarter of 2021 and 1.19%
in the second quarter of 2020.
“Evans delivered record earnings for the quarter reflecting a
strong emergence from the pandemic as the economy recovers. We
exhibited strength in capturing the pent-up demand in both
commercial and consumer lending and regained the momentum that had
been building pre-COVID. These results were driven by flexibility,
responsiveness and engagement with clients and prospective clients
throughout this period,” said David J. Nasca, President and CEO of
Evans Bancorp, Inc.
“During these adverse economic conditions we have been able to
serve and expand our client base, increase our market presence in
Rochester and deepen relationships. As the economy continues to
rebound, we are excited and well-positioned as a strong resource to
support our clients in their growth and expansion plans and grow
our franchise.”
Net Interest Income
($ in thousands)
2Q 2021
1Q 2021
2Q 2020
Interest income
$
19,576
$
17,970
$
17,069
Interest expense
1,226
1,373
2,136
Net interest income
18,350
16,597
14,933
Provision (credit) for loan losses
(760)
313
597
Net interest income after provision
$
19,110
$
16,284
$
14,336
Net interest income increased $1.8 million, or 11%, from the
sequential first quarter, and $3.4 million, or 23%, from prior-year
second quarter. The change over both periods reflected an increase
in fees earned in connection with PPP and commercial prepayments.
The increase from the prior-year period also reflected higher
interest-earning assets. As PPP loans are forgiven, the Company is
accelerating the recognition of fees that were being amortized over
the original life of the loan. PPP fees recognized in interest
income were $2.5 million in the second quarter of 2021, $1.7
million in the first quarter of 2021 and $0.6 million in the second
quarter of 2020.
Second quarter net interest margin of 3.62% increased 19 basis
points from the first quarter of 2021, reflecting the accelerated
PPP fee amortization and commercial prepayment income. Net interest
margin increased 26 basis points from the second quarter of 2020
due to higher interest-earning assets, PPP fee amortization,
commercial prepayment income and reduced interest expense as the
Company continued to align rates on deposits. The yield on loans
increased 26 basis points when compared with the first quarter of
2021 and increased 10 basis points when compared with the second
quarter of 2020. The cost of interest-bearing liabilities decreased
to 0.34% compared with 0.39% in the first quarter of 2021 and 0.65%
in the second quarter of 2020.
The $0.8 million release of allowance for loan losses reflects a
decrease of $0.7 million in specific reserves associated with a
single commercial customer relationship, improvement of
non-performing assets and continued positive macroeconomic trends,
partially offset by loan growth during the quarter. Evans has
deferred the adoption of the Current Expected Credit Loss
Impairment Model (CECL), as permitted by its classification as a
Smaller Reporting Company by the Securities and Exchange
Commission.
Asset Quality
($ in thousands)
2Q 2021
1Q 2021
2Q 2020
Total non-performing loans
$
24,317
$
29,079
$
19,718
Total net loan charge-offs
-
27
-
Non-performing loans / Total loans
1.43
%
1.66
%
1.17
%
Net loan charge-offs / Average loans
-
%
0.01
%
-
%
Allowance for loan losses / Total
loans
1.17
%
1.18
%
1.11
%
The Company continues to classify loans to clients within the
hotel industry as criticized given their level of seasonality and
ongoing challenges during the COVID-19 pandemic. At June 30, 2021,
criticized assets totaled $146.2 million, with the hotel portfolio
comprising 54% of that amount. The Company continues to monitor
each client in that industry including on-going conversations with
the borrowers. The $4.8 million decrease in non-performing assets
compared with the first quarter of 2021 reflects a $2.8 million
commercial real estate loan that was moved back to accruing status
during the quarter and a $2.1 million payoff of a commercial loan
within the hotel industry. The increase from the prior-year period
reflects loans that were moved to nonaccrual status, primarily
within commercial real estate.
“Credit quality continues to improve with non-performing assets
declining 16% from the sequential quarter and, when combined with
an improved economic outlook, allowed us to release $760 thousand
of allowance for loan losses during the quarter,” stated John
Connerton, Chief Financial Officer of Evans Bank. “We continue to
closely monitor the hotel portfolio and are beginning to see modest
improvements as the economy recovers and summer travel increases.
We are further optimistic given the expected opening of the U.S. –
Canada border as many of the locations rely on cross-border
traffic. Ultimately, the hotel portfolio continues to be
well-collateralized, and we believe that we are appropriately
reserved.”
Non-Interest Income
($ in thousands)
2Q 2021
1Q 2021
2Q 2020
Deposit service charges
$
607
$
572
$
397
Insurance service and fee revenue
2,657
2,502
2,667
Bank-owned life insurance
172
163
178
Other income
982
1,329
997
Total non-interest income
$
4,418
$
4,566
$
4,239
The increase in deposit service charges compared with prior
year’s second quarter was due to the temporary suspension of
certain fees during the second quarter of 2020 to assist customers
affected by COVID-19.
The increase in insurance service and fee revenue from the
sequential first quarter reflects seasonally higher policy renewals
for institutional clients.
The decrease in other income from the sequential first quarter
was largely due to changes in the fair value of mortgage servicing
rights.
Non-Interest Expense
($ in thousands)
2Q 2021
1Q 2021
2Q 2020
Salaries and employee benefits
$
9,365
$
9,044
$
8,005
Occupancy
1,177
1,187
1,062
Advertising and public relations
405
263
123
Professional services
989
959
872
Technology and communications
1,432
1,264
1,467
Amortization of intangibles
135
135
134
FDIC insurance
279
300
282
Merger-related expenses
-
-
4,974
Other expenses
1,394
1,213
1,093
Total non-interest expenses
$
15,176
$
14,365
$
18,012
Total non-interest expense increased $0.8 million, or 6%, from
the first quarter of 2021, but decreased from last year’s second
quarter, as that period included FSB merger-related expenses of
$5.0 million.
Salaries and employee benefits increased 4% from the first
quarter of 2021 largely due to annual merit increases and the
capitalization of salary cost related to the origination of PPP
loans in the prior period. The year-over-year change also included
prior period capitalization of salary cost related to PPP loan
originations, as well as incentive accruals and the addition of
personnel related to the FSB acquisition and strategic hires to
support the Company’s continued growth.
The increase in technology and communications from the
sequential first quarter was due to higher software costs, volume
related ATM card fees and online banking activity.
The increase in other expenses from the second quarter of 2020
included higher loan fees and charitable contributions.
The Company’s GAAP efficiency ratio, or noninterest expenses
divided by the sum of net interest income and noninterest income,
was 66.7% in the second quarter of 2021, 67.9% in the first quarter
of 2021, and 93.9% in the second quarter of 2020. The Company’s
non-GAAP efficiency ratio, excluding amortization expense, gains
and losses from investment securities, and merger-related expenses,
was 66.1% compared with 67.2% in the first quarter of 2021 and
67.3% in last year’s second quarter.
Income tax expense was $2.0 million, or an effective tax rate of
24.4%, for the second quarter of 2021 compared with 25.2% in the
first quarter of 2021 and 16.7% in last year’s second quarter.
Excluding the impact of a 2020 historic tax credit transaction, the
effective tax rate was 25.9% in the second quarter of 2020.
Balance Sheet Highlights
Total assets were $2.16 billion as of June 30, 2021, an increase
of 1% from $2.14 billion at March 31, 2021, and up 5% from $2.07
billion at June 30, 2020. The increase from the prior year was due
to an increase in investment securities, interest-bearing deposits
at banks, and loan growth. Since last year’s second quarter,
commercial real estate loans have increased $60 million and
residential mortgages $26 million. Commercial and Industrial loans
decreased $75 million from the second quarter of 2020. Of the
decline, $49 million was a result of the change in PPP loan
balances reflecting the SBA forgiveness of $152 million of PPP
loans offset by $103 million of PPP loan originations.
Investment securities were $234 million at June 30, 2021, $39
million higher than the end of the first quarter of 2021, and $64
million higher than at the end of last year’s second quarter. The
increases reflect 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 $1.88 billion increased $12 million, or 1%,
from March 31, 2021, and were up $75 million, or 4%, from the end
of last year’s second quarter. The increase from the prior year
reflects an accumulation of liquidity by commercial customers in
response to the pandemic, including deposits related to PPP loans,
and increases in consumer deposits from government stimulus
payments and lower consumer spending.
Capital Management
The Company has consistently maintained regulatory capital
ratios measurably above the Federal “well capitalized” standard,
including a Tier 1 leverage ratio of 8.23% at June 30, 2021
compared with 8.19% at March 31, 2021 and 8.44% at June 30, 2020.
Book value per share was $32.28 at June 30, 2021 compared with
$30.76 at March 31, 2021 and $30.13 at June 30, 2020.
Webcast and Conference Call
The Company will host a conference call and webcast on Thursday,
July 29, 2021 at 4:45 p.m. ET. Management will review the financial
and operating results for the second quarter of 2021, 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 Thursday, August 5, 2021. To listen
to the archived call, dial (412) 317-6671 and enter conference ID
number 13721244, 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 $2.2
billion in assets and $1.9 billion in deposits at June 30, 2021.
Evans is a full-service community bank with 20 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)
6/30/2021
3/31/2021
12/31/2020
9/30/2020
6/30/2020
ASSETS
Interest-bearing deposits at banks
$
126,810
$
105,658
$
83,902
$
88,249
$
109,943
Investment Securities
234,350
195,012
166,600
160,757
169,975
Loans
1,697,321
1,747,229
1,693,794
1,703,076
1,685,761
Allowance for loan losses
(19,942)
(20,701)
(20,415)
(20,601)
(18,754)
Goodwill and intangible assets
14,682
14,817
14,951
15,085
15,222
All other assets
106,982
102,250
105,283
110,427
103,793
Total assets
$
2,160,203
$
2,144,265
$
2,044,115
$
2,056,993
$
2,065,940
LIABILITIES AND STOCKHOLDERS'
EQUITY
Demand deposits
486,737
486,385
436,157
442,536
428,655
NOW deposits
261,173
238,769
230,751
215,492
229,788
Savings deposits
940,352
924,781
825,947
799,739
794,513
Time deposits
195,533
222,002
278,554
323,211
356,147
Total deposits
1,883,795
1,871,937
1,771,409
1,780,978
1,809,103
Borrowings
76,895
78,278
79,663
82,909
67,715
Other liabilities
23,824
27,076
24,138
30,218
27,124
Total stockholders' equity
175,689
166,974
168,905
162,888
161,998
SHARES AND CAPITAL RATIOS
Common shares outstanding
5,443,491
5,428,993
5,411,384
5,376,742
5,376,872
Book value per share
$
32.28
$
30.76
$
31.21
$
30.29
$
30.13
Tier 1 leverage ratio
8.23
%
8.19
%
8.21
%
7.82
%
8.44
%
Tier 1 risk-based capital ratio
11.96
%
11.90
%
11.62
%
11.28
%
11.14
%
Total risk-based capital ratio
13.21
%
13.15
%
12.88
%
12.53
%
12.39
%
ASSET QUALITY DATA
Total non-performing loans
$
24,317
$
29,079
$
28,118
$
21,466
$
19,718
Total net loan charge-offs
-
27
60
34
-
Non-performing loans/Total loans
1.43
%
1.66
%
1.66
%
1.26
%
1.17
%
Net loan charge-offs /Average loans
-
%
0.01
%
0.01
%
0.01
%
-
%
Allowance for loans losses/Total loans
1.17
%
1.18
%
1.21
%
1.21
%
1.11
%
EVANS BANCORP, INC AND
SUBSIDIARIES
SELECTED OPERATIONS DATA
(UNAUDITED)
(in thousands, except share and per
share data)
2021
2021
2020
2020
2020
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
Interest income
$
19,576
$
17,970
$
18,175
$
17,766
$
17,069
Interest expense
1,226
1,373
1,744
2,124
2,136
Net interest income
18,350
16,597
16,431
15,642
14,933
Provision (credit) for loan losses
(760)
313
(126)
1,881
597
Net interest income after provision
(credit) for loan losses
19,110
16,284
16,557
13,761
14,336
Deposit service charges
607
572
619
598
397
Insurance service and fee revenue
2,657
2,502
2,301
3,217
2,667
Bank-owned life insurance
172
163
172
170
178
Gain on sale of securities
-
-
-
667
-
Other income
982
1,329
1,711
1,205
997
Total non-interest income
4,418
4,566
4,803
5,857
4,239
Salaries and employee benefits
9,365
9,044
9,087
8,101
8,005
Occupancy
1,177
1,187
1,169
1,204
1,062
Advertising and public relations
405
263
233
503
123
Professional services
989
959
893
865
872
Technology and communications
1,432
1,264
1,306
1,365
1,467
Amortization of intangibles
135
135
133
136
134
FDIC insurance
279
300
339
290
282
Merger-related expenses
-
-
-
524
4,974
Other expenses
1,394
1,213
1,350
1,480
1,093
Total non-interest expenses
15,176
14,365
14,510
14,468
18,012
Income before income taxes
8,352
6,485
6,850
5,150
563
Income tax provision
2,039
1,633
821
606
94
Net income
6,313
4,852
6,029
4,544
469
PER SHARE DATA
Net income per common share-diluted
$
1.15
$
0.89
$
1.11
$
0.84
$
0.09
Cash dividends per common share
$
-
$
0.60
$
-
$
0.58
$
-
Weighted average number of diluted
shares
5,489,420
5,463,674
5,416,198
5,395,806
5,243,581
PERFORMANCE RATIOS
Return on average total assets
1.17
%
0.93
%
1.18
%
0.88
%
0.10
%
Return on average stockholders' equity
14.72
%
11.48
%
14.51
%
11.09
%
1.19
%
Efficiency ratio
66.65
%
67.88
%
68.33
%
67.30
%
93.95
%
Efficiency ratio (Non-GAAP)*
66.06
%
67.24
%
67.71
%
66.28
%
67.30
%
* 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)
2021
2021
2020
2020
2020
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
AVERAGE BALANCES
Loans, net
$
1,718,507
$
1,706,325
$
1,677,502
$
1,671,338
$
1,535,206
Investment securities
216,134
180,473
162,941
172,712
179,677
Interest-bearing deposits at banks
97,168
76,651
92,974
106,154
73,973
Total interest-earning assets
2,031,809
1,963,449
1,933,417
1,950,204
1,788,856
Non interest-earning assets
119,392
115,200
117,458
117,244
107,738
Total Assets
$
2,151,201
$
2,078,649
$
2,050,875
$
2,067,448
$
1,896,594
NOW
246,565
230,627
218,587
221,343
203,458
Savings
928,375
866,991
818,878
799,082
721,578
Time deposits
210,287
246,120
300,605
337,967
337,187
Total interest-bearing deposits
1,385,227
1,343,738
1,338,070
1,358,392
1,262,223
Borrowings
77,050
78,284
80,814
84,926
51,493
Total interest-bearing liabilities
1,462,277
1,422,022
1,418,884
1,443,318
1,313,716
Demand deposits
493,734
464,579
439,953
430,658
399,807
Other non-interest bearing liabilities
23,682
23,031
25,882
29,644
25,540
Stockholders' equity
171,508
169,017
166,156
163,828
157,531
Total Liabilities and Equity
$
2,151,201
$
2,078,649
$
2,050,875
$
2,067,448
$
1,896,594
YIELD/RATE
Loans, net
4.32
%
4.06
%
4.09
%
4.01
%
4.22
%
Investment securities
1.94
%
2.00
%
2.18
%
2.06
%
2.12
%
Interest-bearing deposits at banks
0.08
%
0.08
%
0.10
%
0.10
%
0.08
%
Total interest-earning assets
3.86
%
3.71
%
3.74
%
3.62
%
3.84
%
NOW
0.11
%
0.13
%
0.15
%
0.19
%
0.24
%
Savings
0.17
%
0.20
%
0.24
%
0.33
%
0.37
%
Time deposits
0.52
%
0.64
%
0.90
%
1.04
%
1.40
%
Total interest-bearing deposits
0.21
%
0.27
%
0.37
%
0.48
%
0.62
%
Borrowings
2.55
%
2.52
%
2.43
%
2.26
%
1.41
%
Total interest-bearing liabilities
0.34
%
0.39
%
0.49
%
0.59
%
0.65
%
Interest rate spread
3.52
%
3.32
%
3.25
%
3.03
%
3.19
%
Contribution of interest-free funds
0.10
%
0.11
%
0.13
%
0.16
%
0.17
%
Net interest margin
3.62
%
3.43
%
3.38
%
3.19
%
3.36
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210729005937/en/
For more information contact: John B. Connerton Executive
Vice President and Chief Financial Officer (716) 926-2000
jconnerton@evansbank.com
Media Contact: Kathleen Rizzo Young Public &
Community Relations Manager 716-343-5562
krizzoyoung@evansbank.com
-OR- Deborah K. Pawlowski Kei Advisors LLC (716) 843-3908
dpawlowski@keiadvisors.com
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