Business Wire | Jul 29, 2021 04:15PM EDT

Evans Bancorp Reports Record Net Income of $6.3 Million in Second Quarter 2021

Jul. 29, 2021

WILLIAMSVILLE, N.Y.--(BUSINESS WIRE)--Jul. 29, 2021--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-bearingdeposits at $ 126,810 $ 105,658 $ 83,902 $ 88,249 $ 109,943 banks

Investment 234,350 195,012 166,600 160,757 169,975 Securities

Loans 1,697,321 1,747,229 1,693,794 1,703,076 1,685,761

Allowance for (19,942) (20,701) (20,415) (20,601) (18,754) loan losses

Goodwill andintangible 14,682 14,817 14,951 15,085 15,222 assets

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 23,824 27,076 24,138 30,218 27,124 liabilities

Totalstockholders' 175,689 166,974 168,905 162,888 161,998 equity



SHARES AND CAPITAL RATIOS

Common shares 5,443,491 5,428,993 5,411,384 5,376,742 5,376,872 outstanding

Book value per $ 32.28 $ 30.76 $ 31.21 $ 30.29 $ 30.13 share

Tier 1 leverage 8.23 % 8.19 % 8.21 % 7.82 % 8.44 %ratio

Tier 1risk-based 11.96 % 11.90 % 11.62 % 11.28 % 11.14 %capital ratio

Total risk-based 13.21 % 13.15 % 12.88 % 12.53 % 12.39 %capital ratio



ASSET QUALITY DATA

Totalnon-performing $ 24,317 $ 29,079 $ 28,118 $ 21,466 $ 19,718 loans

Total net loan - 27 60 34 - charge-offs



Non-performingloans/Total 1.43 % 1.66 % 1.66 % 1.26 % 1.17 %loans

Net loancharge-offs / - % 0.01 % 0.01 % 0.01 % - %Average loans

Allowance forloans losses/ 1.17 % 1.18 % 1.21 % 1.21 % 1.11 %Total loans

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 OPERATIONS DATA (UNAUDITED)

(in thousands, except share and per share data)



2021 2021 2020 2020 2020

Second First Quarter Fourth Third Quarter Second Quarter Quarter Quarter

Interest $ 19,576 $ 17,970 $ 18,175 $ 17,766 $ 17,069 income

Interest 1,226 1,373 1,744 2,124 2,136 expense

Net interest 18,350 16,597 16,431 15,642 14,933 income

Provision(credit) for (760) 313 (126) 1,881 597 loan losses

Net interestincome afterprovision 19,110 16,284 16,557 13,761 14,336 (credit) forloan losses



Depositservice 607 572 619 598 397 charges

Insuranceservice and 2,657 2,502 2,301 3,217 2,667 fee revenue

Bank-owned 172 163 172 170 178 life insurance

Gain on sale - - - 667 - of securities

Other income 982 1,329 1,711 1,205 997

Totalnon-interest 4,418 4,566 4,803 5,857 4,239 income



Salaries andemployee 9,365 9,044 9,087 8,101 8,005 benefits

Occupancy 1,177 1,187 1,169 1,204 1,062

Advertisingand public 405 263 233 503 123 relations

Professional 989 959 893 865 872 services

Technology and 1,432 1,264 1,306 1,365 1,467 communications

Amortization 135 135 133 136 134 of intangibles

FDIC insurance 279 300 339 290 282

Merger-related - - - 524 4,974 expenses

Other expenses 1,394 1,213 1,350 1,480 1,093

Totalnon-interest 15,176 14,365 14,510 14,468 18,012 expenses



Income before 8,352 6,485 6,850 5,150 563 income taxes

Income tax 2,039 1,633 821 606 94 provision

Net income 6,313 4,852 6,029 4,544 469



PER SHARE DATA

Net income percommon $ 1.15 $ 0.89 $ 1.11 $ 0.84 $ 0.09 share-diluted

Cash dividendsper common $ - $ 0.60 $ - $ 0.58 $ - share

Weightedaverage number 5,489,420 5,463,674 5,416,198 5,395,806 5,243,581 of dilutedshares



PERFORMANCE RATIOS

Return onaverage total 1.17 % 0.93 % 1.18 % 0.88 % 0.10 %assets

Return onaverage 14.72 % 11.48 % 14.51 % 11.09 % 1.19 %stockholders'equity

Efficiency 66.65 % 67.88 % 68.33 % 67.30 % 93.95 %ratio

Efficiencyratio 66.06 % 67.24 % 67.71 % 66.28 % 67.30 %(Non-GAAP)*



* The calculation of the non-GAAP efficiency ratio excludes amortization ofintangibles, gains and losses from investment securities, merger-relatedexpenses 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/

CONTACT: For more information contact: John B. Connerton Executive Vice President and Chief Financial Officer (716) 926-2000 jconnerton@evansbank.com

CONTACT: Media Contact: Kathleen Rizzo Young Public & Community Relations Manager 716-343-5562 krizzoyoung@evansbank.com

CONTACT: -OR- Deborah K. Pawlowski Kei Advisors LLC (716) 843-3908 dpawlowski@keiadvisors.com