HAMBURG, N.Y.--()--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.
“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.”
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.
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.
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.
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)
|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|
LIABILITIES AND STOCKHOLDERS' EQUITY
|Regular savings deposits||380,924||375,859||365,875||363,552||333,938|
|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
|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)
|Fourth Quarter||Third Quarter||Second Quarter||First Quarter||Fourth Quarter|
|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|
|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|
|Repairs and maintenance||213||210||177||169||191|
|Advertising and public relations||214||119||336||145||247|
|Technology and communications||337||320||276||263||273|
|Amortization of intangibles||63||77||105||104||114|
|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|
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|
|Return on average total assets||
|Return on average stockholders' equity||
EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED AVERAGE BALANCES AND YIELDS/RATES (UNAUDITED)
|Fourth Quarter||Third Quarter||Second Quarter||First Quarter||Fourth Quarter|
|(dollars in thousands)|
|Loans and leases, net||$585,453||$590,200||$574,639||$568,863||$557,875|
|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 interest-bearing deposits||555,010||544,632||533,261||515,361||503,711|
|Total interest-bearing liabilities||596,958||584,515||573,880||557,873||545,136|
|Other non-interest bearing liabilities||12,408||13,186||12,471||13,418||12,219|
|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|
|Loans and leases, net||5.26%||5.13%||5.23%||5.28%||5.49%|
|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%|
|Total interest-bearing deposits||0.76%||0.81%||0.86%||0.96%||1.07%|
|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)|
|Year to Date||Year to Date||Change|
|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%|
|Total non-interest income||12,824||12,432||3.2%|
|Salaries and employee benefits||17,304||15,820||9.4%|
|Repairs and maintenance||769||689||11.6%|
|Advertising and public relations||814||812||0.2%|
|Technology and communications||1,196||982||21.8%|
|Amortization of intangibles||349||490||-28.8%|
|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%|
|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|
|Return on average total assets||1.04%||0.86%|
|Return on average stockholders' equity||11.20%||9.17%|