1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended March 31, 1997 -------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------ ------ Commission file number 0-18539 ------- EVANS BANCORP, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) New York 16-1332767 - ----------------------------------- ---------------------------- (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 14-16 North Main Street, Angola, New York 14006 ----------------------------------------------- (Address of principal executive offices) (Zip Code) (716) 549-1000 ------------------------------------------------ (Issuer's telephone number) Not applicable ------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: Common Stock, $2.50 Par Value--339,790 shares as of March 31, 1997
2 INDEX EVANS BANCORP, INC. AND SUBSIDIARY <TABLE> <CAPTION> PAGE PART 1. FINANCIAL INFORMATION - ------------------------------- <S> <C> <C> Item 1. Financial Statements (Unaudited) Consolidated balance sheets--March 31, 1997 and December 31, 1996 1 Consolidated statements of income--Three months ended March 31, 1997 and 1996 2 Consolidated statements of cash flows--Three months ended March 31, 1997 and 1996 3 Notes to consolidated financial statements-- March 31, 1997 and 1996 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART II. OTHER INFORMATION 7 - --------------------------- Item 1. Legal Proceedings Item 2. Changes In Securities Item 3. Defaults upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURES 8 </TABLE>
3 PART I - FINANCIAL INFORMATION PAGE 1 ITEM I - FINANCIAL STATEMENTS <TABLE> EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS March 31, 1997 and December 31, 1996 (Unaudited) <CAPTION> March 31, December 31, ASSETS 1997 1996 -------------- ------------- <S> <C> <C> Cash and due from banks $ 5,353,187 $ 5,662,231 Interest bearing deposits in other banks 0 0 Federal Funds sold 3,410,000 1,450,000 Securities: Classified as available-for-sale, at fair value 35,982,861 30,201,120 Classified as held-to-maturity, at amortized cost 5,860,542 5,853,204 Loans, net 94,212,725 92,087,902 Premises and equipment, net 3,833,263 3,748,663 Other assets 2,308,325 1,894,937 ------------- ------------- $ 150,960,903 $ 140,898,057 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Demand $ 20,716,750 $ 20,149,152 NOW and money market accounts 6,928,037 6,437,613 Regular savings 45,662,334 42,136,290 Time Deposits, $100,000 and over 19,613,481 14,096,821 Other time accounts 40,656,532 40,641,503 ------------- ------------- 133,577,134 123,461,379 Dividend Payable 0 169,895 Other liabilities 1,787,259 1,756,700 ------------- ------------- 135,364,393 125,387,974 ------------- ------------- STOCKHOLDERS' EQUITY Common Stock, $2.50 par value; 1,000,000 shares authorized; 339,790 and 339,790 shares issued and outstanding 849,475 849,475 Surplus 10,990,720 10,990,720 Retained earnings 4,130,204 3,692,659 Unrealized losses on available for sale securities (373,889) (22,771) ------------- ------------- 15,596,510 15,510,083 ------------- ------------- $ 150,960,903 $ 140,898,057 ============= ============= </TABLE> See Notes to Consolidated Financial Statements.
4 PART I - FINANCIAL INFORMATION PAGE 2 ITEM I - FINANCIAL STATEMENTS <TABLE> EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME For the Three Months ended March 31, 1997 and 1996 (Unaudited) <CAPTION> Three Months Ended March 31, 1997 1996 ---------- ----------- <S> <C> <C> INTEREST INCOME Loans $2,098,404 $1,761,111 Federal funds sold 41,564 68,528 Securities: Taxable 362,045 348,948 Non-taxable 199,148 195,624 Deposits in other banks 0 7,828 ---------- ---------- 2,701,161 2,382,039 INTEREST EXPENSE Interest on Deposits 1,107,429 943,981 Short Term Borrowing 199 0 ---------- ---------- NET INTEREST INCOME 1,593,533 1,438,058 PROVISION FOR CREDIT LOSSES 15,000 15,000 ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 1,578,533 1,423,058 ---------- ---------- NON-INTEREST INCOME: Service charges 162,619 162,185 Other 70,681 69,457 Securities Gains and Losses 374 2,695 ---------- ---------- 233,674 234,337 ---------- ---------- NON-INTEREST EXPENSE: Salaries and employee benefits 629,061 632,101 Occupancy 186,180 135,518 Supplies 21,378 25,846 Repairs and maintenance 37,530 38,065 Advertising and public relations 28,129 38,466 Professional services 54,819 54,393 FDIC assessments 2,592 500 Other 214,157 214,574 ---------- ---------- 1,173,846 1,139,463 ---------- ---------- Income before income taxes 638,361 517,932 ---------- ---------- PROVISION FOR INCOME TAXES 200,816 151,185 ---------- ---------- NET INCOME $ 437,545 $ 366,747 ========== ========== NET INCOME PER COMMON SHARE $ 1.29 $ 1.08 ========== ========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES 339,790 339,790 ========== ========== </TABLE> See Notes to Consolidated Financial Statements.
5 PART I - FINANCIAL INFORMATION PAGE 3 ITEM I - FINANCIAL STATEMENTS <TABLE> EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 1997 and 1996 (Unaudited) <CAPTION> Three Months Ended March 31, 1997 1996 ------------ ------------ <S> <C> <C> OPERATING ACTIVITIES Interest received $2,402,873 $2,239,982 Fees and commissions received 243,468 258,413 Interest paid (1,090,095) (926,410) Cash paid to suppliers and employees (1,148,463) (1,092,103) Income taxes paid (53,250) (77,615) ------------ ------------ Net cash provided by operating activities 354,533 402,267 ------------ ------------ INVESTING ACTIVITIES Available for sale securities Purchases (13,498,292) (3,601,011) Proceeds from sales 6,961,774 1,976,041 Proceeds from maturities 208,332 2,031,789 Held to maturity securities Purchases (280,754) (111,104) Proceeds from sales 0 0 Proceeds from maturities 283,463 173,674 Additions to bank premises and equipment (183,922) (473,961) Increase in loans, net of repayments (2,411,135) (2,744,819) Proceeds from sales of loans 271,098 896,343 ------------ ------------ Net cash used in investing activities (8,649,436) (1,853,048) ------------ ------------ FINANCING ACTIVITIES Increase in deposits 10,115,754 10,264,569 Cash Dividends Paid (169,895) 0 ------------ ------------ Net cash provided by financing activities 9,945,859 10,264,569 ------------ ------------ Net increase in cash and cash equivalents 1,650,956 8,813,788 Cash and cash equivalents, January 1 7,112,231 6,443,256 ------------ ------------ Cash and cash equivalents, March 31 $8,763,187 $15,257,044 ============ ============ </TABLE> See Notes to Consolidated Financial Statements.
6 PART I - FINANCIAL INFORMATION PAGE 4 ITEM I - FINANCIAL STATEMENTS <TABLE> EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 1997 and 1996 (Unaudited) Three Months Ended March 31, 1997 1996 --------- --------- <S> <C> <C> RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $437,545 $366,747 --------- --------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 59,577 62,714 Provision for credit losses 15,000 15,000 Gain on sale of assets (2,410) (11,690) Increase in accrued interest payable 17,533 17,571 Increase in accrued interest receivable (252,357) (129,431) Increase in other liabilities 153,776 89,120 Increase in other assets (74,131) (7,764) --------- --------- Total adjustments (83,012) 35,520 --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES $354,533 $402,267 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Transfers of available for sale securities to held to maturity securities $0 $0 --------- --------- Net unrealized gain/(loss) on available for sale securities ($549,839) ($139,917) ========= ========= </TABLE> See Notes to Consolidated Financial Statements.
7 PART I - FINANCIAL INFORMATION PAGE 5 ITEM 1 - FINANCIAL STATEMENTS EVANS BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1997 AND 1996 (UNAUDITED) 1. GENERAL ------- The accounting and reporting policies followed by Evans Bancorp, Inc., a bank holding company, and its subsidiary, Evans National Bank, in the preparation of the accompanying interim financial statements conform with generally accepted accounting principles and with general practice within the banking industry. The accompanying financial statements are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of financial position and results of operations for the interim periods have been made. Such adjustments are of a normal recurring nature. The results of operations for the three month period ending March 31, 1997 are not necessarily indicative of the results to be expected for the full year. 2. SECURITIES ---------- In 1994 the Bank implemented accounting procedures for securities as outlined in Statement of Financial Accounting Standard No. 115. Securities which the Bank has the ability and intent to hold to maturity are stated at cost, plus discounts accrued and less premiums amortized. Securities which the Bank has identified as available for sale are stated at fair value. 3. ALLOWANCE FOR CREDIT LOSSES --------------------------- The provision for credit losses is based on management's evaluation of the relative risks inherent in the loan portfolio and, on an annual basis, generally exceeds the amount of net loan losses charged against the allowance. 4. INCOME TAXES ------------ Provision for deferred income taxes are made as a result of timing differences between financial and taxable income. These differences relate principally to directors deferred compensation, pension premiums payable and deferred loan origination expenses. 5. PER SHARE DATA -------------- The per share of common stock information is based upon the weighted average number of shares outstanding during each period, retroactively adjusted for stock dividends.
8 PART I - FINANCIAL INFORMATION PAGE 6 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS MATERIAL CHANGES IN FINANCIAL CONDITION - --------------------------------------- Total deposits increased 8.2% during the first three months of 1997. This compares to an increase of 9.4% during the first three months of 1996. Tax collections in local municipalities traditionally contribute to significant increases in total deposits in the first quarter. Time deposits over $100,000 have increased 39.1% since December 31, 1996, as municipalities have placed funds in short-term time deposits. Deposit increases also reflect the expansion of the Bank's trade area to include the Hamburg, NY market and increased activity at the Evans, NY facility since its May, 1996 opening. Total net loans outstanding increased 2.3% during the first three months of 1997, compared to an increase of 2.4% over the same period in 1996. Loan demand has been strong since late 1995 and the commercial mortgage portfolio has continued to grow significantly. During the first quarter of 1996, consumer loans totalling $269 thousand were sold to the Student Loan Marketing Association ("SLMA") and the Federal National Mortgage Association ("FNMA"). A total of $887 thousand in loans were sold in the first quarter of 1996. The securities portfolio increased $5.8 million or 16.1% during the first quarter of 1997. During the first quarter of 1996, the portfolio declined $884 thousand or 2.3%. Since deposit growth outpaced loan growth in the first quarter of 1997, excess funds were invested in US government and agency securities and New York State municipal bonds. These bonds provide liquidity and cash flow, and contribute to improved tax status. The Bank also purchased additional stock in the Federal Home Loan Bank as part of its membership requirement. The fair value of the available for sale portfolio declined at March 31, 1997 as the market reacted to the 25 basis point increase in the Fed funds rate on March 26. The annualized return on average assets at March 31, 1997 was 1.21%. The return on average assets at December 31, 1996 was 1.20%. The Bank's annualized return on average equity at March 31, 1997 was 11.22% compared to 10.72% at December 31, 1996. The capital to assets ratio at March 31, 1997 of 10.89% compares to 11.37% at December 31, 1996. Total assets have increased $10.1 million or 7.1% since December 31, 1996. MATERIAL CHANGES IN THE RESULTS OF OPERATIONS - --------------------------------------------- Net interest income for the quarter ending March 31, 1997 increased 10.8% over the same three month period in 1996. Interest income on loans and securities increased 13.4%. Interest expense on deposits increased 17.3%. The Bank's year-to-date net interest margin was 4.67%, declining slightly from 4.71% as of March 1996. The year-to-date yield on total earning assets was 8.29% as of March 31, 1997, increasing from 8.21% as of March 31, 1996. Yields on US treasury securities and municipal bonds have been computed on a tax-equivalent basis. Comparatively, the year-to-date cost of funds on interest-bearing deposit balances at March 31, 1997 was 4.11% increasing from 3.97% in March 1996. This is largely due to the change in the deposit mix as customers migrated out of regular savings products into higher yielding certificates. The year-to-date provision for credit losses was $15,000 through March 31, 1997. The provision was also $15,000 for the same period last year. Management remains confident in the loan portfolio and in the overall adequacy of the reserve for credit losses in relation to the quality and size of the loan portfolio. Net operating expenses increased 3.0% for the quarter compared to the first quarter of 1996. This compares with a 10% increase in the first quarter of 1996 over the first quarter of 1995. The increase in 1996 over 1995 was the result of the initial phase of the $2.5 million expansion plan. In 1996, occupancy expense increased 37.4% over the first quarter of 1996 due to the second phase of that plan, which included the opening of a newly-constructed facility in Evans, NY in May of 1996 and the renovation of the Main Street, Angola building. These costs have also increased due to the Bank's investment in technologically up-to-date check processing equipment and a new mainframe computer system. Salaries and benefits, supplies, repairs and maintenance and advertising decreased from levels recorded at March 31, 1996 and other categories such as professional services and FDIC insurance assessments showed only minimal increases. Net income for the first quarter of $438 thousand reflects an increase of 19.3% over the first quarter of 1996. The effective combined income tax rate for the first three months of 1996 was 31.5% compared to 29.2% for the same period in 1996.
9 PART II - OTHER INFORMATION PAGE 7 - --------------------------- ITEM 1. Legal Proceedings - None to report ITEM 2. Changes in Securities On May 1, 1997, the Registrant filed an amendment to its Certificate of Incorporation which effected a 5-for-1 stock split pursuant to which each share of outstanding common stock (par value $2.50 per share) was split into five shares of common stock (par value $.50 per share). The Amendment also increased the authorized number of shares of common stock to 10,000,000, par value $.50 per share. ITEM 3. Defaults upon Senior Securities - None to report ITEM 4. Submission of Matters To a Vote of Security Holders The annual shareholders meeting for the Registrant was held on April 29, 1997. At the meeting, Richard M. Craig, LaVerne G. Hall and Richard C. Stevenson were re-elected as directors for a term of three (3) years. The following votes were cast for the nominees: FOR AGAINST Richard M. Craig 266,638 1,479 LaVerne G. Hall 267,400 717 Richard C. Stevenson 254,597 13,125 Edward R. Gerecke, Jr. 930 The following directors continue their terms of office: Robert W. Allen William F. Barrett Phillip Brothman David C. Koch David M. Taylor Carl F. Ulmer At the same meeting, the shareholders also approved an amendment to the Registrant's Certificate of Incorporation to effect a 5-for-1 stock split of the Registrant's common stock shares and to increase the authorized number of common stock shares to 10,000,000, par value $.50 per share. The results of the voting were 267,155 in favor and 839 against this proposal, with 123 abstaining. ITEM 5. Other Information: A cash dividend of $.50 per share was paid on February 1, 1997 to holders of record on November 26, 1996. A total of $169,895 was paid on 339,790 shares. ITEM 6. Exhibits and Reports on form 8-K - None to report The following Exhibits are filed as part of this Report: Exhibit No. Description Page ----------- ----------- ---- 3.3 Amendment to 9 Certificate of Incorporation 4.1 Specimen Stock Certificate 12 Common Shares, par value $.50 per share 27 Financial Data Schedule 15
10 PAGE 8 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned thereunto duly authorized. Evans Bancorp, Inc. DATE May 13, 1997 /Richard M. Craig ------------------------------------ Richard M. Craig President and Chief Executive Officer DATE May 13, 1997 /James Tilley ------------------------------------ James Tilley Senior Vice President