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 September 30, 1999 [ ] 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 (x) whether the issuer (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 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: Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: Common Stock, $.50 Par Value--1,698,950 shares as of October 31, 1999
2 INDEX EVANS BANCORP, INC. AND SUBSIDIARY PAGE PART 1. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated balance sheets--September 30, 1999 and December 31, 1998 1 Consolidated statements of income--Three months ended September 30, 1999 and 1998 2 Consolidated statements of income--Nine months ended September 30, 1999 and 1998 3 Consolidated statements of cash flows--Nine months ended September 30, 1999 and 1998 4 Notes to consolidated financial statements-- September 30, 1999 and 1998 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Quantative and Qualitative Disclosures About Market Risks 9 PART II. OTHER INFORMATION 10 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 11
3 PART I - FINANCIAL INFORMATION PAGE 1 ITEM I - FINANCIAL STATEMENTS EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS September 30, 1999 and December 31, 1998 (Unaudited) <TABLE> <CAPTION> September 30, December 31, ASSETS 1999 1998 ------------- ------------ <S> <C> <C> Cash and due from banks $ 6,070,060 $ 7,300,780 Federal funds sold 1,275,000 0 Securities: Classified as available-for-sale, at fair value 57,612,890 45,969,587 Classified as held-to-maturity, at amortized cost 4,538,369 4,090,385 Loans, net 111,182,050 110,526,449 Properties and equipment, net 3,720,991 3,696,658 Other assets 3,438,696 2,536,371 ------------ ------------ TOTAL ASSETS $187,838,056 $174,120,230 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Demand $ 28,751,547 $ 25,857,037 NOW and money market accounts 7,448,976 7,554,104 Regular savings 59,830,207 47,676,615 Time deposits, $100,000 and over 23,038,459 24,208,290 Other time accounts 41,999,599 38,787,590 ------------ ------------ 161,068,788 144,083,636 Federal funds purchased 0 2,225,000 Other borrowed funds 5,000,000 7,000,000 Dividend payable 407,748 0 Other liabilities 3,052,711 2,188,181 ------------ ------------ TOTAL LIABILITIES 169,529,247 155,496,817 ------------ ------------ STOCKHOLDERS' EQUITY Common stock, $.50 par value; 10,000,000 shares authorized; 1,698,950 shares issued 849,475 849,475 Capital surplus 10,990,720 10,990,720 Retained earnings 7,107,905 6,400,764 Accumulated other comprehensive income (net of tax) (639,291) 443,308 ------------ ------------ 18,308,809 18,684,267 Less: Treasury stock, at cost (2,419 shares) 0 (60,854) Total stockholders' equity 18,308,809 18,623,413 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $187,838,056 $174,120,230 ============ ============ </TABLE> See Notes to Consolidated Statements.
4 PART I - FINANCIAL INFORMATION PAGE 2 ITEM I - FINANCIAL STATEMENTS EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME For the Three Months ended September 30, 1999 and 1998 (Unaudited) <TABLE> <CAPTION> Three Months Ended September 30, 1999 1998 ---------- ---------- <S> <C> <C> INTEREST INCOME Loans $2,341,696 $2,369,670 Federal funds sold 59,640 24,375 Securities: Taxable 458,348 318,942 Non-taxable 339,710 282,552 ---------- ---------- Total Interest Income 3,199,394 2,995,539 INTEREST EXPENSE Interest on deposits 1,165,647 1,196,915 Short term borrowing 78,931 36,627 ---------- ---------- NET INTEREST INCOME 1,954,816 1,761,997 PROVISION FOR LOAN LOSSES 45,000 30,000 ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,909,816 1,731,997 ---------- ---------- NON-INTEREST INCOME: Service charges 196,298 180,681 Other 200,222 99,375 Securities loss 0 (8,791) ---------- ---------- Total non-interest income 396,520 271,265 ---------- ---------- NON-INTEREST EXPENSE: Salaries and employee benefits 810,438 676,878 Occupancy 230,676 191,247 Supplies 48,628 23,628 Repairs and maintenance 57,424 46,166 Advertising and public relations 30,622 26,129 Professional services 69,287 71,939 FDIC assessments 4,286 4,178 Other 298,823 242,070 ---------- ---------- Total non-interest expense 1,550,184 1,282,235 ---------- ---------- Income before income taxes 756,152 721,027 ---------- ---------- INCOME TAXES 203,450 207,400 ---------- ---------- NET INCOME $ 552,702 $ 513,627 ========== ========== NET INCOME PER COMMON SHARE-BASIC $0.33 $0.30 ========== ========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES 1,698,950 1,698,950 ========== ========== </TABLE> See Notes to Consolidated Statements.
5 PART I - FINANCIAL INFORMATION PAGE 3 ITEM I - FINANCIAL STATEMENTS EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME For the Nine Months ended September 30, 1999 and 1998 (Unaudited) <TABLE> <CAPTION> Nine Months Ended September 30, 1999 1998 ---------- ---------- <S> <C> <C> INTEREST INCOME Loans $7,003,251 $7,067,297 Federal funds sold 152,958 64,632 Securities: Taxable 1,235,883 965,569 Non-taxable 947,049 808,094 ---------- ---------- Total Interest Income 9,339,141 8,905,592 INTEREST EXPENSE Interest on deposits 3,437,441 3,584,941 Short term borrowing 237,167 85,124 ---------- ---------- NET INTEREST INCOME 5,664,533 5,235,527 PROVISION FOR LOAN LOSSES 125,000 90,000 ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,539,533 5,145,527 ---------- ---------- NON-INTEREST INCOME: Service charges 543,330 528,711 Other 439,910 236,724 Securities gain(loss) 1,064 (5,483) ---------- ---------- Total non-interest income 984,304 759,952 ---------- ---------- NON-INTEREST EXPENSE: Salaries and employee benefits 2,323,560 2,002,930 Occupancy 665,578 571,740 Supplies 116,533 83,141 Repairs and maintenance 170,455 138,801 Advertising and public relations 126,460 87,931 Professional services 195,397 204,325 FDIC assessments 12,585 12,472 Other 852,032 686,569 ---------- ---------- Total Non-interest Expense 4,462,600 3,787,909 ---------- ---------- Income before income taxes 2,061,237 2,117,570 ---------- ---------- INCOME TAXES 555,900 602,100 ---------- ---------- NET INCOME $1,505,337 $1,515,470 ========== ========== NET INCOME PER COMMON SHARE-BASIC $0.89 $0.89 ========== ========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES 1,698,950 1,698,950 ========== ========== </TABLE> See Notes to Consolidated Statements.
6 PART I - FINANCIAL INFORMATION PAGE 4 ITEM I - FINANCIAL STATEMENTS EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1999 and 1998 (Unaudited) <TABLE> <CAPTION> Nine Months Ended September 30, 1999 1998 ------------ ------------ <S> <C> <C> OPERATING ACTIVITIES Interest received $ 9,094,173 $ 8,506,687 Fees and commissions received 942,294 834,464 Interest paid (3,710,598) (3,520,598) Cash paid to suppliers and employees (4,086,341) (3,575,827) Income taxes paid (621,482) (583,365) ------------ ------------ Net cash provided by operating activities 1,618,046 1,661,361 ------------ ------------ INVESTING ACTIVITIES Available for sale securities Purchases (24,484,803) (27,144,110) Proceeds from sales 2,842,567 14,084,899 Proceeds from maturities 6,105,430 6,741,195 Held to maturity securities Purchases (2,263,557) (1,879,869) Proceeds from maturities 3,999,664 2,274,951 Additions to bank properties and equipment (234,494) (351,121) Increase in loans, net of repayments (5,370,918) (9,849,161) Proceeds from sales of loans 4,178,464 2,961,820 ------------ ------------ Net cash used in investing activities (15,227,647) (13,161,396) ------------ ------------ FINANCING ACTIVITIES Increase in deposits 16,985,152 4,486,477 (Increase) Decrease short term borrowing (3,001,663) 2,351,962 Treasury stock 60,840 (174,645) Cash dividends paid (390,448) (288,822) ------------ ------------ Net cash provided by financing activities 13,653,881 6,374,972 ------------ ------------ Net increase(decrease) in cash and cash equivalents 44,280 (5,125,063) Cash and cash equivalents, January 1 7,300,780 10,336,532 ------------ ------------ Cash and cash equivalents, September 30 $ 7,345,060 $ 5,211,469 ============ ============ </TABLE> See Notes to Consolidated Statements.
7 PART I - FINANCIAL INFORMATION PAGE 5 ITEM I - FINANCIAL STATEMENTS EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1999 and 1998 (Unaudited) <TABLE> <CAPTION> Nine Months Ended September 30, 1999 1998 ---------- ---------- <S> <C> <C> RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $1,505,337 $1,515,470 ---------- ---------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 459,166 229,661 Provision for credit losses 125,000 90,000 Gain on sale of assets (16,178) (17,917) (Decrease)Increase in accrued interest payable (35,990) 123,823 Increase in accrued interest receivable (306,942) (280,458) Increase in other liabilities 66,549 141,966 Increase in other assets (178,896) (141,184) ---------- ---------- Total adjustments 112,709 145,891 ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES $1,618,046 $1,661,361 ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Net unrealized (loss)gain on available for sale securities ($639,291) $ 443,308 ========== ========== </TABLE> See Notes to Consolidated Statements.
8 PART I - FINANCIAL INFORMATION PAGE 6 ITEM 1 - FINANCIAL STATEMENTS EVANS BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1999 AND 1998 (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 nine month period ended September 30, 1999 are not necessarily indicative of the results to be expected for the full year. 2. SECURITIES 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, allowance for loan losses 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 and stock splits. The Company adopted Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share," during the fourth quarter of 1997. Only basic earnings per share is disclosed because the Company does not have any dilutive securities or other contracts to issue common stock or convert to common stock. 6. NEW ACCOUNTING STANDARDS PRONOUNCEMENTS SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information was issued in 1997 by the Financial Accounting Standards Board. This Statement establishes standards for the way that public business enterprises report information about operating segments in annual financial statements. Management has determined that the Bank is the Company's only operating segment. As such additional disclosures are not considered necessary. SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, was issued in June 1998. The Company adopted the provisions of SFAS No. 133 effective October 1, 1998. Because the Company does not use derivatives, the adoption of SFAS No. 133 did not impact the Company's earnings or financial position. As allowed by SFAS No. 133 the Company transferred approximately $2,900,000 of certain securities from held to maturity to the available for sale classification. The realized and unrealized gains on the securities transferred were not material to the Company.
9 PART I - FINANCIAL INFORMATION PAGE 7 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS MATERIAL CHANGES IN FINANCIAL CONDITION Total deposits increased 11.8% over the first nine months of 1999. This compares to an increase of 3.24% over the first nine months of 1998. Demand deposits increased 11.2%, Regular Savings increased 25.5% and Other time accounts increased 8.3% over the first nine months of 1999. Deposit increases primarily are attributable to the expansion of the Bank's trade area. A new branch office was opened in West Seneca, New York in February 1999. Time deposits greater than $100,000 decreased 4.8% in the first nine months of 1999 versus a decrease of 1.25% in the first nine months of 1998. Total net loans outstanding of $111.2 million have increased .6% since December 31, 1998, which compares to an increase of 6.7% from December 1997 to September 1998. Total commercial loans increased $3.8 million. Total consumer loans decreased $952,000, which reflects the current trend of the Bank towards residential mortgage and home equity mortgage refinancing. The decrease also reflects the sale of $3.3 million in residential mortgages to the Federal National Mortgage Association ("FNMA") and $833,000 in student loans sold to Sallie Mae ("SLMA") in the first nine months of 1999. The securities portfolio increased 24.2% between December 31, 1998 and September 30, 1999 versus an increase of 16.1% over the same time period last year. Available funds continue to be invested in US government and agency securities and tax-advantaged bonds issued by New York State municipalities and school districts. The annualized return on average assets ("ROAA") at September 30, 1999 was 1.11%. The ROAA at December 31, 1998 was 1.24%. The return on average equity at September 30, 1999 was 10.72% versus 11.63% at December 31, 1998. The capital to assets ratio of 10.49% at September 30,1999 compares to 10.81% at December 31, 1998. Total assets have increased approximately $13.7 million or 7.9% since December 31, 1998. MATERIAL CHANGES IN THE RESULTS OF OPERATIONS Net interest income for the nine month period ending September 30, 1999 increased 8.2% over the same nine month period in 1998. Interest paid on deposits decreased 4.1%. The decrease reflects the impact of Federal Reserve dropping short term interest rates three times, twenty five basis points each, in the last months of 1998. The cost of short term borrowing was substantially higher due to the increased use of the Bank's funding options as a member of the Federal Home Loan Bank. The Bank's year-to-date net interest margin at September 30, 1999 was 4.54% as compared to 4.65% at September 30, 1998. The year-to-date yield on average earning assets has declined from 8.19% at September 30, 1998 to 7.69% at September 30, 1999. The yield on loans has declined to 8.48% from 8.92% over that time period and the tax-equivalent yield on federal funds and investments has decreased from 6.50% to 6.25%. Comparatively, the year-to-date cost of funds on interest bearing balances decreased from 4.12% at September 30, 1998 to 3.72% at September 30, 1999. The year-to-date provision for credit losses was $125,000 through September 30, 1999 versus $90,000 through the third quarter of 1998. Management has increased the amount set aside for potential loan losses due to the substantial increase in the size of the loan portfolio experienced over the past two years. Management believes that the credit quality of the portfolio remains high as supported by the fact that the charge-offs for the nine month period ending September 1999 were $16,000 versus $21,000 for the same period in September 1998. Non-interest expenses increased 17.8% in the first nine months of 1999. This compares to an increase of only 4.6% in the first nine months of 1998. All expense categories were impacted by the branch expansion into West Seneca, NY. Annual salary adjustments and an increase in the number of full-time equivalent employees from 81 at September 30, 1998 to 88 at September 30, 1999 contributed to the 16% increase in salary and benefit expense. Of the $321,000 increase in salary expense, approximately $155,000 is attributable to staffing the West Seneca office with six full time employees. Two lenders were also added to the Loan Division staff. Occupancy expense is up $94,000 over the same time period in 1998. This represents a 16.4% increase, and includes $59,000 for the West Seneca location. Supplies are up 40%. Miscellaneous forms and supplies ordered for the West Seneca branch totalled $15,000. Advertising and Public Relations increased 43.8%. Approximately $31,000 was spent on the promotion of the new branch. An additional $13,000 was spent on promoting the Bank's PC and telephone banking services. Repairs and Maintenance are up 22.8% with approximately $6,000 of the increase attributable to the West Seneca office. Net income through September 30, 1999 of $1,505,337 reflects a decrease of .7% over the first nine months of 1998 due to the increase in non-interest expense. The effective combined tax rate for the first nine months of 1999 was 27% compared to 28.4% for the first nine months of 1998. The relatively low tax rates experienced in 1999 and 1998 demonstrate the impact of increasing the Bank's investment in tax-advantaged municipal bonds and the benefit realized from a favorable deferred tax position.
10 YEAR 2000 PAGE 8 The Company has long been aware of the complexity and significance of the issues associated with the arrival of the Millennium (Year 2000). The "Year 2000" problem centers around the world's computer systems and a common programming practice that condenses a century date to just two digits, i.e. "98" to represent 1998, to conserve storage space. As a result, these systems may interpret "00" as 1900 rather than 2000, causing potential data corruption, misinterpretation, or system failure. The Company, with the support and direction of its Board of Directors and Senior Management, has dedicated financial and human resources to formally adapt strategies and work towards resolving all potential Year 2000 issues. In the third quarter of 1997, the Company began formalizing its strategy to address the data processing and business impacts we anticipated to be associated with Year 2000 issues. Our ultimate approach was to adopt the five-phase format recommended by the Federal Financial Institutions Examination Council, and follow guidance provided to us by our regulatory authorities who periodically monitor and evaluate our progress. These phases, and our activities, are described as follows: Awareness Phase While this can be considered an ongoing phase relating to education of employees, customers, and vendors, our primary activities defined the Year 2000 problem; obtained Board of Director and Executive level support; established a project team to include the Senior Vice President of Administration, the Bank Auditor; Manager of Data Processing, Manager of Systems Development, representatives from each functional area of the Bank, legal counsel, and the principal of our main-frame software vendor. This committee was responsible for development and implementation of an overall strategy to identify and resolve issues associated with year 2000. Assessment Phase Implementing this phase provided an assessment of the size and complexity, identifying affected areas of our business, identified the required resources, and enabled us to develop a comprehensive plan. An inventory of all hardware and software was completed to establish a specific Year 2000 status, i.e. "already deemed compliant", "requiring replacement or renovation", or "becoming obsolete". Priorities were then determined. Certain systems were identified as mission critical. Non-information technology systems were also addressed. Key vendors, such as providers of power, heating, and telephone services, among others, were contacted regarding their Year 2000 readiness. The Bank has received letters certifying Year 2000 compliance from those suppliers whose services are deemed critical to bank operations. However, in the event of an infra-structure failure, i.e. lack of power, etc., a Bank committee has developed a contingency plan so that business can continue with minimal interruption. The Bank also performed a customer risk assessment in the last quarter of 1998. Renovation Phase The Company does not write or create computer code or perform programming activities. We are reliant on vendors and software suppliers to furnish enhancements in a timely manner. Renovation of our core processing system was completed in early 1998 in conjunction with a plan developed by the vendor, other user financial institutions, and our Company. These renovations were successfully tested in collaboration with all user institutions at our back-up site. The renovated system was successfully installed in June 1998. Additional in-house testing was conducted throughout the remainder of the year. Validation Phase This is probably the most critical and intensive phase of the entire project. It is this phase that we validate, through a variety of testing methods, that each system can process after the turn of the century, with particular emphasis on those identified as "mission critical". As stated above, renovation to our core processing systems was successfully tested, and all testing of mission critical systems was successfully completed by year end 1998. In each case, we followed a comprehensive written test plan involving user representation to validate test results. All systems, including those designated mission critical, have been renovated and successfully tested as of December 31, 1998. During the second quarter of 1999 the Company performed another integrated test of our processing system to validate "Year 2000 readiness". The test was completed successfully and controls are in place to ensure a "clean" system that remains Year 2000 ready.
11 Implementation Phase PAGE 9 The Company's Year 2000 ready systems are in place and presently functioning. As a part of implementation, we plan continued testing in 1999, along with fully integrated tests. Quality reviews will be conducted throughout 1999 and the year 2000 to ensure proper functioning of our systems. The implementation phase involves contingency planning. The Company maintains a formal Business Resumption plan and has developed a supplemental Year 2000 specific contingency plan. In accordance with regulatory guidance we have tested and validated our Business Resumption Contingency Plan. This process was completed in June 1999. The Company believes, however, that due to the widespread nature of potential Year 2000 issues, the contingency planning process is an ongoing one which will require further modifications as the Company obtains additional information, specifically regarding third party Year 2000 readiness. The Company has identified significant (large) commercial depositors and performed an assessment of their efforts towards Year 2000 readiness. Should these depositors be unable to function financially as a result of their own Year 2000 issues, or significantly reduce their deposit levels, there could be an impact on the Bank's own cash flow. Our initial assessment evaluates this risk as minimal, and all customers identified in this risk assessment are aware of the Year 2000 issues and are planning Year 2000 readiness efforts. The Company will periodically monitor these depositors throughout 1999. A risk assessment of large commercial borrowers was also completed representing approximately 70 commercial customers, or 74% of commercial loan outstandings. Based on survey results, all are rated as moderate to low risk. We plan to selectively monitor the progress of certain moderate risk borrowers throughout 1999. New commercial loans exceeding our borrowing threshold for risk ratings will be measured to assure information technology utilized by the borrower will be Year 2000 ready. The Company has a comprehensive Customer Awareness program that includes training and education of employees regarding Year 2000 issues and financial industry efforts toward readiness. Our awareness program provides periodic communication to customers and the community describing our preparation efforts. Management continues to quantify expenses related to Year 2000 readiness. The Company has not been required to provide additional staff for the express purpose of Year 2000 readiness, but rather has utilized existing internal staff. Our budgeted expenses approximate $45,000, of which $15,000 will be allocated for renovation of core processing software. Expenses associated with Year 2000 preparedness are not expected to have a material impact on the financial condition of the Company. The Company's objective is to migrate to the Year 2000 with minimal impact on customers, and be prepared for January 1, 2000. We believe that the manner in which we have addressed this issue underscores our strengths. The Company has the resources and the technological expertise to address such new issues, but is small enough to enable us to make adjustments to internal programs and systems without affecting the ability to service our customers. The Company cannot provide assurance that failure of third parties to adequately address the Year 2000 issue will not have an adverse impact. The Company intends to continue to assess critical suppliers and customers to determine their readiness. The Company is confident that with the implementation of the Year 2000 initiatives as scheduled, the possibility of significant interruptions to normal operations should be reduced. The preceding "Year 2000" discussion contains various statements which represent the Company's beliefs or expectations regarding future events. All forward-looking statements involve a number of risks and uncertainties that could cause the actual results to differ materially from the projected results. Factors that cause the differences include, but are not limited to, the actions of governmental agencies or other third parties with respect to Year 2000 problems. ITEM 3 - QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The Company does not hold investments in instruments (i.e. such as derivative financial or commodity instruments) that are considered to be subject of any significant market risk.
12 PART II - OTHER INFORMATION PAGE 10 ITEM 1. Legal Proceedings - None to report. ITEM 2. Changes in Securities - None to report ITEM 3. Defaults upon Senior Securities - None to report. ITEM 4. Submission of Matters To a Vote of Security Holders--None to report. ITEM 5. Other Information On September 21, 1999, the Board of directors declared a cash dividend of $.24 per share payable on October 8, 1999 to shareholders of record on September 21, 1999. On October 1, 1999, the Company announced that it had signed a letter of intent to acquire the business and assets of the M & W Group, Inc. in exchange for stock of the Company. A copy of the press release is filed as Exhibit 99 to this report. 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 27 Financial Data Schedule 12 99 Press Release 17
13 PAGE 11 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 November 12, 1999 /s/ Richard M.Craig Richard M. Craig President and Chief Executive Officer DATE November 12, 1999 /s/ James Tilley James Tilley Senior Vice President