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, 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 (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, 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--September 30, 1997 and December 31, 1996 1 Consolidated statements of income--Three months ended September 30, 1997 and 1996 2 Consolidated statements of income--Nine months ended September 30, 1997 and 1996 3 Consolidated statements of cash flows--Nine months 4 ended September 30, 1997 and 1996 Notes to consolidated financial statements-- September 30, 1997 and 1996 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION 8 - --------------------------- 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 9 </TABLE>
3 PART I - FINANCIAL INFORMATION PAGE 1 ITEM I - FINANCIAL STATEMENTS EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS September 30, 1997 and December 31, 1996 (Unaudited) <TABLE> <CAPTION> September 30, December 31, ASSETS 1997 1996 -------------- --------------- <S> <C> <C> Cash and due from banks $ 6,012,688 $ 5,662,231 Interest bearing deposits in other banks 0 0 Federal Funds sold 2,800,000 1,450,000 Securities: Classified as available-for-sale, at fair value 35,703,190 30,201,120 Classified as held-to-maturity, at amortized cost 6,547,881 5,853,204 Loans, net 97,777,001 92,087,902 Premises and equipment, net 3,976,845 3,748,663 Other assets 2,477,820 1,894,937 ------------ ------------- $155,295,425 $ 140,898,057 ============ ============= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Demand $ 23,978,354 $ 20,149,152 NOW and money market accounts 6,791,755 6,437,613 Regular savings 45,513,002 42,136,290 Time Deposits, $100,000 and over 17,768,059 14,096,821 Other time accounts 41,981,762 40,641,503 ------------ ------------- 136,032,932 123,461,379 Dividend Payable 509,685 169,895 Other liabilities 2,259,212 1,756,700 ------------ ------------- 138,801,829 125,387,974 ------------ ------------- STOCKHOLDERS' EQUITY Common Stock, $.50 par value; 10,000,000 shares authorized; 1,698,950 and 339,790 shares issued and outstanding 849,475 849,475 Surplus 10,990,720 10,990,720 Retained earnings 4,531,589 3,692,659 Unrealized gains/(losses) on available for sale securities 121,812 (22,771) ------------ ------------- 16,493,596 15,510,083 ------------ ------------- $155,295,425 $ 140,898,057 ============ ============= </TABLE> See Notes to Consolidated Financial 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, 1997 and 1996 (Unaudited) <TABLE> <CAPTION> Three Months Ended September 30, 1997 1996 ---------- ----------- <S> <C> <C> INTEREST INCOME Loans $2,216,758 $ 1,955,251 Federal funds sold 26,428 31,219 Securities: Taxable 343,602 361,765 Non-taxable 249,015 182,968 Deposits in other banks 0 4,068 ---------- ----------- 2,835,803 2,535,271 INTEREST EXPENSE Deposits 1,142,744 965,096 Short Term Borrowing 4,309 426 ---------- ----------- NET INTEREST INCOME 1,688,750 1,569,749 PROVISION FOR CREDIT LOSSES 15,000 15,000 ---------- ----------- NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 1,673,750 1,554,749 ---------- ----------- NON-INTEREST INCOME: Service charges 169,866 170,108 Other 70,577 93,047 Gains/(Losses) on Securities Transactions 1,990 (54,516) ---------- ----------- 242,433 208,639 ---------- ----------- NON-INTEREST EXPENSE: Salaries and employee benefits 637,514 722,775 Occupancy 188,002 163,876 Supplies 25,332 28,048 Repairs and maintenance 43,634 35,312 Advertising and public relations 35,452 29,735 Professional services 88,232 52,657 FDIC assessments 4,074 500 Other 227,165 272,643 ---------- ----------- 1,249,405 1,305,546 ---------- ----------- Income before income taxes 666,778 457,842 ---------- ----------- PROVISION FOR INCOME TAXES 186,925 54,155 ---------- ----------- NET INCOME $ 479,853 $ 403,687 ========== =========== NET INCOME PER COMMON SHARE $ 0.28 $ 0.24 ========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES 1,698,950 1,698,950 ========== =========== </TABLE> See Notes to Consolidated Financial 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, 1997 and 1996 (Unaudited) <TABLE> <CAPTION> Nine Months Ended September 30, 1997 1996 ----------- ----------- <S> <C> <C> INTEREST INCOME Loans $ 6,492,576 $ 5,530,212 Federal funds sold 97,651 161,508 Securities: Taxable 1,097,298 1,092,056 Non-taxable 668,801 577,311 Deposits in other banks 0 20,889 ----------- ----------- 8,356,326 7,381,976 INTEREST EXPENSE Deposits 3,406,777 2,884,999 Short Term Borrowing 6,668 509 ----------- ----------- NET INTEREST INCOME 4,942,881 4,496,468 PROVISION FOR CREDIT LOSSES 45,000 45,000 ----------- ----------- NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 4,897,881 4,451,468 ----------- ----------- NON-INTEREST INCOME: Service charges 498,623 496,234 Other 172,672 207,468 Losses on Securities Transactions (7,750) (45,475) ----------- ----------- 663,545 658,227 ----------- ----------- NON-INTEREST EXPENSE: Salaries and employee benefits 1,890,647 1,983,151 Occupancy 570,024 450,776 Supplies 67,903 84,396 Repairs and maintenance 116,972 108,454 Advertising and public relations 92,389 99,910 Professional services 202,561 159,950 FDIC assessments 11,200 1,500 Other 669,391 704,158 ----------- ----------- 3,621,087 3,592,295 ----------- ----------- Income before income taxes 1,940,339 1,517,400 ----------- ----------- PROVISION FOR INCOME TAXES 591,725 359,195 ----------- ----------- NET INCOME $ 1,348,614 $ 1,158,205 =========== =========== NET INCOME PER COMMON SHARE $ 0.79 $ 0.68 =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES 1,698,950 1,698,950 =========== =========== </TABLE> See Notes to Consolidated Financial Statements.
6 PAGE 4 ITEM I - FINANCIAL STATEMENTS EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1997 and 1996 (Unaudited) <TABLE> <CAPTION> Nine Months Ended September 30, 1997 1996 ------------ ------------ <S> <C> <C> OPERATING ACTIVITIES Interest received $ 7,953,798 $ 7,272,615 Fees and commissions received 725,455 797,043 Interest paid (3,341,151) (2,855,095) Cash paid to suppliers and employees (3,482,480) (3,382,858) Income taxes paid (608,750) (559,443) ------------ ------------ Net cash provided by operating activities 1,246,872 1,272,262 ------------ ------------ INVESTING ACTIVITIES Available for sale securities Purchases (20,390,722) (13,607,497) Proceeds from sales 14,641,489 10,732,162 Proceeds from maturities 407,731 4,279,114 Held to maturity securities Purchases (2,261,519) (1,062,002) Proceeds from sales 0 0 Proceeds from maturities 1,607,944 1,250,154 Additions to bank premises and equipment (509,822) (1,373,081) Increase in loans, net of repayments (7,444,229) (11,919,346) Proceeds from sales of loans 1,726,206 2,111,011 ------------ ------------ Net cash used in investing activities (12,222,922) (9,589,485) ------------ ------------ FINANCING ACTIVITIES Increase in deposits 12,571,553 10,700,983 Cash Dividends Paid (169,895) (40,503) ------------ ------------ Net cash provided by financing activities 12,401,658 10,660,480 ------------ ------------ Net increase in cash and cash equivalents 1,425,608 2,343,257 Cash and cash equivalents, January 1 7,112,231 6,443,256 ------------ ------------ Cash and cash equivalents, September 30 $ 8,537,839 $ 8,786,513 ============ ============ </TABLE> See Notes to Consolidated Financial 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, 1997 and 1996 (Unaudited) <TABLE> <CAPTION> Nine Months Ended September 30, 1997 1996 ----------- ----------- <S> <C> <C> RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $ 1,348,614 $ 1,158,205 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 259,441 218,979 Provision for credit losses 45,000 45,000 (Gain)/Loss on sale of assets (15,076) 20,015 Changes in: Accrued interest payable 72,294 30,413 Accrued interest receivable (357,620) (60,423) Other liabilities 40,954 (40,648) Other assets (146,735) (99,279) ----------- ----------- Total adjustments (101,742) 114,057 ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,246,872 $ 1,272,262 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Transfers of available for sale securities to held $ 0 $ 0 to maturity securities =========== =========== Net unrealized gain/(loss) on available for sale securities $ 179,137 ($ 186,687) =========== =========== </TABLE> See Notes to Consolidated Financial Statements.
8 PART I - FINANCIAL INFORMATION PAGE 6 ITEM 1 - FINANCIAL STATEMENTS EVANS BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 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 nine month period ending September 30, 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.
9 PART I - FINANCIAL INFORMATION PAGE 7 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS MATERIAL CHANGES IN FINANCIAL CONDITION - --------------------------------------- Total deposits increased 10.18% over the first nine months of 1997. This compares to an increase of 9.82% over the first nine months of 1996. Demand deposits have increased 19%, regular savings have increased 8.01%, NOW account balances increased 5.50% and other time accounts are up 3.30%. The Bank introduced a new tiered savings product in May which has attracted new deposits, and the impact of the expansion of the Bank's trade area is also reflected in increased balances. Time deposits over $100,000 have increased 26.04%, largely due to additional municipal deposits obtained through the competitive bidding process. Much of the cash provided by deposit growth has been used to fund loans. Total net loans have increased 6.18% since December 31, 1996, reaching a total of $97.8 million. Loan demand has been strong since the last quarter of 1995, and is expected to continue throughout the remainder of 1997. The fixed and variable home equity products remain popular contributing to an increase in consumer loans over 1996 and the commercial sector of the portfolio has also grown significantly. Growth has not only outpaced runoff, but has offset sales of $1.1 million in New York State Higher Education Loans to the Student Loan Marketing Association ("SLMA") and $691 thousand in residential mortgages to the Federal National Mortgage Association ("FNMA"). Despite the growth in loans, excess funds have been available for investment. The securities portfolio has increased 17.19% between December 31, 1996 and September 30, 1997 compared to a decrease of 5.53% between December 31, 1995 and September 30, 1996. The Bank's portfolio remains concentrated in US government agency securities and New York State municipal bonds. This concentration provides a source of liquidity and cash flows, reduces risk factors and improves tax status. The annualized return on average assets ("ROAA") at September 30, 1997 was 1.20%. The ROAA was also 1.20% at December 31, 1996. The Bank's annualized return on average equity at September 30, 1997 was 11.14%. At December 31, 1996 the return on average equity was 10.72%. The capital to assets ratio at September 30, 1997 of 10.89% compares to 11.37% at December 31, 1996. Total assets have increased 10.22% since December 31, 1996. MATERIAL CHANGES IN THE RESULTS OF OPERATIONS - --------------------------------------------- Net interest income for the quarter ending September 30, 1997 increased 7.58% over the same three month period in 1996. Interest income on loans and securities increased 13.20%, interest expense on deposits increased 18.09%. The year-to-date interest margin was 4.69% as of September 30, 1997 versus 4.79% as of September 30, 1996. The year-to-date tax-equivalent yield on total earning assets was 8.29%, increasing from 8.27% at September 30, 1996. Comparatively, the year-to-date cost of funds on interest-bearing deposit balances at September 30, 1997 was 4.10% increasing from 3.97% at September 30, 1996, largely due to customer movement towards higher yielding products, particularly certificates of deposit. The year-to-date provision for credit losses was $45,000 through September 30, 1997. The provision was also $45,000 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 .80% over September 30, 1996. This compares to an increase of 15.22% in September 1996 over September 1995. Categories such as salaries and benefits, occupancy, supplies, repair and maintenance and advertising were all impacted by the Bank's expansion in 1996. In 1997, net operating expenses have remained stable. Reductions in salary expense have been possible in part, as a result of purchasing technologically- advanced check processing and statement imaging equipment. There has been an increase in occupancy expense, however, due to the depreciation of that equipment, as well as a full nine months of depreciation related to the Evans facility which opened in May 1996. Professional service costs have also been higher over the first nine months of 1997 due to additional legal and accounting expenses related to the stock split and dividend reinvestment plan as well as the cost of an analyst hired to identify areas where efficiency can be improved and costs can be reduced. Net income for the third quarter of $1.3 million reflects an increase of 16.44% over the third quarter of 1996. The effective combined tax rate for the first nine months of 1997 was 30.5% compared to 23.67% for the same period in 1996. A change in the components used in the calculation of deferred taxes resulted in a lower effective tax rate in 1996.
10 PART II - OTHER INFORMATION PAGE 8 - --------------------------- 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 August 19, 1997, the Board of Directors declared a cash dividend of $.30 per share payable on October 21, 1997 to shareholders of record on October 1, 1997. ITEM 6. Exhibits: Filed Here With: Exhibit Description Page - ------- ----------- ---- 27.1 Financial Data Schedule as of September 30, 1997
11 PAGE 9 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 07, 1997 /Richard M. Craig ------------------------------------- Richard M. Craig President and Chief Executive Officer DATE November 07, 1997 /James Tilley ------------------------------------- James Tilley Senior Vice President