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, 2000 ------------------ [ ] 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--1,756,698 shares as of September 30, 2000
2 INDEX EVANS BANCORP, INC. AND SUBSIDIARY PAGE PART 1. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated balance sheets--September 30, 2000 and December 31, 1999 1 Consolidated statements of income--Three months ended September 30, 2000 and 1999 2 Consolidated statements of income--Nine months 3 ended September 30, 2000 and 1999 Consolidated statements of cash flows--Nine months 4 ended September 30, 2000 and 1999 Notes to consolidated financial statements-- September 30, 2000 and 1999 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantative and Qualitative Disclosures About Market Risks 10 PART II. OTHER INFORMATION 11 - --------------------------- 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 12
3 PART I - FINANCIAL INFORMATION PAGE 1 ITEM I - FINANCIAL STATEMENTS EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS September 30, 2000 and December 31, 1999 (Unaudited) <TABLE> <CAPTION> September 30, December 31, ASSETS 2000 1999 ------------- ------------ <S> <C> <C> Cash and due from banks $5,960,370 $8,528,778 Federal funds sold 0 3,450,000 Securities: Classified as available-for-sale, at fair value 69,404,611 59,550,786 Classified as held-to-maturity, at amortized cost 3,649,792 3,448,892 Loans, net 124,968,279 116,433,438 Properties and equipment, net 3,857,246 3,834,496 Other assets 7,551,903 3,541,993 ------------- ------------ TOTAL ASSETS $215,392,201 $198,788,383 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Demand $35,695,754 $29,683,357 NOW and money market accounts 8,991,609 8,048,455 Regular savings 62,147,122 58,819,156 Time deposits, $100,000 and over 26,119,114 28,856,320 Other time accounts 49,760,924 44,541,611 ------------- ------------ 182,714,523 169,948,899 Other borrowed funds 6,705,295 5,000,000 Dividend payable 474,308 0 Other liabilities 2,892,687 5,554,546 ------------- ------------ TOTAL LIABILITIES 192,786,813 180,503,445 =========== =========== STOCKHOLDERS' EQUITY Common stock, $.50 par value; 10,000,000 shares authorized; 1,759,602 shares issued and 1,698,950 shares issued respectively 879,801 849,475 Capital surplus 13,810,991 10,990,720 Retained earnings 8,603,972 7,629,839 Accumulated other comprehensive (loss) income (net of tax) (552,935) (1,185,096) ------------- ------------ 22,741,829 18,284,938 Less: Treasury stock, at cost (2,903 shares) (136,441) 0 Total stockholders' equity 22,605,388 18,284,938 ------------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $215,392,201 $198,788,383 ============ ============ </TABLE> See Notes to Consolidated Financial Statements.
4 PART I - FINANCIAL INFORMATION PAGE 2 ITEM 1 - FINANCIAL STATEMENTS EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME For the Three Months ended September 30, 2000 and 1999 (Unaudited) <TABLE> <CAPTION> Three Months Ended September 30, 2000 1999 ---------- ---------- <S> <C> <C> INTEREST INCOME Loans $2,740,769 $2,341,696 Federal funds sold 45,202 59,640 Securities: Taxable 711,384 458,348 Non-taxable 388,632 339,710 ---------- ---------- Total Interest Income 3,885,987 3,199,394 INTEREST EXPENSE Interest on deposits 1,521,458 1,165,647 Short term borrowing 105,511 78,931 ---------- ---------- NET INTEREST INCOME 2,259,018 1,954,816 PROVISION FOR LOAN LOSSES 60,000 45,000 ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,199,018 1,909,816 ---------- ---------- NON-INTEREST INCOME: Service charges 236,347 196,298 Other 349,415 200,222 Securities loss (16,136) 0 ---------- ---------- Total Non-interest Income 569,626 396,520 ---------- ---------- NON-INTEREST EXPENSE: Salaries and employee benefits 929,271 810,438 Occupancy 251,545 230,676 Supplies 46,662 48,628 Repairs and maintenance 63,264 57,424 Advertising and public relations 39,475 30,622 Professional services 65,035 69,287 FDIC assessments 8,860 4,286 Other 405,805 298,823 ---------- ---------- Total Non-interest Expense 1,809,917 1,550,184 ---------- ---------- Income before income taxes 958,727 756,152 ---------- ---------- INCOME TAXES 264,000 203,450 ---------- ---------- NET INCOME $694,727 $552,702 ========== ========== NET INCOME PER COMMON SHARE-BASIC $0.41 $0.33 ========== ========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES 1,715,342 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, 2000 and 1999 (Unaudited) <TABLE> <CAPTION> Nine Months Ended September 30, 2000 1999 ---------- ---------- <S> <C> <C> INTEREST INCOME Loans $7,922,258 $7,003,251 Federal funds sold 125,551 152,958 Securities: Taxable 2,029,762 1,235,883 Non-taxable 1,161,352 947,049 ---------- ---------- Total Interest Income 11,238,923 9,339,141 INTEREST EXPENSE Interest on deposits 4,389,064 3,437,441 Short term borrowing 313,327 237,167 ---------- ---------- NET INTEREST INCOME 6,536,532 5,664,533 PROVISION FOR LOAN LOSSES 220,000 125,000 ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 6,316,532 5,539,533 ---------- ---------- NON-INTEREST INCOME: Service charges 625,133 543,330 Other 775,213 439,910 Securities (loss) gain (31,616) 1,064 ---------- ---------- Total Non-interest Income 1,368,730 984,304 ---------- ---------- NON-INTEREST EXPENSE: Salaries and employee benefits 2,670,906 2,323,560 Occupancy 734,442 665,578 Supplies 141,218 116,533 Repairs and maintenance 174,947 170,455 Advertising and public relations 101,791 126,460 Professional services 193,855 195,397 FDIC assessments 25,611 12,585 Other 1,095,513 852,032 ---------- ---------- Total Non-interest Expense 5,138,283 4,462,600 ---------- ---------- Income before income taxes 2,546,979 2,061,237 ---------- ---------- INCOME TAXES 673,800 555,900 ---------- ---------- NET INCOME $1,873,179 $1,505,337 ========== ========== NET INCOME PER COMMON SHARE-BASIC $1.09 $0.89 ========== ========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES 1,715,342 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, 2000 and 1999 (Unaudited) <TABLE> <CAPTION> Nine Months Ended September 30, 2000 1999 ----------- ---------- <S> <C> <C> OPERATING ACTIVITIES Interest received $10,961,442 $9,094,173 Fees and commissions received 1,525,784 942,294 Interest paid (4,629,424) (3,710,598) Cash paid to suppliers and employees (5,681,455) (4,086,341) Income taxes paid (807,235) (621,482) ----------- ---------- Net cash provided by operating activities 1,369,112 1,618,046 ----------- ---------- INVESTING ACTIVITIES Available for sale securities Purchases (20,403,274) (24,484,803) Proceeds from sales 7,411,556 2,842,567 Proceeds from maturities 4,029,164 6,105,430 Held to maturity securities Purchases (2,391,654) (2,263,557) Proceeds from maturities 2,190,755 3,999,664 Additions to bank properties and equipment (284,933) (234,494) Investment unconsolidated subsidiary (10,500) 0 Increase in loans, net of repayments (9,841,020) (5,370,918) Proceeds from sales of loans 1,029,497 4,178,464 Proceeds from sales of other real estate owned 294,452 0 ----------- ---------- Net cash used in investing activities (17,975,957) (15,227,647) ----------- ---------- FINANCING ACTIVITIES Increase in deposits 13,144,149 16,985,152 Repayment short term borrowing (1,994,534) (3,001,663) (Purchase)Sale treasury stock (136,441) 60,840 Dividends paid (424,737) (390,448) ----------- ---------- Net cash provided by financing activities 10,588,437 13,653,881 ----------- ---------- Net (decrease)increase in cash and cash equivalents (6,018,408) 44,280 Cash and cash equivalents, January 1 11,978,778 7,300,780 ----------- ---------- Cash and cash equivalents, September 30 $5,960,370 $7,345,060 ========== =========== </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, 2000 and 1999 (Unaudited) <TABLE> <CAPTION> Nine Months Ended September 30, 2000 1999 ---------- ---------- <S> <C> <C> RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $1,873,179 $1,505,337 ---------- ---------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 454,521 459,166 Provision for credit losses 220,000 125,000 (Loss)Gain on sale of assets 25,007 (16,178) Increase(Decrease) in accrued interest payable 72,967 (35,990) Increase in accrued interest receivable (252,075) (306,942) (Decrease)Increase in other liabilities (692,790) 66,549 Increase in other assets (331,697) (178,896) ---------- ---------- Total adjustments (504,067) 112,709 ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES $1,369,112 $1,618,046 ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Net unrealized loss on available for sale securities ($813,139) ($639,291) ---------- ---------- </TABLE> SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: The Bank acquired all of the capital stock of M&W Group, Inc. through the issuance of common stock at an aggregate offering price of $2,850,597. In conjunction with the acquisition, assets acquired and liabilities assumed were as follows: Fair value of assets acquired $858,857 Liabilities assumed $1,198,104 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, 2000 AND 1999 (UNAUDITED) 1. GENERAL The accounting and reporting policies followed by Evans Bancorp, Inc., (the "Company") a bank holding company, and its subsidiary, Evans National Bank (the "Bank") and subsidiaries 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, 2000 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 of the Bank and, on an annual basis, generally exceeds the amount of net loan losses charged against the allowance. 4. REVENUE RECOGNITION The Bank's primary sources of revenue are interest income from loans and investments and service charge income. The revenue is recognized in the period in which it is earned. The Insurance Agency's revenue is derived mainly from insurance commissions. The revenue is recognized on the accrual basis of accounting in accordance with generally accepted accounting principles. 5. 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. 6. 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. 7. ACQUISITION Effective September 1, 2000, the Company completed its previously announced acquisition of the assets, business and certain liabilities of M&W Group, Inc., a retail property and casualty insurance agency headquartered at Silver Creek, New York, with offices located in Angola, North Collins, South Dayton, Cattaraugus and Randolph, New York. Subject to post closing adjustments, the Company issued 60,651 shares of its common stock as the purchase price for the assets acquired.
9 Page 7 The purchase price (including liabilities assumed) exceeded the fair value of the assets acquired by approximately $3.2 million which has been recorded by the Company as goodwill and will be amortized on a straight line basis over the next 10 years. The insurance agency acquired will be operated through M&W Agency, Inc., a newly formed operating subsidiary of the Bank. Due to the insignificant effect on the financial position and results of operation, no pro-forma data of this acquisition is required or presented, and no 8K has been filed. 8. SEGMENT INFORMATION 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. The Company is comprised of two primary business segments, Evans National Bank and M & W Agency, Inc., its insurance subsidiary. The following table sets forth information regarding these segments for the three month and nine month periods ended September 30, 2000. Three Months Ended September 30, 2000 <TABLE> <CAPTION> Banking Activities Insurance Activities Total <S> <C> <C> <C> Net Interest Income 2,262,626 (3,608) 2,259,018 Provision for credit losses 60,000 0 60,000 ------------------- ------------------- ---------------- Net interest income after provision for credit losses 2,202,626 (3,608) 2,199,018 Non-interest income 453,693 132,069 585,762 Net securities losses (16,136) 0 (16,136) Non-interest expense 1,683,970 125,947 1,809,917 Income before income taxes 956,213 2,514 958,727 Income tax expense 262,900 1,100 264,000 ------------------- ------------------- ---------------- Net income 693,313 1,414 694,727 ------------------- ------------------- ---------------- </TABLE> Nine Months Ended September 30, 2000 <TABLE> <CAPTION> Banking Activities Insurance Activities Total <S> <C> <C> <C> Net Interest Income 6,540,140 (3,608) 6,536,532 Provision for credit losses 220,000 0 220,000 ------------------- ------------------- ---------------- Net interest income after provision for credit losses 6,320,140 (3,608) 6,316,532 Non-interest income 1,268,277 132,069 1,400,346 Net securities losses (31,616) 0 (31,616) Non-interest expense 5,012,336 125,947 5,138,283 Income before income taxes 2,544,465 2,514 2,546,979 Income tax expense 672,700 1,100 673,800 ------------------- ------------------- ---------------- Net income 1,871,765 1,414 1,873,179 ------------------- ------------------- ---------------- </TABLE> Prior to September 1, 2000, the Company was comprised of one operating segment, the Bank. SFAS No. 131 was not applicable to the Company's financial statements prior to the September 30, 2000 reporting period. As such, the abbreviated represents one month of insurance activity.
10 PAGE 8 9. NEW ACCOUNTING STANDARDS PRONOUNCEMENTS 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.
11 PAGE 9 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS INTRODUCTION The Bank is in the commercial banking business, attaching deposits from and making loans to the general public in its immediate geographical area. M&W ACQUISITION Effective September 1, 2000, the Company completed its previously announced acquisition of the assets, business and certain liabilities of M&W Group, Inc., a retail property and casualty insurance agency headquartered at Silver Creek, New York, with offices located in Angola, North Collins, South Dayton, Cattaraugus and Randolph, New York. Subject to post closing adjustments, the Company issued 60,651 shares of its common stock as the purchase price for the assets acquired. The purchase price (including liabilities assumed) exceeded the fair value of the assets acquired by approximately $3.2 million which has been recorded by the Company as goodwill and will be amortized on a straight line basis over the next 10 years. The insurance agency acquired will be operated through M&W Agency, Inc., a newly formed operating subsidiary of the Bank. MATERIAL CHANGES IN FINANCIAL CONDITION Total deposits increased 7.5% over the first nine months of 2000. This compares to an increase of 11.8% over the first nine months of 1999. Demand deposits increased 20.3%, NOW accounts increased 11.7%, Regular Savings increased 5.7% and Other time accounts increased 11.7% over the first nine months of 2000. Deposit increases primarily are attributable to the expansion of the Bank's trade area to include West Seneca, NY since opening a new branch in February 1999. All the branches continue to exhibit growth in deposits. Time deposits greater than $100,000 decreased 9.5% in the first nine months of 2000 versus a decrease of 4.8% in the first nine months of 1999, as volatile funds were replaced with core deposits. Excess cash was kept for the Y2K contingency for year-end, since then the excess cash has been reinvested in the securities portfolio resulting in the decrease in total cash and due from banks and federal funds sold of $6.0 million over the first nine months of 2000. Total net loans outstanding of $124.9 million have increased 7.3% since December 31, 1999, which compares to an increase of .6% from December 1998 to September 1999. Growth was concentrated primarily in commercial mortgages (approximately $6.4 million) and home equity loans (approximately $930 thousand). Residential mortgage sales to the Federal National Mortgage Association ("FNMA") for the first nine months of 1999 totaled $3.3 million compared to $519 thousand for the first nine months of 2000. The Bank typically sells residential mortgages to FNMA for the purpose of reducing exposure to the rate risk inherent in long-term loans, while keeping the customer relationships through servicing. In January 2000, the Bank introduced a residential mortgage product which provides for bi-weekly payments. This substantially reduces the life of the loans and these mortgages have been retained in the portfolio. Total commercial loans outstanding at September 30, 2000 increased approximately $10.9 million over the amount outstanding at September 30, 1999 and consumer loans increased approximately $3.1 million during that period. This growth was concentrated primarily in commercial mortgages (approximately $8.0 million), new and increased usage on commercial lines of credit (approximately $1.4 million) and home equity loans (approximately $2.1 million). The securities portfolio increased 16.0% between December 31, 1999 and September 30, 2000 versus an increase of 24.2% 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, 2000 was 1.21%. The ROAA at December 31, 1999 was 1.10%. The return on average equity at September 30, 2000 was 12.46% versus 10.72% at December 31, 1999. The capital to assets ratio of 11.20% at September 30, 2000 compares to 10.17% at December 31, 1999. Total assets have increased approximately $16.6 million or 8.4% since December 31, 1999. Approximately $4.0 million of the increase in assets is attributable to the acquisition of the M&W Group, Inc.
12 PAGE 10 MATERIAL CHANGES IN THE RESULTS OF OPERATIONS Net interest income for the nine month period ending September 30, 2000 increased 15.4% over the same nine month period in 1999. Interest paid on deposits increased 27.7%. The increase reflects the impact of Federal Reserve raising short term interest rates 175 basis points since June of last year. The cost of short term borrowing was substantially higher, 32.1%, due to the fact that the Repo Sweep accounts, which are considered borrowing, are now based on a tiered rate structure with the primary users of this account qualifying for the highest rate offered. Despite the increases in short- term rates by the Federal Reserve, the Bank's net interest margin has been highly consistent. The Bank's year-to-date net interest margin at September 30, 2000 was 4.57% as compared to 4.54% at September 30, 1999. The year-to-date yield on average earning assets has increased to 8.03% at September 30, 2000 from 7.69% at September 30, 1999. The yield on loans has increased to 8.59% from 8.48% over that time period and the tax-equivalent yield on federal funds and investments has increased from 6.25% to 6.98%. Comparatively, the year-to-date cost of funds on interest bearing balances increased from 3.72% at September 30, 1999 to 4.11% at September 30, 2000. This reflects increases in short term rates on Time Deposits over $100,000 which are immediately impacted by Federal Reserve actions. There have also been higher balances maintained in the Repo Sweep accounts. The year-to-date provision for loan losses was $220,000 through September 30, 2000 versus $125,000 through the third quarter of 1999. 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 2000 were $1,000 and $16,000 for the same period in September 1999. Total non-interest expenses increased 14.8% in the first nine months of 2000. This compares to an increase of 17.8% in the first nine months of 1999. All expense categories continue to be impacted by the branch expansion in West Seneca. Salary and employee benefits increased 14.9% due to annual salary adjustments and additional staffing. Two loan officer positions were filled and an additional commercial loan officer was hired. A full-time officer was also hired for ENB Associates Inc. Supplies are up 21.2% over the same time period in 1999 due in part to the new debit card program, supplies for the mass Y2K mailing in January and the purchase of stationary with the Bank's new logo. Advertising and public relations have decreased 19.5% compared to an increase of 43.8% over the same time period in 1999. Last year additional costs were experienced as a result of the West Seneca branch expansion. FDIC assessments have increased 103.5% due to new assessment rates which went into effect on January 1, 2000. Miscellaneous other expenses increased 27.0% for the third quarter of 2000 compared to the third quarter of 1999. Net income through September 30, 2000 of $1,873,179 reflects an increase of 24.4% over the first nine months of 1999. The effective combined tax rate for the first nine months of 2000 was 26% compared to 27% for the first nine months of 1999. The relatively low tax rates experienced in 2000 and 1999 demonstrate the impact of increasing the Bank's investment in tax-advantaged municipal bonds and the benefit realized from a favorable deferred tax position. On March 11, 2000 ENB Associates Inc. a wholly-owned subsidiary of Evans National Bank, began doing business. Through an agreement with O'Keefe Shaw & Co. Inc., ENB Associates, Inc. provides customers with access to non-deposit products, such as annuities and mutual funds. 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. The Company realizes income principally from the interest earned on loans and investments. Loan volumes and yields, as well as the volume of and rates on investments, deposits and borrowings, are affected by market interest rate volatility.
13 PART II - OTHER INFORMATION PAGE 11 - --------------------------- ITEM 1. Legal Proceedings - None to report. ITEM 2. Changes in Securities Effective September 1, 2000, and subject to post closing adjustments, the Company issued 60,651 shares of its common stock, $.50 par value, to M&W Group, Inc. in consideration for the acquisition of the assets, business and certain liabilities of that insurance agency. The aggregate offering price of the shares issued was $2,850,597. The issuance of stock was exempt from registration pursuant to Section 4 (2) of the Securities Act of 1933 and Rules 505 and 506 of Regulation D promulgated thereunder. No underwriter was involved in the stock issuance. 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 19, 2000, the Board of directors declared a cash dividend of $.27 per share payable on October 5, 2000 to shareholders of record on September 21, 2000. Effective September 1, 2000, the Bank completed its previously announced acquisition of the assets, business and certain liabilities of the M&W Group, Inc., a property and casualty insurance agency. 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 13 99 Press Release 14
14 PAGE 12 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 9, 2000 /s/ Richard M. Craig ------------------------------------------ Richard M. Craig President and Chief Executive Officer DATE November 9, 2000 /s/ James Tilley ------------------------------------------ James Tilley Senior Vice President