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 JUNE 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 July 31, 1997
2 INDEX <TABLE> <CAPTION> EVANS BANCORP, INC. AND SUBSIDIARY PAGE PART 1. FINANCIAL INFORMATION - ------------------------------- <S> <C> <C> Item 1. Financial Statements (Unaudited) Consolidated balance sheets--June 30, 1997 and December 31, 1996 1 Consolidated statements of income--Three months ended June 30, 1997 and 1996 2 Consolidated statements of income--Six months 3 ended June 30, 1997 and 1996 Consolidated statements of cash flows--Six months 4 ended June 30, 1997 and 1996 Notes to consolidated financial statements-- June 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 <TABLE> <CAPTION> PART I - FINANCIAL INFORMATION PAGE 1 ITEM I - FINANCIAL STATEMENTS EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS June 30, 1997 and December 31, 1996 (Unaudited) June 30, December 31, ASSETS 1997 1996 <S> <C> <C> Cash and due from banks $6,084,221 $5,662,231 Interest bearing deposits in other banks 0 0 Federal Funds sold 2,815,000 1,450,000 Securities: Classified as available-for-sale, at fair value 36,270,518 30,201,120 Classified as held-to-maturity, at amortized cost 6,490,485 5,853,204 Loans, net 95,820,813 92,087,902 Premises and equipment, net 3,803,401 3,748,663 Other assets 2,155,031 1,894,937 $153,439,469 $140,898,057 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Demand $22,695,483 $20,149,152 NOW and money market accounts 6,857,469 6,437,613 Regular savings 44,223,439 42,136,290 Time Deposits, $100,000 and over 19,648,747 14,096,821 Other time accounts 41,693,366 40,641,503 135,118,504 123,461,379 Dividend Payable 0 169,895 Other liabilities 2,038,968 1,756,700 137,157,472 125,387,974 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 4,561,421 3,692,659 Unrealized losses on available for sale securities (119,619) (22,771) 16,281,997 15,510,083 $153,439,469 $140,898,057 See Notes to Consolidated Financial Statements. </TABLE>
4 <TABLE> <CAPTION> PART I - FINANCIAL INFORMATION PAGE 2 ITEM I - FINANCIAL STATEMENTS EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME For the Three Months ended June 30, 1997 and 1996 (Unaudited) Three Months Ended June 30, 1997 1996 <S> <C> <C> INTEREST INCOME Loans $2,177,414 $1,813,850 Federal funds sold 29,659 61,761 Securities: Taxable 391,651 381,343 Non-taxable 220,637 198,718 Deposits in other banks 0 8,993 2,819,361 2,464,665 INTEREST EXPENSE Deposits 1,156,604 975,922 Short Term Borrowing 2,160 83 NET INTEREST INCOME 1,660,597 1,488,660 PROVISION FOR CREDIT LOSSES 15,000 15,000 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 1,645,597 1,473,660 NON-INTEREST INCOME: Service charges 166,139 163,941 Other 31,414 44,963 Securities Gains and Losses (10,113) 6,347 187,440 215,251 NON-INTEREST EXPENSE: Salaries and employee benefits 624,072 628,274 Occupancy 195,842 151,383 Supplies 21,193 30,501 Repairs and maintenance 35,808 35,077 Advertising and public relations 28,808 31,709 Professional services 59,510 52,900 FDIC assessments 4,533 500 Other 228,070 216,941 1,197,836 1,147,285 Income before income taxes 635,201 541,626 PROVISION FOR INCOME TAXES 203,984 153,855 NET INCOME $431,217 $387,771 NET INCOME PER COMMON SHARE $0.25 $0.23 WEIGHTED AVERAGE NUMBER OF COMMON SHARES 1,698,950 1,698,950 See Notes to Consolidated Financial Statements. </TABLE>
5 <TABLE> <CAPTION> PART I - FINANCIAL INFORMATION PAGE 3 ITEM I - FINANCIAL STATEMENTS EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME For the Six Months ended June 30, 1997 and 1996 (Unaudited) Six Months Ended June 30, 1997 1996 <S> <C> <C> INTEREST INCOME Loans $4,275,818 $3,574,961 Federal Funds Sold 71,223 130,289 Securities: Taxable 753,696 730,291 Non-taxable 419,786 394,342 Deposits in other Banks 0 16,821 5,520,523 4,846,704 INTEREST EXPENSE Deposits 2,264,033 1,919,903 Short Term Borrowing 2,359 83 NET INTEREST INCOME 3,254,131 2,926,718 PROVISION FOR CREDIT LOSSES 30,000 30,000 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 3,224,131 2,896,718 NON-INTEREST INCOME: Service charges 328,758 326,126 Other 102,095 114,420 Securities gains and losses (9,740) 9,042 421,113 449,588 NON-INTEREST EXPENSE: Salaries and employee benefits 1,253,133 1,260,375 Occupancy 382,022 286,901 Supplies 42,571 56,347 Repairs and maintenance 73,338 73,142 Advertising and public relations 56,937 70,175 Professional services 114,329 107,293 FDIC Assessment 7,126 1,000 Other 442,226 431,515 2,371,682 2,286,748 Income before income taxes 1,273,562 1,059,558 PROVISION FOR INCOME TAXES 404,800 305,040 NET INCOME $868,762 $754,518 NET INCOME PER COMMON SHARE $0.51 $0.44 WEIGHTED AVERAGE NUMBER OF COMMON SHARES 1,698,950 1,698,950 See Notes to Consolidated Financial Statements. </TABLE>
6 <TABLE> <CAPTION> PART I - FINANCIAL INFORMATION PAGE 4 ITEM I - FINANCIAL STATEMENTS EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 1997 and 1996 (Unaudited) Six Months Ended June 30, 1997 1996 <S> <C> <C> OPERATING ACTIVITIES Interest received $5,337,980 $4,769,053 Fees and commissions received 448,205 516,779 Interest paid (2,190,470) (1,888,765) Cash paid to suppliers and employees (1,956,194) (2,377,602) Income taxes paid (429,250) (303,295) Net cash provided by operating activities 1,210,271 716,170 INVESTING ACTIVITIES Available for sale securities Purchases (16,093,746) (10,458,874) Proceeds from sales 9,479,604 4,625,320 Proceeds from maturities 342,311 3,911,873 Held to maturity securities Purchases (1,186,054) (272,703) Proceeds from sales 0 0 Proceeds from maturities 569,308 563,790 Additions to bank premises and equipment (259,865) (979,594) Increase in loans, net of repayments (4,414,756) (7,294,705) Proceeds from sales of loans 652,687 1,631,138 Net cash used in investing activities (10,910,511) (8,273,755) FINANCING ACTIVITIES Increase in deposits 11,657,125 10,866,902 Cash Dividends Paid (169,895) (40,503) Net cash provided by financing activities 11,487,230 10,826,399 Net increase in cash and cash equivalents 1,786,990 3,268,814 Cash and cash equivalents, January 1 7,112,231 6,443,256 Cash and cash equivalents, June 30 $8,899,221 $9,712,070 </TABLE> See Notes to Consolidated Financial Statements.
7 <TABLE> <CAPTION> PART I - FINANCIAL INFORMATION PAGE 5 ITEM I - FINANCIAL STATEMENTS EVANS BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 1997 and 1996 (Unaudited) Six Months Ended June 30, 1997 1996 <S> <C> <C> RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $868,762 $754,518 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 237,004 121,222 Provision for credit losses 30,000 30,000 (Gain)/Loss on sale of assets 4,398 (23,039) Increase in accrued interest payable 75,922 31,221 Increase in accrued interest receivable (212,269) (34,595) Increase in other liabilities 251,930 60,286 Increase in other assets (45,476) (223,443) Total adjustments 341,509 (38,348) NET CASH PROVIDED BY OPERATING ACTIVITIES $1,210,271 $716,170 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 ($119,619) ($294,339) </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 June 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 six month period ending June 30, 1997 are not necessarily inductive 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, 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.
9 PART I - FINANCIAL INFORMATION PAGE 7 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS MATERIAL CHANGES IN FINANCIAL CONDITION - --------------------------------------- Total deposits increased 9.4% over the first six months of 1997. This compares to an increase of 10% over the same time period last year. Time deposits over $100,000 have increased 39.4%, largely due to additional municipal deposits obtained through the competitive bidding process, presently funding strong loan demand. Other time accounts are up 2.6%, regular savings balances grew 4.9%, demand deposits increased 12.6% and NOW account balances increased 6.5%. Total net loans of $95.8 million reflect an increase of 4.1% since December 31, 1996. Loan demand has been strong since the last quarter of 1996 and is expected to remain strong throughout 1997. The successful promotion of variable rate home equity loans has contributed to the increase in net loans in 1997. In addition, there has been a significant increase in commercial loan activity. Growth has not only outpaced runoff, but offset sales of $293 thousand in NYSHE loans to SLMA and $354 thousand in residential mortgages to FNMA. The securities portfolio increased 18.6% between December 31, 1996 and June 30, 1997, compared to an increase of 2.5% over the first six months of 1996. Since loan activity picked up in late 1995, fewer dollars were directed into securities. However, deposit growth is traditionally highest in the first two quarters and in 1997 excess funds have been available for investment. The Bank's portfolio remains concentrated in US government and 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 at June 30, 1997 was 1.17%. The return on average assets at December 31, 1996 was 1.20%. The Bank's annualized return on average equity at June 30, 1997 was 10.93% compared to 10.72% at December 31, 1996. The capital to assets ratio at June 30, 1997 of 11.03% compares to 11.37% at December 31, 1996. Total assets have increased $12.5 million or 8.9% since December 31, 1996. MATERIAL CHANGES IN THE RESULTS OF OPERATIONS - --------------------------------------------- Net interest income for the quarter ending June 30, 1997 increased 11.2% over the same six month period in 1996. Interest income on loans and securities increased 13.9%. Interest expense on deposits increased 18%. The Bank's year-to-date net interest margin was 4.68% declining slightly from 4.71% as of June 1996. The year-to-date yield on total earning assets was 8.30% at June 30, 1997, increasing from 8.21% as of June 30, 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 June 30, 1997 was 4.11% increasing from 3.97% in June 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 $30 thousand through June 30, 1997. The provision was also $30 thousand 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 3.7% for the quarter ending June 30, 1997 compared to the same six month period in 1996. This compares with a 10% increase in the second quarter of 1996 over the second quarter of 1995. The increase in 1996 over 1995 was the result of the initial phase of the $2.5 million expansion plan. In 1997, occupancy expense increased 33.2% over the second 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 and advertising decreased from levels recorded at June 30, 1996. Net income for the second quarter of $869 thousand reflects an increase of 15.1% over the second quarter of 1996. The effective combined income tax rate for the first six months of 1997 was 31.8% compared to 28.8% for the same period in 1996.
10 PART II - OTHER INFORMATION PAGE 8 - --------------------------- ITEM 1. Legal Proceedings - None to report. ITEM 2. Changes in Securities - None to report except for the five-for-one stock split which was effective May 1, 1997 and reported in the Registrant's Form 10-Q for the quarter ended March 31, 1997. ITEM 3. Defaults upon Senior Securities - None to report. ITEM 4. Submission of Matters To a Vote of Security Holders--none to report: Except for the annual shareholders meeting held on April 29, 1997 reported in the Form 10-Q filed for the quarter ended March 31, 1997. ITEM 5. Other Information - None to Report. ITEM 6. Exhibits and Reports on Form 8-K Exhibit 27 - Financial Data Schedule
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 August 13, 1997 /s/Richard M. Craig ------------------------------------- Richard M. Craig President and Chief Executive Officer DATE August 13, 1997 /s/James Tilley ------------------------------------- James Tilley Senior Vice President