Q1 2017 evbn 8-K Earnings

News

Release

Evans Bancorp, Inc. One Grimsby Drive Hamburg, NY 14075

Evans Bancorp Net Income Increases 84% to
Record $3.1 Million in the 2017 First Quarter

HAMBURG, NY, April 26, 2017 – Evans Bancorp, Inc. (the “Company” or “Evans”) (NYSE MKT: EVBN), a community financial services company serving Western New York since 1920, today reported its results of operations for the first quarter ended March 31, 2017.

FIRST QUARTER 2017 HIGHLIGHTS (compared with prior-year period)

Record net income of $3.1 million, up 84%, or $1.4 million; Earnings per diluted share
grew 65% to $0.66

Net interest income increased 17% to $9.6 million

Non-interest income of $3.5 million increased 18% on strong insurance business performance

Return on average stockholders’ equity was 11.59%, a significant increase from 7.43%

Measurably improved efficiency ratio to 68.56% from 75.78%

Net income was $3.1 million, or $0.66 per diluted share, in the first quarter of 2017, compared with $2.3 million, or $0.53 per diluted share, in the trailing fourth quarter of 2016 and $1.7 million, or $0.40 per diluted share, in last year’s first quarter. The increase over each comparative period reflects higher net interest income and non-interest income, along with a reduction in provision for loan losses. Return on average equity was 11.59% for the first quarter of 2017 compared with 9.70% in the trailing fourth quarter and 7.43% in the first quarter of 2016.

“We kicked off the year with an extraordinarily strong first quarter resulting from continued success in strategically growing our business combined with favorable economic conditions. We believe that our investments in people and services have delivered outsized growth in the past few quarters while ongoing disruption from bank consolidation coupled with improved competitive strength has also driven performance,” said David J. Nasca, President and CEO of Evans Bancorp. “We achieved a new quarterly record result for net income and our improved efficiency ratio reflects both cost discipline as well as the operating leverage we gain with growth.”



Net Interest Income
($ in thousands)

	1Q 2017		4Q 2016		1Q 2016

Interest income	$	10,918	$	10,664	$	9,356
Interest expense		1,274		1,261		1,096
Net interest income		9,644		9,403		8,260
(Credit) provision for loan losses		(435)		371		208
Net interest income after provision	$	10,079	$	9,032	$	8,052

Net interest income increased $0.2 million, or 3%, from the fourth quarter of 2016 and $1.4 million, or 17%, from the prior-year first quarter. Average commercial loans, including both commercial real estate and commercial and industrial loans, were $747 million in the first quarter, compared with $745 million in the trailing fourth quarter, but were 21% higher than $616 million in the 2016 first quarter. The high volume of loan closings in the fourth quarter of 2016 somewhat muted commercial loan growth in the first quarter of 2017. However, the Company expects

Evans Bancorp Reports 84% Increase in Net Income to a Record $3.1 Million in the 2017 First Quarter

April 26, 2017

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stronger growth trends through the rest of 2017 given the strength of the commercial loan pipeline at the end of the first quarter. The strong growth of average commercial loans from last year’s first quarter was the primary driver of the improvement in net interest income in the first quarter of 2017 when compared with the first three months of 2016. The 3% increase in net interest income when compared with the fourth quarter of 2016 largely reflected a higher net interest margin.

First quarter net interest margin of 3.77% improved 11 basis points from the 2016 fourth quarter and 6 basis points from the first quarter of 2016. The margin improvement stems from increased yields on interest-earning assets. The higher yields when compared with the fourth quarter reflect an increase of 10 basis points in loan yields and 38 basis points in investment security yields. Loan yields have benefited from variable loan re-pricing due to an increase in the prime rate after the Federal Reserve increased its target rate by 25 basis points late in 2016 and again in March of 2017. Fourth quarter 2016 investment yields had a higher than typical impact from accelerated premium amortization, resulting in somewhat depressed yields in that quarter. The improved asset yields when compared with last year’s first quarter reflect an asset mix increasingly weighted toward loans. Average loans were 89% of average interest-earning assets in the first three months of 2017 compared with 86% in the prior-year period.

The $0.4 million release of allowance for loan losses reflects favorable credit quality trends and marginal loan growth in the quarter. Strong loan growth in each of the fourth and first quarters of 2016, along with a higher level of non-performing loans in the first quarter of 2016, were the primary factors driving the provision for loan losses in each of the respective periods.


Asset Quality
($ in thousands)

	1Q 2017			4Q 2016			1Q 2016

Total non-performing loans	$	12,285		$	12,020		$	17,941
Total net loan (recoveries) charge-offs		(98)			167			(28)
Non-performing loans/ Total loans		1.30	%		1.28	%		2.25	%
Net loan (recoveries) charge-offs/ Average loans		(0.04)	%		0.07	%		(0.02)	%
Allowance for loan losses/ Total loans		1.44	%		1.48	%		1.65	%

John B. Connerton, Executive Vice President and Chief Financial Officer, noted, “Net interest income continued to benefit from the size and quality of our loan portfolio. The release of allowance for loan losses during the first quarter reflected improving credit quality trends including a sustained historically low charge-off ratio and a decrease in criticized loans.”

Evans Bancorp Reports 84% Increase in Net Income to a Record $3.1 Million in the 2017 First Quarter

April 26, 2017

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Non-Interest Income
($ in thousands)

	1Q 2017		4Q 2016		1Q 2016

Deposit service charges	$	390	$	429	$	443
Insurance service and fee revenue		2,168		1,344		1,748
Bank-owned life insurance		130		135		136
Loss on tax credit investment		-		(883)		-
Refundable NY state historic tax credit		-		609		-
Other income		834		1,009		667
Total non-interest income	$	3,522	$	2,643	$	2,994

Insurance revenue increased from the trailing fourth quarter and last year’s first quarter due to higher profit sharing revenue, including a seasonal impact compared with the fourth quarter. There was continued growth in commercial lines insurance commissions and personal lines revenue was bolstered by incremental revenue from the two recent insurance agency acquisitions. Two business lines that underperformed in 2016, insurance claims services and financial services, both demonstrated improved results in the first quarter of 2017.

The fourth quarter of 2016 included the impact of a net reduction of non-interest income of $0.3 million related to an investment in an historic rehabilitation tax credit. There were no comparable transactions in each of the first quarters of 2017 and 2016.



Non-Interest Expense
($ in thousands)

	1Q 2017		4Q 2016		1Q 2016

Salaries and employee benefits	$	5,716	$	5,838	$	5,514
Occupancy		775		744		699
Advertising and public relations		190		315		285
Professional services		602		445		580
Technology and communications		607		621		598
Amortization of intangibles		28		-		-
FDIC insurance		227		210		159
Other expenses		910		965		693
Total non-interest expenses	$	9,055	$	9,138	$	8,528

First quarter non-interest expenses increased 6% from the prior-year period, but decreased 1% from the trailing fourth quarter. Salaries and benefits costs decreased $0.1 million from the trailing fourth quarter reflecting seasonal incentive compensation in the fourth quarter. The 4% increase in salaries and benefits from last year’s first quarter reflects strategic personnel hires to support the Company’s continued growth.

Occupancy costs were higher compared with last year’s first quarter due to additional depreciation costs of the new core banking system. Other expenses in the first quarter of 2017 were higher than the 2016 first quarter mostly due to the receipt of an insurance claim of $0.1 million in the prior year period related to litigation costs recorded in previous periods. Higher FDIC insurance costs reflect the Company’s balance sheet growth over the past year.

The Company’s efficiency ratio measurably improved to 68.56% in the 2017 first quarter compared with 74.17% and 75.78% in the trailing fourth quarter and 2016 first quarter, respectively. The reduction in the efficiency ratio reflects the Company’s increased revenue while managing expense growth.

Evans Bancorp Reports 84% Increase in Net Income to a Record $3.1 Million in the 2017 First Quarter

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Income tax expense was $1.4 million, or an effective tax rate of 30.8%, for the first quarter of 2017, compared with $0.2 million, or 7.8%, in the fourth quarter of 2016 and $0.8 million, or 31.9%, in last year’s first quarter. The 2016 fourth quarter’s effective tax rate reflects the benefit of the previously noted tax credit investment transaction. The year-over-year decrease in the effective tax rate was due to an increase in the value of the Company’s deferred tax asset recorded in the 2017 first quarter, reflecting an increase in the projected marginal federal tax rate due to the growth in taxable income.

Balance Sheet Highlights

Total assets were $1.1 billion as of March 31, 2017, relatively unchanged from December 31, 2016, but up 15% from $990 million at March 31, 2016, reflecting the Company’s record loan growth in 2016. Loan growth from the end of last year’s first quarter was $149 million, or 19%, and was predominantly in the commercial real estate and commercial and industrial loan portfolios. Loans increased slightly from $943 million at December 31, 2016 to $946 million at March 31, 2017. Investment securities were $116 million at March 31, 2017, flat to the prior year, but $19 million higher than at the end of 2016. Management plans to leverage the capital generated by the common stock issuance in the first quarter with loan growth over the long term. In the short term, investment securities were purchased to generate more immediate returns.

Total deposits of $978 million were 4% higher than $940 million at the trailing fourth quarter and 15% higher than the 2016 first quarter-end. The year-over-year increase reflects growth in all deposit products including demand deposits which grew 12%. In line with their typical seasonal nature, demand deposit balances were down slightly from the trailing fourth quarter. Deposit growth in the first quarter of 2017 was mostly due to higher municipal deposits.

Capital Management

The Company consistently maintains regulatory capital ratios measurably above the Federal “well capitalized” standard, including a Tier 1 leverage ratio of 10.76% at March 31, 2017, compared with 9.49% at December 31, 2016. The increase reflects the impact of the Company’s common stock offering in January 2017 that resulted in the issuance of 440,000 shares of common stock and netted proceeds of $14.1 million. Book value per share increased to $23.64 at March 31, 2017, compared with $22.50 at December 31, 2016 and $21.54 at March 31, 2016.

Outlook

Mr. Nasca concluded, “We expect to see momentum throughout the year as we leverage a stronger platform to drive continued growth. We have a strong and growing pipeline of business and expect recent loan growth trends to resume for the rest of 2017. The Company has added new leadership talent to grow our business and is executing according to our Strategic Plan. Overall, we believe we are well positioned and on track to meet our strategic goals of above trend asset and net income growth, strong returns, improved efficiency and a robust and competitive operating platform.”

About Evans Bancorp, Inc.

Evans Bancorp, Inc. is a financial holding company and the parent company of Evans Bank, N.A., a commercial bank with $1.1 billion in assets and $978 million in deposits at March 31, 2017. Evans is a full-service community bank, with 14 branches, providing comprehensive financial services to consumer, business and municipal customers throughout Western New York. Evans Bancorp's wholly-owned insurance subsidiary, The Evans Agency, LLC, provides property and casualty insurance through seven insurance offices in the Western New York region. Evans Investment Services provides non-deposit investment products, such as annuities and mutual funds.

Evans Bancorp, Inc. and Evans Bank routinely post news and other important information on their websites, at www.evansbancorp.com and www.evansbank.com.

Safe Harbor Statement: This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements

Evans Bancorp Reports 84% Increase in Net Income to a Record $3.1 Million in the 2017 First Quarter

April 26, 2017

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concerning future business, revenue and earnings. These statements are not historical facts or guarantees of future performance, events or results. There are risks, uncertainties and other factors that could cause the actual results of Evans Bancorp to differ materially from the results expressed or implied by such statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include competitive pressures among financial services companies, interest rate trends, general economic conditions, changes in legislation or regulatory requirements, effectiveness at achieving stated goals and strategies, and difficulties in achieving operating efficiencies. These risks and uncertainties are more fully described in Evans Bancorp’s Annual and Quarterly Reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. Evans Bancorp undertakes no obligation to publicly update or revise forward-looking information, whether as a result of new, updated information, future events or otherwise.


For more information contact:	-OR-
John B. Connerton Executive Vice President and Chief Financial Officer	Deborah K. Pawlowski Kei Advisors LLC
Phone: (716) 926-2000 Email: jconner@evansbank.com	Phone: (716) 843-3908 Email: dpawlowski@keiadvisors.com

Evans Bancorp Reports 84% Increase in Net Income to a Record $3.1 Million in the 2017 First Quarter

April 26, 2017

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EVANS BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA (UNAUDITED)
(in thousands, except shares and per share data)

	3/31/2017			12/31/2016			9/30/2016			6/30/2016			3/31/2016
ASSETS
Investment Securities	$	116,304		$	97,205		$	104,859		$	110,629		$	116,294
Loans		945,583			942,512			912,852			853,306			796,773
Allowance for loan losses		(13,579)			(13,916)			(13,712)			(12,773)			(13,119)
Goodwill and intangible assets		8,638			8,406			8,101			8,101			8,101
All other assets		82,714			66,502			72,563			62,335			81,866
Total assets	$	1,139,660		$	1,100,709		$	1,084,663		$	1,021,598		$	989,915

LIABILITIES AND STOCKHOLDERS'
EQUITY
Demand deposits		194,747			201,741			195,869			187,774			174,276
NOW deposits		103,907			88,632			87,047			88,993			95,622
Savings deposits		531,408			508,652			496,926			480,290			463,672
Time deposits		147,915			140,949			118,123			112,828			115,479
Total deposits		977,977			939,974			897,965			869,885			849,049
Borrowings		33,009			49,689			74,136			41,841			34,224
Other liabilities		16,047			14,298			17,364			15,083			14,482
Total stockholders' equity		112,627			96,748			95,198			94,789			92,160

SHARES AND CAPITAL RATIOS
Common shares outstanding		4,763,696			4,300,634			4,287,400			4,286,939			4,279,296
Book value per share	$	23.64		$	22.50		$	22.20		$	22.11		$	21.54
Tier 1 leverage ratio		10.76	%		9.49	%		9.55	%		10.06	%		10.18	%
Tier 1 risk-based capital ratio		12.58	%		10.82	%		10.82	%		11.45	%		11.94	%
Total risk-based capital ratio		13.83	%		12.07	%		12.07	%		12.70	%		13.20	%

ASSET QUALITY DATA
Total non-performing loans	$	12,285		$	12,020		$	15,279		$	16,076		$	17,941
Total net loan (recoveries) charge-offs		(98)			167			67			(30)			(28)

Non-performing loans/Total loans		1.30	%		1.28	%		1.67	%		1.88	%		2.25	%
Net loan (recoveries) charge-offs/Average loans		(0.04)	%		0.07	%		0.03	%		(0.01)	%		(0.02)	%
Allowance for loans losses/Total loans		1.44	%		1.48	%		1.50	%		1.50	%		1.65	%

Evans Bancorp Reports 84% Increase in Net Income to a Record $3.1 Million in the 2017 First Quarter

April 26, 2017

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EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED OPERATIONS DATA (UNAUDITED)
(in thousands, except share and per share data)

	2017			2016			2016			2016			2016
	First Quarter			Fourth Quarter			Third Quarter			Second Quarter			First Quarter
Interest income		10,918			10,664			10,241			9,694			9,356
Interest expense		1,274			1,261			1,172			1,178			1,096
Net interest income		9,644			9,403			9,069			8,516			8,260
(Credit) provision for loan losses		(435)			371			1,006			(376)			208
Net interest income after provision		10,079			9,032			8,063			8,892			8,052

Deposit service charges		390			429			475			403			443
Insurance service and fee revenue		2,168			1,344			1,855			1,572			1,748
Bank-owned life insurance		130			135			144			141			136
Loss on tax credit investment		-			(883)			-			(2,139)			-
Refundable NY state historic tax credit		-			609			-			1,508			-
Other income		834			1,009			861			795			667
Total non-interest income		3,522			2,643			3,335			2,280			2,994

Salaries and employee benefits		5,716			5,838			5,402			5,467			5,514
Occupancy		775			744			732			740			699
Advertising and public relations		190			315			232			190			285
Professional services		602			445			535			656			580
Technology and communications		607			621			504			551			598
Amortization of intangibles		28			-			-			-			-
FDIC insurance		227			210			201			182			159
Other expenses		910			965			1,105			933			693
Total non-interest expenses		9,055			9,138			8,711			8,719			8,528

Income before income taxes		4,546			2,537			2,687			2,453			2,518
Income tax provision		1,400			198			471			450			804
Net income		3,146			2,339			2,216			2,003			1,714

PER SHARE DATA
Net income per common share-diluted	$	0.66		$	0.53		$	0.51		$	0.46		$	0.40
Cash dividends per common share	$	0.40		$	-		$	0.38		$	-		$	0.38
Weighted average number of diluted shares		4,757,062			4,390,553			4,362,479			4,346,599			4,328,034

PERFORMANCE RATIOS
Return on average total assets		1.14	%		0.86	%		0.84	%		0.80	%		0.71	%
Return on average stockholders' equity		11.59	%		9.70	%		9.23	%		8.56	%		7.43	%
Efficiency ratio		68.56	%		74.17	%		70.23	%		76.30	%		75.78	%

Evans Bancorp Reports 84% Increase in Net Income to a Record $3.1 Million in the 2017 First Quarter

April 26, 2017

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EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED AVERAGE BALANCES AND YIELDS/RATES (UNAUDITED)
(in thousands)
	2017			2016			2016			2016			2016
	First Quarter			Fourth Quarter			Third Quarter			Second Quarter			First Quarter
AVERAGE BALANCES

Loans, net	$	924,612		$	915,095		$	875,999		$	801,115		$	772,672
Investment securities		107,024			105,319			112,025			115,610			103,094
Interest-bearing deposits at banks		5,943			1,537			1,162			15,916			18,862
Total interest-earning assets		1,037,579			1,021,951			989,186			932,641			894,628
Non interest-earning assets		70,724			71,247			69,489			65,539			66,375
Total Assets	$	1,108,303		$	1,093,198		$	1,058,675		$	998,180		$	961,003

NOW		94,088			85,279			86,428			88,966			88,220
Savings		510,632			504,394			487,168			473,791			447,318
Time deposits		144,888			131,479			115,644			114,545			108,954
Total interest-bearing deposits		749,608			721,152			689,240			677,302			644,492
Other borrowings		38,748			61,076			69,307			36,031			34,250
Total interest-bearing liabilities		788,356			782,228			758,547			713,333			678,742

Demand deposits		196,331			198,616			187,201			178,106			176,074
Other non-interest bearing liabilities		15,053			15,873			16,860			13,142			13,879
Stockholders' equity		108,563			96,481			96,067			93,599			92,308

Total Liabilities and Equity	$	1,108,303		$	1,093,198		$	1,058,675		$	998,180		$	961,003

YIELD/RATE

Loans, net		4.49	%		4.39	%		4.37	%		4.46	%		4.54	%
Investment securities		2.50	%		2.12	%		2.20	%		2.72	%		2.40	%
Interest-bearing deposits at banks		0.82	%		0.52	%		0.34	%		0.83	%		0.23	%
Total interest-earning assets		4.27	%		4.15	%		4.12	%		4.18	%		4.21	%

NOW		0.22	%		0.23	%		0.23	%		0.35	%		0.39	%
Savings		0.48	%		0.48	%		0.47	%		0.51	%		0.48	%
Time deposits		1.27	%		1.25	%		1.21	%		1.24	%		1.27	%
Total interest-bearing deposits		0.60	%		0.59	%		0.56	%		0.62	%		0.60	%
Other borrowings		1.65	%		1.26	%		1.12	%		1.59	%		1.61	%
Total interest-bearing liabilities		0.66	%		0.64	%		0.61	%		0.66	%		0.65	%

Interest rate spread		3.61	%		3.51	%		3.51	%		3.52	%		3.56	%
Contribution of interest-free funds		0.16	%		0.15	%		0.14	%		0.15	%		0.15	%
Net interest margin		3.77	%		3.66	%		3.65	%		3.67	%		3.71	%



New York	0-18539	161332767
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)


One Grimsby Drive, Hamburg, New York		14075
_________________________________ (Address of principal executive offices)		___________ (Zip Code)



	Evans Bancorp, Inc.

April 26, 2017	By:	/s/ David J. Nasca

		Name: David J. Nasca
		Title: President and Chief Executive Officer


Exhibit No.	Description
99.1	Press Release of Evans Bancorp, Inc. dated April 26, 2017

cto

Date of Report (Date of Earliest Event Reported):		April 26, 2017



Registrant’s telephone number, including area code:		716-926-2000