<PAGE> 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, 1998
---------------------
[ ] 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, 1998
<PAGE> 2
INDEX
EVANS BANCORP, INC. AND SUBSIDIARY
PAGE
PART 1. FINANCIAL INFORMATION
- -------------------------------
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets--June 30, 1998 and
December 31, 1997 1
Consolidated statements of income--Three months
ended June 30, 1998 and 1997 2
Consolidated statements of income--Six months 3
ended June 30, 1998 and 1997
Consolidated statements of cash flows--Six months 4
ended June 30, 1998 and 1997
Notes to consolidated financial statements--
June 30, 1998 and 1997 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
<PAGE> 3
PAGE 1
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
<TABLE>
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
<CAPTION>
June 30, December 31,
ASSETS 1998 1997
------------ ------------
<S> <C> <C>
Cash and due from banks $ 6,554,288 $ 5,821,532
Federal Funds sold 2,175,000 4,515,000
Securities:
Available-for-sale, at fair value 36,535,454 33,822,334
Held-to-maturity, at amortized cost 6,038,587 6,578,040
Loans, net 105,199,271 101,627,427
Premises and equipment, net 3,926,820 3,827,672
Other assets 2,520,902 2,350,158
------------ ------------
$162,950,322 $158,542,163
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $ 24,339,216 $ 21,680,839
NOW and money market accounts 7,383,746 7,093,959
Regular savings 46,940,821 44,264,697
Time Deposits, $100,000 and over 22,005,486 22,873,379
Other time accounts 38,808,133 42,478,453
------------ ------------
139,477,402 138,391,327
Short Term Borrowing 2,000,000 0
Other liabilities 3,758,481 3,111,536
------------ ------------
145,235,883 141,502,863
------------ ------------
STOCKHOLDERS' EQUITY
Common Stock, $.50 par value; 10,000,000
shares authorized; 1,698,950 and 1,698,950
shares issued and outstanding 849,475 849,475
Surplus 10,990,720 10,990,720
Retained earnings 5,698,271 4,985,249
Unrealized gains on available for sale securities 175,973 213,856
------------ ------------
17,714,439 17,039,300
------------ ------------
$162,950,322 $158,542,163
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 4
PAGE 2
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months ended June 30, 1998 and 1997
(Unaudited)
Three Months Ended
June 30,
1998 1997
---------- ----------
INTEREST INCOME
Loans $2,387,228 $2,177,414
Federal funds sold 9,293 29,659
Securities:
Taxable 321,998 391,651
Non-taxable 264,618 220,637
Deposits in other banks 0 0
---------- ----------
2,983,137 2,819,361
INTEREST EXPENSE
Deposits 1,176,624 1,156,604
Short Term Borrowing 37,345 2,160
---------- ----------
NET INTEREST INCOME 1,769,168 1,660,597
PROVISION FOR CREDIT LOSSES 29,999 15,000
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 1,739,169 1,645,597
---------- ----------
NON-INTEREST INCOME:
Service charges 176,832 166,139
Other 64,790 31,414
Loss on sale of securities (1,284) (10,113)
---------- ----------
240,338 187,440
---------- ----------
NON-INTEREST EXPENSE:
Salaries and employee benefits 663,217 624,072
Occupancy 188,995 195,842
Supplies 28,399 21,193
Repairs and maintenance 47,307 35,808
Advertising and public relations 34,802 28,808
Professional services 63,897 59,510
FDIC assessments 4,169 4,533
Other 228,215 228,070
---------- ----------
1,259,001 1,197,836
---------- ----------
Income before income taxes 720,506 635,201
---------- ----------
PROVISION FOR INCOME TAXES 209,000 203,984
---------- ----------
NET INCOME $ 511,506 $ 431,217
========== ==========
NET INCOME PER COMMON SHARE-BASIC $ 0.30 $ 0.25
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 1,698,950 1,698,950
========== ==========
See Notes to Consolidated Financial Statements.
<PAGE> 5
PAGE 3
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Six Months ended June 30, 1998 and 1997
(Unaudited)
Six Months Ended
June 30,
1998 1997
---------- ----------
INTEREST INCOME
Loans $4,697,627 $4,275,818
Federal Funds Sold 40,257 71,223
Securities:
Taxable 646,627 753,696
Non-taxable 525,542 419,786
Deposits in other Banks 0 0
---------- ----------
5,910,053 5,520,523
INTEREST EXPENSE
Deposits 2,388,026 2,264,033
Short Term Borrowing 48,497 2,359
---------- ----------
NET INTEREST INCOME 3,473,530 3,254,131
PROVISION FOR CREDIT LOSSES 60,000 30,000
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 3,413,530 3,224,131
---------- ----------
NON-INTEREST INCOME:
Service charges 348,030 328,758
Other 137,349 102,095
Gain(loss) on sale of securities 3,308 (9,740)
---------- ----------
488,687 421,113
---------- ----------
NON-INTEREST EXPENSE:
Salaries and employee benefits 1,326,052 1,253,133
Occupancy 380,493 382,022
Supplies 59,513 42,571
Repairs and maintenance 92,635 73,338
Advertising and public relations 61,802 56,937
Professional services 132,386 114,329
FDIC Assessment 8,294 7,126
Other 444,499 442,226
---------- ----------
2,505,674 2,371,682
---------- ----------
Income before income taxes 1,396,543 1,273,562
---------- ----------
PROVISION FOR INCOME TAXES 394,700 404,800
---------- ----------
NET INCOME $1,001,843 $ 868,762
========== ==========
NET INCOME PER COMMON SHARE-BASIC $ 0.59 $ 0.51
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 1,698,950 1,698,950
========== ==========
See Notes to Consolidated Financial Statements.
<PAGE> 6
PAGE 4
PART I - FINANCIA INFORMATION
ITEM I - FINANCIAL STATEMENTS
<TABLE>
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 and 1997
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Interest received $ 5,547,030 $ 5,337,980
Fees and commissions received 536,503 448,205
Interest paid (2,367,240) (2,190,470)
Cash paid to suppliers and employees (2,163,468) (1,956,194)
Income taxes paid (417,973) (429,250)
------------ ------------
Net cash provided by operating
activities 1,134,852 1,210,271
------------ ------------
INVESTING ACTIVITIES
Available for sale securities
Purchases (13,347,284) (16,093,746)
Proceeds from sales 6,219,849 9,479,604
Proceeds from maturities 4,895,965 342,311
Held to maturity securities
Purchases (1,052,390) (1,186,054)
Proceeds from maturities 1,181,519 569,308
Additions to premises and equipment (157,988) (259,865)
Increase in loans, net of repayments (5,453,499) (4,414,756)
Proceeds from sales of loans 1,829,235 652,687
------------ ------------
Net cash used in investing activities (5,884,593) (10,910,511)
------------ ------------
FINANCING ACTIVITIES
Increase in deposits 1,086,075 11,657,125
Short Term Borrowing 2,345,244
Cash Dividends Paid (288,822) (169,895)
------------ ------------
Net cash provided by financing
activities 3,142,497 11,487,230
------------ ------------
Net (decrease)increase in cash and cash
equivalents (1,607,244) 1,786,990
Cash and cash equivalents, January 1 10,336,532 7,112,231
------------ ------------
Cash and cash equivalents, June 30 $ 8,729,288 $ 8,899,221
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 7
PAGE 5
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
<TABLE>
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 and 1997
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1998 1997
---------- ----------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $1,001,843 $ 868,762
---------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization (21,149) 237,004
Provision for credit losses 60,001 30,000
(Gain)loss on sale of assets (10,890) 4,398
Increase in accrued interest payable 53,157 75,922
Increase in accrued interest receivable (208,137) (212,269)
Increase in other liabilities 228,884 251,930
Decrease(Increase) in other assets 31,143 (45,476)
---------- ----------
Total adjustments 133,009 341,509
---------- ----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $1,134,852 $1,210,271
========== ==========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
Net unrealized gain(loss) on available for sale securities $ 258,772 $ (119,619)
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 8
PAGE 6
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998 AND 1997
(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 ended June 30, 1998
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.
<PAGE> 9
PAGE 7
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
MATERIAL CHANGES IN FINANCIAL CONDITION
- ---------------------------------------
An increasingly competitive market for time deposits contributed to a
decline in the rate of deposit growth in the first six months of 1998 versus the
same time period in 1997. Overall, deposits have only increased 0.8% in 1998 as
compared to an increase of 9.4% over the first six months of 1997. Although
increases in demand deposits, NOW accounts and regular savings were on pace with
the comparable time period last year, time deposits greater than $100M decreased
3.8% and other time accounts decreased 8.6% in the first six months of 1998
whereas these categories increased 39.4% and 2.6% over the first six months of
1997, respectively. Many financial institutions have offered special rates and
other premiums to attract new deposits in an effort to fund loan demand and meet
other obligations. This aggressive pursuit of available funds is further
intensified due to the number of non-banking entities which now attract the
dollars that once funded deposit growth.
Total net loans outstanding of $105.2 million have increased 3.5% since
December 31, 1997. Loan demand has been strong for the past two years, with net
loans increasing 4.1% over the first six months of 1997. Growth in the first six
months of 1998 has largely been concentrated in the commercial sector of the
portfolio, particularly in commercial mortgages. Consumer loan growth remains
concentrated in home equities, both the fixed and variable rate products. A
total of $348 thousand of student loans were sold to SLMA in the first half of
1998. Additionally, $1.5 million in residential mortgages were sold to FNMA.
The investment portfolio increased 5.4% between December 31, 1997 and
June 30, 1998 versus an increase of 18.6% over the same time period last year,
reflecting the impact of the slowdown in deposit growth. The Bank continues to
concentrate investments in US government and agency securities and
tax-advantaged municipal bonds.
The annualized return on average assets ("ROAA") at June 30, 1998 was
1.26%. The ROAA at December 31, 1997 was 1.19%. The Banks annualized return on
average equity at June 30, 1998 was 11.73% versus 11.05% at December 31, 1997.
The capital to assets ratio at June 30, 1998 was 11.13% compared to 10.95% at
year-end 1997. Total assets have increased $4.4 million or 2.8% since December
31, 1997.
MATERIAL CHANGES IN THE RESULTS OF OPERATIONS
- ---------------------------------------------
Net interest income for the semi-annual period ending June 30, 1998
increased 6.7% over the same six month period in 1997. Interest income on loans
and investments increased 7.1% whereas interest expense on deposits and
short-term borrowings increased 6.7%. The Bank's year-to-date net interest
margin was 4.69% at June 30, 1998. At June 30, 1997 the year-to-date net
interest margin was 4.68%. The year-to-date yield on total earning assets at
June 30, 1998 was 8.26%, down slightly from 8.30% a year ago. 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, 1998 was 4.13% increasing slightly from 4.11% through June
30, 1997. This increase can be attributed to an increase in the volume of the
Bank's more expensive products, including the tiered rate Premium savings
introduced in May 1997 which now constitutes nearly 6% of total cost funds.
The year-to-date provision for credit losses was $60 thousand through
June 30, 1998, twice the amount set aside for potential credit losses through
the first six months of 1997. Management has increased the provision due to the
substantial increase in the volume of the loan portfolio over the past two
years. Management believes the portfolio continues to be of good quality.
Net operating expenses increased 5.6% over the first six months of 1998
versus an increase of 3.7% over the first six months of 1997. Annual salary
adjustments and an increase in the number of full-time equivalent employees
contributed to a 5.8% increase in salary and benefit expense. The cost of
necessary forms and supplies is up nearly 40% and repair and maintenance costs
are up over 26%. Professional services, such as legal, accounting, payroll and
benefit services, are up 15.8%.
Net income through June 30, 1998 of $1,001,843 reflects an increase of
15.3% over the first six months of 1997. The effective combined tax rate for the
first six months of 1998 was 28.3% compared to 31.8% for the first six months of
1997. The lower rate for 1998 demonstrates the impact of increasing the Bank's
investment in tax-advantaged municipal bonds and the benefit realized from a
favorable deferred tax position.
<PAGE> 10
PAGE 8
PART II - OTHER INFORMATION
- ---------------------------
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:
Except for the annual shareholders meeting held on April 29, 1998
reported in the Form 10-Q filed for the quarter ended March 31, 1998.
ITEM 5. Other Information - None to 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 10
<PAGE> 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 07, 1998 /s/ Richard M. Craig
-------------------------------------
Richard M. Craig
President and Chief Executive Officer
DATE
August 07, 1998 /s/James Tilley
-------------------------------------
James Tilley
Senior Vice President
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EVANS
BANCORP INC BALANCE SHEET AND STATEMENTS OF INCOME (UNAUDITED) AS OF JUNE 30,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000842518
<NAME> EVANS BANCORP INC
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 6,554,288
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,175,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 36,535,454
<INVESTMENTS-CARRYING> 6,038,587
<INVESTMENTS-MARKET> 0
<LOANS> 105,199,277
<ALLOWANCE> (680,428)
<TOTAL-ASSETS> 162,950,322
<DEPOSITS> 139,477,402
<SHORT-TERM> 2,000,000
<LIABILITIES-OTHER> 3,758,481
<LONG-TERM> 0
0
0
<COMMON> 849,475
<OTHER-SE> 16,864,964
<TOTAL-LIABILITIES-AND-EQUITY> 162,950,322
<INTEREST-LOAN> 4,697,627
<INTEREST-INVEST> 1,172,169
<INTEREST-OTHER> 40,257
<INTEREST-TOTAL> 5,910,053
<INTEREST-DEPOSIT> 2,388,026
<INTEREST-EXPENSE> 2,436,523
<INTEREST-INCOME-NET> 3,473,530
<LOAN-LOSSES> 60,000
<SECURITIES-GAINS> 3,308
<EXPENSE-OTHER> 2,505,674
<INCOME-PRETAX> 1,396,543
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,001,843
<EPS-PRIMARY> .59
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.26
<LOANS-NON> 491,278
<LOANS-PAST> 537,123
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 609,539
<CHARGE-OFFS> 19,817
<RECOVERIES> 30,706
<ALLOWANCE-CLOSE> 680,428
<ALLOWANCE-DOMESTIC> 60,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
