<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 March 31, 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
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(Issuer's telephone number)
Not applicable
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(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 March 31, 1998
<PAGE> 2
INDEX
EVANS BANCORP, INC. AND SUBSIDIARY
PAGE
PART 1. FINANCIAL INFORMATION
- -------------------------------
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets--March 31, 1998 and
December 31, 1997 1
Consolidated statements of income--Three months
ended March 31, 1998 and 1997 2
Consolidated statements of cash flows--Three months
ended March 31, 1998 and 1997 3
Notes to consolidated financial statements--
March 31, 1998 and 1997 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. OTHER INFORMATION 7
- -----------------------------
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 8
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE 1
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, 1998 and December 31, 1997
(Unaudited)
March 31, December 31,
ASSETS 1998 1997
-------------------- ------------------
<S> <C> <C>
Cash and due from banks $6,227,992 $5,821,532
Interest bearing deposits in other banks 0 0
Federal Funds sold 0 4,515,000
Securities:
Classified as available-for-sale, at fair value 37,785,156 33,822,334
Classified as held-to-maturity, at amortized cost 6,260,038 6,578,040
Loans, net 104,153,606 101,627,427
Premises and equipment, net 3,950,213 3,827,672
Other assets 2,674,797 2,350,158
-------------------- ------------------
$161,051,802 $158,542,163
==================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $21,893,048 $21,680,839
NOW and money market accounts 6,925,028 7,093,959
Regular savings 49,481,190 44,264,697
Time Deposits, $100,000 and over 24,272,273 22,873,379
Other time accounts 38,775,011 42,478,453
-------------------- ------------------
141,346,550 138,391,327
Dividend Payable 0 0
Other liabilities 2,557,874 3,111,536
-------------------- ------------------
143,904,424 141,502,863
-------------------- ------------------
STOCKHOLDERS' EQUITY
Common Stock, $.50 and $2.50 par value; 10,000,000
and 1,000,000 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 5,186,765 4,985,249
Unrealized gains on available for sale securities 120,418 213,856
-------------------- ------------------
17,147,378 17,039,300
-------------------- ------------------
$161,051,802 $158,542,163
==================== ==================
</TABLE>
See Notes to Consolidated Financial Statements.
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<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 March 31, 1998 and 1997
(Unaudited)
Three Months Ended
March 31,
1998 1997
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<S> <C> <C>
INTEREST INCOME
Loans $2,310,399 $2,098,404
Federal funds sold 30,964 41,564
Securities:
Taxable 324,629 362,045
Non-taxable 260,924 199,148
Deposits in other banks 0 0
-------------------- -----------------
2,926,916 2,701,161
INTEREST EXPENSE
Interest on Deposits 1,211,402 1,107,429
Short Term Borrowing 11,152 199
-------------------- -----------------
NET INTEREST INCOME 1,704,362 1,593,533
PROVISION FOR CREDIT LOSSES 30,001 15,000
-------------------- -----------------
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 1,674,361 1,578,533
-------------------- -----------------
NON-INTEREST INCOME:
Service charges 171,198 162,619
Other 72,559 70,681
Securities Gains 4,592 374
-------------------- -----------------
248,349 233,674
-------------------- -----------------
NON-INTEREST EXPENSE:
Salaries and employee benefits 662,835 629,061
Occupancy 191,498 186,180
Supplies 31,114 21,378
Repairs and maintenance 45,328 37,530
Advertising and public relations 27,000 28,129
Professional services 68,489 54,819
FDIC assessments 4,125 2,592
Other 216,284 214,157
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1,246,673 1,173,846
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Income before income taxes 676,037 638,361
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PROVISION FOR INCOME TAXES 185,700 200,816
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NET INCOME $490,337 $437,545
==================== =================
NET INCOME PER COMMON SHARE $0.29 $0.26
==================== =================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 1,698,950 1,698,950
==================== =================
</TABLE>
See Notes to Consolidated Financial Statements.
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE 3
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1998 and 1997
(Unaudited)
Three Months Ended
March 31,
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES
Interest received $2,457,431 $2,402,873
Fees and commissions received 268,545 243,468
Interest paid (1,208,701) (1,090,095)
Cash paid to suppliers and employees (1,190,540) (1,148,463)
Income taxes paid (47,223) (53,250)
-------------------- --------------------
Net cash provided by operating
activities 279,512 354,533
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INVESTING ACTIVITIES
Available for sale securities
Purchases (11,469,420) (13,498,292)
Proceeds from sales 4,892,987 6,961,774
Proceeds from maturities 2,793,975 208,332
Held to maturity securities
Purchases (188,104) (280,754)
Proceeds from sales 0 0
Proceeds from maturities 311,252 283,463
Additions to bank premises and equipment (137,463) (183,922)
Increase in loans, net of repayments (3,165,495) (2,411,135)
Proceeds from sales of loans 613,502 271,098
-------------------- --------------------
Net cash used in investing activities (6,348,766) (8,649,436)
-------------------- --------------------
FINANCING ACTIVITIES
Increase in deposits 2,955,223 10,115,754
Short Term Borrowing (705,687) 0
Cash Dividends Paid (288,822) (169,895)
-------------------- --------------------
Net cash provided by financing
activities 1,960,714 9,945,859
-------------------- --------------------
Net increase in cash and cash
equivalents (4,108,540) 1,650,956
Cash and cash equivalents, January 1 10,336,532 7,112,231
-------------------- --------------------
Cash and cash equivalents, March 31 $6,227,992 $8,763,187
==================== ====================
</TABLE>
See Notes to Consolidated Financial Statements.
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE 4
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1998 and 1997
(Unaudited)
Three Months Ended
March 31,
1998 1997
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<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $490,337 $437,545
---------------- --------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization (96,797) 59,577
Provision for credit losses 30,001 15,000
Gain on sale of assets (8,779) (2,410)
Increase in accrued interest payable 13,854 17,533
Increase in accrued interest receivable (294,919) (252,357)
Increase in other liabilities 146,042 153,776
Increase in other assets (227) (74,131)
---------------- --------------
Total adjustments (210,825) (83,012)
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NET CASH PROVIDED BY
OPERATING ACTIVITIES $279,512 $354,533
================ ==============
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 $177,086 ($549,839)
================ ==============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 7
PART I - FINANCIAL INFORMATION PAGE 5
ITEM 1 - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 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 three month period ending March
31, 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 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. 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> 8
PART I - FINANCIAL INFORMATION PAGE 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
MATERIAL CHANGES IN FINANCIAL CONDITION
- ---------------------------------------
Total deposits increased 2.1% in the first quarter of 1998 versus an
increase of 8.2% over the first three months of 1997. In 1997, deposit growth
was bolstered by an increase of 39.1% in time deposits over $100,000. In 1998,
this deposit category increased only 6.1% and time deposits under $100,000
decreased 8.7%. Competition for time deposits has been increasingly intense as
financial institutions turn to this source of funding to meet loan demand and
other obligations. Traditional first quarter growth experienced in other deposit
categories provided an offset to the decline in time deposits.
Total net loans outstanding increased 2.5% over the first three
months of 1998 which compares to an increase of 2.3% over the first quarter of
1997. Total commercial loans increased $2.4 million over the first quarter of
1998, where growth remains concentrated in the Bank's commercial mortgage
portfolio. On the consumer side, less significant growth of $141,000 reflects
the current trend towards residential mortgage refinancing and the sale of
$460,000 in residential mortgages to the Federal National Mortgage Association
("FNMA"). Additionally, $149,000 in student loans were sold to the Student Loan
Marketing Association ("SLMA").
The securities portfolio increased 9.0% over the first three months
of 1998 versus growth of 16.1% which occurred in the first quarter of 1997.
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 available for sale portfolio declined slightly in value since
December 31, 1997. At December 31, the portfolio was valued at $376,000 over
amortized cost whereas at March 31, 1998 the portfolio was valued at $231,000
over amortized cost.
The annualized return on average assets at March 31, 1998 was 1.24%
versus 1.19% at year-end 1997. The return on average equity improved to 11.65%
at March 31, 1998 versus 11.06% at December 31, 1997. The capital to assets
ratio of 10.93% at March 31, 1998 compares to 10.95% at December 31, 1997. Total
assets have increased $2.5 million or 1.6% since year-end.
MATERIAL CHANGES IN THE RESULTS OF OPERATIONS
- ---------------------------------------------
Net interest income for the quarter ending March 31, 1998 increased
7.0% over the first quarter of 1997. Interest income increased 8.4%. Loan
interest income was up 10.1% as a result of increased volume. Interest income on
federal funds sold and securities increased only 2.3%, but there is a benefit
derived from increasing the volume of tax-exempt income that is not reflected in
interest income, but in a lower effective tax rate. Interest paid on deposits
increased 9.4% and the cost of short-term borrowing was substantially higher due
to the increased use of the Bank's funding options as a member of the Federal
Home Loan Bank. The Bank's year-to-date net interest margin at March 31, 1998
was 4.65% as compared to 4.67% at March 31, 1997.
The year-to-date yield on average earning assets has declined from
8.29% at March 31, 1997 to 8.24% at March 31, 1998. The yield on loans has
declined to 9.01% from 9.10% over that time period and the tax-equivalent yield
on federal funds sold and investments have decreased to 6.51% from 6.53%.
Comparatively, the year-to-date cost of funds on interest-bearing balances
increased from 4.11% at March 31, 1997 to 4.17% at March 31, 1998. This increase
reflects a change in the mix of interest-bearing deposits, Time deposits made up
55.7% of interest-bearing deposits at March 31, 1998 versus 53.0% the previous
year. A new premium rate retail savings account product introduced in May 1997
has also contributed to the change in mix and a higher overall cost of funds, as
has a volume decrease in average regular savings balances.
The year-to-date provision for credit losses was $30,001 through
March 31, 1998 versus $15,000 through the first quarter of 1997. Management has
increased the amount set aside for potential credit losses due to the
substantial increase in the volume of the portfolio experienced over the past
two years. Management believes that the credit quality of the portfolio remains
high.
Net operating expenses increased 6.2% for the quarter ending March
31, 1998 over the quarter ending March 31, 1997. This compares to an increase of
only 3.0% in the first quarter of 1997 over the first quarter of 1996. Annual
salary adjustments and increase in the number of full-time equivalent employees
from 75 at March 31, 1997 to 80 at March 31, 1998 contributed to the 5.40%
increase in salary and benefit expense. The cost of forms and other necessary
supplies is up 45.5% over the same time period in 1997 and professional
services, such as legal, accounting and payroll and benefit services, are up
24.9%.
<PAGE> 9
PAGE 7
Net income for the first quarter of $490,337 reflects an increase of
12.1% over the first quarter of 1997. The effective combined tax rate for the
first three months of 1998 was 28% compared to 32% for the same period in 1997.
The 28% 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.
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
The annual shareholders meeting for the Registrant was held on April
29, 1998. At the meeting, Phillip Brothman, David M. Taylor and
Thomas H. Waring, Jr. were reelected as directors for a term of
three (3) years. The following votes were cast for the nominees:
FOR AGAINST
Phillip Brothman 1,346,343 2,308
David M. Taylor 1,340,555 8,096
Thomas H. Waring, Jr. 1,324,803 23,848
Edward R. Gerecke, Jr. 2,686
The following directors continue their terms of office:
Robert W. Allen
William F. Barrett
Richard M. Craig
LaVerne G. Hall
Richard C. Stevenson
ITEM 5. Other Information:
A cash dividend of $.17 per share was paid on March 26, 1998 to
holders of record on March 12, 1998. A total of $288,822 was paid on
1,698,950 shares.
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> 10
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
May 13, 1998 /s/Richard M. Craig
---------------------------------------
Richard M. Craig
President and Chief Executive Officer
DATE
May 13, 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. FINANCIAL STATEMENTS (UNAUDITED) FOR QUARTER ENDED MARCH 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000842518
<NAME> EVANS BANCORP INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,227,992
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 37,785,156
<INVESTMENTS-CARRYING> 6,260,038
<INVESTMENTS-MARKET> 0
<LOANS> 104,153,606
<ALLOWANCE> (642,579)
<TOTAL-ASSETS> 161,051,802
<DEPOSITS> 141,346,550
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,557,874
<LONG-TERM> 0
0
0
<COMMON> 849,475
<OTHER-SE> 16,297,903
<TOTAL-LIABILITIES-AND-EQUITY> 161,051,082
<INTEREST-LOAN> 2,310,399
<INTEREST-INVEST> 585,553
<INTEREST-OTHER> 30,964
<INTEREST-TOTAL> 2,926,916
<INTEREST-DEPOSIT> 1,211,402
<INTEREST-EXPENSE> 1,222,555
<INTEREST-INCOME-NET> 1,704,361
<LOAN-LOSSES> 30,001
<SECURITIES-GAINS> 4,592
<EXPENSE-OTHER> 1,246,673
<INCOME-PRETAX> 676,037
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 490,337
<EPS-PRIMARY> .29
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.24
<LOANS-NON> 507,515
<LOANS-PAST> 286,208
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 611,229
<CHARGE-OFFS> 4,923
<RECOVERIES> 7,962
<ALLOWANCE-CLOSE> 642,579
<ALLOWANCE-DOMESTIC> 30,001
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
