<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 September 30, 1999
[ ] 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 October 31, 1999
<PAGE> 2
INDEX
EVANS BANCORP, INC. AND SUBSIDIARY
PAGE
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets--September 30, 1999 and
December 31, 1998 1
Consolidated statements of income--Three months
ended September 30, 1999 and 1998 2
Consolidated statements of income--Nine months
ended September 30, 1999 and 1998 3
Consolidated statements of cash flows--Nine months
ended September 30, 1999 and 1998 4
Notes to consolidated financial statements--
September 30, 1999 and 1998 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3. Quantative and Qualitative Disclosures About
Market Risks 9
PART II. OTHER INFORMATION 10
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 11
<PAGE> 3
PART I - FINANCIAL INFORMATION PAGE 1
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, 1999 and December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1999 1998
------------- ------------
<S> <C> <C>
Cash and due from banks $ 6,070,060 $ 7,300,780
Federal funds sold 1,275,000 0
Securities:
Classified as available-for-sale, at fair value 57,612,890 45,969,587
Classified as held-to-maturity, at amortized cost 4,538,369 4,090,385
Loans, net 111,182,050 110,526,449
Properties and equipment, net 3,720,991 3,696,658
Other assets 3,438,696 2,536,371
------------ ------------
TOTAL ASSETS $187,838,056 $174,120,230
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $ 28,751,547 $ 25,857,037
NOW and money market accounts 7,448,976 7,554,104
Regular savings 59,830,207 47,676,615
Time deposits, $100,000 and over 23,038,459 24,208,290
Other time accounts 41,999,599 38,787,590
------------ ------------
161,068,788 144,083,636
Federal funds purchased 0 2,225,000
Other borrowed funds 5,000,000 7,000,000
Dividend payable 407,748 0
Other liabilities 3,052,711 2,188,181
------------ ------------
TOTAL LIABILITIES 169,529,247 155,496,817
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, $.50 par value; 10,000,000 shares authorized;
1,698,950 shares issued 849,475 849,475
Capital surplus 10,990,720 10,990,720
Retained earnings 7,107,905 6,400,764
Accumulated other comprehensive income (net of tax) (639,291) 443,308
------------ ------------
18,308,809 18,684,267
Less: Treasury stock, at cost (2,419 shares) 0 (60,854)
Total stockholders' equity 18,308,809 18,623,413
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $187,838,056 $174,120,230
============ ============
</TABLE>
See Notes to Consolidated Statements.
<PAGE> 4
PART I - FINANCIAL INFORMATION PAGE 2
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1999 1998
---------- ----------
<S> <C> <C>
INTEREST INCOME
Loans $2,341,696 $2,369,670
Federal funds sold 59,640 24,375
Securities:
Taxable 458,348 318,942
Non-taxable 339,710 282,552
---------- ----------
Total Interest Income 3,199,394 2,995,539
INTEREST EXPENSE
Interest on deposits 1,165,647 1,196,915
Short term borrowing 78,931 36,627
---------- ----------
NET INTEREST INCOME 1,954,816 1,761,997
PROVISION FOR LOAN LOSSES 45,000 30,000
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,909,816 1,731,997
---------- ----------
NON-INTEREST INCOME:
Service charges 196,298 180,681
Other 200,222 99,375
Securities loss 0 (8,791)
---------- ----------
Total non-interest income 396,520 271,265
---------- ----------
NON-INTEREST EXPENSE:
Salaries and employee benefits 810,438 676,878
Occupancy 230,676 191,247
Supplies 48,628 23,628
Repairs and maintenance 57,424 46,166
Advertising and public relations 30,622 26,129
Professional services 69,287 71,939
FDIC assessments 4,286 4,178
Other 298,823 242,070
---------- ----------
Total non-interest expense 1,550,184 1,282,235
---------- ----------
Income before income taxes 756,152 721,027
---------- ----------
INCOME TAXES 203,450 207,400
---------- ----------
NET INCOME $ 552,702 $ 513,627
========== ==========
NET INCOME PER COMMON SHARE-BASIC $0.33 $0.30
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 1,698,950 1,698,950
========== ==========
</TABLE>
See Notes to Consolidated Statements.
<PAGE> 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, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
---------- ----------
<S> <C> <C>
INTEREST INCOME
Loans $7,003,251 $7,067,297
Federal funds sold 152,958 64,632
Securities:
Taxable 1,235,883 965,569
Non-taxable 947,049 808,094
---------- ----------
Total Interest Income 9,339,141 8,905,592
INTEREST EXPENSE
Interest on deposits 3,437,441 3,584,941
Short term borrowing 237,167 85,124
---------- ----------
NET INTEREST INCOME 5,664,533 5,235,527
PROVISION FOR LOAN LOSSES 125,000 90,000
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 5,539,533 5,145,527
---------- ----------
NON-INTEREST INCOME:
Service charges 543,330 528,711
Other 439,910 236,724
Securities gain(loss) 1,064 (5,483)
---------- ----------
Total non-interest income 984,304 759,952
---------- ----------
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,323,560 2,002,930
Occupancy 665,578 571,740
Supplies 116,533 83,141
Repairs and maintenance 170,455 138,801
Advertising and public relations 126,460 87,931
Professional services 195,397 204,325
FDIC assessments 12,585 12,472
Other 852,032 686,569
---------- ----------
Total Non-interest Expense 4,462,600 3,787,909
---------- ----------
Income before income taxes 2,061,237 2,117,570
---------- ----------
INCOME TAXES 555,900 602,100
---------- ----------
NET INCOME $1,505,337 $1,515,470
========== ==========
NET INCOME PER COMMON SHARE-BASIC $0.89 $0.89
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 1,698,950 1,698,950
========== ==========
</TABLE>
See Notes to Consolidated Statements.
<PAGE> 6
PART I - FINANCIAL INFORMATION PAGE 4
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Interest received $ 9,094,173 $ 8,506,687
Fees and commissions received 942,294 834,464
Interest paid (3,710,598) (3,520,598)
Cash paid to suppliers and employees (4,086,341) (3,575,827)
Income taxes paid (621,482) (583,365)
------------ ------------
Net cash provided by operating activities 1,618,046 1,661,361
------------ ------------
INVESTING ACTIVITIES
Available for sale securities
Purchases (24,484,803) (27,144,110)
Proceeds from sales 2,842,567 14,084,899
Proceeds from maturities 6,105,430 6,741,195
Held to maturity securities
Purchases (2,263,557) (1,879,869)
Proceeds from maturities 3,999,664 2,274,951
Additions to bank properties and equipment (234,494) (351,121)
Increase in loans, net of repayments (5,370,918) (9,849,161)
Proceeds from sales of loans 4,178,464 2,961,820
------------ ------------
Net cash used in investing activities (15,227,647) (13,161,396)
------------ ------------
FINANCING ACTIVITIES
Increase in deposits 16,985,152 4,486,477
(Increase) Decrease short term borrowing (3,001,663) 2,351,962
Treasury stock 60,840 (174,645)
Cash dividends paid (390,448) (288,822)
------------ ------------
Net cash provided by financing activities 13,653,881 6,374,972
------------ ------------
Net increase(decrease) in cash and cash equivalents 44,280 (5,125,063)
Cash and cash equivalents, January 1 7,300,780 10,336,532
------------ ------------
Cash and cash equivalents, September 30 $ 7,345,060 $ 5,211,469
============ ============
</TABLE>
See Notes to Consolidated Statements.
<PAGE> 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, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
---------- ----------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $1,505,337 $1,515,470
---------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 459,166 229,661
Provision for credit losses 125,000 90,000
Gain on sale of assets (16,178) (17,917)
(Decrease)Increase in accrued interest payable (35,990) 123,823
Increase in accrued interest receivable (306,942) (280,458)
Increase in other liabilities 66,549 141,966
Increase in other assets (178,896) (141,184)
---------- ----------
Total adjustments 112,709 145,891
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $1,618,046 $1,661,361
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Net unrealized (loss)gain on available for sale securities ($639,291) $ 443,308
========== ==========
</TABLE>
See Notes to Consolidated Statements.
<PAGE> 8
PART I - FINANCIAL INFORMATION PAGE 6
ITEM 1 - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 AND 1998
(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 nine month period ended September 30,
1999 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.
6. NEW ACCOUNTING STANDARDS PRONOUNCEMENTS
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. Management has determined that the Bank is
the Company's only operating segment. As such additional disclosures
are not considered necessary.
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.
<PAGE> 9
PART I - FINANCIAL INFORMATION PAGE 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
MATERIAL CHANGES IN FINANCIAL CONDITION
Total deposits increased 11.8% over the first nine months of 1999. This
compares to an increase of 3.24% over the first nine months of 1998. Demand
deposits increased 11.2%, Regular Savings increased 25.5% and Other time
accounts increased 8.3% over the first nine months of 1999. Deposit increases
primarily are attributable to the expansion of the Bank's trade area. A new
branch office was opened in West Seneca, New York in February 1999. Time
deposits greater than $100,000 decreased 4.8% in the first nine months of 1999
versus a decrease of 1.25% in the first nine months of 1998.
Total net loans outstanding of $111.2 million have increased .6% since
December 31, 1998, which compares to an increase of 6.7% from December 1997 to
September 1998. Total commercial loans increased $3.8 million. Total consumer
loans decreased $952,000, which reflects the current trend of the Bank towards
residential mortgage and home equity mortgage refinancing. The decrease also
reflects the sale of $3.3 million in residential mortgages to the Federal
National Mortgage Association ("FNMA") and $833,000 in student loans sold to
Sallie Mae ("SLMA") in the first nine months of 1999.
The securities portfolio increased 24.2% between December 31, 1998 and
September 30, 1999 versus an increase of 16.1% 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, 1999
was 1.11%. The ROAA at December 31, 1998 was 1.24%. The return on average equity
at September 30, 1999 was 10.72% versus 11.63% at December 31, 1998. The capital
to assets ratio of 10.49% at September 30,1999 compares to 10.81% at December
31, 1998. Total assets have increased approximately $13.7 million or 7.9% since
December 31, 1998.
MATERIAL CHANGES IN THE RESULTS OF OPERATIONS
Net interest income for the nine month period ending September 30, 1999
increased 8.2% over the same nine month period in 1998. Interest paid on
deposits decreased 4.1%. The decrease reflects the impact of Federal Reserve
dropping short term interest rates three times, twenty five basis points each,
in the last months of 1998. 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 September
30, 1999 was 4.54% as compared to 4.65% at September 30, 1998. The year-to-date
yield on average earning assets has declined from 8.19% at September 30, 1998 to
7.69% at September 30, 1999. The yield on loans has declined to 8.48% from 8.92%
over that time period and the tax-equivalent yield on federal funds and
investments has decreased from 6.50% to 6.25%. Comparatively, the year-to-date
cost of funds on interest bearing balances decreased from 4.12% at September 30,
1998 to 3.72% at September 30, 1999.
The year-to-date provision for credit losses was $125,000 through
September 30, 1999 versus $90,000 through the third quarter of 1998. 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 1999 were $16,000 versus $21,000 for the same period in
September 1998.
Non-interest expenses increased 17.8% in the first nine months of 1999.
This compares to an increase of only 4.6% in the first nine months of 1998. All
expense categories were impacted by the branch expansion into West Seneca, NY.
Annual salary adjustments and an increase in the number of full-time equivalent
employees from 81 at September 30, 1998 to 88 at September 30, 1999 contributed
to the 16% increase in salary and benefit expense. Of the $321,000 increase in
salary expense, approximately $155,000 is attributable to staffing the West
Seneca office with six full time employees. Two lenders were also added to the
Loan Division staff. Occupancy expense is up $94,000 over the same time period
in 1998. This represents a 16.4% increase, and includes $59,000 for the West
Seneca location. Supplies are up 40%. Miscellaneous forms and supplies ordered
for the West Seneca branch totalled $15,000. Advertising and Public Relations
increased 43.8%. Approximately $31,000 was spent on the promotion of the new
branch. An additional $13,000 was spent on promoting the Bank's PC and telephone
banking services. Repairs and Maintenance are up 22.8% with approximately $6,000
of the increase attributable to the West Seneca office.
Net income through September 30, 1999 of $1,505,337 reflects a decrease
of .7% over the first nine months of 1998 due to the increase in non-interest
expense. The effective combined tax rate for the first nine months of 1999 was
27% compared to 28.4% for the first nine months of 1998. The relatively low tax
rates experienced in 1999 and 1998 demonstrate 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
YEAR 2000 PAGE 8
The Company has long been aware of the complexity and significance of
the issues associated with the arrival of the Millennium (Year 2000). The "Year
2000" problem centers around the world's computer systems and a common
programming practice that condenses a century date to just two digits, i.e. "98"
to represent 1998, to conserve storage space. As a result, these systems may
interpret "00" as 1900 rather than 2000, causing potential data corruption,
misinterpretation, or system failure. The Company, with the support and
direction of its Board of Directors and Senior Management, has dedicated
financial and human resources to formally adapt strategies and work towards
resolving all potential Year 2000 issues.
In the third quarter of 1997, the Company began formalizing its
strategy to address the data processing and business impacts we anticipated to
be associated with Year 2000 issues. Our ultimate approach was to adopt the
five-phase format recommended by the Federal Financial Institutions Examination
Council, and follow guidance provided to us by our regulatory authorities who
periodically monitor and evaluate our progress. These phases, and our
activities, are described as follows:
Awareness Phase
While this can be considered an ongoing phase relating to education of
employees, customers, and vendors, our primary activities defined the Year 2000
problem; obtained Board of Director and Executive level support; established a
project team to include the Senior Vice President of Administration, the Bank
Auditor; Manager of Data Processing, Manager of Systems Development,
representatives from each functional area of the Bank, legal counsel, and the
principal of our main-frame software vendor. This committee was responsible for
development and implementation of an overall strategy to identify and resolve
issues associated with year 2000.
Assessment Phase
Implementing this phase provided an assessment of the size and
complexity, identifying affected areas of our business, identified the required
resources, and enabled us to develop a comprehensive plan. An inventory of all
hardware and software was completed to establish a specific Year 2000 status,
i.e. "already deemed compliant", "requiring replacement or renovation", or
"becoming obsolete". Priorities were then determined. Certain systems were
identified as mission critical. Non-information technology systems were also
addressed. Key vendors, such as providers of power, heating, and telephone
services, among others, were contacted regarding their Year 2000 readiness. The
Bank has received letters certifying Year 2000 compliance from those suppliers
whose services are deemed critical to bank operations. However, in the event of
an infra-structure failure, i.e. lack of power, etc., a Bank committee has
developed a contingency plan so that business can continue with minimal
interruption. The Bank also performed a customer risk assessment in the last
quarter of 1998.
Renovation Phase
The Company does not write or create computer code or perform
programming activities. We are reliant on vendors and software suppliers to
furnish enhancements in a timely manner. Renovation of our core processing
system was completed in early 1998 in conjunction with a plan developed by the
vendor, other user financial institutions, and our Company. These renovations
were successfully tested in collaboration with all user institutions at our
back-up site. The renovated system was successfully installed in June 1998.
Additional in-house testing was conducted throughout the remainder of the year.
Validation Phase
This is probably the most critical and intensive phase of the entire
project. It is this phase that we validate, through a variety of testing
methods, that each system can process after the turn of the century, with
particular emphasis on those identified as "mission critical". As stated above,
renovation to our core processing systems was successfully tested, and all
testing of mission critical systems was successfully completed by year end 1998.
In each case, we followed a comprehensive written test plan involving user
representation to validate test results. All systems, including those designated
mission critical, have been renovated and successfully tested as of December 31,
1998.
During the second quarter of 1999 the Company performed another integrated test
of our processing system to validate "Year 2000 readiness". The test was
completed successfully and controls are in place to ensure a "clean" system that
remains Year 2000 ready.
<PAGE> 11
Implementation Phase PAGE 9
The Company's Year 2000 ready systems are in place and presently
functioning. As a part of implementation, we plan continued testing in 1999,
along with fully integrated tests. Quality reviews will be conducted throughout
1999 and the year 2000 to ensure proper functioning of our systems. The
implementation phase involves contingency planning. The Company maintains a
formal Business Resumption plan and has developed a supplemental Year 2000
specific contingency plan. In accordance with regulatory guidance we have tested
and validated our Business Resumption Contingency Plan. This process was
completed in June 1999.
The Company believes, however, that due to the widespread nature of
potential Year 2000 issues, the contingency planning process is an ongoing one
which will require further modifications as the Company obtains additional
information, specifically regarding third party Year 2000 readiness.
The Company has identified significant (large) commercial depositors
and performed an assessment of their efforts towards Year 2000 readiness. Should
these depositors be unable to function financially as a result of their own Year
2000 issues, or significantly reduce their deposit levels, there could be an
impact on the Bank's own cash flow. Our initial assessment evaluates this risk
as minimal, and all customers identified in this risk assessment are aware of
the Year 2000 issues and are planning Year 2000 readiness efforts. The Company
will periodically monitor these depositors throughout 1999.
A risk assessment of large commercial borrowers was also completed
representing approximately 70 commercial customers, or 74% of commercial loan
outstandings. Based on survey results, all are rated as moderate to low risk. We
plan to selectively monitor the progress of certain moderate risk borrowers
throughout 1999. New commercial loans exceeding our borrowing threshold for risk
ratings will be measured to assure information technology utilized by the
borrower will be Year 2000 ready.
The Company has a comprehensive Customer Awareness program that
includes training and education of employees regarding Year 2000 issues and
financial industry efforts toward readiness. Our awareness program provides
periodic communication to customers and the community describing our preparation
efforts.
Management continues to quantify expenses related to Year 2000
readiness. The Company has not been required to provide additional staff for the
express purpose of Year 2000 readiness, but rather has utilized existing
internal staff. Our budgeted expenses approximate $45,000, of which $15,000 will
be allocated for renovation of core processing software. Expenses associated
with Year 2000 preparedness are not expected to have a material impact on the
financial condition of the Company.
The Company's objective is to migrate to the Year 2000 with minimal
impact on customers, and be prepared for January 1, 2000. We believe that the
manner in which we have addressed this issue underscores our strengths. The
Company has the resources and the technological expertise to address such new
issues, but is small enough to enable us to make adjustments to internal
programs and systems without affecting the ability to service our customers. The
Company cannot provide assurance that failure of third parties to adequately
address the Year 2000 issue will not have an adverse impact. The Company intends
to continue to assess critical suppliers and customers to determine their
readiness. The Company is confident that with the implementation of the Year
2000 initiatives as scheduled, the possibility of significant interruptions to
normal operations should be reduced.
The preceding "Year 2000" discussion contains various statements which
represent the Company's beliefs or expectations regarding future events. All
forward-looking statements involve a number of risks and uncertainties that
could cause the actual results to differ materially from the projected results.
Factors that cause the differences include, but are not limited to, the actions
of governmental agencies or other third parties with respect to Year 2000
problems.
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.
<PAGE> 12
PART II - OTHER INFORMATION PAGE 10
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.
ITEM 5. Other Information
On September 21, 1999, the Board of directors declared a cash dividend
of $.24 per share payable on October 8, 1999 to shareholders of record
on September 21, 1999.
On October 1, 1999, the Company announced that it had signed a letter
of intent to acquire the business and assets of the M & W Group, Inc.
in exchange for stock of the Company. A copy of the press release is
filed as Exhibit 99 to this 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 12
99 Press Release 17
<PAGE> 13
PAGE 11
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 12, 1999 /s/ Richard M.Craig
Richard M. Craig
President and Chief Executive Officer
DATE
November 12, 1999 /s/ James Tilley
James Tilley
Senior Vice President
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
EVANS BANCORP INC. CONSOLIDATED STATEMENTS OF INCOME AND BALANCE SHEET AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000842518
<NAME> EVANS BANCORP INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-01-1999
<CASH> 6,070,060
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,275,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 57,612,890
<INVESTMENTS-CARRYING> 4,538,369
<INVESTMENTS-MARKET> 0
<LOANS> 111,182,050
<ALLOWANCE> (841,732)
<TOTAL-ASSETS> 187,838,056
<DEPOSITS> 161,068,788
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,460,459
<LONG-TERM> 5,000,000
0
0
<COMMON> 849,475
<OTHER-SE> 17,459,334
<TOTAL-LIABILITIES-AND-EQUITY> 187,838,056
<INTEREST-LOAN> 7,003,251
<INTEREST-INVEST> 2,182,932
<INTEREST-OTHER> 152,958
<INTEREST-TOTAL> 9,339,141
<INTEREST-DEPOSIT> 3,437,441
<INTEREST-EXPENSE> 3,674,608
<INTEREST-INCOME-NET> 5,664,533
<LOAN-LOSSES> 125,000
<SECURITIES-GAINS> 1,064
<EXPENSE-OTHER> 4,462,600
<INCOME-PRETAX> 2,061,237
<INCOME-PRE-EXTRAORDINARY> 2,061,257
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,505,337
<EPS-BASIC> .89
<EPS-DILUTED> 0
<YIELD-ACTUAL> 7.69
<LOANS-NON> 858,000
<LOANS-PAST> 2,579,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 729,000
<CHARGE-OFFS> 16,000
<RECOVERIES> 4,000
<ALLOWANCE-CLOSE> 842,000
<ALLOWANCE-DOMESTIC> 125,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE> 1
PAGE 17
Exhibit 99
<PAGE> 2
PRESS RELEASE
Angola, New York - October 1, 1999
Evans Bancorp, Inc., the parent company of Evans National Bank, and M&W
Insurance Group, Inc. are pleased to announce that they have signed a Letter of
Intent for Evans Bancorp, Inc. to acquire the business and assets of M&W Group,
Inc. in exchange for stock of Evans Bancorp, Inc. The Letter of Intent is
non-binding and is subject to the negotiation and execution of a definitive
agreement between the parties. As soon as the definitive agreement is reached,
more details will be announced. The transaction is subject to further business,
financial, and legal due diligence, and will be subject to the satisfaction of
customary closing conditions and regulatory approvals.
Evans Bancorp, Inc. is a bank holding company headquartered in Angola, New York
and the parent of Evans National Bank. Evans National Bank is an FDIC
full-service commercial bank which, as of December 31, 1998, had total assets of
$174,120,230, total deposits of $144,083,636, and total stockholders' equity of
$18,623,413. The Bank is headquartered in Angola, New York, with branches
located in Evans, Derby, Forestville, Hamburg, North Boston, and West Seneca.
Richard M. Craig, Chairman and Chief Executive Officer of Evans Bancorp, Inc.
and Evans National Bank, stated: "In this time of consolidation in the financial
services industry, we are delighted to have the opportunity to expand the range
of financial services offered to our customers within the communities we serve
through this acquisition. M&W Group has the same approach to personal customer
service which has made our bank successful."
Evans Bancorp, Inc. intends to continue to operate the M&W Group as an
independent subsidiary of Evans National Bank under the management of Robert G.
Miller, Jr., President and majority stockholder of M&W Group, Inc.
M&W Group, Inc. is a retail property, casualty, and financial services agency
headquartered in Silver Creek, New York, with offices located in Angola, North
Collins, South Dayton, Cattaraugus, and Randolph. In 1998, M&W Group had total
written property and casualty premiums in excess of $12,000,000.
Mr. Miller stated: "We believe that this is a wonderful opportunity for our
agency. The resources of Evans Bancorp, Inc. will enable M&W Group to continue
to expand and provide greater service to our customers."
This press release contains forward-looking statements relating to the possible
acquisition of M&W Group and the integration of the products and services of
both companies. As required by the Private Securities Litigation Reform Act of
1995, the companies advise that forward-looking statements are subject to risks
known and unknown, uncertainties, and other factors that could cause actual
results to differ materially from those projected. Factors that could affect the
actual results include the successful completion of due diligence and
negotiation of a definitive agreement, obtaining necessary consents and
approvals, including government approvals.
