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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, 2000
-----------------
[ ] 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--1,696,050 shares as of March 31, 2000
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INDEX
EVANS BANCORP, INC. AND SUBSIDIARY
PAGE
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets--March 31, 2000 and
December 31, 1999 1
Consolidated statements of income--Three months
ended March 31, 2000 and 1999 2
Consolidated statements of cash flows--Three months
ended March 31, 2000 and 1999 3
Notes to consolidated financial statements--
March 31, 2000 and 1999 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Item 3. Quantative and Qualitative Disclosures About Market Risks 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
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<TABLE>
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PART I - FINANCIAL INFORMATION PAGE 1
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, 2000 and December 31, 1999
(Unaudited)
March 31, December 31,
ASSETS 2000 1999
------------- -------------
<S> <C> <C>
Cash and due from banks $ 5,916,663 $ 8,528,778
Federal Funds sold 250,000 3,450,000
Securities:
Classified as available-for-sale, at fair value 68,317,372 59,550,786
Classified as held-to-maturity, at amortized cost 4,030,350 3,448,892
Loans, net 122,016,612 116,433,438
Properties and equipment, net 3,775,019 3,834,496
Other assets 3,852,199 3,541,993
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TOTAL ASSETS $ 208,158,215 $ 198,788,383
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $ 31,522,718 $ 29,683,357
NOW and money market accounts 7,578,163 8,048,455
Regular savings 61,759,167 58,819,156
Time Deposits, $100,000 and over 31,806,174 28,856,320
Other time accounts 45,684,467 44,541,611
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178,350,689 169,948,899
Other Borrowed Funds 5,000,000 5,000,000
Dividend Payable 424,738
Other liabilities 6,110,082 5,554,546
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TOTAL LIABILITIES 189,885,509 180,503,445
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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 7,748,422 7,629,839
Accumulated other comprehensive loss income (net of tax) (1,179,611) (1,185,096)
------------- -------------
18,409,006 18,284,938
Less: Treasury stock, at cost (2,900 shares) (136,300) 0
------------- -------------
Total stockholders' equity 18,272,706 18,284,938
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 208,158,215 $ 198,788,383
============= =============
</TABLE>
See Notes to Consolidated Financial Statements
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<TABLE>
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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, 2000 and 1999
(Unaudited)
Three Months Ended
March 31,
2000 1999
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INTEREST INCOME
<S> <C> <C>
Loans $ 2,531,066 $ 2,328,626
Federal funds sold 54,238 39,211
Securities:
Taxable 629,273 354,481
Non-taxable 384,271 295,404
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Total Interest Income 3,598,848 3,017,722
INTEREST EXPENSE
Interest on Deposits 1,398,196 1,120,084
Short Term Borrowing 98,396 83,875
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NET INTEREST INCOME 2,102,256 1,813,763
PROVISION FOR LOAN LOSSES 60,000 35,000
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,042,256 1,778,763
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NON-INTEREST INCOME:
Service charges 192,825 177,321
Other 201,714 137,021
Securities (Losses)gains (8,838) 1,064
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Total Non-interest Income 385,701 315,406
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NON-INTEREST EXPENSE:
Salaries and employee benefits 874,614 739,620
Occupancy 237,917 215,782
Supplies 47,940 33,108
Repairs and maintenance 58,126 53,969
Advertising and public relations 29,540 46,667
Professional services 68,780 63,142
FDIC assessments 8,224 4,212
Other 359,495 262,014
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Total Non-interest Expense 1,684,636 1,418,514
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Income before income taxes 743,321 675,655
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INCOME TAXES 200,000 181,200
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NET INCOME $ 543,321 $ 494,455
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NET INCOME PER COMMON SHARE-BASIC $ 0.32 $ 0.29
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES 1,697,850 1,695,179
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</TABLE>
See Notes to Consolidated Financial Statements
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<TABLE>
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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, 2000 and 1999
(Unaudited)
Three Months Ended
March 31,
2000 1999
------------ ------------
OPERATING ACTIVITIES
<S> <C> <C>
Interest received $ 3,396,533 $ 2,853,510
Fees and commissions received 351,917 300,172
Interest paid (1,443,261) (1,231,916)
Cash paid to suppliers and employees (1,730,109) (1,559,382)
Income taxes paid (66,500) (5,000)
------------ ------------
Net cash provided by operating
activities 508,580 357,384
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INVESTING ACTIVITIES
Available for sale securities
Purchases (9,800,895) (6,056,445)
Proceeds from sales 552,214 2,842,567
Proceeds from maturities 480,009 2,142,991
Held to maturity securities
Purchases (691,622) (97,640)
Proceeds from maturities 110,165 1,058,841
Additions to properties and equipment (73,300) (52,084)
Investment Unconsolidated Subsidiary (10,500) 0
(Increase)Decrease in loans, net of repayments (5,764,836) 360,280
Proceeds from sales of loans 122,141 1,686,333
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Net cash (used in)provided by investing activities (15,076,624) 1,884,843
------------ ------------
FINANCING ACTIVITIES
Increase in deposits 8,401,790 8,795,261
Purchase of Treasury Stock (136,300) (48,015)
Purchase(Repayment) of Short Term Borrowing 490,439 (3,191,969)
Dividends Paid 0 (390,448)
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Net cash provided by financing
activities 8,755,929 5,164,829
------------ ------------
Net (decrease)increase in cash and cash
equivalents (5,812,115) 7,407,056
Cash and cash equivalents, January 1 11,978,778 7,300,780
------------ ------------
Cash and cash equivalents, March 31 $ 6,166,663 $ 14,707,836
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
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<TABLE>
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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, 2000 and 1999
(Unaudited)
Three Months Ended
March 31,
2000 1999
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<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 543,321 $ 494,455
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Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 154,352 158,455
Provision for loan losses 60,000 35,000
Loss(Gain) on sale of assets 8,359 (5,447)
Increase(Decrease) in accrued interest payable 53,331 (27,956)
Increase in accrued interest receivable (213,406) (192,261)
(Decrease)Increase in other liabilities (12,815) 140,909
Increase in other assets (84,562) (245,771)
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Total adjustments (34,741) (137,071)
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NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 508,580 $ 357,384
=========== ===========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
Net unrealized (loss)gain on available for sale securities ($1,734,721) $ 339,758
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
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PART I - FINANCIAL INFORMATION PAGE 5
ITEM 1 - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 AND 1999
(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 consolidated 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,
2000 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 LOAN LOSSES
The provision for loan 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.
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.
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PART I - FINANCIAL INFORMATION PAGE 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
MATERIAL CHANGES IN FINANCIAL CONDITION
Total deposits increased 5.0% in the first quarter of 2000 versus an
increase of 6.1% over the first three months of 1999. Tax collections in local
municipalities traditionally contribute to significant increases in the total
deposits in the first quarter. Time Deposits over $100,000 have increased 10.2%,
as municipalities have placed funds in short-term time deposits since December
31, 1999 and Regular Savings Deposits have increased 5.0%. Deposit increases of
6.4%, also reflect the expansion of the Bank's trade area to include West
Seneca, NY since opening a new branch in February, 1999.
Total net loans outstanding increased 4.8% over the first three months
of 2000 which compares to a decrease of 1.9% over the first quarter of 1999.
Growth was concentrated primarily in commercial mortgages approximately ($1.5
million) and home equity loans approximately ($1.0 million).
Total commercial loans outstanding at March 31, 2000 year-to-date
increased approximately $10.1 million over the amount outstanding at March 31,
1999 year-to-date and consumer loans increased approximately $3.6 million during
that period. This growth was concentrated primarily in commercial mortgages
approximately ($6.5 million), new and increased usage on commercial lines of
credit approximately ($2.8 million) and home equity loans approximately ($4.2
million).
The securities portfolio increased 14.8% over the first three months of
2000 versus a decrease of .5% which occurred over the first three months of
1999. 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.
On February 15, 2000 the Bank entered into an agreement with O'Keefe
Shaw & Co.,Inc. establishing ENB Associates Inc., a wholly owned subsidiary of
Evans National Bank. Beginning March 11, 2000 ENB Associates Inc. began the
activity of providing non-deposit investment products such as annuities and
mutual funds. As of March 31, 2000 ENB Associates Inc. assets totaled
$67,532.19.
The annualized return on average assets at March 31, 2000 was 1.07%
versus 1.10% at December 31, 1999. The return on average equity at March 31,
2000 was 11.20% versus 10.72% at December 31, 1999. The capital to assets ratio
of 9.73% at March 31, 2000 compares to 10.17% at December 31, 1999. Total assets
have increased approximately $9.4 million or 4.7% since December 31, 1999.
MATERIAL CHANGES IN THE RESULTS OF OPERATIONS
Net interest income for the quarter ending March 31, 2000 increased
15.9% over the first quarter of 1999. Interest income increased 19.3%. Interest
income on federal funds sold increased 38.3%. Interest paid on deposits
increased 24.8%. 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, 2000
was 4.52% as compared to 4.55% at March 31, 1999.
The year-to-date yield on average earning assets increased to 7.90% at
March 31, 2000 from 7.78% at March 31, 1999. The yield on loans has increased to
8.58% from 8.52% over that time period and the tax-equivalent yield on federal
funds sold and investments has increased to 6.82% from 6.51%. Comparatively, the
year-to-date cost of funds on interest- bearing balances increased from 3.81% at
March 31, 1999 to 3.94% at March 31, 2000. This increase reflects a change in
the mix of interest-bearing deposits. A shift from passbook saving accounts to
the higher interest bearing premium savings accounts reflects an increase in the
mix of premium accounts from 7.96% at March 31, 1999 to 11.42% at March 31,
2000.
The year-to-date provision for loan losses was $60,000 through March 31,
2000 versus $35,000 through the first quarter of 1999. Management has increased
the amount set aside for potential loan 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.
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PAGE 7
Non-interest expenses increased 18.8% for the quarter ending March 31,
2000 over the quarter ending March 31, 1999. This compares to an increase of
13.8% in the first quarter of 1999 over the first quarter of 1998. All expense
categories were impacted by the branch expansion into West Seneca. Annual salary
adjustments and an increase in the number of full-time equivalent employees from
85 at March 31, 1999 to 87 at March 31, 2000 contributed to the 18.3% increase
in salary and benefit expense. Supplies are up 44.8% over the same time period
in 1999 due in part to the new debit card program . Advertising and public
relations have decreased 36.7% for the quarter ending March 31, 2000 compared to
an increase of 72.8% over the quarter ending March 31, 1999 compared to 1998
which was related to the branch expansion cost. FDIC assessments have increased
95.3% due to assessment rates increased as of January 1, 2000. Miscellaneous
other expenses increased 37.2% for the first quarter of 2000 compared to the
first quarter of 1999.
Net income for the first quarter of $543,321 reflects an increase of
9.9% over the first quarter of 1999. The increase was in line with projections
and growth due to the branch expansion. The effective combined tax rate for the
first three months of 2000 and for the first three months of 1999 was 27%. The
27% for 2000 and 1999 demonstrates the impact of increasing the Bank's
investment in tax-advantaged municipal bonds and the benefit realized from a
favorable deferred tax position.
ITEM 3 - QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company does not hold investments in instruments (ie: such as
derivative financial or commodity instruments) that are considered to be
subject of any market risk.
The Company realizes income principally from the interest earned on
loans and investments. Loan volumes and yields, as well as the volume of
and rates on investments, deposits and borrowings, are affected by
market interest rate volatility.
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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
The 2000 Annual Shareholders meeting of the Registrant was
held on April 18, 2000. At the meeting, Richard M. Craig,
LaVerne G. Hall and Richard C. Stevenson were reelected as
directors for a term of three (3) years. The following votes
were cast for the nominees:
FOR WITHHELD
Richard M. Craig 1,280,353 16,198
LaVerne G. Hall 1,277,877 18,680
Richard C. Stevenson 1,204,770 91,787
The following directors also continue their terms of office:
Robert W. Allen
William F. Barrett
David C. Koch
David M. Taylor
Phillip Brothman
Thomas H. Waring, Jr.
ITEM 5. Other Information:
A cash dividend of $.25 per share was paid on April 5, 2000 to
holders of record on February 15, 2000. A total of $424,738 was
paid on 1,698,950 shares.
In October of 1999, the Company announced that it had entered
into a letter of intent to acquire the business and assets of
M&W Group, Inc., an insurance agency headquartered in Silver
Creek, New York. That transaction is expected to close within
the second quarter of 2000.
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
10.1 Investment Service Agreement 10
between O'Keefe Shaw & Co.,Inc. and
ENB Associates Inc.
27 Financial Data Schedule 26
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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
May 8, 2000 /s/Richard M. Craig
Richard M. Craig
President and Chief Executive Officer
DATE
May 8, 2000 /s/James Tilley
James Tilley
Senior Vice President
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PAGE 10
EXHIBIT 10.1
<PAGE> 2
INVESTMENT SERVICE AGREEMENT
This Agreement ("Agreement") is made and entered into this 15TH day of
FEBRUARY, 2000, by and among O'Keefe Shaw & Co., Inc., whose principal place of
business is located at 646 N. French Rd., Suite 7, Amherst, NY 14228
("Broker-Dealer"), Evans National Bank whose principal place of business is
located at 14 N. Main St., Angola, NY 14006 ("Bank"), and ENB Associates, Inc.
(ENB).
WHERE AS, Broker/Dealer is an independent registered securities
broker/dealer, and is a member of NASD, and cleared through First Clearing
Corporation, a subsidiary of First Union Securities, a division of First Union
Bank, to sell securities, including mutual funds and annuities; and
WHERE AS, Bank is a national bank with offices in Erie and Chautauqua
Counties and ENB Associates is a wholly owned subsidiary of Bank, and desires to
provide non-deposit investment products to Bank Customers at its (Banks) branch
locations at specific designated areas of said branch; and
WHERE AS, the parties have agreed to enter into this arrangement for
investment services, whereby ENB will employ a licensed investment specialist to
sell fixed and variable annuities and mutual funds through Broker/Dealer, who
will hold the license of ENB's investment specialist and will be responsible for
compliance, training and regulatory reporting.
IT IS HEREBY AGREED to by and between the parties as follows:
SECTION 1
Definitions
-----------
The following terms shall have the following meanings when used herein:
"Registered Representative" shall mean an employee of "ENB" who is
registered and qualified by the NASD whose license is held by Broker-Dealer, and
who is supervised by Broker-Dealer.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"SEC" shall mean the Securities and Exchange Commission.
<PAGE> 3
"Bank Employee" shall mean an employee of "Bank" who is in a
customer-contact position and who is not registered and qualified by the NASD.
"Compliance Manuals" shall mean Broker-Dealer's operations and
procedures manual and compliance manual, as amended from time to time,
maintained in accordance with NASD rules.
"Investment Program" shall mean all securities business conducted at or
through the offices of "Bank".
"Bank Share Payments" shall mean the payments made by Broker-Dealer to
"Bank" pursuant to Schedule A hereof.
"Investment Program Account" or "Account" shall mean an account opened
by or with Broker-Dealer for the purpose of transacting securities brokerage
activities under the Investment Program.
"Investment Program Customer" or "Customer" shall mean a person who
opens an Investment Program Account.
SECTION 2
Obligations of Broker-Dealer
----------------------------
2.1 COMPLIANCE WITH APPLICABLE STATUTE AND REGULATIONS. Broker-Dealer
shall continue to be registered with the SEC as a broker-dealer under Section
15(b) of the Securities Exchange Act of 1934, as amended, and registered or
licensed as a broker-dealer under such state securities laws as the nature of
its business would require. Broker-Dealer shall continue to be a member firm of
the NASD. Broker-Dealer shall comply with all statutory and regulatory
requirements applicable to broker-dealers, as that term is used under Section
15(B) of the Securities Exchange Act of 1934, as amended, including all
applicable rules of the NASD. Broker-Dealer shall comply with all applicable
state securities laws. Broker-Dealer shall ensure that each employee of
Broker-Dealer continues to be registered and qualified to perform all services
provided to Customers.
2.2 INVESTMENT PROGRAM. Broker-Dealer shall exclusively
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<PAGE> 4
control, supervise, and be responsible for the Investment Program and all
securities activities transacted thereunder. Broker-Dealer shall comply with all
applicable laws and regulations. Broker-Dealer shall be solely responsible for
ensuring that the Investment Program complies with all applicable state and
federal securities laws and regulations and with NASD rules. Broker-Dealer and
Registered Representative shall obtain and maintain any and all licenses and
permits required under applicable federal and state securities laws and
regulations for the activities and transactions occurring under the Investment
Program.
2.3 SENIOR SECURITIES PRINCIPAL. A qualified employee or principal of
Broker-Dealer shall act as "senior securities principal" with respect to the
Investment Program.
2.4 SUPERVISION OF REGISTERED REPRESENTATIVE. Broker-Dealer is solely
and fully responsible for the proper supervision and discipline of the
Registered Representative under all applicable securities laws, rules or
regulations and all applicable NASD rules to the same extent as if the
Registered Representative were also an employee of Broker-Dealer. Broker-Dealer
shall provide the Registered Representative with updated copies of the
Compliance Manuals and monitor the Registered Representative's compliance with
the policies and procedures contained in the Compliance Manuals. Broker-Dealer
shall provide the Registered Representative with all information and
professional materials that it provides to registered representatives who are
employees of Broker-Dealer. The Registered Representative's conduct shall be
governed in all respects by the Compliance Manuals, rules, and instructions
provided by Broker-Dealer, as well as by NASD rules and all other applicable
securities laws, rules, or regulations, or NASD rules.
2.5 TRAINING OF ASSOCIATION EMPLOYEES AND "BANK" EMPLOYEES.
Broker-Dealer shall, at no cost to "Bank" or Association, train all "Bank"
Employees and Association Employees regarding standards of conduct and
permissible activities in connection with the Investment Program. Such training
shall occur, at a minimum, on a semi-annual basis and shall take place at the
facilities of Association or "Bank".
Broker-Dealer shall provide manuals outlining such standards and
activities ("Conduct Manuals") to all Association Employees and "Bank"
Employees. Broker-Dealer shall conduct an annual evaluation of "Bank" Employees'
and Association Employees' compliance with the Conduct Manual.
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2.6 MARKETING. On an annual basis, Broker-Dealer shall prepare a written
marketing plan for the benefit of the Investment Program and submit for "Bank"
approval. All materials used to advertise, promote, or explain the Investment
Program (marketing materials) shall be reviewed and approved by Broker-Dealer
and deemed to be Broker-Dealer material.
Broker-Dealer shall not distribute marketing materials, conduct sales
presentations about, or advertise the Investment Program without the "Bank's"
express written consent, which shall not be unreasonably withheld.
2.7 USE OF "BANK" OR ASSOCIATION NAME.
(a) Broker-Dealer shall not use "Bank's" name or logo, or refer to
"Bank" or any person affiliated with "Bank", in any advertisements, sales
presentations or marketing materials without the express written consent of
"Bank".
(b) Broker-Dealer shall not use Association's name or logo or refer to
Association in any advertisements, sales presentations or marketing materials.
(c) Broker-Dealer acknowledges and agrees that this Agreement does not
operate to assign, transfer or convey to Broker-Dealer any license, privilege or
right of any kind or nature whatsoever to use for any reason any trade names,
trademarks, network names, proprietary logotypes or network marks owned by
"Bank" or Association in any of Broker-Dealers advertising, signage, promotional
materials, including printed sales/marketing materials.
2.8 "BANK" SHARE PAYMENTS. Broker-Dealer shall make "Bank" Share
Payments to "Bank" with respect to all transactions which occur under, or are
attributable to, the Investment Program, in accordance with Schedule A, attached
hereto. A deposit account will be established at the "bank" for purpose of
clearing proceeds of all financial transactions of the annuity sales portion of
the Investment Program. The "Bank" will deduct the appropriate Share Payment
amount from the transaction account. Share Payments resulting from the mutual
fund portion of the Investment Program will be remitted directly from
Broker-Dealer.
Broker-Dealer shall provide a monthly detail of all transactions by Investment
Program customers, as well as a reconciliation of Share Payments, no later than
seven (7) business days after the end of the
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<PAGE> 6
calendar month for which the information is provided.
2.9 REGULATORY INQUIRIES. Should any state or federal regulatory agency
with authority over "Bank", Association, or Broker-Dealer make inquiries with
respect to this Agreement or the Investment Program, each party to this
Agreement agrees to assist the other party in the timely preparation of any
reports or correspondence required or requested by the regulatory agency. Should
any such regulatory agency request a review of customer records each party
agrees to make such records available at its respective office during normal
business hours.
2.10 INTERAGENCY STATEMENT. Broker-Dealer and "Bank" shall establish and
observe appropriate policies and procedures consistent with the Interagency
Statement on Retail sales of Non-deposit Investment Products, dated February
14,1994 ("Interagency Statement"), including the Statement's provisions relating
to customer disclosures.
2.11 MONITORING COMPLIANCE WITH AGREEMENT. Broker-Dealer shall allow
"Bank" and/or Association to monitor and periodically review the Investment
Program for the purpose of verifying that Broker-Dealer, its employees and
Registered Representative are complying with the terms of this Agreement.
Broker-Dealer agrees to allow "Bank", Association, and the federal and state
banking agencies having jurisdiction over "Bank" or Association to have access
to such records of Broker-Dealer as are necessary to appropriately evaluate
compliance with this Agreement; provided, however, that such information shall
otherwise be treated by "Bank" and Association as confidential.
2.12 NOTICES. Broker-Dealer shall deliver to the "Bank", within five (5)
business days of receipt, a copy of all notices or correspondence it receives
from any federal, state or local governmental authority, including regulatory
agencies, relating to "Bank", the Association, the Investment Program,
Registered Representative, or this Agreement.
2.13 ACCOUNT-OPENING DOCUMENTS. Broker-Dealer shall provide to "Bank"
all documents and materials necessary to open Investment Program Accounts
(`Account-Opening Documents") and shall be responsible that all such documents'
comply with all applicable laws and regulations.
2.14 DOCUMENTATION FROM THIRD PARTY. Broker-Dealer shall be
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<PAGE> 7
responsible for ensuring that any documentation regarding securities
transactions under the Investment Program which is sent directly to an
Investment Program Customer by a clearing broker, an issuer, transfer agent,
principal underwriter, or other third party, complies with all applicable
securities laws and regulations and NASD rules.
2.15 CONFIDENTIALITY OF INFORMATION. Broker-Dealer shall not disclose to
any other person or firm, directly or indirectly, any confidential information
of the Bank or its customers, except for the specific purposes provided in the
Investment Service Agreement
SECTION 3
Obligations of "Bank"
---------------------
3.1 ASSOCIATION EMPLOYEES AND "BANK" EMPLOYEES. Association Employees
and "Bank" Employees may distribute promotional literature regarding the
Investment Program, direct persons to Registered Representatives, and provide
certain other limited types of information and assistance but may not engage in
any securities brokerage or securities investment advisory activities on behalf
of Association, "Bank" or Broker-Dealer. "Bank" will monitor the activities of
such employees and ensure their compliance with the limits on their permissible
activities and conduct as set forth in the Conduct Manual provided by
Broker-Dealer.
3.2 NOTICES. "Bank" shall deliver to Broker-Dealer within five (5)
business days of receipt, a copy of all notices or correspondence it receives
from any federal, state or local governmental authority, including regulatory
agencies, relating to Broker-Dealer, the Investment Program, Registered
Representative, or this Agreement.
3.3 COMPENSATION OF PERSONNEL. "Bank" shall be solely responsible for
the payment of all compensation under the Investment Program to personnel of
"Bank" and Association, including the salary and any commissions paid to the
Registered Representative.
3.4 CONFIDENTIALITY OF INFORMATION. Bank shall not disclose to any other
person or firm, directly or indirectly, any confidential information of the
Broker-Dealer or its customers, except for the specific purposes provided in the
Investment Service Agreement
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<PAGE> 8
SECTION 4
The Investment Program
----------------------
4.1 DESCRIPTION OF INVESTMENT PROGRAM. Broker-Dealer shall offer the
following products and services under the Investment Program:
(a) BROKERAGE SERVICES. The Registered Representative will initiate
purchases and sales of securities included in the Investment Program from time
to time, including equity and debt securities and shares of certain investment
companies registered under the Investment Company Act of 1940, for Investment
Program Customers. Broker-Dealer will retain a clearing broker (the "Clearing
Broker') to perform for Broker-Dealer such services as are customarily performed
by clearing brokers.
(b) INVESTMENT ADVISORY SERVICES. The Registered Representative may
provide investment advice and recommendations to Investment Program Customer, in
accordance with each Investment Program Customer's suitability profile and/or
investment goals.
4.2 OPENING OF ACCOUNTS. All Account-Opening Documents will be prepared
by the Registered Representative at "Bank's" office. The Registered
Representative will transmit Account-Opening Documents to Broker-Dealer for
approval to open an account. The Registered Representative will forward the
originals of the Account-Opening Documents to Broker-Dealer.
SECTION 5
Term. Renewal and Termination of Agreement
------------------------------------------
5.1 TERM. This Agreement shall become effective upon the execution of
both parties hereof, and unless sooner terminated as herein provided, is for an
initial term of one (1) year from the date first set forth above. After the
initial term, this Agreement shall be subject to automatic successive renewals
of one year each, unless (I) either party has given written notice to the other
party of its election to terminate the Agreement at least 60 days prior to the
expiration of a term or (ii) the Agreement has terminated pursuant to the
remaining provisions of this Section 5.
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<PAGE> 9
5.2 TERMINATION.
(a) Either party, in its sole discretion, may terminate this Agreement
at any time, without cause, upon 60 days prior written notice to the other
party, in which event this Agreement shall terminate sixty (60) days after the
date of such notice.
(b) Either party may terminate this Agreement at any time in the event
that any governmental or judicial authority or any federal or state regulatory
agency with authority over "Bank", Association, or Broker-Dealer requires or
requests, in writing, that either party terminate the Agreement. Termination
under this subsection shall become effective thirty (30) days from the date of
such written notice (which notice shall be forwarded to the other party pursuant
to either Subsection 2.12 or 3.2) unless the regulatory agency or authority
requiring or requesting termination specifies a termination date less than
thirty days from the date of the written notice, in which event the termination
shall become effective on the date specified by the agency or authority.
5.3 RIGHT TO TERMINATE UPON BREACH. Either party shall have the right to
terminate this Agreement at any time if:
(a) the other party commits a material breach of any material provision
of the Agreement and fails to cure such material breach within thirty (30) days
of receipt of written notice thereof from the non-breaching party; or
(b) the other party (I) becomes insolvent; (ii) fails to pay its debts
or perform its obligations in the ordinary course of business as they mature; or
(iii) becomes the subject of any voluntary or involuntary proceeding in
bankruptcy, liquidation, dissolution, receivership, attachment or composition
for the benefit of creditors, and such proceeding is not dismissed within thirty
(30) days after the commencement of such proceeding, and the party terminating
the Agreement provides written notice thereof to such other party.
Termination shall become effective (I) under subsection (a)
automatically upon the expiration of the cure period in the absence of a cure;
provided, however, that the non-breaching party may, in its sole discretion,
extend the cure period for the breach; and (ii) under subsection (b) immediately
upon the non-terminating party's receipt of notice of termination at any time
after the specified event or the failure of the specified proceeding to be
timely dismissed.
Notwithstanding the foregoing, if the Agreement is not
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<PAGE> 10
terminated upon the event of a material breach by either party, the
non-breaching party shall have the right to terminate this Agreement upon the
occurrence of any subsequent breach by the breaching party in the performance of
any material provision herein.
5.4 RIGHT TO TERMINATE BY "BANK". Notwithstanding anything to the
contrary contained herein, "Bank" shall have the right to terminate this
Agreement at any time in the event that the Board of Directors of "Bank"
determines that "Bank's" continued performance under the terms of this Agreement
constitutes an unsafe or unsound practice or violates the rules or regulations
of any federal or state regulatory agency with authority over "Bank" or
Association or violates applicable state and federal securities laws or
regulations or NASD rules, and so certifies to Broker-Dealer in writing.
Termination under this Subsection 5.4 shall become effective thirty (30) days
after written notice to Broker-Dealer.
5.5 EFFECT OF TERMINATION. Notwithstanding anything to the contrary
contained herein, in the event of any termination of this Agreement, the
obligations of Broker-Dealer and "Bank" under Section 6 for expenses or other
liabilities arising from or related to acts or omissions which occurred prior to
the effective date of termination shall survive the termination of this
Agreement.
5.6 TERMINATION FOLLOW-UP. In the event that this Agreement is
terminated pursuant to any of the foregoing provisions:
(a) Broker-Dealer shall immediately discontinue the use of any and all
materials, forms, and documents which refer to the Investment Program or "Bank"
or which bear the logo of "Bank", and shall so certify in writing to `Bank";
(b) "Bank" shall immediately discontinue the use of any and all
materials, forms, and documents which refer to Broker-Dealer or which bear the
logo of Broker-Dealer and shall so certify in writing to Broker-Dealer.
(c) if this Agreement is terminated pursuant to Section 5, and `Bank" is
transferring its securities business to another broker/dealer, including a
broker/dealer subsidiary of "Bank", each Investment Program Customer will be
notified by Broker-Dealer that Customer's Accounts will be transferred to
"Bank's" new broker/dealer unless the Customer notifies Broker-Dealer to the
contrary. Broker-Dealer shall provide such notice at least thirty (30) days
prior to such termination; provide, however, if such termination shall occur
thirty (30) days or
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<PAGE> 11
less from the written notice thereof, Broker-Dealer shall provide such notice to
each Customer within five (5) business days of receipt of written notice
terminating the Agreement. Unless Customer notifies Broker-Dealer to the
contrary, Broker-Dealer will arrange for the transfer of Customer's account(s)
to "Bank"'s new broker/dealer in accordance with the provisions of Section 65 of
the Uniform Practice Code of the NASD.
SECTION 6
Indemnification
---------------
6.1 INDEMNIFICATION BY BROKER-DEALER. Broker-Dealer agrees to indemnify,
defend and hold harmless "Bank" and Association and their officers, directors,
employees, agents, affiliates an assigns from and against any and all losses,
costs, claims, damages, fines, penalties, expenses (including attorneys' fees)
or liabilities, joint or several, which they may incur in connection with
investigating any claim against them or in defending any action and any amount
paid in settlement or compromise, insofar as such losses, claims, damages,
liabilities, actions, costs or expenses arise out of or are a result of (I) any
failure by Broker-Dealer, employees of Broker-Dealer, or by any entity that
Broker-Dealer controls or contracts with, to fulfill any of Broker-Dealer's
obligations under this Agreement; (ii) any act or omission, or alleged act or
omission, of Broker-Dealer, any employee of Broker-Dealer, or Registered
Representative; or (iii) any failure by Broker-Dealer, any employee of
Broker-Dealer, or Registered Representative to comply with applicable securities
laws, rules or regulations, NASD rules, or the Compliance Manuals.
6.2 INDEMNIFICATION BY "BANK". "Bank" agrees to indemnify and hold
harmless Broker-Dealer and its officers directors, employees, agents, affiliates
and permitted assigns from and against any and all losses, costs, claims,
damages, fines, penalties, expenses (including attorneys' fees) or liabilities
they may incur arising out of the failure of any "Bank" Employee, as defined
herein, to comply with the standards of conduct set forth in the Conduct Manual.
SECTION 7
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<PAGE> 12
Representations and Warranties of Parties
-----------------------------------------
7.1 REPRESENTATIONS AND WARRANTIES OF BROKER-DEALER. Broker-Dealer
represents and warrants to "Bank" that: (I) it is and will continue to be
registered with the SEC as a broker-dealer under Section 15(b) of the Securities
Exchange Act of 1934, as amended, and registered or licensed as a broker-dealer
under such state securities laws as the nature of its business would require;
(ii) it is and will continue to be a member firm of the NASD; (iii) it is in
compliance with all requirements imposed by the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder as promulgated by the SEC;
(iv) it is in compliance with all NASD rules, NASD bylaws, and the NASD Rules of
Fair Practice; (v) it is in compliance with all state securities laws; (vi) each
employee of Broker-Dealer is registered and qualified to perform all services
which the employee will provide to Customers; (vii) it has full legal right,
power and authority to enter into and perform this Agreement; (viii) this
Agreement has been duly authorized, executed and delivered by it and constitutes
its legal, valid and binding agreement; and (ix) it has obtained all consents,
approvals, authorizations and orders of governmental agencies or authorities
required in connection with the transactions contemplated by this Agreement on
the part of Broker-Dealer. Broker-Dealer will comply with all applicable laws,
rules and regulations of the SEC, the NASD, and all applicable state securities
laws.
7.2 REPRESENTATIONS AND WARRANTIES OF "BANK". "Bank" represents and
warrants to Broker-Dealer that (i) "Bank" has full legal right, power and
authority to enter into and perform this Agreement; (ii) this Agreement has been
duly authorized, executed and delivered by "Bank" and constitutes the legal,
valid and binding agreement of "Bank", and (iii) no consent, approval,
authorization or order of any governmental agency or authority (except those
previously obtained by "Bank" disclosed to Broker-Dealer and in full force and
effect) is required in connection with the transactions contemplated by this
Agreement on the part of "Bank".
SECTION 8
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<PAGE> 13
General Provisions
------------------
8.1 NOTICES. All notices, requests, approvals, consents or other
communications required or permitted to be delivered hereunder shall be in
writing and shall be deemed delivered or given as of the day they are received
and may be addressed as designated below or to such other address as the party
receiving the notice requests by written notice to the other party delivered in
accordance with this Section.
IF TO BROKER-DEALER:
O'Keefe Shaw & Co., Inc.
646 N. French Rd., Suite 7
Amherst, NY 14228
Peter S. O'Keefe, President
WITH A COPY TO:
IF TO "BANK": Evan National Bank
14 N. Main St.
Angola, NY 14006
Richard M. Craig, Pres & CEO
8.2 FURTHER ASSURANCES. The parties hereto, from time to time after the
execution of this Agreement, without further consideration, shall execute and
deliver, as appropriate, such documents and take such actions as may be
reasonably necessary and proper to carry out and consummate more effectively the
transactions contemplated hereby.
8.3 ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
and understanding of the parties hereto with respect to the subject matter
hereof and supersedes and terminates all other prior commitments, arrangements
or understandings, both oral and written, between the parties with respect
hereto.
8.4 MODIFICATION. This Agreement may not be modified or amended except
by an instrument in writing executed by each of the parties hereto which
expressly refers to this Agreement.
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<PAGE> 14
8.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
8.6 REGULATORY COMPLIANCE. If, for any reason, any portion of this
Agreement must be changed to comply with statutory or regulatory requirements,
the parties to this Agreement agree to bargain in good faith to make necessary
changes to this Agreement to conform to such regulatory requirements consistent
with the substantive business goals of this Agreement.
8.7 SEVERABILITY. The provisions of this Agreement are severable and the
invalidity of one or more provisions shall not be deemed to invalidate the
remainder of this Agreement.
8.8 ENFORCEMENT. If any action at law or in equity is necessary to
enforce the terms of this agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and expenses in addition to any other relief
to which such prevailing party may be entitled.
8.9 HEADINGS. The descriptive headings of this Agreement have been
inserted for convenience and shall not be deemed to limit or otherwise affect
the construction of any provision hereof.
8.10 WAIVER. None of the provisions of this Agreement shall be deemed to
have been waived by any act or acquiescence on the part of any party or their
agents or employees, and may be waived only by instruments in writing signed by
an authorized officer of the respective party. No waiver of any provision of
this Agreement shall constitute a waiver of any other provision or of the same
provision on another occasion.
8.11 ASSIGNMENT. No party may assign this Agreement without the prior
written consent of the other party.
8.12 RELATIONSHIP OF THE PARTIES. Nothing contained herein shall be
deemed or construed by the parties hereto or by any third party as creating the
relationship of principal and agent, or of partnership, or of joint venture
between the parties hereto, or as making "Bank" or Association in any way
responsible for the debts, losses, actions or failure to act of Broker-Dealer,
employees of Broker-Dealer, or Registered Representative.
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<PAGE> 15
IN WITNESS WHEREOF, the parties have signed this Agreement as
of the date first above written.
ATTEST:
Evans National Bank
/s/Richard M. Craig 2/15/2000
- ----------------------------------------- ---------
Richard M. Craig, President and CEO Dated
ATTEST:
O'Keefe Shaw & Co., Inc.
/s/Peter S. O'Keefe 2/15/2000
- ----------------------------------------- ---------
Peter S. O'Keefe, President Dated
ATTEST:
ENB Associates, Inc.
/s/Richard M. Craig 2/15/2000
- ----------------------------------------- ---------
Richard M. Craig, President Dated
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<PAGE> 16
SCHEDULE A
- ----------
Revenues will be shared as following basis:
ENB ASSOCIATES, INC. EMPLOYEE:
- ------------------------------
70% to ENB Associates, Inc.
30% to O'Keefe Shaw & Co., Inc.
O'KEEFE SHAW & CO., INC. EMPLOYEE *:
- ------------------------------------
30% to ENB Associates, Inc.
70% to O'Keefe Shaw & Co., Inc.
* Net of clearing expenses
15 of 15
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from Evans
Bancorp Inc. Unaudited Balance Sheet and Statement of Income 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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,916,663
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 250,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 68,317,372
<INVESTMENTS-CARRYING> 4,030,350
<INVESTMENTS-MARKET> 0
<LOANS> 122,016,612
<ALLOWANCE> 899,412
<TOTAL-ASSETS> 208,158,215
<DEPOSITS> 178,350,689
<SHORT-TERM> 0
<LIABILITIES-OTHER> 6,534,820
<LONG-TERM> 5,000,000
0
0
<COMMON> 849,475
<OTHER-SE> 17,423,231
<TOTAL-LIABILITIES-AND-EQUITY> 208,158,215
<INTEREST-LOAN> 2,531,066
<INTEREST-INVEST> 1,013,544
<INTEREST-OTHER> 54,238
<INTEREST-TOTAL> 3,598,848
<INTEREST-DEPOSIT> 1,398,196
<INTEREST-EXPENSE> 1,496,592
<INTEREST-INCOME-NET> 2,102,256
<LOAN-LOSSES> 60,000
<SECURITIES-GAINS> (8,838)
<EXPENSE-OTHER> 1,684,636
<INCOME-PRETAX> 743,321
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 543,321
<EPS-BASIC> .32
<EPS-DILUTED> 0
<YIELD-ACTUAL> 7.90
<LOANS-NON> 3,731,359
<LOANS-PAST> 49,829
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 838,167
<CHARGE-OFFS> 115
<RECOVERIES> 1,360
<ALLOWANCE-CLOSE> 899,412
<ALLOWANCE-DOMESTIC> 60,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
