<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(mark one)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended June 30, 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
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EVANS BANCORP, INC.
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(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
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(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--1,698,484 shares as of June 30, 2000
<PAGE> 2
INDEX
EVANS BANCORP, INC. AND SUBSIDIARY
PAGE
PART 1. FINANCIAL INFORMATION
-------------------------------
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets--June 30, 2000 and
December 31, 1999 1
Consolidated statements of income--Three months
ended June 30, 2000 and 1999 2
Consolidated statements of income--Six months
ended June 30, 2000 and 1999 3
Consolidated statements of cash flows--Six months
ended June 30, 2000 and 1999 4
Notes to consolidated financial statements--
June 30, 2000 and 1999 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 8
PART II. OTHER INFORMATION 9
---------------------------
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 10
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE 1
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 2000 and December 31, 1999
(Unaudited)
June 30, December 31,
ASSETS 2000 1999
------------------- -------------------
<S> <C> <C>
Cash and due from banks $ 7,755,036 $ 8,528,778
Federal Funds sold 3,550,000 3,450,000
Securities:
Classified as available-for-sale, at fair value 67,398,387 59,550,786
Classified as held-to-maturity, at amortized cost 3,551,855 3,448,892
Loans, net 120,884,484 116,433,438
Properties and equipment, net 3,727,635 3,834,496
Other assets 4,127,380 3,541,993
------------------- -------------------
TOTAL ASSETS $210,994,777 $198,788,383
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $ 34,856,615 $ 29,683,357
NOW and money market accounts 9,675,126 8,048,455
Regular savings 60,908,274 58,819,156
Time Deposits, $100,000 and over 30,250,280 28,856,320
Other time accounts 46,676,381 44,541,611
------------------- -------------------
182,366,676 169,948,899
Other Borrowed Funds 5,000,000 5,000,000
Other liabilities 4,514,995 5,554,546
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TOTAL LIABILITIES 191,881,671 180,503,445
------------------- -------------------
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 8,383,554 7,629,839
Accumulated other comprehensive (loss) income (net of tax) (1,088,741) (1,185,096)
------------------- -------------------
19,135,008 18,284,938
Less: Treasury Stock, at cost (466 shares) (21,902) 0
------------------- -------------------
Total Stockholders' equity 19,113,106 18,284,938
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $210,994,777 $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 June 30, 2000 and 1999
(Unaudited)
Three Months Ended
June 30,
2000 1999
------------------- -------------------
<S> <C> <C>
INTEREST INCOME
Loans $2,650,423 $2,332,930
Federal funds sold 26,111 54,107
Securities:
Taxable 689,105 423,054
Non-taxable 388,449 311,934
------------------- -------------------
Total Interest Income 3,754,088 3,122,025
INTEREST EXPENSE
Interest on Deposits 1,469,410 1,151,710
Short Term Borrowing 109,420 74,361
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NET INTEREST INCOME 2,175,258 1,895,954
PROVISION FOR LOAN LOSSES 100,000 45,000
------------------- -------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,075,258 1,850,954
------------------- -------------------
NON-INTEREST INCOME:
Service charges 195,961 169,710
Other 224,084 102,667
Securities (Loss) Gain (6,642) 0
------------------- -------------------
Total Non-interest Income 413,403 272,377
------------------- -------------------
NON-INTEREST EXPENSE:
Salaries and employee benefits 867,021 773,501
Occupancy 244,980 219,120
Supplies 46,616 34,797
Repairs and maintenance 53,557 59,062
Advertising and public relations 32,776 49,171
Professional services 60,040 62,969
FDIC assessments 8,527 4,087
Other 330,213 291,195
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Total Non-interest Expense 1,643,730 1,493,902
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Income before income taxes 844,931 629,429
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INCOME TAXES 209,800 171,250
------------------- -------------------
NET INCOME $635,131 $458,179
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NET INCOME PER COMMON SHARE-BASIC $0.37 $0.27
=================== ===================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 1,698,268 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 INCOME
For the Six Months ended June 30, 2000 and 1999
(Unaudited)
Six Months Ended
June 30,
2000 1999
------------------- -------------------
<S> <C> <C>
INTEREST INCOME
Loans $5,181,489 $4,661,556
Federal Funds Sold 80,349 93,318
Securities:
Taxable 1,318,378 777,535
Non-taxable 772,720 607,338
------------------- -------------------
Total Interest Income 7,352,936 6,139,747
INTEREST EXPENSE
Interest on Deposits 2,867,606 2,271,794
Short Term Borrowing 207,816 158,236
------------------- -------------------
NET INTEREST INCOME 4,277,514 3,709,717
PROVISION FOR LOAN LOSSES 160,000 80,000
------------------- -------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,117,514 3,629,717
------------------- -------------------
NON-INTEREST INCOME:
Service charges 388,786 347,031
Other 425,798 239,688
Securities (Loss) Gain (15,480) 1,064
------------------- -------------------
Total Non-interest Income 799,104 587,783
------------------- -------------------
NON-INTEREST EXPENSE:
Salaries and employee benefits 1,741,635 1,513,121
Occupancy 482,897 434,902
Supplies 94,556 67,905
Repairs and maintenance 111,683 113,031
Advertising and public relations 62,316 95,838
Professional services 128,820 126,111
FDIC Assessment 16,751 8,299
Other 689,708 553,209
------------------- -------------------
Total Non-interest Expense 3,328,366 2,912,416
------------------- -------------------
Income before income taxes 1,588,252 1,305,084
------------------- -------------------
INCOME TAXES 409,800 352,450
------------------- -------------------
NET INCOME $1,178,452 $952,634
=================== ===================
NET INCOME PER COMMON SHARE-BASIC $0.69 $0.56
=================== ===================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 1,698,268 1,698,950
=================== ===================
</TABLE>
See Notes to Consolidated Financial Statements.
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<TABLE>
<CAPTION>
PART I - FINANCIA INFORMATION PAGE 4
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
Six Months Ended
June 30,
2000 1999
------------------- -------------------
<S> <C> <C>
OPERATING ACTIVITIES
Interest received $7,172,600 $6,101,106
Fees and commissions received 749,576 559,856
Interest paid (3,003,150) (2,449,218)
Cash paid to suppliers and employees (3,189,304) (2,791,423)
Income taxes paid (499,500) (347,000)
------------------- -------------------
Net cash provided by operating
activities 1,230,222 1,073,321
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INVESTING ACTIVITIES
Available for sale securities
Purchases (11,494,166) (18,272,730)
Proceeds from sales 2,228,379 2,842,567
Proceeds from maturities 1,564,975 6,904,242
Held to maturity securities
Purchases (1,629,027) (1,592,571)
Proceeds from maturities 1,526,065 1,014,678
Additions to properties and equipment (166,692) (97,593)
Investment unconsolidated subsidiary (10,500) 0
Increase in loans, net of repayments (4,988,600) (2,379,120)
Proceeds from sales of loans 315,856 3,204,950
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Net cash used in investing activities (12,653,710) (8,375,577)
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FINANCING ACTIVITIES
Increase in deposits 12,417,777 12,152,332
Repayment of short term borrowing (1,221,392) (1,858,669)
(Purchase) sale treasury stock (21,902) 60,840
Dividends paid (424,737) (390,448)
------------------- -------------------
Net cash provided by financing
activities 10,749,746 9,964,055
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Net (decrease) increase in cash and cash
equivalents (673,742) 2,661,799
Cash and cash equivalents, January 1 11,978,778 7,300,780
------------------- -------------------
Cash and cash equivalents, June 30 $11,305,036 $9,962,579
=================== ===================
</TABLE>
See Notes to Consolidated Financial Statements.
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE 5
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
Six Months Ended
June 30,
2000 1999
------------------- -------------------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $1,178,452 $952,634
------------------- -------------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 285,147 309,199
Provision for loan losses 160,000 80,000
Loss(Gain) on sale of assets 13,887 (11,137)
Increase(Decrease) in accrued interest payable 72,272 (19,188)
Increase in accrued interest receivable (173,102) (84,938)
Decrease in other liabilities (34,886) (2,775)
Increase in other assets (271,548) (150,474)
------------------- -------------------
Total adjustments 51,770 120,687
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NET CASH PROVIDED BY
OPERATING ACTIVITIES $1,230,222 $1,073,321
=================== ===================
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
Net unrealized loss on available for sale securities ($1,601,178) ($695,457)
=================== ===================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 8
PART I - FINANCIAL INFORMATION PAGE 6
ITEM 1 - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 six month period ended June 30, 2000
are not necessarily indicative of the results to be expected for the
full year.
2. SECURITIES
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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, 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 7.3% over the first six months of 2000 versus
an increase of 8.4% over the first six months of 1999. Demand deposits increased
17.4%, NOW accounts increased 20.2%, Other time accounts increased 4.8% and Time
Deposits over $100,000 increased 4.8% during the first six months of 2000.
Deposit increases primarily are attributable to the expansion of the Bank's
trade area to include West Seneca, NY since opening a new branch in February
1999. All of the Bank's branches continue to exhibit growth in deposits.
Total net loans outstanding increased 3.8% over the first six months of
2000 which compares to a decrease of 1.3% over the first six months of 1999.
Growth was concentrated primarily in commercial mortgages (approximately $5.1
million) and home equity loans (approximately $900 thousand). Residential
mortgage sales to the Federal National Mortgage Association ("FNMA") for the
first six months of 1999 totaled $2.8 million compared to $206 thousand for the
first six months of 2000. The Bank typically sells residential mortgages to FNMA
for the purpose of reducing exposure to the risks inherent in long-term loans,
while keeping the customer relationships through servicing. In January 2000, the
Bank introduced a residential mortgage product which provides for bi-weekly
payments. This substantially reduces the life of the loans and these mortgages
have been retained in the portfolio.
Total commercial loans outstanding at June 30, 2000 year-to-date
increased approximately $8.2 million over the amount outstanding at June 30,
1999 year-to-date and consumer loans increased approximately $3.7 million during
that period. This growth was concentrated primarily in commercial mortgages
(approximately $6.1 million), new and increased usage on commercial lines of
credit (approximately $2.6 million) and home equity loans (approximately $3.5
million).
The securities portfolio increased 12.6% between December 31, 1999 and
June 30, 2000 versus an increase of 15.3% 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 June 30, 2000 was
1.15%. The ROAA at December 31, 1999 was 1.10%. The return on average equity at
June 30, 2000 was 12.01% versus 10.72% at December 31, 1999. The capital to
assets ratio of 10.00% at June 30,2000 compares to 10.17% at December 31, 1999.
Total assets have increased approximately $12.2 million or 6.1% since December
31, 1999.
MATERIAL CHANGES IN THE RESULTS OF OPERATIONS
---------------------------------------------
Net interest income for the semi-annual period ending June 30, 2000
increased 15.3% over the same six month period in 1999. Interest paid on
deposits increased 26.2%. The increase reflects the impact of Federal Reserve
raising short term interest rates 175 basis points since June of last year. The
cost of short term borrowing was substantially higher due to the fact that the
Repo Sweep accounts, which are considered borrowing, are now based on a tiered
rate structure with the primary users of this account qualifying for the highest
rate offered. The Bank's year-to-date net interest margin at June 30, 2000 was
4.55% as compared to 4.54% at June 30, 1999.
The year-to-date yield on average earning assets has increased to 7.97%
at June 30, 2000 from 7.73% at June 30, 1999. The yield on loans has increased
to 8.64% from 8.50% over that time period and the tax-equivalent yield on
federal funds and investments has increased from 6.24% to 6.90%. Comparatively,
the year-to-date cost of funds on interest bearing balances increased from 3.75%
at June 30, 1999 to 4.04% at June 30, 2000. This increase reflects increases in
short term rates on Time Deposits over $100,000 impacted from Federal Reserve
raising short term interest rates and higher balances in the Repo Sweep
accounts.
The year-to-date provision for loan losses was $160,000 through June 30,
2000 versus $80,000 through the second quarter of 1999. Management has increased
the amount set aside for potential loan losses due to the substantial increase
in the volume 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 six month period ending June
2000 were $1,000 versus $5,000 for the same period in June 1999.
<PAGE> 10
PAGE 8
Total non-interest expenses increased 14.3% in the first six months of
2000. This compares to an increase of 16.2% in the first six months of 1999. All
expense categories continue to be impacted by the branch expansion into West
Seneca. Salary and employee benefits increased 15.1% due to annual salary
adjustments and additional staffing. Two loan officer positions were filled and
an additional commercial loan officer was hired. A full-time officer was also
hired for ENB Associates Inc. Supplies are up 39.2% over the same time period in
1999 due in part to the new debit card program, supplies for the mass Y2K
mailing in January and the purchase of stationery with the Bank's new logo.
Advertising and public relations have decreased 35% compared to an increase of
55.1% over June 1999. Last year additional costs were experienced as a result of
the West Seneca branch expansion. FDIC assessments have increased 101.8% due to
new assessment rates which went into effect on January 1, 2000. Miscellaneous
other expenses increased 24.7% for the second quarter of 2000 compared to the
second quarter of 1999.
Net income through June 30, 2000 of $1,178,452 reflects an increase of
23.7% over the first six months of 1999. The effective combined tax rate for the
first six months of 2000 was 26% compared to 27% for the first six months of
1999. The relatively low tax rates experienced in 2000 and 1999 demonstrate the
impact of increasing the Bank's investment in tax- advantaged municipal bonds
and the benefit realized from a favorable deferred tax position.
On March 11, 2000 ENB Associates Inc. a wholly-owned subsidiary of
Evans National Bank, began doing business. Through an agreement with O'Keefe
Shaw & Co. Inc., ENB Associates, Inc. provides customers with access to
non-deposit products, such as annuities and mutual funds. As of June 30, 2000
ENB Associates Inc. generated $17 thousand in revenue for the Bank.
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.
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.
<PAGE> 11
PART II - OTHER INFORMATION PAGE 9
---------------------------
ITEM 1. Legal Proceedings - None to report.
ITEM 2. Changes in Securities - None to report
ITEM 3. Defaults upon Senior Securities - None to report.
ITEM 4. Submission of Matters To a Vote of Security Holders--None to
report except for the annual shareholders meeting held on April
18, 2000 reported in the Form 10-Q filed for the quarter ended
March 31, 2000.
ITEM 5. Other Information:
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 during
the third 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
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27 Financial Data Schedule 11
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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
August 9, 2000 /s/Richard M. Craig
-------------------------------------------
Richard M. Craig
President and Chief Executive Officer
DATE
August 9, 2000 /s/James Tilley
-------------------------------------------
James Tilley
Senior Vice President
