United States
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
(Mark One)
| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For quarterly period ended March 31, 2005
| o | 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.
| New York | 16-1332767 | |
| (State of other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
14 -16 North Main Street, Angola, New York 14006
(716) 926-2000
Not applicable
Indicate by check mark whether the registrant: (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 þ No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the exchange Act)
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Common Stock, $.50 Par Value— 2,593,494 shares as of May 11, 2005
INDEX
EVANS BANCORP, INC. AND SUBSIDIARIES
| PAGE | ||||||||
| 1 | ||||||||
| 2 | ||||||||
| 3 | ||||||||
| 4-5 | ||||||||
| 6 | ||||||||
| 11 | ||||||||
| 18 | ||||||||
| 19 | ||||||||
Item 1. Legal Proceedings |
None | |||||||
| 19 | ||||||||
Item 3. Defaults upon Senior Securities |
None | |||||||
Item 4. Submission of Matters to a Vote of Security Holders |
None | |||||||
| 19 | ||||||||
| 20 | ||||||||
| 21 | ||||||||
| EX-10.1 Summary of Comp. Arrangements for Named Executive | ||||||||
| EX-31.1 Certification of PEO Pursuant to Sect. 302 | ||||||||
| EX-31.2 Certification of PFO Pursuant to Sect. 302 | ||||||||
| EX-32.1 Certification of PEO Pursuant to 18 USC Sect. 1350 | ||||||||
| EX-32.2 Certification of PFO Pursuant to 18 USC Sect. 1350 | ||||||||
1
PART I - FINANCIAL INFORMATION
EVANS BANCORP, INC. AND SUBSIDIARIES |
| March 31, | December 31, | |||||||
| 2005 | 2004 | |||||||
ASSETS |
||||||||
Cash and cash equivalents: |
||||||||
Cash and due from banks |
$ | 13,347 | $ | 8,124 | ||||
Federal funds sold |
8,875 | — | ||||||
Total cash and cash equivalents |
$ | 22,222 | $ | 8,124 | ||||
Interest bearing deposits at other banks |
— | 984 | ||||||
Securities: |
||||||||
Available-for-sale, at fair value |
174,538 | 166,817 | ||||||
Held-to-maturity, at amortized cost |
3,025 | 3,062 | ||||||
Loans, net of allowance for loan losses of $3,179 in 2005
and $2,999 in 2004 |
222,725 | 217,599 | ||||||
Properties and equipment, net |
8,303 | 7,747 | ||||||
Goodwill |
9,498 | 9,219 | ||||||
Intangible assets |
3,043 | 3,170 | ||||||
Bank-owned life insurance |
8,047 | 7,943 | ||||||
Other assets |
6,075 | 4,377 | ||||||
TOTAL ASSETS |
$ | 457,476 | $ | 429,042 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
LIABILITIES |
||||||||
Deposits: |
||||||||
Demand |
$ | 57,845 | $ | 54,013 | ||||
NOW |
13,104 | 11,650 | ||||||
Regular savings |
94,792 | 101,540 | ||||||
Muni-Vest savings |
70,744 | 40,235 | ||||||
Time deposits |
120,565 | 94,490 | ||||||
Total deposits |
357,050 | 301,928 | ||||||
Other borrowed funds |
40,909 | 68,034 | ||||||
Junior subordinated debentures |
11,330 | 11,330 | ||||||
Securities sold under agreements to repurchase |
6,926 | 7,306 | ||||||
Dividend Payable |
857 | — | ||||||
Other liabilities |
6,007 | 4,970 | ||||||
Total liabilities |
423,079 | 393,568 | ||||||
CONTINGENT LIABILITIES AND COMMMITMENTS |
||||||||
STOCKHOLDERS’ EQUITY: |
||||||||
Common stock, $.50 par value; 10,000,000 shares authorized;
2,615,123 and 2,615,123 shares issued, respectively, and
2,589,903 and 2,592,423 shares outstanding, respectively |
1,307 | 1,307 | ||||||
Capital surplus |
23,406 | 23,361 | ||||||
Retained earnings |
11,213 | 10,808 | ||||||
Accumulated other comprehensive income, net of tax |
(903 | ) | 563 | |||||
Less: Treasury stock, at cost (25,220 and 22,700 shares, respectively) |
(626 | ) | (565 | ) | ||||
Total
stockholders’ equity |
34,397 | 35,474 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 457,476 | $ | 429,042 | ||||
See Notes to Unaudited Consolidated Financial Statements
2
PART I - FINANCIAL INFORMATION
EVANS BANCORP, INC. AND SUBSIDIARIES
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2005 | 2004 | |||||||
INTEREST INCOME |
||||||||
Loans |
$ | 3,528 | $ | 2,771 | ||||
Federal
funds sold/Interest on deposits at other banks |
36 | 20 | ||||||
Securities: |
||||||||
Taxable |
1,145 | 678 | ||||||
Non taxable |
490 | 554 | ||||||
Total interest income |
5,199 | 4,023 | ||||||
INTEREST EXPENSE |
||||||||
Deposits |
1,250 | 846 | ||||||
Borrowings |
444 | 180 | ||||||
Junior subordinated debentures |
143 | — | ||||||
Total interest expense |
1,837 | 1,026 | ||||||
NET INTEREST INCOME |
3,362 | 2,997 | ||||||
PROVISION FOR LOAN LOSSES |
151 | 136 | ||||||
NET INTEREST INCOME AFTER |
||||||||
PROVISION FOR LOAN LOSSES |
3,211 | 2,861 | ||||||
NON INTEREST INCOME: |
||||||||
Bank service charges |
488 | 430 | ||||||
Insurance service and fees |
2,027 | 1,389 | ||||||
Net gain on sales of securities |
93 | 143 | ||||||
Premium on loans sold |
9 | 5 | ||||||
Bank owned life insurance |
103 | 101 | ||||||
Other |
308 | 262 | ||||||
Total non interest income |
3,028 | 2,330 | ||||||
NON INTEREST EXPENSE: |
||||||||
Salaries and employee benefits |
2,367 | 1,979 | ||||||
Occupancy |
508 | 410 | ||||||
Supplies |
105 | 87 | ||||||
Repairs and maintenance |
148 | 102 | ||||||
Advertising and public relations |
161 | 84 | ||||||
Professional services |
289 | 176 | ||||||
Amortization of intangibles |
127 | 88 | ||||||
Other Insurance |
94 | 86 | ||||||
Other |
686 | 623 | ||||||
Total non interest expense |
4,485 | 3,635 | ||||||
INCOME BEFORE INCOME TAXES |
1,754 | 1,556 | ||||||
INCOME TAXES |
492 | 388 | ||||||
NET INCOME |
$ | 1,262 | $ | 1,168 | ||||
Net income per common share-basic |
$ | 0.49 | $ | 0.45 | ||||
Net income per common share-diluted |
$ | 0.49 | $ | 0.45 | ||||
Weighted average number of common shares |
2,591,029 | 2,599,353 | ||||||
Weighted average number of diluted shares |
2,593,937 | 2,600,551 | ||||||
See notes to Unaudited Consolidated Financial Statements
3
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARIES
| Accumulated | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Common | Capital | Retained | Comprehensive | Treasury | ||||||||||||||||||||
| Stock | Surplus | Earnings | Income | Stock | Total | |||||||||||||||||||
Balance, January 1, 2004 |
$ | 1,230 | $ | 19,359 | $ | 11,145 | $ | 1,918 | $ | (328 | ) | $ | 33,324 | |||||||||||
Comprehensive income: |
||||||||||||||||||||||||
Net income |
1,168 | 1,168 | ||||||||||||||||||||||
Unrealized loss on available for sale
securities, net of tax effect of $25 and
reclassification adjustment of $(143) |
(40 | ) | (40 | ) | ||||||||||||||||||||
Total comprehensive income |
1,128 | |||||||||||||||||||||||
Cash dividends ($0.29 per common share) |
(817 | ) | (817 | ) | ||||||||||||||||||||
Stock options expense |
37 | 37 | ||||||||||||||||||||||
Issued 31,942 shares for purchase of
insurance agencies |
16 | 708 | 724 | |||||||||||||||||||||
Purchased 5,400 shares for treasury |
(135 | ) | (135 | ) | ||||||||||||||||||||
Balance, March 31, 2004 |
$ | 1,246 | $ | 20,104 | $ | 11,496 | $ | 1,878 | $ | (463 | ) | $ | 34,261 | |||||||||||
Balance, January 1, 2005 |
$ | 1,307 | $ | 23,361 | $ | 10,808 | $ | 563 | $ | (565 | ) | $ | 35,474 | |||||||||||
Comprehensive income: |
||||||||||||||||||||||||
Net Income |
1,262 | 1,262 | ||||||||||||||||||||||
Unrealized loss on available for sale
securities, net of tax effect of $935
and
reclassification adjustment of $(93) |
(1,466 | ) | (1,466 | ) | ||||||||||||||||||||
Total comprehensive income |
(204 | ) | ||||||||||||||||||||||
Cash dividends ($0.33 per common share) |
(857 | ) | (857 | ) | ||||||||||||||||||||
Stock options expense |
45 | 45 | ||||||||||||||||||||||
Purchased 2,600 shares for treasury |
(61 | ) | (61 | ) | ||||||||||||||||||||
Balance, March 31, 2005 |
$ | 1,307 | $ | 23,406 | $ | 11,213 | $ | (903 | ) | $ | (626 | ) | $ | 34,397 | ||||||||||
See Notes to Unaudited Consolidated Financial Statements
4
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARIES
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2005 | 2004 | |||||||
OPERATING ACTIVITIES: |
||||||||
Interest received |
$ | 5,061 | $ | 3,844 | ||||
Fees received |
2,832 | 2,111 | ||||||
Interest paid |
(1,748 | ) | (1,067 | ) | ||||
Cash paid to employees and suppliers |
(4,014 | ) | (3,298 | ) | ||||
Income taxes paid |
(131 | ) | (319 | ) | ||||
Net cash provided by operating activities |
2,000 | 1,271 | ||||||
INVESTING ACTIVITIES: |
||||||||
Available for sales securities: |
||||||||
Purchases |
(16,105 | ) | (52,921 | ) | ||||
Proceeds from sales |
1,070 | 8,878 | ||||||
Proceeds from maturities |
4,817 | 9,938 | ||||||
Held to maturity securities: |
||||||||
Purchases |
(94 | ) | (1,091 | ) | ||||
Proceeds from maturities |
1,120 | 180 | ||||||
Additions to properties and equipment |
(739 | ) | (408 | ) | ||||
Increase in loans, net of repayments |
(6,449 | ) | (4,943 | ) | ||||
Proceeds from sales of loans |
1,201 | 881 | ||||||
Proceeds from sales of other real estate owned |
— | (6 | ) | |||||
Additions to goodwill and intangibles |
(279 | ) | — | |||||
Acquisitions |
— | (138 | ) | |||||
Net cash used in investing activities |
(15,458 | ) | (39,630 | ) | ||||
FINANCING ACTIVITIES: |
||||||||
Proceeds from borrowings |
— | 11,024 | ||||||
Repayments of borrowings |
(25,100 | ) | — | |||||
Repayments of long-term borrowings |
(2,405 | ) | (13,450 | ) | ||||
Increase in deposits |
55,122 | 65,963 | ||||||
Purchase of treasury stock |
(61 | ) | (135 | ) | ||||
Net cash provided by financing activities |
27,556 | 63,402 | ||||||
Net increase in cash and equivalents |
14,098 | 25,043 | ||||||
CASH AND CASH EQUIVALENTS: |
||||||||
Beginning of period |
8,124 | 8,509 | ||||||
End of period |
$ | 22,222 | $ | 33,552 | ||||
(continued)
5
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(in thousands)
| Three Months Ended | ||||||||
| March, 31 | ||||||||
| 2005 | 2004 | |||||||
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 1,262 | $ | 1,168 | ||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
||||||||
Depreciation and amortization |
471 | 440 | ||||||
Provision for loan losses |
151 | 136 | ||||||
Net (gain) loss on sales of assets |
(93 | ) | (137 | ) | ||||
Premiums on loans sold |
(9 | ) | (5 | ) | ||||
Stock options expense |
45 | 37 | ||||||
Changes in assets and liabilities affecting cash flow: |
||||||||
Other assets |
(757 | ) | (590 | ) | ||||
Other liabilities |
930 | 222 | ||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES |
$ | 2,000 | $ | 1,271 | ||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTMENTS AND FINANCIAL ACTIVITIES |
||||||||
Acquisition of insurance agencies: |
||||||||
Fair value of: |
||||||||
Assets acquired, non-cash |
$ | — | $ | 861 | ||||
Liabilities assumed |
$ | — | $ | — | ||||
Securities issued |
$ | — | $ | 723 | ||||
(concluded)
See notes to Unaudited Consolidated Financial Statements
6
PART 1 – FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARIES
| 1. | ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
| The accounting and reporting policies followed by Evans Bancorp, Inc. (the “Company”), a financial holding company, and its two direct wholly-owned subsidiaries: Evans National Bank (the “Bank”), and its subsidiaries, ENB Associates Inc. (“ENB”), Evans National Leasing, Inc. (“ENL”) and Evans National Holding Corp. (“ENHC”); and Evans National Financial Services, Inc. (“ENFS”), and its subsidiary, ENB Insurance Agency, Inc. (“ENBI”) in the preparation of the accompanying interim unaudited consolidated financial statements conform with accounting principles generally accepted in the United States of America and with general practice within the banking industry. Except as the context otherwise requires, the Company and its direct and indirect subsidiaries are collectively referred to in this report as the “Company.” | ||||
| 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 ended March 31, 2005 are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2004. | ||||
| 2. | SECURITIES | |||
| Securities which the Company has the positive ability and intent to hold to maturity are stated at amortized cost. Securities which the Company has identified as available for sale are stated at fair value with changes in fair value included as a component of stockholders’ equity. | ||||
| 3. | ALLOWANCE FOR LOAN LOSSES | |||
| The allowance for loan losses represents the amount charged against the Bank’s earnings to establish an allowance for probable loan losses based on the Bank’s management’s evaluation of the loan portfolio. Factors considered by the Bank’s management in establishing the allowance include: the collectibility of individual loans, current loan concentrations, charge-off history, delinquent loan percentages, input from regulatory agencies and general economic conditions. | ||||
| On a quarterly basis, management of the Bank meets to review and determine the adequacy of the allowance for loan losses. In making this determination, the Bank’s management analyzes the ultimate collectibility of the loans in its portfolio by incorporating feedback provided by the Bank’s internal loan staff, an internal loan review function and information provided by examinations performed by regulatory agencies. | ||||
| The analysis of the allowance for loan losses is composed of three components: specific credit allocation, general portfolio allocation and subjectively by determined allocation. The specific credit allocation includes a detailed review of the credit in accordance with the Statement of Financial Accounting Standards (“SFAS”) No. 114, “Accounting by Creditors for Impairment of a Loan” and No. 118, “Accounting by Creditors for Impairment of a Loan – Income Recognition and Disclosures,” and allocation is made based on this analysis. The general portfolio allocation consists of an assigned reserve percentage based on the actual credit rating of the loan. | ||||
| The subjective portion of the allowance reflects management’s evaluation of various conditions, and involves a higher degree of uncertainty because this component of the allowance is not identified with specific problem credits of portfolio segments. The conditions evaluated in connection with this component include the following: industry and regional conditions; seasoning of the loan portfolio and changes in the composition of and growth in the loan portfolio; the strength and duration of the business cycle; existing | ||||
7
| general economic and business conditions in the lending areas; credit quality trends in nonaccruing loans; historical loan charge-off experience; and the results of bank regulatory examinations. | ||||
| The following table sets forth information regarding the allowance for loan losses for the three month period ended March 31, 2005 and 2004. | ||||
Allowance for loan losses
| Three months ended March 31, | ||||||||
| 2005 | 2004 | |||||||
| (In thousands) | ||||||||
Beginning balance, January 1 |
$ | 2,999 | $ | 2,539 | ||||
Charge-offs: |
||||||||
Commercial |
— | — | ||||||
Real estate mortgages |
— | — | ||||||
Installment loans |
(3 | ) | (1 | ) | ||||
Direct financing leases |
— | — | ||||||
Total charge-offs |
(3 | ) | (1 | ) | ||||
Recoveries: |
||||||||
Commercial |
— | |||||||