Regulatory Compliance - The Company is subject to extensive regulation under federal and state laws, which may materially affect its business and financial condition [39]. - The Company must obtain prior approval from the Federal Reserve Board (FRB) for mergers or acquisitions involving more than 5% of voting shares [41]. - The Company has qualified for an exception allowing it to redeem or repurchase its outstanding equity securities without prior FRB approval as of December 31, 2024 [46]. - The Company is prohibited from engaging in certain tying arrangements in connection with credit extensions, ensuring compliance with federal regulations [56]. - The Company must adhere to strict limits on loans to insiders, ensuring that such loans are made on terms comparable to those offered to non-affiliated individuals [59]. - The USA PATRIOT Act requires financial institutions to enhance anti-money laundering compliance programs, impacting merger and acquisition applications [85]. - Noncompliance with applicable regulations may lead to sanctions, including civil money penalties and restrictions on mergers and acquisitions [114]. - Cybersecurity and data privacy risks have become a focus of regulatory scrutiny, which may require changes to the Company's systems and business practices [128]. Financial Performance - Net income for 2024 was $11,954,000, a decline of 51.2% compared to $24,524,000 in 2023 [333]. - Comprehensive income for 2024 was $10,282,000, significantly lower than $31,531,000 in 2023, indicating a decline of 67.3% [333]. - Net interest income after provision for credit losses decreased to $56,732,000 in 2024, compared to $61,190,000 in 2023, reflecting a decline of 7.9% [332]. - Non-interest income significantly dropped to $10,958,000 in 2024, down 66.7% from $32,922,000 in 2023 [332]. - Total non-interest expense decreased to $53,422,000 in 2024, a reduction of 10% from $59,382,000 in 2023 [332]. - The provision for credit losses increased to $2,236,000 in 2024 from $18,000 in 2023, reflecting a substantial rise in credit risk assessment [332]. - The company reported a decrease in cash and due from banks, which fell to $14.6 million in 2024 from $19.7 million in 2023, a decline of approximately 25.5% [330]. - The company experienced a net increase in deposits of $147,724,000 in 2024, a significant improvement from a decrease of $52,895,000 in 2023 [336]. Capital and Assets - The Bank was in compliance with regulatory capital requirements as of December 31, 2024 [63]. - The minimum capital ratios established by the Capital Rules include 4.5% CET1 to risk-weighted assets and 8.0% Total capital to risk-weighted assets [71]. - The Capital Rules introduced a capital conservation buffer of 2.5% of CET1, resulting in effective minimum ratios of 7% CET1 to risk-weighted assets [71]. - The Bank's regulatory capital ratios under risk-based capital rules are detailed in the Consolidated Financial Statements included in the Annual Report [81]. - As of December 31, 2024, the Company held 3% of total deposits in the Buffalo, NY metropolitan area, amounting to approximately $1.86 billion out of a total market of $62 billion [34]. - As of December 31, 2024, the company's total assets increased to $2.187 billion from $2.109 billion in 2023, representing a growth of approximately 3.7% [330]. - The total stockholders' equity reached $183.1 million in 2024, up from $178.2 million in 2023, marking an increase of about 2.5% [331]. - The total liabilities increased to $2.004 billion in 2024 from $1.930 billion in 2023, reflecting an increase of approximately 3.8% [331]. Loans and Credit Risk - The company's portfolio of commercial real estate loans totaled $1.0 billion, representing 56% of total loans outstanding as of December 31, 2024 [98]. - The allowance for credit losses was $24.2 million, which is 1.36% of the total gross loan portfolio of $1.8 billion as of December 31, 2024 [102]. - Commercial real estate loans in non-accrual status decreased to $12.4 million from $20.2 million year-over-year [98]. - The company emphasizes the origination of commercial loans, which generally earn a higher interest rate but expose the company to greater credit risk [98]. - The company adopted the Current Expected Credit Loss (CECL) model effective January 1, 2023, which requires estimating lifetime expected credit losses on loans [101]. - The allowance for credit losses is determined based on expected credit losses, utilizing borrower-specific data and macroeconomic assumptions [366]. - Management reviews the adequacy of the allowance for credit losses quarterly, incorporating feedback from internal loan staff and regulatory examinations [367]. Mergers and Acquisitions - The merger agreement with NBT will convert each share of the company's common stock into 0.91 shares of NBT common stock, with a fixed exchange ratio [90]. - The company is subject to business uncertainties and contractual restrictions while the merger is pending, which may affect employee retention and customer relationships [91]. - The company may pursue mergers and acquisitions, which involve risks such as management distraction and integration challenges [136]. - The company sold substantially all assets of its subsidiary TEA on November 30, 2023, ceasing its insurance business [341]. Economic and Market Conditions - The Company’s financial performance is highly dependent on economic conditions in Western New York and the Finger Lakes Region, with potential adverse effects from persistent inflation and rising prices [142]. - The Company faces significant competition from larger financial institutions in its primary market area, including M&T Bank and KeyBank, which together hold 78% of the market's deposits [34]. - The Company faces intense competition from various financial institutions, which may limit its growth and profitability [143]. - The company operates primarily in Western New York and the Finger Lakes Region, making it vulnerable to economic downturns in these areas [99]. Employee and Corporate Culture - The Company employed 266 full-time equivalent employees as of December 31, 2024, with an average tenure of 6.9 years for all employees and 13.2 years for executive officers [35]. - The Company is committed to maintaining a corporate culture that values integrity, diversity, and employee development, which is essential for its strategic success [36]. - Loss of key employees could disrupt customer relationships, potentially leading to a loss of business [144]. Interest Rates and Investment Risks - Rising interest rates have decreased the value of the company's securities portfolio, leading to potential losses if securities need to be sold to meet liquidity needs [106]. - A significant portion of the Company's loans have fixed interest rates, which may lead to adverse effects on net interest income in a rising interest rate environment [111]. - The Federal Reserve decreased the federal funds rate three times in 2024, resulting in an aggregate decrease of 100 basis points [108]. - The FDIC increased initial base insurance deposit assessment rates by 2 basis points effective January 1, 2023, which may adversely impact the Company's results of operations [117]. - The Company is subject to reinvestment risk, as decreases in interest rates can lead to increased prepayments of loans and mortgage-related securities [110]. Goodwill and Pension Plans - The Company recognized $1.8 million of goodwill related to the acquisition of Fairport Savings Bank on May 1, 2020, and evaluates goodwill for impairment at least annually [138]. - The Bank has a defined benefit pension plan that was frozen on January 31, 2008, with no additional benefits accrued since then [385]. - The Bank maintains a defined contribution 401(k) plan and various non-qualified retirement plans for senior management and directors [386]. - The actuarially determined pension benefit is based on the employee's years of service, age, and compensation [385].

Financial Performance - Net income for Q4 2024 was $3.7 million, or $0.67 per diluted share, down from $10.2 million, or $1.85 per diluted share in Q4 2023[3] - Full year 2024 net income was $12.0 million, or $2.16 per diluted share, compared to $24.5 million, or $4.48 per diluted share in 2023[4] - Net income for the fourth quarter of 2024 was $3.7 million, an increase from $2.9 million in the third quarter[33] - Net income for Evans Bancorp in Q4 2024 was $3.7 million, a decrease of 51% compared to $11.95 million in Q4 2023[36] - The effective tax rate for the year was 16.2%, significantly lower than 29.4% in 2023[27] - Return on average total assets improved to 0.67% in the fourth quarter, compared to 0.52% in the third quarter[33] - Return on average total assets dropped to 0.54%, down from 1.14% in the prior year, reflecting a decline in profitability[36] - Return on average stockholders' equity fell to 6.65%, compared to 15.47% in 2023, highlighting a significant decrease in shareholder returns[36] Loan and Deposit Activity - Total loans increased by $63 million, or 4%, since December 31, 2023, with a strong loan pipeline of $76 million[6] - Total deposits rose by $148 million, or 9%, from the end of last year's fourth quarter, totaling $1.87 billion[20] - Average loans, net, increased to $1.76 billion in the fourth quarter, up from $1.74 billion in the third quarter[35] - Total deposits were $1.866 billion, down from $1.900 billion in the previous quarter[32] Interest Income and Expenses - Net interest income for Q4 2024 was $15.7 million, a 4% increase from Q3 2024, and a 13% increase year-over-year[8] - Net interest income decreased by 4% to $59.0 million, with a net interest margin of 2.81%, down 21 basis points from the previous year[24] - Interest income increased by 13% year-over-year, reaching $109.92 million, while interest expense rose by 43% to $50.95 million[36] - Net interest income after provision for credit losses was $14.6 million, compared to $14.5 million in the previous quarter[33] - The net interest margin for Q4 2024 was 2.96%, up 16 basis points sequentially and 21 basis points year-over-year[9] - The net interest margin improved to 2.96% in the fourth quarter, compared to 2.80% in the third quarter[35] - Net interest margin decreased to 2.81%, down from 3.02% in the previous year, indicating tighter margins[36] Non-Interest Income and Expenses - Non-interest income fell to $11.0 million in 2024, down from $32.9 million in 2023, primarily due to a $20.2 million gain on the sale of the insurance agency in the prior year[26] - Total non-interest income decreased by 67% to $10.96 million, primarily due to a 100% decline in gain on sale of insurance agency and investment securities[36] - Non-interest expense decreased by $6.0 million to $53.4 million, with a GAAP efficiency ratio of 76.40%, up from 63.09% in 2023[27] - The efficiency ratio was 75.55% in the fourth quarter, slightly up from 75.32% in the third quarter[33] - The efficiency ratio increased to 76.40%, compared to 63.09% in the previous year, indicating reduced operational efficiency[36] Credit Losses and Asset Quality - The provision for credit losses in Q4 2024 was $1.1 million, primarily due to a specific reserve on a non-performing loan[10] - Provision for credit loss was $2.2 million, with a non-performing loans ratio of 1.14%, improved from 1.59% in 2023[25] - Provision for credit losses surged by 12,322%, amounting to $2.24 million, indicating a significant increase in expected credit losses[36] - Total non-performing loans decreased to $20.3 million from $32.6 million in the previous quarter[32] Assets and Capital Ratios - Total assets were $2.19 billion as of December 31, 2024, a decrease of $93 million, or 4%, since September 30, 2024[18] - Total assets as of December 31, 2024, were $2.187 billion, a decrease from $2.280 billion in the previous quarter[32] - The Company's Tier 1 leverage ratio was 10.37% at December 31, 2024, maintaining regulatory capital ratios above the "well capitalized" standard[22] - The Tier 1 risk-based capital ratio was 13.63%, slightly down from 13.80% in the previous year[32] Merger Activity - The merger with NBT Bancorp Inc. was approved by Evans shareholders, with an aggregate transaction value of approximately $236 million[7]

Loan and Credit Losses - As of September 30, 2024, the allowance for credit losses (ACL) on loans totaled $23.1 million, an increase from $21.8 million at September 30, 2023, representing a growth of 6%[136] - The company recorded a provision for credit losses of $0.6 million during the three months ended September 30, 2024, primarily due to loan growth and slower prepayment rates[152] - The provision for credit losses in Q3 2024 was $0.6 million, primarily due to loan growth and slower prepayment speeds[168] Loan Portfolio and Performance - Total gross loans reached $1.8 billion at September 30, 2024, compared to $1.7 billion at both December 31, 2023, and September 30, 2023, indicating a year-over-year growth of approximately 6%[146] - The commercial and industrial (C&I) loan portfolio increased by $33 million, or 15%, from December 31, 2023, to $256 million at September 30, 2024[148] - Non-performing loans amounted to $33 million, or 1.82% of total loans outstanding, as of September 30, 2024, up from $27 million, or 1.59%, at December 31, 2023[149] Investment Securities - Total investment securities were $276 million at September 30, 2024, down from $337 million at September 30, 2023, primarily due to strategic repositioning of the balance sheet[154] - The company's highest concentration in its securities portfolio was in U.S. government-sponsored mortgage-backed securities, comprising 62% of total investment securities as of September 30, 2024[155] - The Bank's investment portfolio included mortgage-backed securities, which comprised 62% of the portfolio as of September 30, 2024[185] Deposits and Liquidity - Total deposits increased to $1.9 billion at September 30, 2024, representing an increase of $182 million, or 11%, from December 31, 2023, and $95 million, or 5%, from September 30, 2023[158] - Interest-bearing deposits at banks increased significantly to $107 million at September 30, 2024, compared to $4 million at December 31, 2023, reflecting strategic balance sheet strengthening[154] - The Bank could draw advances of up to $373 million on the FHLB via an Overnight Line of Credit Agreement as of September 30, 2024[183] Income and Expenses - Net income for Q3 2024 was $2.9 million, or $0.53 per diluted share, down from $3.6 million, or $0.66 per diluted share, in Q3 2023[165] - Net interest income for the three months ended September 30, 2024, was $15,044 thousand, compared to $14,256 thousand for the same period in 2023[162] - Non-interest income was $3.0 million in Q3 2024, up from $2.4 million in Q2 2024, but down from $5.6 million in Q3 2023[169] Efficiency and Ratios - The GAAP efficiency ratio was 75.32% in Q3 2024, compared to 72.72% in Q3 2023[172] - The Tier 1 leverage ratio was 10.01% as of September 30, 2024, compared to 9.40% at September 30, 2023[179] - The net interest margin for the three months ended September 30, 2024, was 2.80%, slightly up from 2.79% in the prior year[162] Strategic Initiatives - The proposed merger with NBT Bancorp Inc. has an aggregate transaction value of approximately $236 million, with each outstanding share of Evans common stock converting into 0.91 shares of NBT common stock[144] - Non-interest expense rose to $13.6 million in Q3 2024, an increase of $1.0 million from Q2 2024, including $0.6 million in merger-related costs[170] Risk and Sensitivity - The sensitivity analysis indicated that a +200 basis points change in interest rates could decrease net interest income by $3,542 thousand as of September 30, 2024[194] - The Company relies on cash on hand and dividends from its subsidiary bank to service its debt, which could be impacted by the subsidiary bank's capital deterioration[182]

Financial Performance - Evans Bancorp reported net income of $2.9 million, or $0.53 per diluted share, in Q3 2024, flat sequentially from Q2 2024 and down from $3.6 million, or $0.66 per diluted share, in Q3 2023[2] - Evans Bancorp reported a net income of $2.9 million for Q3 2024, compared to $2.5 million in Q2 2024, reflecting a 16% increase[21] - Net income for the third quarter of 2024 was $2.9 million, compared to $2.9 million in the previous quarter[24] Loan and Deposit Growth - Total loans increased by $67 million, or 4%, since year-end 2023, and by $84 million, or 5%, compared to the prior-year period[2] - Total deposits rose by $182 million, or 11%, from December 31, 2023, and increased $95 million, or 5%, from the end of last year's third quarter[2] - Loans outstanding reached $1.79 billion, an increase of 1.3% from $1.77 billion in the previous quarter[23] - Total deposits rose to $1.90 billion, up from $1.89 billion in Q2 2024, indicating a growth of 0.6%[23] Interest Income and Margin - Net interest income was $15.0 million, up $0.7 million, or 5%, from Q2 2024, and increased $0.8 million, or 6%, compared to Q3 2023[6] - The net interest margin for Q3 2024 was 2.80%, up 9 basis points sequentially and 1 basis point year-over-year[7] - Net interest income after provision for credit losses increased to $14.5 million, up from $14.0 million in the second quarter[24] - The net interest margin improved to 2.80%, compared to 2.71% in the previous quarter[25] Asset Growth - Total assets were $2.28 billion as of September 30, 2024, an increase of $171 million, or 8%, since December 31, 2023[15] - Total assets increased to $2.28 billion as of September 30, 2024, up from $2.26 billion at June 30, 2024, representing a growth of approximately 0.3%[23] - Total assets reached $2,265,380 thousand, a slight increase from $2,252,033 thousand in the second quarter of 2024[25] Capital Ratios - The Tier 1 leverage ratio was 10.01% at September 30, 2024, compared to 9.40% at September 30, 2023[19] - The Tier 1 risk-based capital ratio was reported at 13.38%, slightly down from 13.55% in the previous quarter[23] Non-Interest Income and Expenses - Non-interest income for Q3 2024 was $2.994 million, an increase of $0.6 million from the previous quarter, primarily due to a gain on the sale of an OREO property[10] - Total non-interest income rose to $2.994 million, compared to $2.400 million in the previous quarter[24] - Total non-interest expenses increased to $13.587 million, up from $12.558 million in the second quarter[24] Efficiency and Returns - Return on average total assets was 0.52%, consistent with the previous quarter[24] - Return on average stockholders' equity was 6.44%, down from 6.76% in the second quarter[24] - Efficiency ratio was 75.32%, slightly up from 75.11% in the previous quarter[24] Credit Quality - Non-performing loans increased to $32.6 million, up from $25.1 million in Q2 2024, marking a rise of 29.8%[23] - The allowance for credit losses as a percentage of total loans remained stable at 1.29%[23] - Provision for credit losses was $570,000, compared to $297,000 in the second quarter[24] Stockholder Information - Book value per share increased to $33.58, compared to $32.15 in the previous quarter, reflecting a growth of 4.5%[23] - Cash dividends per common share remained at $0.66, unchanged from the previous quarter[24] Strategic Initiatives - The company announced a definitive agreement to merge with NBT Bancorp Inc., with an aggregate transaction value of approximately $236 million[4] - The company continues to focus on enhancing operational efficiencies and managing competitive pressures in the financial services sector[21] - Future outlook includes potential expansion strategies and continued investment in technology to improve service delivery[21]

Credit Losses and Provisions - The allowance for credit losses (ACL) on loans totaled $22.6 million at June 30, 2024, compared to $21.4 million at June 30, 2023, reflecting an increase of $1.2 million [110]. - The company recorded a provision for credit losses of $0.3 million during Q2 2024, mainly due to loan growth and slower prepayment rates [122]. - The company recorded a provision for credit losses of $0.6 million in the first half of 2024, compared to a release of $0.8 million in the same period of 2023 [142]. Loan and Deposit Growth - Total gross loans were $1.8 billion at June 30, 2024, up from $1.7 billion at both December 31, 2023, and June 30, 2023 [118]. - Total deposits increased by $173 million, or 10%, from December 31, 2023, to $1.9 billion at June 30, 2024 [128]. - The commercial and industrial (C&I) portfolio grew to $257 million at June 30, 2024, representing a $34 million, or 15%, increase from December 31, 2023 [120]. - Residential mortgage originations were $15 million in Q2 2024, compared to $10 million in both Q1 2024 and Q2 2023 [119]. Non-Performing Loans - Non-performing loans amounted to $25 million, or 1.42% of total loans outstanding, at June 30, 2024, down from $28 million, or 1.66%, at June 30, 2023 [121]. Investment Securities - Total investment securities decreased to $267 million at June 30, 2024, from $354 million at June 30, 2023, primarily due to strategic repositioning [125]. - The total net unrealized loss position of the available for sale investment portfolio was $59 million at June 30, 2024, compared to $65 million at June 30, 2023 [127]. Interest Income and Expenses - Net interest income for the six months ended June 30, 2024 was $28.2 million, with a net interest margin of 2.75% [134]. - Net interest income for Q2 2024 was $14.3 million, a 3% increase from Q1 2024, but a 9% decrease from Q2 2023, attributed to higher average loans and increased interest expenses [137]. - For the first six months of 2024, net interest income was $28.2 million, a 14% decrease from the same period in 2023, driven by higher costs of interest-bearing liabilities [140]. Assets and Liabilities - Total assets increased to $2,252.0 million as of June 30, 2024, compared to $2,157.5 million at December 31, 2023 [132]. - Total liabilities increased to $2,077.6 million as of June 30, 2024, compared to $1,996.4 million at December 31, 2023 [134]. - Total borrowings decreased from $145 million at December 31, 2023 to $129 million at June 30, 2024 [129]. - Long-term Federal Home Loan Bank advances increased to $41 million at June 30, 2024 from $6 million at December 31, 2023 [129]. - Short-term borrowings with the Federal Reserve were $88 million at June 30, 2024, compared to $100 million at June 30, 2023 [129]. Stockholders' Equity - Stockholders' equity increased to $174.4 million as of June 30, 2024, compared to $161.1 million at December 31, 2023 [134]. Interest Rate Sensitivity - The Bank's net interest income is projected to decrease by $3,440,000 under a +200 basis points interest rate scenario by June 30, 2024 [156]. - A +100 basis points change is expected to increase net interest income by $1,047,000 by June 30, 2024 [156]. - A -100 basis points change is projected to decrease net interest income by $1,082,000 by June 30, 2024 [156]. - Under a -200 basis points scenario, net interest income is expected to decrease by $2,218,000 by June 30, 2024 [156]. - The Bank's assumptions regarding interest rate changes include immediate adjustments of up to 200 basis points [156]. - The impact of interest rate changes on net interest income is inherently uncertain and may differ significantly from projections [156]. - Management's assumptions include factors such as prepayment rates of mortgage-related assets and loan and deposit volumes [156]. - The Bank cannot precisely predict the impact of interest rate changes due to market conditions and interest rate differentials [156]. - The amounts presented in the sensitivity table are not considered significant to the Bank's projected net interest income [156]. - Management may take actions to counter changes in interest rates, which could affect net interest income [156]. Non-Interest Income and Expenses - Non-interest income in Q2 2024 was $2.4 million, slightly up from $2.3 million in Q1 2024, but down from $4.7 million in Q2 2023, primarily due to lower insurance service revenue [138]. - Non-interest expense decreased to $12.6 million in Q2 2024, down from $12.9 million in Q1 2024 and $14.2 million in Q2 2023, mainly due to reduced salaries and employee benefits [139]. - Total non-interest expense for the first six months of 2024 was $25.5 million, an 11% decrease from the prior year, reflecting lower salaries related to TEA [142]. Efficiency Ratio - The GAAP efficiency ratio improved to 75.11% in Q2 2024 from 79.92% in Q1 2024, but was higher than 69.53% in Q2 2023 [140]. - The net interest margin for the first six months of 2024 was 2.75%, down 53 basis points from 3.28% in the same period of 2023 [141]. Net Income - Net income for Q2 2024 was $2.9 million, or $0.53 per diluted share, up from $2.3 million, or $0.42 per diluted share in Q1 2024, but down from $4.9 million, or $0.90 per diluted share in Q2 2023 [136].

Financial Data and Key Metrics Changes - Net interest income increased to $14.3 million, up $0.4 million from the previous quarter, driven by higher average loans and balance sheet strengthening efforts [7] - Year-over-year, net interest income reflected higher interest expense due to competitive pressure on deposit pricing [7] - Non-interest expenses decreased by $1.6 million year-over-year, primarily due to the sale of TEA [8] Business Line Data and Key Metrics Changes - Total loans increased by 2.5% in the quarter, with net commercial originations at $85.3 million compared to $36.3 million in the first quarter [9] - Criticized loans decreased to $68 million from $70 million at the end of the first quarter [39] - Commercial loan production for the first half of the year was $44 million, with a $137 million pipeline anticipated for mid-single-digit growth for the full year [44] Market Data and Key Metrics Changes - The variable rate portfolio is approximately $300 million, with expectations for funding costs to stabilize [14] - Total deposits increased by $173 million or 10% year-to-date, although flat compared to the previous quarter [75] - The net interest margin (NIM) for the second quarter was 2.71%, down eight basis points from the linked quarter, but better than expectations [74] Company Strategy and Development Direction - The company focuses on customer acquisition, relationship management, and improving client experience while optimizing operational efficiency [38] - A commitment to community banking and local economic development through initiatives like the Regional Revitalization Partnership (RRP) [56][72] - The company aims to maintain a disciplined approach to credit risk management while navigating evolving market dynamics [39][61] Management's Comments on Operating Environment and Future Outlook - Management remains cautiously optimistic about growth prospects despite challenges posed by the current economic environment [5] - The expectation is that the third quarter will be the low point for margins, with gradual improvement anticipated in the fourth quarter and next year [11][62] - Management has not observed any significant credit issues in the portfolio and is confident in the ability to deliver performance against economic headwinds [5][31] Other Important Information - The company has made significant investments in technology and personnel to enhance operational efficiencies [55][88] - The provision for credit losses was $297,000, attributed to growth and slower prepayment rates, partially offset by improving economic factors [59] Q&A Session Summary Question: Can you go through the origination yields that you're seeing nowadays in the commercial book? - The current origination yields for commercial loans are around prime plus, with longer-term commercial loans at 7.5% and above [81] Question: How are you thinking about the seasonality in the final two quarters of the year? - The company expects traditional seasonality, with the lowest point typically in December [26] Question: Is there any additional color on the OREO that is set to sell at no loss? - The property involved was a hotel that has now turned around with new operators, and the company expects no losses upon sale [49] Question: What is a good go-forward tax rate? - The anticipated go-forward tax rate is around 22.5% [23]

Financial Performance - Net income for the second quarter of 2024 was $2.9 million, a 26% increase from $2.3 million in the first quarter of 2024, but down from $4.9 million in the second quarter of 2023[4]. - Evans Bancorp reported a net income of $2.9 million for the second quarter of 2024[34]. - The return on average total assets increased to 0.52% in the second quarter of 2024, up from 0.44% in the first quarter[32]. Loan and Deposit Growth - Total loan balances reached $1.77 billion, an increase of $43 million, or 5% annualized, year-to-date, and up $94 million, or 6%, compared to the second quarter of 2023[6]. - Total deposits increased to $1.89 billion, up $173 million, or 10%, year-to-date, and up $105 million, or 6%, from the end of last year's second quarter[20]. - Total deposits stood at $1.892 billion as of June 30, 2024, consistent with $1.891 billion in the previous quarter[31]. - Average net loans increased to $1,715,280 thousand in Q2 2024, up from $1,703,320 thousand in Q1 2024[34]. Interest Income and Margin - Net interest income was $14.3 million, a sequential increase of $0.4 million, or 3%, but down $1.4 million, or 9%, from the second quarter of 2023[7]. - Net interest income for the second quarter of 2024 was $14.32 million, compared to $13.91 million in the first quarter, reflecting a growth of 2.95%[32]. - The net interest margin for the second quarter of 2024 was 2.71%, which decreased 8 basis points from the first quarter and 39 basis points from the prior-year period[8]. - The net interest margin for Q2 2024 was 2.71%, a decrease from 2.79% in Q1 2024[34]. - The interest rate spread for Q2 2024 was 1.99%, down from 2.05% in Q1 2024[34]. - The yield on loans increased to 5.63% in Q2 2024, up from 5.56% in Q1 2024[34]. Asset Management - Total assets increased to $2.26 billion, a rise of $149 million, or 7%, since December 31, 2023, and up $102 million, or 5%, since June 30, 2023[18]. - Total assets as of June 30, 2024, were $2.257 billion, slightly down from $2.259 billion at the end of the first quarter[31]. - Total assets reached $2,252,033 thousand in Q2 2024, compared to $2,120,830 thousand in Q1 2024, reflecting a growth of approximately 6.2%[34]. - Total liabilities and equity amounted to $2,252,033 thousand in Q2 2024, reflecting a significant increase from $2,120,830 thousand in Q1 2024[34]. Efficiency and Expenses - Non-interest income totaled $2.4 million, an increase of $0.1 million from the first quarter of 2024, but down $2.3 million from the prior-year period due to lower insurance service revenue[12]. - Non-interest expenses decreased to $12.6 million, down $0.4 million from the first quarter of 2024 and down $1.6 million from the second quarter of 2023[13]. - The efficiency ratio improved to 75.11% in the second quarter of 2024, compared to 79.92% in the first quarter of 2024 and 69.53% in the second quarter of 2023[16]. - The efficiency ratio improved to 75.11% in the second quarter of 2024 from 79.92% in the first quarter, reflecting better operational efficiency[32]. Capital and Asset Quality - The Tier 1 risk-based capital ratio was 13.55% for the second quarter of 2024, slightly down from 13.63% in the first quarter[31]. - Non-performing loans decreased to $25.128 million, down from $27.977 million in the previous quarter, indicating improved asset quality[31]. - Book value per share was $32.15 at June 30, 2024, reflecting an increase from $29.12 at June 30, 2023, despite unrealized losses on investment securities[23]. - The company maintained a tangible book value per share of $31.81 as of June 30, 2024, compared to $31.29 in the previous quarter[31]. - Average tangible common stockholders' equity was $172,546 thousand in Q2 2024, compared to $175,103 thousand in Q1 2024[34].

Credit Losses and Loan Performance - As of March 31, 2024, the allowance for credit losses (ACL) on loans totaled $22.3 million, an increase from $21.5 million at March 31, 2023[98]. - Non-performing loans amounted to $28 million, or 1.62% of total loans, as of March 31, 2024, compared to $24 million, or 1.45%, a year prior[111]. - The criticized loan portfolio decreased to $70 million at March 31, 2024, down from $90 million a year earlier[112]. - The company recorded a provision for credit losses of $0.3 million during the first quarter of 2024, primarily due to slower prepayment rates and higher net loan charge-offs[113]. Loan and Deposit Trends - Total gross loans remained stable at $1.7 billion as of March 31, 2024, with real estate-secured loans increasing to $1.5 billion from $1.4 billion a year earlier[108]. - Total deposits increased by $173 million, or 10%, from December 31, 2023, reaching $1.9 billion as of March 31, 2024[119]. Investment Securities - Investment securities totaled $272 million at March 31, 2024, down from $370 million a year earlier, reflecting strategic repositioning of the balance sheet[115]. - The company’s highest concentration in its securities portfolio was in U.S. government-sponsored mortgage-backed securities, comprising 62% of total investment securities as of March 31, 2024[116]. - The total net unrealized loss position of the available-for-sale investment portfolio was $58 million at March 31, 2024, reflecting an increase in market interest rates[117]. Income and Expenses - Net income was $2.3 million, or $0.42 per diluted share, in the first quarter of 2024, compared to $10.2 million, or $1.85 per diluted share in the fourth quarter of 2023[124]. - Net interest income of $13.9 million was flat compared to the fourth quarter of 2023 but decreased by $3.4 million, or 20%, year-over-year[126]. - First quarter net interest margin was 2.79%, an increase of 4 basis points from the fourth quarter of 2023 but a decrease of 67 basis points from the first quarter of 2023[127]. - Non-interest income was $2.3 million in the first quarter of 2024, down from $18.6 million in the fourth quarter of 2023[129]. - Non-interest expense was $12.9 million in the first quarter of 2024, compared to $16.3 million in the fourth quarter of 2023[131]. - The Company's GAAP efficiency ratio was 79.9% in the first quarter of 2024, compared to 50.16% in the fourth quarter of 2023[133]. Capital and Liquidity - The Tier 1 leverage ratio was 10.52% at March 31, 2024, compared to 10.37% at December 31, 2023[136]. - Book value per share was $31.62 at March 31, 2024, down from $32.40 at December 31, 2023[137]. - As of March 31, 2024, the Company reported net short-term liquidity of $336 million, a slight increase from $333 million at December 31, 2023[143]. - The Company does not foresee any funding issues that would significantly pressure liquidity, although an economic recession could negatively impact it[144]. - The Bank had $88 million in short-term borrowings with the Federal Reserve at March 31, 2024, compared to $86 million at December 31, 2023[120]. Interest Rate Risk Management - The primary market risk faced by the Company is interest rate risk, which affects net interest income due to the timing and amounts of asset and liability repricing[148]. - The sensitivity analysis indicates that a 200 basis point increase in interest rates could decrease projected annual net interest income by $2,173,000 as of March 31, 2024[151]. - Conversely, a 100 basis point increase could increase projected annual net interest income by $1,513,000, while a 100 basis point decrease could reduce it by $1,492,000[151]. - Management employs a model to monitor interest rate sensitivity, considering ongoing lending and deposit activities[149]. - The Company plans to mitigate interest rate risk through adjustments in loan and deposit pricing and the composition of interest-earning assets[149]. - Assumptions regarding prepayment rates, loan and deposit volumes, and pricing are critical in calculating the impact of interest rate changes on net interest income[151]. - The Company acknowledges that actual results may differ significantly from projections due to uncertainties in market conditions and interest rate changes[151].

Financial Data and Key Metrics Changes - The company reported earnings of $2.3 million or $0.42 per diluted share for Q1 2024, a decrease from $10.2 million in the linked fourth quarter of 2023, which included a $20 million gain from the sale of TEA [31] - Net interest margin (NIM) for the first quarter was 2.79%, up 4 basis points from the previous quarter, benefiting from a balance sheet restructure and prudent pricing strategy [32] - Total deposits increased by $173 million or 10% during the quarter, with a year-over-year increase of $41 million or 2% [34] Business Line Data and Key Metrics Changes - Total loans were flat compared to the linked quarter, with net commercial originations of $36.3 million, down from $58 million in the fourth quarter [9] - Non-interest income decreased by $1.8 million compared to Q1 2023, primarily due to a reduction in TEA insurance revenue [58] - The company experienced a year-over-year increase in total loans of $63 million, driven by commercial real estate loan growth of $76 million, partially offset by a $15 million decrease in commercial and industrial loans [60] Market Data and Key Metrics Changes - The company noted a strong loan pipeline of approximately $95 million, indicating optimism despite a challenging rate environment [3] - The deposit rate offerings are currently stable, but modest increases in costs are expected as customers shift balances to interest-bearing accounts [61] Company Strategy and Development Direction - The company is focused on customer acquisition and relationship management to foster loan and deposit growth while optimizing operational efficiency [55] - Strategic investments in people and technology are emphasized to drive future efficiencies and enhance customer experience [54] - The company aims to maintain competitive rates in its markets to attract deposits while managing liquidity and profitability [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current economic environment, noting that they are not seeing significant credit stress at this time [49] - The expectation for loan growth is approximately 5% for 2024, supported by a strong liquidity position [60] - Management anticipates that the NIM will stabilize, with expectations of 2.65% in the second quarter of 2024 [61] Other Important Information - The company completed the sale of the Evans Agency (TEA) on November 30, 2023, which has impacted financial results [56] - The board will see changes with the departure of two directors, reducing the board size to 12 members [30] Q&A Session Summary Question: What is the overall balance sheet management strategy as the year progresses? - Management indicated that the balance sheet is expected to remain flat, with some deposit growth anticipated [63] Question: How do you see loan growth spreading over the remaining quarters? - Management expects loan growth to be fairly evenly distributed throughout the year [40] Question: What are the expectations for capital management in the coming quarters? - Management highlighted the flexibility created by the TEA sale and discussed potential buybacks and restructuring considerations [64] Question: Are there any signs of credit stress in the markets? - Management reported no significant signs of credit stress, maintaining a conservative approach to lending [49]

Evans Bancorp (EVBN) came out with quarterly earnings of $0.42 per share, missing the Zacks Consensus Estimate of $0.46 per share. This compares to earnings of $1.06 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -8.70%. A quarter ago, it was expected that this bank would post earnings of $0.44 per share when it actually produced earnings of $1.85, delivering a surprise of 320.45%.Over the last four quarters, the company has ...