Evans Bank(US:EVBN)2023-10-27 01:20Financial Data and Key Metrics Changes - The company reported earnings of $3.6 million or $0.60 per diluted share, a decrease from the previous year's third quarter primarily due to reduced net interest income, although increased insurance service and fee revenue helped offset this decline [6][23] - Net interest margin (NIM) decreased by 31 basis points to 2.79%, impacted by higher interest expenses and a reversal of approximately $400,000 of interest income from a large commercial loan [27][11] - Total deposits increased by $18 million or 1% from the second quarter, reaching $1.81 billion, while average total deposits decreased slightly to $1.79 billion [30][31] Business Line Data and Key Metrics Changes - Non-interest income was $5.6 million, down approximately 4% year-over-year but up 15% sequentially, with insurance being the largest contributor, increasing 3% year-over-year and 22% from the previous quarter [7][8] - Total loans increased by approximately $34 million, with commercial loans rising 3% or $31 million, and net commercial originations were $62 million during the quarter [29][30] Market Data and Key Metrics Changes - The company noted that deposit rates have continued to increase due to strong competition in the time deposit marketplace, leading to a shift of customer funds from non-interest bearing to interest-bearing accounts [31][10] - The percentage of uninsured and uncollateralized deposits remained steady at 18% [30] Company Strategy and Development Direction - The company is focusing on controlling costs and expenditures by enhancing operating efficiency and providing exceptional client experiences [24] - The management indicated that they are being selective in underwriting decisions and are seeing opportunities in commercial real estate [29] Management's Comments on Operating Environment and Future Outlook - Management expects market conditions and pricing pressures to persist, but signs of moderation in deposit cost increases are being observed [4][11] - The company anticipates NIM compression of approximately 15 to 20 basis points in the fourth quarter of 2023, with expectations of moderation in NIM pressure at the beginning of next year [11][27] Other Important Information - The company is taking corrective measures to control costs and is focused on maintaining a solid and stable deposit base backed by a diversified product portfolio [24][30] - Credit metrics remain sound, with a 2% decrease in non-performing loans and actual charge-offs continuing to be low [30][23] Q&A Session Summary Question: Clarification on NIM guidance - The NIM guidance of 15 to 20 basis points of compression refers to the adjusted level of 287, excluding the interest reversal [13] Question: Investments for 2024 - Management indicated that there are no significant investments planned that would cause an outsized impact next year, with expectations for low single-digit growth [15][34] Question: Loan pipeline and growth expectations - The current loan pipeline stands at $67 million, with expectations for total commercial loan growth to be approximately 3% in 2023 [9][63] Question: Credit metrics and interest income reversal - The interest income reversal was due to a large commercial loan that went on non-accrual status, but it was well secured and no additional reserves were needed [53] Question: NIM pressure and competitive landscape - Management acknowledged some pullback from competition due to funding challenges in the industry, but they are still capturing their share of the market [44][49]