Evans Bancorp Reports Net Income of $3.7 Million In Fourth Quarter 2024

Evans Bancorp, Inc. (the "Company" or "Evans") (NYSE:EVBN), a community financial services company serving Western New York since 1920, today reported results of operations for the fourth quarter and full year ended December 31, 2024. The prior-year periods include business activity relating to The Evans Agency ("TEA") prior to the sale to Arthur J. Gallagher & Co. on November 30, 2023.

HIGHLIGHTS

• Net income per share was $0.67 in the fourth quarter, which included $1.1 million in merger-related expenses and a partially offsetting benefit from the recognition of a real estate historic tax credit investment
• Fourth quarter net interest margin was 2.96%, up 16 basis points sequentially driven by strategic deposit pricing
• Total loans grew by $63 million, or 4%, since December 31, 2023
• Strong loan pipeline of $76 million
• Total deposits up $148 million, or 9%, from December 31, 2023
• Evans shareholders approved the merger with NBT Bancorp Inc.

Net income of $3.7 million, or $0.67 per diluted share, in the fourth quarter of 2024 was up sequentially and reflected higher net interest income of $0.7 million and an increase in non-interest income of $0.3 million offset by higher provision for credit losses of $0.5 million and an increase in non-interest expense of $0.8 million, which included $1.1 million of merger related costs. Last year's fourth quarter had net income of $10.2 million, or $1.85 per diluted share. The prior year period included the sale of The Evans Agency to Arthur J. Gallagher & Co., and recognized a pretax gain of $20.2 million. In addition, in the fourth quarter of 2023, the Company strategically repositioned its balance sheet by selling $78 million of investment securities, primarily available-for-sale U.S. Treasuries and government-sponsored agency securities, and used the proceeds to pay down short-term borrowings. This action resulted in $5.0 million of pretax losses on investment securities during the fourth quarter of 2023. Return on average equity was 8.06% for the fourth quarter of 2024, compared with 6.44% in the third quarter of 2024 and 25.73% in the fourth quarter of 2023.

For the full year of 2024, net income was $12.0 million, or $2.16 per diluted share, compared with $24.5 million, or $4.48 per diluted share, in 2023. The change largely reflected the gain on sale of the insurance agency, which benefited the 2023 period. The return on average equity was 6.65% in 2024 compared with 15.47% in 2023.

David J. Nasca, President and CEO of Evans Bancorp, Inc., commented, "As we close out 2024, we reflect on a transformative year for our organization, marked by solid growth and progress, as well as key milestones related to our pending merger with NBT Bancorp Inc. Throughout this process, we have remained focused on execution, maintaining strong credit quality, and ensuring a smooth transition that prioritizes the needs of our customers, employees and shareholders.

"This quarter, Evans shareholders approved the merger with NBT, a pivotal step in our journey. We are confident that this partnership will enhance our long-term ability to deliver exceptional service, strengthen our position in the market, and create lasting value for all stakeholders – the community, clients, associates, and stockholders. We thank our team members for their dedication and our customers and shareholders for their continued trust as we look forward to a bright future."

On September 9, 2024, NBT Bancorp Inc. ("NBT") (NASDAQ:NBTB) and Evans announced that they had entered into a definitive agreement pursuant to which Evans will merge with and into NBT. In accord with the merger agreement, NBT will acquire 100% of the outstanding shares of Evans in exchange for common shares of NBT. The exchange ratio will be fixed at 0.91 NBT shares for each share of Evans, resulting in an aggregate transaction value of approximately $236 million based on NBT's closing stock price of $46.28 on September 6, 2024. On December 20, 2024, the shareholders of Evans voted to approve the merger. In addition, regulatory approval was received for the merger in December. Evans reported over 75% of the issued and outstanding shares of Evans were represented at a special shareholder meeting and over 96% of the votes cast were voted to approve the merger. The merger is expected to close in the second quarter of 2025 in conjunction with the system conversion.

Net interest income of $15.7 million increased $0.7 million, or 4%, over the third quarter of 2024 due to higher average loans originated and reductions in the cost of funds as the competitive market for funding decreases in response to the federal reserve's rate cuts. Compared with last year's fourth quarter, net interest income was higher by $1.8 million, or 13%, due to higher average loan balances and higher yields on those balances.

Fourth quarter net interest margin of 2.96% increased 16 basis points from the trailing third quarter and was up 21 basis points over the prior-year period. The yield on loans decreased 8 basis points compared with the third quarter, though was up 29 basis points year-over-year. The cost of interest-bearing liabilities was 3.01% compared with 3.28% in the third quarter of 2024 and 2.87% in the fourth quarter of 2023.

The $1.1 million provision for credit losses in the fourth quarter was due mostly to a specific reserve taken on one loan previously classified as non-performing. A new appraisal related to this loan identified a reduction in value as the business vacated the property. The decrease in non-performing loans of $12.3 million during the quarter was due largely to one loan that was 90 days past due and still accruing in the third quarter of 2024, which renewed early in the fourth quarter.

Total non-interest income increased $0.3 million from the sequential quarter, due in part to the net incremental impact of a historic tax credit placed in service during the fourth quarter. The amounts are reflected on the refundable NY state tax credit and the loss on tax credit investment lines on the income statement. Additionally, the Company received $0.3 million gain from the payment of an additional tax credit investment, which was recognized in the other income category. These increases were partially offset in comparison with the third quarter due to a gain on the sale of a property that the Company had in other real estate owned during the sequential quarter.

Excluding the 2023 fourth quarter's transactions relating to the gain on the sale of TEA and loss on sale of securities, non-interest income would have been $3.4 million.

Non-interest expenses increased $0.8 million from the sequential quarter, which included an additional $0.5 million of merger-related expenses in support of the planned merger with NBT.

Salaries and employee benefits, the largest component of non-interest expenses, were up $0.4 million, or 5%, from the third quarter of 2024 largely due to higher incentive accruals of $0.5 million. Compared with last year's fourth quarter, the decrease of $2.3 million, or 23%, was primarily due to salaries and employee benefit expenses related to TEA of $0.8 million and a $1.4 million larger incentive accrual in the prior year's fourth quarter.

The Company's GAAP efficiency ratio, or noninterest expenses divided by the sum of net interest income and noninterest income, was 75.55% in the fourth quarter of 2024, 75.32% in the third quarter of 2024, and 50.16% in the fourth quarter of 2023.

Income tax benefit was $0.2 million in the fourth quarter of 2024, mainly a result of the recognition of deductions taken on the 2023 tax return related to the sale of TEA and the impact of the historic tax credit recognized in the fourth quarter. This was compared to tax expense and an effective tax rate of 24.2% in the third quarter of 2024 and 36.1% in last year's fourth quarter. The elevated tax rate in the 2023 fourth quarter reflected the sale of TEA, which included significant non-deductible goodwill expense.

Balance Sheet Highlights

Total assets were $2.19 billion as of December 31, 2024, a decrease of $93 million, or 4%, since September 30, 2024, though were up $79 million, or 4%, since December 31, 2023. Interest-bearing deposits at banks decreased $79 million for the quarter and increased $24 million since December 31, 2023. In addition, loan growth was $63 million, or 4%, since year end 2023 and flat when compared with the sequential period.

Investment securities were $263 million at December 31, 2024, $13 million lower than the end of the third quarter of 2024 and $15 million lower than the end of last year's fourth quarter. The primary objectives of the Company's investment portfolio are to provide liquidity, secure municipal deposits, and maximize income while preserving the safety of principal. The Company has the positive intent and ability to hold the remaining portfolio through recovery of value.

Total deposits of $1.87 billion increased $148 million, or 9%, from the end of last year's fourth quarter. On a sequential basis, total deposits were down $34 million, or 2%, due mostly to normal municipal seasonality.

At December 31, 2024, Evans had $80 million borrowed at FHLB. Given the current collateral available at FHLB, advances up to $401 million can be drawn on the FHLB via the Company's overnight line of credit. Additionally, Evans has the ability to borrow from the Federal Reserve. At December 31, 2024, Evans had no short-term borrowings with the Federal Reserve and $96 million in additional availability to borrow against collateral.

Capital Management

The Company has consistently maintained regulatory capital ratios measurably above the Federal "well capitalized" standard, including a Tier 1 leverage ratio of 10.37% at December 31, 2024 compared with 10.01% at September 30, 2024 and 10.37% at December 31, 2023.

Book value per share was $32.89 at December 31, 2024 compared with $33.58 at September 30, 2024 and $32.40 at December 31, 2023. Reflected in the book value changes are the Federal Reserve's aggressive interest rate hikes that have resulted in significant unrealized losses on investment securities. As of December 31, 2024, this amounted to $7.63 per share impact to book value. Such unrealized gains and losses are due to changes in interest rates and represent the difference, net of applicable income tax effect, between the estimated fair value and amortized cost of investment securities classified as available-for-sale.

Non-GAAP tangible book value per share was $32.56 at December 31, 2024 compared with $33.25 at September 30, 2024 and $32.07 at December 31, 2023.

2024 Year in Review (compared with prior-year)

Net interest income was $59.0 million, down 4%. The yield on loans increased 40 basis points while competition on deposits and changes in customer behaviors contributed to the 82 basis points increase in cost of funds during 2024. Net interest margin was 2.81%, a decrease of 21 basis points.

The Company's provision for credit loss was $2.2 million, which reflected a reserve taken on one loan previously in non-performing and for loan growth during the full year. Provision for credit losses in 2023 was negligible due to improving economic conditions. The ratio of non-performing loans to total loans was 1.14% compared with 1.59% in 2023.

Non-interest income was $11.0 million in 2024 compared with $32.9 million in 2023. The decrease was due to the gain on sale of the insurance agency of $20.2 million and the related decrease in insurance service and fee income of $9.7 million, partially offset by loss on sale of investment securities of $5.0 million in 2023.

Non-interest expense decreased $6.0 million to $53.4 million, which reflected reductions of $6.7 million related to the sale of TEA offset by merger related expenses of $1.7 million.

The Company's GAAP efficiency ratio was 76.40% in 2024 compared with 63.09% in 2023.

Income tax expense for the year was $2.3 million, representing an effective tax rate of 16.2% compared with an effective tax rate of 29.4% in 2023.

About Evans Bancorp, Inc.

Evans Bancorp, Inc. is a financial holding company and the parent company of Evans Bank, N.A., a commercial bank with $2.2 billion in assets and $1.9 billion in deposits at December 31, 2024. Evans Bank is a full-service community bank with 18 branches providing comprehensive financial services to consumer, business and municipal customers throughout Western New York. Evans Investment Services provides non-deposit investment products, such as annuities and mutual funds.

Evans Bancorp, Inc. and Evans Bank routinely post news and other important information on their websites, at www.evansbancorp.com and www.evansbank.com.

Safe Harbor Statement: This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements concerning future business, revenue and earnings. These statements are not historical facts or guarantees of future performance, events or results. There are risks, uncertainties and other factors that could cause the actual results of Evans Bancorp to differ materially from the results expressed or implied by such statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include the impacts from competitive pressures among financial services companies, interest rate trends, general economic conditions, changes in legislation or regulatory requirements, effectiveness at achieving stated goals and strategies, and difficulties in achieving operating efficiencies. These risks and uncertainties are more fully described in Evans Bancorp's Annual and Quarterly Reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. Evans Bancorp undertakes no obligation to publicly update or revise forward-looking information, whether as a result of new, updated information, future events or otherwise.