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 third quarter ended September 30, 2022.

THIRD QUARTER 2022 HIGHLIGHTS (compared with prior-year period unless otherwise noted)

Achieved third quarter net income of $5.9 million, or $1.06 per diluted share; earnings reflect higher than typical loan loss provision compared with a credit to provision last year
Generated net interest income growth of 6% overcoming a $2 million decrease in PPP fees as the program nears conclusion
Total loan balances increased $87 million, or 5%, excluding PPP loans
Total deposits of $1.87 billion were flat with last year as strong demand deposit growth offset noncore interest rate sensitive balances
Driving operational efficiency as ratio improved 270 basis points to 63.3% while continuing to invest in people and technology

Net income was $5.9 million, or $1.06 per diluted share, in the third quarter of 2022, compared with $5.7 million, or $1.03 per diluted share, in the second quarter of 2022 and $7.0 million, or $1.27 per diluted share, in last year's third quarter. The increase from the sequential second quarter was largely due to higher net interest income. The change from prior year reflected an increase in provision for loan losses compared with a sizable credit to provision for loan losses in the third quarter of 2021, partially offset by higher net interest income during the quarter. Return on average equity was 14.15% for the third quarter of 2022, compared with 13.77% in the second quarter of 2022 and 15.58% in the third quarter of 2021.

"Third quarter results were solid and up from the prior quarter, with strong revenue, a strengthened net interest margin, and a lower efficiency ratio. On a year-over-year basis, earnings reflected a single charged-off credit that resulted in a higher than typical provision. Overall lending performance continues to be positive considering higher rates that have slowed Commercial Real Estate activity. Of note, Commercial & Industrial lending has been more robust in these challenging economic conditions, strengthening a solid pipeline as we approach the end of the year," said David J. Nasca, President and CEO of Evans Bancorp, Inc. "We remain positive on our local economy and believe our strong and diversified portfolio is well positioned to enable us to navigate the continuing headwinds."

Net Interest Income
($ in thousands)

	3Q 2022		2Q 2022		3Q 2021

Interest income	$	20,487	$	19,097	$	19,302
Interest expense		1,299		1,045		1,139
Net interest income		19,188		18,052		18,163
Provision (credit) for loan losses		1,328		267		(1,459)
Net interest income after provision	$	17,860	$	17,785	$	19,622

Net interest income increased $1.1 million, or 6%, from the sequential second quarter and $1.0 million, or 6%, when compared with prior-year third quarter. The increase from the sequential quarter primarily reflected higher rates on a relatively similar base of interest earning assets. Rate changes reflected the 300 basis point increase in the federal funds rate since the beginning of 2022. Partially offsetting the improvement in interest income was a $0.3 million increase in interest expense related to competitive pricing on deposits. The increase from prior year reflected higher interest income on investment securities of $1.1 million. A $1.9 million increase in interest income on loans resulting from the fed funds rate increases and higher average loan balances offset lower Paycheck Protection Program loan fees.

Third quarter net interest margin of 3.72% improved 27 basis points over the trailing second quarter and 24 basis points from the prior-year period. The yield on loans also improved both sequentially and year-over year, up 23 basis points and 11 basis points, respectively. The cost of interest-bearing liabilities was 0.36% compared with 0.28% in the second quarter of 2022 and 0.31% in the third quarter of 2021.

As a result of the COVID-19 pandemic, the Company classified $81 million of loans to clients within the hotel industry as criticized in 2020. Subsequently, more than half of this portfolio has been upgraded or paid off. Currently, $38 million of the hotel portfolio remains in criticized status at the end of the 2022 third quarter. The improvement of the remaining criticized hotel credits is dependent on continued positive payment performance. Given released travel restrictions and improvements in tourism and business travel, trends for this industry have improved.

The higher than average provision for loan losses of $1.3 million in the current quarter was primarily due to the $1.5 million charge-off of a single government agency guaranteed commercial loan. During the quarter, the Company was notified that its claim for reimbursement of the guarantee was denied. Management has evaluated the remaining government guaranteed portfolio and determined that the above loan had unique characteristics.

Evans has deferred the adoption of the Current Expected Credit Loss Impairment Model (CECL) until January 2023, as permitted by its classification as a Smaller Reporting Company by the Securities and Exchange Commission.

Asset Quality
($ in thousands)

	3Q 2022			2Q 2022			3Q 2021

Total non-performing loans	$	25,961		$	22,010		$	25,463
Total net loan charge-offs		1,518			66			431
Non-performing loans / Total loans		1.60	%		1.36	%		1.58	%
Net loan charge-offs / Average loans		0.38	%		0.02	%		0.10	%
Allowance for loan losses / Total loans		1.15	%		1.17	%		1.12	%

"During the quarter, we were notified that the government denied the guarantee on a single loan that had been in our nonperforming category since late 2019. As a result, we charged-off the $1.5 million loan in the quarter. Although disappointed with the agency's decision concerning the guarantee, the characteristics of this particular loan were unique and are not indicative of other commercial credits in our portfolio or specifically other loans with a government guarantee," stated John Connerton, Chief Financial Officer of Evans Bank. "Our return on average assets (ROA) for the quarter was 1.08%, demonstrating the strength of our performance especially considering this one credit negatively impacted the ratio by 20 basis points."

Non-Interest Income
($ in thousands)
	3Q 2022		2Q 2022		3Q 2021

Deposit service charges	$	782	$	703	$	664
Insurance service and fee revenue		3,383		2,567		3,191
Bank-owned life insurance		161		171		158
Other income		1,441		1,171		1,144
Total non-interest income	$	5,767	$	4,612	$	5,157

Higher debit card usage drove deposit service charges up 18% over last year's third quarter.

The increase in insurance service and fee revenue from the sequential second quarter reflects seasonally higher commercial lines insurance commissions and profit-sharing revenue. The increase from the prior year was primarily due to increased commissions resulting from higher premiums and new commercial lines insurance business.

The increases in other income over both prior periods was largely due to a $0.2 million final payment in connection with a historic tax credit investment and movements in the fair value of mortgage servicing rights.

Non-Interest Expense
($ in thousands)
	3Q 2022		2Q 2022		3Q 2021

Salaries and employee benefits	$	10,450	$	9,436	$	9,930
Occupancy		1,118		1,131		1,126
Advertising and public relations		417		438		434
Professional services		839		843		840
Technology and communications		1,339		1,237		1,327
Amortization of intangibles		100		100		135
FDIC insurance		255		250		285
Other expenses		1,273		1,349		1,316
Total non-interest expenses	$	15,791	$	14,784	$	15,393

Total non-interest expense increased $1.0 million, or 7%, from the second quarter of 2022, and $0.4 million, or 3%, from last year's third quarter.

Salaries and employee benefits increased $1.0 million, or 11%, from the sequential second quarter, which reflected a $0.7 million increase in incentive accruals. The $0.5 million, or 5%, increase over last year's third quarter was mainly due to annual merit increases.

Technology and communications increased $0.1 million from prior quarter due to higher ATM card activity and software costs.

The Company's GAAP efficiency ratio, or noninterest expenses divided by the sum of net interest income and noninterest income, was 63.3% in the third quarter of 2022, 65.2% in the second quarter of 2022, and 66.0% in the third quarter of 2021.

Income tax expense was $2.0 million, for an effective tax rate of 25.2%, in the third quarter of 2022 compared with 24.7% in the second quarter of 2022 and 25.6% in last year's third quarter.

Balance Sheet Highlights

Total assets were $2.13 billion as of September 30, 2022, down 4% from the end of the trailing quarter and down 1% compared with balances at September 30, 2021. The change from the sequential quarter was due to an $81 million decline in interest-bearing deposits at banks and a $27 million decrease in investment securities which was partially offset by a $13 million increase in total loans. Since last year's third quarter, while interest-bearing deposits decreased $172 million, investment securities increased $118 million and total loans increased $12 million. PPP loan balances, which are included in commercial and industrial loans, were down $75 million year-over-year. Excluding the decline in PPP loans, commercial and industrial loans increased $28 million, or 14%, from the third quarter of 2021. Residential mortgages and commercial real estate loans increased $27 million and $26 million, respectively, since the third quarter of 2021.

Investment securities were $377 million at September 30, 2022, $27 million lower than the end of the second quarter of 2022, but $118 million higher than at the end of last year's third quarter. The decrease from the sequential quarter reflects changes in unrealized gains and losses on investment securities. The increase from prior year reflects the use of excess cash balances. 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.

Total deposits of $1.87 billion decreased $95 million, or 5%, from June 30, 2022, and $2 million, or less than 1%, from the end of last year's third quarter. The decrease from the sequential quarter primarily reflects seasonal municipal deposit outflows and a large component of one product, interest rate sensitive customers that the Bank determined to be noncore. From a product line perspective, there were decreases in consumer savings deposits of $50 million, commercial savings of $26 million, municipal savings deposits of $25 million and NOW deposits of $2 million, partially offset by an increase in demand deposits of $9 million.

Capital Management

The Company has consistently maintained regulatory capital ratios measurably above the Federal "well capitalized" standard, including a Tier 1 leverage ratio of 9.00% at September 30, 2022 compared with 8.73% at June 30, 2022 and 8.34% at September 30, 2021.

Book value per share was $27.20 at September 30, 2022 compared with $29.53 at June 30, 2022 and $32.73 at September 30, 2021. Reflected in the book value changes are the Federal Reserve's aggressive interest rate hikes that have resulted in significant changes in unrealized gains and losses on investment securities, which reduced book value per share at September 30, 2022 by $2.83 when compared with the sequential second quarter and $8.38 from last year's third quarter. Such unrealized gains and losses are generally 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. The Company had no other-than-temporary impairment charges in its investment portfolio in 2022 or 2021.

Tangible book value per share was $24.65 at September 30, 2022 compared with $26.97 at June 30, 2022 and $30.07 at September 30, 2021.

In October 2022, the Company paid a semi-annual cash dividend of $0.64 per common share. Cash dividends totaled $1.26 per common share during 2022, up 5% over 2021.

Webcast and Conference Call

The Company will host a conference call and webcast on Wednesday, October 26, 2022 at 4:45 p.m. ET. Management will review the financial and operating results for the third quarter of 2022, as well as the Company's strategy and outlook. A question and answer session will follow the formal presentation.

The conference call can be accessed by calling (201) 689-8471. Alternatively, the webcast can be monitored at www.evansbancorp.com.

A telephonic replay will be available from 7:45 p.m. ET on the day of the teleconference until Wednesday, November 2, 2022. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13733202, or access the webcast replay at www.evansbancorp.com, where a transcript will be posted once available.

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 $2.1 billion in assets and $1.9 billion in deposits at September 30, 2022. Evans is a full-service community bank with 18 financial centers providing comprehensive financial services to consumer, business and municipal customers throughout Western New York. Evans Insurance Agency, a wholly owned subsidiary, provides life insurance, employee benefits, and property and casualty insurance through ten offices in the Western New York region. 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 COVID-19, 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.


EVANS BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA (UNAUDITED)
(in thousands, except shares and per share data)

		9/30/2022			6/30/2022			3/31/2022			12/31/2021			9/30/2021
ASSETS
Interest-bearing deposits at banks	$	6,813		$	88,190		$	147,277		$	234,929		$	179,231
Investment Securities		376,713			403,322			388,953			309,124			258,221
Loans		1,626,457			1,613,834			1,604,079			1,571,905			1,614,162
Allowance for loan losses		(18,630)			(18,819)			(18,618)			(18,438)			(18,051)
Goodwill and intangible assets		14,029			14,129			14,229			14,329			14,546
All other assets		124,323			107,698			104,814			98,791			103,949
Total assets	$	2,129,705		$	2,208,354		$	2,240,734		$	2,210,640		$	2,152,058

LIABILITIES AND STOCKHOLDERS'
EQUITY
Demand deposits		558,805			550,079			528,962			492,864			502,689
NOW deposits		263,648			265,181			257,475			259,908			253,124
Savings deposits		913,383			1,015,511			1,051,136			1,019,925			942,147
Time deposits		137,910			137,561			149,243			164,340			178,083
Total deposits		1,873,746			1,968,332			1,986,816			1,937,037			1,876,043
Borrowings		83,456			59,028			64,322			67,965			71,564
Other liabilities		22,652			18,319			20,393			21,746			25,617
Total stockholders' equity		149,850			162,675			169,203			183,892			178,834

SHARES AND CAPITAL RATIOS
Common shares outstanding		5,509,917			5,508,663			5,519,831			5,482,756			5,463,141
Book value per share	$	27.20		$	29.53		$	30.65		$	33.54		$	32.73
Tangible book value per share	$	24.65		$	26.97		$	28.08		$	30.93		$	30.07
Tier 1 leverage ratio		9.00	%		8.73	%		8.57	%		8.57	%		8.34	%
Tier 1 risk-based capital ratio		12.40	%		12.47	%		12.55	%		12.76	%		12.34	%
Total risk-based capital ratio		13.57	%		13.68	%		13.78	%		14.02	%		13.57	%

ASSET QUALITY DATA
Total non-performing loans	$	25,961		$	22,010		$	20,659		$	18,415		$	25,463
Total net loan charge-offs		1,518			66			41			6			431

Non-performing loans/Total loans		1.60	%		1.36	%		1.29	%		1.17	%		1.58	%
Net loan charge-offs /Average loans		0.38	%		0.02	%		0.01	%		-	%		0.10	%
Allowance for loans losses/Total loans		1.15	%		1.17	%		1.16	%		1.17	%		1.12	%

EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED OPERATIONS DATA (UNAUDITED)
(in thousands, except share and per share data)

		2022			2022			2022			2021			2021
		Third Quarter			Second Quarter			First Quarter			Fourth Quarter			Third Quarter
Interest income	$	20,487		$	19,097		$	17,517		$	20,732		$	19,302
Interest expense		1,299			1,045			1,016			1,057			1,139
Net interest income		19,188			18,052			16,501			19,675			18,163
Provision (credit) for loan losses		1,328			267			221			393			(1,459)
Net interest income after provision (credit) for loan losses		17,860			17,785			16,280			19,282			19,622

Deposit service charges		782			703			692			688			664
Insurance service and fee revenue		3,383			2,567			2,299			2,107			3,191
Bank-owned life insurance		161			171			154			360			158
Loss on tax credit investment		-			-			-			(30)			-
Refundable NY state historic tax credit		-			-			-			21			-
Other income		1,441			1,171			1,286			1,560			1,144
Total non-interest income		5,767			4,612			4,431			4,706			5,157

Salaries and employee benefits		10,450			9,436			9,470			10,273			9,930
Occupancy		1,118			1,131			1,180			1,208			1,126
Advertising and public relations		417			438			179			325			434
Professional services		839			843			872			799			840
Technology and communications		1,339			1,237			1,174			1,353			1,327
Amortization of intangibles		100			100			100			132			135
FDIC insurance		255			250			270			269			285
Other expenses		1,273			1,349			1,215			1,926			1,316
Total non-interest expenses		15,791			14,784			14,460			16,285			15,393

Income before income taxes		7,836			7,613			6,251			7,703			9,386
Income tax provision		1,972			1,879			1,503			1,804			2,407
Net income		5,864			5,734			4,748			5,899			6,979

PER SHARE DATA
Net income per common share-diluted	$	1.06		$	1.03		$	0.86		$	1.06		$	1.27
Cash dividends per common share	$	0.64		$	-		$	0.62		$	-		$	0.60
Weighted average number of diluted shares		5,546,764			5,550,436			5,547,548			5,540,924			5,516,781

PERFORMANCE RATIOS
Return on average total assets		1.08	%		1.04	%		0.86	%		1.07	%		1.28	%
Return on average stockholders' equity		14.15	%		13.77	%		10.46	%		12.98	%		15.58	%
Return on average tangible common stockholders' equity*		15.46	%		15.06	%		11.35	%		14.11	%		16.96	%
Efficiency ratio		63.28	%		65.23	%		69.08	%		66.79	%		66.01	%
Efficiency ratio (Non-GAAP)**		62.88	%		64.79	%		68.60	%		66.23	%		65.43	%

* The calculation of the average tangible common stockholders' equity ratio excludes goodwill and intangible assets from average stockholders equity.
** The calculation of the non-GAAP efficiency ratio excludes amortization of intangibles, gains and losses from investment securities, merger-related expenses and the impact of historic tax credit transactions.


EVANS BANCORP, INC AND SUBSIDIARIES
SELECTED AVERAGE BALANCES AND YIELDS/RATES (UNAUDITED)
(in thousands)
		2022			2022			2022			2021			2021
		Third Quarter			Second Quarter			First Quarter			Fourth Quarter			Third Quarter
AVERAGE BALANCES

Loans, net	$	1,597,382		$	1,591,971		$	1,566,716		$	1,573,608		$	1,647,395
Investment securities		406,703			392,371			357,930			283,216			248,690
Interest-bearing deposits at banks		42,788			111,457			178,729			229,658			174,296
Total interest-earning assets		2,046,873			2,095,799			2,103,375			2,086,482			2,070,381
Non interest-earning assets		122,321			116,202			110,316			110,315			109,601
Total Assets	$	2,169,194		$	2,212,001		$	2,213,691		$	2,196,797		$	2,179,982

NOW		269,359			258,197			252,965			254,059			262,105
Savings		964,051			1,020,004			1,024,447			983,403			949,956
Time deposits		132,319			143,677			156,534			170,318			186,126
Total interest-bearing deposits		1,365,729			1,421,878			1,433,946			1,407,780			1,398,187
Borrowings		65,990			63,203			65,154			69,847			74,326
Total interest-bearing liabilities		1,431,719			1,485,081			1,499,100			1,477,627			1,472,513

Demand deposits		549,625			542,827			512,118			515,204			503,006
Other non-interest bearing liabilities		22,073			17,562			20,897			22,223			25,250
Stockholders' equity		165,777			166,531			181,576			181,743			179,213

Total Liabilities and Equity	$	2,169,194		$	2,212,001		$	2,213,691		$	2,196,797		$	2,179,982

Average tangible common stockholders' equity*		151,690			152,345			167,287			167,285			164,588

YIELD/RATE

Loans, net		4.47	%		4.24	%		4.07	%		4.86	%		4.36	%
Investment securities		2.23	%		2.09	%		1.95	%		1.91	%		1.82	%
Interest-bearing deposits at banks		2.01	%		0.81	%		0.16	%		0.15	%		0.14	%
Total interest-earning assets		3.97	%		3.65	%		3.38	%		3.94	%		3.70	%

NOW		0.10	%		0.09	%		0.09	%		0.09	%		0.10	%
Savings		0.19	%		0.14	%		0.14	%		0.14	%		0.15	%
Time deposits		0.64	%		0.49	%		0.44	%		0.44	%		0.49	%
Total interest-bearing deposits		0.22	%		0.16	%		0.16	%		0.17	%		0.18	%
Borrowings		3.27	%		2.95	%		2.79	%		2.64	%		2.62	%
Total interest-bearing liabilities		0.36	%		0.28	%		0.27	%		0.28	%		0.31	%

Interest rate spread		3.61	%		3.37	%		3.11	%		3.66	%		3.39	%
Contribution of interest-free funds		0.11	%		0.08	%		0.07	%		0.08	%		0.09	%
Net interest margin		3.72	%		3.45	%		3.18	%		3.74	%		3.48	%
* Average tangible common stockholders' equity excludes goodwill and intangible assets from average stockholders equity.

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Evans Bancorp Reports Net Income of $5.9 Million in Third Quarter 2022