Evans Bancorp, Inc.

Reported Q2 2024 earnings were $2.9 million, or $0.53 per diluted share, versus $0.42 in Q1 2024 and $0.53 was up 26% sequentially. Net interest income was $14.3 million, up $0.4 million sequentially; net interest margin was 2.71%, down 8 bps from Q1. Provision for credit losses was $297,000. Total loans were up 2.5% in the quarter and up $94 million, or 6%, year over year; total deposits were flat sequentially and up $173 million, or 10%, year to date. Noninterest expenses declined sequentially, and the company expects 2024 bank-only expense excluding TEA to decline 1% to 2%. Looking ahead, management expects Q3 2024 NIM to be approximately 2.68% and then improve slowly in Q4 and next year; commercial loan growth is expected to be mid-single-digits for 2024.

David Nasca said the bank is making progress toward historic profitability despite a difficult rate environment, helped by balance-sheet optimization, loan growth, stable deposits, and disciplined expense control. He emphasized strong commercial and consumer banking production, operational efficiency initiatives like electronic signature pads across branches, and continued investment in community banking relationships. His tone was cautiously optimistic, saying they do not see credit issues percolating and believe growth prospects remain positive.

John Connerton highlighted that sequential earnings growth was driven by higher net interest income and lower noninterest expense, while the year-over-year comparison was affected by lower net interest income and the TEA sale. He cited $14.3 million of net interest income, 2.71% NIM, $297,000 of credit loss provision, and a 6% year-over-year rise in loans, with criticized loans at $68 million versus $70 million in Q1. He also said deposits were flat sequentially but up $173 million year to date, the bank added $55 million of broker deposits in Q1, expenses for the bank-only business are expected to decline 1% to 2% in 2024, and the go-forward tax rate should be 22.5%.

Analysts focused on loan origination yields, the amount of the portfolio that reprices with short-term rates, CD pricing, municipal deposit seasonality, and whether fees and expenses were likely to stay elevated. Management said commercial lines are pricing at prime plus and longer-term commercial/CRE loans are around 7.5% and above, the variable-rate portfolio is around $300 million, CDs are around 4.5%, and municipal balances should follow normal seasonality with a low in September and December. On credit, management said the hotel loan moving to ORE is expected to close with no loss, there are no broader credit concerns, and delinquency trends have not worsened.