Evans Bancorp said profits for the third quarter rose less than 1 percent, as higher taxes outpaced strong growth in loans and deposits, a wider profit margin and higher revenues.
The Angola-based parent of Evans Bank reported net income of $1.43 million, up 0.7 percent from $1.42 million. Per-share earnings were flat at 52 cents. Not counting one-time accounting items, net operating income rose 0.7 percent to $1.53 million or 55 cents per share.
Net interest income from taking deposits and making loans jumped 21.1 percent from a year ago, as the margin widened. Loans and deposits grew at annualized paces of 20.4 percent and 34.4 percent, respectively, during the three months. Annualized means one-quarter's pace calculated across a year.
However, while income before taxes was up 12.1 percent from a year ago, the bank had to pay 41 percent higher income taxes because less of its income was tax-exempt. The bank earned more from loans than it did from municipal investments or bank-owned life insurance, so its tax bracket jumped from 28.3 percent to 35.6 percent. And they expect that to continue.
"We feel we've had a strong quarter," said Chief Financial Officer Gary Kajtoch. "We're very pleased that despite a very tough economic environment, we're able to achieve an increase in the bottom line. We've seen some terrific loan growth, and we're able to grow core deposits as well, which is pretty good in this environment and in this marketplace."
Net interest income from taking deposits and making loans rose 21.1 percent to $5.13 million. Loans grew 5.1 percent from June 30 and 18.7 percent from yearend 2007, to $379.4 million, led by commercial real estate. "We're still open for business. We're still making loans," Kajtoch said.
Deposits rose 8.6 percent from June and 23.8 percent from yearend 2007, to $403.5 million, driven by a new retail money market product introduced in May and growth in core checking accounts. Kajtoch also said the bank benefited slightly from disruption in the industry, as customers left big banks for smaller ones.
Loan writeoffs increased slightly, primarily tied to direct finance commercial leases, and the bank nearly doubled its provision for bad debt to $580,000 from $280,000. Kajtoch said the bank's national commercial lease business has a higher yield but also higher risk, and the bank has tightened credit standards and consolidated its network of brokers.
Fees rose 1.4 percent to $2.92 million, comprising 36.2 percent of revenues. Insurance fees rose 4.3 percent as the bank purchased another agency in August. Operating expenses rose 8.1 percent to $5.25 million, led by salaries, benefits and occupancy costs due to the bank's new Elmwood Avenue branch, as well as an enhanced bonus system and higher 401(k) contributions. The bank also cited higher FDIC insurance premiums that took effect in the second quarter.