Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended March 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________.
Commission file number 0-18539
EVANS BANCORP, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 16-1332767
------------------------------- -------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14 - 16 North Main Street, Angola, New York 14006
-------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(716) 549-1000
----------------------------------
(Registrant's telephone number)
Not applicable
-----------------------------------
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the exchange Act) Yes [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
Common Stock, $.50 Par Value--2,477,599 shares as of April 23, 2004
EVANS BANCORP, INC. AND SUBSIDIARY
PAGE
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets-March 31, 2004 (Unaudited) and
December 31, 2003 1
Consolidated Statements of Income (Unaudited)-Three months
ended March 31, 2004 and 2003 2
Consolidated Statements of Stockholders' Equity (Unaudited)-Three months
ended March 31, 2004 and 2003 3
Consolidated Statements of Cash Flows (Unaudited)-Three months
ended March 31, 2004 and 2003 4
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risks 19
Item 4. Controls and Procedures 20
PART II. OTHER INFORMATION 20
Item 1. Legal Proceedings
Item 2. Changes In Securities, Use of Proceeds and Issuer Purchases of Equity Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 21
PAGE 1
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, 2004 and December 31, 2003
March 31, December 31,
2004 2003
--------- ------------
(Unaudited)
(In thousands except share and
per share amounts)
ASSETS
Cash and due from banks $ 11,027 $ 8,509
Federal funds sold 22,525 -
--------- ---------
Total cash and cash equivalents 33,552 8,509
Interest bearing deposits at other banks 1,083 98
Securities:
Available-for-sale, at fair value 150,742 116,807
Held-to-maturity, at amortized cost 3,681 3,749
Loans, net 189,441 185,528
Properties and equipment, net 6,215 5,982
Goodwill 2,945 2,945
Intangible assets 1,913 1,177
Bank-owned life insurance 7,424 7,323
Other assets 3,342 2,559
--------- ---------
TOTAL ASSETS $ 400,338 $ 334,677
========= =========
LIABILITIES AND STOCKHOLDERS EQUITY
LIABILITIES
Deposits:
Demand $ 51,105 $ 51,885
NOW and money market 11,363 11,464
Regular savings 168,113 105,599
Time deposits 101,707 97,377
--------- ---------
Total deposits 332,288 266,325
Other borrowed funds 21,476 25,388
Securities sold under agreements to repurchase 6,947 5,460
Dividend payable 817 -
Other liabilities 4,549 4,180
--------- ---------
Total liabilities 366,077 301,353
--------- ---------
CONTINGENT LIABILITIES AND COMMITMENTS (Note 9)
STOCKHOLDERS' EQUITY
Common stock, $.50 par value; 10,000,000 shares authorized;
2,491,188 and 2,459,246 shares issued, respectively, and
2,470,827 and 2,444,285 shares outstanding, respectively 1,246 1,230
Capital surplus 20,104 19,359
Retained earnings 11,496 11,145
Accumulated other comprehensive income, net of tax 1,878 1,918
Less: Treasury stock, at cost (20,361 and 14,961 shares, respectively) (463) (328)
--------- ---------
Total stockholders' equity 34,261 33,324
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 400,338 $ 334,677
========= =========
See Notes to Consolidated Financial Statements
PAGE 2
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months (Unaudited) ended March 31, 2004 and 2003
Three Months Ended
March 31,
2004 2003
---------- ----------
(In thousands except share and
per share amounts)
INTEREST INCOME
Loans $ 2,771 $ 2,640
Federal funds sold & interest on deposits in other banks 20 48
Securities:
Taxable 678 572
Non-taxable 554 561
---------- ----------
Total interest income 4,023 3,821
INTEREST EXPENSE
Interest on deposits 846 1,013
Interest on borrowings 180 122
---------- ----------
Total interest expense 1,026 1,135
NET INTEREST INCOME 2,997 2,686
PROVISION FOR LOAN LOSSES 136 120
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,861 2,566
NON-INTEREST INCOME:
Service charges 430 450
Insurance service and fees 1,354 1,041
Commission fees 35 40
Net gain on sales of securities 143 249
Premiums on loans sold 5 20
Other 363 338
---------- ----------
Total non-interest income 2,330 2,138
NON-INTEREST EXPENSE:
Salaries and employee benefits 1,979 1,686
Occupancy 410 404
Supplies 87 84
Repairs and maintenance 102 119
Advertising and public relations 84 76
Professional services 176 267
FDIC assessments 11 9
Other insurance 86 68
Other 700 597
---------- ----------
Total non-interest expense 3,635 3,310
---------- ----------
Income before income taxes 1,556 1,394
INCOME TAXES 388 320
---------- ----------
NET INCOME $ 1,168 $ 1,074
========== ==========
Net income per common share-basic* $ 0.47 $ 0.44
========== ==========
Net income per common share-diluted* $ 0.47 $ 0.44
========== ==========
Weighted average number of common shares* 2,475,574 2,450,870
========== ==========
Weighted average number of diluted shares* 2,476,715 2,450,870
========== ==========
*Adjusted for 5 percent stock dividend paid December 2003
See notes to Consolidated Financial Statements
PAGE 3
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2003
(UNAUDITED)
ACCUMULATED
OTHER
COMMON CAPITAL RETAINED COMPREHENSIVE TREASURY
STOCK SURPLUS EARNINGS INCOME STOCK TOTAL
(In thousands except share and per share amounts)
Balance, January 1, 2003 $1,167 16,579 11,180 1,942 (6) 30,862
Comprehensive income:
Net income 1,074 1,074
Unrealized loss on available
for sale securities, net of
reclassification adjustment $107 (167) (167)
------
Total comprehensive income 907
------
Cash dividends ($.30 per common share) (747) (747)
Fractional shares paid in cash on stock
dividend (12) (12)
------ ------ ------ ----- --- ------
Balance, March 31, 2003 $1,167 16,579 11,495 1,775 (6) 31,010
====== ====== ====== ===== === ======
THREE MONTHS ENDED MARCH 31, 2004
(UNAUDITED)
ACCUMULATED
OTHER
COMMON CAPITAL RETAINED COMPREHENSIVE TREASURY
STOCK SURPLUS EARNINGS INCOME STOCK TOTAL
(In thousands except share and per share amounts)
Balance, January 1, 2004 $1,230 19,359 11,145 1,918 (328) 33,324
Comprehensive income:
Net income 1,168 1,168
Unrealized loss on available
for sale securities, net of
reclassification adjustment $86 (40) (40)
------
Total comprehensive income 1,128
------
Cash dividends ($.33 per common share) (817) (817)
Stock options expense 37 37
Issued 31,942 shares for purchase of 16 708 724
insurance agencies
Purchased 5,400 shares for treasury (135) (135)
------ ------ ------ ----- ---- ------
Balance, March 31, 2004 $1,246 20,104 11,496 1,878 (463) 34,261
====== ====== ====== ===== ==== ======
PAGE 4
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2004 and 2003
(Unaudited)
Three Months Ended
March 31,
2004 2003
-------- --------
(In thousands)
OPERATING ACTIVITIES
Interest received $ 3,844 $ 3,598
Fees and commissions received 2,111 1,832
Interest paid (1,067) (1,198)
Cash paid to suppliers and employees (3,299) (3,540)
Income taxes paid (319) (18)
-------- --------
Net cash provided by operating activities 1,270 674
INVESTING ACTIVITIES
Available for sale securities
Purchases (52,921) (54,048)
Proceeds from sales 8,878 8,680
Proceeds from maturities 9,938 11,696
Held to maturity securities
Purchases (1,091) (151)
Proceeds from maturities 180 466
Cash paid for bank owned life insurance - (6,200)
Additions to properties and equipment (408) (66)
Increase in loans, net of repayments (4,943) (11,869)
Proceeds from sales of loans 881 2,871
Proceeds from sales of other real estate owned (6) -
Acquisition of insurance agencies (138) (180)
-------- --------
Net cash used in investing activities (39,630) (48,801)
FINANCING ACTIVITIES
Increase in deposits 65,963 36,523
(Repayments) proceeds of borrowings (2,426) 5,267
Purchase of treasury stock (134) -
Dividends paid, net - (12)
-------- --------
Net cash provided by financing activities 63,403 41,778
-------- --------
Net increase (decrease) in cash and cash
equivalents 25,043 (6,349)
Cash and cash equivalents, beginning of period 8,509 19,758
-------- --------
Cash and cash equivalents, end of period $ 33,552 $ 13,409
======== ========
See notes to Consolidated Financial Statements
PAGE 5
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2004 and 2003
(Unaudited)
Three Months Ended
March 31,
2004 2003
------- -------
(In thousands)
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 1,168 $ 1,074
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 440 265
Provision for loan losses 136 120
Gain on sale of assets (137) (249)
Premiums on loans sold (5) (20)
Stock options expensed 37 -
Increase in accrued interest payable (41) (63)
Increase in accrued interest receivable (358) (462)
Increase in other liabilities 263 170
Decrease in other assets (233) (161)
------- -------
Total adjustments 102 (400)
------- -------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 1,270 $ 674
======= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Acquisition of insurance agencies $ 724 $ 202
See notes to Consolidated Financial Statements
6
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2004 and 2003
(Unaudited)
1. GENERAL
The accounting and reporting policies followed by Evans Bancorp, Inc.,
(the "Company") a bank holding company, and its wholly-owned
subsidiary, Evans National Bank, (the "Bank") and the Bank's
wholly-owned subsidiaries, ENB Associates Inc., ("ENB"), M&W Agency,
Inc., ("M&W") and Evans National Holding Corp ("ENHC") in the
preparation of the accompanying interim financial statements conform
with accounting principles generally accepted in the United States of
America and with general practice within the banking industry.
The accompanying consolidated financial statements are unaudited. In
the opinion of management, all adjustments necessary for a fair
presentation of financial position and results of operations for the
interim periods have been made. Such adjustments are of a normal
recurring nature.
The results of operations for the three month period ended March 31,
2004 are not necessarily indicative of the results to be expected for
the full year. The accompanying Consolidated Financial Statements
should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto included in our Report on Form 10-K
for the year ended December 31, 2003.
2. SECURITIES
Securities which the Company has the positive ability and intent to
hold to maturity are stated at amortized cost. Securities which the
Company has identified as available for sale are stated at fair value
with changes in fair value included as a component of stockholders'
equity.
3. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses represents the amount charged against the
Bank's earnings to establish a reserve or allowance sufficient to
absorb probable loan losses based on management's evaluation of the
loan portfolio. Factors considered include current loan concentrations,
charge-off history, delinquent loan percentages, input from regulatory
agencies and general economic conditions.
On a quarterly basis, management of the Bank meets to review the
adequacy of the allowance for loan losses. In making this
determination, the Bank analyzes the ultimate collectibility of the
loans in its portfolio by incorporating feedback provided by internal
loan staff, an independent loan review function and information
provided by examinations performed by regulatory agencies.
The analysis of the allowance for loan losses is composed of three
components: specific credit allocation, general portfolio allocation
and subjectively by determined allocation. The specific credit
allocation includes a detailed review of the credit in accordance with
the Statement of Financial Accounting Standards ("SFAS") No. 114 and
No. 118, and allocation is made based on this analysis. The general
portfolio allocation consists of an assigned reserve percentage based
on the credit rating of the loan.
The subjective portion of the allowance reflects management's
evaluation of various conditions, and involves a higher degree of
uncertainty because this component of the allowance is not identified
with specific problem credits or portfolio segments. The conditions
evaluated in connection with this element include the following:
industry and regional conditions; seasoning of the loan portfolio and
changes in the composition of and growth in the loan portfolio; the
strength and duration of the business cycle; existing general economic
and business conditions in the lending areas; credit quality trends in
nonaccruing loans; historical loan charge-off experience; and the
results of bank regulatory examinations.
7
The following table sets forth information regarding the allowance for
loan losses for the three month periods ended March 31, 2004 and 2003.
ALLOWANCE FOR LOAN LOSSES
Three months ended March 31,
2004 2003
------- -------
(In thousands)
Beginning balance, January 1 $ 2,539 $ 2,146
Total charge offs (1) -
Total recoveries 57 -
------- -------
Net recoveries 56 -
Provision for loan losses 136 120
------- -------
Ending balance, March 31 $ 2,731 $ 2,266
======= =======
4. GOODWILL
Goodwill represents the excess of the purchase price over the fair
value of the net assets acquired in connection with the Company's
acquisition of the M&W Group, Inc. The goodwill is not amortized but
the Company periodically assesses whether events or changes in
circumstances indicate that the carrying amount of goodwill may be
impaired.
5. REVENUE RECOGNITION
The Bank's primary sources of revenue are interest income from loans
and investments and service charge income from loans and deposits.
M&W's revenue is derived mainly from insurance commissions. Revenue is
recognized in the period in which it is earned. The revenue is
recognized on the accrual basis of accounting in accordance with
accounting principles generally accepted in the United States of
America.
6. PER SHARE DATA
The common stock per share information is based upon the weighted
average number of shares outstanding during each period, retroactively
adjusted for stock dividends and stock splits. Basic earnings per share
and diluted earnings per share are the same for the periods ending
March 31, 2004 and 2003. The Company's potential dilutive securities
included 1,141 dilutive shares for the three months ended March 31,
2004. There were no dilutive shares for the three months ended March
31, 2003. All share and per share amounts have been adjusted to reflect
a 5 percent stock dividend paid in December 2003.
7. TREASURY STOCK
During the quarter ended March 31, 2004 the Company repurchased 5,400
shares of common stock at an average cost of $24.86 per share.
8
8. SEGMENT INFORMATION
The Company is comprised of two primary business segments, banking and
insurance agency activities. The following table sets forth information
regarding these segments for the three month periods ended March 31,
2004 and 2003.
Three Months Ended
March 31, 2004
(in thousands)
INSURANCE
BANKING ACTIVITIES AGENCY ACTIVITIES TOTAL
Net interest income (expense) $ 3,002 ($ 5) $ 2,997
Provision for loan losses 136 0 136
------- ------- -------
Net interest income (expense) after
provision for loan losses 2,866 (5) 2,861
Non-interest income 976 0 976
Insurance commissions and fees 0 1,354 1,354
Non-interest expense 2,695 940 3,635
------- ------- -------
Income before income taxes 1,147 409 1,556
Income taxes 224 164 388
------- ------- -------
Net income $ 923 $ 245 $ 1,168
======= ======= =======
Three Months Ended
March 31, 2003
(in thousands)
INSURANCE
BANKING ACTIVITIES AGENCY ACTIVITIES TOTAL
Net interest income (expense) $ 2,693 ($ 7) $ 2,686
Provision for loan losses 120 - 120
------- ------- -------
Net interest income (expense) after
provision for loan losses 2,573 (7) 2,566
Non-interest income 1,097 - 1,097
Insurance commissions and fees - 1,041 1,041
Non-interest expense 2,576 734 3,310
------- ------- -------
Income before income taxes 1,094 300 1,394
Income taxes 200 120 320
------- ------- -------
Net income $ 894 $ 180 $ 1,074
======= ======= =======
9
9. CONTINGENT LIABILITIES AND COMMITMENTS
The consolidated financial statements do not reflect various
commitments and contingent liabilities, which arise in the normal
course of business, and which involve elements of credit risk, interest
rate risk and liquidity risk. These commitments and contingent
liabilities are commitments to extend credit and standby letters of
credit. A summary of the Bank's commitments and contingent liabilities
at March 31, 2004 and 2003 is as follows:
2004 2003
(In thousands)
Commitments to extend credit $44,199 $39,374
Standby letters of credit 1,724 2,457
------- -------
Total $45,923 $41,831
======= =======
Commitments to extend credit and standby letters of credit include
exposure to some credit loss in the event of nonperformance of the
customer. The Bank's credit policies and procedures for credit
commitments and financial guarantees are the same as those for
extensions of credit that are recorded on the consolidated balance
sheets. Because these instruments have fixed maturity dates, and
because they may expire without being drawn upon, they do not
necessarily represent cash requirements to the Bank. The Bank has not
incurred any losses on its commitments during the past two years.
Certain lending commitments for conforming residential mortgage loans
to be sold into the secondary market are considered derivative
instruments under the guidelines of SFAS No. 133. The changes in the
fair value of these commitments due to interest rate risk are not
recorded on the consolidated balance sheets as these derivatives are
not considered material.
The Bank and its subsidiary, M&W Agency, Inc., lease certain offices,
land, and equipment under long-term operating leases. The aggregate
minimum annual rental commitments under these leases total
approximately $305,000 in 2004, $268,000 in 2005, $227,000 in 2006,
$224,000 in 2007, $203,000 in 2008 and $2,676,000 thereafter. The
Company is subject to possible litigation proceedings in the normal
course of business. As of March 31, 2004, the Company had no asserted
claims pending against the Company that management considered to be
significant.
10. RECLASSIFICATIONS
Certain reclassifications have been made to the 2003 financial
statements to conform with the presentation used in 2004.
11. NET PERIODIC BENEFIT COSTS
The Bank has defined benefit pension plan covering substantially all
employees. The plan provides benefits that are based on the employees'
compensation and years of service. The Bank uses an actuarial method of
amortizing prior service cost and unrecognized net gains or losses
which result from actual experience and assumptions being different
than those that are projected. The amortization method the Bank is
using recognizes the prior service cost and net gains or losses over
the average remaining service period of active employees.
The Bank also maintains a nonqualified supplemental executive
retirement plan covering certain members of senior management. The Bank
uses an actuarial method of amortizing unrecognized net gains or losses
which result from actual expense and assumptions being different than
those that are projected. The amortization method the Bank is using
recognizes the net gains or losses over the average remaining service
period of active employees.
10
The following table represents net periodic benefit costs recognized:
THREE MONTHS ENDED MARCH 31
(in thousands)
PENSION BENEFITS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
2004 2003 2004 2003
---- ---- ---- ----
Service cost 54 39 22 18
Interest cost 38 40 35 33
Expected return on plan assets (42) (34) - -
Amortization of prior service cost (4) (4) 24 24
Amortization of the net loss 1 4 3 2
--- --- --- ---
Net periodic benefit cost 47 45 84 77
=== === === ===
11
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Quarterly Report on Form 10-Q may contain certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1993, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), that involve substantial risks and
uncertainties. When used in this report, or in the documents incorporated by
reference herein, the words "anticipate", "believe", "estimate", "expect",
"intend", "may", and similar expressions identify such forward-looking
statements. Actual results, performance or achievements could differ materially
from those contemplated, expressed or implied by the forward-looking statements
contained herein. These forward-looking statements are based largely on the
expectations of the Company or the Company's management and are subject to a
number of risks and uncertainties, including but not limited to, economic,
competitive, regulatory, and other factors affecting the Company's operations,
markets, products and services, as well as expansion strategies and other
factors discussed elsewhere in this report and other reports filed by the
Company with the Securities and Exchange Commission. Many of these factors are
beyond the Company's control. Forward-looking statements speak only as of the
date they are made. The Company undertakes no obligation to publicly update or
revise forward-looking information, whether as a result of new, updated
information, future events or otherwise.
The Company's results of operations are dependent primarily on net
interest income, which is the difference between the income earned on loans and
securities and the Company's cost of funds, consisting of the interest paid on
deposits and borrowings. Results of operations are also affected by the
provision for loan losses, investment activities, loan origination, insurance
service and fees, loan sale and servicing activities, service charges and fees
collected on deposit accounts. Noninterest expense primarily consists of
salaries and employee benefits, occupancy and equipment expense and technology
and communication expenses.
APPLICATION OF CRITICAL ACCOUNTING ESTIMATES
The Company's consolidated financial statements, are prepared in
accordance with accounting principles generally accepted in the United States of
America and follow general practices within the industries in which it operates.
Application of these principles requires management to make estimates,
assumptions, and judgments that affect the amounts reported in the financial
statements and accompanying notes. These estimates, assumptions, and judgments
are based on information available as of the date of the financial statements.
Accordingly, as this information changes, the financial statements could reflect
different estimates, assumptions and judgments. Certain policies inherently have
a greater reliance on the use of estimates, assumptions and judgments, and as
such have a greater possibility of producing results that could be materially
different than originally reported.
The most significant accounting policies followed by the Company are
presented in Note 1 to the consolidated financial statements. These policies,
along with the disclosures presented in the other financial statement notes and
in this financial review, provide information on how significant assets and
liabilities are valued in financial statements and how those values are
determined. Based on the valuation techniques used and the sensitivity of
financial statement amounts to the methods, assumptions and estimates underlying
those amounts, management has identified the determination of the allowance for
loan losses and valuation of goodwill to be the accounting areas that require
the most subjective or complex judgments and as such could be most subject to
revision as new information becomes available.
The allowance for loan losses represents management's estimate of
probable credit losses in the loan portfolio. Determining the amount of the
allowance for loan losses is considered a critical accounting estimate because
it requires significant judgment and the use of estimates related to the amount
and timing of expected future cash flows on the impaired loans, estimated losses
on pools of homogeneous loans based on historical loss experience and
consideration of current economic trends and conditions, all of which may be
susceptible to significant change. The loan portfolio also represents the
largest asset type on the consolidated balance sheets. Note 1 to the
Consolidated Financial Statements describes the methodology used to determine
the allowance for loan losses.
The amount of goodwill reflected in the Company's consolidated
financial statements is required to be tested by management for impairment on at
least an annual basis. The test for impairment of goodwill on the identified
reporting unit is considered a critical accounting estimate because it requires
judgment and the use of estimates related to the growth assumptions and market
multiples used in the valuation model.
12
ANALYSIS OF FINANCIAL CONDITION
Average Balance Sheet
The following table presents the significant categories of the assets
and liabilities of the Company, interest income and interest expense, and the
corresponding yields earned and rates paid for the periods indicated. The assets
and liabilities are presented as daily averages. The average loan balances
include both performing and non-performing loans. Yields are presented on a non
tax-equivalent basis.
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2004 MARCH 31, 2003
AVERAGE INTEREST AVERAGE INTEREST
OUTSTANDING EARNED/ OUTSTANDING EARNED/
BALANCE PAID YIELD/ BALANCE PAID YIELD/
(000) (000) RATE (000) (000) RATE
ASSETS
Interest-earning assets:
Loans, net $185,900 $ 2,771 5.96% $154,194 $ 2,640 6.85%
Taxable investments 73,584 678 3.68% 65,766 572 3.48%
Tax-exempt investments 51,417 554 4.31% 50,739 561 4.42%
Time deposits-other bank 185 1 1.69% 877 6 2.60%
Federal funds sold 9,597 19 0.82% 14,252 42 1.19%
-------- -------- ------- -------- -------- -------
Total interest-earning assets 320,683 4,023 5.02% 285,828 3,821 5.35%
======== ========
Noninterest-earning assets
Cash and due from banks 9,851 9,845
Premises and equipment, net 6,140 5,414
Other assets 14,613 11,388
-------- --------
Total Assets $351,287 $312,475
======== ========
LIABILITIES & STOCKHOLDERS'
EQUITY
Interest-bearing liabilities:
NOW accounts $ 11,069 6 0.20% $ 9,904 $ 6 0.24%
Savings deposits 118,782 228 0.77% 109,659 293 1.07%
Time deposits 100,266 612 2.44% 97,896 714 2.92%
Fed funds purchased 4,082 11 1.04% - - 0.00%
Securities sold u/a to repurchase 7,789 16 0.86% 5,606 16 1.14%
FHLB advances 17,773 148 3.32% 8,095 99 4.89%
Notes payable 787 5 2.62% 669 7 3.95%
-------- -------- ------- -------- -------- --------
Total interest-bearing liabilities 260,548 $ 1,026 1.58% 231,829 $ 1,135 1.96%
-------- --------
Noninterest-bearing liabilities:
Demand deposits 52,083 44,764
Other 4,142 4,801
-------- --------
Total liabilities $316,773 $281,394
Stockholders' equity 34,514 31,081
-------- --------
Total Liabilities and Stockholders'
Equity $351,287 $312,475
======== ========
Net interest earnings $ 2,997 $ 2,686
======== ========
Net yield on interest earning assets 3.74% 3.76%
13
Total gross loans have grown to $192.2 million at March 31, 2004, reflecting a
2.2% or $4.1 million increase from December 31, 2003. Total net loans (loans
after allowance for loan losses) have grown to $189.4 million at March 31, 2004,
reflecting a 2.1% or $3.9 million increase from December 31, 2003. During the
quarter, the Bank has continued to shift its loan portfolio composition toward
higher-yielding commercial loans, especially those secured by real estate.
Commercial loans total $136.7 million at March 31, 2004, reflecting a 2.7% or
$3.6 million increase from December 31, 2003. Consumer loans total $55.0 million
at March 31, 2004, reflecting a 1.0% or $0.5 million increase from December 31,
2003. Given the current low interest rate environment, the Bank continues to
sell certain fixed rate residential loans originated below a designated interest
rate level, while maintaining the servicing rights to such loans. During the
first quarter 2004, the Bank sold loans to FNMA totaling $0.9 million as
compared to $2.9 million during the first quarter 2003. At March 31, 2004, the
Bank had a loan servicing portfolio principal balance of $30.9 million upon
which it earns a servicing fee. This loan servicing portfolio balance compares
to $30.9 million at December 31, 2003.
Loan Portfolio Composition
The following table presents selected information on the composition of
the Company's loan portfolio in dollar amounts and in percentages as of the
dates indicated.
MARCH 31, 2004 DECEMBER 31, 2003
($000) PERCENTAGE ($000) PERCENTAGE
COMMERCIAL LOANS
Real Estate $ 111,052 57.9% $ 108,325 57.8%
Installment 13,448 7.0% 14,033 7.5%
Lines of credit 12,083 6.3% 10,645 5.7%
Cash Reserve 93 0.1% 81 0.0%
---------- ---------- ---------- ----------
Total Commercial Loans 136,676 71.3% 133,084 71.0%
CONSUMER LOANS
Real Estate 24,120 12.6% 24,270 12.9%
Home Equity 27,973 14.6% 26,857 14.3%
Installment 2,018 1.1% 2,046 1.1%
Overdrafts 531 0.3% 811 0.4%
Credit Card 260 0.1% 292 0.2%
Other 70 0.0% 170 0.1%
---------- ---------- ---------- ----------
Total Consumer Loans 54,972 28.7% 54,446 29.0%
---------- ---------- ---------- ----------
Total Loans 191,648 100.0% 187,530 100.0%
---------- ---------- ---------- ----------
Net Deferred Costs &
Unearned Discounts 524 537
Allowance for Loan Losses (2,731) (2,539)
---------- ----------
Loans, net $ 189,441 $ 185,528
========== ==========
14
Loan quality has remained stable with $1 thousand in charge offs and
$57 thousand in loan loss recoveries, incurred during he three months ended
March 31 2004. Non-performing loans, defined as accruing loans greater than 90
days past due and non-accrual loans, totaled 0.11% of total loans outstanding at
March 31, 2004 as compared to 0.49% at December 31, 2003. The decrease in
non-performing loans was due to one large commercial loan with a principal
balance at December 31, 2003 of $493 thousand being paid off in January 2004. No
loans were considered impaired at March 31, 2004. The allowance for loan losses
totaled $2.7 million or 1.42% of gross loans outstanding at March 31, 2004 as
compared to $2.5 million or 1.35% of gross loans outstanding at December 31,
2003.
The adequacy of the Company's allowance for loan losses is reviewed
quarterly with consideration given to loan concentrations, charge-off history,
delinquent loan percentages, and general economic conditions. Management
believes the allowance for loan losses is adequate to absorb credit losses from
existing loans.
The following table sets forth information regarding non-performing loans.
March 31, 2004 December 31, 2003
--------------- -----------------
($000) ($000)
Non-accruing loans:
One-to-four family $ - $ -
Home Equity - -
Commercial real estate and multifamily 175 256
Consumer - -
Commercial Business - 40
------ ------
Total $ 175 $ 296
------ ------
Accruing loans 90+ days past due 30 627
------ ------
Total non-performing loans $ 205 $ 923
====== ======
Total non-performing loans as a percentage
of total assets 0.05% 0.27%
====== ======
Total non-performing loans as a percentage
of total loans 0.11% 0.49%
====== ======
15
The following table sets forth information regarding the allowance for loan
losses for the three month periods ended March 31, 2004 and 2003.
Three Months Ended March 31,
2004 2003
---- ----
($000) ($000)
Beginning balance $ 2,539 $ 2,146
Total charge offs (1) -
Total recoveries 57 -
------- -------
Net recoveries 56 -
Provision for loan losses 136 120
------- -------
Ending balance $ 2,731 $ 2,266
======= =======
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
Balance at Balance at
3/31/2004 12/31/2003
Attributable to : Attributable to :
----------------- -----------------
($000) ($000)
Real Estate Loans $1,614 $1,619
Commercial Loans and Leases 370 384
Consumer Loans 143 147
All other loans 8 -
Unallocated 596 389
------ ------
Total $2,731 $2,539
====== ======
Investing Activities
The Company's securities portfolio increased by 28.1% to approximately
$154.4 million at March 31, 2004 as compared to approximately $120.6 million at
December 31, 2003. The growth in the securities portfolio of 28.1% for the three
months ended March 31, 2004 was due in part to the Company's utilization of an
advance from the Federal Home Loan Bank of New York to fund an investment
leverage strategy. Additionally, the success of attracting municipal deposits,
with Muni-Vest, has increased the excess funds available for investment not used
for lending. Muni-Vest is a product which pays higher money-market equivalent
rates of return to municipalities and school districts in markets where the Bank
operates. Available funds continue to be invested in US government and agency
securities and tax-advantaged bonds issued by New York State municipalities and
school districts. The Company monitors extension and prepayment risk in the
portfolio to limit potential exposures. Management believes the average expected
life of assets within the portfolio is 3.8 years as of March 31, 2004, as
compared to 3.9 years at December 31, 2003. Available-for-sale securities with a
total fair value of $144.5 million at March 31, 2004 were pledged as collateral
to secure public deposits and for other purposes required or permitted by law.
16
Funding Activities
Total deposits during the quarter increased 24.8% to $332.3 million at
March 31, 2004 from $266.3 million at December 31, 2003. Demand deposits
decreased 1.5% to $51.1 million at March 31, 2004. Regular savings deposits
increased to $168.1 million at March 31, 2004, reflecting a 59.2% or $62.5
million increase for the quarter, primarily due to the Bank's success in
attracting these municipal deposits with Muni-Vest. Typically, in the first
quarter of each year, the Bank experiences an influx of tax deposits from
municipalities which can be expected to decrease as they pay expenses as the
year progresses. As these deposits are drawn down throughout the year, the Bank
expects to supplement and offset the roll-off of those deposits with growth of
other core deposits. Core deposits (all deposits excluding time deposits greater
than $100,000) increased to $293.4 million, reflecting a 27.2% or $62.7 million
increase for the quarter. Demand deposits decreased 1.5%, regular savings
increased 59.2%, time deposits $100 thousand and over increased 9.2%, other time
accounts increased 1.7%, and securities sold under agreement to repurchase
increased 27.2% from December 31, 2003 all of which vary day to day within a
range based on customer transaction volume and represent normal deposit
activity.
17
ANALYSIS OF RESULTS OF OPERATIONS
Net Income
Net income was $1.2 million or $0.47 per share for the quarter ended
March 31, 2004 as compared to $1.1 million or $0.44 per share for the quarter
ended March 31, 2003. Net income represented a return on average assets of 1.33%
for the quarter ended March 31, 2004, compared to 1.37% for the same period in
2003. The return on average equity for the first quarter of 2004 was 13.54%,
compared to 13.82% for the first quarter of 2003.
Other Operating Results
Net interest income increased $0.3 million, or 11.6%, for the quarter
ended March 31, 2004, compared to the same time period in 2003. Total interest
income in the first quarter 2004 increased 5.3% and interest paid on deposits
and borrowings decreased 9.6% from the first quarter of 2003. Interest income
increased due to the $34.9 million, or 12.2% increase in average
interest-earning assets to $320.7 million for the first quarter of 2004 from
$285.8 million for the first quarter of 2003. The interest expense decrease
reflects the effect of interest rate reductions made by the Company since March
31, 2003 in spite of the offsetting $28.7 million, or 12.4% increase in average
interest-bearing liabilities to $260.5 million for the first quarter of 2004
from $231.8 million for the first quarter of 2003. The cost of interest-bearing
liabilities decreased to 1.58% for the quarter ended March 31, 2004 from 1.96%
for the quarter ended March 31, 2003. The Company's net interest margin on
earning assets, for the three month period ended March 31, 2004 was 3.74%, as
compared to 3.76% for the same time period in 2003. The Company anticipates
continuing pressures on its net interest margin will remain challenged in the
near term future as a result of the current low interest rate environment.
The provision for loan losses increased to $136 thousand for the first
quarter of 2004 from $120 thousand for the same time period in 2003. The higher
first quarter provision in 2004 was a result of continued commercial loan
growth. Commercial real estate loans tend to have a higher credit risk than
consumer loans.
Non-interest income increased 9.0% to $2.3 million for the first
quarter 2004 as compared to $2.1 million for the first quarter 2003. M&W Agency
insurance commissions represented the largest increase in the first quarter, a
30.1% or $0.3 million increase over the first quarter 2003, partially due to the
M&W acquisition of Tarbox Inc. located in Gowanda, New York, in the third
quarter of 2003, and the purchases in the first quarter 2004 of the Easy PA
Agency, Inc. and Ellwood Agency, Inc. insurance agencies, located in Hamburg,
New York, on January 2, 2004. Net gains on sales of securities decreased $0.1
million, or 42.6% for the first quarter 2004 as compared to the first quarter
2003.
Non-interest expense was $3.6 million for the first quarter 2004, an
increase of $0.3 million, or 9.8%, over the first quarter 2003. The primary
component of the increase of $0.3 million for the quarter was increased salary
and employee benefit expense related to Company growth and merit pay increases
paid in early 2004. Professional services expense for the quarter was $176
thousand, compared to $267 thousand for the first quarter of 2003. The larger
professional services expense in 2003 was primarily related to a project to
increase the Bank's fee income. Other miscellaneous expense increased by $103
thousand compared with the first quarter 2003, due to a number of items
including increased operating costs for the M&W Agency insurance operations
reflecting the two January agency acquisitions, as well as other
transaction-based expenses related to the increased size and volume in the
Bank's business.
Income tax expense totaled $388,000 and $320,000 for the three month
periods ended March 31, 2004 and 2003, respectively. The effective combined tax
rate for the first quarter of 2004 was 24.9% compared to 23.0% for the first
quarter of 2003. The increase in the effective tax rate is primarily
attributable to the increase in taxable investment income as a percentage of
total income.
CAPITAL
The Bank has consistently maintained regulatory capital ratios at, or
above, standards developed by regulatory agencies to be considered "well
capitalized". Total stockholders' equity was $34.3 million at March 31, 2004, up
from $33.3 million at December 31, 2003. This increase is primarily attributable
to the issuance of common stock with the total value of $723,750 related to the
purchase of Easy PA Agency and Ellwood Agency on January 2, 2004. Equity as a
percentage of assets was 8.6% at March 31, 2004, compared to 10.0% at December
31, 2003. Book value per common share rose to $13.87 at March 31, 2004, up from
$13.63 at December 31, 2003.
CAPITAL EXPENDITURES
The Bank has approved the construction and furnishing of a new branch
office in 2004. The cost to the Bank is expected to be approximately $0.6
million. The Bank has also signed a letter of intent to purchase a building in
Hamburg, New York, which will function as its administrative building, with
occupancy expected in 2004. The cost to the Bank is expected to be approximately
$1.0 million. The Bank intends to spend approximately an additional $0.5 million
to $0.8 million to ready the building for use and occupancy. Other planned
expenditures include replacing a number of personal computers, replacing/adding
automated teller machines (ATMs) and miscellaneous other equipment. The Bank
believes it has a sufficient capital base to support these capital expenditures
with current assets and retained earnings.
18
LIQUIDITY
The Bank utilizes cash flows from the investment portfolio and federal
funds sold balances to manage the liquidity requirements it experiences due to
loan demand and deposit fluctuations. The Bank also has many borrowing options.
As a member of the Federal Home Loan Bank ("FHLB"), the Bank is able to borrow
funds at competitive rates. Advances of up to $13.1 million can be drawn on the
FHLB via the Overnight Line of Credit Agreement. An amount equal to 25% of the
Bank's total assets could be borrowed through the advance programs under certain
qualifying circumstances. The Bank also has the ability to purchase up to $7
million in federal funds from one of its correspondent banks. By placing
sufficient collateral in safekeeping at the Federal Reserve Bank, the Bank could
also borrow at the discount window. Additionally, the Bank has access to capital
markets as a funding source.
The cash flows from the investment portfolio are laddered, so that
securities mature at regular intervals, to provide funds from principal and
interest payments at various times as liquidity needs may arise. Contractual
maturities are also laddered, with consideration as to the volatility of market
prices, so that securities are available for sale from time-to-time without the
need to incur significant losses. At March 31, 2004, approximately 2.1% of the
Bank's securities had maturity dates of one year or less and approximately 16.3%
had maturity dates of five years or less. Available assets of $177.8 million,
less public and purchased funds of $166.1 million, resulted in a long-term
liquidity ratio of 107% at March 31, 2004, versus 123% at December 31, 2003. The
decrease is due to the large increase in municipal deposits over the three month
period ended March 31, 2004.
Liquidity needs can also be met by more aggressively pursuing municipal
deposits, which are normally awarded on the basis of competitive bidding. The
Bank maintains a sufficient level of US government and government agency
securities and New York State municipal bonds that can be pledged as collateral
for these deposits.
19
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Additional information called for by this item is contained in the
Liquidity section of Management's Discussion and Analysis of Financial
Condition and Results of Operation.
Market risk is the risk of loss from adverse changes in market prices
and/or interest rates of the Bank's financial instruments. The Primary market
risk the Company is exposed to is interest rate risk. The core banking
activities of lending and deposit-taking expose the Bank to interest rate risk,
which occurs when assets and liabilities reprice at different times and by
different amounts as interest rates change. As a result, net interest income
earned by the Bank is subject to the effects of changing interest rates. The
Bank measures interest rate risk by calculating the variability of net interest
income in the future periods under various interest rate scenarios using
projected balances for interest-earning assets and interest-bearing liabilities.
Management's philosophy toward interest rate risk management is to limit the
variability of net interest income. The balances of financial instruments used
in the projections are based on expected growth from forecasted business
opportunities, anticipated prepayments of loans and investment securities and
expected maturities of investment securities, loans and deposits. Management
supplements the modeling technique described above with analysis of market
values of the Bank's financial instruments and changes to such market values
given changes in the interest rates.
The Bank's Asset Liability Committee, which includes members of senior
management, monitors the Bank's interest rate sensitivity with the aid of a
computer model that considers the impact of ongoing lending and deposit
gathering activities, as well as interrelationships in the magnitude and timing
of the repricing of financial instruments, including the effect of changing
interest rates on expected prepayments and maturities. When deemed prudent,
management has taken actions, and intends to do so in the future, to mitigate
exposure to interest rate risk through the use of on - or off-balance sheet
financial instruments. Possible actions include, but are not limited to changes
in the pricing of loan and deposit products, and modifying the composition of
interest-earning assets and interest-bearing liabilities, and other financial
instruments used for interest rate risk management purposes.
The following table demonstrates the possible impact of changes in
interest rates on the Bank's net interest income:
SENSITIVITY OF NET INTEREST INCOME
TO CHANGES IN INTEREST RATES
Calculated increase (decrease)
in projected annual net interest income
($000) ($000)
Changes in interest rates March 31, 2004 December 31, 2003
-------------- -----------------
+200 basis points (332) 515
- -200 basis points (1,462) (1,390)
Many assumptions were utilized by the Bank to calculate the impact that
changes in interest rates may have on net interest income. The more significant
assumptions related to the rate of prepayments of mortgage-related assets, loan
and deposit volumes and pricing, and deposit maturities. The Bank assumed
immediate changes in rates including 100 and 200 basis point rate changes. In
the event that 100 or 200 basis point rate changes cannot be achieved, the
applicable rate changes are limited to lesser amounts such that interest rates
cannot be less than zero. These assumptions are inherently uncertain and, as a
result, the Bank cannot precisely predict the impact of changes in interest
rates on net interest income. Actual results may differ significantly due to the
timing, magnitude, and frequency of interest rate changes in market conditions
and interest rate differentials (spreads) between maturity/repricing categories,
as well as any actions, such as those previously described, which management may
take to counter such changes. In light of the uncertainties and assumptions
associated with the process, the amounts presented in the table and changes in
such amounts are not considered significant to the Bank's projected net interest
income.
20
ITEM 4 - CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Treasurer have concluded that
the Company's disclosure controls and procedures (as defined in Exchange Act
Rule 13a-15(e)) are sufficiently effective to ensure that the information
required to be disclosed by the Company in the reports it files under the
Exchange Act is gathered, analyzed and disclosed with adequate timeliness,
accuracy and completeness, based on an evaluation of such controls and
procedures conducted within 90 days prior to the date hereof.
CHANGES IN INTERNAL CONTROLS
There were no changes in the Company's internal controls that occurred
in the last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, these controls.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings - None to report
ITEM 2. Changes in Securities , Use of Proceeds and Issuer Purchases of Equity
Securities
On January 2, 2004, the Company issued 31,942 shares of its common stock to the
shareholders of Easy PA Agency, Inc., and Ellwood Agency, Inc. in connection
with the acquisition of substantially all of the assets of Easy PA Agency, Inc.,
and Ellwood Agency, Inc. The shares had an aggregate value of $723,750 at the
time of issuance, based upon the average closing price for the ten trading days
during the period beginning 15 days and ending 5 days prior to the closing of
the transaction. The shares were issued in reliance upon an exemption from
registration under Regulation D of the Securities Act of 1933, as amended.
The following table includes all issuer repurchases, including those made
pursuant to publicly announced plans or programs.
MAXIMUM NUMBER (OR
TOTAL NUMBER OF SHARES APPROPRIATE DOLLAR VALUE) OF
PURCHASED AS PART OF SHARES THAT MAY YET BE
TOTAL NUMBER OF AVERAGE PRICE PUBLICLY ANNOUNCED PLANS PURCHASED UNDER THE PLANS OR
PERIOD SHARES PURCHASED PAID PER SHARE OR PROGRAMS PROGRAMS
- ------------------------------------------------------------------------------------------------------------------------
January, 2004 (January
1, 2004 through January
31, 2004 - - - 50,000
- ------------------------------------------------------------------------------------------------------------------------
February, 2004
(February 1, 2004
through February
29, 2004) - - - 50,000
- ------------------------------------------------------------------------------------------------------------------------
March, 2004 (March
1, 2004
through March
31, 2004) 5,400 $24.86 5,400 44,600
- ------------------------------------------------------------------------------------------------------------------------
All of the foregoing shares were purchased in open market transactions. On
October 22, 2003, the Company announced that its Board of Directors had
authorized the purchase of up to 50,000 shares of the Company's common stock
over a two year period. There were no other publicly announced plans outstanding
as of March 31, 2004.
ITEM 3. Defaults upon Senior Securities - None to report
ITEM 4. Submission of Matters To a Vote of Security Holders - None to report
ITEM 5. Other Information - None to report
21
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Name Page No.
31.1 Certification of the Principal Executive Officer pursuant to section 302 of 21
The Sarbanes-Oxley Act of 2002.
31.2 Certification of the Principal Financial Officer pursuant to section 302 of 23
The Sarbanes-Oxley Act of 2002.
32.1 Certification of the Principal Executive Officer pursuant to 18 USC Section 25
1350 Chapter 63 of Title 18, United States Code, as adopted pursuant to
Section 906 of The Sarbanes -Oxley Act of 2002
32.2 Certification of the Principal Financial Officer pursuant to 18 USC Section 27
1350 Chapter 63 of Title 18, United States Code, as adopted pursuant to
Section 906 of The Sarbanes -Oxley Act of 2002
(b) Reports on Form 8-K :
The registrant filed a form 8-K on January 27, 2004 to report under
Item 7 and Item 12. The report included a press release setting forth
results of operations and financial conditions for the fourth quarter
2003.
The registrant filed a Form 8-K on February 18, 2004 to report under
Item 9. The report included a press release announcing the semi-annual
dividend of $0.33 per common share.
The registrant filed a Form 8-K/A on February 27, 2004 under Item 7 and
Item 12. The report included a press release correcting its January 27,
2004 earnings press release.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
Evans Bancorp, Inc.
DATE
April 27, 2004 /s/James Tilley
--------------
James Tilley
President and CEO
DATE
April 27, 2004 /s/Mark DeBacker
---------------
Mark DeBacker
Treasurer