Earnings call: Evans Bancorp reports mixed Q3 results, anticipates net interest margin compression

Evans Bancorp (NYSE:) has reported mixed yet generally positive financial outcomes for the third quarter of fiscal year 2023. Despite industry challenges and a reversal of interest income on a large credit client, the company experienced favorable credit trends and an 8% annualized loan growth. However, Evans Bancorp anticipates further compression in the net interest margin (NIM) in the upcoming quarter, with potential moderation in 2024.

Key takeaways from the earnings call include:

• The company faced industry headwinds, particularly related to the cost of deposits, impacting the industry margin.
• Despite these challenges, credit trends remained favorable, and the firm reported an 8% annualized loan growth.
• Evans Bancorp is implementing cost control measures in response to market conditions and pricing pressures.
• The company anticipates a 15-20 basis point compression in NIM in the fourth quarter of 2023, with potential moderation in 2024.
• There are no significant investments anticipated for 2024, and the company expects its expense run rate to decrease by 3%.
• The tax rate for the full year is projected to be 23%.
• The corrected earnings per diluted share stand at $0.66.
• Loan growth is expected to be in low single digits, with yields typically above 7.5%.
• The company is exploring restructuring options to improve NIM and create shareholder value.

Evans Bancorp (NASDAQ:EVBN) also discussed the unwinding of accrued interest in their receivable account during the earnings call. The interest was reported to be well secured, and the company does not anticipate the need for further reserves or write-offs.

The company is actively considering all options for creating value for shareholders, including long-term strategic moves. The loan pipeline for the company is valued at $67 million, and they project low single-digit net loan growth with yields typically above 7.5%.

The earnings call concluded with management expressing their anticipation for reporting fourth-quarter results in 2023. The company’s forward-looking approach, despite industry headwinds, reflects its commitment to managing costs and creating shareholder value.

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