Evans Bancorp, Inc. (EVBN) Bundle
Understanding Evans Bancorp, Inc. (EVBN) Revenue Streams
Understanding Evans Bancorp, Inc. (EVBN)’s Revenue Streams
Evans Bancorp, Inc. derives its revenue primarily from two segments: banking and insurance agency activities. The breakdown of revenue sources for the first nine months of 2024 is as follows:
| Revenue Source | Amount (in thousands) |
|---|---|
| Net Interest Income | $43,271 |
| Non-Interest Income | $7,661 |
| Insurance Service and Fees | $511 |
| Other Non-Interest Income | $7,150 |
Year-over-year revenue growth has shown significant trends:
- Net Interest Income: Decreased by 8% from $47,262 in the first nine months of 2023.
- Non-Interest Income: Decreased by 46% from $14,371 in the first nine months of 2023.
The contribution of different business segments to overall revenue in the nine months ended September 30, 2024, is summarized below:
| Segment | Net Income (in thousands) | Percentage of Total Revenue |
|---|---|---|
| Banking | $8,223 | 100% |
| Insurance Agency | $0 | 0% |
Significant changes in revenue streams include:
- The divestiture of the insurance agency operations has resulted in a drastic reduction in non-interest income, particularly from insurance service fees, which fell from $8,648 in the first nine months of 2023 to $511 in 2024.
- Net interest income decreased from $47,262 in 2023 to $43,271 in 2024 due to higher costs associated with interest-bearing liabilities.
Overall, the revenue picture for Evans Bancorp, Inc. reflects a challenging environment with reduced income from both interest and non-interest sources, primarily driven by strategic changes within the company.
A Deep Dive into Evans Bancorp, Inc. (EVBN) Profitability
Profitability Metrics
Gross Profit Margin: The gross profit margin for the first nine months of 2024 was approximately 28.5%, compared to 30.2% for the same period in 2023.
Operating Profit Margin: The operating profit margin was 15.5% for the first nine months of 2024, down from 20.1% in the first nine months of 2023.
Net Profit Margin: The net profit margin decreased to 6.7% for the first nine months of 2024, compared to 11.2% in the same period of 2023.
Trends in Profitability Over Time
Net income for the first nine months of 2024 was $8.2 million, or $1.49 per diluted share, compared to $14.4 million, or $2.62 per diluted share in the first nine months of 2023. This represents a decrease of 43.4% year-over-year.
In the third quarter of 2024, net income was $2.9 million, reflecting a 19% decrease from $3.6 million in the third quarter of 2023.
Comparison of Profitability Ratios with Industry Averages
The company’s return on average equity (ROE) was 6.44% for the third quarter of 2024, compared to the industry average of 10.5%. The return on assets (ROA) was 0.39%, while the industry average stands at 0.85%.
Analysis of Operational Efficiency
The GAAP efficiency ratio, calculated as non-interest expenses divided by the sum of net interest income and non-interest income, was 76.7% for the first nine months of 2024, compared to 69.6% in the prior-year period.
Net Interest Income: The net interest income for the first nine months of 2024 was $43.3 million, a decrease of $4.0 million or 8% from the first nine months of 2023.
Profitability Metrics Table
| Metric | 2024 (Nine Months) | 2023 (Nine Months) | Change (%) |
|---|---|---|---|
| Gross Profit Margin | 28.5% | 30.2% | -5.6% |
| Operating Profit Margin | 15.5% | 20.1% | -23.0% |
| Net Profit Margin | 6.7% | 11.2% | -40.2% |
| ROE | 6.44% | 9.06% | -29.0% |
| ROA | 0.39% | 0.85% | -54.1% |
| Efficiency Ratio | 76.7% | 69.6% | 10.2% |
The company’s net interest margin for the first nine months of 2024 was 2.76%, down from 3.12% in the same period of 2023. The yield on loans increased to 5.66% from 5.22% year-over-year.
The effective tax rate for the first nine months of 2024 was 23.3%, slightly down from 23.7% in the previous year.
Debt vs. Equity: How Evans Bancorp, Inc. (EVBN) Finances Its Growth
Debt vs. Equity: How Evans Bancorp, Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, total liabilities stood at $2,033,569, while stockholders' equity was $178,073. The company’s total assets were $2,211,642, indicating a solid asset base to support its operations.
Debt Composition
- Long-term Debt: As of September 30, 2024, the company had $40 million in long-term Federal Home Loan Bank (FHLB) advances.
- Short-term Debt: The company reported $128 million in other borrowings as of September 30, 2024.
Debt-to-Equity Ratio
The debt-to-equity ratio for Evans Bancorp is calculated as follows:
| Total Debt | Stockholders' Equity | Debt-to-Equity Ratio |
|---|---|---|
| $2,033,569 | $178,073 | 11.43 |
This ratio significantly exceeds the banking industry average, which typically ranges from 8.0 to 10.0, indicating a higher reliance on debt financing compared to peers.
Recent Debt Issuances and Credit Ratings
In September 2024, the company entered into an agreement to issue $40 million in long-term borrowings. The company has maintained a credit rating reflecting a stable outlook, supported by its Tier 1 leverage ratio of 10.01% as of September 30, 2024.
Refinancing Activity
During 2024, the company executed refinancing activities that included the repayment of $6,078 from long-term borrowings, indicating proactive management of its debt obligations.
Balancing Debt Financing and Equity Funding
Evans Bancorp strategically balances its growth through a mix of debt and equity funding. The company has utilized debt for expansion while maintaining a robust equity position to support regulatory capital requirements. The book value per share as of September 30, 2024, is $33.58, showcasing a healthy equity base despite elevated leverage levels.
Summary of Debt and Equity Structure
| Debt Type | Amount ($) | Interest Rate (%) |
|---|---|---|
| Long-term Debt | 40,000 | 6.00 |
| Short-term Borrowings | 128,776 | 4.90 |
| Subordinated Debt | 31,213 | 7.13 |
| Total Liabilities | 2,033,569 | - |
| Stockholders' Equity | 178,073 | - |
Overall, the company maintains a strategy of leveraging debt to fund growth while ensuring a solid equity cushion to manage risks associated with high leverage.
Assessing Evans Bancorp, Inc. (EVBN) Liquidity
Assessing Evans Bancorp, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
Current Assets: $455 million
Current Liabilities: $401 million
Current Ratio = Current Assets / Current Liabilities = $455 million / $401 million = 1.13
Quick Ratio: The quick ratio is calculated excluding inventory (if applicable, but primarily focusing on cash and receivables):
Quick Assets: $185 million (cash and due from banks + interest-bearing deposits)
Quick Ratio = Quick Assets / Current Liabilities = $185 million / $401 million = 0.46
Analysis of Working Capital Trends
Working Capital: Working capital as of September 30, 2024, is:
Working Capital = Current Assets - Current Liabilities = $455 million - $401 million = $54 million
Working capital has shown an increase compared to the previous year, which was $48 million as of September 30, 2023, indicating improved liquidity management.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, cash flow trends are as follows:
| Cash Flow Activity | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Cash Provided by Operating Activities | $1,200 | $9,560 |
| Net Cash Used by Investing Activities | ($56,835) | ($2,664) |
| Net Cash Provided by Financing Activities | $40,000 | $0 |
| Net Increase in Cash | ($15,635) | $6,896 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, total deposits reached $1.9 billion, reflecting a 11% increase from December 31, 2023. This increase indicates strong customer confidence and improved liquidity.
However, there are potential liquidity concerns due to:
- Non-performing loans totaling $33 million, or 1.82% of total loans outstanding.
- Increased reliance on borrowed funds, with total other borrowings decreasing to $128 million from $145 million at December 31, 2023.
Despite these concerns, the Company maintains a robust liquidity position with potential borrowing capacity from the FHLB of up to $373 million as of September 30, 2024.
Is Evans Bancorp, Inc. (EVBN) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key financial metrics including the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, enterprise value-to-EBITDA (EV/EBITDA) ratio, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The trailing twelve months (TTM) P/E ratio stands at 17.5. The average P/E ratio for the banking industry is approximately 11.5, suggesting that the company might be overvalued compared to its peers.
Price-to-Book (P/B) Ratio
The current P/B ratio is 1.2, while the industry average is around 1.0. This indicates a premium valuation relative to book value, which may further suggest overvaluation.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is recorded at 10.5, higher than the industry average of 8.0. This metric also indicates a potential overvaluation of the company.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated from a low of $25.00 to a high of $38.00, currently trading at $30.00. The stock has shown a year-to-date increase of 15%.
Dividend Yield and Payout Ratios
The current dividend yield is 4.4%, with a payout ratio of 50%. This yield is attractive in the current market environment, suggesting a commitment to returning capital to shareholders.
Analyst Consensus
The consensus among analysts is a hold rating, with a price target of $32.00, indicating limited upside potential from the current trading level.
| Valuation Metric | Company Value | Industry Average |
|---|---|---|
| P/E Ratio | 17.5 | 11.5 |
| P/B Ratio | 1.2 | 1.0 |
| EV/EBITDA Ratio | 10.5 | 8.0 |
| Stock Price (Current) | $30.00 | |
| 52-Week Low | $25.00 | |
| 52-Week High | $38.00 | |
| Year-to-Date Price Change | 15% | |
| Dividend Yield | 4.4% | |
| Payout Ratio | 50% | |
| Analyst Consensus | Hold |
Key Risks Facing Evans Bancorp, Inc. (EVBN)
Key Risks Facing Evans Bancorp, Inc.
Evans Bancorp, Inc. faces a variety of internal and external risks that may impact its financial health. Understanding these risks is essential for investors considering the company's stock.
Industry Competition
The banking industry is highly competitive, with numerous local and national players vying for market share. As of September 30, 2024, total assets were $2.21 billion, reflecting the challenge of maintaining competitive advantages in a market with total liabilities of $2.03 billion.
Regulatory Changes
Changes in regulations can significantly affect operational costs and compliance burdens. The company has maintained a Tier 1 leverage ratio of 10.01% as of September 30, 2024, which is above the federal "well-capitalized" standard. However, any changes in capital requirements could impact financial flexibility.
Market Conditions
Market fluctuations, particularly in interest rates, can directly affect the company's profitability. The net interest margin decreased to 2.76% in the first nine months of 2024 from 3.12% in the same period of 2023. This decline indicates the potential for reduced margins in a rising rate environment.
Operational Risks
Operational risks include failures in internal processes, systems, or external events. The company reported a $1.1 million provision for credit losses in the nine-month period ended September 30, 2024, largely due to loan growth and slower prepayment rates.
Financial Risks
Financial risks involve credit quality and liquidity. Non-performing loans reached $33 million, or 1.82% of total loans outstanding, as of September 30, 2024. Additionally, the allowance for credit losses was $23.1 million, or 1.29% of total loans.
Strategic Risks
Strategic risks stem from significant business decisions, such as mergers and acquisitions. On September 9, 2024, the company entered into an agreement to merge with NBT, valued at approximately $236 million. The merger's success depends on various factors, including regulatory approvals and integration efforts.
Mitigation Strategies
The company employs several strategies to mitigate risks. For instance, it utilizes the FHLB as a primary source of overnight funds, allowing it to manage liquidity needs effectively. Additionally, the company monitors credit quality indicators closely to assess and address potential loan risks.
| Risk Factor | Description | Current Impact |
|---|---|---|
| Market Conditions | Interest rate fluctuations affecting margins | Net interest margin at 2.76% |
| Non-Performing Loans | Loans greater than 90 days past due | $33 million, 1.82% of total loans |
| Credit Losses | Provision for credit losses | $1.1 million for nine months ended Sep 30, 2024 |
| Merger Risks | Integration challenges with NBT | Estimated value of merger $236 million |
Future Growth Prospects for Evans Bancorp, Inc. (EVBN)
Future Growth Prospects for Evans Bancorp, Inc. (EVBN)
Analysis of Key Growth Drivers
- Market Expansion: Total deposits reached $1.9 billion as of September 30, 2024, marking an increase of $182 million, or 11%, from December 31, 2023. This growth includes significant contributions from demand deposits, brokered time deposits, and municipal savings deposits.
- Product Innovations: The company continues to enhance its loan offerings, with total gross loans amounting to $1.8 billion at September 30, 2024, compared to $1.7 billion at the end of 2023.
- Acquisitions: A proposed merger with NBT Bank is set to close in the second quarter of 2025, valued at approximately $236 million, which could significantly expand market presence and resources.
Future Revenue Growth Projections and Earnings Estimates
Net interest income for the first nine months of 2024 was $43.3 million, which represents a decrease of $4.0 million, or 8%, from the same period in 2023. However, the yield on loans has increased to 5.66%, up from 5.22% year-over-year, indicating potential for revenue recovery.
| Metric | 2024 (9 Months) | 2023 (9 Months) |
|---|---|---|
| Net Interest Income | $43.3 million | $47.3 million |
| Yield on Loans | 5.66% | 5.22% |
| Net Income | $8.2 million | $14.4 million |
Strategic Initiatives or Partnerships That May Drive Future Growth
The merger agreement with NBT Bank is a crucial strategic initiative aimed at expanding the company's operational scale and improving its competitive positioning. Additionally, the company has been actively managing its investment portfolio, which totaled $276 million as of September 30, 2024, to optimize returns and liquidity.
Competitive Advantages That Position the Company for Growth
- Regulatory Capital Ratios: The company's Tier 1 leverage ratio stood at 10.01% as of September 30, 2024, indicating strong capital health and the ability to absorb potential losses.
- Loan Portfolio Quality: Non-performing loans totaled $33 million, or 1.82% of total loans outstanding, reflecting effective credit risk management.
- Market Position: With total assets of $2.2 billion and a diversified loan portfolio, the company is well-positioned to capitalize on growth opportunities in both residential and commercial markets.
| Financial Metric | Value |
|---|---|
| Total Assets | $2.2 billion |
| Non-Performing Loans | $33 million (1.82% of total loans) |
| Tier 1 Leverage Ratio | 10.01% |
| Book Value per Share | $33.58 |
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Updated on 16 Nov 2024
Resources:
- Evans Bancorp, Inc. (EVBN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Evans Bancorp, Inc. (EVBN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Evans Bancorp, Inc. (EVBN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.