Evans Bancorp, Inc.

Greetings and welcome to the Evans Bank Corp third quarter fiscal year 2022 financial results. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded. I'd now like to introduce your host, Deborah Pawlowski. Please proceed, ma'am.

Good afternoon, everyone. We certainly appreciate your taking the time today to join us, as well as your interest in Evans Bank Corp. On the call, I have with me here David Naska, our President and CEO, and John Connerton, our Chief Financial Officer. David and John are going to review the results for a third quarter of 2022 and provide an update on the company's strategic progress and outlook. After that, we will open the call for questions. You should have a copy of the financial results that were released today after markets closed. If not, you can access them on our website at www.evansbank.com. As you are aware, we may make some forward-looking statements During the formal discussion, as well as during the Q&A, these statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ from what is stated on today's call. These risks and uncertainties and other factors are provided in the earnings release, as well as with other documents filed by the company with Securities and Exchange Commission. You can find those documents on our website or at sec.gov. So with that, let me turn it over to David to begin. David?

Thank you, Debbie. Good afternoon, everyone. We appreciate you joining us for disclosure of our results today. I will start with an overview of the past quarter and then hand it off to John to discuss the details. Our third quarter results were solid with $25 million of revenue, a strengthened net interest margin, lower efficiency ratio, and further improvement within our hotel portfolio. We delivered quarterly earnings of $5.9 million, which was up from the second quarter. On a year-over-year basis, earnings reflected the impact of a single charged-off credit from a declination on a government-guaranteed loan that resulted in a higher-than-typical provision during the quarter. We believe that credit was unique and not indicative of our portfolio, other government-guaranteed loans, or our long-standing credit discipline. John will provide more detail. In October, we continued to increase returns to shareholders with a semiannual cash dividend of $0.64 per common share or a 3.5% annualized return. For the year, dividends totaled $1.26, which was up 5% over 2021. Overall, lending performance has been somewhat encouraging considering current headwinds and higher rates that have slowed commercial real estate activity. Importantly, Commercial industrial lending has been more robust and resilient in these challenging economic conditions and is responsible for a strong pipeline. As we have discussed for several quarters, due to the impacts of the pandemic, during 2020, the bank classified the entire hotel portfolio as criticized in recognition of increased risk. We have been working with and supporting these clients and closely monitoring their progress. As of the end of the most recent quarter, we have now had more than half of the portfolio upgraded or paid off, leaving just $38 million in criticized status. While trends for this industry have improved given released travel restrictions and improvements in tourism and business travel, the bank is looking to assure sustained performance on these remaining credits before upgrading. On the community front, We are working in a public-private partnership with the City of Buffalo, the Buffalo Erie Niagara Land Development Corporation, aka the Land Bank, a local developer, and a minority and women-owned realtor firm to rebuild a neighborhood by constructing and marketing up to 10 single-family homes in an underserved area within the City of Buffalo. Evans is providing the financing for the construction of the homes and will assist with mortgages for prospective new owners. The infill housing initiative is located in an area near the Westminster Commons where Evans has a new branch and invested over $30 million in affordable housing units, a homeless shelter, a charter school, and a fresh food grocery store. This innovative initiative is one that we hope will be a model to be replicated elsewhere within underserved neighborhoods in the city of Buffalo. Internally, as part of our operational effectiveness strategy, we have spent a good deal of effort focused on refining initiatives to build out more back office and customer facing solutions centered on speed, flexibility, and efficiency. We recently completed an upgrade to our core operating system to provide new security features and processing efficiencies in the branches. We also kicked off a large commercial efficiency project which will touch all areas of commercial lending, including loan application, underwriting, booking, and servicing. We plan to utilize enhanced current loan origination systems and are bringing in some new technology solutions with enhanced work streams in order to facilitate commercial production and documentation in a scalable, integrated, digital, and streamlined workflow with better controls and an enhanced client experience. In total, we expect to invest about $1 million in the project over a 12-month period, with savings to be recognized in later 2023 and beyond. We believe that driving greater operational efficiency and improvement around client engagement can help us enhance and scale returns over the long term. Another area of focus for 2023 is within our non-interest income categories. The competitive landscape and regulatory environment have brought to the forefront changes to overdraft fees in terms of how they are handled and assessed and at what levels. We estimate these efforts, while favorable for consumers, will have a negative impact to our service charge income of approximately $500,000 annually. There are a number of efforts to help counter and bolster our fee income, the most important of which is our insurance business. While we are entering a hardening market with higher premiums that equate to higher commissions, we are also winning new business, especially within public entity clients such as government services and in particular school districts. You can see the early success of our efforts in the growth of our insurance business this past quarter. While we remain positive on our local economy, We believe our strong and diversified portfolio positions us well to continue to serve our clients and communities through a range of economic environments such as we prospectively face. With that, I'll turn it over to John to run through our results, and then we'll be happy to take any questions. John?