Evans Bancorp, Inc.

Greetings. Welcome to the Evans Bancorp fourth quarter fiscal year 2022 financial results. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I'll now turn the conference over to your host, Craig Mahalik. You may begin.

Thank you, and good afternoon, everyone. Certainly appreciate you taking the time to join us. as well as your interest in Evans Bancorp. 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 the fourth quarter and full year of 2022 and provide an update on the company's strategic progress and outlook. After that, we'll 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 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 the Securities and Exchange Commission. Please find those documents on our website or at the scc.gov. So with that, let me turn it over to David to begin. David.

Thank you, Craig. Good afternoon, everyone. We appreciate you joining us today. I'll start with a review of the past year and then hand it off to John to discuss our results in detail. I'm once again proud to report on the outstanding efforts and responsiveness of our teams in successfully adapting to rapidly shifting economic conditions and environments during 2022. Evans delivered solid fourth quarter results with $6 million in net income, and 14% annualized commercial loan growth, which added to strong performance for the full year of $22.4 million and 9% commercial loan growth ex-PPP loans. These results approach prior year record earnings despite a significant swing in our provision for loan losses and having to replace nearly $9 million in fee income received in 2021 from extensive participation in the Paycheck Protection Program. As you know, the economy opened 2022 with tremendous liquidity from government stimulus, remaining at financial institutions, and very little opportunity to invest this liquidity in the extremely low interest rate environment. Given inflationary pressures and macroeconomic challenges from ramping supply inputs, such as labor, oil, building supplies, and housing, as well as the Russian invasion of Ukraine, The Fed embarked on an historic level of interest rate tightening that raised short-term interest rates 425 basis points in seven actions taken from March to December. This unprecedented level of tightening resulted in an inverted yield curve, which has historically indicated potential recession. Margins expanded as rates for loans increased, and deposit costs stayed modest until late in the third quarter. At that point, Competitive options mirrored rate increases and money began to flow to alternative investments such as U.S. Treasuries and higher rate deposits, putting pressure on banks to match or lose funding. On the asset side of the balance sheet, loan yields rose and outstripped the levels of deposit increases for a couple of quarters until interest rates reached a level that challenged CRE projects and residential mortgages. Overall, the bank successfully weathered and performed in this environment by delivering record commercial loan originations of $95 million ex-PPP at significantly improved rates, driving the yield on earning assets for the loan portfolio to 4.88%. In relation to non-interest income, it was a solid year in our insurance business with 6% commercial insurance growth and 2% personal lines growth. offsetting the loss of revenue from the discontinued operations of our insurance claim service business. We saw strong account retention, price hardening, and a good level of new business attraction. While we continued to make investments in strategic focus areas, we also worked hard throughout the year to pursue efficiencies and deliver disciplined expense management to enhance returns. This included further utilization of technology, to refine back office processes along with greater customer facing solutions centered on speed, flexibility, and efficiency. We completed our branch optimization project in the third quarter, which included consolidating two branches in the southern area of our footprint, closing a branch in Rochester, and converting a downtown Buffalo location to a loan production office. The anticipated employee savings were realized through normal attrition, The merger of the two branches has been very successful with excellent morale amongst the team as the combined larger branch is more efficient. Importantly, there has been no material customer defection as a result of these changes. Additionally, we have received a purchase offer for the closed location in Derby. The net result of our efforts can be seen in the efficiency ratio, which was 62.9% in the fourth quarter, which is our lowest level in more than 10 years. This past year was also our largest yet on the philanthropy side, as we made $400,000 in total charitable contributions. This included $100,000 to the Buffalo Together 514 Community Response Fund, established in collaboration with local funding organizations, 100 local and national foundations and corporations, and over 2,000 community members after the mass killing of 10 innocent people in a racist attack in East Buffalo. The fund was created to address systemic and structural issues related to racism and a lack of investment that harmed communities of color. Of our total contributions last year, nearly 80% was directed towards underserved communities and organizations serving low and moderate income residents. Another area of focus and where strides were made this past year were our efforts and commitment towards inclusion, diversity, equity, and awareness. The bank appointed a Chief Diversity, Inclusion, and Community Development Officer responsible for driving the overall development, implementation, and communication of our inclusive strategic plan. Overall, a 13% increase in ethnic minority associates was realized through concentrated recruitment efforts. As part of our inclusive culture, we continue to achieve pay parity between genders for those who identify as male or female and across race and ethnic backgrounds. We have also been successful expanding our supplier diversity program to ensure that minority and women-owned businesses were bidding on and securing business from Evans and are ahead of our five-year goals in all initiatives. The bank has continued to focus on its return of capital to shareholders and total shareholder return. For the year, dividends totaled $1.26, which was up 5% over 2021 and equated to a yield of 3.2%. As we enter 2023, the focus will continue to be on loan growth, customer acquisition, and relationship management, along with optimizing operational efficiency and expense management to deliver returns. This will play out against expected headwinds of margin pressure caused by rising interest rates and pricing competition and potential recessionary effects impacting the economy and our customers. We believe our value lies in our community-based, customer-centric model, which allows us to support, serve, and grow our customer base in all economic environments. With that, I'll turn it over to John to run through our results in detail, and then we'll be happy to take any questions. John? Thank you, David, and good afternoon, everyone.