Evans Bancorp, Inc.

Greetings and welcome to the Evans Bank Corp's fourth quarter fiscal year 2023 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 zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Debra Pawlowski, Investor Relations for Evans Bancorp. Thank you, Debra. You may begin.

Thank you, Alicia, and good afternoon, everyone. We appreciate your taking the time to join us today as well as your interest in Evans Bancorp. Joining me here are David Naska, our President CEO, and John Connerton, our Chief Financial Officer. David and John are going to review the results for the fourth quarter of 2023 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 the markets closed, and if not, you can access them on our website at evansbank.com. As you may be 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 materially 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. Please find those documents on our website or at sec.gov. So with that, let me turn it over to David to begin.

Thank you, Debbie, and good afternoon, everyone. We appreciate you joining us today. I will start with a review of the highlights from the past year, including the strategic initiatives we completed in the fourth quarter, and we'll then hand it off to John to discuss our results in detail. 2023 was a year that can be characterized as one of resilience. With a backdrop of interest rate volatility and economic challenges that accelerated throughout the year, the entire Evans team continued to deliver results. Net income was constrained by margin pressure due to the acceleration of funding costs, which rose faster than asset yields as banks responded to the steepest Federal Reserve increase in rates in decades and fought to maintain liquidity during a time of industry concern. We believe we manage this unique environment well by retaining key relationships, deposits, and our liquidity position. In addition, growth, while difficult to come by, was attained through our commercial business development and lending activity. The bank instituted CECL at the beginning of 2023, which provided increased allowance for credit losses of $2.7 million. Our credit trends have remained favorable as we experienced continued improvement in criticized assets and low charge-offs this past year. Combined with improved economic conditions, we saw a muted provision impact in 2023. During the year, we continued proactive measures to control costs, deliver efficiencies and scalability, and improve the overall customer experience with new technology and process improvements. Of note, total non-interest expense for the year decreased about $550,000, or 1%, which reflected our branch rationalization earlier in the year as well as other initiatives which was which were partially offset by investments in technology and the community the bank has maintained focus on return of capital to shareholders and total shareholder returns for the year dividends totaled 1.32 cents per share which was up five percent and equated to a yield of about 4.3 percent turning to the strategic actions taken during the fourth quarter For more than 20 years, insurance had been an integral part of Evans Bank. Ultimately, we built a successful business that was highly valued. On November 30th of 2023, the company finalized the sale of the Evans Agency to Arthur J. Gallagher and Company for $40 million. A question could be, why did we sell? Growth in insurance required additional investments and acquisitions have become increasingly competitive based on how big insurance companies value assets and how they are financing them. We completed a significant amount of research and validated the opportunity that existed for a sale along with exercising what we felt was a fiduciary responsibility to realize the value created. The decision was also driven in part by recognition that the Evans agency could realize greater opportunity for success and sustainability integrated with one of the top insurance and benefits companies in the world. AJ Gallagher is a growth focused insurance first company with broader scope and scale to provide optimal benefits for all stakeholders. Of the objectives for the deal, a key one was to ensure a good home for our associates and clients. There were no job eliminations, and current leadership and the 60-plus direct employees of the agency were all offered positions with Gallagher. Clients will have access to a greater breadth of insurance expertise in specialty areas while experiencing the continuity of working with their current talented team of agency associates and leadership. In the end, we believe the combination provides the best opportunity to elevate our customers' experience and provide our associates significant opportunities for career growth and to flourish with enhanced resources. Gallagher will remain an insurance partner with Evans, providing commercial, employee benefits, and personal insurance products to our existing and prospective commercial, municipal, public entity, and retail clients. From a shareholder perspective, we believe the rationale was compelling. This was a unique opportunity to monetize the strategic investments made in insurance services and allows us to optimize our capital and unlock value that we do not believe was being recognized in our stock. The sale price represented a substantial premium for the agency at almost 20 years of earnings. It eliminates about $12 million of goodwill and other intangible assets, resulting in approximately $4.55 per share tangible book value improvement. The after-tax gain was approximately $13 million, which provides us with the flexibility to strategically redeploy capital back into our core banking franchise. Given the current environment, we will continue to review a broad range of options to determine the best uses for this capital. Ultimately, we believe there are ample opportunities to grow and create shareholder value. This includes the balance sheet restructuring that we completed in the fourth quarter, which consisted of selling 78 million of available for sale investment securities, predominantly U.S. Treasuries and government-sponsored agency securities, Proceeds realized from the restructuring totaled $73 million, which were used to pay down short-term borrowings, and a $5 million loss was recognized on the sale. This transaction reduces a portion of the bank's liability sensitivity and is expected to improve returns in 2024 by enhancing our net interest margin. John will give you more details on that in a moment. Looking forward, headwinds are expected to continue for community and regional banks with likely pressures on margins, growth, and funding until interest rates recede. We are seeing signs of moderation in deposit cost increases, and John will talk to our NIM expectations during his remarks. Although we do not have control over economic conditions, we are focused on what we can impact, which is growth in our core banking model and controlling costs to optimize our efficiency. With that, I'll turn it over to John to run through our results in greater detail, and then we will be happy to take any questions. John?