falseFY0000842518YesYesNoNoP3YP5YP3YP5Yhttp://fasb.org/us-gaap/2023#AccountingStandardsUpdate201613Member0.500.500000842518us-gaap:CommonStockMember2023-01-012023-12-310000842518us-gaap:CommonStockMember2022-01-012022-12-310000842518evbn:EmployeeStockPurchasePlanMember2022-01-012022-12-310000842518evbn:EmployeeStockPurchasePlanMember2021-01-012021-12-310000842518us-gaap:TreasuryStockCommonMember2023-12-310000842518us-gaap:RetainedEarningsMember2023-12-310000842518us-gaap:AdditionalPaidInCapitalMember2023-12-310000842518us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310000842518us-gaap:AccountingStandardsUpdate201613Memberus-gaap:RetainedEarningsMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:TreasuryStockCommonMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:RetainedEarningsMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:CommonStockMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:AdditionalPaidInCapitalMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310000842518us-gaap:TreasuryStockCommonMember2022-12-310000842518us-gaap:RetainedEarningsMember2022-12-310000842518us-gaap:CommonStockMember2022-12-310000842518us-gaap:AdditionalPaidInCapitalMember2022-12-310000842518us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2022-12-310000842518us-gaap:RetainedEarningsMember2021-12-310000842518us-gaap:CommonStockMember2021-12-310000842518us-gaap:AdditionalPaidInCapitalMember2021-12-310000842518us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310000842518us-gaap:RetainedEarningsMember2020-12-310000842518us-gaap:CommonStockMember2020-12-310000842518us-gaap:AdditionalPaidInCapitalMember2020-12-310000842518us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310000842518us-gaap:EmployeeStockOptionMemberevbn:EquityPlansMember2023-01-012023-12-310000842518us-gaap:EmployeeStockOptionMember2022-12-310000842518us-gaap:EmployeeStockOptionMember2022-01-012022-12-310000842518evbn:TwoThousandNineteenLongTermEquityIncentivePlanMember2023-12-310000842518srt:MaximumMemberevbn:EquityPlansMember2023-12-310000842518srt:MinimumMemberus-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2023-12-310000842518srt:MaximumMemberus-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2023-12-310000842518evbn:EmployeeStockPurchasePlanMember2023-12-310000842518us-gaap:EmployeeStockOptionMember2021-01-012021-12-310000842518us-gaap:RestrictedStockMember2022-01-012022-12-310000842518us-gaap:RestrictedStockMember2021-01-012021-12-310000842518us-gaap:RestrictedStockMember2022-12-310000842518evbn:EmployeeStockPurchasePlanMember2023-01-012023-12-310000842518srt:MinimumMemberus-gaap:EmployeeStockOptionMemberevbn:EquityPlansMember2023-01-012023-12-310000842518srt:MaximumMemberus-gaap:EmployeeStockOptionMemberevbn:EquityPlansMember2023-01-012023-12-310000842518us-gaap:RestrictedStockMember2023-01-012023-12-310000842518us-gaap:EmployeeStockOptionMember2023-01-012023-12-310000842518evbn:WealthManagementAndOtherFinancialServicesMember2023-01-012023-12-310000842518evbn:ProfitSharingAndContingentRevenueMember2023-01-012023-12-310000842518evbn:PersonalPropertyAndCasualtyInsuranceCommissionsMember2023-01-012023-12-310000842518evbn:OtherInsuranceRelatedRevenueMember2023-01-012023-12-310000842518evbn:EmployeeBenefitsSalesCommissionsMember2023-01-012023-12-310000842518evbn:CommercialPropertyAndCasualtyInsuranceCommissionsMember2023-01-012023-12-310000842518evbn:WealthManagementAndOtherFinancialServicesMember2022-01-012022-12-310000842518evbn:ProfitSharingAndContingentRevenueMember2022-01-012022-12-310000842518evbn:PersonalPropertyAndCasualtyInsuranceCommissionsMember2022-01-012022-12-310000842518evbn:OtherInsuranceRelatedRevenueMember2022-01-012022-12-310000842518evbn:EmployeeBenefitsSalesCommissionsMember2022-01-012022-12-310000842518evbn:CommercialPropertyAndCasualtyInsuranceCommissionsMember2022-01-012022-12-310000842518evbn:WealthManagementAndOtherFinancialServicesMember2021-01-012021-12-310000842518evbn:ProfitSharingAndContingentRevenueMember2021-01-012021-12-310000842518evbn:PersonalPropertyAndCasualtyInsuranceCommissionsMember2021-01-012021-12-310000842518evbn:OtherInsuranceRelatedRevenueMember2021-01-012021-12-310000842518evbn:InsuranceClaimsServicesRevenueMember2021-01-012021-12-310000842518evbn:EmployeeBenefitsSalesCommissionsMember2021-01-012021-12-310000842518evbn:CommercialPropertyAndCasualtyInsuranceCommissionsMember2021-01-012021-12-310000842518us-gaap:LandMember2023-12-310000842518us-gaap:FurnitureAndFixturesMember2023-12-310000842518us-gaap:BuildingAndBuildingImprovementsMember2023-12-310000842518us-gaap:LandMember2022-12-310000842518us-gaap:FurnitureAndFixturesMember2022-12-310000842518us-gaap:BuildingAndBuildingImprovementsMember2022-12-310000842518us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-12-310000842518us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-12-310000842518us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-12-310000842518us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2023-12-310000842518us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2023-12-310000842518us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancialAssetNotPastDueMember2023-12-310000842518us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancialAssetNotPastDueMember2023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:HomeEquityMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:HomeEquityMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:HomeEquityMemberus-gaap:FinancialAssetNotPastDueMember2023-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2023-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2023-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancialAssetNotPastDueMember2023-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2023-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2023-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancialAssetNotPastDueMember2023-12-310000842518srt:FederalHomeLoanBankOfNewYorkMemberus-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMember2023-12-310000842518us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2023-12-310000842518us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2023-12-310000842518us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2023-12-310000842518us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2023-12-310000842518us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2023-12-310000842518us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2023-12-310000842518us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2023-12-310000842518us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2023-12-310000842518us-gaap:FinancingReceivables60To89DaysPastDueMember2023-12-310000842518us-gaap:FinancingReceivables30To59DaysPastDueMember2023-12-310000842518us-gaap:FinancialAssetNotPastDueMember2023-12-310000842518us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2022-12-310000842518us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2022-12-310000842518us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancialAssetNotPastDueMember2022-12-310000842518us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancialAssetNotPastDueMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:HomeEquityMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:HomeEquityMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:HomeEquityMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:HomeEquityMemberus-gaap:FinancialAssetNotPastDueMember2022-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2022-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2022-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancialAssetNotPastDueMember2022-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2022-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancialAssetNotPastDueMember2022-12-310000842518srt:FederalHomeLoanBankOfNewYorkMemberus-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMember2022-12-310000842518us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2022-12-310000842518us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2022-12-310000842518us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2022-12-310000842518us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2022-12-310000842518us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2022-12-310000842518us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2022-12-310000842518us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2022-12-310000842518us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2022-12-310000842518us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2022-12-310000842518us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2022-12-310000842518us-gaap:FinancingReceivables60To89DaysPastDueMember2022-12-310000842518us-gaap:FinancingReceivables30To59DaysPastDueMember2022-12-310000842518us-gaap:FinancialAssetNotPastDueMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FederalNationalMortgageAssociationFnmaInsuredLoansMember2023-01-012023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FederalHomeLoanMortgageCorporationFhlmcInsuredLoansMember2023-01-012023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FederalNationalMortgageAssociationFnmaInsuredLoansMember2022-01-012022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FederalHomeLoanMortgageCorporationFhlmcInsuredLoansMember2022-01-012022-12-310000842518srt:MinimumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputDiscountRateMember2023-12-310000842518srt:MaximumMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputDiscountRateMember2023-12-310000842518us-gaap:SubordinatedDebtMember2023-12-310000842518us-gaap:CommonStockMember2023-12-310000842518evbn:CapitalSecuritiesAndCommonStockMember2023-12-310000842518us-gaap:SubordinatedDebtMember2022-12-310000842518evbn:CapitalSecuritiesAndCommonStockMember2022-12-310000842518us-gaap:InternalRevenueServiceIRSMemberus-gaap:LatestTaxYearMember2023-01-012023-12-310000842518us-gaap:InternalRevenueServiceIRSMemberus-gaap:EarliestTaxYearMember2023-01-012023-12-310000842518us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2023-12-310000842518us-gaap:FairValueInputsLevel3Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2023-12-310000842518us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-12-310000842518us-gaap:FairValueInputsLevel3Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2022-12-310000842518us-gaap:FinancialStandbyLetterOfCreditMember2023-12-310000842518us-gaap:FinancialStandbyLetterOfCreditMember2022-12-3100008425182022-01-012023-12-310000842518evbn:BankingActivitiesMember2022-12-310000842518evbn:BankingActivitiesMember2021-12-310000842518srt:MinimumMember2023-12-310000842518srt:MaximumMember2023-12-310000842518us-gaap:CoreDepositsMember2023-12-310000842518us-gaap:OtherIntangibleAssetsMember2022-12-310000842518us-gaap:CoreDepositsMember2022-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:RealEstateLoanMember2023-12-310000842518us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2023-01-010000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2023-01-010000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2023-01-010000842518us-gaap:HomeEquityMember2023-01-010000842518us-gaap:CommercialPortfolioSegmentMember2023-01-0100008425182023-01-010000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:RealEstateLoanMember2022-12-310000842518us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2022-01-010000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2022-01-010000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2022-01-010000842518us-gaap:HomeEquityMember2022-01-010000842518us-gaap:CommercialPortfolioSegmentMember2022-01-0100008425182022-01-010000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2023-12-310000842518us-gaap:PerformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMember2023-12-310000842518us-gaap:PerformingFinancingReceivableMemberus-gaap:HomeEquityMember2023-12-310000842518us-gaap:PerformingFinancingReceivableMemberus-gaap:ConsumerPortfolioSegmentMember2023-12-310000842518us-gaap:NonperformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMember2023-12-310000842518us-gaap:NonperformingFinancingReceivableMemberus-gaap:HomeEquityMember2023-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:SubstandardMember2023-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:SpecialMentionMember2023-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:PassMember2023-12-310000842518us-gaap:CommercialPortfolioSegmentMemberus-gaap:SubstandardMember2023-12-310000842518us-gaap:CommercialPortfolioSegmentMemberus-gaap:SpecialMentionMember2023-12-310000842518us-gaap:CommercialPortfolioSegmentMemberus-gaap:PassMember2023-12-310000842518us-gaap:ResidentialPortfolioSegmentMember2023-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMember2023-12-310000842518us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2023-12-310000842518us-gaap:HomeEquityMember2023-12-310000842518us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2022-12-310000842518us-gaap:HomeEquityMember2022-12-310000842518us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2023-01-012023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2023-01-012023-12-310000842518us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2022-01-012022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2022-01-012022-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2022-01-012022-12-310000842518us-gaap:HomeEquityMember2022-01-012022-12-310000842518us-gaap:CommercialPortfolioSegmentMember2022-01-012022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:HomeEquityMemberus-gaap:RealEstateLoanMember2023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:RealEstateLoanMember2023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:RealEstateLoanMember2023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SubstandardMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SpecialMentionMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:PassMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:RealEstateLoanMemberevbn:WatchMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:HomeEquityMemberus-gaap:RealEstateLoanMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:SubstandardMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:SpecialMentionMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:RealEstateLoanMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:PassMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberevbn:WatchMember2022-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:SubstandardMember2022-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:SpecialMentionMember2022-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:PassMember2022-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberevbn:WatchMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:RealEstateLoanMember2022-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2022-12-310000842518us-gaap:CommercialPortfolioSegmentMemberus-gaap:SubstandardMember2022-12-310000842518us-gaap:CommercialPortfolioSegmentMemberus-gaap:SpecialMentionMember2022-12-310000842518us-gaap:CommercialPortfolioSegmentMemberus-gaap:PassMember2022-12-310000842518us-gaap:CommercialPortfolioSegmentMemberevbn:WatchMember2022-12-310000842518us-gaap:CommercialPortfolioSegmentMember2022-12-310000842518us-gaap:ResidentialPortfolioSegmentMember2023-01-012023-12-310000842518us-gaap:HomeEquityMember2023-01-012023-12-310000842518us-gaap:ConsumerPortfolioSegmentMember2023-01-012023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMember2022-01-012022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:HomeEquityMember2022-01-012022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMember2023-01-012023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:HomeEquityMember2023-01-012023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ConsumerPortfolioSegmentMember2023-01-012023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialPortfolioSegmentMember2023-01-012023-12-310000842518us-gaap:RealEstateSectorMember2023-01-012023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ConsumerPortfolioSegmentMember2022-01-012022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialPortfolioSegmentMember2022-01-012022-12-310000842518us-gaap:RealEstateSectorMember2022-01-012022-12-310000842518us-gaap:AccountingStandardsUpdate201613Memberus-gaap:RetainedEarningsMember2022-01-012022-12-310000842518us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:AssetPledgedAsCollateralMember2023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMember2023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:HomeEquityMember2023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ConsumerPortfolioSegmentMember2023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialPortfolioSegmentMember2023-12-310000842518us-gaap:RealEstateSectorMember2023-12-310000842518us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:AssetPledgedAsCollateralMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RealEstateSectorMemberus-gaap:HomeEquityMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RealEstateSectorMemberus-gaap:ConsumerPortfolioSegmentMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RealEstateSectorMemberus-gaap:CommercialPortfolioSegmentMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:RealEstateSectorMemberus-gaap:HomeEquityMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:RealEstateSectorMemberus-gaap:ConsumerPortfolioSegmentMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:RealEstateSectorMemberus-gaap:CommercialPortfolioSegmentMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:HomeEquityMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ConsumerPortfolioSegmentMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialPortfolioSegmentMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RealEstateSectorMember2022-12-310000842518srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:RealEstateSectorMember2022-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMember2021-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:HomeEquityMember2021-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ConsumerPortfolioSegmentMember2021-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:CommercialPortfolioSegmentMember2021-12-310000842518us-gaap:RealEstateSectorMember2021-12-310000842518srt:MaximumMemberus-gaap:FederalFundsPurchasedMember2023-12-310000842518srt:MinimumMemberus-gaap:FederalHomeLoanBankAdvancesMember2023-12-310000842518srt:MaximumMemberus-gaap:FederalHomeLoanBankAdvancesMember2023-12-310000842518us-gaap:FederalHomeLoanBankAdvancesMember2023-01-012023-12-310000842518us-gaap:FederalFundsPurchasedMember2023-01-012023-12-310000842518evbn:FrbBorrowingsMember2023-01-012023-12-310000842518us-gaap:FederalHomeLoanBankAdvancesMember2022-01-012022-12-310000842518us-gaap:FederalFundsPurchasedMember2022-01-012022-12-310000842518us-gaap:FederalHomeLoanBankAdvancesMember2021-01-012021-12-310000842518evbn:FrbBorrowingsMember2021-01-012021-12-310000842518us-gaap:RetainedEarningsMember2023-01-012023-12-310000842518us-gaap:RetainedEarningsMember2021-01-012021-12-310000842518evbn:EvansAgencyLlcMember2022-01-012022-12-310000842518evbn:EvansAgencyLlcMember2021-01-012021-12-310000842518us-gaap:ConsumerPortfolioSegmentMember2023-12-310000842518us-gaap:ConsumerPortfolioSegmentMember2022-12-310000842518us-gaap:FixedIncomeFundsMemberus-gaap:PensionPlansDefinedBenefitMember2023-12-310000842518us-gaap:EquityFundsMemberus-gaap:PensionPlansDefinedBenefitMember2023-12-310000842518evbn:CashAndShortTermInvestmentsMemberus-gaap:PensionPlansDefinedBenefitMember2023-12-310000842518us-gaap:FixedIncomeFundsMemberus-gaap:PensionPlansDefinedBenefitMember2022-12-310000842518us-gaap:EquityFundsMemberus-gaap:PensionPlansDefinedBenefitMember2022-12-310000842518evbn:CashAndShortTermInvestmentsMemberus-gaap:PensionPlansDefinedBenefitMember2022-12-310000842518evbn:NormalMarketConditionsMemberus-gaap:FixedIncomeSecuritiesMember2023-12-310000842518evbn:NormalMarketConditionsMemberus-gaap:EquitySecuritiesMember2023-12-310000842518us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2023-12-310000842518us-gaap:FixedIncomeFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2023-12-310000842518evbn:EquitySecuritiesSmallCapMemberus-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2023-12-310000842518evbn:EquitySecuritiesMidCapMemberus-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2023-12-310000842518evbn:EquitySecuritiesLargeCapMemberus-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2023-12-310000842518evbn:EquitySecuritiesInternationalLargeCapMemberus-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2023-12-310000842518us-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2023-12-310000842518us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2022-12-310000842518us-gaap:FixedIncomeFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2022-12-310000842518evbn:EquitySecuritiesSmallCapMemberus-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2022-12-310000842518evbn:EquitySecuritiesMidCapMemberus-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2022-12-310000842518evbn:EquitySecuritiesLargeCapMemberus-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2022-12-310000842518evbn:EquitySecuritiesInternationalLargeCapMemberus-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2022-12-310000842518us-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2022-12-310000842518evbn:NonQualifiedExecutiveInsentiveRetirementPlanMember2023-12-310000842518evbn:FsbBancorpIncMember2023-12-310000842518evbn:NonQualifiedExecutiveInsentiveRetirementPlanMember2022-12-310000842518srt:MinimumMemberus-gaap:FixedIncomeSecuritiesMemberus-gaap:PensionPlansDefinedBenefitMember2023-01-012023-12-310000842518srt:MinimumMemberus-gaap:EquitySecuritiesMemberus-gaap:PensionPlansDefinedBenefitMember2023-01-012023-12-310000842518srt:MaximumMemberus-gaap:FixedIncomeSecuritiesMemberus-gaap:PensionPlansDefinedBenefitMember2023-01-012023-12-310000842518srt:MaximumMemberus-gaap:EquitySecuritiesMemberus-gaap:PensionPlansDefinedBenefitMember2023-01-012023-12-310000842518us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2021-12-310000842518us-gaap:PensionPlansDefinedBenefitMember2021-12-310000842518us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2023-12-310000842518us-gaap:PensionPlansDefinedBenefitMember2023-12-310000842518us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2022-12-310000842518us-gaap:PensionPlansDefinedBenefitMember2022-12-310000842518evbn:TwoThousandNineteenLongTermEquityIncentivePlanMember2023-01-012023-12-310000842518evbn:TwoThousandNineteenLongTermEquityIncentivePlanMember2022-01-012022-12-310000842518srt:MinimumMemberus-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2023-01-012023-12-310000842518srt:MaximumMemberus-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2023-01-012023-12-310000842518us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2023-01-012023-12-310000842518evbn:NonQualifiedExecutiveInsentiveRetirementPlanMember2023-01-012023-12-310000842518evbn:FsbBancorpIncMember2023-01-012023-12-310000842518us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2022-01-012022-12-310000842518evbn:NonQualifiedExecutiveInsentiveRetirementPlanMember2022-01-012022-12-310000842518us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2021-01-012021-12-310000842518evbn:NonQualifiedExecutiveInsentiveRetirementPlanMember2021-01-012021-12-310000842518srt:MinimumMemberus-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2023-12-310000842518srt:MaximumMemberus-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2023-12-310000842518srt:MaximumMemberus-gaap:CommercialPortfolioSegmentMember2023-12-310000842518us-gaap:CollateralPledgedMember2023-12-310000842518us-gaap:CollateralPledgedMember2022-12-310000842518us-gaap:SecuritiesAssetsMember2023-01-012023-12-310000842518us-gaap:SecuritiesAssetsMember2022-01-012022-12-310000842518us-gaap:SecuritiesAssetsMember2021-01-012021-12-310000842518us-gaap:JuniorSubordinatedDebtMemberevbn:CapitalSecuritiesAndCommonStockMember2023-01-012023-12-310000842518us-gaap:CapitalUnitsMember2023-01-012023-12-310000842518evbn:CapitalSecuritiesAndCommonStockMember2023-01-012023-12-310000842518us-gaap:JuniorSubordinatedDebtMemberevbn:CapitalSecuritiesAndCommonStockMember2023-12-310000842518us-gaap:SubordinatedDebtMember2020-07-090000842518us-gaap:SubordinatedDebtMember2020-07-092020-07-090000842518us-gaap:FinancialStandbyLetterOfCreditMember2023-12-310000842518us-gaap:CommitmentsToExtendCreditMember2023-12-310000842518us-gaap:FinancialStandbyLetterOfCreditMember2022-12-310000842518us-gaap:CommitmentsToExtendCreditMember2022-12-310000842518srt:MaximumMemberus-gaap:StockholdersEquityTotalMemberus-gaap:CreditConcentrationRiskMember2023-01-012023-12-310000842518srt:ParentCompanyMember2023-01-012023-12-310000842518srt:ParentCompanyMember2022-01-012022-12-310000842518srt:ParentCompanyMember2021-01-012021-12-310000842518srt:ParentCompanyMember2021-12-310000842518srt:ParentCompanyMember2020-12-310000842518us-gaap:FairValueInputsLevel1Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2023-12-310000842518us-gaap:FairValueInputsLevel1Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2023-12-310000842518us-gaap:FairValueInputsLevel1Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-12-310000842518us-gaap:FairValueInputsLevel1Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2022-12-310000842518us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000842518us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000842518us-gaap:MortgageBackedSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000842518us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2023-12-310000842518us-gaap:FairValueInputsLevel2Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2023-12-310000842518us-gaap:USTreasuryAndGovernmentMember2023-12-310000842518us-gaap:USStatesAndPoliticalSubdivisionsMember2023-12-310000842518us-gaap:MortgageBackedSecuritiesMember2023-12-310000842518us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000842518us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000842518us-gaap:MortgageBackedSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000842518us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-12-310000842518us-gaap:FairValueInputsLevel2Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2022-12-310000842518us-gaap:USTreasuryAndGovernmentMember2022-12-310000842518us-gaap:USStatesAndPoliticalSubdivisionsMember2022-12-310000842518us-gaap:MortgageBackedSecuritiesMember2022-12-310000842518us-gaap:USTreasuryAndGovernmentMember2023-12-310000842518us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember2023-12-310000842518us-gaap:FederalHomeLoanMortgageCorporationCertificatesAndObligationsFHLMCMember2023-12-310000842518us-gaap:CollateralizedMortgageObligationsMember2023-12-310000842518us-gaap:AssetBackedSecuritiesSecuritizedLoansAndReceivablesMember2023-12-310000842518us-gaap:MortgageBackedSecuritiesMember2022-12-310000842518us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember2022-12-310000842518us-gaap:FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember2022-12-310000842518us-gaap:FederalHomeLoanMortgageCorporationCertificatesAndObligationsFHLMCMember2022-12-310000842518us-gaap:CollateralizedMortgageObligationsMember2022-12-310000842518us-gaap:AssetBackedSecuritiesSecuritizedLoansAndReceivablesMember2022-12-310000842518us-gaap:USStatesAndPoliticalSubdivisionsMember2023-12-310000842518us-gaap:MortgageBackedSecuritiesMember2023-12-310000842518us-gaap:FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember2023-12-310000842518us-gaap:DebtSecuritiesMember2023-12-310000842518us-gaap:USTreasuryAndGovernmentMember2022-12-310000842518us-gaap:USStatesAndPoliticalSubdivisionsMember2022-12-310000842518us-gaap:DebtSecuritiesMember2022-12-310000842518us-gaap:OperatingSegmentsMemberevbn:InsuranceAgencyMember2023-12-310000842518us-gaap:OperatingSegmentsMemberevbn:BankingActivitiesMember2023-12-310000842518srt:ParentCompanyMember2023-12-310000842518us-gaap:OperatingSegmentsMemberevbn:InsuranceAgencyMember2022-12-310000842518us-gaap:OperatingSegmentsMemberevbn:BankingActivitiesMember2022-12-310000842518srt:ParentCompanyMember2022-12-310000842518us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2023-01-012023-12-310000842518us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2023-01-012023-12-310000842518us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2022-01-012022-12-310000842518us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-01-012022-12-310000842518us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-01-012021-12-310000842518us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-01-012021-12-310000842518us-gaap:OperatingSegmentsMemberevbn:InsuranceAgencyMember2023-01-012023-12-310000842518us-gaap:OperatingSegmentsMemberevbn:BankingActivitiesMember2023-01-012023-12-310000842518us-gaap:OperatingSegmentsMember2023-01-012023-12-310000842518us-gaap:OperatingSegmentsMemberevbn:InsuranceAgencyMember2022-01-012022-12-310000842518us-gaap:OperatingSegmentsMemberevbn:BankingActivitiesMember2022-01-012022-12-310000842518us-gaap:OperatingSegmentsMember2022-01-012022-12-310000842518us-gaap:OperatingSegmentsMemberevbn:InsuranceAgencyMember2021-01-012021-12-310000842518us-gaap:OperatingSegmentsMemberevbn:BankingActivitiesMember2021-01-012021-12-310000842518us-gaap:OperatingSegmentsMember2021-01-012021-12-310000842518srt:MaximumMemberevbn:EmployeeStockPurchasePlanMember2023-01-012023-12-310000842518srt:DirectorMember2023-01-012023-12-310000842518evbn:EmployeeMember2023-01-012023-12-310000842518srt:MaximumMemberevbn:EmployeeStockPurchasePlanMember2022-01-012022-12-310000842518srt:DirectorMember2022-01-012022-12-310000842518evbn:EmployeeMember2022-01-012022-12-310000842518srt:MaximumMemberevbn:EmployeeStockPurchasePlanMember2021-01-012021-12-310000842518srt:DirectorMember2021-01-012021-12-310000842518evbn:EmployeeMember2021-01-012021-12-310000842518us-gaap:FederalReserveBankAdvancesMember2023-12-310000842518us-gaap:FederalFundsPurchasedMember2023-12-310000842518evbn:FrbBorrowingsMember2023-12-310000842518us-gaap:FederalHomeLoanBankAdvancesMember2022-12-310000842518us-gaap:FederalFundsPurchasedMember2022-12-310000842518us-gaap:FederalHomeLoanBankAdvancesMember2021-12-310000842518us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2023-12-310000842518us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2023-12-310000842518us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2022-12-310000842518us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-12-310000842518us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-12-310000842518us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-12-310000842518us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-12-310000842518us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-12-3100008425182020-12-310000842518evbn:BankMember2023-12-310000842518evbn:BankMember2022-12-310000842518us-gaap:TreasuryStockCommonMember2022-01-012022-12-310000842518us-gaap:RetainedEarningsMember2022-01-012022-12-310000842518us-gaap:AdditionalPaidInCapitalMember2022-01-012022-12-310000842518us-gaap:TreasuryStockCommonMember2023-01-012023-12-310000842518us-gaap:AdditionalPaidInCapitalMember2023-01-012023-12-310000842518us-gaap:CommonStockMember2021-01-012021-12-310000842518us-gaap:AdditionalPaidInCapitalMember2021-01-012021-12-310000842518evbn:EvansAgencyLlcMember2023-11-012023-11-300000842518us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2023-01-012023-12-310000842518srt:MinimumMemberus-gaap:CommercialPortfolioSegmentMember2023-01-012023-12-310000842518srt:MaximumMemberus-gaap:CommercialPortfolioSegmentMember2023-01-012023-12-310000842518srt:MinimumMemberus-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:RealEstateLoanMember2023-01-012023-12-310000842518srt:MaximumMemberus-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:RealEstateLoanMember2023-01-012023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2023-12-310000842518evbn:HotelLoansMember2023-12-310000842518evbn:HotelLoansMember2022-12-310000842518us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2023-12-310000842518us-gaap:FairValueMeasurementsNonrecurringMember2023-12-310000842518us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2022-12-310000842518us-gaap:FairValueMeasurementsNonrecurringMember2022-12-310000842518us-gaap:ResidentialPortfolioSegmentMemberevbn:NonaccruingMember2023-01-012023-12-310000842518us-gaap:CommercialRealEstatePortfolioSegmentMemberevbn:NonaccruingMember2023-01-012023-12-310000842518us-gaap:CommercialPortfolioSegmentMember2023-01-012023-12-310000842518us-gaap:RealEstateSectorMemberus-gaap:ResidentialPortfolioSegmentMember2022-12-310000842518us-gaap:RealEstateSectorMember2022-12-3100008425182021-12-310000842518us-gaap:RestrictedStockMember2023-12-310000842518us-gaap:EmployeeStockOptionMember2023-12-310000842518evbn:EvansAgencyLlcMember2023-01-012023-12-3100008425182022-01-012022-12-3100008425182021-01-012021-12-310000842518us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2022-01-012022-12-310000842518us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2021-01-012021-12-310000842518us-gaap:PensionPlansDefinedBenefitMember2021-01-012021-12-310000842518us-gaap:PensionPlansDefinedBenefitMember2023-01-012023-12-310000842518us-gaap:PensionPlansDefinedBenefitMember2022-01-012022-12-310000842518srt:MaximumMemberus-gaap:ConsumerPortfolioSegmentMember2023-01-012023-12-310000842518srt:MaximumMemberus-gaap:RealEstateSectorMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:RealEstateLoanMember2023-12-310000842518us-gaap:CapitalUnitsMemberevbn:ThreeMonthLiborMember2023-12-310000842518us-gaap:CapitalUnitsMember2023-12-310000842518us-gaap:CommercialPortfolioSegmentMember2023-12-3100008425182023-12-3100008425182022-12-310000842518us-gaap:FederalHomeLoanBankAdvancesMember2023-12-310000842518evbn:EvansAgencyLlcMember2023-11-3000008425182023-10-012023-12-3100008425182023-06-3000008425182024-03-0100008425182023-01-012023-12-31evbn:segmentiso4217:USDxbrli:sharesevbn:entityevbn:ShareBasedCompensationPlanevbn:itemxbrli:pureiso4217:USDxbrli:shares

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2023

[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number: 001-35021

EVANS BANCORP, INC.

(Exact name of registrant as specified in its charter)

New York

16-1332767

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

6460 Main Street, Williamsville, New York

14221

(Address of principal executive offices)

(Zip Code)

(716) 926-2000

Registrant’s telephone number (including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.50 par value

EVBN

NYSE American LLC

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes

No

X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes

No

X

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

X

No

Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

X

No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

X

Smaller reporting company

X

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act [ ]

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [ ]

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. [ ]

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes

No

X

On June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates was approximately $132 million, based upon the closing sale price of a share of the registrant’s common stock on NYSE American, LLC.

As of March 1, 2024, 5,508,593 shares of the registrant’s common stock were outstanding.

Page 1 of 107

Exhibit Index on Page 100

Table of Contents

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statement relating to the registrant's 2024 Annual Meeting of Shareholders, to be held on May 7, 2024, which will be subsequently filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report relates, are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.


‎

2

Table of Contents

TABLE OF CONTENTS

INDEX

PART I

Item 1.

BUSINESS

4

Item 1A.

RISK FACTORS

13

Item 1B.

UNRESOLVED STAFF COMMENTS

20

Item 1C.

CYBERSECURITY

20

Item 2.

PROPERTIES

22

Item 3.

LEGAL PROCEEDINGS

22

Item 4.

MINE SAFETY DISCLOSURES

22

PART II

Item 5.

MARKET FOR REGISTRANT’S COMMON EQUITY RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

22

Item 6.

[RESERVED]

24

Item 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

24

Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

44

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

45

Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

97

Item 9A.

CONTROLS AND PROCEDURES

97

Item 9B.

OTHER INFORMATION

97

Item 9C.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT

INSPECTIONS

97

PART III

Item 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

98

Item 11.

EXECUTIVE COMPENSATION

98

Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED STOCKHOLDER MATTERS

98

Item 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,

AND DIRECTOR INDEPENDENCE

98

Item 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

98

PART IV

Item 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

99

Item 16.

FORM 10-K SUMMARY

102

SIGNATURES

103


‎

3

Table of Contents

PART I

FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. When used in this report, or in the documents incorporated by reference herein, the words “will,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “seek,” “look to,” “goal,” “target” and similar expressions identify such forward-looking statements. These forward-looking statements include statements regarding the business plans, prospects, growth and operating strategies of Evans Bancorp, Inc. (the “Company"), statements regarding the asset quality of the Company’s loan and investment portfolios, and estimates of the Company’s risks and future costs and benefits.

These forward-looking statements are based largely on the expectations of the Company’s management and are subject to a number of risks and uncertainties, including but not limited to: general economic conditions, either nationally or in the Company’s market areas, that are worse than expected; increased competition among depository or other financial institutions; our ability to maintain liquidity, including the percentage of uninsured deposits in our portfolio; inflation and changes in the interest rate environment that reduce the Company’s margins or reduce the fair value of financial instruments; changes in laws or government regulations affecting financial institutions, including changes in regulatory fees and capital requirements; the Company’s ability to enter new markets successfully and capitalize on growth opportunities; the Company’s ability to successfully integrate acquired entities; loan losses in excess of the Company’s allowance for credit losses; changes in accounting pronouncements and practices, as adopted by financial institution regulatory agencies, the Financial Accounting Standards Board (“FASB”) and the Public Company Accounting Oversight Board; the impact of such changes in accounting pronouncements and practices being greater than anticipated; the ability to realize the benefit of deferred tax assets; changes in the financial performance and/or condition of the Company’s borrowers; changes in consumer spending, borrowing and saving habits; changes in the Company’s organization, compensation and benefit plans; changes in consumer behavior and other factors discussed elsewhere in this Annual Report on Form 10-K including the risk factors described in Item 1A, as well as in the Company’s periodic reports filed with the Securities and Exchange Commission. Many of these factors are beyond the Company’s control and are difficult to predict.

Because of these and other uncertainties, the Company’s actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein. Forward-looking statements speak only as of the date they are made. The Company undertakes no obligation to publicly update or revise forward-looking information, whether as a result of new, updated information, future events or otherwise, except to the extent required by law.

Item 1.BUSINESS

EVANS BANCORP, INC.

Evans Bancorp, Inc. (the “Company”) is a New York business corporation which is registered as a financial holding company under the Bank Holding Company Act of 1956, as amended (the “BHCA”). The principal office of the Company is located at 6460 Main Street, Williamsville, NY 14221 and its telephone number is (716) 926-2000. The Company was incorporated on October 28, 1988, but the continuity of its banking business is traced to the organization of the Evans National Bank of Angola on January 20, 1920. Except as the context otherwise requires, the Company and its direct and indirect subsidiaries are collectively referred to in this report as the “Company.” The Company’s common stock is traded on the NYSE American, LLC under the symbol “EVBN.”

At December 31, 2023, the Company had consolidated total assets of $2.1 billion, deposits of $1.7 billion and stockholders’ equity of $178 million.

The Company’s primary business is the operation of its subsidiaries. It does not engage in any other substantial business activities. The Company operates two direct wholly-owned subsidiaries: (1) Evans Bank, N.A. (the “Bank”), which provides a full range of banking services to consumer and commercial customers in Western New York (“WNY”) and the Finger Lakes Region; and (2) Evans National Financial Services, LLC (“ENFS”), which owns 100% of the membership interests in The Evans Agency, LLC (“TEA”), which sold various premium-based insurance policies on a commission basis.

On November 30, 2023, the Company completed the sale of its insurance subsidiary, The Evans Agency, LLC, to Arthur J. Gallagher & Co. and Arthur J. Gallagher Risk Management Services, LLC (collectively, “Gallagher”). As defined in the asset purchase agreement, TEA sold substantially all of its assets to Gallagher for a purchase price of $40.0 million in cash. For more information on the divestiture of TEA see Note 2 to the Company’s Consolidated Financial Statements included under Item 8 of this Annual Report on Form 10-K.

At December 31, 2023, the Bank represented 99% and ENFS represented 1% of the consolidated assets of the Company. Further discussion of our segments is included in Note 19 to the Company’s Consolidated Financial Statements included under Item 8 of this Annual Report on Form 10-K.

4

Table of Contents

EVANS BANK, N.A.

The Bank is a nationally chartered bank that has its headquarters at 6460 Main Street, Williamsville, NY, and a total of 18 full-service banking offices in Erie County, Niagara County, Monroe County and Chautauqua County, NY.

At December 31, 2023, the Bank had total assets of $2.1 billion, investment securities of $278 million, net loans of $1.7 billion and deposits of $1.7 billion. The Bank offers deposit products, which include checking and negotiable order of withdrawal (“NOW”) accounts, savings accounts, and certificates of deposit, as its principal source of funding. The Bank’s deposits are insured up to the maximum permitted by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation (“FDIC”). The Bank offers a variety of loan products to its customers, including commercial and consumer loans and commercial and residential mortgage loans.

As is the case with banking institutions generally, the Bank’s operations are significantly influenced by general economic conditions and by related monetary and fiscal policies of banking regulatory agencies, including the Federal Reserve Board (“FRB”) and FDIC. The Bank is also subject to the supervision, regulation and examination of the Office of the Comptroller of the Currency of the United States of America (the “OCC”).

The Evans Agency, LLC

TEA was a full-service insurance agency that offered personal, commercial and financial services products. TEA’s insurance revenue and expenses are consolidated into the Company’s financials through November 30, 2023. For the eleven months ended November 30, 2023, TEA had total revenue of $10 million.

TEA’s primary market area was Erie, Chautauqua, Cattaraugus and Niagara Counties, NY. Most lines of personal insurance were provided, including automobile, homeowners, boat, recreational vehicle, landlord, and umbrella coverage. Commercial insurance products were also provided, consisting of property, liability, automobile, inland marine, workers compensation, bonds, crop and umbrella insurance. TEA also provided the following financial services products: employee benefits, life and disability insurance, Medicare supplements, long term care, annuities, mutual funds, retirement programs and New York State Disability. See Note 2 to the Company’s Consolidated Financial Statements included under Item 8 of this Annual Report on Form 10-K for more information on the sale of TEA.

Other Subsidiaries

In addition to the Bank, the Company has the following direct and indirect wholly-owned subsidiaries:

Evans National Holding Corp. (“ENHC”). ENHC, a wholly-owned subsidiary of the Bank, operates as a real estate investment trust that holds commercial real estate loans and residential mortgages, providing additional flexibility and planning opportunities for the business of the Bank.

Evans National Financial Services, LLC (“ENFS”). ENFS is a wholly-owned subsidiary of the Company. ENFS's primary business is to own the business and assets of the Company’s non-banking financial services subsidiaries.

The Company also has two special purpose entities: Evans Capital Trust I, a statutory trust formed in September 2004 under the Delaware Statutory Trust Act, solely for the purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the trust, investing the proceeds thereof in certain debentures of the Company and engaging in those activities necessary, advisable or incidental thereto; and ENB Employers Insurance Trust, a Delaware trust company formed in February 2003 for the sole purpose of holding life insurance policies under the Bank’s bank-owned life insurance (“BOLI”) program.

The Company’s main operating segment as of December 31, 2023 are banking activities. Through November 30, 2023 the Company had two operating segments – banking activities and insurance agency activities. See Note 19 to the Company’s Consolidated Financial Statements included under Item 8 of this Annual Report on Form 10-K for more information on the Company’s operating segments.

MARKET AREA

The Company’s footprint is in Western New York and the Finger Lakes Region, primarily Erie County, Monroe County, Niagara County, northern Chautauqua County and northwestern Cattaraugus County, NY. This primary market area is the area where the Bank principally receives deposits and makes loans.

MARKET RISK

5

Table of Contents

For information about, and a discussion of, the Company's "Market Risk," see Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk" of this Annual Report on Form 10-K.

COMPETITION

All phases of the Company’s business are highly competitive. The Company competes actively with local, regional and national financial institutions, as well as with bank branches in the Company’s primary market area. The Company’s market area has a high density of financial institutions, many of which are significantly larger and have greater financial resources than the Company. The Company faces competition for loans and deposits from other commercial banks, savings banks, internet banks, savings and loan associations, mortgage banking companies, credit unions, and other financial services companies. The Company faces additional competition from non-depository competitors such as the mutual fund industry, and securities and brokerage firms.

As an approximate indication of the Company’s competitive position, the Bank had the seventh most deposits in the Buffalo, NY metropolitan statistical area according to the FDIC’s annual deposit market share report as of June 30, 2023 with 2% of the total market’s deposits of $73 billion. By comparison, the market leaders, M&T Bank and KeyBank, had 78% of the Buffalo, NY metropolitan statistical area deposits combined. The Company attempts to be generally competitive with all financial institutions in its service area with respect to interest rates paid on time and savings deposits, service charges on deposit accounts, and interest rates charged on loans.

HUMAN CAPITAL

At December 31, 2023, we employed 300 full-time equivalent employees. At that date, the average tenure of all of our full-time employees was approximately 6.3 years while the average tenure of our executive officers was approximately 12.2 years. None of our associates are represented by collective bargaining agreements. We believe our employee relations to be good.

Oversight of our corporate culture is an important element of our Board of Directors’ oversight of risk because our people are critical to the success of our corporate strategy. Our Board sets the “tone at the top,” and holds senior management accountable for embodying, maintaining, and communicating our culture to employees. In that regard, our culture is designed to embrace associates and create opportunities. We uphold that principle in everything we do. That commitment has been a central pillar in our approach to our employees and the communities we have proudly served for over 100 years. Our culture is designed to adhere to the timeless values of integrity, valuing others, talent, passion, ownership and alignment, and customer focus. In keeping with those values, we expect our people to treat each other and our customers with the highest level of honesty and respect and go out of their way to do the right thing. We dedicate resources to promote a safe and inclusive workplace; attract, develop and retain talented, diverse employees; promote a culture of integrity, caring and excellence; and reward and recognize employees for both the results they deliver and, importantly, how they deliver them. We seek to design careers that are fulfilling, with competitive compensation and benefits alongside a positive work-life balance. We also dedicate resources to fostering professional and personal growth with continuing education, on-the-job training and development programs.

Our associates are key to our success as an organization. We are committed to attracting, retaining and promoting top quality talent regardless of race, color, creed, religion, sex, national origin, age, disability, marital status, citizenship status, military status, sexual orientation, victims of domestic violence, protected veterans status, gender identity, genetic information, genetic predisposition or carrier status and any other category protected by law. We are dedicated to providing a workplace for our employees that is inclusive, supportive, and free of any form of discrimination or harassment; rewarding and recognizing our employees based on their individual results and performance as well as that of their department and the company overall; and recognizing and respecting all of the characteristics and differences that make each of our employees unique.

SUPERVISION AND REGULATION

Bank holding companies and banks are extensively regulated under both federal and state laws and regulations that are intended to protect depositors and customers. Additionally, because the Company is a public company with shares traded on the NYSE American, it is subject to regulation by the Securities and Exchange Commission, as well as the listing standards required by NYSE American. To the extent that the following summary describes statutory and regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions. Any change in applicable laws or regulations, or a change in the way such laws or regulations are interpreted by regulatory agencies or courts, may have a material adverse effect on the Company's business, financial condition and results of operations.

Bank Holding Company Regulation

As a bank holding company registered under the BHCA, the Company and its non-banking subsidiaries are subject to regulation and supervision under the BHCA by the FRB. The FRB requires periodic reports from the Company, and is authorized by the BHCA to make regular examinations of the Company and its non-bank subsidiaries.

6

Table of Contents

The Company is required to obtain the prior approval of the FRB before merging with or acquiring all or substantially all of the assets of, or direct or indirect ownership or control of more than 5% of the voting shares of, a bank or bank holding company. The FRB regulations set out thresholds involving various relations and factors that may establish presumptions of control or a “controlling influence” for BHCA purposes. The FRB will not approve any acquisition, merger or consolidation that would have a substantial anti-competitive result, unless the anti-competitive effects of the proposed transaction are outweighed by a greater public interest in meeting the needs and convenience of the public. The FRB also considers managerial, capital and other financial factors in acting on acquisition or merger applications.

Subject to various exceptions, the Change in Bank Control Act of 1978 (the “CIBCA”), and its implementing regulations, require FRB approval before any person or company acquires “control” of a bank holding company. Control is deemed to exist under the CIBCA if an individual or company acquires 25% or more of any class of voting securities of the bank holding company. There is a rebuttable presumption of control under the CIBCA’s regulations if a person or company acquires 10% or more, but less than 25%, of any class of the bank holding company’s voting securities under certain circumstances including where, as is the case with the Company, the bank holding company has its shares registered under the Exchange Act.

A bank holding company may not engage in, or acquire direct or indirect control of more than 5% of the voting shares of any company engaged in any non-banking activity, unless such activity has been determined by the FRB to be closely related to banking or managing banks. The FRB has identified by regulation various non-banking activities in which a bank holding company may engage with notice to, or prior approval by, the FRB. A bank holding company that meets specified criteria may elect to be regulated as a “financial holding company” and thereby engage in a broader range of non-banking financial activities. The Company has made such an election.

The FRB has enforcement powers over financial holding companies and their non-bank subsidiaries, among other things, to enjoin activities that represent unsafe or unsound practices or constitute violations of law, regulation, administrative orders, or certain written agreements. These powers may be exercised through the issuance of cease and desist orders, civil monetary penalties or other actions.

Under federal law, a bank holding company must serve as a source of financial and managerial strength for its subsidiary banks and must not conduct its operations in an unsafe or unsound manner. The expectation is that a holding company will use available resources to provide capital and other support to its subsidiary institutions in times of financial stress.

A bank holding company is generally required to give the FRB prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company’s consolidated net worth. The FRB may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe and unsound practice, or would violate any law, regulation, FRB order or directive, or any condition imposed by, or written agreement with, the FRB. There is an exception to this approval requirement for well-capitalized bank holding companies that meet certain other conditions. As of December 31, 2023, the Company has qualified for this exception.

Notwithstanding the above requirements, the FRB has issued a supervisory bulletin which indicates that a holding company should notify and consult with the FRB under certain circumstances prior to redeeming or repurchasing common stock or perpetual preferred stock. The supervisory bulletin indicates that such notification is for purposes of allowing FRB supervisory review of, and possible objection to, the proposed repurchase or redemption.

The FRB’s supervisory bulletin also covers the payment of dividends. In general, the FRB’s policy is that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company is consistent with the organization’s capital needs, asset quality and overall financial condition. The supervisory bulletin provides for prior consultation with, and supervisory review of, proposed dividends by the FRB in certain situations, such as where a proposed dividend exceeds earnings for the period for which the dividend would be paid (e.g., calendar quarter) or where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund a proposed dividend. The guidance also provides for FRB consultation for material increases in the amount of a bank holding company’s common stock dividend.

Under the prompt corrective action laws, discussed later, the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized.

These laws, regulations and policies may inhibit the Company’s ability to pay dividends, engage in stock repurchases or otherwise make capital distributions.

Supervision and Regulation of the Bank

The Bank is a nationally chartered banking corporation, primarily subject to supervision, examination and regulation by the OCC. The FDIC has certain backup regulatory authority as the deposit insurer.  The operations of the Bank are subject to numerous statutes and

7

Table of Contents

regulations. Such statutes and regulations relate to investments, loans, mergers and consolidations, issuance of securities, payment of dividends, establishment of branches and other aspects of the Bank’s operations.

Federal statutes and OCC regulations govern the Bank’s investment authority. A national bank has authority to originate and purchase all types of loans, including commercial, commercial real estate, consumer and residential mortgage loans. Federal law generally limits a national bank’s extensions of credit to a single borrower (or related borrowers) to 15% of the bank’s capital and surplus. An additional 10% may be lent if secured by specified readily marketable collateral.

Generally, a national bank is prohibited from investing in corporate equity securities for its own account. Under OCC regulations, a national bank may invest in investment securities, which are generally defined as marketable securities in the form of a note, bond or debenture. The OCC classifies investment securities into five different types and, depending on its type, a national bank may have the authority to purchase, and possibly deal in and underwrite the security, pursuant to specified limits. The OCC has also permitted national banks to purchase certain noninvestment grade securities that can be reclassified and underwritten as loans.

The federal banking agencies have adopted uniform regulations prescribing standards for extensions of credit that are secured by liens on interests in real estate or made for the purpose of financing the construction of a building or other improvements to real estate. Under these regulations, all insured depository institutions, such as the Bank, are required to adopt written policies that establish appropriate limits and standards for extensions of credit that are secured by liens or interests in real estate or are made for the purpose of financing permanent improvements to real estate. The policies must establish loan portfolio diversification standards, prudent underwriting standards (including loan-to-value limits) that are clear and measurable, loan administration procedures, and documentation, approval and reporting requirements. The real estate lending policies must reflect consideration of the Interagency Guidelines for Real Estate Lending Policies that have been adopted by the federal bank regulators.

The Bank is subject to Sections 23A and 23B of the Federal Reserve Act and Regulation W thereunder, which govern certain “covered transactions”, by a bank with its affiliates, including its parent holding company. Covered transactions include a bank’s loans and extensions of credit to an affiliate, purchases of assets from an affiliate, and similar transactions. Covered transactions by the Bank with any affiliate (including the Company) are limited in amount to 10% of the Bank’s capital stock and surplus, and covered transactions with all affiliates are limited in the aggregate to 20% of the Bank’s capital stock and surplus. Furthermore, covered transactions, such as loans and extensions of credit to affiliates are subject to various collateral requirements. In general, the Bank’s transactions with an affiliate (including the Company) must be on terms and under circumstances that are substantially the same, or at least as favorable to, the Bank as comparable transactions between the Bank and nonaffiliates. These laws and regulations may limit the Company’s ability to obtain funds from the Bank for its cash needs, including funds for acquisitions, and the payment of dividends, interest and operating expenses.

The Bank is prohibited from engaging in certain tying arrangements in connection with any extension of credit, lease or sale of property or furnishing of services. For example, subject to certain exceptions, the Bank generally may not require a customer to obtain other services from the Bank or the Company, and may not require the customer to promise not to obtain other services from a competitor as a condition to an extension of credit.

The Bank is also subject to certain restrictions imposed by the Federal Reserve Act and its implementing regulation, Regulation O, on extensions of credit to the Bank’s and its affiliates’ executive officers, directors, principal stockholders, and/or any related interest of such persons (“Insiders”). Under these restrictions, the aggregate amount of loans to any Insiders and his or her related interests may not exceed the loans-to-one-borrower limit discussed above. Aggregate loans by a bank to its Insiders and their related interests may not exceed the bank’s unimpaired capital and unimpaired surplus. Loans to an executive officer, other than loans for the education of the officer’s children and certain loans secured by the officer’s residence, may generally not exceed the lesser of (1) $100,000 or (2) the greater of $25,000 or 2.5% of the bank’s unimpaired capital and surplus. The Federal Reserve Act and Regulation O require that any proposed loan to an Insider, or a related interest of that Insider, be approved in advance by a majority of the board of directors of the bank, if that loan, combined with previous loans by the bank to the Insiders and his or her related interests, exceeds specified amounts.

Generally, loans to Insiders and their related interests must be made on substantially the same terms as, and follow credit underwriting procedures that are not less stringent than, those that are prevailing at the time for comparable transactions with persons not affiliated with the institution. Regulation O contains a general exception for extensions of credit made pursuant to a benefit or compensation plan of a bank that is widely available to employees of the bank or affiliate and that does not give any preference to Insiders of the bank or affiliate over other employees.

As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct special examinations of and to require reporting by, national banks. It may also prohibit an insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the Deposit Insurance Fund. The FDIC has the authority to initiate enforcement actions against insured institutions under certain circumstances. The FDIC may terminate the deposit insurance of any insured depository institution, including the Bank, if it determines after a hearing that the institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, order or any condition imposed by an

8

Table of Contents

agreement with the FDIC. Bank management does not know of any practice, condition or violation that might lead to termination of FDIC deposit insurance.

Deposit insurance premiums are based on an institution’s quarterly average total assets minus average tangible equity. For institutions of the Bank’s asset size, the FDIC operates a risk-based premium system that determines assessment rates from financial modelling designed to estimate the probability of the bank’s failure over a three year period. The FDIC has authority to increase insurance. Effective January 1, 2023, total assessment rates for institutions of the Bank’s size ranged from 2.5 to 32 basis points.

In addition to the foregoing, federal law required the federal regulators to adopt regulations establishing “safety and soundness” standards to promote the safe operation of insured institutions. Such standards specifically address, among other things: (i) internal controls, information systems and internal audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate exposure; (v) asset growth; (vi) ratio of classified assets to capital; (vii) minimum earnings; (viii) compensation and benefits standards for management officials; (ix) information security and (x) residential mortgage lending practices. An institution found to be noncompliant with any such standard may be required to submit a compliance plan and may be subject to enforcement action if an acceptable plan is not submitted and complied with.

Dividends paid by the Bank have been the Company’s primary source of operating funds and are expected to be for the foreseeable future. Capital adequacy requirements serve to limit the amount of dividends that may be paid by the Bank. Under OCC regulations, the Bank may not pay a dividend, without prior OCC approval, if the total amount of all dividends declared during the calendar year, including the proposed dividend, exceed the sum of its retained net income to date during the calendar year combined with its retained net income over the preceding two years (less dividends paid over the period). As of December 31, 2023, approximately $38 million was available for the payment of dividends without prior OCC approval. The Bank’s ability to pay dividends is also subject to the Bank being in compliance with regulatory capital requirements. At December 31, 2023, the Bank was in compliance with these requirements.

Because the Company is a legal entity separate and distinct from the Bank, the Company’s right to participate in the distribution of assets of the Bank in the event of the Bank’s liquidation or reorganization would be subject to the prior claims of the Bank’s creditors. In the event of a liquidation or other resolution of an insured depository institution, the claims of depositors and other general or subordinated creditors are entitled to a priority of payment over the claims of unsecured, non-deposit creditors, including a parent bank holding company (such as the Company) or any shareholder or creditor thereof.

The OCC has broad enforcement powers over national banks, including the power to issue cease and desist orders, impose substantial civil money penalties, remove directors and officers, and appoint a conservator or receiver for the institution. Failure to comply with applicable laws, regulations, conditions, and supervisory agreements could subject the Bank, as well as officers, directors and other institution-affiliated parties of the Bank, to potential enforcement actions and civil money penalties.

Under the Community Reinvestment Act, or “CRA,” as implemented by OCC, a national bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of the communities served by the bank, including low- and moderate-income neighborhoods. The CRA requires the OCC to assess an institution’s record of meeting the credit needs of its communities and to take such record into account in its evaluation of certain applications by that institution, including applications to establish branches and acquire other financial institutions. The FRB also must consider the subsidiary bank’s CRA rating in connection with bank holding company applications to acquire additional institutions. The CRA currently requires the OCC to provide a written evaluation of an institution’s CRA performance utilizing a four-tiered descriptive rating system. The Bank’s most recent OCC CRA rating was “Satisfactory.”

On October 24, 2023, the Federal Deposit Insurance Corporation, the Federal Reserve Board, and the Office of the Comptroller of the Currency (“OCC”) issued a final rule to strengthen and modernize the CRA regulations. Under the final rule, banks with assets of at least $2 billion as of December 31 in both of the prior two calendar years will be a “large bank.” The agencies will evaluate large banks under four performance tests: the Retail Lending Test, the Retail Services and Products Test, the Community Development Financing Test, and the Community Development Services Test. The applicability date for the majority of the provisions in the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027.

Capital Adequacy

The Company and its subsidiary bank are required to comply with applicable capital adequacy standards established by the federal banking agencies. In July 2013, the FRB, the OCC, and the FDIC approved final rules (the “Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations. These rules went into effect as to the Company and the Bank on January 1, 2015, subject to phase-in periods. Effective August 2018, holding companies with less than $3 billion of consolidated assets, including the Company, are generally not subject to the Capital Rules unless otherwise directed by the FRB. The Bank remains subject to the Capital Rules.

9

Table of Contents

Basel III and the Capital Rules. The Capital Rules generally implemented the Basel Committee’s December 2010 final capital framework referred to as “Basel III” for strengthening international capital standards. The Capital Rules substantially revised the risk-based capital requirements applicable to bank holding companies and their depository institution subsidiaries. The Capital Rules revised the definitions and the components of regulatory capital, and addressed other issues affecting the numerator in banking institutions’ regulatory capital ratios. The Capital Rules also addressed asset risk weights and other matters affecting the denominator in banking institutions’ regulatory capital ratios.

Among other matters, the Capital Rules: (i) introduced a “Common Equity Tier 1” (“CET1”) capital measure and related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specified that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain revised requirements; (iii) mandated that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital; and (iv) expanded the scope of the deductions from and adjustments to capital as compared to the previous regulations.

Pursuant to the Capital Rules, the minimum capital ratios are as follows:

 

4.5% CET1 to risk-weighted assets;

 

6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets;

 

8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and

 

4.0% Tier 1 capital to average consolidated assets as reported on the consolidated financial statements (known as the “leverage ratio”).

The Capital Rules also introduced a new “capital conservation buffer,” composed entirely of CET1, on top of the minimum risk-weighted asset ratios described above, which was designed to absorb losses during periods of economic stress. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer face constraints on dividends, equity and other capital instrument repurchases and executive compensation based on the amount of the shortfall. The additional capital conservation buffer of 2.5% of CET1 on top of the minimum risk-weighted asset ratios, effectively results in minimum ratios of (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to risk-weighted assets of at least 8.5% and (iii) Total capital to risk-weighted assets of at least 10.5%.

The Capital Rules provide for a number of deductions from and adjustments to CET1. These include, for example, the requirement that mortgage servicing rights, deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks and significant investments in non-consolidated financial entities be deducted from CET1, subject to specified limits. In addition, the Capital Rules include certain exemptions to address concerns about the regulatory burden on community banks. For example, banking organizations with less than $15 billion in consolidated assets as of December 31, 2009 are permitted to include in Tier 1 capital trust preferred securities and cumulative perpetual preferred stock issued and included in Tier 1 capital prior to May 19, 2010 on a permanent basis, without any phase out (subject to a limit of 25% of Tier 1 capital). Also, community banks were able to elect, in their March 31, 2015 quarterly filings, to permanently opt-out of the requirement to include most accumulated other comprehensive income (“AOCI”) components in the calculation of common equity Tier 1 capital. Such an election, in effect, continued the AOCI treatment under the previous capital regulations. Under the Capital Rules, the Bank made the one-time, permanent election to continue to exclude AOCI from capital.

The Federal Deposit Insurance Act (the “FDIA”) establishes a system of regulatory remedies to resolve the problems of undercapitalized institutions, referred to as “prompt corrective action.” The federal banking regulators have established five capital categories (“well-capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized”) and must take certain mandatory supervisory actions, and are authorized to take other discretionary actions, with respect to institutions which are undercapitalized, significantly undercapitalized or critically undercapitalized. The severity of these mandatory and discretionary supervisory actions depends upon the capital category in which the institution is placed. The federal regulators have specified by regulation the relevant capital levels for each category, which are set forth below.


‎

10

Table of Contents


‎he Federal Deposit Insurance Act (the “FDIA”) establishes a system of regulatory remedies to resolve the problems of undercapitalized institutions, referred to as prompt corrective action. The federal banking regulators have established five capital categories (“well-capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized”) and must take certain mandatory supervisory actions, and are authorized to take other discretionary actions, with respect to institutions which are undercapitalized, significantly undercapitalized or critically undercapitalized. The severity of these mandatory and discretionary supervisory actions depends upon the capital category in which the institution is placed. The federal regulators have specified by regulation the relevant capital levels for each category, which are set forth below.
‎

“Well-Capitalized”

  

“Adequately Capitalized”

CET1 ratio of 6.5%,

Leverage Ratio of 5%,

Tier 1 Capital ratio of 8%,

Total Capital ratio of 10%, and

Not subject to a written agreement, order, capital directive or prompt corrective action directive requiring a specific capital level.

  

CET1 ratio of 4.5%,

Leverage Ratio of 4%,

Tier 1 Capital ratio of 6%, and

Total Capital ratio of 8%.

“Undercapitalized”

  

“Significantly Undercapitalized”

CET1 Ratio of less than 4.5%,

Leverage Ratio less than 4%,

Tier 1 Capital ratio less than 6%, or

Total Capital ratio less than 8%.

  

CET1 Ratio of less than 3%,

Leverage Ratio less than 3%,

Tier 1 Capital ratio less than 4%, or

Total Capital ratio less than 6%.

“Critically Undercapitalized”

  

  

Tangible equity to total assets equal to or less than 2%.

  

For purposes of these regulations, the term “tangible equity” includes capital elements counted as Tier 1 Capital for purposes of the risk-based capital standards plus the amount of outstanding cumulative perpetual preferred stock (including related surplus) not included in Tier 1 capital.

An institution that is classified as well-capitalized based on its capital levels may be reclassified as adequately capitalized, and an institution that is adequately capitalized or undercapitalized based upon its capital levels may be treated as though it were undercapitalized or significantly undercapitalized, respectively. Such reclassification can occur if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition or an unsafe or unsound practice warrants such treatment.

An institution that is categorized as undercapitalized, significantly undercapitalized or critically undercapitalized is required to submit an acceptable capital restoration plan to its appropriate federal banking regulator. In order for the capital restoration plan to be accepted by the appropriate federal banking agency, the law requires that any parent holding company guarantee that its subsidiary depository institution will comply with its capital restoration plan, subject to certain limitations. The obligation of a controlling bank holding company under the FDIA to fund a capital restoration plan is limited to the lesser of 5.0% of an undercapitalized subsidiary institution’s assets or the amount required to meet regulatory capital requirements. An undercapitalized institution is also generally prohibited from increasing its average total assets, making acquisitions, establishing any branches or engaging in any new line of business, except in accordance with an accepted capital restoration plan or with regulatory approval. Institutions that are significantly undercapitalized or undercapitalized and either fail to submit an acceptable capital restoration plan or fail to implement an approved capital restoration plan may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of deposits from correspondent banks. Critically undercapitalized depository institutions are subject to appointment of a receiver or conservator.

The Bank’s regulatory capital ratios under risk-based capital rules in effect through December 31, 2023 are presented in Note 21 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

In an effort to reduce regulatory burden, legislation enacted in May 2018 required the federal banking agencies to establish an optional “community bank leverage ratio” of between 8% to 10% tangible equity to average total consolidated assets for qualifying institutions with assets of less than $10 billion. Pursuant to federal legislation enacted in 2020, the community bank leverage ratio was set at 9% for 2022 and thereafter. Institutions with capital meeting the specified requirements and electing to follow the alternative framework are deemed to comply with the applicable regulatory capital requirements, including the risk-based requirements, and are considered well-capitalized under the prompt corrective action framework. Eligible institutions may opt into and out of the community bank ratio framework on their quarterly call report. The Bank has not exercised its option to use the community bank leverage ratio alternative as of December 31, 2023.

Other Laws and Regulations

In addition to the laws and regulations discussed above, the Bank is also subject to certain fair lending and consumer laws that are designed to protect consumers in transactions with banks. Many of these laws are implemented through regulations issued by the Consumer Financial Protection Bureau (the “CFPB”) though, for institutions of the Bank’s asset size, compliance is subject to examination by the federal banking regulator, i.e., the OCC in the Bank’s case. These laws include, but are not limited to, the Truth in

11

Table of Contents

Lending Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the Right to Financial Privacy Act, the Fair and Accurate Credit Transactions Reporting Act, and federal financial privacy laws. These laws, and their implementing regulations, generally regulate the manner in which financial institutions must deal with customers when taking deposits or making loans to such customers.

The USA PATRIOT Act of 2001 gave the federal government new additional powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, and increased information sharing and broadened anti-money laundering requirements for financial institutions. The USA Patriot Act placed additional responsibilities upon financial institutions in terms of broadened anti-money laundering compliance programs and due diligence policies and controls to facilitate detection and prevention of money laundering and terrorist financing and the reporting of suspicious activity. Such requirements build on previously existing requirements, also applicable to financial institutions, under the Bank Secrecy Act. The Bank has established policies, procedures and systems designed to comply with these laws. The USA PATRIOT Act also requires the federal banking agencies to take into consideration the effectiveness of such controls in determining whether to approve a merger or other acquisition application. Accordingly, if the Bank seeks to engage in a merger or other acquisition, the Bank’s controls designed to combat money laundering are considered as part of the application process.

Monetary Policy and Economic Control

The commercial banking business is affected not only by general economic conditions, but also by the monetary policies of the FRB. Changes in the discount rate on member bank borrowing, availability of borrowing at the “discount window,” open market operations and the imposition of, and changes in, reserve requirements are some of the instruments of monetary policy available to the FRB. These monetary policies are used in varying combinations to influence overall growth and distributions of bank loans, investments and deposits, and this use may affect interest rates charged on loans or paid on deposits. The monetary policies of the FRB have had a significant effect on the operating results of commercial banks and are expected to continue to do so in the future. These monetary policies are influenced by various factors, including inflation, unemployment, and short-term and long-term changes in the international trade balance and in the fiscal policies of the United States Government. Future monetary policies and the effect of such policies on the future business and earnings of the Company cannot be predicted.

AVAILABLE INFORMATION

The Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished by the Company pursuant to Section 13(a) or 15(d) of the Exchange Act are available without charge on the “SEC Filings” section of the Company's website, www.evansbancorp.com, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. The Company is providing the address to its Internet site solely for the information of investors. The Company does not intend its Internet address to be an active link or to otherwise incorporate the contents of the website into this Annual Report on Form 10-K or into any other report filed with or furnished to the SEC. In addition, the SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC on its website, www.sec.gov.


‎

12

Table of Contents

Item 1A.RISK FACTORS

The following factors identified by the Company's management represent significant potential risks that the Company faces in its operations.

Credit Risks

Commercial Real Estate and Commercial Business Loans Expose the Company to Increased Credit Risks



At December 31, 2023, the Company's portfolio of commercial real estate loans totaled $969 million, or 56% of total loans outstanding, and the Company's portfolio of commercial and industrial ("C&I") loans totaled $223 million, or 13% of total loans outstanding. The Company plans to continue to emphasize the origination of commercial loans as they generally earn a higher rate of interest than other loan products offered by the Bank. However, commercial loans generally expose a lender to greater risk of non-payment and loss than one-to-four family residential mortgage loans because repayment of commercial real estate and C&I loans often depends on the successful operations and the income stream of the borrowers. Commercial mortgages are collateralized by real property while C&I loans are typically secured by business assets such as equipment and accounts receivable. Commercial loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one-to-four-family residential mortgage loans. Also, many of the Company's commercial borrowers have more than one commercial real estate or C&I loan outstanding with the Company. Consequently, an adverse development with respect to one loan or one credit relationship can expose the Company to a significantly greater risk of loss compared to an adverse development with respect to a one-to-four-family residential mortgage loan. Commercial real estate loans in non-accrual status at December 31, 2023 were $20.2 million, compared with $15.3 million at December 31, 2022. C&I loans in non-accrual status were $1.8 million and $2.6 million at December 31, 2023 and December 31, 2022, respectively. Increases in the delinquency levels of commercial real estate and C&I loans could result in an increase in non-performing loans and the provision for credit losses, which could have a material adverse effect on the Company's results of operations and financial condition.



Continuing Concentration of Loans in the Company's Primary Market Area May Increase the Company's Risk



Unlike larger banks that are more geographically diversified, the Company provides banking and financial services to customers located primarily in Western New York and the Finger Lakes Region of New York State. Therefore, the Company's success depends primarily on the general economic conditions in those areas. The Company's business lending and marketing strategies focus on loans to small and medium-sized businesses in this geographic region. Moreover, the Company's assets are heavily concentrated in mortgages on properties located in Western New York and the Finger Lakes Region of New York State. Accordingly, the Company's business and operations are vulnerable to downturns in the economy of those areas. A downturn in the economy or recession in these regions could result in a decrease in loan originations and increases in delinquencies and foreclosures, which would more greatly affect the Company than if the Company's lending were more geographically diversified. In addition, the Company may suffer losses if there is a decline in the value of properties underlying the Company's mortgage loans which would have a material adverse impact on the Company's operations.

In the Event the Company's Allowance for Credit Losses is Not Sufficient to Cover Actual Loan Losses, the Company's Earnings Could Decrease



The Company maintains an allowance for credit losses which represents the amount of losses expected in the loan portfolio. There is a risk that the Company may experience significant loan losses which could exceed the recorded amount of the allowance for credit losses. The Company adopted Current Expected Credit Loss (CECL), effective January 1, 2023 which requires financial institutions to determine periodic estimates of lifetime expected credit losses on loans and recognize the expected credit losses as allowances for credit losses. When determining the allowance, expected credit losses over the contractual term of the loans (taking into account prepayments) will be estimated based on various assumptions and judgments about the collectability of its loan portfolio, considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. The emphasis on the origination of commercial real estate and C&I loans is a significant factor in evaluating the allowance for credit losses. As the Company continues to increase the amount of these loans in the portfolio, additional or increased provisions for credit losses may be necessary and would adversely affect the results of operations. In addition, bank regulators periodically review the Company's loan portfolio and credit underwriting procedures, as well as its allowance for credit losses, and may require the Company to increase its provision for credit losses or recognize further loan charge-offs. An increase in our allowance for credit losses may have a material adverse effect on our financial condition and results of operations.

At December 31, 2023, the Company had a gross loan portfolio of $1.7 billion and the allowance for credit losses was $22.1 million, which represented 1.28% of the total amount of gross loans. If the Company's assumptions and judgments prove to be incorrect or bank regulators require the Company to increase its provision for credit losses or recognize further loan charge-offs, the Company may have to increase its allowance for credit losses or loan charge-offs which could have an adverse effect on the Company's operating results and

13

Table of Contents

financial condition. Additionally, there can be no assurances that the Company's allowance for credit losses will be adequate to protect the Company against loan losses that it may incur.



Environmental Factors May Create Liability



In the course of its business, the Bank has acquired, and may acquire in the future, property securing loans that are in default. There is a risk that the Bank could be required to investigate and clean-up hazardous or toxic substances or chemical releases at such properties after acquisition by the Bank in a foreclosure action, and that the Bank may be held liable to a governmental entity or third parties for property damage, personal injury and investigation and clean-up costs incurred by such parties in connection with such contamination. The Bank may in the future be required to perform an investigation or clean-up activities in connection with environmental claims. Any such occurrence could have a material adverse effect on our business, financial condition, and results of operations.



Liquidity Risks

A lack of liquidity could adversely affect the Company’s financial condition and results of operations and result in regulatory restrictions

The Company must maintain sufficient funds to respond to the needs of depositors and borrowers. Deposits have traditionally been the Company’s primary source of funds for use in lending and investment activities and are emphasized due to the relatively lower cost of these funds. The Company also receives funds from loan repayments, investment maturities and income on other interest-earning assets, as well as borrowings. If the Company is required to rely more heavily on more expensive funding sources to support liquidity and future growth, its revenues may not increase proportionately to cover its increased costs, which would adversely affect its operating margins, profitability and growth prospects. Alternatively, the Company may need to sell a portion of its investment securities portfolio to raise funds, which, as discussed below, could result in a loss.

Any decline in funding could adversely impact the Company’s ability to originate loans, invest in securities, pay expenses, or fulfill obligations such as repaying its borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on its liquidity, business, financial condition and results of operations. A lack of liquidity could also attract increased regulatory scrutiny and potential restraints imposed by regulators. Depending on the capitalization status and regulatory treatment of depository institutions, including whether an institution is subject to a supervisory prompt corrective action directive, regulatory restrictions and prohibitions may include restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends and restrictions on the acceptance of brokered deposits.

Rising Interest Rates Have Decreased the Value of the Company’s Securities Portfolio, and the Company Would Realize Losses if it Were Required to Sell Such Securities to Meet Liquidity Needs

As a result of inflationary pressures and the resulting rapid increases in interest rates over the last year, the trading value of previously issued government and other fixed income securities has declined significantly. These securities make up a majority of the securities portfolio of most banks in the U.S., including the Company’s, resulting in unrealized losses embedded in the securities portfolios. While the Company does not currently intend to sell these securities, if the Company were required to sell such securities to meet liquidity needs, it may incur losses, which could impair the Company’s capital, financial condition, and results of operations and require the Company to raise additional capital on unfavorable terms, thereby negatively impacting its profitability. While the Company has taken actions to maximize its funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs. Furthermore, while the Federal Reserve Board has announced a Bank Term Funding Program available to eligible depository institutions secured by U.S. treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral at par, to mitigate the risk of potential losses on the sale of such instruments, there is no guarantee that such programs will be effective in addressing liquidity needs as they arise.

Interest Rate Risks

Changes in Interest Rates Could Adversely Affect the Company's Business, Results of Operations and Financial Condition



The Company's results of operations and financial condition are significantly affected by changes in interest rates. The Company's results of operations depend substantially on its net interest income, which is the difference between the interest income earned on its interest-earning assets and the interest expense paid on its interest-bearing liabilities. Because the Company's interest-bearing liabilities generally re-price or mature more quickly than its interest-earning assets, changes in interest rates could result in a decrease in its net interest income. Management is unable to predict fluctuations in market interest rates, which are affected by many factors, including inflation, recession, unemployment, monetary policy, domestic and international disorder and instability in domestic and foreign financial markets, and investor and consumer demand. During 2022 and 2023, in response to accelerated inflation, the Federal Reserve implemented monetary tightening policies, resulting in significantly increased interest rates.



14

Table of Contents

Changes in interest rates also affect the value of the Company's interest-earning assets, and in particular, the Company's securities portfolio. Generally, the value of securities fluctuates inversely with changes in interest rates. At December 31, 2023, the Company's securities available for sale totaled $276 million. Net unrealized losses on securities available for sale amounted to $40.7 million, net of tax, at December 31, 2023, compared to $47.3 million, net of tax, at December 31, 2022. The change in net unrealized losses included the impact of the $5 million loss on sale of securities as well as the changing interest rate environment in 2023. Decreases in the fair value of securities available for sale could have an adverse effect on stockholders' equity or earnings. For additional information on the loss on sale of securities see Note 3 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

The Company also is subject to reinvestment risk associated with changes in interest rates. Changes in interest rates may affect the average life of loans and mortgage-related securities. Decreases in interest rates can result in increased prepayments of loans and mortgage-related securities, as borrowers refinance to reduce borrowing costs. Under these circumstances, the Company is subject to reinvestment risk to the extent that it is unable to reinvest the cash received from such prepayments at rates that are comparable to the rates on existing loans and securities. Additionally, increases in interest rates may decrease loan demand and make it more difficult for borrowers to repay adjustable rate loans.



A significant portion of our loans have fixed interest rates and longer terms than our deposits and borrowings. As is the case with many banks and savings institutions, our emphasis on increasing the development of core deposits, those with no stated maturity date, has resulted in our interest-bearing liabilities having a shorter duration than our assets. Accordingly, in a rising interest rate environment, our net interest income could be adversely affected if the rates we pay on deposits and borrowings increase more rapidly than the rates we earn on loans. Rising interest rates may also result in increased loan delinquencies and loan losses and a decrease in demand for our products and services.

Regulatory Risks

The Company Operates in a Highly Regulated Environment and May Be Adversely Affected By Changes in Laws and Regulations



The Company and its subsidiaries are subject to regulation, supervision and examination by the OCC, FRB, and by the FDIC, as insurer of its deposits. Such regulation and supervision govern the activities in which a bank and its holding company may engage and are intended primarily for the protection of the deposit insurance funds and depositors. Regulatory requirements affect the Bank's lending practices, capital structure, investment practices, dividend policy and growth. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of a bank, the imposition of deposit insurance premiums and other assessments, the classification of assets by a bank and the adequacy of a bank's allowance for credit losses. Any change in such regulation and oversight could have a material adverse impact on the Bank, the Company and their business, financial condition and results of operations.



Additionally, the CFPB has the authority to issue consumer finance regulations and is authorized, individually or jointly with bank regulatory agencies, to conduct investigations to determine whether any person is, or has, engaged in conduct that violates new and existing consumer financial laws or regulations. Because we have less than $10 billion in total consolidated assets, the FRB and OCC, not the CFPB, are responsible for examining and supervising our compliance with these consumer protection laws and regulations.



Noncompliance with applicable regulations may lead to adverse consequences for the Company. A successful regulatory challenge to an institution's performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on mergers and acquisitions activity and restrictions on expansion. Private parties may also have the ability to challenge an institution's performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial condition and results of operations.



The Company also faces a risk of noncompliance and subsequent enforcement action in connection with federal Bank Secrecy Act and other anti-money laundering and counter terrorist financing statutes and regulations. The federal banking agencies and the U.S. Treasury Department's Financial Crimes Enforcement Network are authorized to impose significant civil money penalties for violations of those requirements and have recently engaged in coordinated enforcement efforts against banks and other financial services providers with the U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service. If the Company or the Bank violates these laws and regulations, or its policies, procedures and systems are deemed deficient, they would be subject to liability, including fines and regulatory actions, which may include restrictions on the Company’s ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of their business plans, including acquisition plans. Any of these results could have a material adverse effect on the Company's business, financial condition, results of operations and growth prospects.



Future FDIC Insurance Premium Increases May Adversely Affect the Company's Earnings



15

Table of Contents

The Company is generally unable to control the amount of premiums that it is required to pay for FDIC insurance. The FDIC increased initial base insurance deposit assessment rates by 2 basis points effective January 1, 2023. If there are additional bank or financial institution failures or other similar occurrences, the FDIC may again increase the premiums assessed upon insured institutions. Such increases and any future increases or required prepayments of FDIC insurance premiums may adversely impact the Company's results of operations.

The Company is a Financial Holding Company and Depends on Its Subsidiaries for Dividends, Distributions and Other Payments



The Company is a legal entity separate and distinct from its banking and other subsidiaries. The Company's principal source of cash flow, including cash flow to pay dividends to the Company's stockholders and principal and interest on its outstanding debt, is dividends from the Bank. There are statutory and regulatory limitations on the payment of dividends by the Bank, as well as the payment of dividends by the Company to its stockholders. Regulations of the OCC affect the ability of the Bank to pay dividends and other distributions and to make loans to the Company. If the Bank is unable to make dividend payments and sufficient capital is not otherwise available, the Company may not be able to make dividend payments to its common stockholders or principal and interest payments on its outstanding debt.



If Regulators Impose Limitations on the Company's Commercial Real Estate Lending Activities, Earnings Could Be Adversely Affected



In 2006, the federal bank regulatory agencies issued joint guidance entitled "Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices" (the "CRE Guidance"). Although the CRE Guidance did not establish specific lending limits, it provides that a bank's commercial real estate lending exposure may receive increased supervisory scrutiny where total non-owner occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate and construction and land loans, represent 300% or more of an institution's total risk-based capital and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months. The Bank's non-owner occupied commercial real estate level equaled 309% of total risk-based capital at December 31, 2023. Including owner-occupied commercial real estate, the ratio of commercial real estate loans to total risk-based capital ratio would be 375% at December 31, 2023. If the Bank’s regulators were to impose restrictions on the amount of commercial real estate loans it can hold in its portfolio, or require higher capital ratios as a result of the level of commercial real estate loans held, the Company's earnings would be adversely affected.



Operational Risks

The Company’s Internal Controls May Fail or Be Circumvented

Management regularly reviews and updates our internal controls and corporate governance policies and procedures. Any system of controls, however well-designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. A failure to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that may lead to a restatement of our financial statements or cause us to fail to meet our reporting obligations. Any failure or circumvention of our controls and procedures, or failure to comply with regulations related to controls and procedures, could have a material adverse effect on our operations, net income, financial condition, reputation, compliance with laws and regulations, or may result in untimely or inaccurate financial reporting.

The Potential for Business Interruption Exists Throughout the Company's Organization



Integral to the Company's performance is the continued efficacy of our technical systems, operational infrastructure, relationships with third parties and the vast array of associates and key executives in the Company's day-to-day and ongoing operations. Failure by any or all of these resources subjects the Company to risks that may vary in size, scale and scope. This includes, but is not limited to, operational or technical failures, pandemics, ineffectiveness or exposure due to interruption in third party support as expected, as well as the loss of key individuals or failure on the part of key individuals to perform properly. Such events could affect the stability of the Company's deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue, cause the Company to incur additional expenses, or disrupt our third party vendors' operations, any of which could result in a material adverse effect on the Company's financial condition and results of operations. Although the Company has established disaster recovery plans and procedures, the occurrence of any such events could have a material adverse effect on the Company.



Lack of System Integrity or Credit Quality Related to Funds Settlement Could Result in a Financial Loss



The Bank settles funds on behalf of financial institutions, other businesses and consumers and receives funds from clients, card issuers, payment networks and consumers on a daily basis for a variety of transaction types. Transactions facilitated by the Bank include debit card, credit card and electronic bill payment transactions, supporting consumers, financial institutions and other businesses. These

16

Table of Contents

payment activities rely upon the technology infrastructure that facilitates the verification of activity with counterparties and the facilitation of the payment. If the continuity of operations or integrity of processing were compromised this could result in a financial loss to the Bank, and therefore the Company, due to a failure in payment facilitation. In addition, the Bank may issue credit to consumers, financial institutions or other businesses as part of the funds settlement. A default on this credit by a counterparty could result in a financial loss to the Bank, and therefore to the Company.



Financial Services Companies Depend on the Accuracy and Completeness of Information about Customers and Counterparties



In deciding whether to extend credit or enter into other transactions, the Company may rely on information furnished by or on behalf of customers and counterparties, including financial statements, credit reports, and other financial information. The Company may also rely on representations of those customers, counterparties, or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports, or other financial information could cause the Company to enter into unfavorable transactions, which could have a material adverse effect on the Company's financial condition and results of operations.



Because the Nature of the Financial Services Business Involves a High Volume of Transactions, the Company Faces Significant Operational Risks



The Company relies on the ability of its employees and systems to process a high number of transactions. Operational risk is the risk of loss resulting from the Company's operations, including but not limited to, the risk of fraud by employees or persons outside of the Company, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, breaches of the internal control system and compliance requirements, and business continuation and disaster recovery. This risk of loss also includes the potential legal actions that could arise as a result of an operational deficiency or as a result of noncompliance with applicable regulatory standards, adverse business decisions or their implementation, and customer attrition due to potential negative publicity. In the event of a breakdown in the internal control system, improper operation of systems or improper employee actions, the Company could suffer financial loss, face regulatory action and suffer damage to its reputation, any of which could have a material adverse effect on the Company's financial condition or results of operation.



The Company's Information Systems May Experience an Interruption or Breach in Security



The Company relies heavily on communications and information systems to conduct its business. As a financial institution, we process a significant number of customer transactions and possess a significant amount of sensitive customer information. As technology advances, the ability to initiate transactions and access data has become more widely distributed among mobile phones, personal computers, automated teller machines, remote deposit capture sites and similar access points. Any failure, interruption, or breach in security or operational integrity of our communications and information systems, or the systems of third parties on which we rely to process transactions, could result in failures or disruptions in the Company's customer relationship management, general ledger, deposit, loan, and other systems. There can be no assurance that failures, interruptions, or security breaches of the Company's information systems will not occur or, if they do occur, that they will be adequately addressed. Unauthorized third parties regularly seek to gain access to nonpublic, private and other information through computer systems. If customers' personal, nonpublic, confidential, or proprietary information in the Company's possession were to be mishandled or misused, we could suffer significant regulatory consequences, reputational damage, and financial loss. Such mishandling or misuse could include, for example, if such information were erroneously provided to parties who are not permitted to have the information, either by fault of the Company's systems, employees or counterparties, or where such information is intercepted or otherwise inappropriately taken by third parties. The occurrence of any failures, interruptions, or security breaches of the Company's information systems could, among other consequences, damage the Company's reputation, result in a loss of customer business, subject the Company to additional regulatory scrutiny, result in increased insurance premiums, or expose the Company to civil litigation and possible financial liability, any of which could have a material adverse effect on the Company's financial condition and results of operations.



In addition, as cybersecurity and data privacy risks for banking organizations and the broader financial system have significantly increased in recent years, cybersecurity and data privacy issues have become the subject of increasing legislative and regulatory focus. The federal bank regulatory agencies have proposed enhanced cyber risk management standards, which would apply to a wide range of large financial institutions and their third-party service providers, and would focus on cyber risk governance and management, management of internal and external dependencies, and incident response, cyber resilience and situational awareness. We may become subject to new legislation or regulation concerning cybersecurity or the privacy of personally identifiable information and personal financial information or of any other information we may store or maintain. We could be adversely affected if new legislation or regulations are adopted or if existing legislation or regulations are modified such that we are required to alter our systems or require changes to our business practices or privacy policies. If cybersecurity, data privacy, data protection, data transfer or data retention laws are implemented, interpreted or applied in a manner inconsistent with our current practices, we may be subject to fines, litigation or regulatory enforcement actions or ordered to change our business practices, policies or systems in a manner that adversely impacts our operating results In addition, increased cost of compliance with cybersecurity regulations, at the federal and state level, could have a material adverse effect on the Company's financial condition and results of operations.

17

Table of Contents

The Company May Be Adversely Affected by the Soundness of Other Financial Institutions



Financial services institutions are interrelated as a result of counterparty relationships. The Company has exposure to many different industries and counterparties, and routinely executes transactions with counterparties in the financial services industry. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, could lead to losses or defaults by us or by other institutions and impact our business. Many of these transactions expose us to credit risk in the event of default of our counterparty or customer. In addition, our credit risk may be further increased when the collateral held by us cannot be relied upon or is liquidated at prices not sufficient to recover the full amount of the financial instrument exposure due to us. Any such losses could materially and adversely affect our results of operations.

The most important counterparty for the Company, in terms of liquidity, is the Federal Home Loan Bank of New York ("FHLBNY"). The Company uses FHLBNY as its primary source of borrowed overnight funds and also has several long-term advances with FHLBNY. At December 31, 2023, the Company had a total of $59 million in borrowed funds with FHLBNY. The Company has placed sufficient collateral in the form of commercial and residential real estate loans at FHLBNY. As a member of the Federal Home Loan Bank System, the Bank is required to hold stock in FHLBNY. The Bank held FHLBNY stock with a carrying value of $4.9 million as of December 31, 2023.



There are 11 branches of the FHLB, including New York. If a branch were at risk of breaching risk-based capital requirements, it could suspend dividends, cut dividend payments, and/or not buy back excess FHLB stock that members hold. FHLBNY has stated that they expect to be able to continue to pay dividends, redeem excess capital stock, and provide competitively priced advances in the future. Nonetheless, the 11 FHLB branches are jointly liable for the consolidated obligations of the FHLB system. To the extent that one FHLB branch cannot meet its obligations to pay its share of the system's debt; other FHLB branches can be called upon to make the payment.

Systemic weakness in the FHLB could result in higher costs of FHLB borrowings, reduced value of FHLB stock, and increased demand for alternative sources of liquidity that are more expensive, such as brokered time deposits, the discount window at the Federal Reserve, or lines of credit with correspondent banks.



A Decline in the Value of the Company's Deferred Tax Assets Could Adversely Affect the Company's Operating Results and Regulatory Capital Ratios



The Company's tax strategies depend on the ability to generate taxable income in future periods. The Company's tax strategies will be less effective in the event the Company fails to generate anticipated amounts of taxable income. The value of the Company's deferred tax assets is subject to an evaluation of whether it is more likely than not that they will be realized for financial statement purposes. In making this determination, management considers all positive and negative evidence available, including the Company's historical levels of taxable income, the opportunity for net operating loss carrybacks, and projections for future taxable income over the statutory tax loss carryover period. If the Company were to conclude that a significant portion of deferred tax assets were not more likely than not to be realized, the required valuation allowance could adversely affect the Company's financial position, results of operations and regulatory capital ratios. In addition, the value of the Company's deferred tax assets could be adversely affected by a change in statutory tax rates.

Strategic Risks

Expansion or Contraction of the Company's Branch Network May Adversely Affect its Financial Results



The Company cannot assure that the opening of new branches will be accretive to earnings or that it will be accretive to earnings within a reasonable period of time. Numerous factors contribute to the performance of a new branch, such as suitable location, qualified personnel, and an effective marketing strategy. Additionally, it takes time for a new branch to gather sufficient loans and deposits to generate income sufficient to cover its operating expenses. Difficulties the Bank experiences in opening new branches may have a material adverse effect on the Company's financial condition and results of operations. The Company cannot assure that the closing of branches will not be dilutive to earnings.



Mergers and Acquisitions Involve Numerous Risks and Uncertainties



The Company may pursue mergers and acquisitions opportunities. Mergers and acquisitions involve a number of risks and challenges, including the expenses involved; diversion of management’s time and attention; integration of branches and operations acquired; potential exposure to unknown risks; increased regulatory scrutiny; the outflow of customers from the acquired branches; the successful retention of personnel from acquired companies or branches; competing effectively in geographic areas not previously served; managing growth resulting from the transaction; and dilution in the acquirer's book and tangible book value per share.



18

Table of Contents

Anti-Takeover Laws and Certain Agreements and Charter Provisions May Adversely Affect Share Value



Certain provisions of the Company's certificate of incorporation and state and federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire control of the Company without approval of the Company's board of directors. Under federal law, subject to certain exemptions, a person, entity or group must notify the FRB before acquiring control of a bank holding company. Acquisition of 10% or more of any class of voting stock of a bank holding company, including shares of the Company's common stock, creates a rebuttable presumption that the acquiror "controls" the bank holding company if certain other conditions are met. Also, a bank holding company must obtain the prior approval of the FRB before, among other things, acquiring direct or indirect ownership or control of more than 5% of the voting shares of any bank, including the Bank. There also are provisions in the Company's certificate of incorporation that may be used to delay or block a takeover attempt. Taken as a whole, these statutory provisions and provisions in the Company's certificate of incorporation could result in the Company being less attractive to a potential acquiror and thus could adversely affect the market price of the Company's common stock.



General Risk Factors

The Company May Incur Impairment to its Goodwill

Goodwill arises when a business is purchased for an amount greater than the fair value of the net assets acquired. The Company has recognized goodwill as an asset on our balance sheet in connection with the acquisition of FSB on May 1, 2020. The Company evaluates goodwill for impairment at least annually. Although the Company determined that goodwill was not impaired during 2023, a significant and sustained decline in the Company’s stock price and market capitalization, a significant decline in our expected future cash flows, a significant adverse change in the business climate, slower growth rates or other factors could result in impairment of goodwill. If the Company were to conclude that a future write-down of the goodwill was necessary, it would record the appropriate charge to earnings, which could be materially adverse to its financial condition and results of operations.

The Company's Business May Be Adversely Affected by Conditions in the Financial Markets and Economic Conditions Generally

The Company's financial performance generally, and in particular the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of collateral securing those loans, is highly dependent upon the business environment in the markets where the Company operates, in Western New York and the Finger Lakes Region of New York State, and in the United States as a whole.

A favorable business environment is generally characterized by, among other factors, economic growth, efficient capital markets, low inflation, high business and investor confidence, and strong business earnings. Unfavorable or uncertain economic and market conditions can be caused by: declines in economic growth, declines in housing and real estate valuations, business activity or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; increases in inflation or interest rates; the COVID-19 pandemic or similar public health emergencies; geopolitical conflicts; natural disasters; or a combination of these or other factors.

The Company's performance could be negatively affected to the extent there is deterioration in business and economic conditions, including persistent inflation, rising prices, and supply chain issues or labor shortages, which have direct or indirect material adverse impacts on us, our customers, and our counterparties. Recessionary conditions may significantly affect the markets in which we do business, the financial condition of our borrowers, the value of our loans and investments, and our ongoing operations, costs and profitability. Declines in real estate values and sales volumes and increased unemployment levels may result in higher than expected loan delinquencies, increases in our levels of nonperforming and classified assets and a decline in demand for our products and services. Such events may cause us to incur losses and may adversely affect our capital, liquidity, and financial condition.



Strong Competition Within the Company's Market Area May Limit the Company's Growth and Profitability



Competition in the banking and financial services industry is intense. The Company competes with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, brokerage and investment banking firms, and financial technology companies operating locally within the Company's market area and elsewhere. Many of these competitors (whether regional or national institutions) have substantially greater resources and lending limits than the Company does, and may offer certain services that the Company does not or cannot provide. The Company's profitability depends upon its continued ability to successfully compete in this market area.



Loss of Key Employees May Disrupt Relationships with Certain Customers



The Company’s success depends, in large part, on its ability to attract and retain skilled people. The Company's business is primarily relationship-driven in that many of the key employees of the Bank have extensive customer relationships. Loss of a key employee with such customer relationships may lead to the loss of business if the customers were to follow that employee to a competitor. While

19

Table of Contents

management believes that the Company's relationships with its key business producers are good, the Company cannot guarantee that all of its key personnel will remain with the organization. Further, competition for highly talented people can be intense, and we may not be able to hire sufficiently skilled people or retain them. Loss of such key personnel, particularly if they enter into an employment relationship with one of the Company's competitors, could result in the loss of some of the Company's customers. Such losses could have a material adverse effect on the Company's business, financial condition and results of operations.



Damage to the Company's Reputation Could Adversely Impact our Business



The Company's business reputation is important to its success. The ability to attract and retain customers, investors, employees and advisors may depend upon external perceptions of the Company. Damage to the Company's reputation could cause significant harm to its business and prospects and may arise from numerous sources, including litigation or regulatory actions, failing to deliver minimum standards of service and quality, compliance failures, unethical behavior and the misconduct of employees, advisors and counterparties. Negative perceptions or publicity regarding these matters could damage the Company's reputation among existing and potential customers, investors, employees and advisors. Adverse developments with respect to the financial services industry may also, by association, negatively impact the Company's reputation or result in greater regulatory or legislative scrutiny or litigation against the Company. Preserving and enhancing the Company's reputation also depends on maintaining systems and procedures that address known risks and regulatory requirements, as well as its ability to identify and mitigate additional risks that arise due to changes in businesses and the marketplaces in which the Company operates, the regulatory environment and client expectations. If any of these developments has a material effect on the Company's reputation, its business could suffer.

Furthermore, shareholders and other stakeholders have begun to consider how corporations are addressing environmental, social and governance (“ESG”) issues. Governments, investors, customers and the general public are increasingly focused on ESG practices and disclosures, and views about ESG are diverse and rapidly changing. These shifts in investing priorities may result in adverse effects on the trading price of the Company’s common stock if investors determine that the Company has not made sufficient progress on ESG matters. The Company could also face potential negative ESG-related publicity in traditional media or social media if shareholders or other stakeholders determine that we have not adequately considered or addressed ESG matters. If the Company, or our relationships with certain customers, vendors or suppliers became the subject of negative publicity, our ability to attract and retain customers and employees, and our financial condition and results of operations, could be adversely impacted.

Changes in the Company’s Accounting Policies or in Accounting Standards Could Materially Affect How the Company Reports its Financial Results

Our accounting policies are fundamental to understanding our financial results and condition. Some of these policies require the use of estimates and assumptions that may affect the value of our assets or liabilities and financial results. Some of our accounting policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. If such estimates or assumptions underlying our financial statements are incorrect, we may experience material losses.

Additionally, from time to time, the FASB and the SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of our external financial statements. These changes are beyond our control, can be hard to predict and could materially impact how we report our results of operations and financial condition. We could be required to apply a new or revised standard retroactively, resulting in our restating prior period financial statements in material amounts.

Item 1B.UNRESOLVED STAFF COMMENTS 

None.

Item 1C. CYBERSECURITY

Overall Risk Management and Strategy

The Company manages its cybersecurity risk in a manner consistent with its overall risk management process in which recognized and emerging risks are identified, assessed, controlled, and monitored on a continual basis. The Company’s cybersecurity risk management follows the “Three Lines of Defense” framework, which is as follows: (1) in the first line of defense, our Information Security function manages cybersecurity risks and controls; (2) in the second line of defense, independent internal risk management provides cybersecurity risk governance oversight; and (3) our Internal Audit function provides independent assurance over cybersecurity practices as the third line of defense.

The Company leverages third parties to support the development and independent validation of cybersecurity risk management practices. Third-party cybersecurity risk oversight includes engaging consultants in the development and deployment of cybersecurity control processes, and a managed security services provider to provide 24/7 alert monitoring and remediation services, semi-annual independent

20

Table of Contents

vulnerability and penetration tests from rotating providers, and an annual information security audit coordinated by the Company’s Internal Audit function.

All third-party service providers to the Company are subject to risk assessments to identify the risks, including cybersecurity-related risks, posed by that individual third-party. Changes in vendor services result in a reassessment of risk. Based on the results of the risk assessment, the Company requires each third-party service provider to meet certain due diligence requirements. These due diligence requirements require third-party service providers to provide the Company with evidence of appropriate policies, an independent examination of their control environment, financial results, and operational resilience, as appropriate.

To date, no prior internal cybersecurity incident has materially affected the Company, however, external incidents have increased attention to risk management processes which continually identify and assess threats to the Company’s operations with consideration to strategy, financial results, and business resilience.

Governance

The Enterprise Risk Committee of the Board of Directors is responsible for the oversight of cybersecurity risk at the Company. The Company has established a Cyber and Technology Risk Appetite Statement, which is approved annually by the Enterprise Risk Committee. Changes in cybersecurity risk are monitored throughout the year and are reported to the Enterprise Risk Committee.

The Enterprise Risk Committee is kept informed of these risks through reporting by the Chief Information Security Officer (“CISO”) and is also charged with reviewing cybersecurity policies, results of an annual information security risk assessment, NYS DFS Compliance Status, and other information security risk assessments or analysis of significant events that may occur throughout the year. The Enterprise Risk Committee additionally reviews the results of vulnerability and penetration testing, tabletop exercises, and other examinations performed, whether internal or external, with a focus on cybersecurity. The Enterprise Risk Committee is kept informed of cybersecurity risks through the Company’s first and second lines of defense, including the Company’s CISO, which provide the following to the Enterprise Risk Committee on a quarterly basis, or more frequently as needed: an analysis comparing actual results against the Company’s Cyber and Technology Risk Appetite Statement, an evaluation on current cybersecurity risks facing the company, and identification of any new or emerging risks associated with cybersecurity. The Audit Committee of the Board of Directors is also informed of any cybersecurity risk that is identified in annual information security specific internal audits or material cybersecurity risks that may have an impact on the financial statements and related disclosures of the Company.

The Company has established a clear chain of command in the management of cybersecurity risks by designating a CISO and Chief Information Officer (“CIO”), who jointly lead the Company’s incident response team, which also includes the company’s management team. The CISO has certifications in information security, and together, the CISO and CIO have over 25 years of cybersecurity experience combined. The CISO and CIO meet with Company senior leadership at least quarterly through an Information Technology Steering Committee in which management assess information security risk. The Company has subscribed to threat intelligence feeds that are reviewed throughout the day to ensure risks are identified and assessed in a timely manner.

In alignment with enterprise risk management processes and the National Institute of Standards and Technology (NIST) Cybersecurity Framework, the Company has developed a control environment to prevent, detect, respond to, and recover from cybersecurity risk events. The Company’s control environment includes policies that set consistent cybersecurity control benchmarks across the organization and inform the CISO about the prevention, detection, mitigation, and remediation of cybersecurity incidents on an ongoing basis.

The Company’s policies require it to maintain and control an inventory of the enterprise assets throughout their life cycle, including end-user devices, network devices, servers, operating systems and applications used throughout the Company. These assets are subject to secure configuration requirements as well as data protection requirements before they may be used in operations. Once appropriate configuration requirements are met, access to these assets is based on account management procedures, which include determining appropriate ownership of the account and monitoring controls over accounts using administrator privileges. Access is generally provisioned on the “least privilege” principle, meaning that a user is given the minimum levels of access or permissions needed to perform their job functions, and consistent with the requirements of the role being provisioned. On a continuous basis, these assets are monitored to assess and track vulnerabilities within the Company’s infrastructure. Any identified vulnerabilities are remediated on a scheduled basis in alignment with an assessment of the associated risk. Upon termination or transfer of the user, processes are in place to remove user access from these assets, and additional monitoring controls are in place to certify access on a recurring basis.

The Company monitors industry events and leverages additional resources to monitor any new threats and vulnerability information. Systemic prevention controls are deployed to protect endpoints, as well as to prevent malicious code, emails, and websites from attempts to gain access to the network. Company personnel are trained on a recurring basis on best practices to protect the Company from cybersecurity risks. The Company’s assets are subject to recovery procedures to bring the asset back to its required state of operations, and these recovery procedures are tested internally by the Company to verify the capabilities of these procedures. The Company has

21

Table of Contents

developed an Incident Response Policy and Plan that assigns appropriate responsibilities in the event of an incident. This assignment of responsibilities allows the Company to assess and respond to any incident in a timely manner. This plan is tested on a recurring basis to maintain preparedness in the event of an actual incident.

Item 2.PROPERTIES

At December 31, 2023, the Bank conducted its business from its administrative office and 18 branch offices. The administrative offices of the Company and the Bank are located at 6460 Main Street in Williamsville, NY. The administrative office facility is 50,000 square feet and is owned by the Bank. This facility is occupied by the Office of the President and Chief Executive Officer of the Company, as well as the Administrative and Loan Divisions of the Bank. The Bank also owns a building in Derby, NY.

Item 3.LEGAL PROCEEDINGS

The nature of the Company’s business generates a certain amount of litigation involving matters arising in the ordinary course of business.

In the opinion of management, there are no proceedings pending to which the Company is a party or to which its property is subject, which, if determined adversely, would have a material effect on the Company’s financial statements.

Item 4.MINE SAFETY DISCLOSURES

Not applicable.

PART II

Item 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED

STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information. The Company’s common stock is listed on the NYSE American under the symbol “EVBN.”

Holders. The approximate number of holders of record of the Company’s common stock as of February 23, 2024 was 1,183.

PERFORMANCE GRAPH

The following Performance Graph compares the Company's cumulative total stockholder return on its common stock for a five-year period (December 31, 2018 to December 31, 2023) with the cumulative total return of the NYSE American Composite Index and NASDAQ Bank Index. The comparison for each of the periods assumes that $100 was invested on December 31, 2018 in each of the Company's common stock and the stocks included in the NYSE American Composite Index and NASDAQ Bank Index and that all dividends were reinvested without commissions. This table does not forecast future performance of the Company's stock.

22

Table of Contents

Picture 1

Index

12/31/18

12/31/19

12/31/20

12/31/21

12/31/22

12/31/23

Evans Bancorp, Inc.

100.00

126.97

91.23

137.95

132.20

116.13

NASDAQ Bank

100.00

124.38

111.15

155.27

126.76

118.30

NYSE American - Composite Index

100.00

113.72

105.18

152.68

184.23

204.68

In accordance with and to the extent permitted by applicable law or regulation, the information set forth above under the heading "Performance Graph" shall not be deemed to be "soliciting material" or to be "filed" with the SEC under the Securities Act or the Exchange Act, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into such a filing.
‎

23

Table of Contents

Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

Issuer Purchases of Equity Securities

Period

Total Number of Shares Purchased

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs

October 1, 2023 - October 31, 2023

Repurchase program(1)

-

$

-

-

187,932 

Employee transactions

-

$

-

N/A

N/A

November 1, 2023 - November 30, 2023

Repurchase program(1)

-

$

-

-

187,932 

Employee transactions

-

$

-

N/A

N/A

December 1, 2023 - December 31, 2023

Repurchase program(1)

-

$

-

-

187,932 

Employee transactions

-

$

-

N/A

N/A

Total:

Repurchase program(1)

-

$

-

-

187,932 

Employee transactions

-

$

-

N/A

N/A

(1)On February 25, 2021, the Board of Directors authorized the Company to repurchase up to 300,000 shares of the Company’s common stock (the “2021 Repurchase Program”). The 2021 Repurchase program does not expire and may be suspended or discontinued by the Board of Directors at any time. The remaining number of shares that may be purchased under the 2021 Repurchase Program as of December 31, 2023 was 187,932.

Item 6.[RESERVED]

Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

This discussion is intended to compare the performance of the Company for the years ended December 31, 2023 and 2022. The review of the information presented should be read in conjunction with Part I, Item 1: “Business” and Part II, Item 8: “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

The Company is a financial holding company registered under the BHCA. The Company currently conducts its business through its two direct wholly-owned subsidiaries: the Bank, and the Bank’s subsidiaries, ENL and ENHC; and ENFS. The Company does not engage in any other substantial business. Unless the context otherwise requires, the term “Company” refers collectively to Evans Bancorp, Inc. and its subsidiaries.


‎

24

Table of Contents

Selected Financial Data

As of and for the year ended December 31,

2023

2022

2021

(in thousands, except for per share data)

Balance Sheet Data

Assets

$

2,108,663 

$

2,178,510 

$

2,210,640 

Interest-earning assets

1,988,380 

2,043,975 

2,103,604 

Investment securities

277,739 

371,275 

309,124 

Loans and leases, net

1,698,832 

1,652,931 

1,553,467 

Deposits

1,718,761 

1,771,679 

1,937,037 

Borrowings

185,775 

231,223 

67,965 

Stockholders' equity

178,219 

153,993 

183,892 

Income Statement Data

Net interest income

$

61,208 

$

72,955 

$

72,785 

Non-interest income

32,922 

19,271 

18,847 

Non-interest expense

59,382 

59,935 

61,219 

Net income

24,524 

22,389 

24,043 

Per Share Data

Earnings per share - basic

$

4.49 

$

4.07 

$

4.41 

Earnings per share - diluted

4.48 

4.04 

4.37 

Cash dividends

1.32 

1.26 

1.20 

Book value

32.40 

28.32 

33.54 

Performance Ratios

Return on average assets

1.14 

%

1.02 

%

1.12 

%

Return on average equity

15.47 

%

13.49 

%

13.71 

%

Return on average tangible

common stockholders' equity*

16.82 

%

14.74 

%

14.96 

%

Net interest margin

3.02 

%

3.53 

%

3.57 

%

Efficiency ratio

63.09 

%

64.99 

%

66.81 

%

Efficiency ratio (Non-GAAP) **

74.69 

%

64.55 

%

66.22 

%

Dividend payout ratio

29.40 

%

30.96 

%

27.19 

%

Capital Ratios

Tier 1 capital to average assets

10.37 

%

9.13 

%

8.57 

%

Equity to assets

8.45 

%

7.07 

%

8.32 

%

Asset Quality Ratios

Total non-performing assets to

total assets

1.30 

%

1.14 

%

0.83 

%

Total non-performing loans

to total loans

1.59 

%

1.48 

%

1.17 

%

Net charge-offs to

average loans

-

%

0.11 

%

0.03 

%

Allowance for credit losses

to non-accrual loans

81.33 

%

87.19 

%

106.04 

%

Allowance for credit losses

to total loans

1.28 

%

1.16 

%

1.17 

%

* The calculation of the average tangible common stockholders’ equity ratio excludes goodwill and intangible assets from average stockholders’ equity. See Reconciliation of GAAP to Non-GAAP Financial Measures below.

** The calculation of the non-GAAP efficiency ratio excludes amortization of intangibles, gains and losses from investment securities, gains from sale of subsidiaries, merger-related expenses and the impact of historic tax credit transactions. See Reconciliation of GAAP to Non-GAAP Financial Measures below.

25

Table of Contents

Reconciliation of GAAP to Non-GAAP Financial Measures

We believe the non-GAAP financial measures included above provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, we acknowledge that our non-GAAP financial measures have a number of limitations. The following reconciliation table provides a more detailed analysis of the non-GAAP financial measures:

2023

2022

2021

(in thousands)

Return on average tangible common stockholders' equity

Net income (GAAP)

$

24,524 

$

22,389 

$

24,043 

Average shareholders' equity (GAAP)

$

158,538 

$

165,982 

$

175,416 

Deduct: Average goodwill and intangible assets

12,711 

14,136 

14,683 

Average tangible shareholders' equity (non-GAAP)

$

145,827 

$

151,846 

$

160,733 

Return on average tangible common stockholders' equity (non-GAAP)

16.82%

14.74%

14.96%

Efficiency ratio

Non-interest expense (GAAP)

$

59,382 

$

59,935 

$

61,219 

Deduct: Intangible amortization expense

367 

400 

537 

Adjusted non-interest expense (non-GAAP)

$

59,015 

$

59,535 

$

60,682 

Net interest income (GAAP)

$

61,208 

$

72,955 

$

72,785 

Non-interest income (GAAP)

32,922 

19,271 

18,847 

Add: Historic tax credit losses, net

-

-

9 

Add: Loss on sale of securities

5,044 

-

-

Deduct: Gain on sale of insurance agency

20,160 

-

-

Adjusted total revenue (non-GAAP)

$

79,014 

$

92,226 

$

91,641 

Efficiency ratio (non-GAAP)

74.69%

64.55%

66.22%

See Item 8, “Consolidated Financial Statements and Supplementary Data,” of this Report on Form 10-K for further information and analysis of changes in the Company's financial condition and results of operations.

Summary

Net income in 2023 was $24.5 million, a 10% increase from 2022 net income of $22.4 million. The increase in net income was due to the gain on sale of the insurance agency partially offset by lower net interest income and loss on sale of investment securities. Net interest income was $61.2 million in 2023 compared with $73.0 million in 2022. The yield on loans increased 86 basis points while competition on deposits and changes in customer behaviors contributed to the 189 basis points increase in cost of funds during 2023. Cost of funds were 2.33% at December 31, 2023 compared with 0.44% during 2022. Contributing to the increase in cost of funds during

26

Table of Contents

2023 was the impact of rising federal funds rates since early 2022. Net interest margin was 3.02% and 3.53% in 2023 and 2022, respectively.

The Company’s provision for credit loss was less than $0.1 million, which reflected improving economic conditions, including peer group metrics, partially offset by loan growth and specific reserves related to individually analyzed loans. Provision for credit loss in 2022 included a $1.5 million charge-off of a single commercial loan and loan growth, partially offset by a decrease in criticized loans. The ratio of non-performing loans to total loans was 1.59% at December 31, 2023 compared with 1.48% at December, 31, 2022.

Non-interest income increased $13.7 million, or 71%, to $32.9 million.  Included in non-interest income was the pretax gain on the sale of TEA of $20.2 million, pretax loss on sale of investment securities of $5 million, reduced bank services charges of $0.3 million, and lower insurance service and fee revenue of $0.2 million.  Non-interest income during 2022 included a gain on sale of an asset that was acquired in foreclosure of $0.2 million, as well as $0.2 million of revenue recognized relating to rents received from the acquired asset and a $0.2 million final payment in connection with a historic tax credit investment. 

Non-interest expense decreased $0.6 million, or 1%, to $59.4 million. Current year decreases included salaries and employee benefits of $1.8 million and loan expenses of $0.3 million, partially offset by higher technology and communication expenses of $0.8 million, charitable contributions of $0.3 million, and FDIC insurance expense of $0.4 million.

Strategy

The Company’s goal is to continue to increase market share and achieve scale while improving profitability and returning value to shareholders. The Company’s biggest strength and earnings driver is commercial and small business lending. The Company expects to continue to focus on building on this competitive advantage by adding personnel in this area. In addition, management intends to continue to develop strategies to deepen existing customer relationships with tailored product sets that reward the Company’s most loyal customers.

The Company’s strategies are designed to direct tactical investment decisions supporting its financial objectives. While the Company intends to focus its efforts on the pursuit of these strategies, there can be no assurance that the Company will successfully implement these strategies or that the strategies will produce the desired results. The Company’s most significant revenue source continues to be net interest income, defined as total interest income less interest expense. Net interest income accounted for 65% of total revenue in 2023. Excluding the one-time gain on the sale of TEA and loss on sale of investment securities, net interest income accounted for 77% of total revenue. To produce net interest income and consistent earnings growth over the long-term, the Company must generate loan and deposit growth at acceptable margins within its market area. To generate and grow loans and deposits, the Company must focus on a number of areas including, but not limited to, sales practices, customer and employee satisfaction and retention, competition, evolving customer behavior, technology, product innovation, interest rates, credit performance of its customers and vendor relationships.

The Company also considers non-interest income important to its continued financial success. Fee income generation is partly related to the Company’s loan and deposit operations, such as deposit service charges. Improved performance in non-interest income can help increase capital ratios because most of the non-interest income is generated without recording assets on the balance sheet. The Company has and will continue to face challenges in increasing its non-interest income as the regulatory environment changes.

The Company has focused its efforts on targeted groups in its community such as (1) smaller businesses with smaller credit needs but rich in deposits and other service needs; (2) middle market commercial businesses; (3) commercial real estate lending; (4) retail customers; and (5) municipal customers. The overarching goal is to cross-sell between financial services and banking lines of business to deepen our relationships with all of our customers.

The Company strives to provide a personal touch to customer service and is committed to maintaining a local, community-based philosophy. The Bank has emphasized hiring local branch and lending personnel with strong ties to the specific local communities it serves.

The Bank serves its market through 18 banking offices in Western New York and the Finger Lakes Region of New York State. The Company’s principal source of funding is through deposits, which it reinvests in the community in the form of loans and investments. Deposits are insured up to the maximum permitted by the Deposit Insurance Fund of the FDIC. The Bank is regulated by the OCC.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

The Company’s Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and follow general practices within the industries in which it operates. Application of these principles requires management to make estimates, assumptions and judgments that affect the amounts reported in the Company’s Consolidated Financial Statements and Notes. These estimates, assumptions and judgments are based on information available as of the date of the Consolidated Financial Statements. Accordingly, as this information changes, the Consolidated Financial Statements could reflect different estimates,

27

Table of Contents

assumptions and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments, and as such, have a greater possibility of producing results that could be materially different than originally reported.

The most significant accounting policies followed by the Company are presented in Note 1 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. These policies, along with the disclosures presented in the other Notes to the Consolidated Financial Statements contained in this Annual Report on Form 10-K and in this financial review, provide information on how significant assets and liabilities are valued in the Company’s Consolidated Financial Statements and how those values are determined.

The more significant area in which management of the Company applies critical assumptions and estimates includes the allowance for credit losses.

Allowance for Credit Losses

The allowance for credit losses (“ACL”) on loans is management’s estimate of expected lifetime credit losses on loans carried at amortized cost. The ACL on loans is established through a provision of credit losses recognized in the Consolidated Statements of Income. Additionally, the ACL on loans is reduced by charge-offs on loans and increased by recoveries of amounts previously charged-off.

At December 31, 2023 the ACL on loans totaled $22.1 million, compared to $22.2 million recorded upon the adoption of ASU 2016-13 at January 1, 2023. A significant portion of our ACL is allocated to the commercial portfolio (both commercial real estate and commercial and industrial (“C&I”) loans). As of December 31, 2023 and January 1, 2023 the ACL allocated to the total commercial portfolio was $17.8 million and $18.0 million, respectively.

Management employs a process and methodology to estimate the ACL on loans that evaluates both quantitative and qualitative factors. The methodology for evaluating quantitative factors consists of two basic components: pooling loans into portfolio segments for loans that share similar risk characteristics and identifying individually analyzed loans that do not share similar risk characteristics with loans that are pooled into portfolio segments.

For pooled loan portfolio segments, the Company utilizes a discounted cash flow (“DCF”) methodology to estimate credit losses over the expected life of the loan. The methodology incorporates a probability of default and loss given default framework. Loss given default is estimated based on historical credit loss experience of a peer group. Probability of default is estimated utilizing a regression model that incorporates economic factors. The model utilizes forecasted econometric factors with a one-year reasonable and supportable forecast period and one-year straight-line reversion period in order to estimate the probability of default for each loan portfolio segment. The DCF methodology combines the probability of default, the loss given default, prepayment speeds and the remaining life of the loan to estimate a reserve for each loan.

The ACL for individually analyzed loans is measured using a DCF method based upon the loan’s contractual effective interest rate, or at the loan’s observable market price, or, if the loan was collateral dependent, at the fair value of the collateral.

Quantitative loss factors are also supplemented by certain qualitative risk factors reflecting management’s evaluation of various conditions. Management’s evaluation of these factors includes a weighted rate and risk range category assigned to each factor. The weighted rates and risk range categories vary between loan segments.

Because the methodology is based upon historical experience and trends, current economic data, reasonable and supportable forecasts, as well as management’s judgement, factors may arise that result in different estimations. Deteriorating conditions or assumptions could lead to further increases in the ACL on loans; conversely, improving conditions or assumptions could lead to further reductions in the ACL on loans.

In estimating the ACL on loans, management considers the sensitivity of the model and significant judgments and assumptions that could result in an amount that is materially different from management’s estimate. Given the concentration of ACL allocation to the total commercial portfolio and the significant judgments made by management in deriving the qualitative loss factors, management analyzed the impact that changes in judgments could have. The result was an ACL allocated to the total commercial loan portfolio that ranged between $13.8 million and $29.3 million at December 31, 2023. The sensitivity and related range of impact is a hypothetical analysis and is not intended to represent management’s judgments or assumptions of qualitative loss factors that were utilized at December 31, 2023 in estimation of the ACL on loans recognized on the Consolidated Balance Sheet.

If the assumptions underlying the determination of the ACL prove to be incorrect, the ACL may not be sufficient to cover actual loan losses and an increase to the ACL may be necessary to allow for different assumptions or adverse developments. In addition, a problem with one or more loans could require a significant increase to the ACL.

28

Table of Contents

Management’s methodology and policy in determining the allowance for credit losses can be found in Note 1 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. The activity in the allowance for credit losses is depicted in supporting tables in Note 4 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2023 AND DECEMBER 31, 2022

Net Income

Net income was $24.5 million in 2023, or $4.48 per diluted share, an increase from $22.4 million, or $4.04 per diluted share, in 2022. For further information on net income by business segments see Note 19 to the Company’s Consolidated Financial Statements included under Item 8 of this Annual Report on Form 10-K.

Net Interest Income

Net interest income, the difference between interest income and fee income on interest earning assets, such as loans and securities, and interest expense on deposits and borrowings, provides the primary basis for the Company’s results of operations.

Net interest income is dependent on the amounts of and yields earned on interest earning assets as compared to the amounts of and rates paid on interest bearing liabilities.

AVERAGE BALANCE SHEET INFORMATION

The following table presents the significant categories of the assets and liabilities of the Company, interest income and interest expense, and the corresponding yields earned and rates paid in 2023, 2022, and 2021. The assets and liabilities are presented as daily averages. The average loan balances include both performing and non-performing loans. Interest income on loans does not include interest on loans for which the Bank has ceased to accrue interest. Available-for-sale securities are stated at fair value. Interest and yield are not presented on a tax-equivalent basis.


‎

29

Table of Contents

2023

2022

2021

Average

Interest

Average

Interest

Average

Interest

Outstanding

Earned/

Yield/

Outstanding

Earned/

Yield/

Outstanding

Earned/

Yield/

Balance

Paid

Rate

Balance

Paid

Rate

Balance

Paid

Rate

(in thousands)

(in thousands)

(in thousands)

ASSETS

Interest-earning assets:

Loans, net (1)

$

1,657,114 

$

87,448

5.28 

%

$

1,595,944 

$

70,562 

4.42 

%

$

1,661,057 

$

72,955 

4.39 

%

Taxable securities

351,903 

8,755 

2.49 

%

373,589 

8,037 

2.15 

%

221,965 

4,224 

1.90 

%

Tax-exempt securities

7,791 

244 

3.13 

%

11,320 

287 

2.54 

%

10,489 

214 

2.04 

%

Interest bearing deposits at banks

7,741 

403 

5.21 

%

85,268 

596 

0.70 

%

144,944 

187 

0.13 

%

Total interest-earning assets

2,024,549 

$

96,850

4.78 

%

2,066,121 

$

79,482 

3.85 

%

2,038,455 

$

77,580 

3.81 

%

Non interest-earning assets:

Cash and due from banks

16,411 

15,556 

15,197 

Premises and equipment, net

16,277 

17,392 

18,963 

Other assets

99,180 

88,075 

79,765 

Total Assets

$

2,156,417 

$

2,187,144 

$

2,152,380 

LIABILITIES & STOCKHOLDERS'

EQUITY

Interest-bearing liabilities:

NOW

$

297,159 

$

4,544 

1.53 

%

$

261,514 

$

427 

0.16 

%

$

248,441 

$

269 

0.11 

%

Regular savings

741,798 

11,835 

1.60 

%

970,401 

1,899 

0.20 

%

932,549 

1,514 

0.16 

%

Time deposits

306,173 

10,099 

3.30 

%

151,719 

1,263 

0.83 

%

202,958 

1,081 

0.53 

%

Other borrowed funds

137,423 

6,789 

4.94 

%

48,731 

1,136 

2.33 

%

39,478 

308 

0.78 

%

Subordinated debt

31,125 

2,186

7.02

%

31,023 

1,791 

5.77 

%

30,922 

1,616 

5.23 

%

Securities sold U/A to repurchase

13,056 

189 

1.45 

%

6,827 

11 

0.16 

%

4,453 

7 

0.16 

%

Total interest-bearing liabilities

1,526,734 

$

35,642

2.33 

%

1,470,215 

$

6,527 

0.44 

%

1,458,801 

$

4,795 

0.33 

%

Noninterest-bearing liabilities:

Demand deposits

451,261 

530,879 

494,294 

Other

19,884 

20,068 

23,869 

Total liabilities

$

1,997,879 

$

2,021,162 

$

1,976,964 

Stockholders' equity

158,538 

165,982 

175,416 

Total Liabilities and Equity

$

2,156,417 

$

2,187,144 

$

2,152,380 

Net interest earnings

$

61,208 

$

72,955 

$

72,785 

Net interest margin

3.02 

%

3.53 

%

3.57 

%

Interest rate spread

2.45 

%

3.41 

%

3.48 

%

(1)Included in interest earned as of December 31, 2022 and 2021 were PPP loans fees of $0.8 million and $8.8 million, respectively. There were no PPP loans recorded in 2023. Other loan fees included in interest earned were not material during 2023, 2022, and 2021.

30

Table of Contents

The following table segregates changes in interest earned and paid for the past two years into amounts attributable to changes in volume and changes in rates by major categories of assets and liabilities. The change in interest income and expense due to both volume and rate has been allocated in the table to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. There are no out-of-period item adjustments included in the following table.

2023 Compared to 2022

2022 Compared to 2021

Increase (Decrease) Due to

Increase (Decrease) Due to

(in thousands)

Volume

Rate

Total

Volume

Rate

Total

Interest earned on:

Loans

$

2,791

$

14,095

$

16,886

$

(2,876)

$

483

$

(2,393)

Taxable securities

(486)

1,204

718

3,202

611

3,813

Tax-exempt securities

(101)

58

(43)

18

55

73

Interest-bearing deposits at banks

(974)

781

(193)

(106)

515

409

Total interest-earning assets

$

1,230

$

16,138

$

17,368

$

238

$

1,664

$

1,902

Interest paid on:

NOW accounts

$

66

$

4,050

$

4,116

$

15

$

143

$

158

Savings deposits

(548)

10,484

9,936

65

320

385

Time deposits

2,261

6,575

8,836

(319)

501

182

Other

4,314

1,913

6,227

335

672

1,007

Total interest-bearing liabilities

$

6,093

$

23,022

$

29,115

$

96

$

1,636

$

1,732

Net interest income decreased by $11.7 million, or 16%, to $61.2 million in 2023 from $73.0 million in 2022. The yield on loans was 5.28% during 2023 compared with 4.42% in the prior year. Yield on savings deposits increased 140 basis points to 1.60% from 2022 while average savings deposits decreased $229 million. Changes in customer behavior contributed to the $154 million increase in average time deposits as customers shift to higher yielding deposit products. The yield on time deposits was 3.30% at December 31, 2023.

The total commercial loan portfolio average balance, including commercial real estate and C&I loans, increased $52.3 million, or 5%, from a $1.1 billion average balance in 2022 to a $1.2 billion average balance in 2023. Average consumer loans, including residential mortgages and home equity lines of credit, increased 2% from $511.2 million in 2022 to $523.0 million in 2023. The increase in the commercial loan portfolio was primarily due to higher levels of commercial real estate originations during the year.

On the funding side, average interest-bearing deposits decreased $39 million, while average overnight and short-term borrowings increased $95 million.

The Company’s net interest margin decreased from 3.53% in 2022 to 3.02% in 2023. The net interest spread, or the difference between yield on interest-earning assets and rate on interest-bearing liabilities, decreased from 3.41% in 2022 to 2.45% in 2023. The yield on interest-earning assets increased 93 basis points to 4.78% during 2023 due to higher loan yields. Cost of interest-bearing liabilities increased 189 basis points to 2.33% during 2023. The increase in the cost of interest-bearing liabilities is the result of higher deposit rates as the Company continues to provide competitive pricing on deposits, as well as the increased cost of borrowings. The rate paid on average time deposits increased from 0.83% in 2022 to 3.30% in 2023.  Average time deposits were 20% of total interest-bearing liabilities in 2023, compared with 10% in 2022.

The Bank regularly monitors its exposure to interest rate risk. Management believes that the proper management of interest-sensitive funds will help protect the Bank’s earnings against changes in interest rates. The Bank’s Asset/Liability Management Committee (“ALCO”) meets monthly for the purpose of evaluating the Bank’s short-term and long-term liquidity position and the potential impact on capital and earnings of changes in interest rates. The Bank has adopted an asset/liability policy that specifies minimum limits for liquidity and capital ratios. This policy includes setting ranges for the negative impact acceptable on net interest income and on the fair value of equity as a result of a shift in interest rates. The asset/liability policy also includes guidelines for investment activities and funds management. At its monthly meetings, ALCO reviews the Bank’s status and formulates its strategies based on current economic conditions, interest rate forecasts, loan demand, deposit volatility and the Bank’s earnings objectives.

31

Table of Contents

Allowance for Credit Losses

Prior to January 1, 2023, the allowance for credit losses represented the amount that in management’s judgement reflected incurred credit losses inherent in the loan portfolio as of the balance sheet date. Based on portfolio composition, the current economic conditions, and reasonable and supportable forecasts of future conditions, the Company recognized an increase to the allowance for credit losses of $2.7 million upon adoption of the new credit loss accounting standard, ASU 2016-13, Financial instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, as of January 1, 2023 as compared with the allowance for credit losses recognized on its consolidated balance sheet at December 31, 2022. The $2.7 million increase was recognized as a net tax cumulative effect adjustment to retained earnings of $2.0 million.

The Company’s provision for credit loss was less the $0.1 million for the year ended 2023, which reflected improving economic conditions including peer group metrics, partially offset by loan growth and specific reserves related individually analyzed loans. Provision for credit loss in 2022 included a $1.5 million charge-off of a single commercial loan in addition to loan growth, partially offset by a decrease of criticized loans. The ratio of non-performing loans to total loans was 1.59% compared with 1.48% in 2022.

A description of how the allowance for credit loan is determined along with tabular data depicting the key factors in calculating the allowance is set forth in Notes 1 and 4 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Non-accrual, Past Due and Restructured Loans

Non-performing loans increased $2.6 million from $24.7 million at December 31, 2022 to $27.3 million at December 31, 2023. The increase in 2023 was driven by one commercial real estate loan totaling $6.6 million that moved to non-accrual status during 2023, partially offset by $1.6 million in paydowns and loans that returned to accruing status as well as a decrease of $2.4 million of loans categorized as 90 days past due as of December 31, 2022. Non-performing loans included $27.2 million of non-accruing loans at December 31, 2023 compared with $22.3 million at December 31, 2022. Total non-accrual loans to total loans was 1.58% and 1.33% at December 31, 2023 and 2022, respectively. There were $0.1 million of accruing loans categorized as 90 days past due at December 31, 2023.

Total non-performing loans to total assets was 1.30% at December 31, 2023 compared with 1.14% at December 31, 2022. Total non-performing loans to total loans at December 31, 2023 and 2022 was 1.59% and 1.48%, respectively.

See Note 4 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information about the Company's non-accrual, past due, and loans modified to borrowers experiencing financial difficulty.

Allowance for Credit Losses

The following table summarizes the Bank’s allocation of the allowance for credit losses by portfolio type for years 2023 and 2022.

Balance at 12/31/2023

Percent of loans to total loans

Balance at 12/31/2022

Percent of loans to total loans

(in thousands)

Residential mortgages*

$

3,883 

26 

%

$

2,102 

26 

%

Commercial mortgages*

12,548 

56 

%

11,595 

54 

%

Home equities

434 

5 

%

608 

5 

%

Commercial and industrial

5,241 

13 

%

4,980 

15 

%

Consumer loans**

8 

-

%

153 

-

%

Total

$

22,114 

100 

%

$

19,438 

100 

%

* includes construction loans

** includes other loans


‎

32

Table of Contents

During 2023, the Company had net loan charge-offs of $0.1 million, compared with of $1.7 million in 2022. The ratio of net loan charge-offs to average net loans outstanding was less than 0.01% in 2023 compared with 0.11% in 2022. There were no significant charge-offs or recoveries during 2023. Charge-offs during 2022 included $1.5 million related to a single commercial loan. The following table presents by loan category net loan charge-offs to average loans outstanding ratios for 2023 and 2022.

2023

2022

Residential mortgages*

-

%

0.03 

%

Commercial mortgages*

-

%

-

%

Home equities

0.02 

%

0.04 

%

Commercial loans

(0.03)

%

0.59 

%

Consumer loans**

6.58 

%

5.54 

%

* includes construction loans

** includes other loans

Commercial mortgages comprised 57% of the allowance for credit losses, and correspondingly, the commercial mortgage portfolio made up the largest proportion, or 56%, of the total loan portfolio as of December 31, 2023, as compared with 60% of the allowance and 54% of the total loan portfolio at December 31, 2022.

C&I loans comprised 24% of the allowance for credit losses and 13% of the loan portfolio as of December 31, 2023, as compared with 26% of the allowance and 15% of the total loan portfolio at December 31, 2022.

Residential mortgages comprised 18% of the allowance for credit losses and 26% of the loan portfolio as of December 31, 2023, as compared with 11% of the allowance and 26% of the total loan portfolio at December 31, 2022.

Overall, the ratio of the allowance for credit losses to total loans increased from 1.16% at December 31, 2022 to 1.28% on December 31, 2023 primarily due to the adoption of ASU 2016-13.

The Company evaluates the loan portfolio to ensure that specific credits are appropriately graded and reserved. At least annually, commercial borrowers’ financial information is reviewed by the individual relationship managers. Independent of the individual relationship managers, the Company has engaged an independent vendor to perform independent reviews and to monitor the management of the Company’s commercial loan portfolio. The Company’s loan review function reviews a percentage of the commercial loan portfolio based on an annual risk assessment, typically ranging from 40% to 50%. The Company believes that the allowance for credit losses is reflective of a fair assessment of the current environment and credit quality trends.

Non-Interest Income

Total non-interest income increased from $19.3 million in 2022 to $32.9 million in 2023. The increase was due to the pretax gain on sale of TEA of $20.2 million, partially offset by a loss on sale of investment securities of $5 million, reduced bank service charges of $0.3 million, a decrease in mortgage servicing rights of $0.2 million, and lower insurance service and fee revenue of $0.2 million. Insurance service and fee revenue reflected eleven months of TEA income as a result of the sale. Included in non-interest income during 2022 was a gain on sale of an asset that was acquired in foreclosure of $0.2 million, as well as $0.2 million of revenue recognized relating to rents received from the acquired asset and a $0.2 million final payment in connection with a historic tax credit investment. Additional information on the sale of TEA is included within Note 2 to the Company’s Consolidated Financial Statements included in item 8 of this Annual Report on Form 10-K.

Non-Interest Expense

Total non-interest expense decreased $0.6 million, or 1%, from $59.9 million in 2022 to $59.4 million in 2023. Current year decreases included salaries and employee benefits of $1.8 million of which $0.9 million is related to lower incentive accruals, and loan expenses of $0.3 million, partially offset by higher technology and communication expenses of $0.8 million, charitable contributions of $0.3 million, and FDIC insurance expense of $0.4 million. The increase in technology and communication expenses is a result of higher software costs and purchase of technology to improve workflow automation and operational efficiency.

The efficiency ratio expresses the relationship of operating expenses to revenues. The Company's GAAP efficiency ratio, or non-interest operating expenses divided by the sum of net interest income and non-interest income, was 63.1% in 2023 compared with 65.0% in 2022. The Company’s non-GAAP efficiency ratio, which excludes amortization expense, gains and losses from investment securities, gain on sale of subsidiary, and the impact of historic tax credit transactions, was 74.7% in 2023 compared with 64.6% in 2022.

33

Table of Contents

Taxes

Income tax expense for the year was $10.2 million, representing an effective tax rate of 29.4% compared with an effective tax rate of 24.2% in 2022. For further discussion of the Company’s income taxes, including a reconciliation from the statutory rate to the actual rate for 2023 and 2022, see Note 14 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

FINANCIAL CONDITION

The Company had total assets of $2.1 billion at December 31, 2023, a decrease of $70 million, or 3% from December 31, 2022. Net loans of $1.7 billion at the most recent year end were $46 million, or 3%, higher than at December 31, 2022. Total investment securities decreased $94 million, or 25%, from $371 million at December 31, 2022 to $278 million at December 31, 2023. Deposits decreased by $53 million, or 3%, to $1.7 billion as of the end of 2023. Stockholders’ equity was $178 million at the conclusion of 2023, a $24 million, or 16% increase from $154 million at the previous year end.

Securities Activities

The primary objectives of the Bank’s securities portfolio are to provide liquidity and maximize income while preserving safety of principal. Secondary objectives include: providing collateral to secure local municipal deposits, the investment of funds during periods of decreased loan demand, interest rate sensitivity considerations, supporting local communities through the purchase of tax-exempt securities and tax planning considerations. The Bank’s Board of Directors is responsible for establishing overall policy and reviewing performance of the Bank’s investments.

Under the Bank’s policy, acceptable portfolio investments include: United States Government obligations, obligations of federal agencies or U.S. Government-sponsored enterprises, mortgage-backed securities, municipal obligations (general obligations, revenue obligations, school districts and non-rated issues from the Bank’s general market area), banker’s acceptances, certificates of deposit, Industrial Development Authority Bonds, Public Housing Authority Bonds, corporate bonds (each corporation limited to the Bank’s legal lending limit), collateralized mortgage obligations, Small Business Investment Companies (SBIC), Federal Reserve stock and Federal Home Loan Bank stock.

In regard to municipal securities, the Company’s general investment policy is that in-state securities must be rated at least Moody’s Baa (or equivalent) at the time of purchase. The Company reviews the ratings report and municipality financial statements and prepares a pre-purchase analysis report before the purchase of any municipal securities. Out-of-state issues must be rated by Moody’s at least Aa (or equivalent) at the time of purchase. The Company did not own any out-of-state municipal bonds at December 31, 2023 or December 31, 2022. Bonds rated below A are reviewed periodically to ensure their continued creditworthiness. While purchase of non-rated municipal securities is permitted, such purchases are limited to bonds issued by municipalities in the Company’s general market area. Those municipalities are typically customers of the Bank whose financial situation is familiar to management. The financial statements of the issuers of non-rated securities are reviewed by the Bank and a credit file of the issuers is kept on each non-rated municipal security with relevant financial information.

The Company has not experienced any credit troubles in its municipal bond portfolio and does not believe any credit troubles are imminent. Aside from the non-rated municipal securities to local municipalities discussed above that are considered held-to-maturity, all of the Company’s available-for-sale municipal bonds are investment-grade government obligation (“G.O.”) bonds. G.O. bonds are generally considered safer than revenue bonds because they are backed by the full faith and credit of the government while revenue bonds rely on the revenue produced by a particular project. All of the Company’s municipal bonds are to municipalities in New York State. To the Company’s knowledge, there has never been a default on a NY G.O. bond in the history of the state. The Company believes that its risk of loss on default of a G.O. municipal bond for the Company is relatively low. However, historical performance does not guarantee future performance.

All fixed and adjustable rate mortgage pools backing the Company’s mortgage-backed securities contain a certain amount of risk related to the uncertainty of prepayments of the underlying mortgages. Interest rate changes have a direct impact on prepayment rates. The Company uses a third-party developed model to monitor the average life and yield volatility of mortgage pools under various interest rate assumptions.

The Company designates all securities at the time of purchase as either “held to maturity” or “available for sale.” Securities designated as held to maturity are reported at amortized cost and consist of municipal investments that the Bank has made in its local market area. At December 31, 2023, $2.1 million in securities were designated as held to maturity. Debt and mortgage backed securities designated as available for sale are reported at fair market value.

Fair values for available for sale securities are determined using independent pricing services and market-participating brokers. The Company utilizes a third-party for these pricing services. The third-party utilizes evaluated pricing models that vary by asset class and

34

Table of Contents

incorporate available trade, bid and other market information for structured securities, cash flow and, when available, loan performance data. Because many fixed income securities do not trade on a daily basis, the third-party service provider’s evaluated pricing applications apply information as applicable through processes, such as benchmarking of like securities, sector groupings, and matrix pricing, to prepare evaluations. In addition, our third-party pricing service provider uses model processes, such as the Option Adjusted Spread model, to assess interest rate impact and develop prepayment scenarios. The models and the process take into account market convention. For each asset class, a team of evaluators gathers information from market sources and integrates relevant credit information, perceived market movements and sector news into the evaluated pricing applications and models. The third party, at times, may determine that it does not have sufficient verifiable information to value a particular security. In these cases the Company will utilize valuations from another pricing service.

Management believes that it has a sufficient understanding of the third party service’s valuation models, assumptions and inputs used in determining the fair value of securities to enable management to maintain an appropriate system of internal control. On a quarterly basis the Company reviews changes, as submitted by our third-party pricing service provider, in the market value of its securities portfolio. Individual changes in valuations are reviewed for consistency with general interest rate movements and any known credit concerns for specific securities. Additionally, on a quarterly basis the Company has its entire securities portfolio priced by a second pricing service to determine consistency with another market evaluator. If, on the Company’s review or in comparing with another servicer, a material difference between pricing evaluations were to exist, the Company may submit an inquiry to our third party pricing service provider regarding the data used to value a particular security. If the Company determines it has market information that would support a different valuation than our third-party pricing service provider’s evaluation it can submit a challenge for a change to that security’s valuation. There were no material differences in valuations noted in 2023 or 2022.

The available for sale portfolio totaled $276 million or approximately 99% of the Company’s securities portfolio at December 31, 2023. Net unrealized gains and losses on available for sale securities resulted in an unrealized loss of $55.0 million at December 31, 2023, as compared with $63.9 million at December 31, 2022. The change in net unrealized losses was due to the sale of $78 million of investment securities in which a $5 million loss was recognized as well as changes in market interest rates during the year. Unrealized gains and losses on available-for-sale securities are reported, net of taxes, as a separate component of stockholders’ equity. For the year ended December 31, 2023, the change in net unrealized losses, net of taxes, on stockholders’ equity was $7 million.

Management assessed available for sale securities in an unrealized loss position at December 31, 2023 and determined the decline in fair value below amortized cost to be primarily related to market interest rate fluctuations and not to the credit deterioration of the individual issuer. As of December 31, 2023, the Company does not intend to sell nor is it anticipated that it would be required to sell any of its impaired securities before recovery of their amortized cost.

The Company’s securities portfolio outstanding balances decreased from $371 million at December 31, 2022 to $278 million at December 31, 2023. The decrease from the prior year is mainly due to the sale of $73 million of securities during 2023 as the Company strategically repositioned its balance sheet. At December 31, 2023, the Company’s concentration in U.S. government-sponsored agency bonds was 35% of the total securities balance versus 38% at December 31, 2022. Government-sponsored mortgage-backed securities comprised 62% of the portfolio at December 31, 2023, compared with 54% of the portfolio at December 31, 2022, and tax-advantaged municipal bonds made up 3% of the portfolio at December 31, 2023 versus 8% of the portfolio at December 31, 2022.

Income from securities held in the Bank’s investment portfolio represented 9% and 10% of total interest income of the Company in 2023 and 2022, respectively. Taxable securities yields increased to 2.49% in 2023 from 2.15% in 2022, while tax-exempt yields were 3.13 % in 2023 and 2.54% in 2022.

The Company’s interest-bearing deposits at banks decreased from $6 million to $4 million from the prior year end. The interest-bearing deposits at banks consist of liquid interest-bearing cash accounts at correspondent banks and Federal Reserve Bank.

As a member of both the Federal Reserve System and the FHLB, the Bank is required to hold stock in those entities. The Bank held $4.9 million and $10.4 million in FHLB stock as of December 31, 2023 and 2022, respectively, and $3.1 million in FRB stock at both of December 31, 2023 and 2022.

Available for sale securities with a total fair value of $172 million at December 31, 2023 were pledged as collateral to secure public deposits and for other purposes required or permitted by law.


‎

35

Table of Contents

The following table sets forth the contractual maturities and weighted average interest yields of the Bank’s securities portfolio that are not carried at fair value through earnings (yields on tax-exempt obligations are not presented on a tax-equivalent basis) as of December 31, 2023. Expected maturities will differ from contracted maturities since issuers may have the right to call or prepay obligations without penalties.

Maturing

Within

After One But

After Five But

After

One Year

Within Five Years

Within Ten Years

Ten Years

Amount

Yield

Amount

Yield

Amount

Yield

Amount

Yield

($ in thousands)

Available for Sale:

Debt Securities

U.S. treasuries and government agencies

$

4,963

2.55

%

$

33,997

1.70

%

$

40,217

1.71

%

$

17,065

1.81

%

States and political subdivisions

748

3.08

%

4,666

2.64

%

613

3.38

%

-

-

%

Total debt securities

$

5,711

2.62

%

$

38,663

1.81

%

$

40,830

1.73

%

$

17,065

1.81

%

Mortgage-backed securities

FNMA

$

-

-

%

$

19

4.65

%

$

17,055

2.04

%

$

37,896

2.06

%

FHLMC

-

-

%

23

5.44

%

9,663

1.91

%

21,487

1.83

%

GNMA

-

-

%

26

3.74

%

-

-

%

31,084

1.96

%

SBA

-

-

%

-

-

%

3,604

2.89

%

14,881

2.79

%

CMO

-

-

%

-

-

%

272

1.66

%

37,401

2.08

%

Total mortgage-backed securities

$

-

-

%

$

68

4.57

%

$

30,594

2.10

%

$

142,749

2.09

%

Total securities designated as available for sale

$

5,711

2.05

%

$

38,731

1.82

%

$

71,424

1.89

%

$

159,814

2.06

%

Held to Maturity:

Debt Securities

States and political subdivisions

$

1,394

4.90

%

$

295

3.26

%

$

370

3.02

%

$

-

-

%

Total securities designated as held to maturity

$

1,394

4.90

%

$

295

3.26

%

$

370

3.02

%

$

-

-

%

Total securities

$

7,105

3.06

%

$

39,026

1.83

%

$

71,794

1.89

%

$

159,814

2.06

%

LENDING ACTIVITIES

The Bank has a loan policy which is approved by its Board of Directors on an annual basis. The loan policy governs the conditions under which loans may be made, addresses the lending authority of Bank officers, documentation requirements, appraisal policy, charge-off policies and desired portfolio mix. The Bank’s lending limit to any one borrower is subject to regulation by the OCC. The Bank continually monitors its loan portfolio to review compliance with new and existing regulations.

The Bank offers a variety of loan products to its customers, including residential and commercial real estate mortgage loans, commercial loans, and installment loans. The Bank primarily extends loans to customers located within the Company’s footprint. Interest income on loans represented 90% of the total interest income of the Company in 2023 compared with 89% in 2022. The Bank’s loan portfolio, net of the allowances for loan losses, totaled $1.7 billion at December 31, 2023 and December 31, 2022. The average net loan portfolio represented 82% and 77% of the Company’s average interest-earning assets during 2023 and 2022, respectively.

Real Estate Loans

Approximately 87% of the Bank’s total loan portfolio at December 31, 2023 consisted of real estate loans or loans collateralized by mortgages on real estate, including residential mortgages, commercial mortgages and other types of real estate loans. The Bank’s real estate loan portfolio was $1.50 billion at December 31, 2023, compared with $1.42 billion at December 31, 2022. The real estate loan portfolio increased by 5% in 2023 over 2022, primarily as a result of higher commercial real estate loans.

Residential Mortgages

The Bank offers fixed rate residential mortgage loans with terms of 10 to 30 years with, typically, up to an 80% loan-to-value (“LTV”) ratio. Fixed rate residential mortgage loans outstanding totaled $435 million at December 31, 2023 compared with $431 million at December 31, 2022, which was 25% and 30% of total loans outstanding, respectively. This balance did not include any construction

36

Table of Contents

residential mortgage loans, which are discussed below. Residential mortgage originations in 2023 were $44 million compared with $70 million in 2022. The decrease was primarily the result of higher interest rates and less attractive refinancing options.

The Bank has contractual arrangements with FNMA and FHLB, pursuant to which the Bank sells certain mortgage loans to FNMA and FHLB and the Bank retains the servicing rights to those loans. The Bank determines with each origination of residential real estate loans which desired maturities, within the context of overall maturities in the loan portfolio, provide the appropriate mix to optimize the Bank’s ability to absorb the corresponding interest rate risk within the Company’s tolerance ranges. In 2023, the Bank sold $8.3 million in mortgages to FNMA and FHLB under this arrangement, compared with $4.8 million in mortgages sold in 2022. No loans were sold to FHLMC by the Company during the years 2023 and 2022.

At December 31, 2023, the Company had $113 million in unpaid principal balances of loans that it serviced for FNMA, FHLB, and FHLMC, compared with $116 million at December 31, 2022. The Company recorded a net servicing asset for such loans of $1.1 million at December 31, 2023 and 2022.

The Bank offers adjustable rate residential mortgage loans with terms of up to 30 years. Rates on these mortgage loans remain fixed for a predetermined time and are adjusted annually thereafter. The Bank’s outstanding adjustable rate residential mortgage loans were $8 million at December 31, 2023 compared with $10 million at December 31, 2022. At each respective time period, adjustable rate residential mortgage loans represented less than 1% of total loans outstanding.

Overall, residential real estate loans increased from $440 million at December 31, 2022 to $444 million at December 31, 2023.

Commercial Real Estate

The Bank also offers commercial mortgage loans with up to an 80% LTV ratio for up to 20 years on a variable and fixed rate basis. Many of these mortgage loans either mature or are subject to a rate call after three to five years. To the extent required, loans exceeding an 80% LTV are reported on an exception report to the Board of Directors. The Bank’s outstanding commercial mortgage loans were $855 million at December 31, 2023, which was 50% of total loans outstanding, and 10% higher than the $779 million balance at December 31, 2022. The balance at December 31, 2023 included $789 million in fixed rate and $66 million in variable rate commercial mortgage loans, which include interest rate calls. These balances do not include commercial mortgage construction loans.

Commercial real estate loan originations were $179 million during 2023 compared with $244 million during 2022.

The commercial real estate portfolio, consisting of both mortgage and construction loans, totaled $969 million at December 31, 2023. The commercial real estate portfolio is comprised of loans secured by non-owner occupied or income producing property types, and owner-occupied real estate loans. The commercial real estate portfolio consisted of $806 million non-owner occupied, or 83% of the portfolio and $163 million, or 17% owner occupied real estate loans. The majority of the non-owner occupied commercial real estate portfolio is made up of five concentrations as seen in the table below.

Percent of Portfolio

Multi-Family

46.04%

Industrial

13.67%

Retail

10.17%

Office

9.26%

Hotel

7.84%

Other

13.02%

The Banks multi-family portfolio consists of properties mainly in the Bank’s market area which are at market rates and does not include rent control buildings.

The other category includes concentration segments with aggregate balances that are less than 6% of the total non-owner occupied CRE portfolio.

Home Equity Loans

The Bank also offers other types of loans collateralized by real estate, such as home equity loans. The Bank offers home equity loans at variable and fixed interest rates with terms of up to 15 years and up to an 85% combined LTV ratio. At December 31, 2023, the real estate loan portfolio included $81 million of home equity loans, which represented 5% of total loans outstanding, compared with $82

37

Table of Contents

million and 5% at December 31, 2022, respectively. The total home equity portfolio included $66 million in variable rate loans and $15 million in fixed rate loans. Home equity loan originations were $17 million during 2023.

Construction Loans

The Bank also offers both residential and commercial real estate construction loans at up to an 80% LTV ratio at fixed interest or adjustable interest rates and multiple maturities. At December 31, 2023, adjustable rate construction loans outstanding totaled $105 million, or 6% of total loans outstanding, and fixed rate real estate construction loans outstanding totaled $12 million, or 1% of total loans outstanding. At December 31, 2022, adjustable rate construction loans outstanding totaled $103 million, or 6% of total loans outstanding, and fixed rate real estate construction loans outstanding totaled $18 million, or 1% of total loans outstanding.

Commercial and Industrial Loans

The Bank offers C&I loans on a secured and unsecured basis, including lines of credit and term loans at fixed and variable interest rates and multiple maturities. The Bank’s C&I loan portfolio totaled $223 million at December 31, 2023, compared with $250 million at December 31, 2022, a 11% decrease. The decrease is due to lower funding of C&I lines of credit resulting from the heightened interest rate environment throughout 2023. C&I loans represented 13% and 15% of the Bank’s total loans at the end of 2023 and 2022, respectively.

Collateral for C&I loans, where applicable, may consist of inventory, receivables, equipment and other business assets. At December 31, 2023, 47% of the Bank’s C&I loans were at variable rates which are tied to the prime rate or SOFR.

Consumer Loans

The Bank’s consumer installment and other loan portfolio totaled $1.0 million at December 31, 2023 compared with $0.6 million at December 31, 2022, representing less than 1% of the Bank’s total loans outstanding at those dates. Traditional installment loans are offered at fixed interest rates with various maturities of up to 60 months, on a secured and unsecured basis. This segment of the portfolio is done on an accommodation basis for customers. The Company does not actively try to grow the portfolio in a significant way. Other loans consisted primarily of cash reserves, overdrafts, and loan clearing accounts.


‎

38

Table of Contents

Loan Maturities and Sensitivities of Loans to Changes in Interest Rates

The following table shows the maturities of loans outstanding as of December 31, 2023 and the classification of those loans according to sensitivity to changes in interest rates.

(in thousands)

Within 1 Year

After 1 - 5 Years

After 5 - 15 Years

After 15 Years

Total

Commercial and Industrial

Interest rates:

Fixed Rate

$

886 

$

58,130 

$

58,918 

$

-

$

117,934 

Variable Rate

71,647 

27,788 

5,673 

58 

105,166 

Total

$

72,533 

$

85,918 

$

64,591 

$

58 

$

223,100 

Commercial Real Estate *

Interest rates:

Fixed Rate

$

33,028 

$

300,665 

$

456,994 

$

7,150 

$

797,837 

Variable Rate

38,413 

74,834 

58,104 

-

171,351 

Total

$

71,441 

$

375,499 

$

515,098 

$

7,150 

$

969,188 

Residential Real Estate **

Interest rates:

Fixed Rate

$

382 

$

7,022 

$

73,333 

$

357,869 

$

438,606 

Variable Rate

8 

14 

461 

7,954 

8,437 

Total

$

390 

$

7,036 

$

73,794 

$

365,823 

$

447,043 

Home Equity

Interest rates:

Fixed Rate

$

16 

$

1,173 

$

13,138 

$

549 

$

14,876 

Variable Rate

-

302 

6,531 

59,703 

66,536 

Total

$

16 

$

1,475 

$

19,669 

$

60,252 

$

81,412 

Consumer and other loans

Interest rates:

Fixed Rate

$

201 

$

428 

$

299 

$

16 

$

944 

Variable Rate

21 

-

-

101 

122 

Total

$

222 

$

428 

$

299 

$

117 

$

1,066 

*Includes commercial real estate construction loans

**Includes residential real estate construction loans

SOURCES OF FUNDS

General

Customer deposits represent the primary source of the Bank’s funds for lending and other investment purposes. In addition to deposits, other sources of funds include loan repayments, loan sales on the secondary market, interest and dividend income from investments, matured investments, borrowings from the FHLB or FRB, and issuance of securities.

Deposits

The Bank offers a variety of deposit products, including checking, savings, NOW accounts, certificates of deposit and jumbo certificates of deposit. Bank deposits are insured up to the limits provided by the FDIC.

As of December 31, 2023 the amount of total uninsured deposits, deposits that exceed the limits provided by the FDIC, was $0.5 billion.

39

Table of Contents

The following schedule indicates the amount of time deposits in uninsured accounts by time remaining until maturity at December 31, 2023:

Dollar Amount

At December 31, 2023:

(in thousands)

Three months or less

$

39,414

Over three through six months

10,148

Over six through twelve months

17,837

Over twelve months

7,243

Total

$

74,642

Total deposits at December 31, 2023 decreased $53 million or 3% from the end of 2022. The change from the prior year reflects the movement of deposits of interest rate sensitive customers and competition within the market.

Included in the decrease were total savings of $152 million and non-interest-bearing demand deposits of $103 million. Offsetting those decreases were increases in time deposits of $131 million and NOW deposits of $71 million. Competitive deposit pricing within the current market played a role in the changes in deposit mix from prior year.

Federal Funds Purchased and Other Borrowed Funds

Another source of the Bank’s funds for lending and investing activities is borrowings from the FHLB and FRB. The Bank had $53 million outstanding on its overnight line of credit with the FHLB as of December 31, 2023, compared with $173 million the year earlier. The Company’s use of its overnight line of credit with FHLBNY varies depending on its ability to fund investment and loan growth with deposits along with the line usage’s impact on interest rate risk.

At December 31, 2023, the Bank had $6 million in FHLB long-term advances compared with $20 million at December 31, 2023. In addition to the FHLB, the Company has the ability to borrow from the Federal Reserve and participates in the Bank Term Funding Program. At December 31, 2023, the Company had $86 million in short-term borrowings with the FRB and $ 8 million in additional availability to borrow against collateral.

Subordinated Debt

On October 1, 2004, Evans Capital Trust I, a statutory business trust wholly-owned by the Company (the “Trust”), issued $11.0 million in aggregate principal amount of floating rate preferred capital securities due November 23, 2034 to investors (the “Capital Securities”) and $0.3 million of common securities to the Company (the “Common Securities”). The Capital Securities represent preferred undivided interests in the assets of the Trust. The Common Securities are wholly-owned by the Company and are the only class of the Trust’s securities possessing general voting powers. In connection with the issuance and sale of the Capital Securities, the Company issued an $11.3 million floating rate junior subordinated debt security, due October 1, 2037, to the Trust. Payments from the Company under the junior subordinated debt security are the sole source of cash flow for the Trust and fund the Trust’s payments on its Capital Securities. The interest rate payable to holders of the Capital Securities was 8.29% at December 31, 2023.

On July 9, 2020, the Company issued and sold $20 million in aggregate principal amount of its 6.00% Fixed-to-Floating Rate Subordinated Notes due July 15, 2030.

Securities Sold Under Agreements to Repurchase

The Bank enters into agreements with certain customers to sell securities owned by the Bank to those customers and repurchase the identical security within one day. No physical movement of the securities is involved. The customer is informed that the securities are held in safekeeping by the Bank on behalf of the customer. Securities sold under agreements to repurchase totaled $9.5 million and $7.1 million at December 31, 2023 and 2022, respectively. Balances can vary day to day based on customer needs.

Liquidity

The Bank utilizes cash flows from the investment portfolio and federal funds sold balances to manage the liquidity requirements related to loan demand and deposit fluctuations. The Bank also has many borrowing options. The Company uses the FHLBNY as its primary source of overnight funds and has long-term advance with FHLBNY. The Company’s use of its overnight line of credit with FHLBNY varies depending on its ability to fund investment and loan growth with core deposits along with the line usage’s impact on interest rate risk. The Company has pledged sufficient collateral in the form of residential and commercial real estate loans at FHLBNY that meets FHLB collateral requirements. As a member of the FHLB, the Bank is able to borrow funds at competitive rates. As of December 31, 2023, advances of up to $364 million could be drawn on the FHLB via an Overnight Line of Credit Agreement between the Bank and the FHLB. The Bank also has the ability to borrow from the Federal Reserve and participates in the Bank Term Funding Program. At

40

Table of Contents

December 31, 2023 the Bank had $8 million in additional availability to borrow against collateral at the Federal Reserve. By placing sufficient collateral in safekeeping at the Federal Reserve Bank, the Bank could borrow at the discount window. The Bank’s liquidity needs also can be met by more aggressively pursuing time deposits, or accessing the brokered time deposit market, including the Certificate of Deposit Account Registry Service (“CDARS”) network.

Cash flows from the Bank’s investment portfolio are laddered, so that securities mature at regular intervals, to provide funds from principal and interest payments at various times as liquidity needs may arise. Contractual maturities are also laddered, with consideration as to the volatility of market prices. At December 31, 2023, approximately 3% of the Bank’s securities had contractual maturity dates of one year or less and approximately 17% had maturity dates of five years or less. Additionally, mortgage-backed securities, which comprised 62% of the investment portfolio at December 31, 2023, provide consistent cash flows for the Bank.

Management, on an ongoing basis, closely monitors the Company’s liquidity position for compliance with internal policies, and believes that available sources of liquidity are adequate to meet funding needs in the normal course of business.  As part of that monitoring process, management calculates the 90-day liquidity each month by analyzing the cash needs of the Bank.  Included in the calculation are assumptions of some significant deposit run-off as well as funds needed for loan closings and investment purchases.  In the Company’s internal stress test at December 31, 2023, the Company had net short-term liquidity of $333 million as compared with $209 million at December 31, 2022.  

Management does not anticipate engaging in any activities, either currently or over the long-term, for which adequate funding would not be available and which would therefore result in significant pressure on liquidity. 

However, an economic recession could negatively impact the Company’s liquidity.  The Bank relies heavily on FHLBNY as a source of funds, particularly with its overnight line of credit.  In past economic recessions, some FHLB branches have suspended dividends, cut dividend payments, and not bought back excess FHLB stock that members hold in an effort to conserve capital.  FHLBNY has stated that it expects to be able to continue to pay dividends, redeem excess capital stock, and provide competitively priced advances in the future.  The 11 FHLB branches are jointly liable for the consolidated obligations of the FHLB system.  To the extent that one FHLB branch cannot meet its obligations to pay its share of the system’s debt, other FHLB branches can be called upon to make the payment.

Systemic weakness in the FHLB could result in higher costs of FHLB borrowings and increased demand for alternative sources of liquidity that are more expensive, such as brokered time deposits, the discount window at the Federal Reserve, or lines of credit with correspondent banks.

Contractual Obligations

The Company is party to contractual financial obligations, including repayment of borrowings, operating lease payments, commitments to extend credit, and purchase agreements.

At December 31, 2023, the Company had commitments to extend credit of $431 million, compared with $387 million at December 31, 2022. For additional information regarding future financial commitments, this disclosure should be read in conjunction with Note 17 to the Company’s Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Capital

Total Company stockholders’ equity was $178 million at December 31, 2023, an increase from $154 million at December 31, 2022. Equity as a percentage of assets was 8.45% and 7.07% at December 31, 2023 and 2022, respectively. Book value per share of common stock increased to $32.07 at December 31, 2023 from $28.32 at December 31, 2022. Reflected in the book value changes are the Federal Reserve’s aggressive interest rate hikes that have resulted in significant unrealized losses on investment securities. As of December 31, 2023 this amounted to $7.41 per share impact to book value. The increase in stockholders’ equity was primarily the result of $24.5 million of net income in 2023, a decrease in net of tax unrealized losses on available for sale investment securities of $7 million, partially offset by $7.2 million in dividends paid to common stockholders.

The aggregate dividend payment of $1.32 per share in 2023 was $0.06, or 5% higher per share than dividends paid in 2022. The Company typically pays a semi-annual dividend in April and October of each year. Management and the Board of Directors of the Company believe that the dividend level is prudent to maintain available capital to support the continued growth of the Company, as well as to manage the Company’s and the Bank’s capital ratios, while providing a dividend yield (dividend per share divided by stock price) competitive with peers in the industry at an annualized rate of 4.19% at December 31, 2023.

41

Table of Contents

Included in stockholders’ equity is accumulated other comprehensive income/(loss) which includes the net after-tax impact of unrealized gains or losses on investment securities classified as available for sale. Net unrealized losses after tax were $40.7 million at December 31, 2023, compared with $47.3 million at December 31, 2022. Such unrealized gains and losses are generally due to changes in interest rates and represent the difference, net of applicable income tax effect, between the estimated fair value and amortized cost of investment securities classified as available-for-sale. In addition to changes in interest rates, included in the change was an after-tax realized loss of $3.7 million related to the sale of securities.

The Company and the Bank have consistently maintained regulatory capital ratios above well capitalized standards. For further detail on capital and capital ratios, see Note 21 to the Company’s Consolidated Financial Statements included under Item 8 of this Annual Report on Form 10-K.

Market Risk

Market risk is the risk of loss from adverse changes in market prices and/or interest rates of the Bank’s financial instruments. The primary market risk the Company is exposed to is interest rate risk. The core banking activities of lending and deposit-taking expose the Bank to interest rate risk, which occurs when assets and liabilities re-price at different times and by different amounts as interest rates change. As a result, net interest income earned by the Bank is subject to the effects of changing interest rates. The Bank measures interest rate risk by calculating the variability of net interest income in the future periods under various interest rate scenarios using projected balances for interest-earning assets and interest-bearing liabilities. Management’s philosophy toward interest rate risk management is to limit the variability of net interest income. The balances of financial instruments used in the projections are based on expected growth from forecasted business opportunities, anticipated prepayments of loans and investment securities and expected maturities of investment securities, loans and deposits. Management supplements the modeling technique described above with the analysis of market values of the Bank’s financial instruments and changes to such market values given changes in interest rates.

ALCO, which includes members of the Bank’s senior management, monitors the Bank’s interest rate sensitivity with the aid of a model that considers the impact of ongoing lending and deposit gathering activities, as well as the interrelationships between the magnitude and timing of the re-pricing of financial instruments, including the effect of changing interest rates on expected prepayments and maturities. When deemed prudent, the Bank’s management has taken actions and intends to do so in the future, to mitigate the Bank's exposure to interest rate risk through the use of on or off-balance sheet financial instruments. Possible actions include, but are not limited to, changes in the pricing of loan and deposit products, modifying the composition of interest-earning assets and interest-bearing liabilities, and the purchase of other financial instruments used for interest rate risk management purposes. In 2023 and 2022, the Bank did not use off-balance sheet financial instruments to manage interest rate risk.

SENSITIVITY OF NET INTEREST INCOME TO CHANGES IN INTEREST RATES

Calculated increase

in projected annual net interest income

(in thousands)

December 31, 2023

December 31, 2022

Changes in interest rates

+200 basis points

$

(4,618)

$

(2,867)

+100 basis points

219

770

-100 basis points

(168)

(962)

-200 basis points

(310)

(2,661)

Many assumptions are utilized by the Bank to calculate the impact that changes in interest rates may have on net interest income. The more significant assumptions relate to the rate of prepayments of mortgage-related assets, loan and deposit volumes and pricing, and deposit maturities. The Bank also assumes immediate changes in rates, including 100 and 200 basis point rate changes. In the event that a 100 or 200 basis point rate change cannot be achieved, the applicable rate changes are limited to lesser amounts, such that interest rates cannot be less than zero. These assumptions are inherently uncertain and, as a result, the Bank cannot precisely predict the impact of changes in interest rates on net interest income. Actual results may differ significantly due to the timing, magnitude, and frequency of interest rate changes in market conditions and interest rate differentials (spreads) between maturity/re-pricing categories, as well as any actions, such as those previously described, which management may take to counter such changes. At each of December 31, 2023 and December 31, 2022, the Bank's projected net interest income benefitted more from a 100 basis point increase in market rates compared with lower net interest income resulting from a 200 basis point increase in rates.  This relationship was due in part to expected increases in deposit rates needed to retain deposit customers if rates moved up 200 basis points but were not required if rates only moved

42

Table of Contents

100 basis points higher.  In light of the uncertainties and assumptions associated with the process, the amounts presented in the table, and changes in such amounts, are not considered significant to the Bank’s projected net interest income.

Financial instruments with off-balance sheet risk at December 31, 2023 included $390 million in undisbursed lines of credit at an average interest rate of 8.24%; $7.6 million in fixed rate loan origination commitments at 7.07%; and $4 million in adjustable rate letters of credit, which if drawn upon, would typically earn an interest rate equal to the prime lending rate plus 2%. Unused overdraft protection lines totaled $21 million.

The following table represents expected maturities of interest-bearing assets and liabilities and their corresponding average interest rates.

Expected maturity year ended December 31,

2024

2025

2026

2027

2028

Thereafter

Total

Fair Value

(in thousands)

Interest-bearing Assets

Gross loan and lease

receivables

$

88,051

$

86,618

$

108,799

$

130,531

$

144,409

$

1,163,401

$

1,721,809

$

1,606,666

Average interest

7.43

%

6.66

%

5.65

%

5.31

%

6.31

%

5.09

%

5.44

%

5.44

%

Investment securities

$

7,105

$

1,178

$

4,905

$

17,429

$

15,514

$

231,608

$

277,739

$

277,668

Average interest

3.06

%

2.39

%

2.01

%

1.71

%

1.86

%

2.01

%

2.01

%

2.01

%

Interest-bearing Liabilities

Interest-bearing

deposits

$

1,291,140

$

29,033

$

5,282

$

1,968

$

1,100

$

-

$

1,328,523

$

1,326,575

Average interest

2.61

%

4.09

%

1.99

%

0.10

%

3.18

%

-

%

2.65

%

2.65

%

Other borrowed funds

$

145,123

$

-

$

-

$

-

$

-

$

-

$

145,123

$

145,055

Average interest

5.32

%

-

%

-

%

-

%

-

%

-

%

5.32

%

4.42

%

Securities sold under

agreements to repurchase

$

9,475

$

-

$

-

$

-

$

-

$

-

$

9,475

$

9,475

Average interest

1.75

%

-

%

-

%

-

%

-

%

-

%

1.75

%

1.75

%

Subordinated debt

$

-

$

-

$

-

$

-

$

-

$

31,177

$

31,177

$

29,563

Average interest

-

%

-

%

-

%

-

%

-

%

6.83

%

6.83

%

4.86

%

Operating lease

obligations

$

970

$

828

$

756

$

503

$

353

$

1,021

$

4,431

$

4,063

Average interest

3.06

%

2.95

%

2.90

%

3.01

%

3.09

%

3.47

%

3.10

%

3.10

%

The amounts in the above table exclude acquisition fair value adjustments, yield adjustments on loans, and debt issuance costs.

When rates rise or fall, the market value of the Company’s rate-sensitive assets and liabilities increases or decreases. As a part of the Company’s asset/liability policy, the Company has set limitations on the acceptable level of the negative impact of such rate fluctuations on the market value of the Company’s balance sheet. On a quarterly basis, the balance sheet is shocked for immediate rate movement of 200 basis points. At December 31, 2023, the Company determined it would take an immediate movement in rates in excess of 200 basis points to eliminate the current capital cushion in excess of regulatory requirements. The Company’s and the Bank’s capital ratios are also reviewed by management on a quarterly basis.

Capital Expenditures

Significant planned expenditures for 2024 include the purchase of technology to improve workflow automation and operational efficiency. The Company believes it has a sufficient capital base to support these known and potential capital expenditures, currently expected to total approximately $1.0 million, with current assets.

Impact of Inflation and Changing Prices

There will continually be economic events, such as changes in the economic policies of the FRB, which will have an impact on the profitability of the Company. Inflation may result in impaired asset growth, reduced earnings and substandard capital ratios. The net interest margin can be adversely impacted by the volatility of interest rates throughout the year. Since these factors are unknown,

43

Table of Contents

management attempts to structure the balance sheet and re-pricing frequency of assets and liabilities to avoid a significant concentration that could result in a negative impact on earnings.

Segment Information

The Company’s operating segments have been determined based upon its internal profitability reporting. The Company’s operating segments consisted of banking activities and insurance agency activities.

The banking activities segment includes all of the activities of the Bank in its function as a full-service commercial bank. Net income from banking activities was $8.8 million in 2023 compared with $20.9 million in 2022. The decrease in net income from banking activities was primarily driven by a decrease in net interest income of $11.8 million and a loss on sale of securities of $5.0 million, partially offset by lower income tax expense of $3.8 million. Net interest income decreased from $73.0 million in 2022 to $61.2 million in 2023. Non-interest expense increased $0.5 million to $52.6 million in 2023. Total assets of the banking activities segment were $2.1 billion at December 31, 2023, an decrease of $54 million or 2.5% from December 31, 2022.

On November 30, 2023 the Company sold the assets of TEA and ceased insurance activities for the Company. This Annual Report on Form 10-K includes the Company’s insurance agency activities for the first eleven months of 2023. For more information on the sale of TEA see Note 2 of Item 8 on this Annual Report on Form 10-K.

The insurance activities segment includes activities of TEA. TEA was a property and casualty insurance agency with locations in the Western New York area. Net income from insurance activities was $15.7 million in 2023, an increase from $1.5 million in 2022. Included in 2023 net income was the pretax gain on sale of TEA of $20.2 million and associated income tax expense of $6.6 million.

Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information called for by this Item is incorporated by reference to the discussion of "Liquidity" and "Market Risk”, including the discussion under the caption "Sensitivity of Net Interest Income to Changes in Interest Rates" included in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K.


‎

44

Table of Contents

Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial Statements and Supplementary Data consist of the financial statements as indexed and presented below.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm (Crowe LLP - PCAOB ID: 173)

46

Consolidated Balance Sheets – December 31, 2023 and 2022

48

Consolidated Statements of Income – Years Ended December 31, 2023, 2022 and 2021

49

Consolidated Statements of Comprehensive Income (Loss) – Years Ended December 31, 2023, 2022 and 2021

50

Consolidated Statements of Changes in Stockholders’ Equity – Years Ended December 31, 2023, 2022 and 2021

51

Consolidated Statements of Cash Flows – Years Ended December 31, 2023, 2022 and 2021

52

Notes to Consolidated Financial Statements

54


‎

45

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and the Board of Directors

Evans Bancorp, Inc.

Williamsville, New York

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Evans Bancorp, Inc. (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for credit losses effective January 1, 2023 due to the adoption of ASC 326.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses – Loans Collectively Evaluated for Impairment

As discussed above, on January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments, which resulted in an increase in the allowance for credit losses (ACL) of $2.7 million and reduced retained earnings, net of deferred tax, by $2.0 million through a cumulative-effect adjustment. As more fully described in Notes 1 and 4 to the consolidated financial statements, the ACL represents management’s estimate of expected credit losses over the contractual term of the loan. At December 31, 2023, the Company’s loan portfolio totaled $1.7 billion and the associated ACL was $22.1 million.

Management employs a process and methodology to estimate the ACL on loans that evaluates both quantitative and qualitative factors. The methodology for evaluating quantitative factors consists of two basic components: pooling loans into portfolio segments for loans that share similar risk characteristics and identifying individually analyzed loans that do not share similar risk characteristics with loans that are pooled into portfolio segments.

46

Table of Contents

For pooled loan portfolio segments, which are collectively evaluated for impairment, the Company utilizes a discounted cash flow (“DCF”) methodology to estimate credit losses over the expected life of the loan. The methodology incorporates a probability of default and loss given default framework. Loss given default is estimated based on historical credit loss experience. Probability of default is estimated utilizing a regression model that incorporates economic factors. The model utilizes forecasted econometric factors with a one-year reasonable and supportable forecast period and one-year straight-line reversion period in order to estimate the probability of default for each loan portfolio segment. The DCF methodology combines the probability of default, the loss given default, prepayment speeds and the remaining life of the loan to estimate a reserve for each loan.

Quantitative loss factors are also supplemented by certain qualitative risk factors reflecting management’s evaluation of various conditions. Management’s evaluation of these factors includes a weighted rate and risk range category assigned to each factor. The weighted rates and risk range categories vary between loan segments.

We identified auditing the ACL on loans collectively evaluated for impairment as a critical audit matter because the methodology to determine the estimate for credit losses significantly changed upon adoption of ASC 326, including the application of new accounting policies, the use of subjective judgments for both the quantitative and qualitative calculations and overall changes made to the loss estimation models. Performing audit procedures to evaluate the implementation and subsequent application of ASC 326 for loans involved a high degree of auditor judgment and required significant effort, including the need to involve more experienced audit personnel and valuation specialists.

The primary procedures we performed to address this critical audit matter included:

Testing the design and operating effectiveness of controls over the evaluation of the ACL on loans collectively evaluated for impairment, including controls addressing:

oThe selection and application of new accounting policies.

oData inputs, judgments and calculations used to determine the qualitative loss factors.

oInformation technology general controls and application controls.

oProblem loan identification and delinquency monitoring.

oManagement’s evaluation of qualitative loss factors.

Substantively testing management’s process, including evaluating their judgments and assumptions, for developing the ACL on loans collectively evaluated for impairment, which included:

oEvaluating the appropriateness of the Company’s accounting policies, judgments and elections involved in the adoption of ASC 326.

oTesting the mathematical accuracy of the ACL calculation.

oUtilizing internal specialists to perform procedures to assist in evaluating the relevance of macroeconomic loss drivers.

oTesting the relevance and reliability of the data used in the qualitative allocation.

oEvaluating the reasonableness of management’s judgments related to the qualitative loss factors to determine if the loss factors are calculated in accordance with management’s policies and were consistently applied from the point of adoption to year end.

/s/ Crowe LLP

We have served as the Company's auditor since 2020.

Grand Rapids, Michigan

March 4, 2024


‎

47

Table of Contents

EVANS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2023 AND DECEMBER 31, 2022

(in thousands, except share and per share amounts)

December 31,

December 31,

2023

2022

ASSETS

Cash and due from banks

$

19,669

$

16,796

Interest-bearing deposits at banks

3,798

6,258

Securities:

Available for sale, at fair value (amortized cost: $330,725 at December 31, 2023;

275,680

364,326

$428,216 at December 31, 2022)

Held to maturity, at amortized cost (fair value: $1,988 at December 31, 2023;

2,059

6,949

$6,809 at December 31, 2022)

Federal Home Loan Bank common stock, at cost

4,914

10,437

Federal Reserve Bank common stock, at cost

3,097

3,074

Loans, net of allowance for credit losses of $22,114 at December 31, 2023

and $19,438 at December 31, 2022

1,698,832

1,652,931

Properties and equipment, net of accumulated depreciation of $12,538 at December 31, 2023

and $11,596 at December 31, 2022

15,397

16,999

Goodwill

1,768

12,702 

Intangible assets

94

1,227

Bank-owned life insurance

42,758

41,826

Operating lease right-of-use asset

3,781

4,392

Other assets

36,816

40,593

TOTAL ASSETS

$

2,108,663

$

2,178,510

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Deposits:

Demand

$

390,238

$

493,710

NOW

345,279

273,359

Savings

649,621

801,943

Time

333,623

202,667

Total deposits

1,718,761

1,771,679

Securities sold under agreement to repurchase

9,475

7,147

Other borrowings

145,123

193,001

Operating lease liability

4,063

4,723

Other liabilities

21,845

16,892

Subordinated debt

31,177

31,075

Total liabilities

1,930,444

2,024,517

STOCKHOLDERS' EQUITY:

Common stock, $.50 par value, 10,000,000 shares authorized; 5,601,308

and 5,544,339 shares issued at December 31, 2023 and December 31, 2022,

respectively, and 5,499,772 and 5,437,048 outstanding at December 31, 2023

and December 31, 2022, respectively

2,803

2,775

Capital surplus

82,712

81,031

Treasury stock, at cost, 101,536 and 107,291 shares at December 31, 2023 and

December 31, 2022, respectively

(3,656)

(3,891)

Retained earnings

138,631

123,356

Accumulated other comprehensive loss, net of tax

(42,271)

(49,278)

Total stockholders' equity

178,219

153,993

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

2,108,663

$

2,178,510

See Notes to Consolidated Financial Statements


‎

48

Table of Contents

EVANS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2023, 2022, AND 2021

(in thousands, except share and per share amounts)

2023

2022

2021

INTEREST INCOME

Loans

$

87,448

$

70,562 

$

72,955 

Interest bearing deposits at banks

403 

596 

187 

Securities:

Taxable

8,755 

8,037 

4,224 

Non-taxable

244 

287 

214 

Total interest income

96,850

79,482 

77,580 

INTEREST EXPENSE

Deposits

26,478 

3,589 

2,864 

Other borrowings

6,978 

1,147 

315 

Subordinated debt

2,186

1,791 

1,616 

Total interest expense

35,642 

6,527 

4,795 

NET INTEREST INCOME

61,208 

72,955 

72,785 

PROVISION (CREDIT) FOR LOAN LOSSES

18

2,739 

(1,513)

NET INTEREST INCOME AFTER

PROVISION FOR LOAN LOSSES

61,190

70,216 

74,298 

NON-INTEREST INCOME

Deposit service charges

2,593 

2,861 

2,531 

Insurance service and fees

10,261 

10,453 

10,457 

Gain on loans sold

179

95 

11 

Bank-owned life insurance

932 

707 

853 

Loss on tax credit investments

-

-

(30)

Refundable state historic tax credit

-

-

21 

Loss on sale of securities

(5,044)

-

-

Interchange fee income

2,047 

2,071 

2,116 

Gain on sale of insurance agency

20,160 

-

-

Other

1,794

3,084 

2,888 

Total non-interest income

32,922

19,271 

18,847 

NON-INTEREST EXPENSE

Salaries and employee benefits

37,047 

38,854 

38,612 

Occupancy

4,506 

4,619 

4,698 

Advertising and public relations

1,207 

1,159 

1,427 

Professional services

3,563 

3,425 

3,587 

Technology and communications

5,959 

5,187 

5,376 

Amortization of intangibles

367 

400 

537 

FDIC insurance

1,400 

1,025 

1,133 

Other

5,333 

5,266 

5,849 

Total non-interest expense

59,382 

59,935 

61,219 

INCOME BEFORE INCOME TAXES

34,730

29,552 

31,926 

INCOME TAX PROVISION

10,206

7,163 

7,883 

NET INCOME

$

24,524

$

22,389 

$

24,043 

Net income per common share-basic

$

4.49

$

4.07 

$

4.41 

Net income per common share-diluted

$

4.48

$

4.04 

$

4.37 

Weighted average number of common shares outstanding

5,456,250 

5,495,044 

5,447,057 

Weighted average number of diluted shares outstanding

5,471,033 

5,536,375 

5,501,511 

See Notes to Consolidated Financial Statements


‎

49

Table of Contents

EVANS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

YEARS ENDED DECEMBER 31, 2023, 2022, AND 2021

(in thousands)

2023

2022

2021

NET INCOME

$

24,524

$

22,389

$

24,043

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:

Unrealized gain (loss) on available-for-sale securities:

Unrealized gain (loss) on available-for-sale securities

10,340

(44,188)

(5,557)

Reclassification of loss on sale of securities

(3,733)

-

-

Total

6,607

(44,188)

(5,557)

Defined benefit pension plans:

Amortization of prior service cost

-

22

23 

Amortization of actuarial loss

80

200

280

Actuarial gains

320

359

302

Total

400

581

605

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX

7,007

(43,607)

(4,952)

COMPREHENSIVE INCOME (LOSS)

$

31,531

$

(21,218)

$

19,091

See Notes to Consolidated Financial Statements


‎

50

Table of Contents

EVANS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

YEARS ENDED DECEMBER 31, 2023, 2022, AND 2021

(in thousands, except share and per share amounts)

Accumulated

Other

Common

Capital

Retained

Comprehensive

Treasury

Stock

Surplus

Earnings

Income (Loss)

Stock

Total

Balance, December 31, 2020

$

2,708 

$

76,394 

$

90,522 

$

(719)

$

-

$

168,905 

Net Income

24,043 

24,043 

Other comprehensive income

(4,952)

(4,952)

Cash dividends ($1.20 per common share)

(6,541)

(6,541)

Stock compensation expense

947 

947 

Issued 18,181 restricted shares, net of forfeitures

9 

(9)

-

Issued 8,293 shares under Dividend Reinvestment Plan

4 

290 

294 

Issued 12,166 shares in Employee Stock Purchase Plan

6 

393 

399 

Issued 19,715 shares in stock option exercises

10 

187 

197 

Issued 13,017 shares for earnout

7 

593 

600 

Balance, December 31, 2021

$

2,744 

$

78,795 

$

108,024 

$

(5,671)

$

-

$

183,892 

Net Income

22,389 

22,389 

Other comprehensive income

(43,607)

(43,607)

Cash dividends ($1.26 per common share)

(6,942)

(6,942)

Stock compensation expense

1,206 

1,206 

Repurchased 112,068 shares of Common Stock

(4,140)

(4,140)

Issued 18,844 restricted shares

9 

(9)

-

Reissued 7,244 restricted shares in stock option exercises

10 

(115)

249 

144 

Forfeitures 2,467 shares of restricted stock

-

Issued 7,738 shares under Dividend Reinvestment Plan

4 

291 

295 

Issued 12,731 shares in Employee Stock Purchase Plan

7 

377 

384 

Issued 22,270 shares in stock option exercises

11 

361 

-

372 

Balance, December 31, 2022

$

2,775 

$

81,031