Thank you, Mary, and good afternoon, everyone. We certainly appreciate you taking the time today to join us and your interest in Evans Bancorp.

On the call today, we have with me here, David Nasca, President and Chief Executive Officer; and John Connerton, our Chief Financial Officer. David and John will review our results for the third quarter of 2020 and then we’ll open the call for questions.

You should have a copy of the financial results that were released today after the markets closed. If not, you can access them on our website at evansbank.com.

On the website, you will also find slides that accompany today’s discussion. If you are reviewing those slides, please turn to page two for the safe harbor.

As you are aware, we may make some forward-looking statements during the formal discussion, as well as during the Q&A. These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ from what is stated on today’s call.

These risks and uncertainties and other factors are provided in the earnings release, as well as with other documents filed by the company with the Securities and Exchange Commission. You can find those documents on our website or at sec.gov.

So, with that, let me turn it over to David to begin. David?

Thank you, Debby. Good afternoon, everyone.

We appreciate you joining us for the call today. I hope everyone is staying healthy and safe and getting through the increased challenges posed by the pandemic.

Before we get started, I’d like to take this opportunity to thank the entire Evans team for a tangoing effort and tireless commitment to continue to respond to the challenges of this singularly unique and uncertain operating environment in our centennial year. This comprises all the projects which Evans has undertaken, including an acquisition closed in May with computer conversion and product transition in the third quarter, administrative office move, PPP and mortgage operation integration and systems conversions during the height of a robust mortgage origination and refinance boom.

Our client’s needs are being met with consistent communication, support and execution, as we seek to guide them through compound business challenges. I’m excited to announce that we officially opened and move to our new corporate administrative offices as marked by yesterday’s ribbon cutting.

While the current environment certainly complicated this transition, we were able to successfully consolidate it -- consolidate all nine branch associates from three offices into one. During construction, we needed to reengineer certain aspects of the building to meet new safety protocols required to deal with a pandemic and assure the safety of our associates.

Currently, about a third of our workforce has returned on-site work at the new building, while the remaining two-thirds continue to operate remotely until at least January. Continual assessment is being done on our hybrid model to determine changes to our operating posture, while assuring the safety of our associates and clients is paramount.

Remote operations have been executed successfully since the outset of the pandemic in March and can effectively be continued indefinitely. We do believe that the new offices will position our organization to operate more efficiently and effectively into the future, while assisting in growth and the attraction and retention of talent.

Today we reported third quarter of 2020 results with net income of $4.5 million. In light of the current challenges all banks are facing and absent some remaining one-time merger costs, our third quarter results were solid and reflected our agile response to the pandemic, incremental business from Fairport Savings Bank and successful participation in the Paycheck Protection Program or PPP.

Our acquisition of Fairport Savings Bank or FSB positions us strongly in a strategically prioritized contiguous market and we are encouraged with the progress we are making integrating the Bank and new clients. System and computer conversion and integration were completed during the quarter with high satisfaction and retention rates.

While overall growth in the expanded Rochester market has been somewhat muted, given the ongoing challenges of in person meetings and the virtual environment in which we are operating, we are working to advance our combined market strategy. Our commercial team in the Rochester market is now fully staffed and operational, and significant inroads are being made with new relationship opportunities.

We’ve also been leveraging FSB strong retail presence and consumer lending team, and when combined with our existing Evans capabilities, has successfully manage the substantial mortgage loan purchase and refinancing volumes. The combined mortgage business provides another profit center to diversify earnings.

Additionally, expense management efforts related to the merger are on track. Evans was a major participant in helping our community recover and remain resilient with its performance in the FSB’s PPP program, resulting in the near doubling of our commercial lending client base.

We continue to utilize PPP as a platform to build and add relationships and offer other products and services and we have focused on cultivating those relationships. To-date, we have successfully converted over half of those customers to more permanent status, where they are now utilizing three or more of the Bank services.

Please see slide four in the third quarter 2020 financial results deck, which was included with the financials for additional details. Looking ahead, the Western New York market area continues to recover from the COVID-19 pandemic and while we are certainly not back to normal, we’re encouraged with the significant drop of deferrals, which now makes up approximately 0.5% of our total loan portfolio, which is a decrease of 98% in deferrals originated.

We believe we are appropriately reserved for the continuing economic events of the pandemic, and given our strong capital and liquidity position are well-positioned looking forward. With that, I’ll hand it over to John Connerton to run through the results in more detail and then we’ll be happy to take questions.

John?

Thank you, David, and good afternoon, everyone. As reported today, third quarter net income was $4.5 million or $0.84 per diluted share, compared with $5.2 million or $1.04 per diluted share in last year’s period and $500,000 or $0.09 per diluted share in the linked second quarter.

Included in the current results was an elevated loan loss provision of $1.9 million to reserve for a well defined weakness in the hotel portfolio and $524,000 of remaining merger related costs. Net interest income increased 15% year-over-year and 5% sequentially, as we recognize a full quarter impact of FSB, as well as higher interest income from recognized fees as a result of PPP lending.

The total amount of amortized PPP loan fees was approximately $900,000 in the quarter. This amortization may be lengthened or shortened depending if these PPP loans are extended to 60 months or forgiven as allowed by legislation.

The net interest margin of 3.19% was down 17 basis points and 75 basis points from the linked second quarter in 2019 third quarter, respectively. The current margin reflects the significant line of the Fed funds rate by 150 basis points in early 2020, a lower margin on residential mortgages from FSB, as well as PPP loans and finally the significant increase of interest earning cash balances due to deposit growth.

In total the yield on loans decreased 21 basis points and 150 basis points from the linked second quarter in 2019 third quarter, respectively. We believe our net interest margin should remain at around this level in the fourth quarter, though keep in mind, there could be some unforeseen moves by the Fed and the impact from the PPP portfolio is still a variable, given the potential amount that may or may not be forgiven by the federal government.

Given our strong liquidity base, we do not -- we do have some pricing power on the liability side of the balance sheet. We’re letting time deposits roll off and are continually looking at areas where we have the ability to re-price, while limiting any loss of core relationships.

The increased level of provision this quarter reflects the elevated risk associated with the hotel portfolio, resulting from the continued impact of the COVID-19 pandemic on these clients. Our hotel portfolio consists of 15 relationships for $81 million or 6.5% of the total commercial loan portfolio.

The majority of the portfolio received two deferrals of 90 days each, which have expired, as these individual credits adjust their business models in response to the pandemic’s challenges, they’re requiring additional assistance from the Bank. We’re in close communication with these customers in order to determine progress or additional challenges as circumstances warrant.

The portfolio consists of limited service hotels that rely mostly on consumer rather than business customers and there is a level of seasonality associated with a revenue stream. Therefore, progress will be evidence -- better evidence after a full cycle, which will include summer 2021.

As a result, we have risk rated these loans as criticized assets which increase the commensurate level of reserves we need to hold on this portfolio. Given the downgrade of the hotel portfolio, our total criticized assets at quarter end increase to $133.1 million, compared with $71.5 million at the end of second quarter of 2020.

Our commercial bankers and credit risk management teams have and will continue to extensively review the Bank’s portfolios as we evaluate repayment risk. It is important to note that these credits have strong borrowers with full guarantees and their properties are in our footprint and market, which allows the Bank continue line of sight into conditions of the assets and the market and progress on performance.

Additionally, the portfolio is well collateralized and an average loan to value ratio of 53%. Currently, the majority of the hotel loans are paying either interest-only or full principal on interest.

As expected, the vast majority of second quarter deferrals have moved back to normal paying status. Since the initial deferral period, the Bank allowed customers to take a second 90-day deferral period, of which the majority has expired.

As of October 20th, the Bank had $8 million in deferrals, which includes $4 million in consumer and $4 million in commercial loans. The majority represent the remaining second deferrals that are expected to expire in the fourth quarter and begin payment status.

For further detail on our commercial loan deferrals and hotel portfolio, please refer to slide five and seven. Non-interest income increased primarily due to a $606 -- $667,000 gain on the sale of investment security.

Deposit service charges were up from the linked quarter as a result of higher consumer spending and the reinstatement of certain fees that had been temporarily suspended during the second quarter of 2020 to assist customers affected by COVID-19. Seasonally higher commercial lines insurance commissions and profit sharing revenue as a lead driver behind the increase in the insurance service and fee revenue when compared with the linked second quarter.

Non-interest expenses were up over the prior period due to the addition of FSB and the remaining $524,000 of merger, which were largely due to the system conversion and integration being completed in August. When compared with the linked quarter salaries would have been up to a larger degree as a third quarter included a full three months of acquired salaries, helping to partially offset this was lower incentive compensation accruals of approximately $700,000.

Additionally, I will note, we are attaining the cost saves from FSB as anticipated. The effective tax rate for the quarter was 11.8%, which reflects the historic tax credit transaction completed in the 2020 first quarter.

Absent the tax credit the rate was 25.6%. At this time, we do not anticipate additional historic tax transactions this year.

Turning to the balance sheet, the loan portfolio increased $483 million or 40%, compared with last year third quarter, including $271 million from FSB and $203 million from PPP. Absent FSB and PPP lending, we experienced muted loan growth as a result of the current economic environment.

Our pipeline, however, is solid and we expect to achieve moderate growth in the fourth quarter. Total deposits were up 41% or $522 million since the end of last year third quarter.

FSB added $239 million to this total. We also experienced significant growth from our commercial customers as they accumulated liquidity due to the proceeds from PPP loans, while government stimulus payments and lower consumer spending drove an increase on the consumer deposit side.

In the quarter deposits were down slightly, largely reflecting seasonally lower municipal deposit balances. As a reminder, in the light of the heightened uncertainty surrounding COVID-19 pandemic, we completed a private placement of $20 million and 6% fixed to floating rate subordinated notes at the beginning of the third quarter.

Of that total $15 million has been moved to the Bank as Tier 1 capital. Looking forward, we will continue to adapt to changing market conditions and we are confident that we have taken the appropriate actions to remain in a very solid financial position to successfully operate during this challenging environment.

That concludes my comments. So we now would like to open the line for questions.

Good afternoon, guys.

Good afternoon, Alex.

Just first off, wanting to circle back to the hotel downgrades during the quarter, you obviously gave a lot of detail here on LTVs, et cetera. But is there -- do you have line of sight to some of these loans stopping paying or maybe you can give us a little bit of color on sort of what the debt service coverage ratio looks like or if there is, like, real specific reason why they’re being downgraded or if it’s just overall stresses in the industry?

I think it’s a combination of a couple of those things, Alex, or both of those things. I mean, they’re -- for a period of time, they’re in the second quarter, they’re -- debt to income ratios were infinitesimal just because there was no revenue coming in like a lot of industries.

I think really the move to the downgrade was the impact and the longevity that we see COVID-19 impacting through the third quarter and we’ve made that assessment that it’s going to take a while especially some of the seasonality this industry has, especially up in our footprint, such that they’re not going to get back to decent cash flow until probably there’s more opening from COVID-19 next year, as well as the impact from seasonal -- from the seasonality. So we’re looking for their revenue to come back next season, which would start in the spring and summer, and that’ll give us a better indication of their health.

We also thought it was better…

Okay.

… to continue receiving some payments, Alex, in terms of the interest that we’re getting paid, they may be paying interest-only, but they are paying, some people are paying principal interest. But it was more a reflection of what’s going on in the industry, because we did not want to continue to defer if we didn’t need to understand it.

Understood. And how much of the provision in the third quarter would be attributed to those downgrades specifically?

Almost all of it. Yeah.

Okay. And then I guess it would be pretty fair to assume that if there was since if you saw similar stresses in some of the other kind of at risk industries like restaurants or whatnot that you would have done similar actions.

And so based on where you sit today, the hotel look to concern everything else needs to be at least has line of sight back to normal normalcy?

At this point, yes, that’s what we’re seeing. And most of our other industries and clients have gone back to not business as normal, but certainly a point where they have some predictability.

I’d say one other thing, Alex, with regard to the hotels too. We have clear line of sight into those businesses.

We’re talking to them probably once a week. This is a, call it, a life preserver for them to continue paying us, but get to a situation where they can improve their occupancy and begin resuming full principal and interest payments.

Okay. Understood.

And then just switching gears to talk about the margin for a couple of minutes. John, you mentioned that you think the margin should remain around this level in the fourth quarter.

Is that -- there’s obviously a lot of moving parts in the margin and liquidity, and additional stimulus money and PPP and all that kind of stuff. So maybe we can sort of push the margin aside and talk about NII.

Maybe you can kind of walk through some of the moving parts in NII over the -- into going into the fourth quarter and into next year, and whether or not you foresee NII continue to trend higher or if PPP, for example, is going to be enough of a headwind to kind of push it down for a couple of quarters?

I think NII from a growth level perspective, because we expect growth on our loans and the second -- the third quarter had a full hit of PPP and FSB, with those lower earning assets that we’ve put on. So we think that’s a good indication of our run rate from an NII -- from a just a managed income perspective and we feel that there’s growth ahead of us due to probably our expected growth in fourth quarter and beyond.

Okay. And then loan pipes going into the fourth quarter, is that kind of across the footprint or is that specific to the new Rochester market?

And then in terms of the categories is -- I presume that most of its commercial kind of your sort of core product, correct?

Yes. So it’s across the footprint.

We’re having some good success in Rochester, but it’s across the footprint. And we also have a pretty robust residential mortgage market going on right now too.

But it’s generally our commercial business that we’re talking about when we’re talking about the pipeline here.

Okay. And then the residential is a lot -- does a lot of that go to a secondary market, are you going to bring someone on your balance sheet?

We’re putting it on our balance sheet. Just, as I mentioned, we have a significant amount of cash and looking forward, I’ve been utilizing some of that based on our balance sheet, as we’re already spending the dollars they originate it.

We’re going to put some of that asset on. But there is some robust refinancing or pay off out of our own current portfolio.

So there -- it -- so there will be a little muted growth, but we expect it will be growth on residential portfolio, as we take an opportunity to put some of the -- those assets on our books also.

There was also a bit of a commitment for sale from the FSB portfolio. So not all of its going to go on our books, but what we can put on, we will, some will still go to the secondary market that were pre-committed.

Okay. And then just thinking to the fourth quarter on fee income, usually you see a little bit of a tick down in insurance revenue, which is pretty consistent every single year.

But then, when I look at some of the other lines, like deposit service charges, it looks like you’re not back to a full run rate yet compared to last year, and of course, with the additional operations. Do you foresee that getting back to a normalized level by the fourth quarter?

Do you think there’s going to continue to be some stress on some of these categories, just due to customer behavior?

I think, third quarter is probably a good proxy for going forward. But I think customer behavior right now, if COVID starts to lock things up a little more, we might -- they might pull back on that.

But our expectation is this run rate is probably good for the for the foreseeable future in the in the next few quarters.

Okay. And then -- and they took the same for expenses, in terms of the integration, everything that now that’s done.

How should we think about expenses from there?

I think, again, these expenses -- the expense level that we had in third quarter is pretty emblematic of our run rate and our base.

Yeah.

It’s a hard deal to make it [ph].

Yes. Of course.

And then just finally for me, on the tax rate, I know you said, you weren’t going to do any more tax credits in the near-term, but should that 11.8% that we saw the stated tax ratio, that carry through for the -- into the final quarter of the year or are we going to get to that normalized 25.5-ish level for the final quarter.

No. The current rate should be -- should fall through to the fourth quarter, because we take the benefit in each quarter even though we took the actual, we recognize the credit in the first quarter.

The benefit runs through the whole year. Obviously, next year and going forward not expecting to take a lot of tax credits that run rate tax rate should be more emblematic of what we’re doing going forward.

Great. Well, thanks for taking all my question, guys.

Thanks, Alex.

Thanks, Alex.

Hi, guys.

H, Kevin.

Hey, Kevin.

Hey. Just starting off, in your view to the stimulus plans and any future, I guess, stimulus?

Do you think it changes the outcome of credit losses this cycle or do you think it simply just delays the realization of the losses?

If you want to talk about the consumer, I think that they’ve done a pretty good job, there’s more needed. If you want to talk about the commercial side of the house, I think PPP is our lifeline that might help them.

It depends on the duration of this event and whether there’s additional PPP coming. That’s kind of an attempt to the answer.

I think it’s uncertain at this point. We’re thinking if you come out of this at the beginning of the year, the first quarter or second quarter is going to tell how some companies are doing, because it’ll be a year since this is transpired.

But, again, there’s talk of additional stimulus on the docket depending on the elections and things like that. So I guess, I’d say, there’s a little bit of uncertainty.

I think the government did a pretty good job with the consumer early on, they need more, I think, right now unfortunately. And with regard to the businesses, I think there’s some people thinking -- there’s some industries that need it, whether it’s airlines, whether it’s -- there’s been talked about hospitality meeting it, but you also have a situation where municipalities need it, because of what’s going on.

And whether that gets sent to the municipalities or not, that’ll be a challenge. There’s pretty big deficit it’s out there.

So there’s some economic impacts that could also impact this thing. So I’m sorry to be a little bit obtuse on that, Kevin, but there’s still some uncertainty, I think.

No. That’s helpful.

It’s quite the question to figure out what happens in the future. I guess, maybe just piggybacking off that a little bit, does the second round of stimulus if we get it or not get it?

Does it change an expectation of when NPAs might peak?

For us, I would say -- yeah, I say, Kevin, our line of sight into our businesses, I think, at the level of activity in the economy up here and our what’s in front of our clients is sufficient enough excluding the hotels to maintain a good business atmosphere. I think the hotels is where if a stimulus does come in, can help them weather the storm through until COVID-19, whether it’s a vaccine or some other resolution comes through.

I think that is where we would look for some assistance to help that industry through to the point where consumers feel more comfortable to go back to normal to visiting those clients.

Okay. Great.

And then maybe just thinking back about the hotels, has there been any market data or changes, sales, et cetera, that you could look to as far as updating LTVs, assuming the ones that you gave in the presentation are at origination?

There has -- I think the question you’re asking is, has there been price discovery yet in terms of…

Yeah.

… if hotels are going to move? And the answer is in this market?

No. There’s not been good price discovery yet.

There is one hotel, which was a Marriott here in town that is getting sold and closed. It is right near the University of Buffalo.

It went up for sale at an amount that was less than the mortgage amount. It is a national owner.

And the bids came in lower than even that amount and they pulled it off the market, because they’re not going to sell it at that level. But other than that, there has not been good price discovery in terms of if these things start changing hands.

Okay. Thanks.

That’s helpful. And then, I guess, with so much access to liquidity and some of your balance sheet changing with the acquisition.

Is there any change and how you think about the interest rate sensitivity on the balance sheet?

I think -- this is John, Kevin. I think, no, I think we’re -- we’ll have another disclosure in our Q.

I think, with our margin going forward, if the environment -- the interest rate environment stays constant, we’re -- we’ll probably be at this level. But up or down we don’t have a significant amount of interest rate sensitivity and as well, like, down is probably, there’s no down.

But in an up rate scenario, I think, we’re -- we don’t have a significant amount of risk, if rates do start to pick up.

Okay. Thanks.

Yeah. We won’t talk about down from here.

And then, maybe just few housekeeping questions if I can. Did you have end of period PPP loans outstanding number?

200 -- I think, we may have discussed that somewhat, $203 million above rate.

Okay.

That was at the end of.

Got it. And then…

I think we set out last quarter and I’m not sure we put it out this quarter. But that’s the right number.

Okay. Great.

And then, did you have a guess on what the allowance might be with the credit mark included and without PPP?

Yeah. Our credit mark was small, insignificant on the -- from the allowance perspective.

Yeah.

Okay. Got it.

Thank you very much. Appreciate it.

Thanks, Kevin.

All right. Well, thank you very much, Mary.

Thank you all for joining us today and participating in a teleconference. We appreciate your continued interest and support.

Please feel free to reach out to us at any time and we look forward to seeing and speaking with all -- we look -- certainly look forward to seeing all of you at some point here, but we look forward to speaking with all of you again in the New Year when we report our fourth quarter of 2020 results. We hope you have a great day and a great weekend.

Thank you.