Executives at Evans Bancorp said Thursday they hope to capture more customers, market share, employees and even empty buildings, as sales of other banks' branches disrupt the local banking scene. But otherwise they are going to be cautious about expansion for a while.
Speaking to more than 100 shareholders at the Hamburg-based bank's 24th annual meeting, David J. Nasca, president and chief executive officer, said the bank would continue its growth over the next three to five years by increasing commercial lending to customers, opening new branches and making acquisitions.
The goal is to increase the bank's size to $1 billion or even $1.5 billion in assets, from just under $800 million now, while increasing profitability and shareholder returns.
"We have identified the opportunities to grow our business; we have developed a plan to achieve the objective and have assembled a team to make it happen," Nasca said during the 50-minute meeting. "We're intently focused on profitability and performance in this low-rate environment."
At the same time, officials will be more deliberate, given ongoing challenges in the industry and the broader economy.
"We're going to be a little cautious. With rates where they are and consumer behavior where it is, it's going to be tougher to build new branches," Nasca said later. "You can't load a lot of expenses on the income statement. We're managing profitability for shareholders."
Instead, Evans will be opportunistic, he said. In particular, he said the bank will seek to capitalize on the disruption from First Niagara Financial Group's pending $1 billion purchase of HSBC Bank USA's branches.
As part of that deal, slated to close next month, First Niagara is buying 195 branches from HSBC, with $15 billion in deposits. But it will turn around and sell 64 of them, with $4 billion in deposits, to KeyCorp, Community Bank System and Financial Institutions. First Niagara also will close 35 overlapping branches, and the other three banks plan similar steps.
As a result of all the changes, Evans is betting that customers and employees of the five banks may find themselves in upheaval and uncertainty, eager for a more stable bank.
In addition, Nasca said he hopes to snag some vacant bank branches from the turmoil, saving Evans from spending money on more costly new buildings, while allowing it to continue expanding its local branch network. He said the bank doesn't need to be "on every corner," but it still has gaps in its franchise where it has customers but no office.
In an interview, Nasca said he has been "talking to First Niagara and Key the last two days," and those banks expect Evans and others to have a "pick of opportunities" for abandoned offices. He said Evans would like to gain offices in West Amherst, Cheektowaga, Buffalo, South Buffalo and Orchard Park, as well as in Lockport, where it now owns an insurance agency.
"We're hopeful there will be fallout from the transaction," Nasca said. But "I think we're going to be slower on the trigger than we otherwise would have in the past."
The bank also wants to grow outside of its traditional market, turning toward Central New York and nearby Pennsylvania, which still has many one-branch banks that Evans could easily swallow. Nasca noted that Evans' branch network is "closer to Pennsylvania than to Lockport."
"We think Central New York looks a lot like Western New York," Nasca said. "We don't have anything that's imminent, but we continue to talk."
Evans has been growing rapidly, increasing its assets by 67 percent in five years and adding six branches in nine years. After many delays due to state historic preservation concerns, the company is set to begin construction next month in Williamsville on its 14th area branch, with an opening planned for the fall.
Nasca said the bank has pursued such growth to "protect the franchise," by gaining the scale necessary to invest in infrastructure and absorb increased regulatory costs while spreading those expenses across a larger base.
"We believe that growth is important for the organization in order to create operating leverage," Nasca said. "Most importantly, we believe that growth will allow us to maintain our commitment to increase shareholder value in an environment dominated by large banks."
Meanwhile, the bank's board of directors named John R. O'Brien as its new chairman, succeeding Phillip Brothman, who is retiring after 12 years. Brothman, who had been chairman of the bank since January 2001, will remain a director until his current term ends in 2013.
O'Brien, a director since 2003, has been vice chairman since 2008. He was executive director of financial administration for the Catholic Diocese of Buffalo until he retired in June 2004. Previously, he served as an audit partner with accounting firm KPMG LLP for 20 years.
The board also voted to name Lee C. Wortham, a director since 2011, as vice chairman to replace O'Brien. A veteran banker and wealth manager, Wortham has been a partner at Barrantys LLC, a consulting firm and service provider to high net-worth families and family businesses, since 2007.