Evans Bancorp is preparing to compete in a local banking landscape that will probably look a lot different by the end of the year.
While M&T Bank remains dominant in deposit market share, KeyCorp is on track to acquire First Niagara Financial Group, a deal which would create a stronger No. 2 player.
Evans isn’t waiting around to see how things turn out. The Hamburg-based bank has run ads trumpeting itself as an alternative for customers impacted by the merger, and some of those customers’ accounts are flowing its way.
Evans had less than 2 percent deposit market share in the region in the most recent figures from the Federal Deposit Insurance Corp., but the bank has ambitions to grow.
Evans expects to surpass the $1 billion mark for assets in the next few months. And in three to four years, the bank is aiming for annual net income of more than $10 million, which would be an increase of about 28 percent from the $7.8 million it recorded in 2015. Meanwhile, Evans has hired more people for revenue-generating jobs, invested in technology, and will open its first Niagara County branch, on May 9 in Lockport.
David J. Nasca, Evans’ president and CEO, said at the bank’s annual shareholders meeting on Thursday in Hamburg that the bank is ready to capitalize on the “market disruption” generated by the Key-First Niagara deal.
“We didn’t put a number target on it, but we expect that it’s going to be significant,” Nasca said. “And we’re already seeing momentum building even before the deal’s closed. We’ve won some customers already. We’re seeing that momentum pick up.”
“We expect when it becomes real for the customers with the deal closing, there will be even more traction,” he said.
John Connerton, Evans’ chief financial officer, said a large chunk of Evans’ deposit growth in the first quarter – an increase of $46 million, or 5.7 percent, from the fourth quarter – stemmed from the planned deal. “We’re tracking that they’re coming from First Niagara,” he said.
John R. O’Brien, Evans’ board chairman, said he feels the bank is well positioned to take advantage of the coming disruption by attracting more customers. “People get a little nervous. They don’t want to get left behind, so they make their own decisions, so we’re glad to be able help out in that area.”
The reordering of the banking landscape will take other forms, starting with First Niagara, No. 2 in deposit market share, vanishing if the deal is approved.
“There will be one less competitor in town,” Connerton said.
But in some ways, Nasca said, Evans’ roster of rivals won’t change that much. “If we’re in (competition) for a deal, it’s usually ourselves, M&T and First Niagara,” he said. “KeyCorp really hasn’t been as present lending-wise here. They’re picking up First Niagara, which was very active. So we expect to see the same competition, but we expect to be competitive as we have been.”
An upcoming sale of branches will also reshape the landscape. KeyCorp will sell 18 First Niagara branches in Erie and Niagara counties, with about $1.7 billion in deposits, in order to receive the Justice Department’s blessing for its deal. The sale could allow a bank already in the Buffalo Niagara market to bolster its presence, or enable a new player to make a splash. The Justice Department did not say who would buy the branches.
Evans didn’t bid on the package of branches, but is open to the idea of making a deal if the buyer doesn’t want to keep every piece of the package. That would be a lower-cost way for Evans to acquire more customers.
Evans has about 265 employees, and plans to stay around that level at least for now, Nasca said. “We expect to generate revenues with the existing base of employees that we have today. We’ll do more with them. That’s part of the reason for the technology investments.”
Nasca said he sees Evans’ relatively smaller size as an advantage: “As these banks get bigger, it’s harder for them to be as customer responsive.”
Shareholder Ed Gerecke of Angola said he sees growth potential for Evans stemming from the Key-First Niagara deal, “depending on where their branches are for sale, and what the sale price is.”