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Deposit growth, fewer bad loans push Evans Bank profits up 30%

Fewer bad loans and a growing deposit base helped Evans Bancorp boost its first-quarter profits by 30 percent, the Hamburg-based banking company said Wednesday.

Evans said its profits improved to $1.88 million, or 46 cents per share, from $1.45 million, or 51 cents per share, a year earlier, when the company had fewer shares of its stock in circulation prior to a May 2010 stock sale.

"I think the results reflect some significant progress," said David J. Nasca, Evans' president and chief executive officer. "This is a really strong quarter."

Evans executives said the quarterly results showed steady improvement in the bank's operations, with deposits growing by 15 percent over the last year, while its growing loan portfolio had fewer accounts go sour.

"What we've been doing is some good blocking and tackling," Nasca said. "We've had good deposit growth. We've had good loan growth."

The bank reduced its provision for loan losses by almost two-thirds to $500,000 during the quarter, mainly because some of last year's provision covered problem accounts at Evans' national leasing business, while this year's reserves did not include any additional leasing accounts.

Evans' operating earnings improved by 23 percent to $1.95 million, or 48 cents per share, from $1.6 million, or 56 cents per share, a year ago.

The bank's net interest income, which is the difference between the interest Evans charges on the loans it makes and the interest it pays on its deposits, grew by 4 percent to $6.3 million, as its core loan portfolio, which excludes direct financing leases, grew by 10 percent over the last year.

Evans' deposits increased by 15 percent to $585 million, growth that Nasca attributed to new checking and savings account products that have helped it win new customers.

Fee income, which accounts for 36 percent of the bank's revenues, fell by 7 percent to $3.5 million, mainly because of lower fees stemming from new federal regulations on overdraft charges, along with a 7 percent drop in revenues from its insurance agency. Evans executives blamed the drop in the insurance business on the soft insurance market and the economy, noting that the bank still has strong customer retention rates.

Evans stopped making new-equipment leases during the second quarter of 2009 and has been steadily winding down its position in that unprofitable business. The portfolio shrunk by $3.1 million during the first quarter to $12.4 million and now makes up 2.3 percent of Evans' total portfolio of loans and leases, less than half its level of a year ago. The portfolio is winding down at a rate of about $1 million a month, said Gary A. Kajtoch, Evans' executive vice president and chief financial officer.


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