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Evans Bancorp third-quarter profits rise 51 percent; better credit quality is cited

Evans Bancorp said Thursday that third-quarter profits rose 51 percent from a year ago, as the bank set aside much less for loan losses and recorded growth in net interest income from lending.

The Hamburg-based parent of Evans Bank reported net income of $1.93 million, or 47 cents per share, up from $1.28 million, or 31 cents per share, in the same quarter a year ago.

The surge was driven largely by better credit quality, particularly on its lease portfolio, as the bank set aside just $200,000 for loan and lease losses, down 80 percent from $1 million a year ago. Most of the decrease in that loss provision stemmed from a $500,000 drop in what it reserved for leases.

Meanwhile, core loans -- not including the national direct financing equipment leases that the bank is discontinuing -- rose 15.4 percent from a year ago to $560.8 million, while total deposits rose 14.6 percent to $613.2 million, as the roll-off of higher-rate promotional certificates of deposit was offset by growth in core checking and savings accounts.

"I think it's pretty stellar momentum into some pretty strong head winds," said President and CEO David J. Nasca.

Net interest income from taking deposits and making loans rose 4.5 percent to $6.5 million, as growth in net earning assets more than offset a tightening of the profit margin because of continued record low interest rates.

Loans grew 5.3 percent during the three months since June 30, or 21.2 percent annualized, driven by a $24 million increase in business and commercial real estate loans to $429.3 million. Checking and savings deposits grew by 9.4 percent since June, or 37.5 percent annualized, with most of the checking increase coming from commercial customers as the bank cross-sells those accounts to its borrowers.

Annualized means one quarter's growth rate multiplied by four.

"Robust core loan and deposit growth continues as Evans' brand recognition spreads and expands through the marketplace, which is a reflection of the increasing demand for community relationship banking," Nasca said.

Loan losses during the quarter were almost zero, although bad debts on the bank's books increased.

"Our conservative underwriting approach provides collateral positions that enable us to exit these nonperforming loans with minimal to no losses," Chief Financial Officer Gary A. Kajtoch said.

Fee and other income rose 2 percent to $3.2 million, and represented 32.8 percent of total revenues. Deposit service fees rose 5.7 percent as the bank raised some charges to match competitors. Insurance agency revenues rose 4.2 percent to $1.8 million as commercial commissions grew.

Expenses rose 5.5 percent to $6.8 million, led by a 9.8 percent increase in salaries and benefits to $4.1 million because of annual bonuses and increased staff.


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