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Deposits, loans buoy profits at Evans

Evans Bancorp said Wednesday that first-quarter profits rose 26.9 percent from a year ago, as loan revenues grew, deposits rose, and credit strengthened.

The Hamburg-based parent of Evans Bank reported net income of $2.4 million, or 58 cents per share, up from $1.9 million, or 46 cents per share, in the same period a year ago.

"It's a clean quarter," said David J. Nasca, Evans' president and CEO. "We've continued strong earnings momentum."

No shares traded Wednesday, but shares closed at $14.45 Tuesday. The stock is up 21 percent since the start of the year.

"I think we're pleased with how the stock price moved up the last quarter," Nasca said. "We don't control it. We just perform every day and try to provide shareholder value, and hope that that shows itself in the stock price. The stock price has finally responded."

Evans has been focusing on internally generated growth, through new savings and checking accounts, its municipal banking business and increased commercial lending. That's paid off, as both loans and deposits were up more than 10 percent from a year ago. The company has $776 million in assets and $650 million in deposits, with 13 branches.

Nasca also said the bank is counting on capturing market share due to unrest caused by the pending purchase of 195 HSBC Bank USA branches by First Niagara Financial Group, and First Niagara's subsequent sale of 46 of those branches to KeyCorp, Community Bank System and Five Star Bank.

"We're seeing a fair amount of discussions and some activity, but we're really starting to see inquiries now," Nasca said.

Net interest income from taking deposits and making loans rose 8.8 percent to $6.9 million.

Core loans -- not including the financing leases -- rose 10.8 percent to $575.2 million, led by business and commercial real estate loans. But total loans were down slightly from the fourth quarter, as activity slowed after Evans closed many loans in late December.

"We had such a monster month in December closing loans that we emptied the pantry," Nasca said. "December was so strong, so we rebuilt the pipeline a little bit. But anytime we have a certain number in our pipeline we're pretty happy."

Total deposits rose 11 percent to $649.7 million, led by growth in savings accounts and municipal deposits, as well as the bank's Better Checking product, which has helped attract customers. Savings rose $20.2 million, or 25.8 percent annualized, just in the recent three-month period that ended March 31, while municipal deposits grew $23.6 million since Dec. 31. High-cost certificates of deposit fell.

The bank set aside $700,000 less for loan losses than a year ago because of the lower balances and improved credit in the equipment-leasing portfolio, which is running off over time.

"We are closely monitoring the strength and breadth of the economic recovery," said Chief Financial Officer Gary A. Kajtoch. "We will continue to apply our prudent underwriting standards in order to grow our portfolio while at the same time minimizing our exposure."

Fee and other income fell 5 percent to $3.3 million, representing 32.4 percent of total revenues, because of 6.9 percent lower insurance revenues due to a decrease in profit-sharing income from insurers. Deposit fees also fell because of changing consumer behaviors.

And data center income, from the Suchak Data Systems LLC data processing firm that Evans bought in 2008, fell by $115,000, as Bank of Akron -- one of three other banks that had contracted with Suchak for data services -- brought its systems in-house. Lake Shore Bancorp and a small Pennsylvania bank remain clients.

Operating expenses rose 4.6 percent to $6.9 million, led by a 7.9 percent increase in salaries and benefits. That was due to raises, health care costs and more staff, offset by lower occupancy costs and federal deposit insurance premiums.