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Community Bank System, which operates 34 branches in mostly rural parts of Western New York, said first-quarter profits rose 7.5 percent to a record for the period, as loan growth, acquisitions and higher fees drove up total revenues.

The DeWitt-based parent of Community Bank reported net income of $20.2 million, or 50 cents per share, up from $18.8 million, or 48 cents per share, in the same period a year ago.

Total revenues rose 9.2 percent to $84.5 million, driven by an 11.6 percent increase in average earning assets from making more loans and from the bank’s acquisition last summer of 19 HSBC Bank USA and First Niagara Financial Group branches. Higher deposit accounts and balances, as well as growth in wealth management and benefits administration services, also added to fee income.

The board of directors in December approved a stock buyback program for up to 2 million shares over the next 12 months, but the company did not buy back any stock in the first quarter.

During the first quarter, the company restructured its balance sheet by selling $398.7 million in longer-term securities investments, for a $47.8 million gain, and repaying $366.6 million of its Federal Home Loan Bank borrowings at a cost of $47.8 million. In April, the bank sold another $250 million of securities for a $15.9 million gain and used some of proceeds to repay $135 million in borrowings. As a result, the bank reduced the size of its balance sheet by nearly 7 percent but created more capital to meet regulatory requirements.

Net interest income from taking deposits and making loans rose 8.4 percent to $58.4 million, as average loans grew by $406.5 million from a year ago and investments rose by $273.6 million. That offset a lower profit margin on lending, as lower interest rates sent the amount it earned on loans down faster than what it paid on deposits.

The bank set aside $1.4 million for loan losses, down $300,000, or 15 percent, from a year ago because of lower actual losses and continued good credit. It wrote off $1.4 million as uncollectible, down from $2 million a year ago.

Fee and other income rose 11.3 percent to $26.1 million, as deposit service fees rose 11.8 percent to $11.6 million, producing nearly half of the increase in other income. Employee benefits administration and consulting grew 8.9 percent because of new customers and growth in the metropolitan New York area, while wealth management revenues rose 18.1 percent because of gains in trust services, asset management and advisory services, and better market conditions.

Operating expenses rose 10.4 percent to $54.6 million, because of higher costs from the acquired branches.

email: jepstein@buffnews.com