Cardtronics Inc. reported yesterday higher first-quarter financials, but ATM surcharge revenues dropped year-over-year primarily because of the success of its Allpoint surcharge-free ATM network, bank branding agreements and free-to-use ATMs in the United Kingdom.

For the three-month period ending March 31, Cardtronics recorded a net income of $6.48 million compared with $3.96 million for the same three-month period last year. The nation’s largest independent ATM deployer (IAD) reported total revenues of $138.04 million compared with $127.77 million in 2010’s first quarter.

“We kicked off 2011 with a continuation of positive revenue and earnings trends seen over the past few years,” said Steven Rathgaber, CEO of the Houston-based IAD. “We won several new contracts in the quarter and continued to grow with our existing premier merchant account base. We are pleased with our continued growth and are excited about what we expect to be another strong year for Cardtronics.”

During an analysts’ conference call, Rathgaber cited ATM deployment agreements with Bank of Ireland, and an ATM placement contract with the Bank of England through Cardtronics’ United Kingdom-based subsidiary Bank Machine Ltd.

He also noted that Cardtronics has expanded its agreement with Kroger Co. to deploy additional ATMs at Ralph’s and Tom Thumb, two Kroger-owned supermarket chains. Earlier this year, Cardtronics signed an agreement to manage some of Cincinnati-based Kroger’s ATMs.

Chris Brewster, Cardtronics' chief financial officer, said the IAD is experiencing higher sales to smaller banks because the financial institutions have to comply with the Americans with Disabilities Act by March of 2012. Cardtronics is a valued-added reseller for ATM manufacturer NCR Corp., which is based in Duluth, Ga.

“Normally, I would be telling you sales have slowed down, but we have had a stronger order flow in the quarter,” Brewster said. Rathgaber added that small banks are emerging from their financial “trauma” of the past few years.

Cardtronics operated 37,034 transacting ATMs in 2011’s first quarter in the United States, United Kingdom and Mexico compared with 35,195 machines in 2010’s first quarter. The company reported 66.624 million cash withdrawals in 2011’s first quarter, up 11 percent compared with 60.131 million cash withdrawals in last year’s first quarter. Average monthly cash withdrawal transactions per machine in the first quarter were 671, up 8 percent compared with 619 monthly cash withdrawal transactions per machine a year earlier.

Although cash withdrawal transactions increased during the quarter, surcharge revenues fell to $65.830 million, down from $66.006 million compared with the same three-month period last year. Brewster attributed the decline in surcharge revenue to the success of Cardtronics’ Allpoint surcharge-free ATM network and Bank Machine’s deployment of free-to-use ATMs in the U.K. Allpoint operates more than 43,000 surcharge-free ATMs in the United States, United Kingdom, Mexico, Australia and Puerto Rico.

Brewster added that Cardtronics’ bank-branding agreements also reduced surcharge revenues. With bank-branding agreements, bank customers can withdraw funds from Cardtronics ATMs surcharge free. Bank branding and surcharge-free network revenues reached $21.681 million in the first quarter, up from $19.132 million in 2010’s first quarter.

While surcharge fee transaction revenues declined during the first quarter, interchange revenues increased to $40.409 million compared with $37.581 million in 2010’s first quarter.