Evans Bancorp might report a loss for the second quarter after the Angola-based bank said late Wednesday that it will record a $1.4 million charge to earnings for restructuring its balance sheet.
In a press release, the bank said it would sell about $45 million of investment securities and lower the rates on high-cost municipal deposits with the expectation of losing some of that business. The goal, Evans said, is to raise its lending profit margin and income in future quarters, while improving performance measurements, reducing interest-rate risk, strengthening its capital base, and growing shareholder value.
However, it comes at a cost. The $1.4 million after-tax charge translates to 51 cents per share. That's more than the bank has earned in any quarter but one in at least eight years, if ever. It earned $1.4 million, or 52 cents per share, in the first quarter of 2006.
The steps represent an aggressive move by new President and CEO David J. Nasca, who took over the helm in April from longtime CEO James Tilley. Nasca, a former executive at First Niagara Financial Group, has already expressed an intention to double the bank's size within three to five years through acquisitions, new offices and new business. But first he has to overcome its recent inability to grow revenues faster than expenses.
The new actions will allow the bank to cut its portfolio of less profitable investments and reduce expensive wholesale borrowings used to finance them, the bank said. It will also free up capital to give the bank more flexibility for other actions, such as a previously stated goal of finding other banks or insurance agencies to buy.
"Despite the continued difficult economic environment for banks, we will continue to capitalize on any further opportunities that will improve our financial position and maximize shareholder value," said senior vice president and treasurer Gary Kajtoch.