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Evans Bancorp sinks on bad loans

Evans Bancorp said Thursday that fourth-quarter profits fell 37.3 percent, after fees fell and it set aside more for loan losses.

The Angola-based parent of Evans Bank reported earnings of $505,000, or 18 cents per share, down from $805,000, or 29 cents per share, in the same quarter a year ago.

Not including identical securities losses and accounting charges in both quarters, net operating profits fell 32.9 percent to $615,000, or 22 cents per share, from $916,000, or 33 cents.

Evans shares fell 23 cents Thursday, closing at $13.69. Earnings were released after the market closed.

"In an environment that's significantly challenged, we performed strongly, and we're pretty well positioned," said CEO David Nasca. "It was pretty excellent performance on a relative basis when you think about where everyone else is."

Net interest income from taking deposits and making loans rose 13.2 percent to $4.95 million, driven by growth in loans and leases and a drop in the cost of deposits that overcame a narrowing of the profit margin.

Loans grew 25.7 percent to $401.6 million from a year ago, led by commercial real estate, which is historically the largest portion of the loan portfolio. The bank wrote off $698,000 as uncollectible, up 169 percent from the same quarter a year ago, largely because of direct finance commercial leases, and the bank set aside $1.7 million in reserve for losses, up from $974,000 a year ago.

Total deposits rose 24 percent from a year ago, to $404 million, driven by a new retail money market account introduced in May 2008. However, the total balances only inched up from the third quarter, as that growth was offset by a decline in certificates of deposit because the bank relied on cheaper wholesale funding instead of paying up for accounts.

Fees fell 4.3 percent to $2.42 million, as insurance revenues ticked up, but deposit service fees fell and Evans lost money on bank-owned life insurance because of market fluctuations.

Operating expenses rose 8.1 percent to $5.06 million, as salaries and benefits fell but the bank added more staff, opened a new branch in Buffalo, launched a new brand, increased retirement fund matches, and bought an insurance agency in August. It also bought technology firm Suchak Data Systems on Dec. 31.

For 2008, profits soared 45.7 percent to $4.91 million, or $1.78 per share, from $3.37 million, or $1.23, in 2007. Without a $1.41 million loss in 2007 from selling $45 million in investments to restructure the balance sheet, profits rose 2.8 percent to $5.32 million.

Nasca said the bank will continue to look at opportunities to add more branches and gain market share, as larger banks tighten up and customers turn to smaller banks instead.

"It's going to be challenging for all of the businesses out there, but I'm pretty optimistic about where our organization is poised right now," he said. "We can sustain ourselves pretty handsomely in a tough environment because of our size."


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