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Evans, FDIC strike deal stemming from Waterford Village shutdown

Waterford Village Bank closed four years ago, but a deal struck in its aftermath has just ended.

Evans Bancorp and the Federal Deposit Insurance Corp. have wrapped up an agreement that helped fill the void created by Waterford’s shutdown.

State regulators in July 2009 shut Clarence-based Waterford, citing a dangerous lack of capital. They turned the Clarence-based bank over to the federal government, naming the FDIC as receiver.

Evans Bancorp, the parent of Evans Bank, assumed Waterford’s $51 million in deposits after the shutdown and bought essentially all of Waterford’s assets, including $43 million in loans.

Under a loss-sharing agreement with Evans as part of the “receivership,” the FDIC pledged to cover 80 percent of any losses on the Waterford loans and foreclosed real estate up to $5.6 million and 95 percent of losses above that amount.

But that arrangement had become more of a burden than a benefit lately, as the FDIC sent a team of 15 auditors to review the Waterford loans each year. That portfolio was down to just $16.6 million as of June 30.

The FDIC approached Evans about wrapping up the loss-sharing agreement, said Kevin Brady, a spokesman for Hamburg-based Evans. “It eases the administrative burden on both sides.”

Evans received roughly $1 million from the FDIC on July 5 to help with the remaining risk. The FDIC will no longer help Evans cover losses on Waterford loans, but the bank in the third quarter will apply more than $600,000 from the FDIC toward its provision for loan losses, to address any future concerns.

And Evans said it has written off an “indemnification asset” of more than $300,000, referring to money it was owed by the FDIC under its agreement for Waterford loans that were written off.

Brady said the funds going toward loan losses and the writeoff combined add up to nearly all of the roughly $1 million involved in the deal. The specific figures are due to be released later.

While the dollar amounts involved in ending the Evans-FDIC agreement were relatively small, the deal closes a chapter on the Waterford shutdown. The deal also allowed the FDIC and Evans to end their agreement a year ahead of schedule.

“I think at the end of the day, everybody’s better off,” Brady said.