Aug. 13--Evans Bancorp swung to a second-quarter loss Wednesday, as the Southtowns bank set aside more for bad debts because of economic conditions and put its national equipment leasing business up for sale.

The Angola-based parent of Evans Bank reported a loss of $1.9 million, or 67 cents per share, compared with a profit of $1.4 million, or 10 cents per share, in the same period a year ago.

However, that included a net loss of $2.1 million from the leasing business, as the bank marked down its value based on the competitive bids it has received so far from potential buyers. That unit lost $300,000 a year ago.

"It's a tale of two cities. We're very disappointed with what the bottom line results were, but we're gratified at the core results," said President and CEO David J. Nasca.

Even without that, however, net income from continuing operations fell 76.7 percent to $258,000, or 9 cents per share, from $1.1 million, or 40 cents per share, as the bank set aside $1.67 million for loan losses.

That included $1.4 million that wasn't tied to particular loans but was done out of caution because the mere risk of losses is higher, officials said. Officials stressed the higher provision was not a sign of actual deterioration.

"The environment is concerning us a bit, but our credit quality is holding up pretty well," Nasca said. "We just said the economy is tough and we need to provision out of prudence."

Evans has been engaged in equipment leasing nationwide since December 2004, but the broker-generated business isn't focused on the local market that Evans knows well, and losses mounted last year and early in 2009. So the bank sharply cut back in the first quarter and then stopped making new leases in April. The portfolio is now down to $40.9 million.

Officials are still in negotiations with potential buyers. "We've got to get the right price and the right execution before we'll do that," Nasca said. "We've been in some discussions with some people, but we're not going to give it away either."

If there's no sale, he said, the bank has already set aside enough for "whatever losses we might have in that portfolio and we'll service it until it goes away." Evans already set aside $3.8 million in reserves out of the total markdown of $7.7 million, resulting in a $3.9 million loss provision for leasing this quarter, and the net loss.

Even with the loss, Evans was able to extend its reach in Buffalo's northern and eastern suburbs July 24 by acquiring the failed Waterford Village Bank in Clarence, with $51 million in deposits and $43 million in loans.

Net interest income rose 18.6 percent to $4.55 million, driven by a lower cost of deposits and growth in loans outside of the leasing business.

Loans rose 5.6 percent from March 31 to $383.8 million, which represents a 22.5 percent annualized pace if maintained for a year. Total deposits fell 1.9 percent from March to $451.3 million, largely from seasonal drops in municipal deposits and run-off in high-cost certificates of deposit.

Fees rose 13.5 percent to $3.02 million, or 39.9 percent of revenues. Operating expenses rose 15.9 percent to $5.56 million because of salaries and benefits from a new branch and two purchases. It also incurred a special assessment of $250,000 for the Federal Deposit Insurance Corp.'s fund.

jepstein@buffnews.com

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