Evans Bancorp said it is facing possible enforcement action by the state Attorney General’s Office over “certain residential mortgage lending practices.”
The Hamburg-based parent of Evans Bank said the Attorney General’s Office on Jan. 22 confirmed it had conducted a nonpublic investigation. The investigation came to light in Evans’ annual report, which was filed this week with the Securities and Exchange Commission.
“The (state Attorney General) is requesting certain remedies including payment of a civil penalty and various remedial measures,” the bank said.
Evans said it believes it has “meritorious defenses to the state Attorney General’s investigation, denies any wrongdoing, and intends to defend against any allegations.”
The bank in its annual report said it had “limited information” about the investigation, and said it could not predict whether a formal action will be filed, or assess whether the outcome would be favorable or unfavorable, or estimate what financial impact, if any, the issue would have on its operations.
“While we respect the process, we are confident that our lending practices are in full compliance with all appropriate laws,” said David J. Nasca, president and chief executive officer, in a statement. “As this is an ongoing, nonpublic investigation, we will have no further comment at this time.”
The state Attorney General’s Office said it does not comment on ongoing investigations.
But according to a Buffalo News analysis of the bank’s mortgage lending activity in Erie County in 2012, using data that the bank submitted to regulators under federal law, its record for outreach to racial and ethnic minorities for business in its service areas might have drawn scrutiny.
The data, which is publicly available on the Federal Financial Institutions Examination Council’s website, appears to show Evans’ home lending in 2012 – the most recently available data – was skewed heavily toward white borrowers, with few applicants coming from black, Hispanic or other minority groups. For example, in a filing about minority status, Evans reported receiving 79 applications for conventional home-purchase loans, with 69 of them identified as white non-Hispanic.
Under the 1977 Community Reinvestment Act and the Home Mortgage Disclosure Act, two federal laws that were passed in response to alleged lending discrimination, banks are required to file reports annually that break out their mortgage applications, approvals and denials by race, ethnicity, sex, income level and census tract.
The Community Reinvestment Act, or CRA, requires that banks make loans and investments in minority communities and to minority borrowers that are part of their overall service area. The FFIEC, which makes available the data, is an interagency regulatory body comprised of the Federal Reserve, the Federal Deposit Insurance Corp., the National Credit Union Administration, the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau.
Bert Ely, a Virginia-based consultant for financial firms, was not familiar with the investigation involving Evans, but he said across the banking industry, the CRA has been credited with helping greatly reduce allegations of the practice known as “redlining.”
Regulators routinely examine banks for compliance with CRA, and Evans has scored well on its CRA exams: it earned a “satisfactory” rating, the second-best of four ratings, on each of six exams going back to 1992, according to the FFIEC’s website. Evans’ most recently published result was for 2009.
However, critics of the bank regulatory agencies have often accused the agencies of being too soft on the banks, noting that the vast majority of banks earn at least a “satisfactory” rating, making the ratings almost meaningless. Evans was the Buffalo Niagara region’s sixth-largest bank based on deposit market share as of June 30, 2013 – the most recently available data– with about 2 percent of the market, according to Federal Deposit Insurance Corp. data.
News Business Reporter Jonathan Epstein contributed to this report. email: email@example.com