Evans Bank parent faces suit alleging redlining

Sept. 02--The State Attorney General's Office is suing Evans Bancorp, accusing Evans Bank's parent company of redlining on Buffalo'sEast Side.

The lawsuit, expected to be filed today in U.S. District Court of Western New York, alleges that Evans denied access to mortgage loans to predominantly African-American neighborhoods in the city because of their racial composition.

"Redlining is illegal, and it's discriminatory -- and must, once and for all, be made a thing of the past," Attorney General Eric T. Schneiderman said in a statement. Redlining refers to companies deliberately avoiding certain geographic areas while doing business in areas around them.

In a statement emailed to The Buffalo News, David J. Nasca, president and CEO of Evans Bank, said he was "disappointed" that the attorney general is filing suit.

"We continue to believe these allegations are without any merit, and we intend to vigorously challenge them," Nasca said. "Despite our best efforts over the last several months to resolve this matter with the attorney general, a resolution unfortunately could not be reached. We remain confident that our residential lending practices meet all applicable laws and regulations."

He added that the bank has "a long history" of complying with federal regulators who "require the fair treatment of customers and fair access to credit and financial products such as mortgage lending."

The Attorney General's Office accuses Evans of intentionally excluding the predominantly African-American neighborhoods from its lending area, as well as developing mortgage products that it said were unavailable in those neighborhoods, regardless of creditworthiness. It also accuses the bank of refusing to solicit customers, market mortgages or provide banking facilities in those neighborhoods.

Schneiderman said the lawsuit is part of an "ongoing, wider investigation" by his office's Civil Rights Bureau into redlining in New York State. He said he was concerned that banks had ceased lending to minority communities in the years since the mortgage crisis erupted.

In a filing with the federal Securities and Exchange Commission in March, Evans acknowledged that it was facing possible enforcement action by the Attorney General's Office over "certain residential mortgage lending practices" but said then that it had "limited information" about the investigation.

Evans said then that it believes it has "meritorious defenses to the state attorney general's investigation, denies any wrongdoing and intends to defend against any allegations."

Last month, Evans said it had been unable to reach an agreement with the Attorney General's Office and had set aside $1 million in reserve to cover expenses or possibly even a fine.

The attorney general's lawsuit contends that Evans "failed to draw mortgage applications from and make mortgage loans to African-American borrowers and East Side residents at the rates expected based on the performance of comparable banks operating in the same area during the same period as Evans."

For instance, the complaint says Evans received 1,114 residential mortgage applications in the Buffalo metro area from 2009 to 2012, and only four came from African-American applicants. The complaint says that, of those 1,114 applications, just eight came from the East Side neighborhoods and only one from an African-American applicant.

Earl V. Wells III of e3communications, the public relations company that represents Evans, sent Nasca's statement to The News on Monday. In it, Nasca called the allegations "unfounded and without substance" and said the bank "will vigorously defend this complaint through the legal system."

Beyond that, he said, "it would be inappropriate for us to have any further comment as this is now a matter before the courts."

Dennis C. Vacco, a Lippes Mathias Wexler Friedman attorney and former state attorney general who is representing Evans, asked The News to send follow-up questions to Wells so they could review them before deciding whether to respond.

The lawsuit contends that Evans defined its "trade area" to include much of the city and surrounding areas but exclude the East Side and that the bank "refused to solicit customers and market its loan products outside its trade area, including in the East Side neighborhoods."

The Attorney General's Office also contends that Evans "avoided" locating its branches and other facilities in East Side neighborhoods, instead locating those offices so as to form an "exclusionary ring" around those neighborhoods. In the City of Buffalo, Evans has branches in Elmwood Village and North Buffalo.

The result of these alleged practices, according to the Attorney General's Office, was the perpetuation of segregated housing patterns, as well as increased East Side vacancies and deteriorated housing stock because of residents' inability to obtain loans.

The lawsuit asks the court to:

-- Declare the policies and practices of Evans Bank a violation of the Fair Housing Act, New York State Human Rights Law and Buffalo City Code.

-- Enjoin the bank from discriminating because of race in any aspect of its business practices.

<p>-- Award monetary damages to compensate for the harm done.

-- Assess a civil fine or penalty against the bank.

-- Award punitive damages, the plaintiff's reasonable attorneys' fees and costs, and other necessary relief.

Evans, based in Hamburg, was the Buffalo Niagara region's sixth-largest bank based on deposit market share as of June 30, 2013 -- the most recently available rankings -- with about 2 percent of the market, according to Federal Deposit Insurance Corp. data.

News Staff Reporter Lisa Khoury contributed to this report. email: [email protected]

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