Evans Bancorp Reports Increase In Net Income for the Second Quarter of 2008

Business Wire, July 30, 2008

* Net interest income increased 15.2% in second quarter compared with the prior year

* Net loans and leases grew at 31.2% annualized rate in the second quarter

* Total deposits grew at 32.4% annualized rate in the second quarter

* Net interest margin increased 73 basis points from prior year to 4.70% in second quarter

* Consistently strong asset quality; net charge-off ratio improved compared with first quarter

ANGOLA, N.Y. -- Evans Bancorp, Inc. ("The Company") (NASDAQ: EVBN), today reported its results of operations for the quarter ended June 30, 2008.

Net income for the second quarter of 2008 was $1.39 million, or $0.50 per diluted share, compared with a net loss of $0.14 million, or $0.05 per diluted share, in the second quarter of 2007. In last year's second quarter, the Company sold $45 million of securities at an after-tax loss of $1.41 million, or $0.51 per diluted share. Return on average equity was 12.37% for the quarter, compared with a negative 1.37% in last year's second quarter. For the six-month period ended June 30, 2008, net income was $2.98 million, or $1.08 per diluted share, up from $1.15 million, or $0.42 per diluted share, in the same period in 2007. The return on average equity was 13.40% and 5.70% for the six-month periods ended June 30, 2008 and 2007, respectively.

"Net operating" income (as defined in the following Supplemental Non-GAAP Disclosure) is net income adjusted for what management considers to be "non-operating" items. Net operating income for the second quarter of 2008 was $1.48 million, or $0.54 per diluted share, up $0.12 million, or 8.9%, from net operating income of $1.36 million, or $0.50 per diluted share, in the second quarter of 2007. For the six-month period ended June 30, 2008, net operating income of $3.18 million, or $1.15 per diluted share, was 16.0% higher than net operating income of $2.74 million, or $1.00 per diluted share, in the same period in 2007.

David J. Nasca, President and CEO of Evans Bancorp, noted, "The Company continued to grow its loan and lease portfolio at an exceptional rate in the second quarter. Success in our retail branches has driven core deposit growth to help fund our increase in loans. This loan and deposit growth, along with a steepened yield curve, drove the increase in net interest income. Evans Bancorp has not been involved in the highly publicized sub-prime lending issues affecting our industry and has not experienced any significant deterioration in its asset quality. The Company's sound loan and securities portfolios, appropriate reserve for loan and lease losses, and strong capital levels put us in a superior position to take advantage of growth opportunities in our market area."

Supplemental Non-GAAP Disclosure

To provide investors with greater visibility of Evans Bancorp's operating results, in addition to the results measured in accordance with U.S. generally accepted accounting principles ("GAAP"), the Company provides supplemental reporting on "net operating" income, which excludes items that management believes to be non-operating in nature. Specifically, net operating income excludes gains and losses on the sale of securities and the amortization of acquisition-related intangible assets. This non-GAAP information is being disclosed because management believes that providing these non-GAAP financial measures provides investors with information useful in understanding the Company's financial performance, its performance trends, and financial position. While the Company's management uses these non-GAAP measures in its analysis of the Company's performance, this information should not be viewed as a substitute for financial results determined in accordance with GAAP or considered to be more important than financial results determined in accordance with GAAP, nor is it necessarily comparable with non-GAAP measures which may be presented by other companies. See the reconciliation of net operating income and diluted net operating earnings per share to net income and diluted earnings per share in the following table:

[TABLE OMITTED]
* After any tax-related effect

Net Interest Income

Net interest income during the second quarter of 2008 increased to $4.83 million, up $0.64 million, or 15.2%, from $4.19 million in the second quarter of 2007. Loan and lease growth and the reduced cost of interest-bearing liabilities were the main factors in the increase. Net loans and leases were $361.0 million at June 30, 2008, up 7.8% from $334.9 million at March 31, 2008 and 13.0% from $319.6 million at December 31, 2007. This equates to an annualized growth rate of 31.2% for the quarter and 26.0% during the first six months of the year. Much of the growth was in the Company's commercial real estate portfolio. Total deposits were $371.5 million at June 30, 2008, up 8.1% from $343.6 million at March 31, 2008 and 14.0% from $325.8 million at December 31, 2007. This equates to an annualized growth rate of 32.4% for the quarter and 28.0% during the first six months of the year. The Company's new retail money market product and long-term certificates of deposit have been the primary drivers of deposit growth. Demand deposit balances fluctuate day-to-day based on the high volume of transactions normally associated with the demand product. Average demand deposit growth is a better measure of sustained growth. Average demand deposits in the second quarter were up 4.2% from the first quarter and 2.2% from the prior year's second quarter. The increase in NOW deposit balances and decrease in muni-vest balances was largely a result of one large municipal customer moving money between two products with similar rates.