Evans Bancorp Reports 2009 First Quarter Results

Business Wire, April 22, 2009

• First quarter net loss of $1.25 million; impacted by higher provision for loan and lease losses and non-cash goodwill impairment charge
• Company exiting national leasing business
• Total deposits grow 13.9% and core lending up 4.1% in first quarter 2009
• Non-interest income grows 10.3% driven by strong growth in insurance services; total revenue was up 15.4%

ANGOLA, N.Y. -- Evans Bancorp, Inc. (the “Company”) (NASDAQ: EVBN), a community financial services company serving Western New York, today reported its results of operations for the quarter ended March 31, 2009.

The Company recorded a net loss for the first quarter of 2009 of $1.2 million, or $0.45 per diluted share, compared with net income of $1.6 million, or $0.58 per diluted share, in the first quarter of 2008. The net loss was primarily due to a $1.2 million after-tax and non-cash charge for impairment of the entire $2.0 million of goodwill associated with the Company’s leasing business. First quarter results were additionally impacted from the recording of a $3.3 million provision for loan and lease losses, or a $2.8 million increase over first quarter 2008, of which $2.5 million was the result of credit deterioration in the leasing portfolio. Return on average equity was (10.81%) for the quarter, compared with 14.45% in last year’s first quarter.

“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 first quarter of 2009 was $0.10 million, or $0.04 per diluted share, a decrease of $1.6 million, or (93.9%), from net operating income of $1.7 million, or $0.62 per diluted share, in the first quarter of 2008.

David J. Nasca, President and CEO of Evans Bancorp stated, “We understand that this quarter’s results are disappointing amidst what has been strong forward momentum and growth by the Company. In the past two years our goal has been to strengthen the balance sheet and our capital position. As a step to reduce additional credit exposure, we have elected to exit our national leasing operations. The actions taken this quarter will help us reduce risk and also enable the reallocation of capital back into our core businesses of banking, insurance and investment services, which have been performing strongly. In addition, our strong capital position allows us to weather this type of economic storm, enables flexibility as opportunities for expansion present themselves, and provides an ability to return capital to our shareholders.”

Mr. Nasca continued, “This quarter we have had strong growth in loans and deposits within our core business franchise and measurable growth in insurance. Our financial services solutions provide us the platform to capture market share in an uncertain environment and drive exceptional customer experience.”

Supplemental Non-GAAP Disclosure

To provide investors with greater visibility of the Company’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 the non-cash impairment and amortization of acquisition-related goodwill and 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 GAAP net income and GAAP diluted earnings per share in the following table:

[Table Omitted]

Net Interest Income

Net interest income increased to $5.21 million during the first quarter of 2009, an increase of $0.27 million, or 5.4%, from $4.95 million in the fourth quarter of 2008, and an increase of 19.6% from $4.36 million in the first quarter 2008. Growth of the core loan portfolio and the reduced cost of interest-bearing liabilities continue to be the main factors driving this increase. The core loan portfolio is defined as total loans and leases less direct financing leases. Core loans were $363.4 million at March 31, 2009, an increase of 4.1% from $349.1 million at December 31, 2008. This equates to a 16.4% annualized growth rate. The Company continued to experience strong growth in commercial real estate. Origination of residential mortgages was also very strong in the first quarter of 2009 with $6.1 million in originations, compared with $2.6 million in last year’s first quarter. Residential mortgage balances are lower, however, as the Company does not hold 30-year loans and has sold most of the mortgages to Fannie Mae, resulting in a gain on sale of $29 thousand, compared with a gain of $1 thousand in the previous year’s first quarter. The Company continues to service all mortgage loans it originates. The direct financing lease portfolio declined $3.2 million to $55.4 million at the end of the 2009 first quarter as the Company measurably slowed lease originations through the first three months of 2009. In April, the Company ceased the origination of new leases outside of the Western New York market.