Evans Bancorp Reports Fourth Quarter and Full Year 2008 Earnings

Business Wire, Feb 5, 2009

ANGOLA, N.Y. -- Evans Bancorp, Inc. (NASDAQ: EVBN):

* Net income increases 45.7% to $4.91 million in 2008; net operating income increases 2.8% to $5.32 million.

* Net interest income increased 13.2% in fourth quarter compared with the prior year.

* Fourth quarter net income was $0.51 million; impacted by increased provision for loan and lease losses, continued soft insurance market, and costs of new branch and brand building investments.

* Net loans and leases increase 25.7% in 2008, total deposits increase 24.0%

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 and year ended December 31, 2008.

Net income for the fourth quarter of 2008 was $0.51 million, or $0.18 per diluted share, a decrease of $0.30 million, or 37.3%, from net income of $0.81 million, or $0.29 per diluted share, in the fourth quarter of 2007. Return on average equity was 4.37% for the quarter, compared with 7.55% in last year's fourth quarter. For the year ended December 31, 2008, net income was $4.91 million, or $1.78 per diluted share, an increase of $1.54 million, or 45.7%, from $3.37 million, or $1.23 per diluted share, in 2007. The increase in net income was partially due to the sale during the second quarter of 2007 of $45 million of securities at an after-tax loss of $1.41 million, or $0.51 per diluted share, as the Company restructured its balance sheet. The return on average equity was 10.82% and 8.15% for the year ended December 31, 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 fourth quarter of 2008 was $0.62 million, or $0.22 per diluted share, a decrease of $0.30 million, or 32.9%, from net operating income of $0.92 million, or $0.33 per diluted share, in the fourth quarter of 2007. For the year ended December 31, 2008, net operating income of $5.32 million, or $1.93 per diluted share, was 2.8% higher than net operating income of $5.17 million, or $1.89 per diluted share, in 2007.

"We made solid headway in 2008 toward building a stronger brand, improving our market presence and strengthening our balance sheet. We ended the year poised, strategically and financially, to continue to grow market share despite 2008 being one of the worst years the financial services industry has faced. For the year, our assets grew nearly 20% with loan growth of 25.7%," stated David J. Nasca, President and CEO of Evans Bancorp. "In the fourth quarter, we were able to grow net interest income before the provision for loan and lease losses by more than 13% as a result of strong growth in both our loan and deposit portfolios and pricing discipline. In the quarter, we made a sizable provision for loan and lease losses, which is reflective of the challenges of the current economy. We have invested in broadening recognition of our services and capabilities in Western New York and believe these investments are critical to our long-term growth."

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 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 GAAP net income and GAAP diluted earnings per share in the following table:

[TABLE OMITTED]

* After any tax-related effect

Net Interest Income

Net interest income during the fourth quarter of 2008 increased to $4.95 million, an increase of $0.58 million, or 13.2%, from $4.37 million in the fourth 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 $401.6 million at December 31, 2008, an increase of 5.8% from $379.4 million at September 30, 2008 and an increase of 25.7% from $319.6 million at December 31, 2007. Much of the growth continues to be in the Company's commercial real estate portfolio. Commercial real estate has historically been the largest component of the Company's loan portfolio. Management's wealth of experience in this type of lending has allowed the Company to grow the portfolio in a difficult environment while maintaining their historically conservative underwriting approach.