Evans Bancorp Reports Fourth Quarter and Full Year 2008 Earnings

Business Wire, Feb 5, 2009

Gary Kajtoch, Senior Vice President and CFO of Evans Bank, the Company's wholly-owned subsidiary, commented, "As we have discussed previously, our direct financing lease portfolio is more susceptible to weakness in a troubled economy than our traditional commercial and consumer loans as evidenced by the increased charge-offs in our leasing portfolio in the fourth quarter. Because we expect direct leasing to continue to be sensitive to the performance of the economy, our portfolio managers and senior management continue to carefully monitor this portfolio. Steps have been taken to mitigate the portfolio's risk, including the tightening of credit standards and consolidation of our broker network."

Non-Interest Income

Non-interest income, which represented 32.8% of total revenue compared with 36.7% in last year's fourth quarter, declined 4.3% to $2.42 million.

Insurance service and fee income, the largest component of non-interest income, improved 3.6% to $1.36 million for the fourth quarter of 2008. Financial services sales revenue was the fastest growing product line for The Evans Agency ("TEA"), the Company's insurance agency subsidiary. However, other large components of non-interest income declined for the quarter. Deposit service charges declined 5.5% to $0.59 million due to decreased activity and bank-owned life insurance ("BOLI") revenue declined from $0.15 million in revenue in last year's fourth quarter to a loss of $0.03 million in the fourth quarter of 2008 as a result of market fluctuations.

Non-Interest Expense

Total non-interest expenses were $5.06 million for the fourth quarter of 2008, an increase of 8.1% from $4.68 million in the fourth quarter of 2007. Salaries and employee benefits decreased $0.06 million, or 2.4%, to $2.57 million for the quarter as the Company reversed its previous accrual for bonuses as the earnings targets in its incentive program were not met. The Company also had savings related to the freezing of its defined benefit pension plan in the first quarter of 2008. These factors were partially offset by the addition of new employees, including those working in the Company's new branch office in Buffalo and from the acquisition of the Fitzgerald Agency in the third quarter of 2008, and increased matching contributions to the Company's 401(k) savings plan. The $0.14 million increase in occupancy expenses was driven by the new branch office as well as new signage needed at various branch offices given the Company's new brand and logo. Advertising and public relations expenses increased $0.08 million in the fourth quarter of 2008 compared with the prior year as a result of the Company's new branding campaign. Professional services expenses increased $0.12 million in the fourth quarter of 2008 compared to the prior year due to increased auditor fees for attestation of the effectiveness of internal controls over financial reporting, the outsourcing of security services at two branches, and payment for increased systems programming. Other expenses increased $0.12 million from the fourth quarter of 2007 to $0.57 million in the fourth quarter of 2008. The increase was primarily due to higher FDIC assessment charges.