United States
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended March 31, 2005

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission file number 0-18539

EVANS BANCORP, INC.

14 -16 North Main Street, Angola, New York 14006

(716) 926-2000

Not applicable

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the exchange Act)

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock, $.50 Par Value— 2,593,494 shares as of May 11, 2005

INDEX

EVANS BANCORP, INC. AND SUBSIDIARIES

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PART I - FINANCIAL INFORMATION

See Notes to Unaudited Consolidated Financial Statements

 2

PART I - FINANCIAL INFORMATION

EVANS BANCORP, INC. AND SUBSIDIARIES

See notes to Unaudited Consolidated Financial Statements

 3

PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS

EVANS BANCORP, INC. AND SUBSIDIARIES

See Notes to Unaudited Consolidated Financial Statements

 4

PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS

EVANS BANCORP, INC. AND SUBSIDIARIES

(continued)

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PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS

EVANS BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(in thousands)

(concluded)

See notes to Unaudited Consolidated Financial Statements

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PART 1 – FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS

EVANS BANCORP, INC. AND SUBSIDIARIES

1.	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
	The accounting and reporting policies followed by Evans Bancorp, Inc. (the “Company”), a financial holding company, and its two direct wholly-owned subsidiaries: Evans National Bank (the “Bank”), and its subsidiaries, ENB Associates Inc. (“ENB”), Evans National Leasing, Inc. (“ENL”) and Evans National Holding Corp. (“ENHC”); and Evans National Financial Services, Inc. (“ENFS”), and its subsidiary, ENB Insurance Agency, Inc. (“ENBI”) in the preparation of the accompanying interim unaudited consolidated financial statements conform with accounting principles generally accepted in the United States of America and with general practice within the banking industry. Except as the context otherwise requires, the Company and its direct and indirect subsidiaries are collectively referred to in this report as the “Company.”
	The accompanying consolidated financial statements are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of financial position and results of operations for the interim periods have been made. Such adjustments are of a normal recurring nature.
	The results of operations for the three month period ended March 31, 2005 are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2004.
2.	SECURITIES
	Securities which the Company has the positive ability and intent to hold to maturity are stated at amortized cost. Securities which the Company has identified as available for sale are stated at fair value with changes in fair value included as a component of stockholders’ equity.
3.	ALLOWANCE FOR LOAN LOSSES
	The allowance for loan losses represents the amount charged against the Bank’s earnings to establish an allowance for probable loan losses based on the Bank’s management’s evaluation of the loan portfolio. Factors considered by the Bank’s management in establishing the allowance include: the collectibility of individual loans, current loan concentrations, charge-off history, delinquent loan percentages, input from regulatory agencies and general economic conditions.
	On a quarterly basis, management of the Bank meets to review and determine the adequacy of the allowance for loan losses. In making this determination, the Bank’s management analyzes the ultimate collectibility of the loans in its portfolio by incorporating feedback provided by the Bank’s internal loan staff, an internal loan review function and information provided by examinations performed by regulatory agencies.
	The analysis of the allowance for loan losses is composed of three components: specific credit allocation, general portfolio allocation and subjectively by determined allocation. The specific credit allocation includes a detailed review of the credit in accordance with the Statement of Financial Accounting Standards (“SFAS”) No. 114, “Accounting by Creditors for Impairment of a Loan” and No. 118, “Accounting by Creditors for Impairment of a Loan – Income Recognition and Disclosures,” and allocation is made based on this analysis. The general portfolio allocation consists of an assigned reserve percentage based on the actual credit rating of the loan.
	The subjective portion of the allowance reflects management’s evaluation of various conditions, and involves a higher degree of uncertainty because this component of the allowance is not identified with specific problem credits of portfolio segments. The conditions evaluated in connection with this component include the following: industry and regional conditions; seasoning of the loan portfolio and changes in the composition of and growth in the loan portfolio; the strength and duration of the business cycle; existing

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	general economic and business conditions in the lending areas; credit quality trends in nonaccruing loans; historical loan charge-off experience; and the results of bank regulatory examinations.
	The following table sets forth information regarding the allowance for loan losses for the three month period ended March 31, 2005 and 2004.

Allowance for loan losses

4.	REVENUE RECOGNITION
	The Bank’s primary sources of revenue are interest income from loans and investments and service charge income from loans and deposits. ENBI’s revenue is derived mainly from insurance commissions. Revenue is recognized in the period in which it is earned. The revenue is recognized on the accrual basis of accounting in accordance with the accounting principles generally accepted in the United States of America.
5.	PER SHARE DATA
	The common stock per share information is based upon the weighted average number of shares outstanding during each period, retroactively adjusted for stock dividends and stock splits. The Company’s potential dilutive securities included 2,908 dilutive shares for the three month period ended March 31, 2005. There were 1,198 dilutive shares for the three month period ended March 31, 2004. On February 16, 2005, the Company declared a cash dividend of $0.33 per share payable on April 4, 2005 to shareholders of record as of March 14, 2005. All share and per share amounts have been adjusted to reflect a 5 percent stock dividend paid in December 2004.
6.	TREASURY STOCK
	During the quarter ended March 31, 2005 the Company repurchased 2,600 shares of common stock at an average cost of $24.11 per share.

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7.	SEGMENT INFORMATION
	The Company is comprised of two primary business segments, banking and insurance agency activities. The following tables set forth information regarding these segments for the three month periods ended March 31, 2005 and 2004.

Three Months Ended
March 31, 2005
(in thousands)

Three Months Ended
March 31, 2004
(in thousands)

Starting January 1, 2005, the activities of non-deposit investment service sales have been functionally reorganized into the Company’s Insurance Agency Activities and are being internally managed as a segment of ENBI. As a result, all activities have been reported as Insurance Agency Activities beginning January 1, 2005. Activities prior to January 1, 2005 have been reclassified as Insurance Agency Activities for comparative purposes.

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8.	CONTINGENT LIABILITIES AND COMMITMENTS
	The consolidated financial statements do not reflect various commitments and contingent liabilities, which arise in the normal course of business, and which involve elements of credit risk, interest rate risk and liquidity risk. These commitments and contingent liabilities are commitments to extend credit and standby letters of credit. A summary of the Bank’s commitments and contingent liabilities at March 31, 2005 and 2004 is as follows:

	Commitments to extend credit and standby letters of credit include exposure to some credit loss in the event of nonperformance of the customer. The Bank’s credit policies and procedures for credit commitments and financial guarantees are the same as those for extensions of credit that are recorded on the Company’s consolidated balance sheets. Because these instruments have fixed maturity dates, and because they may expire without being drawn upon, they do not necessarily represent cash requirements of the Bank. The Bank has not incurred any losses on its commitments during the past two years.
	Certain lending commitments for construction residential mortgage loans are considered derivative instruments under the guidelines of SFAS No. 133. The changes in the fair value of these commitments due to interest rate risk are not recorded on the consolidated balance sheets as these derivatives are not considered material.
	The Company is subject to possible litigation proceedings in the normal course of business. As of March 31, 2005, there were no claims pending against the Company that management considered to be significant.
9.	RECLASSIFICATIONS
	Certain reclassifications have been made to the 2004 consolidated financial statements to conform with the presentation used in 2005.
10.	NET PERIODIC BENEFIT COSTS
	The Bank has a defined benefit pension plan covering substantially all Company employees. The plan provides benefits that are based on the employees’ compensation and years of service. The Bank uses an actuarial method of amortizing prior service cost and unrecognized net gains or losses which result from actual experience and assumptions being different than those that are projected. The amortized method the Bank is using recognizes the prior service cost and net gains or losses over the average remaining service period of active employees.
	The Bank also maintains a nonqualified supplemental executive retirement plan covering certain members of the Company’s senior management. The Bank uses an actuarial method of amortizing unrecognized net gains or losses which result from actual expense and assumptions being different than those that are projected. The amortization method the Bank uses recognizes the net gains or losses over the average remaining service period of active employees.

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The following table represents net periodic benefit costs recognized:

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ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. When used in this report, or in the documents incorporated by reference herein, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “seek,” and similar expressions identify such forward-looking statements. These forward-looking statements include statements regarding the Company’s business plans, prospects, growth and operating strategies, statements regarding the asset quality of the Company’s loan and investment portfolios, and estimates of the Company’s risks and future costs and benefits.

These forward-looking statements are based largely on the expectations of the Company’s management and are subject to a number of risks and uncertainties, including but not limited to general economic conditions, either nationally or in the Company’s market areas, that are worse than expected; increased competition among depository or other financial institutions; inflation and changes in the interest rate environment that reduce the Company’s margins or reduce the fair value of financial instruments; changes in laws or government regulations affecting financial institutions, including changes in regulatory fees and capital requirements; the Company’s ability to enter new markets successfully and capitalize on growth opportunities; the Company’s ability to successfully integrate acquired entities; changes in accounting pronouncements and practices, as adopted by financial institution regulatory agencies, the Financial Accounting Standards Board (“FASB”) and the Public Company Accounting Oversight Board; changes in consumer spending, borrowing and saving habits; changes in the Company’s organization, compensation and benefit plans; and other factors discussed elsewhere in this report on Form 10-K, as well as in the Company’s periodic reports filed with the Securities and Exchange Commission (the “SEC”). Many of these factors are beyond the Company’s control and difficult to predict.

Because of these and other uncertainties, the Company’s actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein. Forward-looking statements speak only as of the date they are made. The Company undertakes no obligation, to publicly update or revise forward-looking information, whether as a result of new, updated information, future events or otherwise.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

     The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and follow general practices within the industries in which it operates. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the consolidated financial statements. Accordingly, as this information changes, the consolidated financial statements could reflect different estimates, assumptions and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments, and as such have a greater possibility of producing results that could be materially different than originally reported.

     The most significant accounting policies followed by the Company are presented in Note 1 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004. These policies, along with the disclosures presented in the other notes to consolidated financial statement and in this Management’s Discussion and Analysis of Financial Condition and Results of Operations provide information on how significant assets and liabilities are valued in the Company’s consolidated financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions and estimates underlying those amounts, management has identified the determination of the allowance for loan losses and valuation of goodwill to be the accounting areas that require the most subjective or complex judgments and as such could be most subject to revision as new information becomes available.

     The allowance for loan losses represents management’s estimate of probable credit losses in the loan portfolio. Determining the amount of the allowance for loan losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on the impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience and consideration of current economic trends and conditions, all of which may be susceptible to significant change. The loan portfolio also represents the largest asset type on the consolidated balance sheets.

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     The amount of goodwill reflected in the Company’s consolidated financial statements is required to be tested by management for impairment on at least an annual basis. The test for impairment of goodwill on the identified reporting unit is considered a critical accounting estimate because it requires judgment and the use of estimates related to the growth assumptions and market multiples used in the valuation model.

ANALYSIS OF FINANCIAL CONDITION

Average Balance Sheet

     The following table presents the significant categories of the assets and liabilities of the Company, interest income and interest expense, and the corresponding yields earned and rates paid for the periods indicated. The assets and liabilities are presented as daily averages. The average loan balances include both performing and non-performing loans. Investments are included at amortized cost. Yields are presented on a non tax-equivalent basis.

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Loan Activity

Total gross loans grew to $225.9 million at March 31, 2005, reflecting a 2.4% or $5.3 million increase from December 31, 2004. Commercial loans totaled $157.5 million at March 31, 2005, reflecting a 3.8% or $5.7 million increase from December 31, 2004. Consumer loans totaled $67.8 million at March 31, 2005, reflecting a 0.6% or $0.4 million decrease from December 31, 2004. The Bank continues to sell certain fixed rate residential mortgages originated below a designated interest level to the Federal National Mortgage Association (“FNMA”), while maintaining the servicing rights. During the first quarter 2005, the Bank sold mortgages to the FNMA totaling $1.2 million as compared to $0.9 million during the first quarter 2004. At March 31, 2005, the Bank had a loan servicing portfolio principal balance of $29.8 million upon which it earns servicing fees. This loan servicing portfolio balance compares to $29.2 million at December 31, 2004.

Loan Portfolio Composition

     The following table presents selected information on the composition of the Company’s loan portfolio in dollar amounts and in percentages as of the dates indicated.

     Asset quality continues to remain strong with net recoveries of $29 thousand in the first quarter of 2005. Non-performing loans, defined as accruing loans greater than 90 days past due and non-accrual loans, totaled 0.99% of total loans outstanding at March 31, 2005 as compared to 0.82% at December 31, 2004. The increase in non-performing loans was primarily due to one $500,000 commercial loan becoming 90 days past due in the first quarter of 2005. The allowance for loan losses totaled $3.2 million or 1.41% of gross loans outstanding at March 31, 2005 as compared to $3.0 million or 1.36% of gross loans outstanding at December 31, 2004.

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     The adequacy of the Company’s allowance for loan losses is reviewed quarterly by the Company’s management with consideration given to loan concentrations, charge-off history, delinquent loan percentages, and general economic conditions. Management believes the allowance for loan losses is adequate for credit losses from existing loans.

     The following table sets forth information regarding non-performing loans as of the dates specified.