HIGHLIGHTS OF THE 2009 THIRD QUARTER

Net interest income increased 16.2% on core loan growth and reduced interest expense compared with last years third quarter.

Results include $0.7 million pre-tax, or $0.4 million ($0.15 per diluted share) after tax, bargain purchase gain from the FDIC-assisted purchase of certain assets and assumption of certain liabilities of Waterford Village Bank ("WVB") in Clarence, NY.

Excluding loans acquired from the acquisition, the Company had annualized organic core loan growth of 19.5%.

National lease portfolio reclassified to held-for-investment: Offers to purchase were not sufficient based on estimated portfolio value. Company will service the $36.2 million portfolio to maturity.

Return on average equity was 22.45% for the third quarter of fiscal 2009, compared with 12.32% in last year's third quarter.

The Company had net income of $2.4 million, or $0.87 per diluted share, in the third quarter of 2009, a 70.9% increase over net income of $1.4 million, or $0.52 per diluted share, in the third quarter of 2008. The significant increase in net income was largely a result of a $0.8 million, or 16.2%, increase in net interest income and a $0.7 million bargain purchase gain on the WVB acquisition.

For the nine months ended September 30, 2009, Evans recorded a net loss of ($0.7) million, or ($0.24) per diluted share, compared with net income of $4.4 million, or $1.60 per diluted share, in the same period in 2008. The return on average equity was (1.98%) for the nine-month period ended September 30, 2009, compared with 13.03% in the same period in 2008.

David J. Nasca, President and CEO of Evans Bancorp, stated, "We believe our impressive third quarter results reflect the strategic focus on our core businesses and our effective pursuit of increased market share in Western New York. We had significant organic loan and deposit growth while successfully integrating the Waterford Village Bank into our operations. Although the economy remains weak, it appears to have stabilized, and the Western New York market has held up relatively well throughout this period when compared with the rest of the country. Nevertheless, we remain cautious and continue to focus on maintaining our high credit standards and well-capitalized position as we pursue growth opportunities."

At September 30, 2009, the Company's direct finance national lease portfolio was re-classified to held-for-investment from held-for-sale at June 30, 2009. The Company received several offers from potential buyers of the portfolio; however, management concluded that none of the offers represented the realizable value for the portfolio. Consequently, management has elected to continue to service the portfolio until its full maturity. The average remaining life of the leases in the portfolio is approximately 18 months and the latest maturity date is in 2014.

Mr. Nasca continued, "After having evaluated several offers, we chose not to sell our national lease portfolio as we believe the realizable value of the portfolio is greater than we were offered and we can produce better value for our shareholders by simply servicing the portfolio to maturity."

Supplemental Non-GAAP Results of Operations 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 and call of securities and the non-cash impairment and amortization of acquisition-related goodwill and intangible assets and bargain purchase gain. 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. 1

 Reconciliation of GAAP Net Income (Loss) to Net Operating Income (Loss) (non-GAAP)                 
                                                                                                    
                                                Three months ended       Nine months ended          
                                                September 30,            September 30,              
 (in thousands, except per share)               2009          2008       2009           2008        
 GAAP Net Income (Loss)                         $  2,436      $  1,425      ($664   )   $  4,403    
 Gain on sale and call of securities( 1)           (6     )      -          (10     )      (4     ) 
 Goodwill impairment charge( 1)                    -             -          1,210          -        
 Amortization of intangibles( 1)                   135           104        408            306      
 Gain on bargain purchase( 1)                      (409   )      -          (409    )      -        
 Net operating income (2)                       $  2,156      $  1,529   $  535         $  4,705    
                                                                                                    
 GAAP diluted earnings (loss) per share         $  0.87       $  0.52       ($0.24  )   $  1.60     
 Gain on sale and call of securities( 1)           -             -          -              -        
 Goodwill impairment charge( 1)                    -             -          0.43           -        
 Amortization of intangibles( 1)                   0.05          0.03       0.15           0.11     
 Gain on bargain purchase( 1)                      (0.15  )      -          (0.15   )      -        
 Diluted net operating earnings per share (2)   $  0.77       $  0.55    $  0.19        $  1.71     
 (1) After any tax-related effect                                                                   
 (2) Non-GAAP measure                                                                               


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Net operating income (non-GAAP) for the third quarter of 2009 was $2.2 million, or $0.77 per diluted share, up from $1.5 million, or $0.55 per diluted share, in the third quarter of last year. The growth in net operating income (non-GAAP) reflects the Company's success at capturing greater market share in Western New York both organically and through acquisition and the advantages gained from an improved interest rate environment.

Net Interest Income

Net interest income increased to $6.0 million during the third quarter of 2009, an increase of 16.2% from $5.1 million in the third quarter of 2008, and an 11.7% increase over second quarter 2009 of $5.35 million. Growth of the core loan portfolio and the reduced cost of interest-bearing liabilities continue to be the main factors driving this increase. Also contributing to the increase was the acquisition of the loans and deposits of WVB in July 2009. The core loan portfolio is defined as total loans and leases less direct financing leases. Core loans were $442.8 million at September 30, 2009, an increase of 15.4% from $383.8 million at June 30, 2009 and an increase of 34.6% from $328.9 million at September 30, 2008. Excluding the $40.3 million in loans at September 30, 2009 that were acquired from WVB, quarterly organic loan growth from the trailing second quarter was 19.5% on an annualized basis. The Company continued to experience strong growth in commercial real estate balances and residential mortgage originations.

The national direct financing lease portfolio declined $4.7 million during the third quarter to $36.2 million at September 30, 2009 as the Company ceased lease originations in the second quarter of 2009. As previously mentioned, during the third quarter of 2009 Evans ceased its marketing efforts to sell the portfolio and intends to service the portfolio until maturity. The national lease portfolio currently comprises 7.6% of the total loans and leases portfolio.

Total deposits were $502.8 million at September 30, 2009, an increase of 11.4% from $451.3 million at June 30, 2009 and 24.6% from $403.5 million a year earlier. Excluding the $49.1 million in deposits at September 30, 2009 that were acquired from WVB, total deposits were up 0.5% from June 30, 2009, and 12.4% from September 30, 2008. Most of the Company's organic deposit growth was in its premium money market savings product which has been a well-received product since its introduction. Regular savings deposits overall increased $18.3 million during the third quarter excluding WVB deposits. While demand deposits decreased from June 30, 2009 to September 30, 2009, average demand deposits in the third quarter were $87.3 million, or 2.3% higher than average demand deposits of $85.3 million in the second quarter of 2009 and 10.3% higher than the third quarter of 2008 average balance. Average demand deposit growth is generally a better long-term measure of growth than spot balance increases due to the transactional nature of the product. The savings and demand deposit growth has been offset by a decline in time deposits (excluding WVB time deposits). Time deposits increased from $128.2 million at June 30, 2009 and $146.5 million at September 30, 2008 to $155.2 million at September 30, 2009 because of $38.2 million time deposits acquired from WVB. Excluding time deposits acquired from WVB, time deposits would have decreased during the quarter and over the past year as customers have been generally reluctant to tie up their money for longer terms at low rates. Customers' general preference to remain liquid in a low interest rate environment and uncertain economy is also reflected in the continued growth of liquid savings deposits.

The Company's net interest margin continued to perform well at 4.43% in the third quarter of 2009, up from 4.25% in the second quarter of 2009. The Company's net interest margin for the third quarter of 2009 decreased from 4.67% last year's third quarter. The increased margin from the second quarter of 2009 was a result of Evans continuing to improve pricing on its deposits while maintaining rates on its loan portfolio. The yield curve remains steep, albeit at low levels, and with the movement from time deposits to liquid savings deposits mentioned above, the change in the funding mix has also contributed to the decrease in the overall rate paid on interest-bearing liabilities. The decrease in net interest margin from the previous year's third quarter was due to the decline in the contribution of interest-free funds from 0.53% to 0.28%. The decrease in stockholders' equity as a percentage of assets accounts for most of this decrease. While assets have continued to grow strongly, equity has declined over the past 12 months as a result of operating losses and dividends paid.

Allowance for Loan and Lease Losses and Asset Quality

Net charge-offs to average total loans and leases decreased to 0.13% for the third quarter of 2009 compared with 7.48% in the second quarter of 2009 and 0.59% for the 2008 third quarter. This decrease in net charge-offs was primarily related to the classification of the direct finance national lease portfolio as held-for-sale on the balance sheet as of June 30, 2009, resulting in its being marked down to its market value. This mark-to-market adjustment and actual charge-offs amounted to $7.7 million in the second quarter. The mark-to-market discount at June 30, 2009 remains appropriate so leases were valued at their principal value, net of the $7.1 million mark-to-market adjustment. The difference between the lease principal value and the book value initially created by the mark-to-market adjustment is adjusted over time as specific leases are deemed uncollectible and written down to zero value. During the third quarter, management deemed $1.4 million in leases as uncollectible, so the leases are reported at $36.2 million, which is the principal balance of $41.9 million, net of the remaining mark of $5.7 million.

The ratio of non-performing loans and leases to total loans and leases increased to 2.07% at September 30, 2009, from 1.14% at June 30, 2009 and 0.20% at the end of last year's third quarter. $3.7 million of the $5.0 million increase in non-performing loans and leases from June 30, 2009 was a result of an increase in loans 90 days past due and still accruing. Management considers these loans well secured and in the process of collection, and still believes that the Company will collect full principal and interest as contracted.

Management did not need to provision any further for the leasing portfolio in the third quarter as management believes that the difference between the lease principal value and the book value adequately covers inherent losses. Therefore, the provision for loan and lease losses of $0.6 million at September 30, 2009 was sharply lower than it has been the past 3 quarters when there were significant provisions for lease losses recorded.