10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C.  20549

___________________

FORM 10-Q

(Mark One)

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

For the quarterly period ended March  31, 2016

[  ]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 0-29030

SUSSEX BANCORP

(Exact name of registrant as specified in its charter)   

New Jersey	22-3475473
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

100 Enterprise Drive, Suite 700,  Rockaway, NJ	07866
(Address of principal executive offices)	(Zip Code)

(844) 256-7328

(Registrant’s telephone number, including area code)

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 ☒No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 

Yes ☒No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☒
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes ☐No ☒

As ofMay 6, 2016 therewere 4,675,976shares of common stock, no par value, outstanding.

SUSSEX BANCORP

FORM 10-Q

INDEX

FORWARD-LOOKING STATEMENTS	i
PART I – FINANCIAL INFORMATION	1
Item 1 - Financial Statements	1
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3 - Quantitative and Qualitative Disclosures about Market Risk	32
Item 4 - Controls and Procedures	32
PART II – OTHER INFORMATION	34
Item 1 - Legal Proceedings	34
Item 1A - Risk Factors	34
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3 - Defaults Upon Senior Securities	34
Item 4 - Mine Safety Disclosures	34
Item 5 - Other Information	34
Item 6 - Exhibits	34

FORWARD-LOOKING STATEMENTS

We may, from time to time, make written or oral “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements contained in our filings with the Securities and Exchange Commission (the “SEC”), our reports to shareholders and in other communications by us. This Report on Form 10-Q contains “forward-looking statements” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated” and “potential.”  Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of operation and business that are subject to various factors which could cause actual results to differ materially from these estimates.  These factors include, but are not limited to:

§ changes in the interest rate environment that reduce margins;

§ changes in the regulatory environment;

§ the highly competitive industry and market area in which we operate;

§ general economic conditions, either nationally or regionally, resulting in, among other things, a deterioration in credit quality;

§ changes in business conditions and inflation;

§ changes in credit market conditions;

§ changes in the securities markets which affect investment management revenues;

§ increases in Federal Deposit Insurance Corporation (“FDIC”) deposit insurance premiums and assessments could adversely affect our financial condition;

§ changes in technology used in the banking business;

§ the soundness of other financial services institutions which may adversely affect our credit risk;

§ our controls and procedures may fail or be circumvented;

§ new lines of business or new products and services which may subject us to additional risks;

§ changes in key management personnel which may adversely impact our operations;

§ the effect on our operations of recent legislative and regulatory initiatives that were or may be enacted in response to the ongoing financial crisis;

§ severe weather, natural disasters, acts of war or terrorism and other external events which could significantly impact our business; and

§ other factors detailed from time to time in our filings with the SEC.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from the results discussed in these forward-looking statements.  You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.  We do not undertake any obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

SUSSEX BANCORP
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)	March 31, 2016		December 31, 2015
ASSETS
Cash and due from banks	$	3,060	$	2,914
Interest-bearing deposits with other banks		5,979		3,206
Cash and cash equivalents		9,039		6,120
Interest bearing time deposits with other banks		100		100
Securities available for sale, at fair value		86,523		93,776
Securities held to maturity, at amortized cost (fair value of $7,039 and $7,008 at March 31, 2016 and December 31, 2015, respectively)		6,816		6,834
Federal Home Loan Bank Stock, at cost		3,839		5,165
Loans receivable, net of unearned income		580,051		543,423
Less:  allowance for loan losses		5,812		5,590
Net loans receivable		574,239		537,833
Foreclosed real estate		3,328		3,354
Premises and equipment, net		9,126		8,879
Accrued interest receivable		2,257		1,764
Goodwill		2,820		2,820
Bank-owned life insurance		12,600		12,524
Other assets		6,085		5,334
Total Assets	$	716,772	$	684,503
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing	$	109,152	$	87,209
Interest bearing		466,148		430,647
Total deposits		575,300		517,856
Short-term borrowings		1,430		34,650
Long-term borrowings		66,000		61,000
Accrued interest payable and other liabilities		5,473		4,169
Junior subordinated debentures		12,887		12,887
Total Liabilities		661,090		630,562
Stockholders' Equity:
Preferred stock, no par value, 1,000,000 shares authorized; none issued		-		-
Common stock, no par value, 10,000,000 shares authorized; 4,735,218 and 4,705,480 shares issued and 4,675,976 and 4,646,238 shares outstanding at March 31, 2016 and December 31, 2015, respectively		36,028		35,927
Treasury stock, at cost; 59,242 shares at March 31, 2016 and December 31, 2015, respectively		(592)		(592)
Retained earnings		19,909		18,520
Accumulated other comprehensive income		337		86
Total Stockholders' Equity		55,682		53,941
Total Liabilities and Stockholders' Equity	$	716,772	$	684,503
See Notes to Consolidated Financial Statements

1

SUSSEX BANCORP
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
	Three Months Ended March 31,
(Dollars in thousands except per share data)		2016		2015
INTEREST INCOME
Loans receivable, including fees	$	6,145	$	5,172
Securities:
Taxable		376		267
Tax-exempt		201		208
Interest bearing deposits		4		4
Total Interest Income		6,726		5,651
INTEREST EXPENSE
Deposits		575		416
Borrowings		437		380
Junior subordinated debentures		68		53
Total Interest Expense		1,080		849
Net Interest Income		5,646		4,802
PROVISION FOR LOAN LOSSES		211		305
Net Interest Income after Provision for Loan Losses		5,435		4,497
OTHER INCOME
Service fees on deposit accounts		225		213
ATM and debit card fees		187		174
Bank-owned life insurance		76		78
Insurance commissions and fees		1,721		1,155
Investment brokerage fees		27		22
Net gain on sales of securities		167		168
Net loss on disposal of premises and equipment		(13)		-
Other		134		91
Total Other Income		2,524		1,901
OTHER EXPENSES
Salaries and employee benefits		3,353		2,780
Occupancy, net		424		477
Data processing		549		354
Furniture and equipment		233		210
Advertising and promotion		105		70
Professional fees		174		146
Director fees		59		166
FDIC assessment		120		124
Insurance		73		52
Stationary and supplies		52		56
Loan collection costs		32		97
Net expenses and write-downs related to foreclosed real estate		75		164
Other		361		374
Total Other Expenses		5,610		5,070
Income before Income Taxes		2,349		1,328
EXPENSE FOR INCOME TAXES		775		376
Net Income		1,574		952
OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized gains on available for sale securities arising during the period		985		316
Fair value adjustments on derivatives		(400)		-
Reclassification adjustment for net gain on securities transactions included in net income		(167)		(168)
Income tax related to items of other comprehensive income		(167)		(60)
Other comprehensive income, net of income taxes		251		88
Comprehensive income	$	1,825	$	1,040
EARNINGS PER SHARE
Basic	$	0.34	$	0.21
Diluted	$	0.34	$	0.21
See Notes to Consolidated Financial Statements

2

SUSSEX BANCORP
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended March 31, 2016 and 2015
							Accumulated
	Number of						Other				Total
	Shares		Common		Retained		Comprehensive		Treasury		Stockholders'
(Dollars in Thousands)	Outstanding		Stock		Earnings		Income		Stock		Equity
Balance December 31, 2014	4,662,606	$	35,553	$	15,566	$	169	$	(59)	$	51,229
Net income	-		-		952		-		-		952
Other comprehensive income	-		-		-		88		-		88
Treasury shares purchased	(19,450)		-		-		-		(204)		(204)
Restricted stock granted	26,441		-		-		-		-		-
Compensation expense related to stock option and restricted stock grants	-		91		-		-		-		91
Dividends declared on common stock ($0.04 per share)	-		-		(187)		-		-		(187)
Balance March 31, 2015	4,669,597	$	35,644	$	16,331	$	257	$	(263)	$	51,969
Balance December 31, 2015	4,646,238	$	35,927	$	18,520	$	86	$	(592)	$	53,941
Net income	-		-		1,574		-		-		1,574
Other comprehensive loss	-		-		-		251		-		251
Restricted stock granted	30,822		-		-		-		-		-
Restricted stock forfeited	(1,084)		-		-		-		-		-
Compensation expense related to stock option and restricted stock grants	-		101		-		-		-		101
Dividends declared on common stock ($0.04 per share)	-		-		(185)		-		-		(185)
Balance March 31, 2016	4,675,976	$	36,028	$	19,909	$	337	$	(592)	$	55,682
See Notes to Consolidated Financial Statements

3

SUSSEX BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
	Three Months Ended March 31,
(Dollars in thousands)	2016		2015
Cash Flows from Operating Activities
Net income	$	1,574	$	952
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		211		305
Depreciation and amortization		258		243
Net amortization of securities premiums and discounts		412		428
Net realized gain on sale of securities		(167)		(168)
Net realized loss on disposal of premises and equipment		13		-
Net realized gain on sale of foreclosed real estate		(3)		(27)
Write-downs of and provisions for foreclosed real estate		-		97
Deferred income tax benefit		(192)		(111)
Earnings on bank-owned life insurance		(76)		(78)
Compensation expense for stock options and stock awards		101		91
Increase in assets:
Accrued interest receivable		(493)		(112)
Other assets		(726)		(563)
Increase in accrued interest payable and other liabilities		904		654
Net Cash Provided by Operating Activities		1,816		1,711
Cash Flows from Investing Activities
Securities available for sale:
Purchases		(2,044)		(21,632)
Sales		8,088		12,767
Maturities, calls and principal repayments		1,789		2,161
Securities held to maturity:
Purchases		(480)		(491)
Maturities, calls and principal repayments		491		-
Net increase in loans		(36,617)		(1,552)
Proceeds from the sale of foreclosed real estate		29		1,566
Purchases of bank premises and equipment		(518)		(343)
Decrease in Federal Home Loan Bank stock		1,326		369
Net Cash Used in Investing Activities		(27,936)		(7,155)
Cash Flows from Financing Activities
Net increase in deposits		57,444		15,242
Increase in short-term borrowed funds		(33,220)		(18,300)
Proceeds from long-term borrowings		5,000		15,000
Repayment of long-term borrowings		-		(5,000)
Purchase of treasury stock		-		(204)
Dividends paid		(185)		(187)
Net Cash Provided by Financing Activities		29,039		6,551
Net Increase in Cash and Cash Equivalents		2,919		1,107
Cash and Cash Equivalents - Beginning		6,120		5,859
Cash and Cash Equivalents - Ending	$	9,039	$	6,966
Supplementary Cash Flows Information
Interest paid	$	975	$	827
Income taxes paid	$	795	$	250
Supplementary Schedule of Noncash Investing and Financing Activities
Foreclosed real estate acquired in settlement of loans	$	-	$	39
See Notes to Consolidated Financial Statements

4

NOTE 1  –  SUMMARY OF SIGNIFICANT ACOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of Sussex Bancorp (“we,” “us,” “our” or the “company”) and our whollyowned subsidiary Sussex Bank (the “Bank”).  The Bank’s whollyowned subsidiaries are SCB Investment Company, Inc., SCBNY Company, Inc., ClassicLake Enterprises, LLC, Wheatsworth Properties Corp., PPD Holding Company, LLC, and Tri-State Insurance Agency, Inc. (“Tri-State”), a full service insurance agency located in Sussex County, New Jersey with a satellite office located in Bergen County, New Jersey.  Tri-State’s operations are considered a separate segment for financial disclosure purposes.  All inter-company transactions and balances have been eliminated in consolidation.  The Bank operates twelve banking offices, eight located in Sussex County, New Jersey,  one located in Bergen County, New Jersey, one located in Warren County, New Jersey,  one in Queens County, New Yorkand one in Orange County, New York.

We are subject to the supervision and regulation of the Board of Governors of the Federal Reserve System (the “FRB”).  The Bank’s deposits are insured by the Deposit Insurance Fund (“DIF”) of the FDIC up to applicable limits.  The operations of the company and the Bank are subject to the supervision and regulation of the FRB, the FDIC and the New Jersey Department of Banking and Insurance (the “Department”) and the operations of Tri-State are subject to supervision and regulation by the Department.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information.  Accordingly, they do not include all of the information and footnotes required by the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for full year financial statements.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal, recurring nature.  Operating results for the threemonth period ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.  These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto that are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.  

New Accounting Standards

In May 2014, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. The ASU’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this objective, the standard requires five basic steps: i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. For public entities, the guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that year.  We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In June 2014, FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force), to clarify that a performance target in a share-based compensation award that could be achieved after an employee completes the requisite service period should be treated as a performance condition that affects the vesting of the award.  As such, the performance target should not be reflected in estimating the grant-date fair value of the award. For all entities, the amendments are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In April 2015, FASB issued ASU 2015-05, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, to clarify whether a hosting arrangement (e.g., cloud computing, software as a service, infrastructure as a service, etc.) contains a software license, and thus, whether it is to be accounted for by the customer similarly to other internal-use software.  Specifically, the amendments revise the scope of Subtopic 350-40 to include internal-use software accessed through a hosting arrangement only if both of the following criteria are met: (1) the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty.  There is no significant penalty if the customer has the ability to take delivery of the software without incurring significant cost and the ability to use the software separately without significant loss of utility or value and (2) it is feasible for the customer to either run the software on its own hardware or contract with another party unrelated to the vendor to host the software.  If both of the above criteria are present in a hosting arrangement, then the arrangement contains a software license and the customer should account for that element in accordance with Subtopic 350-40 (i.e., generally capitalize and subsequently amortize the cost of the license).  If both

5

of the above criteria are not present, the customer should account for the arrangement as a service contract (i.e., expense fees as incurred).  The amendments are effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years.  An entity can elect to adopt the amendments either (1) prospectively to all arrangements entered into or materially modified after the effective date or (2) retrospectively. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In January 2016, FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.ASU 2016-01, among other things; (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; and (vii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale. For public entities, the guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017.  The Company is currently evaluating the impact of the pending adoption of the new standard on its consolidated financial statements.

In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted for all public business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently evaluating the impact of the pending adoption of the new standard on its consolidated financial statements.

In March 2016, FASB issued ASU 2016-09, Compensation  – Stock Compensation (Topic718): Improvements to Employee Share-Based Payment Accounting. FASB is issuing ASU 2016-09as part of its initiative to reduce complexity in accounting standards. The areas for simplification in this ASU 2016-09involve several aspects of the accounting for employee share-based payment transactions, including the income taxconsequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.Some of the areas for simplification apply only to nonpublic entities. For public business entities, the amendments in thisupdate are effective for annual periods beginning after December 15, 2016, and interim periods within those annualperiods. Early adoption is permitted for any entity in any interim or annual period. If an entity early adopts theamendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includesthat interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The Company is currently evaluating the impact of the pending adoption of the new standard on its consolidated financial statements.

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NOTE 2 – SECURITIES

Available for Sale

The amortized cost and approximate fair value of securities available for sale as of March  31, 2016 and December 31, 2015 are summarized as follows:

				Gross		Gross
		Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)		Cost		Gains		Losses		Value
March 31, 2016
U.S. government agencies	$	12,485	$	71	$	(28)	$	12,528
State and political subdivisions		29,611		656		(23)		30,244
Mortgage-backed securities -
U.S. government-sponsored enterprises		43,466		369		(84)		43,751
	$	85,562	$	1,096	$	(135)	$	86,523
December 31, 2015
U.S. government agencies	$	12,792	$	51	$	(55)	$	12,788
State and political subdivisions		37,771		507		(129)		38,149
Mortgage-backed securities -
U.S. government-sponsored enterprises		43,069		206		(436)		42,839
	$	93,632	$	764	$	(620)	$	93,776

Securities with a carrying value of approximately $32.8 million and $33.4 million at March  31, 2016 and December 31, 2015, respectively, were pledged to secure public deposits and for borrowings at the Federal Reserve Bank as required or permitted by applicable laws and regulations.

The amortized cost and fair value of securities available for sale at March 31, 2016 are shown below by contractual maturity.  Actual maturities may differ from contractual maturities as issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Investments which pay principal on a periodic basis are not included in the maturity categories.

	Amortized		Fair
(Dollars in thousands)	Cost		Value
Due in one year or less	$	-	$	-
Due after one year through five years		699		704
Due after five years through ten years		3,643		3,728
Due after ten years		25,269		25,812
Total bonds and obligations		29,611		30,244
U.S. government agencies		12,485		12,528
Mortgage-backed securities:
U.S. government-sponsored enterprises		43,466		43,751
Total available for sale securities	$	85,562	$	86,523

Gross gains on sales of securities available for sale were $167 thousand and $216 thousand and gross losses were less than $1 thousand and $48 thousand for the three months ended March 31, 2016 and 2015, respectively.

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Temporarily Impaired Securities

The following table shows gross unrealized losses and fair value of securities with unrealized losses that are not deemed to be other than temporarily impaired, aggregated by category and length of time that individual available for sale securities have been in a continuous unrealized loss position at March  31, 2016 and December 31, 2015.

	Less Than 12 Months				12 Months or More				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
March 31, 2016
U.S. government agencies	$	4,587	$	(6)	$	2,452	$	(22)	$	7,039	$	(28)
State and political subdivisions		1,414		(3)		1,048		(20)		2,462		(23)
Mortgage-backed securities -
U.S. government-sponsored enterprises		12,922		(79)		1,512		(5)		14,434		(84)
Total temporarily impaired securities	$	18,923	$	(88)	$	5,012	$	(47)	$	23,935	$	(135)
December 31, 2015
U.S. government agencies	$	5,888	$	(23)	$	2,473	$	(32)	$	8,361	$	(55)
State and political subdivisions		5,780		(107)		2,998		(22)		8,778		(129)
Mortgage-backed securities -
U.S. government-sponsored enterprises		31,885		(436)		-		-		31,885		(436)
Total temporarily impaired securities	$	43,553	$	(566)	$	5,471	$	(54)	$	49,024	$	(620)

For each security whose fair value is less than their amortized cost basis, a review is conducted to determine if an other-than-temporary impairment has occurred. As of March 31, 2016, we reviewed our available for sale securities portfolio for indications of impairment. This review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer and the intent and likelihood of selling the security.  The intent and likelihood of sale of debt and equity securities are evaluated based upon our investment strategy for the particular type of security and our cash flow needs, liquidity position, capital adequacy and interest rate risk position. 

U.S. Government Agencies

At March  31, 2016 and December 31, 2015, the decline in fair value and the unrealized losses for our U.S. government agencies securities were primarily due to changes in spreads and market conditions and not credit quality.  At March  31, 2016, there werefive securities with a fair value of $7.0 million that had an unrealized loss that amounted to $28 thousand.  As of March 31, 2016, we did not intend to sell and it was not more-likely-than-not that we would be required to sell any of these securities before recovery of their amortized cost basis.  Therefore, none of the U.S. government agency securities at March 31, 2016 were deemed to be other-than-temporarily impaired (“OTTI”).

At December 31, 2015, there were six securities with a fair value of $8.4 million that had an unrealized loss that amounted to $55 thousand.

State and Political Subdivisions

At March 31, 2016 and December 31, 2015, the decline in fair value and the unrealized losses for our state and political subdivisions securities were caused by changes in interest rates and spreads and were not the result of credit quality.  At March 31, 2016, there were foursecurities with a fair value of $2.5 million that had an unrealized loss that amounted to $23 thousand.  These securities typically have maturity dates greater than 10 years and the fair values are more sensitive to changes in market interest rates.  As of March 31, 2016,  we did not intend to sell and it was not more-likely-than-not that we would be required to sell any of these securities before recovery of their amortized cost basis.  Therefore, none of our state and political subdivision securities at March 31, 2016 were deemed to be OTTI.  

At December 31, 2015, there were 15 securities with a fair value of $8.8 million that had an unrealized loss that amounted to $129 thousand. 

Mortgage-Backed Securities

At March 31, 2016 and December 31, 2015, the decline in fair value and the unrealized losses for our mortgage-backed securities guaranteed by U.S. government-sponsored enterprises were primarily due to changes in spreads and market conditions and not credit quality.  At March 31, 2016, there were eightsecurities with a fair value of $14.4 million that had an unrealized loss that amounted to $84thousand.  As of March 31, 2016,  we did not intend to sell and it was not

8

more-likely-than-not that we would be required to sell any of these securities before recovery of their amortized cost basis.  Therefore, none of our mortgage-backed securities at March 31, 2016 were deemed to be OTTI.  

At December 31, 2015, there were 18 securities with a fair value of $31.9 million that had an unrealized loss that amounted to $436 thousand. 

Held to Maturity Securities

The amortized cost and approximate fair value of securities held to maturity as of March 31, 2016 and December 31, 2015 are summarized as follows:

				Gross		Gross
		Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)		Cost		Gains		Losses		Value
March 31, 2016
State and political subdivisions	$	6,816	$	223	$	-	$	7,039
December 31, 2015
State and political subdivisions	$	6,834	$	174	$	-	$	7,008

The amortized cost and carrying value of securities held to maturity at March 31, 2016 are shown below by contractual maturity.  Actual maturities may differ from contractual maturities as issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

		Amortized		Fair
(Dollars in thousands)		Cost		Value
Due in one year or less	$	2,942	$	2,942
Due after one year through five years		1,000		1,003
Due after five years through ten years		1,827		1,926
Due after ten years		1,047		1,168
Total held to maturity securities	$	6,816	$	7,039

Temporarily Impaired Securities

For each security whose fair value is less than their amortized cost basis, a review is conducted to determine if an other-than-temporary impairment has occurred.As of March 31, 2016, we did not have any held to maturity investments with unrealized losses. This review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer and the intent and likelihood of selling the security.  The intent and likelihood of sale of debt securities is evaluated based upon our investment strategy for the particular type of security and our cash flow needs, liquidity position, capital adequacy and interest rate risk position. For each security whose fair value is less than their amortized cost basis, a review is conducted to determine if an other-than-temporary impairment has occurred.

At December 31, 2015,  we did not have any held to maturity securities in an unrealized loss position. 

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NOTE 3 – LOANS

The composition of net loans receivable atMarch 31, 2016 and December 31, 2015 is as follows:

(Dollars in thousands)	March 31, 2016		December 31, 2015
Commercial and industrial	$	24,278	$	20,023
Construction		15,827		13,348
Commercial real estate		409,358		382,262
Residential real estate		130,189		127,204
Consumer and other		1,172		1,253
Total loans receivable		580,824		544,090
Unearned net loan origination fees		(773)		(667)
Allowance for loan losses		(5,812)		(5,590)
Net loans receivable	$	574,239	$	537,833

Mortgage loans serviced for others are not included in the accompanying balance sheets.  The total amount of loans serviced for the benefit of others was approximately $448 thousand and$454 thousand at March 31, 2016 and December 31, 2015, respectively. Mortgage servicing rights were immaterial at March 31, 2016 and December 31, 2015.

NOTE 4 – ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY OF FINANCING RECEIVABLES

The following table presents changes in the allowance for loan losses disaggregated by the class of loans receivable for the three months ended March 31, 2016 and 2015:  

	Commercial				Commercial		Residential		Consumer
	and				Real		Real		and
(Dollars in thousands)	Industrial		Construction		Estate		Estate		Other		Unallocated		Total
Three Months Ended:
March 31, 2016
Beginning balance	$	85	$	220	$	3,646	$	784	$	87	$	768	$	5,590
Charge-offs		-		-		-		(9)		(19)		-		(28)
Recoveries		7		-		31		-		1		-		39
Provision		6		47		170		133		52		(197)		211
Ending balance	$	98	$	267	$	3,847	$	908	$	121	$	571	$	5,812
March 31, 2015
Beginning balance	$	231		383	$	3,491	$	903	$	19	$	614	$	5,641
Charge-offs		(19)		-		(188)		-		(7)		-		(214)
Recoveries		4		-		12		12		3		-		31
Provision		(78)		5		472		(74)		73		(93)		305
Ending balance	$	138	$	388	$	3,787	$	841	$	88	$	521	$	5,763

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The following table presents the balance of the allowance of loan losses and loans receivable by class at March 31, 2016 and December 31, 2015 disaggregated on the basis of our impairment methodology.

	Allowance for Loan Losses						Loans Receivable
			Balance		Balance
			Related to		Related to
			Loans		Loans
			Individually		Collectively				Individually		Collectively
			Evaluated for		Evaluated for				Evaluated for		Evaluated for
(Dollars in thousands)	Balance		Impairment		Impairment		Balance		Impairment		Impairment
March 31, 2016
Commercial and industrial	$	98	$	-	$	98	$	24,278	$	20	$	24,258
Construction		267		-		267		15,827		-		15,827
Commercial real estate		3,847		249		3,598		409,358		5,130		404,228
Residential real estate		908		68		840		130,189		1,333		128,856
Consumer and other loans		121		107		14		1,172		138		1,034
Unallocated		571		-		-		-		-		-
Total	$	5,812	$	424	$	4,817	$	580,824	$	6,621	$	574,203
December 31, 2015
Commercial and industrial	$	85	$	-	$	85	$	20,023	$	20	$	20,003
Construction		220		-		220		13,348		-		13,348
Commercial real estate		3,646		112		3,534		382,262		5,160		377,102
Residential real estate		784		79		705		127,204		1,546		125,658
Consumer and other loans		87		73		14		1,253		138		1,115
Unallocated		768		-		-		-		-		-
Total	$	5,590	$	264	$	4,558	$	544,090	$	6,864	$	537,226

An age analysis of loans receivable, which were past due as of March 31, 2016 and December 31, 2015, is as follows:

													Recorded
													Investment
					Greater						Total		> 90 Days
	30-59 Days		60-89 days		Than		Total Past				Financing		and
(Dollars in thousands)	Past Due		Past Due		90 Days (a)		Due		Current		Receivables		Accruing
March 31, 2016
Commercial and industrial	$	-	$	4	$	20	$	24	$	24,254	$	24,278	$	-
Construction		-		-		-		-		15,827		15,827		-
Commercial real estate		2,306		1,280		3,993		7,579		401,779		409,358		-
Residential real estate		1,001		247		1,202		2,450		127,739		130,189		-
Consumer and other		4		-		138		142		1,030		1,172		-
Total	$	3,311	$	1,531	$	5,353	$	10,195	$	570,629	$	580,824	$	-
December 31, 2015
Commercial and industrial	$	5	$	-	$	20	$	25	$	19,998	$	20,023	$	-
Construction		-		-		-		-		13,348		13,348		-
Commercial real estate		758		1,461		4,016		6,235		376,027		382,262		-
Residential real estate		335		247		1,138		1,720		125,484		127,204		-
Consumer and other		16		1		138		155		1,098		1,253		-
Total	$	1,114	$	1,709	$	5,312	$	8,135	$	535,955	$	544,090	$	-
(a) includes loans greater than 90 days past due and still accruing and non-accrual loans.

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Loans for which the accrual of interest has been discontinued at March 31, 2016 and December 31, 2015 were:

(Dollars in thousands)	March 31, 2016		December 31, 2015
Commercial and industrial	$	20	$	20
Commercial real estate		3,993		4,016
Residential real estate		1,202		1,138
Consumer and other		138		138
Total	$	5,353	$	5,312

In determining the adequacy of the allowance for loan losses, we estimate losses based on the identification of specific problem loans through our credit review process and also estimate losses inherent in other loans on an aggregate basis by loan type.  The credit review process includes the independent evaluation of the loan officer assigned risk ratings by the Chief Credit Officer and a third party loan review company.  Such risk ratings are assigned loss component factors that reflect our loss estimate for each group of loans.  It is management’s and the Board of Directors’ responsibility to oversee the lending process to ensure that all credit risks are properly identified, monitored, and controlled, and that loan pricing, terms and other safeguards against non-performance and default are commensurate with the level of risk undertaken and is rated as such based on a risk-rating system.  Factors considered in assigning risk ratings and loss component factors include: borrower specific information related to expected future cash flows and operating results, collateral values, financial condition and payment status; levels of and trends in portfolio charge-offs and recoveries; levels in portfolio delinquencies; effects of changes in loan concentrations and observed trends in the economy and other qualitative measurements.

Our risk-rating system is consistent with the classification system used by regulatory agencies and with industry practices. Loan classifications of Substandard, Doubtful or Loss are consistent with the regulatory definitions of classified assets.  The classification system is as follows:

· Pass: This category represents loans performing to contractual terms and conditions and the primary source of repayment is adequate to meet the obligation.  We have five categories within the Pass classification depending on strength of repayment sources, collateral values and financial condition of the borrower. 

· Special Mention:  This category represents loans performing to contractual terms and conditions; however the primary source of repayment or the borrower is exhibiting some deterioration or weaknesses in financial condition that could potentially threaten the borrowers’ future ability to repay our loan principal and interest or fees due.

· Substandard: This category represents loans that the primary source of repayment has significantly deteriorated or weakened which has or could threaten the borrowers’ ability to make scheduled payments.  The weaknesses require close supervision by management and there is a distinct possibility that we could sustain some loss if the deficiencies are not corrected.  Such weaknesses could jeopardize the timely and ultimate collection of our loan principal and interest or fees due.  Loss may not be expected or evident, however, loan repayment is inadequately supported by current financial information or pledged collateral.

· Doubtful: Loans so classified have all the inherent weaknesses of a substandard loan with the added provision that collection or liquidation in full is highly questionable and not reasonably assured.  The probability of at least partial loss is high, but extraneous factors might strengthen the asset to prevent loss. The validity of the extraneous factors must be continuously monitored. Once these factors are questionable the loan should be considered for full or partial charge-off.

· Loss: Loans so classified are considered uncollectible, and of such little value that their continuance as active assets is not warranted.  Such loans are fully charged off.

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The following tables illustrate our corporate credit risk profile by creditworthiness category as of March 31, 2016 and December 31, 2015: 

			Special
(Dollars in thousands)	Pass		Mention		Substandard		Doubtful		Total
March 31, 2016
Commercial and industrial	$	24,224	$	19	$	35	$	-	$	24,278
Construction		15,827		-		-		-		15,827
Commercial real estate		394,515		8,887		5,956		-		409,358
Residential real estate		128,119		737		1,333		-		130,189
Consumer and other		1,034		-		138		-		1,172
	$	563,719	$	9,643	$	7,462	$	-	$	580,824
December 31, 2015
Commercial and industrial	$	19,983	$	5	$	35	$	-	$	20,023
Construction		13,348		-		-		-		13,348
Commercial real estate		367,305		8,957		6,000		-		382,262
Residential real estate		124,915		743		1,546		-		127,204
Consumer and other		1,115		-		138		-		1,253
	$	526,666	$	9,705	$	7,719	$	-	$	544,090

The following table reflects information about our impaired loans by class as of March 31, 2016 and December 31, 2015:

		March 31, 2016						December 31, 2015
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
(Dollars in thousands)	Investment		Balance		Allowance		Investment		Balance		Allowance
With no related allowance recorded:
Commercial and industrial	$	20	$	20	$	-	$	20	$	20	$	-
Commercial real estate		2,207		2,218		-		2,684		2,684		-
Residential real estate		999		999		-		1,123		1,152		-
With an allowance recorded:
Commercial real estate		2,923		2,923		249		2,476		2,476		112
Residential real estate		334		364		68		423		423		79
Consumer and other		138		138		107		138		138		73
Total:
Commercial and industrial		20		20		-		20		20		-
Commercial real estate		5,130		5,141		249		5,160		5,160		112
Residential real estate		1,333		1,363		68		1,546		1,575		79
Consumer and other		138		138		107		138		138		73
	$	6,621	$	6,662	$	424	$	6,864	$	6,893	$	264

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The following table presents the average recorded investment and income recognized for the three months ended March 31, 2016 and 2015:

	For the Three Months Ended March 31, 2016				For the Three Months Ended March 31, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(Dollars in thousands)	Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Commercial and industrial	$	20	$	-	$	10	$	-
Commercial real estate		2,446		8		2,759		5
Residential real estate		1,061		1		1,631		1
Total impaired loans without a related allowance		3,527		9		4,400		6
With an allowance recorded:
Commercial real estate		2,699		8		2,766		8
Residential real estate		379		-		513		3
Consumer and other		138		-		69		-
Total impaired loans with an allowance		3,216		8		3,395		11
Total impaired loans	$	6,743	$	17	$	7,795	$	17

We recognize interest income on performing impaired loans as payments are received.  On non-performing impaired loans we do not recognize interest income as all payments are recorded as a reduction of principal on such loans.

Impaired loans include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties.  These concessions could include a reduction in the interest rate on the loan, payment extensions, postponement or forgiveness of principal, forbearance or other actions intended to maximize collection.  The concessions rarely result in the forgiveness of principal or accrued interest.  In addition, we attempt to obtain additional collateral or guarantor support when modifying such loans.  Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.

The following table presents the recorded investment in troubled debt restructured loans, based on payment performance status:

(Dollars in thousands)		Commercial Real Estate	Residential Real Estate		Total
March 31, 2016
Performing	$	1,137	$	131	$	1,268
Non-performing		1,828		194		2,022
Total	$	2,965	$	325	$	3,290
December 31, 2015
Performing	$	1,144	$	409	$	1,553
Non-performing		1,831		194		2,025
Total	$	2,975	$	603	$	3,578

Troubled debt restructured loans are considered impaired and are included in the previous impaired loans disclosures in this footnote.  As of March 31, 2016, we have not committed to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

There wereno troubled debt restructurings that occurred during the threemonths ended March 31, 2016  and 2015. 

There were no troubled debt restructurings for which there was a payment default within twelve months following the date of the restructuring for the threemonths ended March 31, 2016 and 2015.

14

We may obtain physical possession of residential real estate collateralizing a consumer mortgage loan via foreclosure on an in-substance repossession. As of both March 31, 2016 and December 31, 2015, we held $130 thousand inforeclosed residential real estate properties as a result of obtaining physical possession. In addition, as of March 31, 2016 and December 31, 2015,respectively, we had consumer loans with a carrying value of $878 thousand and $945 thousand collateralized by residential real estate property for which formal foreclosure proceedings were in process.

NOTE 5 – EARNINGS PER SHARE

Basic earnings per share are calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period.  Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares (unvested restricted stock grants and stock options) had been issued, as well as any adjustment to income that would result from the assumed issuance of potential common shares that may be issued by us. Potential common shares related to stock options are determined using the treasury stock method.

	Three Months Ended March 31, 2016					Three Months Ended March 31, 2015
(In thousands, except share and	Income		Shares	Per Share		Income		Shares	Per Share
per share data)	(Numerator)		(Denominator)	Amount		(Numerator)		(Denominator)	Amount
Basic earnings per share:
Net earnings applicable to common stockholders	$	1,574	4,578,598	$	0.34	$	952	4,571,142	$	0.21
Effect of dilutive securities:
Unvested stock awards		-	27,828				-	31,768
Diluted earnings per share:
Net income applicable to common stockholders and assumed conversions	$	1,574	4,606,426	$	0.34	$	952	4,602,910	$	0.21

There were 57,038 and 21,244 shares of unvested restricted stock awards and options outstanding duringthe quarterended March 31,  2016 and 2015, respectively, which were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive.  .

NOTE 6 – OTHER COMPREHENSIVEINCOME

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income.  Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income.

The components of other comprehensive income, both before tax and net of tax, are as follows:

	Three Months Ended March 31, 2016						Three Months Ended March 31, 2015
	Before Tax		Tax Effect		Net of Tax		Before Tax		Tax Effect		Net of Tax
(Dollars in thousands)
Other comprehensive income (loss):
Unrealized gains on available for sale securities	$	985	$	394	$	591	$	316	$	127	$	189
Fair value adjustments on derivatives		(400)		(160)		(240)		-		-		-
Reclassification adjustment for net gains on securities transactions included in net income		(167)		(67)		(100)		(168)		(67)		(101)
Total other comprehensive income	$	418	$	167	$	251	$	148	$	60	$	88

15

NOTE 7 – SEGMENT INFORMATION

Our insurance agency operations are managed separately from the traditional banking and related financial services that we also offer.  The insurance agency operation provides commercial, individual, and group benefit plans and personal coverage.

	Three Months Ended March 31, 2016						Three Months Ended March 31, 2015
	Banking and						Banking and
	Financial		Insurance				Financial		Insurance
	Services		Services		Total		Services		Services		Total
(Dollars in thousands)
Net interest income from external sources	$	5,646	$	-	$	5,646	$	4,802	$	-	$	4,802
Other income from external sources		786		1,738		2,524		743		1,158		1,901
Depreciation and amortization		252		6		258		239		4		243
Income before income taxes		1,514		835		2,349		928		400		1,328
Income tax expense (1)		441		334		775		216		160		376
Total assets		709,893		6,879		716,772		598,265		5,986		604,251

(1) Insurance Services calculated at statutory tax rate of 40%

NOTE 8–  STOCK-BASED COMPENSATION

We currently have stock-based compensation plans in place for our directors, officers, employees, consultants and advisors.  Under the terms of these plans we may grant restricted shares and stock options for the purchase of our common stock.  The stock-based compensation is granted under terms determined by our Compensation Committee.Our standard stock option grants have a maximum term of 10 years, generally vest over periods ranging between one and four years, and are granted with an exercise price equal to the fair market value of the common stock on the date of grant.  Restricted stock is valued at the market value of the common stock on the date of grant and generally vests over periods oftwo toseven years.  All dividends paid on restricted stock, whether vested or unvested, are paid to the shareholder.

Information regarding our stock option plans for the three months endedMarch 31, 2016 is as follows:

			Weighted
			Average	Weighted
			Exercise	Average		Aggregate
	Number of		Price per	Contractual		Intrinsic
	Shares		Share	Term		Value
Options outstanding, beginning of year	51,985	$	10.06
Options granted	26,216		12.83
Options outstanding, end of quarter	78,201	$	10.99	9.1	$	127,046
Options exercisable, end of quarter	10,396	$	10.06	8.7	$	25,407
Option price range at end of quarter	$9.97 to $12.83
Option price of exercisable shares	$9.97 to $10.25

The following table summarizes information about stock option assumptions:

	2016		2015
Expected dividend yield		1.25%		1.56%
Expected volatility		22.72%		34.32%
Risk-free interest rate		1.71%		1.37%
Expected option life		7.5 Years		7.5 Years

During the three months ended March 31, 2016 and 2015, we  expensed $11 thousandand $9 thousand, respectively, in stock-based compensation under stock option awards. 

16

The weighted average grant date fair values of options granted during the three months ended March 31, 2016 and 2015,were$3.37 per share and $3.56 per share, respectively. Expected future expense relating to the unvested options outstanding as of March 31, 2016 is $227 thousand over a weighted average period of 4.1 years. Upon exercise of vested options, management expects to draw on treasury stock as the source of the shares.

The summary of changes in unvested restricted stock awards for thethreemonths endedMarch 31, 2016, is as follows:

			Weighted
			Average
	Number of		Grant Date
	Shares		Fair Value
Unvested restricted stock, beginning of year	93,570	$	7.67
Granted	30,822		12.68
Forfeited	(1,084)		9.58
Vested	(35,362)		7.00
Unvested restricted stock, end of period	87,946	$	9.67

During the three months ended March 31, 2016 and 2015, we expensed$90 thousand and $82 thousand, respectively, in stock-based compensation under restricted stock awards.

At March 31, 2016, unrecognized compensation expense for unvested restricted stock was $722 thousand, which is expected to be recognized over an average period of 1.9years.

NOTE 9 – GUARANTEES

We do not issue any guarantees that would require liability recognition or disclosure, other than standby letters of credit.  Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party.  Generally, all letters of credit, when issued, have expiration dates within one year.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  Generally, we hold collateral and/or personal guarantees supporting these commitments.  As of March 31, 2016, we  had $729 thousand of outstanding letters of credit.  Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payments required under the corresponding guarantees.  The amount of the liability as of March 31, 2016, for guarantees under standby letters of credit issued is not material.

NOTE 10–  FAIR VALUE OF FINANCIAL INSTRUMENTS

Management uses its best judgment in estimating the fair value of our financial instruments; however, there are inherent weaknesses in any estimation technique.  Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts we could have realized in a sale transaction on the dates indicated.  The fair value amounts have been measured as of their respective period ends, and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates.  As such, the fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period end.

In accordance with U.S. GAAP, we use a hierarchical disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value.  The three broad levels defined by the hierarchy are as follows:

· Level I - Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

· Level II - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these asset and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.

· Level III - Assets and liabilities that have little to no pricing observability as of reported date.  These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

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The following table summarizes the fair value of our financial assets measured on a recurring basis by the above pricing observability levels as of March 31, 2016 and December 31, 2015:

			Quoted Prices in		Significant
			Active Markets		Other		Significant
	Fair		for Identical		Observable		Unobservable
	Value		Assets		Inputs		Inputs
(Dollars in thousands)	Measurements		(Level I)		(Level II)		(Level III)
March 31, 2016
U.S. government agencies	$	12,528	$	-	$	12,528	$	-
State and political subdivisions		30,244		-		30,244		-
Mortgage-backed securities -
U.S. government-sponsored enterprises		43,751		-		43,751		-
Derivative instruments
Interest rate swaps		(400)		-		(400)		-
December 31, 2015
U.S. government agencies	$	12,788	$	-	$	12,788	$	-
State and political subdivisions		38,149		-		38,149		-
Mortgage-backed securities -
U.S. government-sponsored enterprises		42,839		-		42,839		-

Our available for sale and held to maturity securities portfolios contain investments, which were all rated within our investment policy guidelines at time of purchase, and upon review of the entire portfolio all securities are marketable and have observable pricing inputs.

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2016 and December 31, 2015are as follows:

			Quoted Prices in		Significant
			Active Markets		Other		Significant
	Fair		for Identical		Observable		Unobservable
	Value		Assets		Inputs		Inputs
(Dollars in thousands)	Measurements		(Level I)		(Level II)		(Level III)
March 31, 2016
Impaired loans	$	1,051	$	-	$	-	$	1,051
December 31, 2015
Impaired loans	$	801	$	-	$	-	$	801
Foreclosed real estate		756		-		-		756

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The following table presents additional qualitative information about assets measured at fair value on a nonrecurring basis and for which Level III inputs were used to determine fair value:

	Qualitative Information about Level III Fair Value Measurements
	Fair				Range
	Value		Valuation	Unobservable	(Weighted
(Dollars in thousands)	Estimate		Techniques	Input	Average)
March 31, 2016
Impaired loans	$	1,051	Appraisal of	Appraisal	0% to -27.30%
			collateral	adjustments (1)	(-2.5%)
December 31, 2015
Impaired loans	$	801	Appraisal of	Appraisal	0% to -61.8%
			collateral	adjustments (1)	(-5.8%)
Foreclosed real estate		756	Appraisal of	Selling
			collateral	expenses (1)	-7.0%  (-7.0%)
(1) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated selling expenses.  The range and weighted average of selling expenses and other appraisal adjustments are presented as a percentage of the appraisal.

The following information should not be interpreted as an estimate of the fair value of the entire company since a fair value calculation is only provided for a limited portion of our assets and liabilities.  Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between our disclosures and those of other companies may not be meaningful.  The following methods and assumptions were used to estimate the fair value of our financial instruments at March 31, 2016 and December 31, 2015:  

Cash and Cash Equivalents (Carried at Cost): The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets’ fair value.

Deposits (Carried at Cost): Fair value for fixed-rate time certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits.  We generally purchase amounts below the insured limit, limiting the amount of credit risk on these time deposits.  

Securities: The fair value of securities, available for sale (carried at fair value) and securities held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level I), or matrix pricing (Level II), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.  For certain securities which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence (Level III).  In the absence of such evidence, management’s best estimate is used. 

Federal Home Loan Bank Stock (Carried at Cost):  The carrying amount of restricted investment in bank stock approximates fair value and considers the limited marketability of such securities.

Loans Receivable (Carried at Cost): The fair values of non-impaired loans are estimated using discounted cash flow analyses, using the market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans.  Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal.  Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.

Impaired Loans (Carried at Lower of Cost or Fair Value): Fair value of impaired loans is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds.  These assets are included in Level III fair values, based upon the lowest level of input that is significant to the fair value measurements.  The fair value of impaired loans totaled  $1.1 million and$801 thousand at March 31, 2016 and

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December 31, 2015,  respectively.  These balances consist of loans that were written down or required additional reserves during the periods endedMarch 31, 2016 and December 31, 2015, respectively. 

Deposit Liabilities (Carried at Cost): The fair values disclosed for demand, savings and money market accounts are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts).  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits. 

Borrowings (Carried at Cost): Fair values of Federal Home Loan Bank (“FHLB”) advances are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity.  These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party. 

Derivatives (Carried at Fair Value):  The Company also uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges, and which satisfy hedge accounting requirements, involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount.  These derivatives were used to hedge the variable cash outflows associated with FHLB borrowings along with our junior subordinated debenture at U.S. Capital Trust. The effective portion of changes in the fair value of these derivatives are recorded in accumulated other comprehensive income, and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of these derivatives are recognized directly in earnings.

The fair value of the Company's derivatives are determined using discounted cash flow analysis using observable market-based inputs, which are considered Level 2 inputs.

Junior Subordinated Debentures (Carried at Cost): Fair values of junior subordinated debt are estimated using discounted cash flow analysis, based on market rates currently offered on such debt with similar credit risk characteristics, terms and remaining maturity. 

Accrued Interest Receivable and Accrued Interest Payable (Carried at Cost): The carrying amounts of accrued interest receivable and payable approximate its fair value.

Off-Balance Sheet Instruments (Disclosed at Cost): Fair values for our off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties’ credit standing. 

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The fair values of our financial instruments at March 31, 2016 and December 31, 2015, were as follows:

					Quoted Prices in		Significant
					Active Markets		Other		Significant
	March 31, 2016				for Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
(Dollars in thousands)	Amount		Value		(Level I)		(Level II)		(Level III)
Financial assets:
Cash and cash equivalents	$	9,039	$	9,039	$	9,039	$	-	$	-
Time deposits with other banks		100		100		-		100		-
Securities available for sale		86,523		86,523		-		86,523		-
Securities held to maturity		6,816		7,039		-		7,039		-
Federal Home Loan Bank stock		3,839		3,839		-		3,839		-
Loans receivable, net of allowance		574,239		572,914		-		-		572,914
Accrued interest receivable		2,257		2,257		-		2,257		-
Financial liabilities:
Non-maturity deposits		419,030		419,030		-		419,030		-
Time deposits		156,270		156,175		-		156,175		-
Short-term borrowings		1,430		1,430		1,430		-		-
Long-term borrowings		66,000		67,358		-		67,358		-
Junior subordinated debentures		12,887		10,374		-		10,374		-
Accrued interest payable		386		386		-		386		-
Derivative instruments:
Interest rate swaps		(400)		(400)		-		(400)		-

					Quoted Prices in		Significant
					Active Markets		Other		Significant
	December 31, 2015				for Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
(Dollars in thousands)	Amount		Value		(Level I)		(Level II)		(Level III)
Financial assets:
Cash and cash equivalents	$	6,120	$	6,120	$	6,120	$	-	$	-
Time deposits with other banks		100		100		-		100		-
Securities available for sale		93,776		93,776		-		93,776		-
Securities held to maturity		6,834		7,008		-		7,008		-
Federal Home Loan Bank stock		5,165		5,165		-		5,165		-
Loans receivable, net of allowance		537,833		528,065		-		-		528,065
Accrued interest receivable		1,764		1,764		-		1,764		-
Financial liabilities:
Non-maturity deposits		380,983		380,983		-		380,983		-
Time deposits		136,873		136,619		-		136,619		-
Short-term borrowings		34,650		34,650		34,650		-		-
Long-term borrowings		61,000		58,685		-		58,685		-
Junior subordinated debentures		12,887		9,344		-		9,344		-
Accrued interest payable		281		281		-		281		-

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NOTE 11 – DERIVATIVES

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. 

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three months ended March 31, 2016 such derivatives were used to hedge the variable cash outflows associated with four FHLB borrowings totaling $26.0 million.  The Company entered into an interest rate swap agreement to hedge its $12.5 million variable rate (3Mo Libor +1.44%) junior subordinated debt issued by Sussex Capital Trust II, a non-consolidated wholly-owned subsidiary of the Company, for 10 years at a fixed rate of 3.10%.  The ineffective portion of the change in fair value of the derivatives are recognized directly in earnings. The Company implemented this program during the quarter ended March 31, 2016. During the three months ended March 31, 2016 the Company’s did not record any hedge ineffectiveness.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Statements of Financial Condition at March 31, 2016:

	March 31, 2016
	Notional/		Balance
	Contract	Fair	Sheet	Expiration
	Amount	Value	Location	Date
(Dollars in thousands)
Derivatives designated as hedging instruments
Interest rate swaps by effective date:
March 15, 2016	$          12,500	$                (64)	Other Liabilities	March 15, 2026
December 15, 2016	5,000	(97)	Other Liabilities	December 15, 2026
June 15, 2017	6,000	(114)	Other Liabilities	June 15, 2027
December 15, 2017	10,000	(71)	Other Liabilities	December 15, 2027
December 15, 2017	5,000	(54)	Other Liabilities	December 15, 2027
Total	$          38,500	$              (400)

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The table below presents the Company’s derivative financial instruments that are designated as cash flow hedgers of interest rate risk and their effect on the Company’s Consolidated Statements of Financial Conditions during the three months ended March 31, 2016:

	Three Months Ended March 31, 2016
	Amount of Loss
	Recognized in OCI	Location of Gain
	on	(Loss) Recognized in	Amount of Gain (Loss)
	Derivatives, net of	Income of	Recognized in Income of
	Tax	Derivatives	Derivatives
	(Effective Portion)	(Ineffective Portion)	(Ineffective Portion)
(Dollars in thousands)
Derivatives in cash flow hedges Interest rate swaps by effective
date:
March 15, 2016	$                               (38)	Not applicable	$                                    -
December 15, 2016	(58)	Not applicable	-
June 15, 2017	(68)	Not applicable	-
December 15, 2017	(43)	Not applicable	-
December 15, 2017	(32)	Not applicable	-
Total	$                             (240)		$                                    -

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Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT STRATEGY

We are a community-oriented financial institution serving northern New Jersey, northeastern Pennsylvania, New York City, New York and Orange County, New York.  During the first quarter of 2016 our presence in northern New Jersey continued to grow to new markets in Bergen County, NJ, with the opening of a new branch in Oradell, NJ.  On April 29, 2016 we closed a branch location in Port Jervis, NY in Orange County.  While offering traditional community bank loan and deposit products and services, we obtain non-interest income through our insurance brokerage operations and the sale of non-deposit products.

We continue to focus on strengthening our core operating performance by improving our net interest income and margin by closely monitoring our yield on earning assets and adjusting the rates offered on deposit products.  We have beenfocused on building for the future and strengthening our core operating results within our risk management framework. 

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements are prepared in accordance with U.S. GAAP and practices within the banking industry.  Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in our consolidated financial statements and accompanying notes.  These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments.  Actual results could differ from those estimates.

Critical accounting estimates are necessary in the application of certain accounting policies and procedures, and are particularly susceptible to significant change. Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions.  There have been no material changes to our critical accounting policies during the three months ended March 31, 2016.  For additional information on our critical accounting policies, please refer to Note 1 of the consolidated financial statements included in our 2015 Annual Report on Form 10-K.

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COMPARISION OF OPERATING RESULTS FOR THREE MONTHS ENDED MARCH 31, 2016 AND 2015

Overview – For the quarter ended March 31, 2016, we reported net income of $1.6 million as compared to net income of $952 thousand for the same period last year.  The improvement for the first quarter of 2016 as compared to the same period last year was driven by a 17.6% increase in net interest income as a result of strong growth in average loans and deposits, which increased $89.0 million, or 18.9%, and $86.2 million, or 18.5%, respectively, and a $435 thousand, or 108.9%, increase in income before taxes from our insurance agency, Tri-State Insurance Agency.  For the first quarter of the 2016, return on average assets and equity were 0.90% and 11.4%, respectively, as compared to the same period last year of 0.64% and 7.3%, respectively. 

Comparative Average Balances and Average Interest Rates – The following table presents, on a fully tax equivalent basis, a summary of our interest-earning assets and their average yields, and interest-bearing liabilities and their average costs for the three month periods ended March 31, 2016 and 2015:

	Three Months Ended March 31,
(Dollars in thousands)	2016					2015
		Average			Average		Average			Average
Earning Assets:		Balance		Interest	Rate (2)		Balance		Interest	Rate (2)
Securities:
Tax exempt (3)	$	30,236	$	300	3.99%	$	31,339	$	312	4.04%
Taxable		69,870		376	2.16%		54,267		267	2.00%
Total securities		100,106		676	2.72%		85,606		579	2.74%
Total loans receivable (1) (4)		559,879		6,145	4.41%		470,870		5,172	4.45%
Other interest-earning assets		8,638		4	0.19%		7,118		4	0.23%
Total earning assets		668,623	$	6,825	4.11%	$	563,594	$	5,755	4.14%
Non-interest earning assets		38,701					41,353
Allowance for loan losses		(5,659)					(5,742)
Total Assets	$	701,665					599,205
Sources of Funds:
Interest bearing deposits:
NOW	$	140,031	$	71	0.20%	$	128,160	$	50	0.16%
Money market		29,951		28	0.38%		14,511		5	0.14%
Savings		138,528		70	0.20%		140,497		71	0.20%
Time		146,344		406	1.12%		112,067		290	1.05%
Total interest bearing deposits		454,854		575	0.51%		395,235		416	0.43%
Borrowed funds		75,965		437	2.31%		63,715		380	2.42%
Junior subordinated debentures		12,887		68	2.12%		12,887		53	1.67%
Total interest bearing liabilities		543,706	$	1,080	0.80%	$	471,837	$	849	0.73%
Non-interest bearing liabilities:
Demand deposits		98,264					71,695
Other liabilities		4,381					3,595
Total non-interest bearing liabilities		102,645					75,290
Stockholders' equity		55,314					52,078
Total Liabilities and Stockholders' Equity	$	701,665				$	599,205
Net Interest Income and Margin(5)				5,745	3.46%				4,906	3.53%
Tax-equivalent basis adjustment				(99)					(104)
Net Interest Income			$	5,646				$	4,802
(1) Includes loan fee income.
(2) Average rates on securities are calculated on amortized costs.
(3) Full tax equivalent basis, using a 39% effective tax rate and adjusted for TEFRA (Tax and Equity Fiscal Responsibility Act) interest expense disallowance.
(4) Loans outstanding include non-accrual loans.
(5) Represents the difference between interest earned and interest paid, divided by average total interest-earning assets.

Net Interest Income – Net interest income is the difference between interest and fees on loans and other interest-earning assets and interest paid on interest-bearing liabilities.  Net interest income is directly affected by changes in volume and mix of interest-earning assets and interest-bearing liabilities that support those assets, as well as changing interest rates when differences exist in repricing dates of assets and liabilities.

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Net interest income on a fully tax equivalent basis increased $839 thousand, or 17.1%, to $5.7 million for the first quarter of 2016, as compared to $4.9 million for the same period in 2015.  The increase in net interest income was largely due to a $105.0 million, or 18.6%, increase in average interest earning assets, principally loans receivable, which increased $89.0 million, or 18.9%.  The improvement in net interest income was partly offset by a decline in the net interest margin of 7 basis points to 3.46% for the first quarter of 2016 as compared to the same period in 2015.  The decline in the net interest margin was mostly attributed to an 8 basis point increase in the average rate on interest bearing deposits, which was primarily driven by market competition and the Company’s strategy to use longer term wholesale deposit funding to manage interest rate risk. Included in the net interest margin decrease is a 4 basis point decline in the average rate earned on loans, which is mostly due to loan growth and loan repricing in a low rate environment.

Interest Income – Our total interest income, on a fully tax equivalent basis, increased $1.1million, or 18.6%, to $6.8million for the quarter ended March 31, 2016, as compared to the same period last year.  The increase was due to higher average earning assets, which increased $105.0 million for the quarter ended March 31, 2016, as compared to the same period in 2015. 

Our total interest income earned on loans receivable increased $973 thousand, or 18.8%, to $6.1 million for the firstquarter of 2016, as compared to the same period in 2015.  The increase was driven by an increase in average balance of loans receivable of $89.0 million, or 18.9%, for the three months ended March 31, 2016, as compared to the same period last year.  The increase in interest income earned on loans receivable was partially offset by a 4 basis point decline in the average yield to 4.41% for the quarter ended March 31, 2016, as compared to the same period in 2015. 

Our total interest income earned on securities, on a fully tax equivalent basis, increased $97 thousand, to $676 thousand for the quarter ended March 31, 2016 from $579 thousand for the same period in 2015.  This  increase was largely due to anincrease in the average balance of securities of $14.5 million, or 16.9%, for the quarter ended March 31, 2016, as compared to the same period last year. 

Other interest-earning assets include federal funds sold and interest bearing deposits in other banks. Our interest earned on total other interest-earning assets remained flat at  $4 thousand for the firstquarter of 2016, as compared to the same period in 2015.  The average balances in other interest-earning assets increased $1.5million to $8.6 million in the firstquarter of 2016 from $7.1 million during the first quarter a year earlier.  The increase in average balance was partially offset by a 4 basis point decline in the average yield to 0.19% as compared to 0.23% in the same period in 2015.

Interest Expense – Our interest expense for the three months ended March 31, 2016 increased $231 thousand, or 27.2%, to $1.1 million from $849 thousand for the same period in 2015.  The increase was principally due to higher average balances in interest-bearing liabilities, which increased $71.9 million, or 15.2%, to $543.7 million for the firstquarter of 2016 from $471.8 million for the same period in 2015.

Our interest expense on deposits increased $159 thousand, or 38.2%, for the quarter ended March 31, 2016, as compared to the same period last year.  The increase was largely attributed to the increase inthe average balance of total interest bearing deposits, which increased $59.6 millionduring the firstquarter of 2016, as compared to the same period in 2015.  The increase in interest expense was attributable to an eight basis point increase in the average rate on interest bearing deposits.

Our interest expense on borrowed funds increased $72thousand, or 16.6%, for the quarter ended March 31, 2016, as compared to the same period last year.  The increase was largely attributed to the average balance of borrowed funds increasing  $12.3 million during the first quarter of 2016, as compared to the same period in 2015.

Provision for Loan Losses – Provision for loan losses decreased $94 thousand, or 30.8%, to $211 thousand for the first quarter of 2016, as compared to $305 thousand for the same period in 2015.The decrease in the provision for loan losses for the quarter ended March 31, 2016 was largely attributed to the resolution of problem loans.  The provision for loan losses reflects management’s judgment concerning the risks inherent in our existing loan portfolio and the size of the allowance necessary to absorb the risks, as well as the activity in the allowance during the periods.  Management reviews the adequacy of its allowance on an ongoing basis and will provide additional provisions, as management may deem necessary. 

Non-Interest Income – Our non-interest income increased$623 thousand, or 32.8%, to $2.5 million for the first quarter of 2016, as compared to the same period last year.  The increase was primarily due to higher insurance commissions and fees, which increased $566 thousand, or 49.0%, for the first quarter of 2016 as compared to the same period in 2015.   The growth in Tri-State Insurance Agency’s commissions and fees was principally due to an increase in contingency fee income of $405 thousand or 127.7% for the quarter ended March 31, 2016 as compared to the same period last year.

Non-Interest Expense – Our non-interest expenses increased$540 thousand, or 10.7%, to $5.6 million for the first quarter of 2016, as compared to the same period last year.  The increase for the first quarter of 2016, as compared to the

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same period in 2015, was largely due to increases in salaries and employee benefits of $573 thousand and in data processing expenses of $195 thousand, which were partially offset by decreases in director fees and expenses and write-downs related to foreclosed real estate of $107 thousand and $89 thousand, respectively.  The increase in salaries and employee benefits expense was partially due to an increase in personnel to support our growth initiative in new markets, including the opening of our Oradell branch in the first quarter of 2016.The increase in data processing is related to the reinvestment of the Company’s infrastructure due to continued growth.  The decrease in director fees was principally related to a deferred compensation plan that is tied to the performance of the Company’s stock.The decrease in expenses related to foreclosed real estate was attributable to the stabilization of the market value of other real estate owned.

Income Taxes –  Our income tax expense, which includes both federal and state tax expenses, was $775 thousand for the three months ended March 31, 2016, compared to $376 thousand for the three months ended March 31, 2015.  Our effective tax rate was 33.0% and 28.3% for the quarter ended March 31, 2016 and 2015, respectively.  The increased effective tax rate was the result of a smaller percentage of our pre-tax income resulting from tax exempt sources.

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COMPARISION OF FINANCIAL CONDITION AT MARCH 31, 2016 TO DECEMBER 31, 2015

Total Assets – At March 31, 2016, our total assets were $716.8 million, an increase of $32.3 million, or 4.7%, as compared to total assets of $684.5 million at December 31, 2015.  The increase in total assets was largely driven by growth in loans receivable of $36.6 million, or 6.7%, which was partially offset by a decline in the securities portfolio of $7.3 million, or 7.2%.

Cash and Cash Equivalents – Our cash and cash equivalents increased by $2.9 million to $9.0 million at March 31, 2016, or 1.3% of total assets, from $6.1 million, or 0.9%,of total assets, at December 31, 2015.

Securities Portfolio – At March 31, 2016, the securities portfolio, which includes available for sale and held to maturity securities, was $93.3 million, compared to $100.6 million at December 31, 2015. Available for sale securities were $86.5 million at March 31, 2016, compared to $93.8 million at December 31, 2015. The available for sale securities are held primarily for liquidity, interest rate risk management and profitability. Accordingly, our investment policy is to invest in securities with low credit risk, such as U.S. government agency obligations, state and political obligations and mortgage-backed securities. Held to maturity securities were $6.8 million at March 31, 2016 and December 31, 2015.

Net unrealized gains in the available for sale securities portfolio were $961 thousand atMarch 31, 2016.Net unrealized gains in the available for sale securities portfolio were $144 thousand at December 31, 2015.

We conduct a regular assessment of our investment securities to determine whether any securities are OTTI.  Further detail of the composition of the securities portfolio and discussion of the results of the most recent OTTI assessment are in Note 2 –  Securities to our unaudited consolidated financial statements.

The unrealized losses in our securities portfolio are mostly driven by changes in spreads and market interest rates.  All of our securities in an unrealized loss position have been evaluated for other-than-temporary impairment as of March 31, 2016 and we do not consider any security OTTI.  We evaluated the prospects of the issuers in relation to the severity and the duration of the unrealized losses.  In addition, we do not intend to sell, and it is more likely than not that we will not have to sell any of our securities before recovery of their cost basis. 

Other investments totaled $3.8 million atMarch 31, 2016, as compared to $5.2million at December 31, 2015,  which consisted primarily of FHLB stock. We also held $100 thousand in time deposits with other financial institutions at March 31, 2016 and December 31, 2015. 

Loans – The loan portfolio comprises our largest class of earning assets.Total loans receivable, net of unearned income, increased $36.6 million, or 6.7%, to $580.1 million at March 31, 2016, as compared to $543.4 million at December 31, 2015.  During the three months ended March 31, 2016, the Company had $50.6 million in commercial loan production, which was partly offset by $2.4 million in commercial loan payoffs.

The following table summarizes the composition of our gross loan portfolio by type:

(Dollars in thousands)	March 31, 2016		December 31, 2015
Commercial and industrial loans	$	24,278	$	20,023
Construction		15,827		13,348
Commercial real estate		409,358		382,262
Residential real estate		130,189		127,204
Consumer and other		1,172		1,253
Total gross loans	$	580,824	$	544,090

Loan and Asset Quality – The ratio of NPAs, which include non-accrual loans, loans 90 days past due and still accruing, troubled debt restructured loans currently performing in accordance with renegotiated terms and foreclosed real estate, to total assets improved to 1.39% at March 31, 2016 from 1.49% at December 31, 2015.  NPAs decreased $270 thousand, or 2.6%, to $9.9 million at March 31, 2016, as compared to $10.2 million at December 31, 2015.  Non-accrual loans increased $41 thousand, or 0.8%, to $5.4 million at March 31, 2016, as compared to $5.3 million at December 31, 2015.  The top five non-accrual loan relationships total $3.4 million, which equates to 63.1% of total nonaccrual loans and 33.9% of total NPAs at March 31, 2016.  The remaining non-accrual loans at March 31, 2016 have an average loan balance of $94 thousand.  Loans past due 30 to 89 days increased $2.0 million, or 71.5%, to approximately $4.8 million at March 31, 2016, as compared to $2.8 million at December 31, 2015.  The increase was largely due to four loans.  Loans that make up approximately half of the balance increase have made payments to bring their status current in April.

We continue to actively market our foreclosed real estate properties, which decreased $26 thousand to $3.3 million at March 31, 2016, as compared to $3.4 million at December 31, 2015.  The decrease was primarily due to the sale of $26

28

thousand in foreclosed real estate properties.  At March 31, 2016, the Company’s foreclosed real estate properties had an average carrying value of approximately $303 thousand per property.

The allowance for loan losses increased by $222 thousand, or 4.0%, to $5.8 million, or 1.00% of total loans, at March 31, 2016, compared to $5.6 million, or 1.03% of total loans, at December 31, 2015. The Company recorded $211 thousand in provision for loan losses for the quarter ended March 31, 2016.  Additionally, the Company recorded net recoveries of $11 thousand for the quarter ended March 31, 2016, as compared to $183 thousand in net charge-offs for the quarter ended March 31, 2015. The allowance for loan losses as a percentage of non-accrual loans increased to 108.6% at March 31, 2016 from 105.2% at December 31, 2015.

Management continues to monitor our asset quality and believes that the NPAs are adequately collateralized and anticipated material losses have been adequately reserved for in the allowance for loan losses.  However, given the uncertainty of the current real estate market, additional provisions for losses may be deemed necessary in future periods.  The following table provides information regarding risk elements in the loan portfolio at each of the periods presented:

(Dollars in thousands)	March 31, 2016		December 31, 2015
Non-accrual loans	$	5,353	$	$5,312
Non-accrual loans to total loans		0.92%		0.98%
Non-performing assets	$	9,949	$	$10,219
Non-performing assets to total assets		1.39%		1.49%
Allowance for loan losses as a % of non-accrual loans		108.57%		105.23%
Allowance for loan losses to total loans		1.00%		1.03%

A loan is considered impaired, in accordance with the impairment accounting guidance, when based on current information and events, it is probable that we will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan.  Total impaired loans at March 31, 2016 were $6.6 million and at December 31, 2015 were $6.9 million.  Impaired loans measured at fair value on a non-recurring basis increased to $1.1 million onMarch 31, 2016from $801 thousand at December 31, 2015.   These balances consist of loans that were written down or required additional reserves during the periods ended March 31, 2016 and December 31, 2015, respectively.  Impaired loans include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties.  These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.  Not all impaired loans and restructured loans are on non-accrual, and therefore not all are considered non-performing loans.  Restructured loans still accruing totaled $1.3 million and $1.6 million at March 31, 2016 and December 31, 2015, respectively.

We also continue to monitor our portfolio for potential problem loans. Potential problem loans are defined as loans which cause management to have serious concerns as to the ability of such borrowers to comply with the present loan repayment terms and which may cause the loan to be placed on non-accrual status. As of March 31, 2016,  we had sixloan relationships totaling $1.4 million that we deemed potential problem loans. Management is actively monitoring these loans.

Further detail of the credit quality of the loan portfolio is included in Note 4 –  Allowance for Loan Losses and Credit Quality of Financing Receivables to our unaudited consolidated financial statements.

Allowance for Loan Losses – The allowance for loan losses consists of general, allocated and unallocated components.  The allocated component relates to loans that are classified as impaired.  For those loans that are classified as impaired, an allowance is established when the discounted cash flows, collateral value or observable market price of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on historical charge-off experience and expected losses derived from our internal risk rating process.  The unallocated component covers the potential for other adjustments that may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data. 

Management regularly assesses the appropriateness and adequacy of the loan loss reserve in relation to credit exposure associated with individual borrowers, overall trends in the loan portfolio and other relevant factors, and believes the reserve is reasonable and adequate for each of the periods presented.

At March 31, 2016, the total allowance for loan losses increased by $222 thousand, or 4.0%, to $5.8 million, or 1.00% of total loans as compared to $5.6 million, or 1.03% of total loans, at December 31, 2015. The Company recorded $211 thousand in provision for loan losses for the quarter ended March 31, 2016.  Additionally, the Company recorded net recoveries of $11 thousand for the quarter ended March 31, 2016, as compared to $183 thousand in net charge-offs for

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the quarter ended March 31, 2015. The allowance for loan losses as a percentage of non-accrual loans increased to 108.6% at March 31, 2016 from 105.3% at December 31, 2015.  The provision also reflects the continued weakness in current real estate values in our market area and reduced cash flows to support the repayment of loans.

The table below presents information regarding our provision and allowance for loan losses for the three months ended March 31, 2016 and 2015:

(Dollars in thousands)	March 31, 2016		March 31, 2015
Balance, beginning of period	$	5,590	$	5,641
Provision		211		305
Charge-offs		(28)		(214)
Recoveries		39		31
Balance, end of period	$	5,812	$	5,763

The table below presents details concerning the allocation of the allowance for loan losses to the various categories for each of the periods presented.  The allocation is made for analytical purposes and it is not necessarily indicative of the categories in which future credit losses may occur.  The total allowance is available to absorb losses from any category of loans.

	March 31, 2016			December 31, 2015
			Percentage of			Percentage of
			Loans In Each			Loans In Each
			Category To			Category To
(Dollars in thousands)	Amount		Gross Loans		Amount	Gross Loans
Commercial and industrial	$	98	4.2%	$	85	3.7%
Construction		267	2.7%		220	2.5%
Commercial real estate		3,847	70.5%		3,646	70.2%
Residential real estate		908	22.4%		784	23.4%
Consumer and other loans		121	0.2%		87	0.2%
Unallocated		571	0.0%		768	-
Total	$	5,812	100.0%	$	5,590	100.0%

Bank-Owned Life Insurance (“BOLI”)  –  Our BOLI carrying value amounted to $12.6 million atMarch  31, 2016 and $12.5 million at December 31, 2015.

Goodwill and Other Intangibles – Goodwill represents the excess of the purchase price over the fair market value of net assets acquired.  At March  31, 2016 and December 31, 2015, we had recorded goodwill totaling $2.8 million, primarily as a result of the acquisition of Tri-State in 2001.  Our recorded goodwill total also includes $486 thousand related to the 2006 acquisition of $6.3 million in deposits in our Port Jervis branch.  As of March 31, 2016 deposits in that branch were $19 million.  During the quarter ended March 31, 2016 we announced the closing of this branch, as a result we will monitor the outflow of these deposits and evaluate the related goodwill for impairment.  In accordance with U.S. GAAP, goodwill is not amortized, but evaluated at least annually for impairment.  Any impairment of goodwill results in a charge to income.  We periodically assess whether events and changes in circumstances indicate that the carrying amounts of goodwill and intangible assets may be impaired.  The estimated fair value of the reporting segment exceeded its book value; therefore, no write-down of goodwill was required.  The goodwill related to the insurance agency is not deductible for tax purposes.

Deposits – Our total deposits increased $57.4 million, or 11.1%, to $575.3 million at March 31, 2016, from $517.9 million at December 31, 2015.  The increase in deposits was due to increases in both interest bearing deposits of $35.5 million, or 8.2%, and non-interest bearing deposits of $21.9 million, or 25.2%, at March 31, 2016, as compared to December 31, 2015.  Included in total deposits at March 31, 2016, were $35.9 million in deposit balances with an average cost of 0.56% attributed to our newest branch in Oradell, New Jersey, which opened in the beginning of March 2016, and $51.8 million in deposit balances with an average cost of 0.47% attributed to our branch in Astoria, New York, which opened in Mid-March of 2015.

Borrowings – Borrowings consist of short-term and long-term advances from the FHLB.  The advances are secured under terms of a blanket collateral agreement by a pledge of qualifying mortgage loans.  We had $67.4 million and$95.7 million in borrowings, at a weighted average interest rate of 2.57% atMarch  31, 2016and 2.61% at December 31, 2015.  The long-term borrowings at March 31, 2016 consisted of $50.0 million of fixed rate advances, $5.0 million of advances with quarterly convertible puts that allow us to put the advance back to the FHLB quarterly after one year

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from issuance and $11.0 million of advances with quarterly convertible options that allow the FHLB to change the note rate to a then current market rate.  During the quarter ended March 31, 2016, the Company entered into forward starting interest rate swap agreements related to four of its FHLB borrowings.  Please refer to Liquidity and Capital Resources section Off-Balance Sheet Arrangements.

Junior Subordinated Debentures – On June 28, 2007, Sussex Capital Trust II (the “Trust”), a Delaware statutory business trust and our non-consolidated wholly owned subsidiary, issued $12.5 million of variable rate capital trust pass-through securities to investors.  The Trust purchased $12.9 million of variable rate junior subordinated deferrable interest debentures from us.  The debentures are the sole asset of the Trust.  The terms of the junior subordinated debentures are the same as the terms of the capital securities.  We have also fully and unconditionally guaranteed the obligations of the Trust under the capital securities.  The interest rate is based on the three-month LIBOR plus 144 basis points and adjusts quarterly.  The rate at March 31, 2016,  was 2.07%.  The capital securities are currently redeemable by us at par in whole or in part.  The capital securities must be redeemed upon final maturity of the subordinated debentures on September 15, 2037.  The proceeds of these trust preferred securities, which have been contributed to the Bank, are included in the Bank’s capital ratio calculations and treated as Tier I capital.

During the quarter ended March 31, 2016, the Company entered into an interest rate swap agreement related to the junior subordinated debentures.   Please refer to Liquidity and Capital Resources section Off-Balance Sheet Arrangements. 

In accordance with FASB ASC 810, Consolidations, our wholly owned subsidiary, the Trust, is not included in our consolidated financial statements.

Equity–Stockholders’ equity, inclusive of accumulated other comprehensive income, net of income taxes, was $55.7 million at March31, 2016, an increase of $1.7 million when compared to December 31, 2015.  The increase was largely due to net income for the quarter ended March  31, 2016. 

LIQUIDITY AND CAPITAL RESOURCES

A fundamental component of our business strategy is to manage liquidity to ensure the availability of sufficient resources to meet all financial obligations and to finance prospective business opportunities. Liquidity management is critical to our stability. Our liquidity position over any given period of time is a product of our operating, financing and investing activities. The extent of such activities is often shaped by such external factors as competition for deposits and loan demand.

Traditionally, financing for our loans and investments is derived primarily from deposits, along with interest and principal payments on loans and investments.  At March 31, 2016, total deposits amounted to $575.3 million, an increase of $57.4 million, or 11.1%, from December 31, 2015. At March 31, 2016 and December 31, 2015, advances from FHLB and subordinated debentures totaled $80.3 million and $108.5 million, respectively, and represented 11.2% and 15.9% of total assets, respectively. 

Loan production continued to be our principal investing activity. Total loans receivable, net of unearned income, at March 31, 2016, amounted to $580.1million, an increase of $36.6 million, or 6.7%, compared to December 31, 2015.

Our most liquid assets are cash and due from banks and federal funds sold.  At March 31, 2016, the total of such assets amounted to $9.0 million, or 1.3%, of total assets, compared to $6.1 million, or 0.9%, of total assets at December 31, 2015. Another significant liquidity source is our available for sale securities portfolio.  At March 31, 2016, available for sale securities amounted to $86.5 million, compared to $93.8 million at December 31, 2015.

In addition to the aforementioned sources of liquidity, we have available various other sources of liquidity, including federal funds purchased from other banks and the FRB discount window.  The Bank also has the capacity to borrow an additional $49.5 millionthrough its membership in the FHLB and $10.0 million at Atlantic Community Bankers Bank at March  31, 2016.  Management believes that our sources of funds are sufficient to meet our present funding requirements.

In July 2013, the FRB, the Office of the Comptroller of the Currency (the “OCC”) and the FDIC approved final rules (the “Capital Rules”) that established a new capital framework for U.S. banking organizations. The Capital Rules generally implement the Basel Committee on Banking Supervision’s (the “Basel Committee”) December 2010 final capital framework referred to as “Basel III” for strengthening international capital standards. In addition, the Capital Rules implement certain provisions of the Dodd-Frank Act, including the requirements of Section 939A to remove references to credit ratings from the federal banking agencies’ rules.

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At March 31, 2016, the Bank’s Tier I,  Tier II and Common Equity Tier I capital ratios were 11.29%, 12.31% and 11.29%, respectively.  In addition to the risk-based guidelines, the Bank’s regulators require that banks which meet the regulators’ highest performance and operational standards maintain a minimum leverage ratio (Tier I capital as a percentage of tangible assets) of 4.0%.  As of March 31, 2016, the Bank had a leverage ratio of 9.18%.  The Bank’s risk based and leverage ratios are in excess of those required to be considered “well-capitalized” under FDIC regulations.

The Capital Rules also requires a “capital conservation buffer,” composed entirely of CET1, on top of these minimum risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer will face constraints on dividends, equity and other capital instrument repurchases and compensation based on the amount of the shortfall. Beginning January 1, 2016, the capital standards applicable to the Company will include an additional capital conservation buffer of 0.625%, increasing 0.625% each year thereafter. When fully phased-in onJanuary 1, 2019, the Company will include an additional capital conservation buffer of 2.5% of CET1, effectively resulting in minimum ratios inclusive of the capital conservation buffer of (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to risk-weighted assets of at least 8.5%, and (iii) Total capital to risk-weighted assets of at least 10.5%. As of March 31, 2016, the Bank had a capital conservation buffer of 4.32%.

The Capital Rules substantially revised the risk-based capital requirements applicable to bank holding companies and their depository institution subsidiaries. The risk-based capital guidelines are designed to make regulatory capital requirements sensitive to differences in risk profiles among banks and bank holding companies, to account for off-balance sheet exposures and to minimize disincentives for holding liquid, low-risk assets. The capital guidelines apply on a consolidated basis to bank holding companies with consolidated assets of $1 billion or more, and to certain bank holding companies with less than $1 billion in assets if they are engaged in substantial non-banking activity or meet certain other criteria.  Under FRB reporting requirements, a bank holding company that reaches $1 billion or more in total consolidated assets as of June 30 of the preceding year must begin reporting its consolidated capital beginning in March of the following year.  The threshold for capital consolidation was raised from $500 million to $1 billion effective May 15, 2015, As a result, the Company is  no longer required to report its consolidated capital.  The Bank, however, must continue to meet minimum capital requirements under the Capital Rules.

We have no investment or financial relationship with any unconsolidated entities that are reasonably likely to have a material effect on liquidity or the availability of capital resources, except for the trust preferred securities of the Trust.  We are not aware of any known trends or any known demands, commitments, events or uncertainties, which would result in any material increase or decrease in liquidity.  Management believes that any amounts actually drawn upon can be funded in the normal course of operations.

Off-Balance Sheet Arrangements – Our consolidated financial statements do not reflect off-balance sheet arrangements that are made in the normal course of business.  These off-balance sheet arrangements consist of unfunded loans and letters of credit made under the same standards as on-balance sheet instruments.  These unused commitments, at March 31, 2016,  totaled $113.6 millionandconsisted of $53.4 million in commitments to grant commercial real estate, construction and land development loans, $22.6 million in home equity lines of credit, $36.9 million in other unused commitments and $729 thousand in letters of credit.  These instruments have fixed maturity dates, and because many of them will expire without being drawn upon, they do not generally present any significant liquidity risk to us.  Management believes that any amounts actually drawn upon can be funded in the normal course of operations.

During the first quarter of 2016, the Company entered into interest rate swap agreements with notional amounts totaling $38.5 million, of which all are designated as cash flow hedges. The Company entered into $26.0 million in forward starting interest rate swap agreements to coincide with the maturity of five FHLB Advances over the next 21 months that have an average rate of 4.03%.  The forward interest rate swaps have a term of 10 years at an average fixed rate of 1.97% and will hedge short term wholesale funding.  Additionally, the Company entered into a $12.5 million interest rate swap agreement to coincide with a junior subordinated debt issued by Sussex Capital Trust II, for a term of 10 years at a fixed rate of 3.10%.

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4 - Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were

32

effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely discussion regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation that occurred during our last fiscal quarter that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1 - Legal Proceedings

We are not involved in any legal proceedings other than routine legal proceedings occurring in the ordinary course of business.  Management believes that such proceedings are, in the aggregate, immaterial to our financial condition and results of operations.

Item 1A - Risk Factors

For a summary of risk factors relevant to our operations, see Part 1, Item 1A, “Risk Factors” in our 2015 Annual Report on Form 10-K.  There are no material changes in the risk factors relevant to our operations.

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information with respect to any purchase of shares of our common stock made by or on behalf of us or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Exchange Act, during the three months ended March 31, 2016:

					Maximum
				Total Number	Number of
				of Shares	Shares that
				Purchased as	May Yet Be
	Total Number			Part of Publicly	Purchased
	of Shares		Average Price	Announced	Under the
Period	Purchased		Paid per Share	Program	Program(1)
January 1, 2016 through January 31, 2016	-	$	-	-	185,073
February 1, 2016 through February 29, 2016	-		-	-	185,073
March 1, 2016 through March 31, 2016	-		-	-	185,073
Total	-	$	-	-

(1) On February 26, 2016, the Board of Directors authorized a continuation of the stock repurchase program, under which we may repurchase up to 184,000 shares.  The stock repurchase program expires on February 25, 2017, unless completed sooner or otherwise extended.

There were no sales by us of unregistered securities during the three months ended March 31, 2016.

Item 3 - Defaults Upon Senior Securities

Not applicable.

Item 4 - Mine Safety Disclosures

Not applicable.

Item 5 - Other Information

Not applicable.

Item 6 - Exhibits

The exhibits required to be filed as part of this Quarterly Report on Form 10-Q are listed in the Exhibit Index attached hereto and are incorporated herein by reference.

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

Date: May  13, 2016		SUSSEX BANCORP
	By:	/s/ Steven M. Fusco
		Steven M. Fusco
		Chief Financial Officer and Senior Executive Vice President
		(Principal Financial and Accounting Officer)

35

EXHIBIT INDEX

Exhibit Number	Description
*
3.1	Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Quarterly Report on 10-Q filed with the SEC on August 15, 2011).
3.2	Amended and Restated By-laws (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on June 3, 2014).
4.1	Specimen common stock certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registration Statement on Form S-1 filed with the SEC on June 3, 2013).
31.1	Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.
32.1*	Section 1350 Certifications of the Chief Executive Officer and Chief Financial Officer.
101	Financial statements from the Quarterly Report on Form 10-Q of Sussex Bancorp for the quarter ended March 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Income and Comprehensive Income; (iii) the Consolidated Statements of Stockholders’ Equity; (iv) the Consolidated Statements of Cash Flows and (v) Notes to Unaudited Consolidated Financial Statements.

_______________________________

*  Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

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EX-31.1

Exhibit 31.1

I, Anthony Labozzetta, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sussex Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 13, 2016	By:	/s/ Anthony Labozzetta
		Anthony Labozzetta
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

I, Steven M. Fusco, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Sussex Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 13, 2016	By:	/s/ Steven M. Fusco
		Steven M. Fusco
		Chief Financial Officer and Senior Executive Vice President
		(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

Statement Furnished PURSUANT TO SECTION 906 of the

SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

In connection with the Quarterly Report on Form 10-Q of Sussex Bancorp (the “Company”) for the quarter ended March 31, 2016 (the “Report”), I, Anthony Labozzetta, President and Chief Executive Officer, and I, Steven M. Fusco, Chief Financial Officer and Senior Executive Vice President, each certify as follows:

A) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m or 78o(d)), and

B) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report.

This statement is authorized to be attached as an exhibit to the Report so that this statement will accompany the Report at such time as the Report is filed with the Securities and Exchange Commission, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. Pursuant to Securities and Exchange Commission Release 33-8238, dated June 5, 2003, this certification is being furnished and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any registration statement of the Company filed under the Securities Act of 1933, as amended, except to the extent that the Company specifically incorporates it by reference. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date: May 13, 2016	By: /s/ Anthony Labozzetta           .
	Anthony Labozzetta
	President and Chief Executive Officer
	(Principal Executive Officer)

By: /s/ Steven M. Fusco                .

Steven M. Fusco

Chief Financial Officer and

Senior Executive Vice President

(Principal Financial and Accounting Officer)

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Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 06, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2016
Entity Registrant Name	SUSSEX BANCORP
Entity Central Index Key	0001028954
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	sbbx
Entity Common Stock, Shares Outstanding		4,675,976

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Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
ASSETS
Cash and due from banks	$ 3,060	$ 2,914
Interest-bearing deposits with other banks	5,979	3,206
Cash and cash equivalents	9,039	6,120
Interest bearing time deposits with other banks	100	100
Securities available for sale, at fair value	86,523	93,776
Securities held to maturity, at amortized cost (fair value of $7,039 and $7,008 at March 31, 2016 and December 31, 2015, respectively)	6,816	6,834
Federal Home Loan Bank Stock, at cost	3,839	5,165
Loans receivable, net of unearned income	580,051	543,423
Less: allowance for loan losses	5,812	5,590
Net loans receivable	574,239	537,833
Foreclosed real estate	3,328	3,354
Premises and equipment, net	9,126	8,879
Accrued interest receivable	2,257	1,764
Goodwill	2,820	2,820
Bank-owned life insurance	12,600	12,524
Other assets	6,085	5,334
Total Assets	716,772	684,503
Deposits:
Non-interest bearing	109,152	87,209
Interest bearing	466,148	430,647
Total deposits	575,300	517,856
Short-term borrowings	1,430	34,650
Long-term borrowings	66,000	61,000
Accrued interest payable and other liabilities	5,473	4,169
Junior subordinated debentures	12,887	12,887
Total Liabilities	$ 661,090	$ 630,562
Stockholders' Equity:
Preferred stock, no par value, 1,000,000 shares authorized; none issued
Common stock, no par value, 10,000,000 shares authorized; 4,735,218 and 4,705,480 shares issued and 4,675,976 and 4,646,238 shares outstanding at March 31, 2016 and December 31, 2015, respectively	$ 36,028	$ 35,927
Treasury stock, at cost; 59,242 shares at March 31, 2016 and December 31, 2015, respectively	(592)	(592)
Retained earnings	19,909	18,520
Accumulated other comprehensive income	337	86
Total Stockholders' Equity	55,682	53,941
Total Liabilities and Stockholders' Equity	$ 716,772	$ 684,503

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Consolidated Balance Sheets [Abstract]
Securities held to maturity, fair value	$ 7,039	$ 7,008
Preferred stock, par value
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Common stock, par value
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	4,735,218	4,705,480
Common stock, shares outstanding	4,675,976	4,646,238
Treasury stock, shares	59,242	59,242

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Consolidated Statements Of Income And Comprehensive Income - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015
INTEREST INCOME
Loans receivable, including fees		$ 6,145	$ 5,172
Securities:
Taxable		376	267
Tax-exempt		201	208
Interest bearing deposits		4	4
Total Interest Income		6,726	5,651
INTEREST EXPENSE
Deposits		575	416
Borrowings		437	380
Junior subordinated debentures		68	53
Total Interest Expense		1,080	849
Net Interest Income		5,646	4,802
PROVISION FOR LOAN LOSSES		211	305
Net Interest Income after Provision for Loan Losses		5,435	4,497
OTHER INCOME
Service fees on deposit accounts		225	213
ATM and debit card fees		187	174
Bank-owned life insurance		76	78
Insurance commissions and fees		1,721	1,155
Investment brokerage fees		27	22
Net gain on sales of securities		167	168
Net loss on disposal of premises and equipment		(13)
Other		134	91
Total Other Income		2,524	1,901
OTHER EXPENSES
Salaries and employee benefits		3,353	2,780
Occupancy, net		424	477
Data processing		549	354
Furniture and equipment		233	210
Advertising and promotion		105	70
Professional fees		174	146
Director fees		59	166
FDIC assessment		120	124
Insurance		73	52
Stationary and supplies		52	56
Loan collection costs		32	97
Net expenses and write-downs related to foreclosed real estate		75	164
Other		361	374
Total Other Expenses		5,610	5,070
Income before Income Taxes		2,349	1,328
EXPENSE FOR INCOME TAXES	[1]	775	376
Net Income		1,574	952
OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized gains on available for sale securities arising during the period		985	316
Fair value adjustments on derivatives		(400)
Reclassification adjustment for net gain on securities transactions included in net income		(167)	(168)
Income tax related to items of other comprehensive income		(167)	(60)
Other comprehensive income, net of income taxes		251	88
Comprehensive income		$ 1,825	$ 1,040
EARNINGS PER SHARE
Basic		$ 0.34	$ 0.21
Diluted		$ 0.34	$ 0.21

[1] Insurance Services calculated at statutory tax rate of 40%

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Consolidated Statements Of Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]	Treasury Stock [Member]	Total
Balance at Dec. 31, 2014	$ 35,553	$ 15,566	$ 169	$ (59)	$ 51,229
Balance, shares at Dec. 31, 2014	4,662,606
Net income		952			952
Other comprehensive income (loss)			88		88
Treasury shares purchased				(204)	(204)
Treasury shares purchased, shares	(19,450)
Restricted stock granted	26,441
Compensation expense related to stock option and restricted stock grants	$ 91				91
Dividends declared on common stock		(187)			(187)
Balance at Mar. 31, 2015	$ 35,644	16,331	257	(263)	51,969
Balance, shares at Mar. 31, 2015	4,669,597
Balance at Dec. 31, 2015	$ 35,927	18,520	86	(592)	$ 53,941
Balance, shares at Dec. 31, 2015	4,646,238				4,646,238
Net income		1,574			$ 1,574
Other comprehensive income (loss)			251		251
Restricted stock granted	30,822
Restricted stock forfeited	(1,084)
Compensation expense related to stock option and restricted stock grants	$ 101				101
Dividends declared on common stock		(185)			(185)
Balance at Mar. 31, 2016	$ 36,028	$ 19,909	$ 337	$ (592)	$ 55,682
Balance, shares at Mar. 31, 2016	4,675,976				4,675,976

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Consolidated Statements Of Stockholders' Equity (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Consolidated Statements Of Stockholders' Equity [Abstract]
Dividends declared	$ 0.04	$ 0.04

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Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash Flows from Operating Activities
Net income	$ 1,574	$ 952
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	211	305
Depreciation and amortization	258	243
Net amortization of securities premiums and discounts	412	428
Net realized gain on sale of securities	(167)	(168)
Net realized loss on sale and disposal of premises and equipment	13
Net realized gain on sale of foreclosed real estate	(3)	(27)
Write-downs of and provisions for foreclosed real estate		97
Deferred income tax benefit	(192)	(111)
Earnings on bank-owned life insurance	(76)	(78)
Compensation expense for stock options and stock awards	101	91
Increase in assets:
Accrued interest receivable	(493)	(112)
Other assets	(726)	(563)
Increase in accrued interest payable and other liabilities	904	654
Net Cash Provided by Operating Activities	1,816	1,711
Securities available for sale:
Purchases	(2,044)	(21,632)
Sales	8,088	12,767
Maturities, calls and principal repayments	1,789	2,161
Securities held to maturity:
Purchases	(480)	(491)
Maturities, calls and principal repayments	491
Net increase in loans	(36,617)	(1,552)
Proceeds from the sale of foreclosed real estate	29	1,566
Purchases of bank premises and equipment	(518)	(343)
Decrease in Federal Home Loan Bank stock	1,326	369
Net Cash Used in Investing Activities	(27,936)	(7,155)
Cash Flows from Financing Activities
Net increase in deposits	57,444	15,242
Increase in short-term borrowed funds	(33,220)	(18,300)
Proceeds from long-term borrowings	5,000	15,000
Repayment of long-term borrowings		(5,000)
Purchase of treasury stock		(204)
Dividends paid	(185)	(187)
Net Cash Provided by Financing Activities	29,039	6,551
Net Increase in Cash and Cash Equivalents	2,919	1,107
Cash and Cash Equivalents - Beginning	6,120	5,859
Cash and Cash Equivalents - Ending	9,039	6,966
Supplementary Cash Flows Information
Interest paid	975	827
Income taxes paid	$ 795	250
Supplementary Schedule of Noncash Investing and Financing Activities
Foreclosed real estate acquired in settlement of loans		$ 39

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Summary Of Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

Summary Of Significant Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

NOTE 1 – SUMMARY OF SIGNIFICANT ACOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of Sussex Bancorp (“we,” “us,” “our” or the “company”) and our wholly owned subsidiary Sussex Bank (the “Bank”).  The Bank’s wholly owned subsidiaries are SCB Investment Company, Inc., SCBNY Company, Inc., ClassicLake Enterprises, LLC, Wheatsworth Properties Corp., PPD Holding Company, LLC, and Tri-State Insurance Agency, Inc. (“Tri-State”), a full service insurance agency located in Sussex County, New Jersey with a satellite office located in Bergen County, New Jersey.  Tri-State’s operations are considered a separate segment for financial disclosure purposes.  All inter-company transactions and balances have been eliminated in consolidation.  The Bank operates twelve banking offices, eight located in Sussex County, New Jersey,  one located in Bergen County, New Jersey, one located in Warren County, New Jersey, one in Queens County, New York and one in Orange County, New York.

We are subject to the supervision and regulation of the Board of Governors of the Federal Reserve System (the “FRB”).  The Bank’s deposits are insured by the Deposit Insurance Fund (“DIF”) of the FDIC up to applicable limits.  The operations of the company and the Bank are subject to the supervision and regulation of the FRB, the FDIC and the New Jersey Department of Banking and Insurance (the “Department”) and the operations of Tri-State are subject to supervision and regulation by the Department.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information.  Accordingly, they do not include all of the information and footnotes required by the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for full year financial statements.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal, recurring nature.  Operating results for the threemonth period ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.  These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto that are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.  

New Accounting Standards

In May 2014, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. The ASU’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this objective, the standard requires five basic steps: i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. For public entities, the guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that year.  We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In June 2014, FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force), to clarify that a performance target in a share-based compensation award that could be achieved after an employee completes the requisite service period should be treated as a performance condition that affects the vesting of the award.  As such, the performance target should not be reflected in estimating the grant-date fair value of the award. For all entities, the amendments are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In April 2015, FASB issued ASU 2015-05, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, to clarify whether a hosting arrangement (e.g., cloud computing, software as a service, infrastructure as a service, etc.) contains a software license, and thus, whether it is to be accounted for by the customer similarly to other internal-use software.  Specifically, the amendments revise the scope of Subtopic 350-40 to include internal-use software accessed through a hosting arrangement only if both of the following criteria are met: (1) the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty.  There is no significant penalty if the customer has the ability to take delivery of the software without incurring significant cost and the ability to use the software separately without significant loss of utility or value and (2) it is feasible for the customer to either run the software on its own hardware or contract with another party unrelated to the vendor to host the software.  If both of the above criteria are present in a hosting arrangement, then the arrangement contains a software license and the customer should account for that element in accordance with Subtopic 350-40 (i.e., generally capitalize and subsequently amortize the cost of the license).  If both of the above criteria are not present, the customer should account for the arrangement as a service contract (i.e., expense fees as incurred).  The amendments are effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years.  An entity can elect to adopt the amendments either (1) prospectively to all arrangements entered into or materially modified after the effective date or (2) retrospectively. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In January 2016, FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01, among other things; (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; and (vii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale. For public entities, the guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017.  The Company is currently evaluating the impact of the pending adoption of the new standard on its consolidated financial statements.

In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted for all public business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently evaluating the impact of the pending adoption of the new standard on its consolidated financial statements.

In March 2016, FASB issued ASU 2016-09, Compensation  – Stock Compensation (Topic718): Improvements to Employee Share-Based Payment Accounting. FASB is issuing ASU 2016-09as part of its initiative to reduce complexity in accounting standards. The areas for simplification in this ASU 2016-09involve several aspects of the accounting for employee share-based payment transactions, including the income taxconsequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.Some of the areas for simplification apply only to nonpublic entities. For public business entities, the amendments in thisupdate are effective for annual periods beginning after December 15, 2016, and interim periods within those annualperiods. Early adoption is permitted for any entity in any interim or annual period. If an entity early adopts theamendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includesthat interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The Company is currently evaluating the impact of the pending adoption of the new standard on its consolidated financial statements.

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Securities

3 Months Ended

Mar. 31, 2016

Securities [Abstract]

Securities

NOTE 2 – SECURITIES

Available for Sale

The amortized cost and approximate fair value of securities available for sale as of March 31, 2016 and December 31, 2015 are summarized as follows:

				Gross		Gross
		Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)		Cost		Gains		Losses		Value
March 31, 2016
U.S. government agencies	$	12,485	$	71	$	(28)	$	12,528
State and political subdivisions		29,611		656		(23)		30,244
Mortgage-backed securities -
U.S. government-sponsored enterprises		43,466		369		(84)		43,751
	$	85,562	$	1,096	$	(135)	$	86,523
December 31, 2015
U.S. government agencies	$	12,792	$	51	$	(55)	$	12,788
State and political subdivisions		37,771		507		(129)		38,149
Mortgage-backed securities -
U.S. government-sponsored enterprises		43,069		206		(436)		42,839
	$	93,632	$	764	$	(620)	$	93,776

Securities with a carrying value of approximately $32.8 million and $33.4 million at March 31, 2016 and December 31, 2015, respectively, were pledged to secure public deposits and for borrowings at the Federal Reserve Bank as required or permitted by applicable laws and regulations.

The amortized cost and fair value of securities available for sale at March 31, 2016 are shown below by contractual maturity.  Actual maturities may differ from contractual maturities as issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Investments which pay principal on a periodic basis are not included in the maturity categories.

	Amortized		Fair
(Dollars in thousands)	Cost		Value
Due in one year or less	$	-	$	-
Due after one year through five years		699		704
Due after five years through ten years		3,643		3,728
Due after ten years		25,269		25,812
Total bonds and obligations		29,611		30,244
U.S. government agencies		12,485		12,528
Mortgage-backed securities:
U.S. government-sponsored enterprises		43,466		43,751
Total available for sale securities	$	85,562	$	86,523

Gross gains on sales of securities available for sale were $167 thousand and $216 thousand and gross losses were less than $1 thousand and $48 thousand for the three months ended March 31, 2016 and 2015, respectively.

Temporarily Impaired Securities

The following table shows gross unrealized losses and fair value of securities with unrealized losses that are not deemed to be other than temporarily impaired, aggregated by category and length of time that individual available for sale securities have been in a continuous unrealized loss position at March  31, 2016 and December 31, 2015.

	Less Than 12 Months				12 Months or More				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
March 31, 2016
U.S. government agencies	$	4,587	$	(6)	$	2,452	$	(22)	$	7,039	$	(28)
State and political subdivisions		1,414		(3)		1,048		(20)		2,462		(23)
Mortgage-backed securities -
U.S. government-sponsored enterprises		12,922		(79)		1,512		(5)		14,434		(84)
Total temporarily impaired securities	$	18,923	$	(88)	$	5,012	$	(47)	$	23,935	$	(135)
December 31, 2015
U.S. government agencies	$	5,888	$	(23)	$	2,473	$	(32)	$	8,361	$	(55)
State and political subdivisions		5,780		(107)		2,998		(22)		8,778		(129)
Mortgage-backed securities -
U.S. government-sponsored enterprises		31,885		(436)		-		-		31,885		(436)
Total temporarily impaired securities	$	43,553	$	(566)	$	5,471	$	(54)	$	49,024	$	(620)

For each security whose fair value is less than their amortized cost basis, a review is conducted to determine if an other-than-temporary impairment has occurred. As of March 31, 2016, we reviewed our available for sale securities portfolio for indications of impairment. This review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer and the intent and likelihood of selling the security.  The intent and likelihood of sale of debt and equity securities are evaluated based upon our investment strategy for the particular type of security and our cash flow needs, liquidity position, capital adequacy and interest rate risk position. 

U.S. Government Agencies

At March  31, 2016 and December 31, 2015, the decline in fair value and the unrealized losses for our U.S. government agencies securities were primarily due to changes in spreads and market conditions and not credit quality.  At March  31, 2016, there were five securities with a fair value of $7.0 million that had an unrealized loss that amounted to $28 thousand.  As of March 31, 2016, we did not intend to sell and it was not more-likely-than-not that we would be required to sell any of these securities before recovery of their amortized cost basis.  Therefore, none of the U.S. government agency securities at March 31, 2016 were deemed to be other-than-temporarily impaired (“OTTI”).

At December 31, 2015, there were six securities with a fair value of $8.4 million that had an unrealized loss that amounted to $55 thousand.

State and Political Subdivisions

At March 31, 2016 and December 31, 2015, the decline in fair value and the unrealized losses for our state and political subdivisions securities were caused by changes in interest rates and spreads and were not the result of credit quality.  At March 31, 2016, there were four securities with a fair value of $2.5 million that had an unrealized loss that amounted to $23 thousand.  These securities typically have maturity dates greater than 10 years and the fair values are more sensitive to changes in market interest rates.  As of March 31, 2016, we did not intend to sell and it was not more-likely-than-not that we would be required to sell any of these securities before recovery of their amortized cost basis.  Therefore, none of our state and political subdivision securities at March 31, 2016 were deemed to be OTTI.  

At December 31, 2015, there were 15 securities with a fair value of $8.8 million that had an unrealized loss that amounted to $129 thousand. 

Mortgage-Backed Securities

At March 31, 2016 and December 31, 2015, the decline in fair value and the unrealized losses for our mortgage-backed securities guaranteed by U.S. government-sponsored enterprises were primarily due to changes in spreads and market conditions and not credit quality.  At March 31, 2016, there were eight securities with a fair value of $14.4 million that had an unrealized loss that amounted to $84 thousand.  As of March 31, 2016, we did not intend to sell and it was not more-likely-than-not that we would be required to sell any of these securities before recovery of their amortized cost basis.  Therefore, none of our mortgage-backed securities at March 31, 2016 were deemed to be OTTI.  

At December 31, 2015, there were 18 securities with a fair value of $31.9 million that had an unrealized loss that amounted to $436 thousand. 

Held to Maturity Securities

The amortized cost and approximate fair value of securities held to maturity as of March 31, 2016 and December 31, 2015 are summarized as follows:

				Gross		Gross
		Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)		Cost		Gains		Losses		Value
March 31, 2016
State and political subdivisions	$	6,816	$	223	$	-	$	7,039
December 31, 2015
State and political subdivisions	$	6,834	$	174	$	-	$	7,008

The amortized cost and carrying value of securities held to maturity at March 31, 2016 are shown below by contractual maturity.  Actual maturities may differ from contractual maturities as issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

		Amortized		Fair
(Dollars in thousands)		Cost		Value
Due in one year or less	$	2,942	$	2,942
Due after one year through five years		1,000		1,003
Due after five years through ten years		1,827		1,926
Due after ten years		1,047		1,168
Total held to maturity securities	$	6,816	$	7,039

Temporarily Impaired Securities

For each security whose fair value is less than their amortized cost basis, a review is conducted to determine if an other-than-temporary impairment has occurred.As of March 31, 2016, we did not have any held to maturity investments with unrealized losses. This review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer and the intent and likelihood of selling the security.  The intent and likelihood of sale of debt securities is evaluated based upon our investment strategy for the particular type of security and our cash flow needs, liquidity position, capital adequacy and interest rate risk position. For each security whose fair value is less than their amortized cost basis, a review is conducted to determine if an other-than-temporary impairment has occurred.

At December 31, 2015,  we did not have any held to maturity securities in an unrealized loss position. 

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Loans

3 Months Ended

Mar. 31, 2016

Loans [Abstract]

Loans

NOTE 3 – LOANS

The composition of net loans receivable at March 31, 2016 and December 31, 2015 is as follows:

(Dollars in thousands)	March 31, 2016		December 31, 2015
Commercial and industrial	$	24,278	$	20,023
Construction		15,827		13,348
Commercial real estate		409,358		382,262
Residential real estate		130,189		127,204
Consumer and other		1,172		1,253
Total loans receivable		580,824		544,090
Unearned net loan origination fees		(773)		(667)
Allowance for loan losses		(5,812)		(5,590)
Net loans receivable	$	574,239	$	537,833

Mortgage loans serviced for others are not included in the accompanying balance sheets.  The total amount of loans serviced for the benefit of others was approximately $448 thousand and$454 thousand at March 31, 2016 and December 31, 2015, respectively. Mortgage servicing rights were immaterial at March 31, 2016 and December 31, 2015.

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Allowance For Loan Losses And Credit Quality Of Financing Receivables

3 Months Ended

Mar. 31, 2016

Allowance For Loan Losses And Credit Quality Of Financing Receivables [Abstract]

Allowance For Loan Losses And Credit Quality Of Financing Receivables

NOTE 4 – ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY OF FINANCING RECEIVABLES

The following table presents changes in the allowance for loan losses disaggregated by the class of loans receivable for the three months ended March 31, 2016 and 2015:  

	Commercial				Commercial		Residential		Consumer
	and				Real		Real		and
(Dollars in thousands)	Industrial		Construction		Estate		Estate		Other		Unallocated		Total
Three Months Ended:
March 31, 2016
Beginning balance	$	85	$	220	$	3,646	$	784	$	87	$	768	$	5,590
Charge-offs		-		-		-		(9)		(19)		-		(28)
Recoveries		7		-		31		-		1		-		39
Provision		6		47		170		133		52		(197)		211
Ending balance	$	98	$	267	$	3,847	$	908	$	121	$	571	$	5,812
March 31, 2015
Beginning balance	$	231		383	$	3,491	$	903	$	19	$	614	$	5,641
Charge-offs		(19)		-		(188)		-		(7)		-		(214)
Recoveries		4		-		12		12		3		-		31
Provision		(78)		5		472		(74)		73		(93)		305
Ending balance	$	138	$	388	$	3,787	$	841	$	88	$	521	$	5,763

The following table presents the balance of the allowance of loan losses and loans receivable by class at March 31, 2016 and December 31, 2015 disaggregated on the basis of our impairment methodology.

	Allowance for Loan Losses						Loans Receivable
			Balance		Balance
			Related to		Related to
			Loans		Loans
			Individually		Collectively				Individually		Collectively
			Evaluated for		Evaluated for				Evaluated for		Evaluated for
(Dollars in thousands)	Balance		Impairment		Impairment		Balance		Impairment		Impairment
March 31, 2016
Commercial and industrial	$	98	$	-	$	98	$	24,278	$	20	$	24,258
Construction		267		-		267		15,827		-		15,827
Commercial real estate		3,847		249		3,598		409,358		5,130		404,228
Residential real estate		908		68		840		130,189		1,333		128,856
Consumer and other loans		121		107		14		1,172		138		1,034
Unallocated		571		-		-		-		-		-
Total	$	5,812	$	424	$	4,817	$	580,824	$	6,621	$	574,203
December 31, 2015
Commercial and industrial	$	85	$	-	$	85	$	20,023	$	20	$	20,003
Construction		220		-		220		13,348		-		13,348
Commercial real estate		3,646		112		3,534		382,262		5,160		377,102
Residential real estate		784		79		705		127,204		1,546		125,658
Consumer and other loans		87		73		14		1,253		138		1,115
Unallocated		768		-		-		-		-		-
Total	$	5,590	$	264	$	4,558	$	544,090	$	6,864	$	537,226

An age analysis of loans receivable, which were past due as of March 31, 2016 and December 31, 2015, is as follows:

													Recorded
													Investment
					Greater						Total		> 90 Days
	30-59 Days		60-89 days		Than		Total Past				Financing		and
(Dollars in thousands)	Past Due		Past Due		90 Days (a)		Due		Current		Receivables		Accruing
March 31, 2016
Commercial and industrial	$	-	$	4	$	20	$	24	$	24,254	$	24,278	$	-
Construction		-		-		-		-		15,827		15,827		-
Commercial real estate		2,306		1,280		3,993		7,579		401,779		409,358		-
Residential real estate		1,001		247		1,202		2,450		127,739		130,189		-
Consumer and other		4		-		138		142		1,030		1,172		-
Total	$	3,311	$	1,531	$	5,353	$	10,195	$	570,629	$	580,824	$	-
December 31, 2015
Commercial and industrial	$	5	$	-	$	20	$	25	$	19,998	$	20,023	$	-
Construction		-		-		-		-		13,348		13,348		-
Commercial real estate		758		1,461		4,016		6,235		376,027		382,262		-
Residential real estate		335		247		1,138		1,720		125,484		127,204		-
Consumer and other		16		1		138		155		1,098		1,253		-
Total	$	1,114	$	1,709	$	5,312	$	8,135	$	535,955	$	544,090	$	-
(a) includes loans greater than 90 days past due and still accruing and non-accrual loans.

Loans for which the accrual of interest has been discontinued at March 31, 2016 and December 31, 2015 were:

(Dollars in thousands)	March 31, 2016		December 31, 2015
Commercial and industrial	$	20	$	20
Commercial real estate		3,993		4,016
Residential real estate		1,202		1,138
Consumer and other		138		138
Total	$	5,353	$	5,312

In determining the adequacy of the allowance for loan losses, we estimate losses based on the identification of specific problem loans through our credit review process and also estimate losses inherent in other loans on an aggregate basis by loan type.  The credit review process includes the independent evaluation of the loan officer assigned risk ratings by the Chief Credit Officer and a third party loan review company.  Such risk ratings are assigned loss component factors that reflect our loss estimate for each group of loans.  It is management’s and the Board of Directors’ responsibility to oversee the lending process to ensure that all credit risks are properly identified, monitored, and controlled, and that loan pricing, terms and other safeguards against non-performance and default are commensurate with the level of risk undertaken and is rated as such based on a risk-rating system.  Factors considered in assigning risk ratings and loss component factors include: borrower specific information related to expected future cash flows and operating results, collateral values, financial condition and payment status; levels of and trends in portfolio charge-offs and recoveries; levels in portfolio delinquencies; effects of changes in loan concentrations and observed trends in the economy and other qualitative measurements.

Our risk-rating system is consistent with the classification system used by regulatory agencies and with industry practices. Loan classifications of Substandard, Doubtful or Loss are consistent with the regulatory definitions of classified assets.  The classification system is as follows:

· Pass: This category represents loans performing to contractual terms and conditions and the primary source of repayment is adequate to meet the obligation.  We have five categories within the Pass classification depending on strength of repayment sources, collateral values and financial condition of the borrower. 

· Special Mention:  This category represents loans performing to contractual terms and conditions; however the primary source of repayment or the borrower is exhibiting some deterioration or weaknesses in financial condition that could potentially threaten the borrowers’ future ability to repay our loan principal and interest or fees due.

· Substandard: This category represents loans that the primary source of repayment has significantly deteriorated or weakened which has or could threaten the borrowers’ ability to make scheduled payments.  The weaknesses require close supervision by management and there is a distinct possibility that we could sustain some loss if the deficiencies are not corrected.  Such weaknesses could jeopardize the timely and ultimate collection of our loan principal and interest or fees due.  Loss may not be expected or evident, however, loan repayment is inadequately supported by current financial information or pledged collateral.

· Doubtful: Loans so classified have all the inherent weaknesses of a substandard loan with the added provision that collection or liquidation in full is highly questionable and not reasonably assured.  The probability of at least partial loss is high, but extraneous factors might strengthen the asset to prevent loss. The validity of the extraneous factors must be continuously monitored. Once these factors are questionable the loan should be considered for full or partial charge-off.

· Loss: Loans so classified are considered uncollectible, and of such little value that their continuance as active assets is not warranted.  Such loans are fully charged off.

The following tables illustrate our corporate credit risk profile by creditworthiness category as of March 31, 2016 and December 31, 2015: 

			Special
(Dollars in thousands)	Pass		Mention		Substandard		Doubtful		Total
March 31, 2016
Commercial and industrial	$	24,224	$	19	$	35	$	-	$	24,278
Construction		15,827		-		-		-		15,827
Commercial real estate		394,515		8,887		5,956		-		409,358
Residential real estate		128,119		737		1,333		-		130,189
Consumer and other		1,034		-		138		-		1,172
	$	563,719	$	9,643	$	7,462	$	-	$	580,824
December 31, 2015
Commercial and industrial	$	19,983	$	5	$	35	$	-	$	20,023
Construction		13,348		-		-		-		13,348
Commercial real estate		367,305		8,957		6,000		-		382,262
Residential real estate		124,915		743		1,546		-		127,204
Consumer and other		1,115		-		138		-		1,253
	$	526,666	$	9,705	$	7,719	$	-	$	544,090

The following table reflects information about our impaired loans by class as of March 31, 2016 and December 31, 2015:

		March 31, 2016						December 31, 2015
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
(Dollars in thousands)	Investment		Balance		Allowance		Investment		Balance		Allowance
With no related allowance recorded:
Commercial and industrial	$	20	$	20	$	-	$	20	$	20	$	-
Commercial real estate		2,207		2,218		-		2,684		2,684		-
Residential real estate		999		999		-		1,123		1,152		-
With an allowance recorded:
Commercial real estate		2,923		2,923		249		2,476		2,476		112
Residential real estate		334		364		68		423		423		79
Consumer and other		138		138		107		138		138		73
Total:
Commercial and industrial		20		20		-		20		20		-
Commercial real estate		5,130		5,141		249		5,160		5,160		112
Residential real estate		1,333		1,363		68		1,546		1,575		79
Consumer and other		138		138		107		138		138		73
	$	6,621	$	6,662	$	424	$	6,864	$	6,893	$	264

The following table presents the average recorded investment and income recognized for the three months ended March 31, 2016 and 2015:

	For the Three Months Ended March 31, 2016				For the Three Months Ended March 31, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(Dollars in thousands)	Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Commercial and industrial	$	20	$	-	$	10	$	-
Commercial real estate		2,446		8		2,759		5
Residential real estate		1,061		1		1,631		1
Total impaired loans without a related allowance		3,527		9		4,400		6
With an allowance recorded:
Commercial real estate		2,699		8		2,766		8
Residential real estate		379		-		513		3
Consumer and other		138		-		69		-
Total impaired loans with an allowance		3,216		8		3,395		11
Total impaired loans	$	6,743	$	17	$	7,795	$	17

We recognize interest income on performing impaired loans as payments are received.  On non-performing impaired loans we do not recognize interest income as all payments are recorded as a reduction of principal on such loans.

Impaired loans include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties.  These concessions could include a reduction in the interest rate on the loan, payment extensions, postponement or forgiveness of principal, forbearance or other actions intended to maximize collection.  The concessions rarely result in the forgiveness of principal or accrued interest.  In addition, we attempt to obtain additional collateral or guarantor support when modifying such loans.  Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.

The following table presents the recorded investment in troubled debt restructured loans, based on payment performance status:

(Dollars in thousands)		Commercial Real Estate	Residential Real Estate		Total
March 31, 2016
Performing	$	1,137	$	131	$	1,268
Non-performing		1,828		194		2,022
Total	$	2,965	$	325	$	3,290
December 31, 2015
Performing	$	1,144	$	409	$	1,553
Non-performing		1,831		194		2,025
Total	$	2,975	$	603	$	3,578

Troubled debt restructured loans are considered impaired and are included in the previous impaired loans disclosures in this footnote.  As of March 31, 2016, we have not committed to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

There wereno troubled debt restructurings that occurred during the three months ended March 31, 2016 and 2015. 

There were no troubled debt restructurings for which there was a payment default within twelve months following the date of the restructuring for the threemonths ended March 31, 2016 and 2015.

We may obtain physical possession of residential real estate collateralizing a consumer mortgage loan via foreclosure on an in-substance repossession. As of both March 31, 2016 and December 31, 2015, we held $130 thousand in foreclosed residential real estate properties as a result of obtaining physical possession. In addition, as of March 31, 2016 and December 31, 2015,respectively, we had consumer loans with a carrying value of $878 thousand and $945 thousand collateralized by residential real estate property for which formal foreclosure proceedings were in process.

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Earnings Per Share

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Earnings Per Share

NOTE 5 – EARNINGS PER SHARE

Basic earnings per share are calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period.  Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares (unvested restricted stock grants and stock options) had been issued, as well as any adjustment to income that would result from the assumed issuance of potential common shares that may be issued by us. Potential common shares related to stock options are determined using the treasury stock method.

	Three Months Ended March 31, 2016					Three Months Ended March 31, 2015
(In thousands, except share and	Income		Shares	Per Share		Income		Shares	Per Share
per share data)	(Numerator)		(Denominator)	Amount		(Numerator)		(Denominator)	Amount
Basic earnings per share:
Net earnings applicable to common stockholders	$	1,574	4,578,598	$	0.34	$	952	4,571,142	$	0.21
Effect of dilutive securities:
Unvested stock awards		-	27,828				-	31,768
Diluted earnings per share:
Net income applicable to common stockholders and assumed conversions	$	1,574	4,606,426	$	0.34	$	952	4,602,910	$	0.21

There were 57,038 and 21,244 shares of unvested restricted stock awards and options outstanding during the quarter ended March 31, 2016 and 2015, respectively, which were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive.  .

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Other Comprehensive Income

3 Months Ended

Mar. 31, 2016

Other Comprehensive Income [Abstract]

Other Comprehensive Income

NOTE 6 – OTHER COMPREHENSIVE  INCOME

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income.  Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income.

The components of other comprehensive income, both before tax and net of tax, are as follows:

	Three Months Ended March 31, 2016						Three Months Ended March 31, 2015
	Before Tax		Tax Effect		Net of Tax		Before Tax		Tax Effect		Net of Tax
(Dollars in thousands)
Other comprehensive income (loss):
Unrealized gains on available for sale securities	$	985	$	394	$	591	$	316	$	127	$	189
Fair value adjustments on derivatives		(400)		(160)		(240)		-		-		-
Reclassification adjustment for net gains on securities transactions included in net income		(167)		(67)		(100)		(168)		(67)		(101)
Total other comprehensive income	$	418	$	167	$	251	$	148	$	60	$	88

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Segment Reporting

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Segment Reporting

NOTE 7 – SEGMENT INFORMATION

Our insurance agency operations are managed separately from the traditional banking and related financial services that we also offer.  The insurance agency operation provides commercial, individual, and group benefit plans and personal coverage.

	Three Months Ended March 31, 2016						Three Months Ended March 31, 2015
	Banking and						Banking and
	Financial		Insurance				Financial		Insurance
	Services		Services		Total		Services		Services		Total
(Dollars in thousands)
Net interest income from external sources	$	5,646	$	-	$	5,646	$	4,802	$	-	$	4,802
Other income from external sources		786		1,738		2,524		743		1,158		1,901
Depreciation and amortization		252		6		258		239		4		243
Income before income taxes		1,514		835		2,349		928		400		1,328
Income tax expense (1)		441		334		775		216		160		376
Total assets		709,893		6,879		716,772		598,265		5,986		604,251

(1) Insurance Services calculated at statutory tax rate of 40%

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2016

Stock-Based Compensation [Abstract]

Stock-Based Compensation

NOTE 8 – STOCK-BASED COMPENSATION

We currently have stock-based compensation plans in place for our directors, officers, employees, consultants and advisors.  Under the terms of these plans we may grant restricted shares and stock options for the purchase of our common stock.  The stock-based compensation is granted under terms determined by our Compensation Committee.  Our standard stock option grants have a maximum term of 10 years, generally vest over periods ranging between one and four years, and are granted with an exercise price equal to the fair market value of the common stock on the date of grant.  Restricted stock is valued at the market value of the common stock on the date of grant and generally vests over periods of two to seven years.  All dividends paid on restricted stock, whether vested or unvested, are paid to the shareholder.

Information regarding our stock option plans for the three months ended March 31, 2016 is as follows:

			Weighted
			Average	Weighted
			Exercise	Average		Aggregate
	Number of		Price per	Contractual		Intrinsic
	Shares		Share	Term		Value
Options outstanding, beginning of year	51,985	$	10.06
Options granted	26,216		12.83
Options outstanding, end of quarter	78,201	$	10.99	9.1	$	127,046
Options exercisable, end of quarter	10,396	$	10.06	8.7	$	25,407
Option price range at end of quarter	$9.97 to $12.83
Option price of exercisable shares	$9.97 to $10.25

The following table summarizes information about stock option assumptions:

	2016		2015
Expected dividend yield		1.25%		1.56%
Expected volatility		22.72%		34.32%
Risk-free interest rate		1.71%		1.37%
Expected option life		7.5 Years		7.5 Years

During the three months ended March 31, 2016 and 2015, we  expensed $11 thousand and $9 thousand, respectively, in stock-based compensation under stock option awards. 

The weighted average grant date fair values of options granted during the three months ended March 31, 2016 and 2015,were$3.37 per share and $3.56 per share, respectively. Expected future expense relating to the unvested options outstanding as of March 31, 2016 is $227 thousand over a weighted average period of 4.1 years. Upon exercise of vested options, management expects to draw on treasury stock as the source of the shares.

The summary of changes in unvested restricted stock awards for the three months ended March 31, 2016, is as follows:

			Weighted
			Average
	Number of		Grant Date
	Shares		Fair Value
Unvested restricted stock, beginning of year	93,570	$	7.67
Granted	30,822		12.68
Forfeited	(1,084)		9.58
Vested	(35,362)		7.00
Unvested restricted stock, end of period	87,946	$	9.67

During the three months ended March 31, 2016 and 2015, we expensed $90 thousand and $82 thousand, respectively, in stock-based compensation under restricted stock awards.

At March 31, 2016, unrecognized compensation expense for unvested restricted stock was $722 thousand, which is expected to be recognized over an average period of 1.9 years.

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Guarantees

3 Months Ended

Mar. 31, 2016

Guarantees [Abstract]

Guarantees

NOTE 9 – GUARANTEES

We do not issue any guarantees that would require liability recognition or disclosure, other than standby letters of credit.  Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party.  Generally, all letters of credit, when issued, have expiration dates within one year.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  Generally, we hold collateral and/or personal guarantees supporting these commitments.  As of March 31, 2016, we had $729 thousand of outstanding letters of credit.  Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payments required under the corresponding guarantees.  The amount of the liability as of March 31, 2016, for guarantees under standby letters of credit issued is not material.

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Fair Value Of Financial Instruments

3 Months Ended

Mar. 31, 2016

Fair Value Of Financial Instruments [Abstract]

Fair Value Of Financial Instruments

NOTE 10 – FAIR VALUE OF FINANCIAL INSTRUMENTS

Management uses its best judgment in estimating the fair value of our financial instruments; however, there are inherent weaknesses in any estimation technique.  Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts we could have realized in a sale transaction on the dates indicated.  The fair value amounts have been measured as of their respective period ends, and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates.  As such, the fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period end.

In accordance with U.S. GAAP, we use a hierarchical disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value.  The three broad levels defined by the hierarchy are as follows:

· Level I - Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

· Level II - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these asset and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.

· Level III - Assets and liabilities that have little to no pricing observability as of reported date.  These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

The following table summarizes the fair value of our financial assets measured on a recurring basis by the above pricing observability levels as of March 31, 2016 and December 31, 2015:

			Quoted Prices in		Significant
			Active Markets		Other		Significant
	Fair		for Identical		Observable		Unobservable
	Value		Assets		Inputs		Inputs
(Dollars in thousands)	Measurements		(Level I)		(Level II)		(Level III)
March 31, 2016
U.S. government agencies	$	12,528	$	-	$	12,528	$	-
State and political subdivisions		30,244		-		30,244		-
Mortgage-backed securities -
U.S. government-sponsored enterprises		43,751		-		43,751		-
Derivative instruments
Interest rate swaps		(400)		-		(400)		-
December 31, 2015
U.S. government agencies	$	12,788	$	-	$	12,788	$	-
State and political subdivisions		38,149		-		38,149		-
Mortgage-backed securities -
U.S. government-sponsored enterprises		42,839		-		42,839		-

Our available for sale and held to maturity securities portfolios contain investments, which were all rated within our investment policy guidelines at time of purchase, and upon review of the entire portfolio all securities are marketable and have observable pricing inputs.

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2016 and December 31, 2015 are as follows:

			Quoted Prices in		Significant
			Active Markets		Other		Significant
	Fair		for Identical		Observable		Unobservable
	Value		Assets		Inputs		Inputs
(Dollars in thousands)	Measurements		(Level I)		(Level II)		(Level III)
March 31, 2016
Impaired loans	$	1,051	$	-	$	-	$	1,051
December 31, 2015
Impaired loans	$	801	$	-	$	-	$	801
Foreclosed real estate		756		-		-		756

The following table presents additional qualitative information about assets measured at fair value on a nonrecurring basis and for which Level III inputs were used to determine fair value:

	Qualitative Information about Level III Fair Value Measurements
	Fair				Range
	Value		Valuation	Unobservable	(Weighted
(Dollars in thousands)	Estimate		Techniques	Input	Average)
March 31, 2016
Impaired loans	$	1,051	Appraisal of	Appraisal	0% to -27.30%
			collateral	adjustments (1)	(-2.5%)
December 31, 2015
Impaired loans	$	801	Appraisal of	Appraisal	0% to -61.8%
			collateral	adjustments (1)	(-5.8%)
Foreclosed real estate		756	Appraisal of	Selling
			collateral	expenses (1)	-7.0%  (-7.0%)
(1) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated selling expenses.  The range and weighted average of selling expenses and other appraisal adjustments are presented as a percentage of the appraisal.

The following information should not be interpreted as an estimate of the fair value of the entire company since a fair value calculation is only provided for a limited portion of our assets and liabilities.  Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between our disclosures and those of other companies may not be meaningful.  The following methods and assumptions were used to estimate the fair value of our financial instruments at March 31, 2016 and December 31, 2015:

Cash and Cash Equivalents (Carried at Cost): The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets’ fair value.

Deposits (Carried at Cost): Fair value for fixed-rate time certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits.  We generally purchase amounts below the insured limit, limiting the amount of credit risk on these time deposits.  

Securities: The fair value of securities, available for sale (carried at fair value) and securities held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level I), or matrix pricing (Level II), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.  For certain securities which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence (Level III).  In the absence of such evidence, management’s best estimate is used. 

Federal Home Loan Bank Stock (Carried at Cost):  The carrying amount of restricted investment in bank stock approximates fair value and considers the limited marketability of such securities.

Loans Receivable (Carried at Cost): The fair values of non-impaired loans are estimated using discounted cash flow analyses, using the market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans.  Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal.  Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.

Impaired Loans (Carried at Lower of Cost or Fair Value): Fair value of impaired loans is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds.  These assets are included in Level III fair values, based upon the lowest level of input that is significant to the fair value measurements.  The fair value of impaired loans totaled $1.1 million and $801 thousand at March 31, 2016 and December 31, 2015, respectively.  These balances consist of loans that were written down or required additional reserves during the periods ended March 31, 2016 and December 31, 2015, respectively. 

Deposit Liabilities (Carried at Cost): The fair values disclosed for demand, savings and money market accounts are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts).  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits. 

Borrowings (Carried at Cost): Fair values of Federal Home Loan Bank (“FHLB”) advances are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity.  These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party. 

Derivatives (Carried at Fair Value):  The Company also uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges, and which satisfy hedge accounting requirements, involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount.  These derivatives were used to hedge the variable cash outflows associated with FHLB borrowings along with our junior subordinated debenture at U.S. Capital Trust. The effective portion of changes in the fair value of these derivatives are recorded in accumulated other comprehensive income, and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of these derivatives are recognized directly in earnings.

The fair value of the Company's derivatives are determined using discounted cash flow analysis using observable market-based inputs, which are considered Level 2 inputs.

Junior Subordinated Debentures (Carried at Cost): Fair values of junior subordinated debt are estimated using discounted cash flow analysis, based on market rates currently offered on such debt with similar credit risk characteristics, terms and remaining maturity. 

Accrued Interest Receivable and Accrued Interest Payable (Carried at Cost): The carrying amounts of accrued interest receivable and payable approximate its fair value.

Off-Balance Sheet Instruments (Disclosed at Cost): Fair values for our off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties’ credit standing. 

The fair values of our financial instruments at March 31, 2016 and December 31, 2015, were as follows:

					Quoted Prices in		Significant
					Active Markets		Other		Significant
	March 31, 2016				for Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
(Dollars in thousands)	Amount		Value		(Level I)		(Level II)		(Level III)
Financial assets:
Cash and cash equivalents	$	9,039	$	9,039	$	9,039	$	-	$	-
Time deposits with other banks		100		100		-		100		-
Securities available for sale		86,523		86,523		-		86,523		-
Securities held to maturity		6,816		7,039		-		7,039		-
Federal Home Loan Bank stock		3,839		3,839		-		3,839		-
Loans receivable, net of allowance		574,239		572,914		-		-		572,914
Accrued interest receivable		2,257		2,257		-		2,257		-
Financial liabilities:
Non-maturity deposits		419,030		419,030		-		419,030		-
Time deposits		156,270		156,175		-		156,175		-
Short-term borrowings		1,430		1,430		1,430		-		-
Long-term borrowings		66,000		67,358		-		67,358		-
Junior subordinated debentures		12,887		10,374		-		10,374		-
Accrued interest payable		386		386		-		386		-
Derivative instruments:
Interest rate swaps		(400)		(400)		-		(400)		-

					Quoted Prices in		Significant
					Active Markets		Other		Significant
	December 31, 2015				for Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
(Dollars in thousands)	Amount		Value		(Level I)		(Level II)		(Level III)
Financial assets:
Cash and cash equivalents	$	6,120	$	6,120	$	6,120	$	-	$	-
Time deposits with other banks		100		100		-		100		-
Securities available for sale		93,776		93,776		-		93,776		-
Securities held to maturity		6,834		7,008		-		7,008		-
Federal Home Loan Bank stock		5,165		5,165		-		5,165		-
Loans receivable, net of allowance		537,833		528,065		-		-		528,065
Accrued interest receivable		1,764		1,764		-		1,764		-
Financial liabilities:
Non-maturity deposits		380,983		380,983		-		380,983		-
Time deposits		136,873		136,619		-		136,619		-
Short-term borrowings		34,650		34,650		34,650		-		-
Long-term borrowings		61,000		58,685		-		58,685		-
Junior subordinated debentures		12,887		9,344		-		9,344		-
Accrued interest payable		281		281		-		281		-

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Derivatives

3 Months Ended

Mar. 31, 2016

Derivatives [Abstract]

Derivatives

NOTE 11 –  DERIVATIVES

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. 

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three months ended March 31, 2016 such derivatives were used to hedge the variable cash outflows associated with four FHLB borrowings totaling $26.0 million. The Company entered into an interest rate swap agreement to hedge its $12.5 million variable rate (3 Mo Libor +1.44%) junior subordinated debt issued by Sussex Capital Trust II, a non-consolidated wholly-owned subsidiary of the Company, for 10 years at a fixed rate of 3.10%.  The ineffective portion of the change in fair value of the derivatives are recognized directly in earnings. The Company implemented this program during the quarter ended March 31, 2016. During the three months ended March 31, 2016 the Company’s did not record any hedge ineffectiveness.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Statements of Financial Condition at March 31, 2016:

	March 31, 2016
	Notional/		Balance
	Contract	Fair	Sheet	Expiration
	Amount	Value	Location	Date
(Dollars in thousands)
Derivatives designated as hedging instruments
Interest rate swaps by effective date:
March 15, 2016	$          12,500	$                (64)	Other Liabilities	March 15, 2026
December 15, 2016	5,000	(97)	Other Liabilities	December 15, 2026
June 15, 2017	6,000	(114)	Other Liabilities	June 15, 2027
December 15, 2017	10,000	(71)	Other Liabilities	December 15, 2027
December 15, 2017	5,000	(54)	Other Liabilities	December 15, 2027
Total	$          38,500	$              (400)

The table below presents the Company’s derivative financial instruments that are designated as cash flow hedgers of interest rate risk and their effect on the Company’s Consolidated Statements of Financial Conditions during the three months ended March 31, 2016:

	Three Months Ended March 31, 2016
	Amount of Loss
	Recognized in OCI	Location of Gain
	on	(Loss) Recognized in	Amount of Gain (Loss)
	Derivatives, net of	Income of	Recognized in Income of
	Tax	Derivatives	Derivatives
	(Effective Portion)	(Ineffective Portion)	(Ineffective Portion)
(Dollars in thousands)
Derivatives in cash flow hedges Interest rate swaps by effective
date:
March 15, 2016	$                               (38)	Not applicable	$                                    -
December 15, 2016	(58)	Not applicable	-
June 15, 2017	(68)	Not applicable	-
December 15, 2017	(43)	Not applicable	-
December 15, 2017	(32)	Not applicable	-
Total	$                             (240)		$                                    -

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Summary Of Significant Accounting Policies (Policy)

3 Months Ended

Mar. 31, 2016

Summary Of Significant Accounting Policies [Abstract]

Basis Of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of Sussex Bancorp (“we,” “us,” “our” or the “company”) and our wholly owned subsidiary Sussex Bank (the “Bank”).  The Bank’s wholly owned subsidiaries are SCB Investment Company, Inc., SCBNY Company, Inc., ClassicLake Enterprises, LLC, Wheatsworth Properties Corp., PPD Holding Company, LLC, and Tri-State Insurance Agency, Inc. (“Tri-State”), a full service insurance agency located in Sussex County, New Jersey with a satellite office located in Bergen County, New Jersey.  Tri-State’s operations are considered a separate segment for financial disclosure purposes.  All inter-company transactions and balances have been eliminated in consolidation.  The Bank operates twelve banking offices, eight located in Sussex County, New Jersey,  one located in Bergen County, New Jersey, one located in Warren County, New Jersey, one in Queens County, New York and one in Orange County, New York.

We are subject to the supervision and regulation of the Board of Governors of the Federal Reserve System (the “FRB”).  The Bank’s deposits are insured by the Deposit Insurance Fund (“DIF”) of the FDIC up to applicable limits.  The operations of the company and the Bank are subject to the supervision and regulation of the FRB, the FDIC and the New Jersey Department of Banking and Insurance (the “Department”) and the operations of Tri-State are subject to supervision and regulation by the Department.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information.  Accordingly, they do not include all of the information and footnotes required by the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for full year financial statements.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal, recurring nature.  Operating results for the threemonth period ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.  These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto that are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.  

New Accounting Standards

New Accounting Standards

In May 2014, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. The ASU’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this objective, the standard requires five basic steps: i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. For public entities, the guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that year.  We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In June 2014, FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force), to clarify that a performance target in a share-based compensation award that could be achieved after an employee completes the requisite service period should be treated as a performance condition that affects the vesting of the award.  As such, the performance target should not be reflected in estimating the grant-date fair value of the award. For all entities, the amendments are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In April 2015, FASB issued ASU 2015-05, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, to clarify whether a hosting arrangement (e.g., cloud computing, software as a service, infrastructure as a service, etc.) contains a software license, and thus, whether it is to be accounted for by the customer similarly to other internal-use software.  Specifically, the amendments revise the scope of Subtopic 350-40 to include internal-use software accessed through a hosting arrangement only if both of the following criteria are met: (1) the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty.  There is no significant penalty if the customer has the ability to take delivery of the software without incurring significant cost and the ability to use the software separately without significant loss of utility or value and (2) it is feasible for the customer to either run the software on its own hardware or contract with another party unrelated to the vendor to host the software.  If both of the above criteria are present in a hosting arrangement, then the arrangement contains a software license and the customer should account for that element in accordance with Subtopic 350-40 (i.e., generally capitalize and subsequently amortize the cost of the license).  If both of the above criteria are not present, the customer should account for the arrangement as a service contract (i.e., expense fees as incurred).  The amendments are effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years.  An entity can elect to adopt the amendments either (1) prospectively to all arrangements entered into or materially modified after the effective date or (2) retrospectively. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In January 2016, FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01, among other things; (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; and (vii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale. For public entities, the guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017.  The Company is currently evaluating the impact of the pending adoption of the new standard on its consolidated financial statements.

In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted for all public business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently evaluating the impact of the pending adoption of the new standard on its consolidated financial statements.

In March 2016, FASB issued ASU 2016-09, Compensation  – Stock Compensation (Topic718): Improvements to Employee Share-Based Payment Accounting. FASB is issuing ASU 2016-09as part of its initiative to reduce complexity in accounting standards. The areas for simplification in this ASU 2016-09involve several aspects of the accounting for employee share-based payment transactions, including the income taxconsequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.Some of the areas for simplification apply only to nonpublic entities. For public business entities, the amendments in thisupdate are effective for annual periods beginning after December 15, 2016, and interim periods within those annualperiods. Early adoption is permitted for any entity in any interim or annual period. If an entity early adopts theamendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includesthat interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The Company is currently evaluating the impact of the pending adoption of the new standard on its consolidated financial statements.

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Securities (Tables)

3 Months Ended

Mar. 31, 2016

Securities [Abstract]

Amortized Cost And Approximate Fair Value Of Securities Available For Sale

				Gross		Gross
		Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)		Cost		Gains		Losses		Value
March 31, 2016
U.S. government agencies	$	12,485	$	71	$	(28)	$	12,528
State and political subdivisions		29,611		656		(23)		30,244
Mortgage-backed securities -
U.S. government-sponsored enterprises		43,466		369		(84)		43,751
	$	85,562	$	1,096	$	(135)	$	86,523
December 31, 2015
U.S. government agencies	$	12,792	$	51	$	(55)	$	12,788
State and political subdivisions		37,771		507		(129)		38,149
Mortgage-backed securities -
U.S. government-sponsored enterprises		43,069		206		(436)		42,839
	$	93,632	$	764	$	(620)	$	93,776

Amortized Cost And Fair Value Of Securities By Contractual Maturity Of Available-For-Sale Securities

	Amortized		Fair
(Dollars in thousands)	Cost		Value
Due in one year or less	$	-	$	-
Due after one year through five years		699		704
Due after five years through ten years		3,643		3,728
Due after ten years		25,269		25,812
Total bonds and obligations		29,611		30,244
U.S. government agencies		12,485		12,528
Mortgage-backed securities:
U.S. government-sponsored enterprises		43,466		43,751
Total available for sale securities	$	85,562	$	86,523

Temporarily Impaired Gross Unrealized Losses And Fair Value Of Available-For-Sale Securities

	Less Than 12 Months				12 Months or More				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
March 31, 2016
U.S. government agencies	$	4,587	$	(6)	$	2,452	$	(22)	$	7,039	$	(28)
State and political subdivisions		1,414		(3)		1,048		(20)		2,462		(23)
Mortgage-backed securities -
U.S. government-sponsored enterprises		12,922		(79)		1,512		(5)		14,434		(84)
Total temporarily impaired securities	$	18,923	$	(88)	$	5,012	$	(47)	$	23,935	$	(135)
December 31, 2015
U.S. government agencies	$	5,888	$	(23)	$	2,473	$	(32)	$	8,361	$	(55)
State and political subdivisions		5,780		(107)		2,998		(22)		8,778		(129)
Mortgage-backed securities -
U.S. government-sponsored enterprises		31,885		(436)		-		-		31,885		(436)
Total temporarily impaired securities	$	43,553	$	(566)	$	5,471	$	(54)	$	49,024	$	(620)

Amortized Cost And Approximate Fair Value Of Securities Held-To-Maturity

				Gross		Gross
		Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)		Cost		Gains		Losses		Value
March 31, 2016
State and political subdivisions	$	6,816	$	223	$	-	$	7,039
December 31, 2015
State and political subdivisions	$	6,834	$	174	$	-	$	7,008

Amortized Cost And Fair Value Of Securities By Contractual Maturity Of Held-To-Maturity Securities

		Amortized		Fair
(Dollars in thousands)		Cost		Value
Due in one year or less	$	2,942	$	2,942
Due after one year through five years		1,000		1,003
Due after five years through ten years		1,827		1,926
Due after ten years		1,047		1,168
Total held to maturity securities	$	6,816	$	7,039

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Loans (Tables)

3 Months Ended

Mar. 31, 2016

Loans [Abstract]

Composition Of Net Loans Receivable

(Dollars in thousands)	March 31, 2016		December 31, 2015
Commercial and industrial	$	24,278	$	20,023
Construction		15,827		13,348
Commercial real estate		409,358		382,262
Residential real estate		130,189		127,204
Consumer and other		1,172		1,253
Total loans receivable		580,824		544,090
Unearned net loan origination fees		(773)		(667)
Allowance for loan losses		(5,812)		(5,590)
Net loans receivable	$	574,239	$	537,833

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Allowance For Loan Losses And Credit Quality Of Financing Receivables (Tables)

3 Months Ended

Mar. 31, 2016

Allowance For Loan Losses And Credit Quality Of Financing Receivables [Abstract]

Changes In The Allowance For Loan Losses

	Commercial				Commercial		Residential		Consumer
	and				Real		Real		and
(Dollars in thousands)	Industrial		Construction		Estate		Estate		Other		Unallocated		Total
Three Months Ended:
March 31, 2016
Beginning balance	$	85	$	220	$	3,646	$	784	$	87	$	768	$	5,590
Charge-offs		-		-		-		(9)		(19)		-		(28)
Recoveries		7		-		31		-		1		-		39
Provision		6		47		170		133		52		(197)		211
Ending balance	$	98	$	267	$	3,847	$	908	$	121	$	571	$	5,812
March 31, 2015
Beginning balance	$	231		383	$	3,491	$	903	$	19	$	614	$	5,641
Charge-offs		(19)		-		(188)		-		(7)		-		(214)
Recoveries		4		-		12		12		3		-		31
Provision		(78)		5		472		(74)		73		(93)		305
Ending balance	$	138	$	388	$	3,787	$	841	$	88	$	521	$	5,763

Allowances Of Loan Losses And Loans Receivable By Class Disaggregated

	Allowance for Loan Losses						Loans Receivable
			Balance		Balance
			Related to		Related to
			Loans		Loans
			Individually		Collectively				Individually		Collectively
			Evaluated for		Evaluated for				Evaluated for		Evaluated for
(Dollars in thousands)	Balance		Impairment		Impairment		Balance		Impairment		Impairment
March 31, 2016
Commercial and industrial	$	98	$	-	$	98	$	24,278	$	20	$	24,258
Construction		267		-		267		15,827		-		15,827
Commercial real estate		3,847		249		3,598		409,358		5,130		404,228
Residential real estate		908		68		840		130,189		1,333		128,856
Consumer and other loans		121		107		14		1,172		138		1,034
Unallocated		571		-		-		-		-		-
Total	$	5,812	$	424	$	4,817	$	580,824	$	6,621	$	574,203
December 31, 2015
Commercial and industrial	$	85	$	-	$	85	$	20,023	$	20	$	20,003
Construction		220		-		220		13,348		-		13,348
Commercial real estate		3,646		112		3,534		382,262		5,160		377,102
Residential real estate		784		79		705		127,204		1,546		125,658
Consumer and other loans		87		73		14		1,253		138		1,115
Unallocated		768		-		-		-		-		-
Total	$	5,590	$	264	$	4,558	$	544,090	$	6,864	$	537,226

An Age Analysis Of Loans Receivable

													Recorded
													Investment
					Greater						Total		> 90 Days
	30-59 Days		60-89 days		Than		Total Past				Financing		and
(Dollars in thousands)	Past Due		Past Due		90 Days (a)		Due		Current		Receivables		Accruing
March 31, 2016
Commercial and industrial	$	-	$	4	$	20	$	24	$	24,254	$	24,278	$	-
Construction		-		-		-		-		15,827		15,827		-
Commercial real estate		2,306		1,280		3,993		7,579		401,779		409,358		-
Residential real estate		1,001		247		1,202		2,450		127,739		130,189		-
Consumer and other		4		-		138		142		1,030		1,172		-
Total	$	3,311	$	1,531	$	5,353	$	10,195	$	570,629	$	580,824	$	-
December 31, 2015
Commercial and industrial	$	5	$	-	$	20	$	25	$	19,998	$	20,023	$	-
Construction		-		-		-		-		13,348		13,348		-
Commercial real estate		758		1,461		4,016		6,235		376,027		382,262		-
Residential real estate		335		247		1,138		1,720		125,484		127,204		-
Consumer and other		16		1		138		155		1,098		1,253		-
Total	$	1,114	$	1,709	$	5,312	$	8,135	$	535,955	$	544,090	$	-
(a) includes loans greater than 90 days past due and still accruing and non-accrual loans.

Loans Which The Accrual Of Interest Has Been Discontinued

(Dollars in thousands)	March 31, 2016		December 31, 2015
Commercial and industrial	$	20	$	20
Commercial real estate		3,993		4,016
Residential real estate		1,202		1,138
Consumer and other		138		138
Total	$	5,353	$	5,312

Credit Risk Profile By Creditworthiness

			Special
(Dollars in thousands)	Pass		Mention		Substandard		Doubtful		Total
March 31, 2016
Commercial and industrial	$	24,224	$	19	$	35	$	-	$	24,278
Construction		15,827		-		-		-		15,827
Commercial real estate		394,515		8,887		5,956		-		409,358
Residential real estate		128,119		737		1,333		-		130,189
Consumer and other		1,034		-		138		-		1,172
	$	563,719	$	9,643	$	7,462	$	-	$	580,824
December 31, 2015
Commercial and industrial	$	19,983	$	5	$	35	$	-	$	20,023
Construction		13,348		-		-		-		13,348
Commercial real estate		367,305		8,957		6,000		-		382,262
Residential real estate		124,915		743		1,546		-		127,204
Consumer and other		1,115		-		138		-		1,253
	$	526,666	$	9,705	$	7,719	$	-	$	544,090

Impaired Loans

		March 31, 2016						December 31, 2015
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
(Dollars in thousands)	Investment		Balance		Allowance		Investment		Balance		Allowance
With no related allowance recorded:
Commercial and industrial	$	20	$	20	$	-	$	20	$	20	$	-
Commercial real estate		2,207		2,218		-		2,684		2,684		-
Residential real estate		999		999		-		1,123		1,152		-
With an allowance recorded:
Commercial real estate		2,923		2,923		249		2,476		2,476		112
Residential real estate		334		364		68		423		423		79
Consumer and other		138		138		107		138		138		73
Total:
Commercial and industrial		20		20		-		20		20		-
Commercial real estate		5,130		5,141		249		5,160		5,160		112
Residential real estate		1,333		1,363		68		1,546		1,575		79
Consumer and other		138		138		107		138		138		73
	$	6,621	$	6,662	$	424	$	6,864	$	6,893	$	264

The following table presents the average recorded investment and income recognized for the three months ended March 31, 2016 and 2015:

	For the Three Months Ended March 31, 2016				For the Three Months Ended March 31, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(Dollars in thousands)	Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Commercial and industrial	$	20	$	-	$	10	$	-
Commercial real estate		2,446		8		2,759		5
Residential real estate		1,061		1		1,631		1
Total impaired loans without a related allowance		3,527		9		4,400		6
With an allowance recorded:
Commercial real estate		2,699		8		2,766		8
Residential real estate		379		-		513		3
Consumer and other		138		-		69		-
Total impaired loans with an allowance		3,216		8		3,395		11
Total impaired loans	$	6,743	$	17	$	7,795	$	17

Troubled Debt Restructured On Recorded Investment

(Dollars in thousands)		Commercial Real Estate	Residential Real Estate		Total
March 31, 2016
Performing	$	1,137	$	131	$	1,268
Non-performing		1,828		194		2,022
Total	$	2,965	$	325	$	3,290
December 31, 2015
Performing	$	1,144	$	409	$	1,553
Non-performing		1,831		194		2,025
Total	$	2,975	$	603	$	3,578

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Calculation Methods Of Earnings Per Share

	Three Months Ended March 31, 2016					Three Months Ended March 31, 2015
(In thousands, except share and	Income		Shares	Per Share		Income		Shares	Per Share
per share data)	(Numerator)		(Denominator)	Amount		(Numerator)		(Denominator)	Amount
Basic earnings per share:
Net earnings applicable to common stockholders	$	1,574	4,578,598	$	0.34	$	952	4,571,142	$	0.21
Effect of dilutive securities:
Unvested stock awards		-	27,828				-	31,768
Diluted earnings per share:
Net income applicable to common stockholders and assumed conversions	$	1,574	4,606,426	$	0.34	$	952	4,602,910	$	0.21

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Other Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2016

Other Comprehensive Income [Abstract]

Components Of Other Comprehensive Income And Related Tax Effects

	Three Months Ended March 31, 2016						Three Months Ended March 31, 2015
	Before Tax		Tax Effect		Net of Tax		Before Tax		Tax Effect		Net of Tax
(Dollars in thousands)
Other comprehensive income (loss):
Unrealized gains on available for sale securities	$	985	$	394	$	591	$	316	$	127	$	189
Fair value adjustments on derivatives		(400)		(160)		(240)		-		-		-
Reclassification adjustment for net gains on securities transactions included in net income		(167)		(67)		(100)		(168)		(67)		(101)
Total other comprehensive income	$	418	$	167	$	251	$	148	$	60	$	88

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Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Schedule Of Segment Information

	Three Months Ended March 31, 2016						Three Months Ended March 31, 2015
	Banking and						Banking and
	Financial		Insurance				Financial		Insurance
	Services		Services		Total		Services		Services		Total
(Dollars in thousands)
Net interest income from external sources	$	5,646	$	-	$	5,646	$	4,802	$	-	$	4,802
Other income from external sources		786		1,738		2,524		743		1,158		1,901
Depreciation and amortization		252		6		258		239		4		243
Income before income taxes		1,514		835		2,349		928		400		1,328
Income tax expense (1)		441		334		775		216		160		376
Total assets		709,893		6,879		716,772		598,265		5,986		604,251

(1) Insurance Services calculated at statutory tax rate of 40%

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2016

Stock-Based Compensation [Abstract]

Summary Of Information Regarding Stock Option Plans

			Weighted
			Average	Weighted
			Exercise	Average		Aggregate
	Number of		Price per	Contractual		Intrinsic
	Shares		Share	Term		Value
Options outstanding, beginning of year	51,985	$	10.06
Options granted	26,216		12.83
Options outstanding, end of quarter	78,201	$	10.99	9.1	$	127,046
Options exercisable, end of quarter	10,396	$	10.06	8.7	$	25,407
Option price range at end of quarter	$9.97 to $12.83
Option price of exercisable shares	$9.97 to $10.25

Summary Of Stock Option Assumptions

	2016		2015
Expected dividend yield		1.25%		1.56%
Expected volatility		22.72%		34.32%
Risk-free interest rate		1.71%		1.37%
Expected option life		7.5 Years		7.5 Years

Summary Of Information Regarding Restricted Stock Activity

			Weighted
			Average
	Number of		Grant Date
	Shares		Fair Value
Unvested restricted stock, beginning of year	93,570	$	7.67
Granted	30,822		12.68
Forfeited	(1,084)		9.58
Vested	(35,362)		7.00
Unvested restricted stock, end of period	87,946	$	9.67

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Fair Value Of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Of Financial Instruments [Abstract]

Summary Of Financial Assets Measured On A Recurring Basis

			Quoted Prices in		Significant
			Active Markets		Other		Significant
	Fair		for Identical		Observable		Unobservable
	Value		Assets		Inputs		Inputs
(Dollars in thousands)	Measurements		(Level I)		(Level II)		(Level III)
March 31, 2016
U.S. government agencies	$	12,528	$	-	$	12,528	$	-
State and political subdivisions		30,244		-		30,244		-
Mortgage-backed securities -
U.S. government-sponsored enterprises		43,751		-		43,751		-
Derivative instruments
Interest rate swaps		(400)		-		(400)		-
December 31, 2015
U.S. government agencies	$	12,788	$	-	$	12,788	$	-
State and political subdivisions		38,149		-		38,149		-
Mortgage-backed securities -
U.S. government-sponsored enterprises		42,839		-		42,839		-

Summary Of Financial Assets Measured On A Nonrecurring Basis

			Quoted Prices in		Significant
			Active Markets		Other		Significant
	Fair		for Identical		Observable		Unobservable
	Value		Assets		Inputs		Inputs
(Dollars in thousands)	Measurements		(Level I)		(Level II)		(Level III)
March 31, 2016
Impaired loans	$	1,051	$	-	$	-	$	1,051
December 31, 2015
Impaired loans	$	801	$	-	$	-	$	801
Foreclosed real estate		756		-		-		756

Qualitative Information About Level 3 Fair Value Measurements

	Qualitative Information about Level III Fair Value Measurements
	Fair				Range
	Value		Valuation	Unobservable	(Weighted
(Dollars in thousands)	Estimate		Techniques	Input	Average)
March 31, 2016
Impaired loans	$	1,051	Appraisal of	Appraisal	0% to -27.30%
			collateral	adjustments (1)	(-2.5%)
December 31, 2015
Impaired loans	$	801	Appraisal of	Appraisal	0% to -61.8%
			collateral	adjustments (1)	(-5.8%)
Foreclosed real estate		756	Appraisal of	Selling
			collateral	expenses (1)	-7.0%  (-7.0%)
(1) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated selling expenses.  The range and weighted average of selling expenses and other appraisal adjustments are presented as a percentage of the appraisal.

Estimated Fair Values Of Financial Instruments

					Quoted Prices in		Significant
					Active Markets		Other		Significant
	March 31, 2016				for Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
(Dollars in thousands)	Amount		Value		(Level I)		(Level II)		(Level III)
Financial assets:
Cash and cash equivalents	$	9,039	$	9,039	$	9,039	$	-	$	-
Time deposits with other banks		100		100		-		100		-
Securities available for sale		86,523		86,523		-		86,523		-
Securities held to maturity		6,816		7,039		-		7,039		-
Federal Home Loan Bank stock		3,839		3,839		-		3,839		-
Loans receivable, net of allowance		574,239		572,914		-		-		572,914
Accrued interest receivable		2,257		2,257		-		2,257		-
Financial liabilities:
Non-maturity deposits		419,030		419,030		-		419,030		-
Time deposits		156,270		156,175		-		156,175		-
Short-term borrowings		1,430		1,430		1,430		-		-
Long-term borrowings		66,000		67,358		-		67,358		-
Junior subordinated debentures		12,887		10,374		-		10,374		-
Accrued interest payable		386		386		-		386		-
Derivative instruments:
Interest rate swaps		(400)		(400)		-		(400)		-

					Quoted Prices in		Significant
					Active Markets		Other		Significant
	December 31, 2015				for Identical		Observable		Unobservable
	Carrying		Fair		Assets		Inputs		Inputs
(Dollars in thousands)	Amount		Value		(Level I)		(Level II)		(Level III)
Financial assets:
Cash and cash equivalents	$	6,120	$	6,120	$	6,120	$	-	$	-
Time deposits with other banks		100		100		-		100		-
Securities available for sale		93,776		93,776		-		93,776		-
Securities held to maturity		6,834		7,008		-		7,008		-
Federal Home Loan Bank stock		5,165		5,165		-		5,165		-
Loans receivable, net of allowance		537,833		528,065		-		-		528,065
Accrued interest receivable		1,764		1,764		-		1,764		-
Financial liabilities:
Non-maturity deposits		380,983		380,983		-		380,983		-
Time deposits		136,873		136,619		-		136,619		-
Short-term borrowings		34,650		34,650		34,650		-		-
Long-term borrowings		61,000		58,685		-		58,685		-
Junior subordinated debentures		12,887		9,344		-		9,344		-
Accrued interest payable		281		281		-		281		-

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Derivatives (Tables)

3 Months Ended

Mar. 31, 2016

Derivatives [Abstract]

Schedule Of Fair Value of Derivatives

	March 31, 2016
	Notional/		Balance
	Contract	Fair	Sheet	Expiration
	Amount	Value	Location	Date
(Dollars in thousands)
Derivatives designated as hedging instruments
Interest rate swaps by effective date:
March 15, 2016	$          12,500	$                (64)	Other Liabilities	March 15, 2026
December 15, 2016	5,000	(97)	Other Liabilities	December 15, 2026
June 15, 2017	6,000	(114)	Other Liabilities	June 15, 2027
December 15, 2017	10,000	(71)	Other Liabilities	December 15, 2027
December 15, 2017	5,000	(54)	Other Liabilities	December 15, 2027
Total	$          38,500	$              (400)

Schedule Of Derivative Financial Instruments Designated As Cash Flow Hedges

	Three Months Ended March 31, 2016
	Amount of Loss
	Recognized in OCI	Location of Gain
	on	(Loss) Recognized in	Amount of Gain (Loss)
	Derivatives, net of	Income of	Recognized in Income of
	Tax	Derivatives	Derivatives
	(Effective Portion)	(Ineffective Portion)	(Ineffective Portion)
(Dollars in thousands)
Derivatives in cash flow hedges Interest rate swaps by effective
date:
March 15, 2016	$                               (38)	Not applicable	$                                    -
December 15, 2016	(58)	Not applicable	-
June 15, 2017	(68)	Not applicable	-
December 15, 2017	(43)	Not applicable	-
December 15, 2017	(32)	Not applicable	-
Total	$                             (240)		$                                    -

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Summary Of Significant Accounting Policies (Details)	3 Months Ended
	Mar. 31, 2016 site
Banking offices	12
Sussex County, New Jersey [Member]
Banking offices	8
Bergen County, New Jersey [Member]
Banking offices	1
Warren County, New Jersey [Member]
Banking offices	1
Queens County, New York [Member]
Banking offices	1
Orange County, New York [Member]
Banking offices	1

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Securities (Narrative) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) security	Mar. 31, 2015 USD ($)	Dec. 31, 2015 USD ($) security
Schedule Of Available-For-Sale And Held-To-Maturity [Line Items]
Available for sale securities carrying value pledged to secure public deposits	$ 32,800		$ 33,400
Gains on sales of securities available for sale	167	$ 216
Gross losses on sales of securities avaiable for sale		$ 48
Fair value of available-for-sale securities	23,935		49,024
Unrealized loss of available-for-sale securities	$ 135		$ 620
Number of securities with unrealized losses, held-to-maturity | security	0		0
Maximum [Member]
Schedule Of Available-For-Sale And Held-To-Maturity [Line Items]
Gross losses on sales of securities avaiable for sale	$ 1
U.S. Government Agencies [Member]
Schedule Of Available-For-Sale And Held-To-Maturity [Line Items]
Number of securities with unrealized losses, available-for-sale | security	5		6
Fair value of available-for-sale securities	$ 7,039		$ 8,361
Unrealized loss of available-for-sale securities	$ 28		$ 55
State And Political Subdivisions [Member]
Schedule Of Available-For-Sale And Held-To-Maturity [Line Items]
Number of securities with unrealized losses, available-for-sale | security	4		15
Fair value of available-for-sale securities	$ 2,462		$ 8,778
Unrealized loss of available-for-sale securities	$ 23		$ 129
Number of securities with unrealized losses from state and political subdivisions maturity minimum number of years	10 years
Mortgage Backed U.S. Government-Sponsored Enterprises [Member]
Schedule Of Available-For-Sale And Held-To-Maturity [Line Items]
Number of securities with unrealized losses, available-for-sale | security	8		18
Fair value of available-for-sale securities	$ 14,434		$ 31,885
Unrealized loss of available-for-sale securities	$ 84		$ 436

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Securities (Amortized Cost And Approximate Fair Value Of Securities Available For Sale) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 85,562	$ 93,632
Gross Unrealized Gains	1,096	764
Gross Unrealized Losses	(135)	(620)
Fair Value	86,523	93,776
U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	12,485	12,792
Gross Unrealized Gains	71	51
Gross Unrealized Losses	(28)	(55)
Fair Value	12,528	12,788
State And Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	29,611	37,771
Gross Unrealized Gains	656	507
Gross Unrealized Losses	(23)	(129)
Fair Value	30,244	38,149
Mortgage Backed U.S. Government-Sponsored Enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	43,466	43,069
Gross Unrealized Gains	369	206
Gross Unrealized Losses	(84)	(436)
Fair Value	$ 43,751	$ 42,839

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Securities (Amortized Cost And Fair Value Of Securities By Contractual Maturity Of Available-For-Sale Securities) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Due in one year or less, Amortized Cost
Due after one year through five years, Amortized Cost	$ 699
Due after five years through ten years, Amortized Cost	3,643
Due after ten years, Amortized Cost	25,269
Total bonds and obligations, Amortized Cost	$ 29,611
Due in one year or less, Fair Value
Due after one year through five years, Fair Value	$ 704
Due after five years through ten years, Fair Value	3,728
Due after ten years, Fair Value	25,812
Total bonds and obligations, Fair Value	30,244
Amortized Cost	85,562	$ 93,632
Fair Value	86,523	93,776
U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	12,485	12,792
Fair Value	12,528	12,788
Mortgage Backed U.S. Government-Sponsored Enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	43,466	43,069
Fair Value	$ 43,751	$ 42,839

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Securities (Temporarily Impaired Gross Unrealized Losses And Fair Value Of Available-For-Sale Securities) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Less Than Twelve Months, Fair Value	$ 18,923	$ 43,553
Less Than Twelve Months, Gross Unrealized Losses	(88)	(566)
Twelve Months or More, Fair Value	5,012	5,471
Twelve Months or More, Gross Unrealized Losses	(47)	(54)
Total, Fair Value	23,935	49,024
Total, Gross Unrealized Losses	(135)	(620)
U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than Twelve Months, Fair Value	4,587	5,888
Less Than Twelve Months, Gross Unrealized Losses	(6)	(23)
Twelve Months or More, Fair Value	2,452	2,473
Twelve Months or More, Gross Unrealized Losses	(22)	(32)
Total, Fair Value	7,039	8,361
Total, Gross Unrealized Losses	(28)	(55)
State And Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than Twelve Months, Fair Value	1,414	5,780
Less Than Twelve Months, Gross Unrealized Losses	(3)	(107)
Twelve Months or More, Fair Value	1,048	2,998
Twelve Months or More, Gross Unrealized Losses	(20)	(22)
Total, Fair Value	2,462	8,778
Total, Gross Unrealized Losses	(23)	(129)
Mortgage Backed U.S. Government-Sponsored Enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than Twelve Months, Fair Value	12,922	31,885
Less Than Twelve Months, Gross Unrealized Losses	(79)	(436)
Twelve Months or More, Fair Value	1,512
Twelve Months or More, Gross Unrealized Losses	(5)
Total, Fair Value	14,434	31,885
Total, Gross Unrealized Losses	$ (84)	$ (436)

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Securities (Amortized Cost And Approximate Fair Value Of Securities Held-To-Maturity) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	$ 6,816
Securities held to maturity, fair value	7,039	$ 7,008
State And Political Subdivisions [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	6,816	6,834
Gross Unrealized Gains	223	174
Securities held to maturity, fair value	$ 7,039	$ 7,008

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Securities (Amortized Cost And Fair Value Of Securities By Contractual Maturity Of Held-To-Maturity Securities) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Securities [Abstract]
Due in one year or less, Amortized Cost	$ 2,942
Due after one year through five years, Amortized Cost	1,000
Due after five years through ten years, Amortized Cost	1,827
Due after ten years, Amortized Cost	1,047
Amortized Cost	6,816
Due in one year or less, Fair Value	2,942
Due after one year through five years, Fair Value	1,003
Due after five years through ten years, Fair Value	1,926
Due after ten years, Fair Value	1,168
Total held to maturity securities, Fair Value	$ 7,039	$ 7,008

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Loans (Composition Of Net Loans Receivable) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans receivable	$ 580,824	$ 544,090
Unearned net loan origination fees	(773)	(667)
Allowance for loan losses	(5,812)	(5,590)
Net loans receivable	574,239	537,833
Mortgage loans serviced for the benefit of others	448	454
Commercial And Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans receivable	24,278	20,023
Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans receivable	15,827	13,348
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans receivable	409,358	382,262
Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans receivable	130,189	127,204
Consumer And Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans receivable	$ 1,172	$ 1,253

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Allowance For Loan Losses And Credit Quality Of Financing Receivables (Narrative) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) loan	Mar. 31, 2015 loan	Dec. 31, 2015 USD ($)
Allowance For Loan Losses And Credit Quality Of Financing Receivables [Abstract]
Number of loans modified by troubled debt restructuring | loan	0	0
Number of loans with subsequent default | loan	0	0
Carrying value of foreclosed residential real estate properties | $	$ 130		$ 130
Carrying value of collateralized consumer loans | $	$ 878		$ 945

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Allowance For Loan Losses And Credit Quality Of Financing Receivables (Changes In The Allowance For Loan Losses) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	$ 5,590	$ 5,641
Charge-offs	(28)	(214)
Recoveries	39	31
Provision	211	305
Ending balance	5,812	5,763
Commercial And Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	85	231
Charge-offs		(19)
Recoveries	7	4
Provision	6	(78)
Ending balance	98	138
Construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	220	383
Provision	47	5
Ending balance	267	388
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	3,646	3,491
Charge-offs		(188)
Recoveries	31	12
Provision	170	472
Ending balance	3,847	3,787
Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	784	903
Charge-offs	(9)
Recoveries		12
Provision	133	(74)
Ending balance	908	841
Consumer And Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	87	19
Charge-offs	(19)	(7)
Recoveries	1	3
Provision	52	73
Ending balance	121	88
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	768	614
Provision	(197)	(93)
Ending balance	$ 571	$ 521

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Allowance For Loan Losses And Credit Quality Of Financing Receivables (Allowances Of Loan Losses And Loans Receivable By Class Disaggregated) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015	Dec. 31, 2014
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, Allowance for Loan Losses	$ 5,812	$ 5,590	$ 5,763	$ 5,641
Allowance for Loan Losses, Balance Related to Loans Individually Evaluated for Impairment	424	264
Allowance for Loan Losses, Balance Related to Loans Collectively Evaluated for Impairment	4,817	4,558
Total Financing Receivables	580,824	544,090
Loans Receivable, Individually Evaluated for Impairment	6,621	6,864
Loans Receivable, Collectively Evaluated for Impairment	574,203	537,226
Commercial And Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, Allowance for Loan Losses	$ 98	$ 85	138	231
Allowance for Loan Losses, Balance Related to Loans Individually Evaluated for Impairment
Allowance for Loan Losses, Balance Related to Loans Collectively Evaluated for Impairment	$ 98	$ 85
Total Financing Receivables	24,278	20,023
Loans Receivable, Individually Evaluated for Impairment	20	20
Loans Receivable, Collectively Evaluated for Impairment	24,258	20,003
Construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, Allowance for Loan Losses	$ 267	$ 220	388	383
Allowance for Loan Losses, Balance Related to Loans Individually Evaluated for Impairment
Allowance for Loan Losses, Balance Related to Loans Collectively Evaluated for Impairment	$ 267	$ 220
Total Financing Receivables	$ 15,827	$ 13,348
Loans Receivable, Individually Evaluated for Impairment
Loans Receivable, Collectively Evaluated for Impairment	$ 15,827	$ 13,348
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, Allowance for Loan Losses	3,847	3,646	3,787	3,491
Allowance for Loan Losses, Balance Related to Loans Individually Evaluated for Impairment	249	112
Allowance for Loan Losses, Balance Related to Loans Collectively Evaluated for Impairment	3,598	3,534
Total Financing Receivables	409,358	382,262
Loans Receivable, Individually Evaluated for Impairment	5,130	5,160
Loans Receivable, Collectively Evaluated for Impairment	404,228	377,102
Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, Allowance for Loan Losses	908	784	841	903
Allowance for Loan Losses, Balance Related to Loans Individually Evaluated for Impairment	68	79
Allowance for Loan Losses, Balance Related to Loans Collectively Evaluated for Impairment	840	705
Total Financing Receivables	130,189	127,204
Loans Receivable, Individually Evaluated for Impairment	1,333	1,546
Loans Receivable, Collectively Evaluated for Impairment	128,856	125,658
Consumer And Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, Allowance for Loan Losses	121	87	88	19
Allowance for Loan Losses, Balance Related to Loans Individually Evaluated for Impairment	107	73
Allowance for Loan Losses, Balance Related to Loans Collectively Evaluated for Impairment	14	14
Total Financing Receivables	1,172	1,253
Loans Receivable, Individually Evaluated for Impairment	138	138
Loans Receivable, Collectively Evaluated for Impairment	1,034	1,115
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, Allowance for Loan Losses	$ 571	$ 768	$ 521	$ 614
Allowance for Loan Losses, Balance Related to Loans Individually Evaluated for Impairment
Allowance for Loan Losses, Balance Related to Loans Collectively Evaluated for Impairment
Total Financing Receivables
Loans Receivable, Individually Evaluated for Impairment
Loans Receivable, Collectively Evaluated for Impairment

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Allowance For Loan Losses And Credit Quality Of Financing Receivables (An Age Analysis Of Loans Receivable) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	$ 10,195	$ 8,135
Loans Receivable, Current	570,629	535,955
Total Financing Receivables	580,824	544,090
Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	3,311	1,114
Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	1,531	1,709
Financing Receivables, Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	5,353	5,312
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	24	25
Loans Receivable, Current	24,254	19,998
Total Financing Receivables	24,278	20,023
Commercial And Industrial [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due		5
Commercial And Industrial [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	4
Commercial And Industrial [Member] | Financing Receivables, Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	20	20
Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Receivable, Current	15,827	13,348
Total Financing Receivables	15,827	13,348
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	7,579	6,235
Loans Receivable, Current	401,779	376,027
Total Financing Receivables	409,358	382,262
Commercial Real Estate [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	2,306	758
Commercial Real Estate [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	1,280	1,461
Commercial Real Estate [Member] | Financing Receivables, Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	3,993	4,016
Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	2,450	1,720
Loans Receivable, Current	127,739	125,484
Total Financing Receivables	130,189	127,204
Residential Real Estate [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	1,001	335
Residential Real Estate [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	247	247
Residential Real Estate [Member] | Financing Receivables, Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	1,202	1,138
Consumer And Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	142	155
Loans Receivable, Current	1,030	1,098
Total Financing Receivables	1,172	1,253
Consumer And Other [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	4	16
Consumer And Other [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due		1
Consumer And Other [Member] | Financing Receivables, Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total past due	$ 138	$ 138

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Allowance For Loan Losses And Credit Quality Of Financing Receivables (Loans Which The Accrual Of Interest Has Been Discontinued) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	$ 5,353	$ 5,312
Commercial And Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	20	20
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	3,993	4,016
Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	1,202	1,138
Consumer And Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	$ 138	$ 138

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Allowance For Loan Losses And Credit Quality Of Financing Receivables (Credit Risk Profile By Creditworthiness) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	$ 580,824	$ 544,090
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	24,278	20,023
Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	15,827	13,348
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	409,358	382,262
Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	130,189	127,204
Consumer And Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	1,172	1,253
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	563,719	526,666
Pass [Member] | Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	24,224	19,983
Pass [Member] | Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	15,827	13,348
Pass [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	394,515	367,305
Pass [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	128,119	124,915
Pass [Member] | Consumer And Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	1,034	1,115
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	9,643	9,705
Special Mention [Member] | Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	19	5
Special Mention [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	8,887	8,957
Special Mention [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	737	743
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	7,462	7,719
Substandard [Member] | Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	35	35
Substandard [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	5,956	6,000
Substandard [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	1,333	1,546
Substandard [Member] | Consumer And Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans receivable	$ 138	$ 138

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Allowance For Loan Losses And Credit Quality Of Financing Receivables (Impaired Loans) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Financing Receivable, Impaired [Line Items]
Recorded Investment, Total	$ 6,621		$ 6,864
Unpaid Principal Balance, Total	6,662		6,893
Related Allowance	424		264
Average Recorded Investment, With no related allowance recorded	3,527	$ 4,400
Average Recorded Investment, With an allowance recorded	3,216	3,395
Average Recorded Investment, Total	6,743	7,795
Interest Income Recognized, With no related allowance recorded	9	6
Interest Income Recognized, With an allowance recorded	8	11
Interest Income Recognized, Total	17	17
Commercial And Industrial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance recorded	20		20
Recorded Investment, Total	20		20
Unpaid Principal Balance, With no related allowance recorded	20		20
Unpaid Principal Balance, Total	20		20
Average Recorded Investment, With no related allowance recorded	20	10
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance recorded	2,207		2,684
Recorded Investment, With an allowance recorded	2,923		2,476
Recorded Investment, Total	5,130		5,160
Unpaid Principal Balance, With no related allowance recorded	2,218		2,684
Unpaid Principal Balance, With an allowance recorded	2,923		2,476
Unpaid Principal Balance, Total	5,141		5,160
Related Allowance	249		112
Average Recorded Investment, With no related allowance recorded	2,446	2,759
Average Recorded Investment, With an allowance recorded	2,699	2,766
Interest Income Recognized, With no related allowance recorded	8	5
Interest Income Recognized, With an allowance recorded	8	8
Residential Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance recorded	999		1,123
Recorded Investment, With an allowance recorded	334		423
Recorded Investment, Total	1,333		1,546
Unpaid Principal Balance, With no related allowance recorded	999		1,152
Unpaid Principal Balance, With an allowance recorded	364		423
Unpaid Principal Balance, Total	1,363		1,575
Related Allowance	68		79
Average Recorded Investment, With no related allowance recorded	1,061	1,631
Average Recorded Investment, With an allowance recorded	379	513
Interest Income Recognized, With no related allowance recorded	1	1
Interest Income Recognized, With an allowance recorded		3
Consumer And Other [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With an allowance recorded	138		138
Recorded Investment, Total	138		138
Unpaid Principal Balance, With an allowance recorded	138		138
Unpaid Principal Balance, Total	138		138
Related Allowance	107		$ 73
Average Recorded Investment, With an allowance recorded	$ 138	$ 69

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Allowance For Loan Losses And Credit Quality Of Financing Receivables (Troubled Debt Restructured On Recorded Investment) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Financing Receivable, Modifications [Line Items]
Total	$ 3,290	$ 3,578
Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total	2,965	2,975
Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total	325	603
Performing [Member]
Financing Receivable, Modifications [Line Items]
Total	1,268	1,553
Performing [Member] | Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total	1,137	1,144
Performing [Member] | Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total	131	409
Non-performing [Member]
Financing Receivable, Modifications [Line Items]
Total	2,022	2,025
Non-performing [Member] | Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total	1,828	1,831
Non-performing [Member] | Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Total	$ 194	$ 194

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Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Earnings Per Share [Abstract]
Net earnings applicable to common stockholders (Numerator)	$ 1,574	$ 952
Net income applicable to common stockholders and assumed conversions (Numerator)	$ 1,574	$ 952
Basic, Shares (Denominator)	4,578,598	4,571,142
Unvested stock awards, Shares (Denominator)	27,828	31,768
Diluted, Shares (Denominator)	4,606,426	4,602,910
Basic, Per Share Amount	$ 0.34	$ 0.21
Diluted, Per Share Amount	$ 0.34	$ 0.21
Shares of common stock outstanding not included in the computation of diluted EPS	57,038	21,244

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Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Other Comprehensive Income [Abstract]
Unrealized gains on available for sale securities arising during the period	$ 985	$ 316
Fair value adjustments on derivatives, Before Tax	(400)
Reclassification adjustment for net gains on securities transactions included in net income, Before Tax	(167)	(168)
Total other comprehensive income, Before Tax	418	148
Unrealized gains on available for sale securities, Tax Effect	394	127
Fair value adjustments on derivatives, Tax Effect	(160)
Reclassification adjustment for net gains on securities transactions included in net income, Tax Effect	(67)	(67)
Total other comprehensive income, Tax Effect	167	60
Unrealized gains on available for sale securities, Net of Tax	591	189
Fair value adjustments on derivatives, Net of Tax	(240)
Reclassification adjustment for net gains on securities transactions included in net income, Net of Tax	(100)	(101)
Other comprehensive income, net of income taxes	$ 251	$ 88

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Segment Reporting (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Segment Reporting Information [Line Items]
Net interest income from external sources		$ 5,646	$ 4,802
Other income from external sources		2,524	1,901
Depreciation and amortization		258	243
Income before income taxes		2,349	1,328
Income tax expense	[1]	775	376
Total assets		716,772	604,251	$ 684,503
Banking And Financial Services [Member]
Segment Reporting Information [Line Items]
Net interest income from external sources		5,646	4,802
Other income from external sources		786	743
Depreciation and amortization		252	239
Income before income taxes		1,514	928
Income tax expense	[1]	441	216
Total assets		709,893	598,265
Insurance Services [Member]
Segment Reporting Information [Line Items]
Other income from external sources		1,738	1,158
Depreciation and amortization		6	4
Income before income taxes		835	400
Income tax expense	[1]	334	160
Total assets		$ 6,879	$ 5,986
Statutory tax rate		40.00%	40.00%

[1] Insurance Services calculated at statutory tax rate of 40%

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Stock-Based Compensation (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option grants, maximum term, in years	7 years 6 months
Weighted average grant date fair value of options granted per share	$ 3.37	$ 3.56
Stock options expected future expense	$ 227
Restricted stock awards expense	90	$ 82
Unrecognized compensation expense for non-vested restricted stock	722
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 11	$ 9
Unrecognized compensation expense, period for recognition	4 years 1 month 6 days
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense, period for recognition	1 year 10 months 24 days
Minimum [Member] | Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period, years	1 year
Minimum [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period, years	2 years
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option grants, maximum term, in years	10 years
Maximum [Member] | Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period, years	4 years
Maximum [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period, years	7 years

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Stock-Based Compensation (Summary Of Information Regarding Stock Option Plans) (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Outstanding, beginning of year | shares	51,985
Number of Shares, Options granted | shares	26,216
Number of Shares, Outstanding, end of quarter | shares	78,201
Number of Shares, Exercisable, end of quarter | shares	10,396
Weighted Average Exercise Price per Share, Outstanding, beginning of year	$ 10.06
Weighted Average Exercise Price per Share, Options granted	12.83
Weighted Average Exercise Price per Share, Outstanding, end of quarter	10.99
Weighted Average Exercise Price per Share, Exercisable, end of quarter	$ 10.06
Weighted Average Contractual Term, Outstanding, end of quarter	9 years 1 month 6 days
Weighted Average Contractual Term, Exercisable, end of quarter	8 years 8 months 12 days
Aggregate Intrinsic Value, Outstanding, end of quarter | $	$ 127,046
Aggregate Intrinsic Value, Exercisable, end of quarter | $	$ 25,407
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option price range at end of quarter	$ 9.97
Option price of exercisable shares	9.97
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option price range at end of quarter	12.83
Option price of exercisable shares	$ 10.25

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Stock-Based Compensation (Summary Of Stock Option Assumptions) (Details)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Stock Incentive Plans [Abstract]
Expected dividend yield	1.25%	1.56%
Expected volatility	22.72%	34.32%
Risk-free interest rate	1.71%	1.37%
Expected option life	7 years 6 months

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Stock-Based Compensation (Summary Of Information Regarding Restricted Stock Activity) (Details)	3 Months Ended
	Mar. 31, 2016 $ / shares shares
Stock-Based Compensation [Abstract]
Unvested restricted stock, beginning of year, Number of Shares | shares	93,570
Granted, Number of Shares | shares	30,822
Forfeited, Number of Shares | shares	(1,084)
Vested, Number of Shares | shares	(35,362)
Unvested restricted stock, end of period, Number of Shares | shares	87,946
Unvested restricted stock, beginning of year, Weighted Average Grant Date Fair Value | $ / shares	$ 7.67
Granted, Weighted Average Grant Date Fair Value | $ / shares	12.68
Forfeited, Weighted Average Grant Date Fair Value | $ / shares	9.58
Vested, Weighted Average Grant Date Fair Value | $ / shares	7.00
Unvested restricted stock, end of period, Weighted Average Grant Date Fair Value | $ / shares	$ 9.67

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Guarantees (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)
Guarantees [Abstract]
Letter of credit, expiration term	1 year
Undrawn standby letters of credit outstanding	$ 729

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Fair Value Of Financial Instruments (Narrative) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Impaired Loans [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans, fair value	$ 1,051	$ 801

XML

Fair Value Of Financial Instruments (Summary Of Financial Assets Measured On A Recurring Basis) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 86,523	$ 93,776
Derivative instruments	400
Significant Other Observable Inputs (Level II) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	86,523	93,776
Derivative instruments	$ 400
Significant Unobservable Inputs (Level III) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative instruments
U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 12,528	12,788
U.S. Government Agencies [Member] | Significant Other Observable Inputs (Level II) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 12,528	$ 12,788
U.S. Government Agencies [Member] | Significant Unobservable Inputs (Level III) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
State And Political Subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 30,244	$ 38,149
State And Political Subdivisions [Member] | Significant Other Observable Inputs (Level II) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 30,244	$ 38,149
State And Political Subdivisions [Member] | Significant Unobservable Inputs (Level III) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Mortgage Backed U.S. Government-Sponsored Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 43,751	$ 42,839
Mortgage Backed U.S. Government-Sponsored Enterprises [Member] | Significant Other Observable Inputs (Level II) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 43,751	$ 42,839
Mortgage Backed U.S. Government-Sponsored Enterprises [Member] | Significant Unobservable Inputs (Level III) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale

XML

Fair Value Of Financial Instruments (Summary Of Financial Assets Measured On A Nonrecurring Basis) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets	$ 1,051	$ 801
Impaired Loans [Member] | Significant Unobservable Inputs (Level III) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets	$ 1,051	801
Foreclosed Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets		756
Foreclosed Real Estate [Member] | Significant Unobservable Inputs (Level III) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Assets		$ 756

XML

Fair Value Of Financial Instruments (Qualitative Information About Level 3 Fair Value Measurements) (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Impaired Loans [Member]
Qualitative and Quantitative Information, Transferor's Continuing Involvement [Line Items]
Fair Value Estimate	$ 1,051	$ 801
Impaired Loans [Member] | Significant Unobservable Inputs (Level III) [Member]
Qualitative and Quantitative Information, Transferor's Continuing Involvement [Line Items]
Fair Value Estimate	$ 1,051	$ 801
Impaired Loans [Member] | Minimum [Member] | Significant Unobservable Inputs (Level III) [Member]
Qualitative and Quantitative Information, Transferor's Continuing Involvement [Line Items]
Range (Weighted Average)	0.00%	0.00%
Impaired Loans [Member] | Maximum [Member] | Significant Unobservable Inputs (Level III) [Member]
Qualitative and Quantitative Information, Transferor's Continuing Involvement [Line Items]
Range (Weighted Average)	(27.30%)	(61.80%)
Impaired Loans [Member] | Weighted Average [Member] | Significant Unobservable Inputs (Level III) [Member]
Qualitative and Quantitative Information, Transferor's Continuing Involvement [Line Items]
Range (Weighted Average)	(2.50%)	(5.80%)
Foreclosed Real Estate [Member]
Qualitative and Quantitative Information, Transferor's Continuing Involvement [Line Items]
Fair Value Estimate		$ 756
Foreclosed Real Estate [Member] | Significant Unobservable Inputs (Level III) [Member]
Qualitative and Quantitative Information, Transferor's Continuing Involvement [Line Items]
Fair Value Estimate		$ 756
Range (Weighted Average)		(7.00%)
Foreclosed Real Estate [Member] | Weighted Average [Member] | Significant Unobservable Inputs (Level III) [Member]
Qualitative and Quantitative Information, Transferor's Continuing Involvement [Line Items]
Range (Weighted Average)		(7.00%)

XML

Fair Value Of Financial Instruments (Estimated Fair Values Of Financial Instruments) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 86,523	$ 93,776
Securities held to maturity	7,039	7,008
Fair Value	400
Carrying Amount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	9,039	6,120
Time deposits with other banks	100	100
Securities available for sale	86,523	93,776
Securities held to maturity	6,816	6,834
Federal Home Loan Bank stock	3,839	5,165
Loans receivable, net of allowance	574,239	537,833
Accrued interest receivable	2,257	1,764
Non-maturity deposits	419,030	380,983
Time deposits	156,270	136,873
Short-term borrowings	1,430	34,650
Long-term borrowings	66,000	61,000
Junior subordinated debentures	12,887	12,887
Accrued interest payable	386	281
Fair Value	400
Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	9,039	6,120
Time deposits with other banks	100	100
Securities available for sale	86,523	93,776
Securities held to maturity	7,039	7,008
Federal Home Loan Bank stock	3,839	5,165
Loans receivable, net of allowance	572,914	528,065
Accrued interest receivable	2,257	1,764
Non-maturity deposits	419,030	380,983
Time deposits	156,175	136,619
Short-term borrowings	1,430	34,650
Long-term borrowings	67,358	58,685
Junior subordinated debentures	10,374	9,344
Accrued interest payable	386	281
Fair Value	400
Quoted Prices In Active Markets For Identical Assets (Level I) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	9,039	6,120
Short-term borrowings	1,430	34,650
Significant Other Observable Inputs (Level II) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Time deposits with other banks	100	100
Securities available for sale	86,523	93,776
Securities held to maturity	7,039	7,008
Federal Home Loan Bank stock	3,839	5,165
Accrued interest receivable	2,257	1,764
Non-maturity deposits	419,030	380,983
Time deposits	156,175	136,619
Long-term borrowings	67,358	58,685
Junior subordinated debentures	10,374	9,344
Accrued interest payable	386	281
Fair Value	400
Significant Unobservable Inputs (Level III) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans receivable, net of allowance	$ 572,914	$ 528,065
Fair Value

XML

Derivatives (Schedule Of Fair Value of Derivatives) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)
Derivatives, Fair Value [Line Items]
Fair Value	$ 400
Designated as Hedging Instrument [Member]
Derivatives, Fair Value [Line Items]
Notional/Contract Amount	38,500
Fair Value	(400)
Derivative Effective Date March 15, 2016 [Member] | Designated as Hedging Instrument [Member]
Derivatives, Fair Value [Line Items]
Notional/Contract Amount	12,500
Fair Value	$ (64)
Expiration Date	Mar. 15, 2026
Derivative Effective Date December 15, 2016 [Member] | Designated as Hedging Instrument [Member]
Derivatives, Fair Value [Line Items]
Notional/Contract Amount	$ 5,000
Fair Value	$ (97)
Expiration Date	Dec. 15, 2026
Derivative Effective Date June 15, 2017 [Member] | Designated as Hedging Instrument [Member]
Derivatives, Fair Value [Line Items]
Notional/Contract Amount	$ 6,000
Fair Value	$ (114)
Expiration Date	Jun. 15, 2027
Derivative Effective Date December 15, 2017 Contract 1 [Member] | Designated as Hedging Instrument [Member]
Derivatives, Fair Value [Line Items]
Notional/Contract Amount	$ 10,000
Fair Value	$ (71)
Expiration Date	Dec. 15, 2027
Derivative Effective Date December 15, 2017 Contract 2 [Member] | Designated as Hedging Instrument [Member]
Derivatives, Fair Value [Line Items]
Notional/Contract Amount	$ 5,000
Fair Value	$ (54)
Expiration Date	Dec. 15, 2027

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Derivatives (Schedule Of Derivative Financial Instruments Designated As Cash Flow Hedges) (Details) - Cash Flow Hedging [Member] $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Loss Recognized in OCI on Derivatives, net of Tax (Effective Portion)	$ (240)
Amount of Gain (Loss) Recognized in Income Derivatives (Ineffective Portion)
Derivative Effective Date March 15, 2016 [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Loss Recognized in OCI on Derivatives, net of Tax (Effective Portion)	$ (38)
Amount of Gain (Loss) Recognized in Income Derivatives (Ineffective Portion)
Derivative Effective Date December 15, 2016 [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Loss Recognized in OCI on Derivatives, net of Tax (Effective Portion)	$ (58)
Amount of Gain (Loss) Recognized in Income Derivatives (Ineffective Portion)
Derivative Effective Date June 15, 2017 [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Loss Recognized in OCI on Derivatives, net of Tax (Effective Portion)	$ (68)
Amount of Gain (Loss) Recognized in Income Derivatives (Ineffective Portion)
Derivative Effective Date December 15, 2017 Contract 1 [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Loss Recognized in OCI on Derivatives, net of Tax (Effective Portion)	$ (43)
Amount of Gain (Loss) Recognized in Income Derivatives (Ineffective Portion)
Derivative Effective Date December 15, 2017 Contract 2 [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Loss Recognized in OCI on Derivatives, net of Tax (Effective Portion)	$ (32)
Amount of Gain (Loss) Recognized in Income Derivatives (Ineffective Portion)