10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2015

OR

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

For the transition period from         to 

Commission File No. 000-53869

FIRST NATIONAL COMMUNITY BANCORP, INC.

(Exact Name of Registrant as Specified in Its Charter)

Pennsylvania	23-2900790
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
102 E. Drinker St., Dunmore, PA	18512
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code    (570) 346-7667

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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 (232.405 of this chapter) 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 ☐

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

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

Common Stock, $1.25 par value	16,500,945 shares
(Title of Class)	(Outstanding at November 6, 2015)

1

Contents

Part I - Financial Information	3
Item 1 - Financial Statements (unaudited)	3
Consolidated Statements of Financial Condition	3
Consolidated Statements of Income	4
Consolidated Statements of Comprehensive Income	5
Consolidated Statements of Changes in Shareholder’s Equity	6
Consolidated Statements of Cash Flows	7
Notes to Consolidated Financial Statements	8
Item 2 - Management’s Discussion and Analysis Of Financial Condition and Results of Operations	41
Item 3 - Quantitative And Qualitative Disclosures About Market Risk	67
Item 4 - Controls and Procedures	67
Part II Other Information	67
Item 1 – Legal Proceedings	67
Item 1A. - Risk Factors	68
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3 - Defaults upon Senior Securities	68
Item 4 - Mine Safety Disclosures	68
Item 5 - Other Information	68
Item 6 - Exhibits	69

2

Part I - Financial Information

Item 1 - Financial Statements

FIRST NATIONAL COMMUNITY BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(unaudited)

	September 30,			December 31,
(dollars in thousands, except share data)	2015			2014
Assets
Cash and cash equivalents:
Cash and due from banks	$	20,631		$	22,657
Interest-bearing deposits in other banks		10,383			13,010
Total cash and cash equivalents		31,014			35,667
Securities available for sale, at fair value		249,228			218,989
Stock in Federal Home Loan Bank of Pittsburgh, at cost		4,298			2,803
Loans held for sale		4,634			603
Loans, net of allowance for loan and lease losses of $9,825 and $11,520		713,341			658,747
Bank premises and equipment, net		11,258			11,003
Accrued interest receivable		2,618			2,075
Intangible assets		179			302
Bank-owned life insurance		29,232			28,817
Other real estate owned		1,618			2,255
Other assets		7,799			8,768
Total assets	$	1,055,219		$	970,029
Liabilities
Deposits:
Demand (non-interest-bearing)	$	152,038		$	124,064
Interest-bearing		700,004			671,272
Total deposits		852,042			795,336
Borrowed funds
Federal Home Loan Bank of Pittsburgh advances		93,058			61,194
Subordinated debentures		14,000			25,000
Junior subordinated debentures		10,310			10,310
Total borrowed funds		117,368			96,504
Accrued interest payable		11,187			10,262
Other liabilities		14,989			16,529
Total liabilities		995,586			918,631
Shareholders' equity
Preferred shares ($1.25 par)
Authorized: 20,000,000 shares at September 30, 2015 and December 31, 2014
Issued and outstanding: 0 shares at September 30, 2015 and December 31, 2014		-			-
Common shares ($1.25 par)
Authorized: 50,000,000 shares at September 30, 2015 and December 31, 2014
Issued and outstanding: 16,500,945 shares, September 30, 2015 and 16,484,419 shares, December 31, 2014		20,626			20,605
Additional paid-in capital		61,939			61,781
Accumulated deficit		(25,495	)		(32,126	)
Accumulated other comprehensive income		2,563			1,138
Total shareholders' equity		59,633			51,398
Total liabilities and shareholders’ equity	$	1,055,219		$	970,029

The accompanying notes to consolidated financial statements are an integral part of these statements.

3

FIRST NATIONAL COMMUNITY BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(dollars in thousands, except share data)	2015			2014			2015			2014
Interest income
Interest and fees on loans	$	6,693		$	6,852		$	19,640		$	19,958
Interest and dividends on securities:
U.S. government agencies		1,061			893			3,044			2,496
State and political subdivisions, tax-free		19			409			91			1,679
State and political subdivisions, taxable		324			76			447			271
Other securities		92			74			331			206
Total interest and dividends on securities		1,496			1,452			3,913			4,652
Interest on interest-bearing deposits in other banks		10			8			42			44
Total interest income		8,199			8,312			23,595			24,654
Interest expense
Interest on deposits		677			751			2,003			2,435
Interest on borrowed funds:
Interest on Federal Home Loan Bank of Pittsburgh advances		128			125			367			334
Interest on subordinated debentures		162			575			1,290			1,706
Interest on junior subordinated debentures		50			50			150			149
Total interest on borrowed funds		340			750			1,807			2,189
Total interest expense		1,017			1,501			3,810			4,624
Net interest income before credit for loan and lease losses		7,182			6,811			19,785			20,030
Credit for loan and lease losses		(191	)		(54	)		(340	)		(5,629	)
Net interest income after credit for loan and lease losses		7,373			6,865			20,125			25,659
Non-interest income
Deposit service charges		799			781			2,218			2,217
Net gain on the sale of securities		4			2,958			2,302			6,006
Net gain on the sale of mortgage loans held for sale		13			57			69			223
Net loss on the sale of education loans		-			-			-			(13	)
Net gain on the sale of other real estate owned		129			35			145			103
Gain on branch divestitures		-			-			-			607
Loan-related fees		94			101			290			292
Income from bank-owned life insurance		145			165			415			496
Legal settlements		-			-			184			2,127
Other		195			345			720			799
Total non-interest income		1,379			4,442			6,343			12,857
Non-interest expense
Salaries and employee benefits		3,240			3,316			9,582			9,809
Occupancy expense		500			438			1,665			1,554
Equipment expense		408			355			1,234			1,068
Advertising expense		86			109			335			353
Data processing expense		471			508			1,420			1,556
Regulatory assessments		203			266			711			1,389
Bank shares tax		217			21			652			372
Expense of other real estate owned		91			514			338			2,495
Legal expense		80			268			331			1,428
Professional fees		193			306			780			1,240
Insurance expenses		128			196			528			757
Other operating expenses		798			1,486			2,301			2,718
Total non-interest expense		6,415			7,783			19,877			24,739
Income before income taxes		2,337			3,524			6,591			13,777
Provision (credit) for income taxes		-			166			(40	)		326
Net income	$	2,337		$	3,358		$	6,631		$	13,451
Earnings per share
Basic	$	0.14		$	0.20		$	0.40		$	0.82
Diluted	$	0.14		$	0.20		$	0.40		$	0.82
Cash dividends declared per common share	$	-		$	-		$	-		$	-
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic		16,500,945			16,471,569			16,497,373			16,471,569
Diluted		16,500,945			16,471,569			16,497,373			16,471,851

The accompanying notes to consolidated financial statements are an integral part of these statements.

4

FIRST NATIONAL COMMUNITY BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(dollars in thousands)	2015			2014			2015			2014
Net income	$	2,337		$	3,358		$	6,631		$	13,451
Other comprehensive income (loss):
Unrealized gains (losses) on securities available for sale		3,465			(482	)		4,461			10,528
Taxes		(1,178	)		163			(1,516	)		(3,580	)
Net of tax amount		2,287			(319	)		2,945			6,948
Reclassification adjustment for gains included in net income		(4	)		(2,958	)		(2,302	)		(5,638	)
Taxes		1			1,006			782			1,917
Net of tax amount		(3	)		(1,952	)		(1,520	)		(3,721	)
Total other comprehensive income (loss)		2,284			(2,271	)		1,425			3,227
Total comprehensive income	$	4,621		$	1,087		$	8,056		$	16,678

The accompanying notes to consolidated financial statements are an integral part of these statements.

5

FIRST NATIONAL COMMUNITY BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the Nine Months Ended September 30, 2015 and 2014

(unaudited)

	Number				Additional						Accumulated			Total
	of Common		Common		Paid-in			Accumulated			Comprehensive			Shareholders'
(in thousands, except per share data)	Shares		Stock		Capital			Deficit			(Loss) Income			Equity
Balances, December 31, 2013		16,471,569	$	20,589	$	61,627		$	(45,546	)	$	(3,092	)	$	33,578
Net income for the period		-		-		-			13,451			-			13,451
Restricted stock awards		-		-		65			-			-			65
Other comprehensive income, net of tax of $1,663		-		-		-			-			3,227			3,227
Balances, September 30, 2014		16,471,569	$	20,589	$	61,692		$	(32,095	)	$	135		$	50,321
Balances, December 31, 2014		16,484,419	$	20,605	$	61,781		$	(32,126	)	$	1,138		$	51,398
Net income for the period		-		-		-			6,631			-			6,631
Common shares issued under long-term incentive compensation plan		16,526		21		(21	)		-			-			-
Restricted stock awards		-		-		179			-			-			179
Other comprehensive income, net of tax of $734		-		-		-			-			1,425			1,425
Balances, September 30, 2015		16,500,945	$	20,626	$	61,939		$	(25,495	)	$	2,563		$	59,633

The accompanying notes to consolidated financial statements are an integral part of these statements.

6

FIRST NATIONAL COMMUNITY BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine Months Ended
	September 30,
(in thousands)	2015			2014
Operating activities:
Net income	$	6,631		$	13,451
Adjustments to reconcile net income to net cash provided by operating activities:
Investment securities amortization, net		1,173			953
Equity in trust		(5	)		(4	)
Depreciation and amortization		1,168			1,068
Stock-based compensation		179			65
Credit for loan and lease losses		(340	)		(5,629	)
Credit for off-balance sheet commitments		(27	)		(201	)
Gain on the sale of available-for-sale securities		(2,302	)		(5,638	)
Gain on the sale of held-to-maturity securities		-			(368	)
Gain on the sale of loans held for sale		(69	)		(223	)
Loss on the sale of education loans		-			13
Gain on branch divestitures		-			(607	)
Loss on the disposition of bank premises and equipment and other assets		-			352
Gain on the sale of other real estate owned		(145	)		(103	)
Valuation adjustment of other real estate owned		208			2,199
Income from bank-owned life insurance		(415	)		(496	)
Proceeds from the sale of loans held for sale		1,982			6,806
Funds used to originate loans held for sale		(1,352	)		(5,934	)
(Increase) decrease in accrued interest receivable		(543	)		33
Decrease (increase) in other assets		829			(64	)
Increase in accrued interest payable		925			1,783
Decrease in other liabilities		(2,221	)		(333	)
Total adjustments		(955	)		(6,328	)
Net cash provided by operating activities		5,676			7,123
Cash flows from investing activities:
Maturities, calls and principal payments of available-for-sale securities		7,326			5,965
Proceeds from the sale of available-for-sale securities		78,765			78,582
Proceeds from the sale of held-to-maturity securities		-			2,686
Purchases of available-for-sale securities		(113,042	)		(88,528	)
Purchase of Federal Home Loan Bank of Pittsburgh stock		(1,495	)		(2,210	)
Proceeds from the sale of education loans		-			2,537
Net increase in loans to customers		(58,975	)		(33,095	)
Proceeds from the sale of other real estate owned		697			1,268
Proceeds from the sale of bank premises and equipment		-			2,504
Purchases of property and equipment		(1,175	)		(982	)
Net cash used in investing activities		(87,899	)		(31,273	)
Cash flows from financing activities:
Net increase (decrease) in deposits		56,706			(81,076	)
Net proceeds from Federal Home Loan Bank of Pittsburgh advances - overnight		19,500			-
Proceeds from Federal Home Loan Bank of Pittsburgh advances - term		142,947			194,235
Repayment of Federal Home Loan Bank of Pittsburgh advances - term		(130,583	)		(152,572	)
Principal reduction on subordinated debentures		(11,000	)		-
Net cash provided by (used in) financing activities		77,570			(39,413	)
Net decrease in cash and cash equivalents		(4,653	)		(63,563	)
Cash and cash equivalents at beginning of period		35,667			103,556
Cash and cash equivalents at end of period	$	31,014		$	39,993
Supplemental cash flow information
Cash paid during the period for:
Interest	$	2,885		$	2,841
Income taxes		22			238
Other transactions:
Principal balance of loans transferred to other real estate owned		149			13
Principal balance of loans transferred to held for sale		4,592			-
Bank premises transferred to other real estate owned		-			1,749
Change in deferred gain on sale of other real estate owned		(26	)		27

The accompanying notes to consolidated financial statements are an integral part of these statements.

7

FIRST NATIONAL COMMUNITY BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1.     Basis of Presentation

The consolidated financial statements are comprised of the accounts of First National Community Bancorp, Inc., and its wholly owned subsidiary, First National Community Bank (the “Bank”), as well as the Bank’s wholly owned subsidiaries (collectively, the “Company”). The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”) and general practices within the banking industry. In the opinion of management, all adjustments necessary for a fair presentation of the results for the three and nine month periods ended September 30, 2015 have been included in the consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. Prior period amounts have been reclassified when necessary to conform to the current period’s presentation. These reclassifications did not have an impact on the operating results or financial position of the Company. The operating results and financial position of the Company for the three and nine months ended September 30, 2015 may not be indicative of its future results of operations and financial position.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to change in the near term are the allowance for loan and lease losses (“ALLL”), investment security valuations, the evaluation of investment securities and other real estate owned (“OREO”) for impairment, and the evaluation of deferred income taxes.

These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s audited financial statements, included in its Annual Report filed on Form 10-K as of and for the year ended December 31, 2014 (the “2014 Form 10-K”) and the Company’s Quarterly Reports filed on Form 10-Q for the periods ended March 31, 2015 and June 30, 2015.

Note 2.New Authoritative Accounting Guidance

Accounting Standards Update (“ASU”) 2014-04, Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40): “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure,” clarifies that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (a) the creditor obtaining legal title to residential real estate property upon completion of a foreclosure or (b) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The adoption of this guidance on January 1, 2015 did not have a material effect on the operating results or financial position of the Company.

ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” changes the criteria for reporting a discontinued operation. Under the new guidance, a disposal of a component of an entity or group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on the entity’s operations and financial results. This new guidance reduces complexity by removing the complex and extensive implementation guidance and illustrations that are necessary to apply the current definition of a discontinued operation. The new guidance also requires expanded disclosures about discontinued operations that will provide users with more information about the assets, liabilities, revenues and expenses of a discontinued operation and will require pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting, which will provide users with information about the ongoing trends in a reporting organization’s results from continuing operations. The adoption of this guidance on January 1, 2015 did not have a material effect on the operating results or financial position of the Company.

ASU 2014-11, Transfers and Servicing (Topic 860): “Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures,” changes the accounting for repurchase-to-maturity transactions and repurchase financing arrangements by aligning the accounting for these transactions with the accounting for other typical repurchase agreements. Going forward, these transactions would all be accounted for as secured borrowings. The new guidance eliminates sale accounting for repurchase-to-maturity transactions and supersedes the guidance under which a transfer of a financial assets and a contemporaneous repurchase financing could be accounted for on a combined basis as a forward arrangement, which has resulted in outcomes referred to as off-balance sheet accounting. ASU 2014-11 also requires a new disclosure for transactions economically similar to repurchase agreements in which the transferor retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction, and requires expanded disclosure about the nature of the collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The adoption of this guidance on January 1, 2015 did not have a material effect on the operating results or financial position of the Company.

8

ASU 2014-14, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): “Classification of Certain Government-Guaranteed Mortgage Loans Upon Foreclosure,” requires that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if the following conditions are met: (1) the loan has a government guarantee that is not separable from the loan before foreclosure; (2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim; and (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The adoption of this guidance on January 1, 2015 did not have a material effect on the operating results or financial position of the Company.

Accounting Guidance to be Adopted in Future Periods

ASU 2014-09, Revenue from Contracts with Customers (Topic 606): Section A, “Summary and Amendments That Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs-Contract with Customers (Subtopic 340-40);” Section B, “Conforming Amendments to Other Topics and Subtopics in the Codification and Status Tables;” and Section C, “Background Information and Basis for Conclusions,” provides a robust framework for addressing revenue recognition issues, upon its effective date, replaces almost all existing revenue recognition guidance, including industry specific guidance, in current GAAP. The core principle of ASU 2014-09 is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 will also result in enhanced interim and annual disclosures, both qualitative and quantitative, about revenue in order to help financial statement users understand the nature, amount, timing and uncertainty of revenue and related cash flows. ASU 2014-09 is effective in annual reporting periods beginning after December 15, 2016 and the interim periods within that year for public business entities, not-for-profit entities that have issued, or are conduit bond obligors for, securities that are traded, listed or quoted on an exchange or over-the-counter market and employee benefit plans that file or furnish financial statements to the SEC. On August 12, 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): “Deferral of the Effective Date,” which defers the adoption of ASU 2014-09 for one year for all entities. Accordingly, the Company will adopt this guidance on January 1, 2018 in accordance with ASU 2015-14, and is currently evaluating the effect this guidance may have on its operating results or financial position.

ASU 2014-12, Compensation – Stock Compensation (Topic 718): “Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period,” requires a performance target that affects vesting and that can be achieved after the requisite service period to be treated as a performance condition. To account for such awards, an entity should apply existing guidance as it relates to awards with performance conditions that affect vesting. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent compensation cost attributable to the period(s) for which the requisite service already has been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service periods. The total amount of compensation cost should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. ASU 2014-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The adoption of this guidance on January 1, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” defines management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and provide guidance for related footnote disclosures. ASU 2014-15 requires an entity’s management to assess the entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically ASU 2014-15: (1) provides a definition of the term substantial doubt; (2) requires an evaluation as to whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable); (3) provides principles for considering the mitigating effect of management’s plans; (4) requires certain disclosures when substantial doubt is alleviated; and (5) require an express statement and other disclosures when substantial doubt is not alleviated. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of this guidance on December 31, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

9

ASU 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items,” will alleviate uncertainty for preparers, auditors and regulators because auditors and regulators will no longer be required to evaluate whether a preparer presented an unusual and/or infrequent item appropriately. Although ASU 2015-01 eliminates the concept of extraordinary items, the presentation and disclosure guidance for items that are unusual in nature or infrequent in occurrence has been retained and has been expanded to include items that are both unusual in nature or infrequent in occurrence. The nature and financial effects of each event or transaction is required to be presented as a separate component of income from continuing operations or, alternatively, in the notes to the financial statements. ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption of this guidance is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The adoption of this guidance on January 1, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

ASU 2015-02, Consolidation (Topic 810): “Amendments to the Consolidation Analysis,” improves targeted areas of the consolidation guidance and reduces the number of consolidation models. The new consolidation standard changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable interest entity (“VIE”), and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. It also eliminates the VIE consolidation model based on majority exposure to variability that applied to certain investment companies and similar entities. ASU 2015-02 is effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The adoption of this guidance on January 1, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): “Simplifying the Presentation of Debt Issuance Costs,” more closely aligns the presentation of debt issuance costs under U.S. GAAP with the presentation under comparable IFRS standards. Under ASU 2015-03, debt issuance costs related to a recognized debt liability will no longer be recorded as a separate asset, but will be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. The costs will continue to be amortized to interest expense using the effective interest method. ASU 2015-03 is effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, and requires retrospective application to all prior periods presented in the financial statements. Early adoption of this guidance is permitted. The adoption of this guidance on January 1, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

ASU 2015-05, Intangibles – Goodwill and Other Internal-Use Software (Subtopic 350-40): “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” provides explicit guidance on a customer’s accounting for fees paid in a cloud computing environment. Specifically, the amendments in this ASU provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU 2015-05 is effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption of this guidance is permitted. The adoption of this guidance on January 1, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

Note 3.     Regulatory Matters

The Bank was under a Consent Order (the “Order”) from the Office of the Comptroller of the Currency (“OCC”) dated September 1, 2010. On March 25, 2015, after meeting all of the requirements of the Order, the Bank was fully and completely released from the Order. The Company was subject to a Written Agreement (the “Written Agreement”) with the Federal Reserve Bank of Philadelphia (the “Reserve Bank”) dated November 24, 2010. On September 8, 2015, the Company was notified by the Reserve Bank that effective September 2, 2015 it had been fully and completely released from the Written Agreement.

The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices must be met. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

In July 2013, the Federal Reserve, the OCC and the FDIC approved the final Basel III capital framework for U.S. banking organizations (the “Regulatory Capital Rules”) implementing regulatory capital reforms and changes required by the Dodd-Frank Act.

10

The Regulatory Capital Rules are effective on January 1, 2014; however, the mandatory compliance date for the Company and the Bank as “standardized approach” banking organizations began on January 1, 2015 and is subject to transitional provisions extending to January 1, 2019. The Regulatory Capital Rules include new risk-based capital and leverage ratios and refine the definition of what constitutes “capital” for purposes of calculating those ratios. The new minimum capital level requirements applicable to the Company and the Bank under the Regulatory Capital Rules are:

● a total risk-based capital ratio of 8.00% (unchanged from current rules);

● a Tier I risk-based capital ratio of 6.00% (increased from 4.00%);

● a new common equity Tier I risk-based capital ratio of 4.50%; and

● a Tier I capital to average assets (“Tier I leverage ratio”) of 4.00% for all institutions.

The Regulatory Capital Rules also establish a “capital conservation buffer” above the new regulatory minimum capital requirements, which must consist entirely of common equity Tier I capital and result in the following minimum ratios effective January 1, 2019:

● a total risk-based capital ratio of 10.50%.

● a Tier I risk-based capital ratio of 8.50%; and

● a common equity Tier I risk-based capital ratio of 7.00%;

The new capital conservation buffer requirement will be phased in beginning in January 2016 at 0.625% of risk-weighted assets and will increase by that amount each year until fully implemented in January 2019 at 2.50%. An institution will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations will establish a maximum percentage of eligible retained income that could be utilized for such actions.

The Regulatory Capital Rules also implement revisions and clarifications consistent with Basel III regarding the various components of Tier I capital, including common equity, unrealized gains and losses, as well as certain instruments that will no longer qualify as Tier I capital, some of which will be phased out over time.

The Regulatory Capital Rules also revise the prompt corrective action framework, which is designed to place restrictions on insured depository institutions, including the Bank, if their capital levels begin to show signs of weakness. These revisions took effect January 1, 2015. Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions are required to meet the following increased capital level requirements in order to qualify as “well capitalized”:

● a total risk-based capital ratio of 10.00% (unchanged from current rules);

● a Tier I risk-based capital ratio of 8.00% (increased from 6.00%);

● a new common equity Tier I risk-based capital ratio of 6.50%; and

● a Tier I leverage ratio of 5.00%.

The Regulatory Capital Rules set forth certain changes for the calculation of risk-weighted assets, which are required to be utilized beginning January 1, 2015. The provisions applicable to banking organizations under the “standardized approach” include changes with respect to risk weights for commercial real estate loans, past due exposures and conversion factors for commitments with an original maturity of one year or less.

Current quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total capital, Tier I capital, and Tier I common equity (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined).

11

The Company’s and the Bank’s actual capital positions at September 30, 2015 and December 31, 2014 are presented in the following table:

Capital Analysis

	September 30,		December 31,
(in thousands)	2015		2014
Company:
Tier I common equity	$	56,964	N/A
Tier I capital		66,964	$	59,930
Tier II capital:
Subordinated notes		9,800		25,000
Allowable portion of allowance for loan and lease losses		9,650		8,591
Total tier II capital		19,450		33,591
Total risk-based capital		86,414		93,521
Total risk-weighted assets	$	771,395	$	683,956
Total average assets (for Tier I leverage ratio)	$	1,019,307	$	990,346
Bank:
Tier I common equity	$	92,821	N/A
Tier I capital		92,821	$	96,816
Tier II capital:
Allowable portion of allowance for loan and lease losses		9,645		8,587
Total tier II capital		9,645		8,587
Total risk-based capital		102,466		105,403
Total risk-weighted assets	$	771,002	$	683,576
Total average assets (for Tier I leverage ratio)	$	1,018,916	$	990,407

12

The following tables present summary information regarding the Company’s and the Bank’s risk-based capital and related ratios at September 30, 2015 and December 31, 2014:

	Company					Bank					Minimum Required For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Regulations*
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Ratio			Ratio
September 30, 2015
Total capital (to risk-weighted assets)	$	86,414		11.20	%	$	102,466		13.29	%		8.00	%		10.00	%
Tier I capital (to risk-weighted assets)		66,964		8.68	%		92,821		12.04	%		6.00	%		8.00	%
Tier I common equity (to risk-weighted assets)		56,964		7.38	%		92,821		12.04	%		4.50	%		6.50	%
Tier I capital (to average assets)		66,964		6.57	%		92,821		9.11	%		4.00	%		5.00	%

	Company					Bank					Minimum  Required For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Regulations*
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Ratio			Ratio
December 31, 2014
Total capital (to risk-weighted assets)	$	93,521		13.67	%	$	105,403		15.42	%		8.00	%		10.00	%
Tier I capital (to risk-weighted assets)		59,930		8.76	%		96,816		14.16	%		4.00	%		6.00	%
Tier I capital (to average assets)		59,930		6.05	%		96,816		9.78	%		4.00	%		5.00	%

*Applies to the Bank only.

Note 4.     Loans

The following table summarizes loans receivable, net, by category at September 30, 2015 and December 31, 2014:

	September 30,			December 31,
(in thousands)	2015			2014
Residential real estate	$	129,444		$	122,832
Commercial real estate		249,526			233,473
Construction, land acquisition and development		25,516			18,835
Commercial and industrial		142,425			132,057
Consumer		132,418			122,092
State and political subdivisions		42,219			40,205
Total loans, gross		721,548			669,494
Unearned income		(104	)		(98	)
Net deferred loan costs		1,722			871
Allowance for loan and lease losses		(9,825	)		(11,520	)
Loans, net	$	713,341		$	658,747

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The Company has granted loans, letters of credit and lines of credit to certain executive officers and directors of the Company as well as to certain related parties of executive officers and directors. These loans, letters of credit and lines of credit were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and, when made, did not involve more than the normal risk of collectability. See Note 11 to these consolidated financial statements for more information about related party transactions.

The Company originates one- to four-family mortgage loans for sale in the secondary market. During the three and nine month periods ended September 30, 2015, the Company sold $0.3 million and $1.9 million, respectively, of one- to four-family mortgages. The Company retains servicing rights on these mortgages. During 2015, as part of its asset/liability management strategy, the Company opted to retain up to $10.0 million in residential mortgages in the loan portfolio. Based on a change in strategy during the third quarter, the Company elected to transfer $4.6 million of loans previously retained in the portfolio to held for sale at September 30, 2015 and to sell, on the secondary market, all eligible residential mortgages originated going forward. The Company had $4.6 million and $603 thousand in residential mortgage loans held-for-sale at September 30, 2015 and December 31, 2014, respectively.

The Company sold substantially all of its education loans, which are categorized as consumer loans, to a third party during the nine months ended September 30, 2014. The education loans had a recorded investment of $2.6 million at the time of sale. The Company recognized a loss of $13 thousand upon the sale of these loans which is included in non-interest income for the nine months ended September 30, 2014.

The Company does not have any lending programs commonly referred to as subprime lending. Subprime lending generally targets borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios.

See Note 2 to the Company’s consolidated financial statements included in the 2014 Form 10-K for information about the risk characteristics related to the Company’s loan segments.

The Company provides for loan losses based on the consistent application of its documented ALLL methodology. Loan losses are charged to the ALLL and recoveries are credited to it. Additions to the ALLL are provided by charges against income based on various factors which, in management’s judgment, deserve current recognition of estimated probable losses. Loan losses are charged-off in the period the loans, or portions thereof, are deemed uncollectible. Generally, the Company will record a loan charge-off (including a partial charge-off) to reduce a loan to the estimated recoverable amount based on its methodology detailed below. The Company regularly reviews the loan portfolio and makes adjustments for loan losses in order to maintain the ALLL in accordance with GAAP. The ALLL consists primarily of the following two components:

(1) Specific allowances are established for impaired loans, which are defined by the Company as all loan relationships with an aggregate outstanding balance greater than $100 thousand that are rated substandard and on non-accrual status, rated doubtful or loss, and all troubled debt restructured loans (“TDRs”). The amount of impairment provided for as an allowance is represented by the deficiency, if any, between the carrying value of the loan and either (a) the present value of expected future cash flows discounted at the loan’s effective interest rate, (b) the loan’s observable market price, or (c) the fair value of the underlying collateral, less estimated costs to sell, for collateral dependent loans. Impaired loans that have no impairment losses are not considered for general valuation allowances described below. If the Company determines that collection of the impairment amount is remote, the Company will record a charge-off.

(2) General allowances are established for loan losses on a portfolio basis for loans that do not meet the definition of impaired. The Company divides its portfolio into loan segments for loans exhibiting similar characteristics. Loans rated special mention or substandard and accruing, which are embedded in these loan segments, are then separated from these loan segments. These loans are then subject to an analysis placing increased emphasis on the credit risk associated with these specific loans. The Company applies an estimated loss rate to each loan segment. The loss rates applied are based on the Company’s own historical loss experience based on the loss rate for each segment of loans with similar risk characteristics in its portfolio. In addition, management evaluates and applies certain qualitative or environmental factors that are likely to cause estimated credit losses associated with the Company’s existing portfolio to differ from historical experience, which are discussed below. This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant revisions based upon changes in economic and real estate market conditions. Actual loan losses may be significantly more than the ALLL that is established, which could have a material negative effect on the Company’s operating results or financial condition.

14

Management makes adjustments for loan losses based on its evaluation of several qualitative and environmental factors, including but not limited to:

● changes in national, local, and business economic conditions and developments, including the condition of various market segments;

● changes in the nature and volume of the Company’s loan portfolio;

● changes in the Company’s lending policies and procedures, including underwriting standards, collection, charge-off and recovery practices and results;

● changes in the experience, ability and depth of the Company’s lending management and staff;

● changes in the quality of the Company's loan review system and the degree of oversight by the Company’s Board of Directors;

● changes in the trend of the volume and severity of past due and classified loans, including trends in the volume of non-accrual loans, troubled debt restructurings and other loan modifications;

● the existence and effect of any concentrations of credit and changes in the level of such concentrations;

● the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the Company's current loan portfolio; and

● analysis of customers’ credit quality, including knowledge of their operating environment and financial condition.

Each quarter, management evaluates the ALLL and adjusts the ALLL as appropriate through a provision for loan losses. While the Company uses the best information available to make evaluations, future adjustments to the ALLL may be necessary if conditions differ substantially from the information used in making the evaluations. In addition, as an integral part of its examination process, the OCC periodically reviews the Company’s ALLL. The OCC may require the Company to adjust the ALLL based on its analysis of information available to it at the time of its examination.

Based on its evaluation of the ALLL, management established an unallocated reserve of $68 thousand and $45 thousand at September 30, 2015 and December 31, 2014, respectively. As previously mentioned, as part of its evaluation, management applies loss rates to each loan segment of the loan portfolio for each quarter over the previous three years, which have resulted in overall negative historical loss factors and consequently related negative provisions for the commercial and industrial loan segment at September 30, 2015 and the construction, land acquisition and development loan segment at December 31, 2014. Based on the higher risk characteristics inherent in this segment of the portfolio, management reversed the negative provisions related to the negative historical loss factors and established the unallocated reserves.

The following table summarizes activity in the ALLL, by loan category, for the three and nine months ended September 30, 2015 and 2014:

	Real Estate
(in thousands)	Residential Real Estate			Commercial Real Estate			Construction, Land Acquisition and Development			Commercial and Industrial			Consumer			State and Political Subdivisions			Unallocated		Total
Three months ended September 30, 2015:
Allowance for loan losses:
Beginning balance, July 1, 2015	$	1,484		$	4,041		$	778		$	1,878		$	1,643		$	504		$	-	$	10,328
Charge-offs		(66	)		-			(683	)		(21	)		(198	)		-			-		(968	)
Recoveries		23			278			-			140			215			-			-		656
Provisions (credits)		(132	)		(84	)		874			(738	)		(147	)		(32	)		68		(191	)
Ending balance, September 30, 2015	$	1,309		$	4,235		$	969		$	1,259		$	1,513		$	472		$	68	$	9,825
Three months ended September 30, 2014:
Allowance for loan losses:
Beginning balance, July 1, 2014	$	2,112		$	5,133		$	923		$	1,758		$	1,681		$	568		$	-	$	12,175
Charge-offs		(67	)		-			-			(22	)		(270	)		-			-		(359	)
Recoveries		9			-			-			69			58			-			-		136
Provisions (credits)		(307	)		128			(148	)		-			258			15			-		(54	)
Ending balance, September 30, 2014	$	1,747		$	5,261		$	775		$	1,805		$	1,727		$	583		$	-	$	11,898
Nine months ended September 30, 2015:
Allowance for loan losses:
Beginning balance, January 1, 2015	$	1,772		$	4,663		$	665		$	2,104		$	1,673		$	598		$	45	$	11,520
Charge-offs		(135	)		(912	)		(689	)		(163	)		(538	)		-			-		(2,437	)
Recoveries		34			296			-			307			445			-			-		1,082
Provisions (credits)		(362	)		188			993			(989	)		(67	)		(126	)		23		(340	)
Ending balance, September 30, 2015	$	1,309		$	4,235		$	969		$	1,259		$	1,513		$	472		$	68	$	9,825
Nine months ended September 30, 2014:
Allowance for loan losses:
Beginning balance, January 1, 2014	$	2,287		$	6,017		$	924		$	2,321		$	1,789		$	679		$	-	$	14,017
Charge-offs		(152	)		-			-			(172	)		(637	)		-			-		(961	)
Recoveries		79			355			3,539			195			303			-			-		4,471
Provisions (credits)		(467	)		(1,111	)		(3,688	)		(539	)		272			(96	)		-		(5,629	)
Ending balance, September 30, 2014	$	1,747		$	5,261		$	775		$	1,805		$	1,727		$	583		$	-	$	11,898

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The following table represents the allocation of the ALLL and the related loan balance, by loan category, disaggregated based on the impairment methodology at September 30, 2015 and December 31, 2014:

	Real Estate
(in thousands)	Residential Real Estate		Commercial Real Estate		Construction, Land Acquisition and Development		Commercial and Industrial		Consumer		State and Political Subdivisions		Unallocated		Total
September 30, 2015
Allowance for loan losses:
Individually evaluated for impairment	$	5	$	303	$	-	$	-	$	2	$	-	$	-	$	310
Collectively evaluated for impairment		1,304		3,932		969		1,259		1,511		472		68		9,515
Total	$	1,309	$	4,235	$	969	$	1,259	$	1,513	$	472	$	68	$	9,825
Loans receivable:
Individually evaluated for impairment	$	2,386	$	7,470	$	704	$	207	$	353	$	-	$	-	$	11,120
Collectively evaluated for impairment		127,058		242,056		24,812		142,218		132,065		42,219		-		710,428
Total	$	129,444	$	249,526	$	25,516	$	142,425	$	132,418	$	42,219	$	-	$	721,548
December 31, 2014
Allowance for loan losses:
Individually evaluated for impairment	$	51	$	331	$	1	$	-	$	1	$	-	$	-	$	384
Collectively evaluated for impairment		1,721		4,332		664		2,104		1,672		598		45		11,136
Total	$	1,772	$	4,663	$	665	$	2,104	$	1,673	$	598	$	45	$	11,520
Loans receivable:
Individually evaluated for impairment	$	2,487	$	6,660	$	256	$	32	$	361	$	-	$	-	$	9,796
Collectively evaluated for impairment		120,345		226,813		18,579		132,025		121,731		40,205		-		659,698
Total	$	122,832	$	233,473	$	18,835	$	132,057	$	122,092	$	40,205	$	-	$	669,494

Credit Quality Indicators – Commercial Loans

Management continuously monitors the credit quality of the Company’s commercial loans by regularly reviewing certain credit quality indicators. Management utilizes credit risk ratings as the key credit quality indicator for evaluating the credit quality of the Company’s loan receivables.

The Company’s commercial loan classification and credit grading processes are part of the lending, underwriting, and credit administration functions to ensure an ongoing assessment of credit quality. Accurate and timely loan classification and credit grading is a critical component of loan portfolio management. Loan officers are required to review their loan portfolio risk ratings regularly for accuracy. The loan review function uses the same risk rating system in the loan review process. Quarterly, the Company engages an independent third party to assess the quality of the loan portfolio and evaluate the accuracy of ratings with the loan officer’s and management’s assessment.

A formal loan classification and credit grading system reflects the risk of default and credit losses. A written description of the risk ratings is maintained that includes a discussion of the factors used to assign appropriate classifications of credit grades to loans. The process identifies groups of loans that warrant the special attention of management. The risk grade groupings provide a mechanism to identify risk within the loan portfolio and provide management and the Board with periodic reports by risk category. The credit risk ratings play an important role in the establishment and evaluation of the provision for loan and lease losses and the ALLL. After determining the historical loss factor which is adjusted for qualitative and environmental factors for each portfolio segment, the portfolio segment balances that have been collectively evaluated for impairment are multiplied by the general reserve loss factor for the respective portfolio segments to determine the general reserve. Loans that have an internal credit rating of special mention or substandard follow the same process; however, the qualitative and environmental factors are further adjusted for the increased risk.

The Company utilizes a loan rating system that assigns a degree of risk to commercial loans based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. Management analyzes these non-homogeneous loans individually by grading the loans as to credit risk and probability of collection for each type of loan. Commercial loans include commercial indirect auto loans which are not individually risk rated, and construction, land acquisition and development loans include residential construction loans which are also not individually risk rated. These loans are monitored on a pool basis due to their homogeneous nature as described in “Credit Quality Indicators – Other Loans” below. The Company risk rates certain residential real estate loans and consumer loans that are part of a larger commercial relationship using its credit grading system as described in “Credit Quality Indicators – Commercial Loans.” The grading system contains the following basic risk categories:

16 

1. Minimal Risk

2. Above Average Credit Quality

3. Average Risk

4. Acceptable Risk

5. Pass - Watch

6. Special Mention

7. Substandard - Accruing

8. Substandard - Non-Accrual

9. Doubtful

10. Loss

This analysis is performed on a quarterly basis using the following definitions for risk ratings:

Pass - Assets rated 1 through 5 are considered pass ratings. These assets show no current or potential problems and are considered fully collectible. All such loans are considered collectively for ALLL calculation purposes. However, accruing TDRs that have been performing for an extended period of time, do not represent a higher risk of loss, and have been upgraded to a pass rating are evaluated individually for impairment.

Special Mention – Assets classified as special mention assets do not currently expose the Company to a sufficient degree of risk to warrant an adverse classification but do possess credit deficiencies or potential weaknesses deserving close attention.  Special Mention assets have a potential weakness or pose an unwarranted financial risk which, if not corrected, could weaken the asset and increase risk in the future.

Substandard - Assets classified as substandard have well defined weaknesses based on objective evidence, and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful - Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable and improbable based on current circumstances.

Loss - Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted.

17

Credit Quality Indicators – Other Loans

Certain residential real estate loans, consumer loans, and commercial indirect auto loans are monitored on a pool basis due to their homogeneous nature. Loans that are delinquent 90 days or more are placed on non-accrual status unless the collection of the loan is in process and reasonably assured. The Company utilizes accruing versus non-accrual status as the credit quality indicator for these loan pools. The following tables present the recorded investment in loans receivable by loan category and credit quality indicator at September 30, 2015 and December 31, 2014:

Credit Quality Indicators
September 30, 2015
	Commercial Loans												Other Loans
			Special								Subtotal		Accruing		Non-accrual		Subtotal		Total
	Pass		Mention		Substandard		Doubtful		Loss		Commercial		Loans		Loans		Other		Loans
Residential real estate	$	21,120	$	405	$	993	$	-	$	-	$	22,518	$	106,411	$	515	$	106,926	$	129,444
Commercial real estate		224,342		13,371		11,813		-		-		249,526		-		-		-		249,526
Construction, land acquisition and development		18,157		362		6,068		-		-		24,587		929		-		929		25,516
Commercial and industrial		134,970		935		2,399		-		-		138,304		4,116		5		4,121		142,425
Consumer		3,101		15		116		-		-		3,232		129,045		141		129,186		132,418
State and political subdivisions		41,604		120		495		-		-		42,219		-		-		-		42,219
Total	$	443,294	$	15,208	$	21,884	$	-	$	-	$	480,386	$	240,501	$	661	$	241,162	$	721,548

Credit Quality Indicators
December 31, 2014
	Commercial Loans												Other Loans
			Special								Subtotal		Accruing		Non-accrual		Subtotal		Total
	Pass		Mention		Substandard		Doubtful		Loss		Commercial		Loans		Loans		Other		Loans
Residential real estate	$	19,892	$	451	$	1,077	$	-	$	-	$	21,420	$	100,576	$	836	$	101,412	$	122,832
Commercial real estate		204,252		13,217		16,004		-		-		233,473		-		-		-		233,473
Construction, land acquisition and development		10,910		1,423		5,566		-		-		17,899		936		-		936		18,835
Commercial and industrial		122,261		1,962		2,397		-		-		126,620		5,437		-		5,437		132,057
Consumer		3,414		-		125		-		-		3,539		118,377		176		118,553		122,092
State and political subdivisions		38,685		925		595		-		-		40,205		-		-		-		40,205
Total	$	399,414	$	17,978	$	25,764	$	-	$	-	$	443,156	$	225,326	$	1,012	$	226,338	$	669,494

Included in loans receivable are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers. The recorded investment in these non-accrual loans was $6.7 million and $5.5 million at September 30, 2015 and December 31, 2014, respectively. Generally, loans are placed on non-accrual status when they become 90 days or more delinquent, and remain on non-accrual status until they are brought current, have six months of performance under the loan terms, and factors indicating reasonable doubt about the timely collection of payments no longer exist. Therefore, loans may be current in accordance with their loan terms, or may be less than 90 days delinquent and still be on a non-accrual status. There were no loans past due 90 days or more and still accruing at September 30, 2015 and December 31, 2014.

18

The following tables present the delinquency status of past due and non-accrual loans at September 30, 2015 and December 31, 2014:

	September 30, 2015
	Delinquency Status
	0-29 Days		30-59 Days		60-89 Days		>/= 90 Days
(in thousands)	Past Due		Past Due		Past Due		Past Due		Total
Performing (accruing) loans:
Real estate:
Residential real estate	$	128,558	$	147	$	4	$	-	$	128,709
Commercial real estate		243,837		95		276		-		244,208
Construction, land acquisition and development		25,147		-		-		-		25,147
Total real estate		397,542		242		280		-		398,064
Commercial and industrial		141,858		250		139		-		142,247
Consumer		130,792		1,245		240		-		132,277
State and political subdivisions		42,052		167		-		-		42,219
Total performing (accruing) loans		712,244		1,904		659		-		714,807
Non-accrual loans:
Real estate:
Residential real estate		406		63		-		266		735
Commercial real estate		1,634		-		119		3,565		5,318
Construction, land acquisition and development		-		369		-		-		369
Total real estate		2,040		432		119		3,831		6,422
Commercial and industrial		110		-		-		68		178
Consumer		36		33		6		66		141
State and political subdivisions		-		-		-		-		-
Total non-accrual loans		2,186		465		125		3,965		6,741
Total loans receivable	$	714,430	$	2,369	$	784	$	3,965	$	721,548

19

	December 31, 2014
	Delinquency Status
	0-29 Days		30-59 Days		60-89 Days		>/= 90 Days
(in thousands)	Past Due		Past Due		Past Due		Past Due		Total
Performing (accruing) loans:
Real estate:
Residential real estate	$	121,407	$	420	$	-	$	-	$	121,827
Commercial real estate		229,207		136		-		-		229,343
Construction, land acquisition and development		18,740		-		95		-		18,835
Total real estate		369,354		556		95		-		370,005
Commercial and industrial		131,621		90		135		-		131,846
Consumer		120,204		1,334		378		-		121,916
State and political subdivisions		40,205		-		-		-		40,205
Total peforming (accruing) loans		661,384		1,980		608		-		663,972
Non-accrual loans:
Real estate:
Residential real estate		495		99		17		394		1,005
Commercial real estate		288		3,628		19		195		4,130
Construction, land acquisition and development		-		-		-		-		-
Total real estate		783		3,727		36		589		5,135
Commercial and industrial		55		-		52		104		211
Consumer		42		-		58		76		176
State and political subdivisions		-		-		-		-		-
Total non-accrual loans		880		3,727		146		769		5,522
Total loans receivable	$	662,264	$	5,707	$	754	$	769	$	669,494

20

The following tables present a distribution of the recorded investment, unpaid principal balance and the related allowance for the Company’s impaired loans, which have been analyzed for impairment under ASC 310, at September 30, 2015 and December 31, 2014. Non-accrual loans, other than TDRs, with aggregate loan relationship balances less than the $100 thousand loan relationship threshold are not evaluated individually for impairment and are accordingly not included in the following tables. However, these loans are evaluated collectively for impairment as homogenous pools in the general allowance under ASC Topic 450. Total non-accrual loans, other than TDRs, with balances less than the $100 thousand loan relationship threshold, that were evaluated under ASC Topic 450 amounted to $0.7 million and $1.0 million at September 30, 2015 and December 31, 2014, respectively.

	September 30, 2015
			Unpaid
	Recorded		Principal		Related
(in thousands)	Investment		Balance		Allowance
With no allowance recorded:
Real estate:
Residential real estate	$	819	$	890	$	-
Commercial real estate		5,462		7,089		-
Construction, land acquisition and development		704		1,052		-
Total real estate		6,985		9,031		-
Commercial and industrial		207		236		-
Consumer		-		-		-
State and political subdivisions		-		-		-
Total impaired loans with no related allowance recorded		7,192		9,267		-
With a related allowance recorded:
Real estate:
Residential real estate		1,567		1,567		5
Commercial real estate		2,008		2,008		303
Construction, land acquisition and development		-		-		-
Total real estate		3,575		3,575		308
Commercial and industrial		-		-		-
Consumer		353		353		2
State and political subdivisions		-		-		-
Total impaired loans with a related allowance recorded		3,928		3,928		310
Total impaired loans:
Real estate:
Residential real estate		2,386		2,457		5
Commercial real estate		7,470		9,097		303
Construction, land acquisition and development		704		1,052		-
Total real estate		10,560		12,606		308
Commercial and industrial		207		236		-
Consumer		353		353		2
State and political subdivisions		-		-		-
Total impaired loans	$	11,120	$	13,195	$	310

21

	December 31, 2014
			Unpaid
	Recorded		Principal		Related
(in thousands)	Investment		Balance		Allowance
With no allowance recorded:
Real estate:
Residential real estate	$	385	$	410	$	-
Commercial real estate		4,401		5,024		-
Construction, land acquisition and development		68		68		-
Total real estate		4,854		5,502		-
Commercial and industrial		32		59		-
Consumer		-		-		-
State and political subdivisions		-		-		-
Total impaired loans with no related allowance recorded		4,886		5,561		-
With a related allowance recorded:
Real estate:
Residential real estate		2,102		2,137		51
Commercial real estate		2,259		2,259		331
Construction, land acquisition and development		188		188		1
Total real estate		4,549		4,584		383
Commercial and industrial		-		-		-
Consumer		361		361		1
State and political subdivisions		-		-		-
Total impaired loans with a related allowance recorded		4,910		4,945		384
Total impaired loans:
Real estate:
Residential real estate		2,487		2,547		51
Commercial real estate		6,660		7,283		331
Construction, land acquisition and development		256		256		1
Total real estate		9,403		10,086		383
Commercial and industrial		32		59		-
Consumer		361		361		1
State and political subdivisions		-		-		-
Total impaired loans	$	9,796	$	10,506	$	384

The total recorded investment in impaired loans, which consists of non-accrual loans with an aggregate loan relationship of greater than $100,000 and TDRs, amounted to $11.1 million and $9.8 million at September 30, 2015 and December 31, 2014, respectively. The related allowance recorded for impaired loans was $0.3 million and $0.4 million at September 30, 2015 and December 31, 2014, respectively.

22

The following table presents the average balance and interest income recognized on impaired loans by loan category for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2015				2014				2015				2014
	Average		Interest		Average		Interest		Average		Interest		Average		Interest
(in thousands)	Balance		Income (1)		Balance		Income (1)		Balance		Income (1)		Balance		Income (1)
Residential real estate	$	2,413	$	28	$	2,490	$	25	$	2,659	$	92	$	2,144	$	62
Commercial real estate		7,017		24		6,628		30		6,884		82		6,613		91
Construction, land acquisition and development		459		5		273		4		465		14		293		12
Total real estate		9,889		57		9,391		59		10,008		188		9,050		165
Commercial and industrial		140		1		66		-		142		1		98		-
Consumer		354		3		363		3		357		9		337		8
State and political subdivisions		-		-		-		-		-		-		-		-
Total impaired loans	$	10,383	$	61	$	9,820	$	62	$	10,507	$	198	$	9,485	$	173

(1) Interest income represents income recognized on performing TDRs. 

The additional interest income that would have been earned on non-accrual and restructured loans in accordance with their original terms approximated $112 thousand and $298 thousand for the three and nine months ended September 30, 2015, respectively, and $100 thousand and $307 thousand for the three and nine months ended September 30, 2014, respectively.

Troubled Debt Restructured Loans

TDRs at September 30, 2015 and December 31, 2014 were $9.4 million and $9.0 million, respectively. Accruing and non-accruing TDRs were $5.1 million and $4.3 million, respectively at September 30, 2015 and $5.3 million and $3.7 million, respectively at December 31, 2014. Approximately $310 thousand and $346 thousand in specific reserves have been established for these loans as of September 30, 2015 and December 31, 2014, respectively.

The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan, an extension of the maturity date, capitalization of real estate taxes, or a permanent reduction of the recorded investment in the loan.

23

The following tables show the pre- and post-modification recorded investment in loans modified as TDRs by loan category during the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30, 2015						Nine Months Ended September 30, 2015
			Pre-Modification		Post-Modification				Pre-Modification		Post-Modification
	Number		Outstanding		Outstanding		Number		Outstanding		Outstanding
	of		Recorded		Recorded		of		Recorded		Recorded
(dollars in thousands)	Contracts		Investments		Investments		Contracts		Investments		Investments
Troubled debt restructurings:
Residential real estate		-	$	-	$	-		5	$	810	$	827
Commercial real estate		-		-		-		1		1,654		742
Construction, land acquisition and development		-		-		-		1		96		96
Commercial and industrial		1		79		79		1		79		79
Consumer		-		-		-		-		-		-
State and political subdivisions		-		-		-		-		-		-
Total new troubled debt restructurings		1	$	79	$	79		8	$	2,639	$	1,744

	Three Months Ended September 30, 2014						Nine Months Ended September 30, 2014
			Pre-Modification		Post-Modification				Pre-Modification		Post-Modification
	Number		Outstanding		Outstanding		Number		Outstanding		Outstanding
	of		Recorded		Recorded		of		Recorded		Recorded
(dollars in thousands)	Contracts		Investments		Investments		Contracts		Investments		Investments
Troubled debt restructurings:
Residential real estate		6	$	411	$	413		12	$	780	$	862
Commercial real estate		-		-		-		4		238		238
Construction, land acquisition and development		-		-		-		-		-		-
Commercial and industrial		-		-		-		-		-		-
Consumer		-		-		-		2		182		187
State and political subdivisions		-		-		-		-		-		-
Total new troubled debt restructurings		6	$	411	$	413		18	$	1,200	$	1,287

During the nine months ended September 30, 2015, there was one commercial real estate loan that was modified with a recorded investment prior to modification of $1.7 million. Pursuant to the modification, management conducted an analysis and determined that there was impairment on the loan. Accordingly, the Company recorded a $912 thousand partial charge-off related to this TDR.

Although the eight loans modified as TDRs during the nine months ended September 30, 2015 did not result in an increase to the specific reserve in the ALLL at September 30, 2015, charge-offs resulting from the modified TDRs totaled $912 thousand for the nine months ended September 30, 2015.

24

The following tables present the types of modifications made during the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30, 2015										Nine Months Ended September 30, 2015
(in thousands)	Extension of Term		Extension of Term and Capitalization of Taxes		Capitalization of Taxes		Principal Forbearance		Total Modifications		Extension of Term		Extension of Term and Capitalization of Taxes		Capitalization of Taxes		Principal Forbearance		Total Modifications
Type of modification:
Residential real estate	$	-	$	-	$	-	$	-	$	-	$	709	$	118	$	-	$	-	$	827
Commercial real estate		-		-		-		-		-		-		-		-		1,654		1,654
Construction, land acquisition and development		-		-		-		-		-		96		-		-		-		96
Commercial and industrial		-		-		-		79		79		-		-		-		79		79
Consumer		-		-		-		-		-		-		-		-		-		-
State and political subdivisions		-		-		-		-		-		-		-		-		-		-
Total modifications	$	-	$	-	$	-	$	79	$	79	$	805	$	118	$	-	$	1,733	$	2,656

	Three Months Ended September 30, 2014										Nine Months Ended September 30, 2014
(in thousands)	Extension of Term		Extension of Term and Capitalization of Taxes		Capitalization of Taxes		Principal Forbearance		Total Modifications		Extension of Term		Extension of Term and Capitalization of Taxes		Capitalization of Taxes		Principal Forbearance		Total Modifications
Type of modification:
Residential real estate	$	148	$	40	$	-	$	225	$	413	$	263	$	339	$	35	$	225	$	862
Commercial real estate		-		-		-		-		-		238		-		-		-		238
Construction, land acquisition and development		-		-		-		-		-		-		-		-		-		-
Commercial and industrial		-		-		-		-		-		-		-		-		-		-
Consumer		-		-		-		-		-		135		52		-		-		187
State and political subdivisions		-		-		-		-		-		-		-		-		-		-
Total modifications	$	148	$	40	$	-	$	225	$	413	$	636	$	391	$	35	$	225	$	1,287

There were no TDRs that re-defaulted (defined as past due 90 days) during the three months ended September 30, 2015. There was one TDR with a recorded investment of $3.5 million that re-defaulted during the nine months ended September 30, 2015. The re-default did not occur within one year of the original modification. There were no TDRs which re-defaulted during the three and nine months ended September 30, 2014 and for which the payment re-default occurred within one year of the modification.

Note 5. Other Real Estate Owned

The following table presents the composition of OREO at September 30, 2015 and December 31, 2014:

	September 30,		December 31,
(in thousands)	2015		2014
Land/lots	$	803	$	1,287
Commercial real estate		788		941
Residential real estate		27		27
Total other real estate owned	$	1,618	$	2,255

25

The following table presents the activity in OREO for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2015			2014			2015			2014
Balance, beginning of period	$	1,740		$	3,182		$	2,255		$	4,246
Property foreclosures		-			-			149			13
Bank premises transferred to OREO		-			-			-			1,749
Valuation adjustments		(78	)		(429	)		(208	)		(2,199	)
Carrying value of OREO sold		(44	)		(136	)		(578	)		(1,192	)
Balance, end of period	$	1,618		$	2,617		$	1,618		$	2,617

At September 30, 2015, OREO consisted of 10 properties with an aggregate carrying value of $1.6 million, a decrease of $0.7 million, or 28.2%, from $2.3 million at December 31, 2014.  There were two properties with a carrying value of $149 thousand foreclosed upon during the nine months ended September 30, 2015. Comprising $1.4 million, or 85.0%, of the outstanding balance of OREO at September 30, 2015 were three properties that were originally held in bank premises and equipment and due to a change in strategic purpose were transferred to OREO in 2014.

During the nine months ended September 30, 2015, there were six sales and one partial sale of properties with an aggregate carrying value of $0.6 million. The Company realized net gains on the sale of these properties of $145 thousand, which is included in non-interest income. During the nine months ended September 30, 2014, the Company foreclosed on one property with a carrying value of $13 thousand. There were five sales and two partial sales of properties with an aggregate carrying value of $1.2 million during the nine months ended September 30, 2014. The Company realized net gains on the sale of these properties of $103 thousand for the nine months ended September 30, 2014, which is included in non-interest income.

During the nine months ended September 30, 2014, the Company transferred four properties located in Monroe County, Pennsylvania, including its former Stroudsburg office and three pieces of vacant land from bank premises and equipment to OREO for disposition due to a change in strategic purpose. At the time of transfer, the four properties had an aggregate carrying value of $3.4 million. During the nine months ended September 30, 2014, one of the properties was subsequently sold and two of the other properties, the Stroudsburg property and one of the parcels, were written down in aggregate $1.2 million to their appraised values, less cost to sell. During the nine months ended September 30, 2015, these three remaining properties were reappraised, and due to continued decline in real estate values in Monroe County, Pennsylvania, the Company incurred additional valuation adjustments totaling $158 thousand. Valuation adjustments, which are included in non-interest expense, totaled $0.1 million and $0.2 million for the three months and nine months ended September 30, 2015, respectively, and $0.4 million and $2.2 million for the respective periods of 2014.

The Company actively markets all OREO properties for sale through a variety of channels including internal marketing and the use of outside brokers/realtors. The carrying value of OREO is generally calculated at an amount not greater than 90% of the most recent fair market appraised value. A 10% factor is generally used to estimate costs to sell, which is based on typical cost factors, such as 6% broker commission, 1% transfer taxes, and 3% various other miscellaneous costs associated with the sales process. This market value is updated on an annual basis or more frequently if new valuation information is available. Further deterioration in the real estate market could result in additional losses on these properties.

26

The following table presents the components of net expense of OREO for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(in thousands)	2015			2014		2015			2014
Insurance	$	19		$	26	$	51		$	66
Legal fees		(6	)		14		33			38
Maintenance		-			2		3			17
Professional fees		3			5		4			83
Real estate taxes		8			28		21			123
Utilities		1			4		14			8
Other		(12	)		6		5			11
Valuation adjustments		78			429		208			2,199
Total expense		91			514		339			2,545
Income from the operation of foreclosed properties		-			-		(1	)		(50	)
Net expense of OREO	$	91		$	514	$	338		$	2,495

There were four consumer mortgage loans that were in the process of foreclosure at September 30, 2015 with a total carrying value of $117 thousand. There were two residential real estate properties with a carrying value of $149 thousand that were foreclosed upon during the nine months ended September 30, 2015. There were two residential properties with an aggregate carrying value of $27 thousand included in OREO at September 30, 2015 and December 31, 2014.

Note 6.  Securities

Securities have been classified as available-for-sale or held-to-maturity in the consolidated financial statements according to management’s intent. The following tables present the amortized cost, gross unrealized gains and losses, and the fair value of the Company’s securities at September 30, 2015 and December 31, 2014:

	September 30, 2015
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding
(in thousands)	Cost		Gains		Losses		Fair Value
Available-for-sale:
Obligations of U.S. government agencies	$	43,788	$	912	$	-	$	44,700
Obligations of state and political subdivisions		55,209		955		12		56,152
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		23,058		489		3		23,544
Collateralized mortgage obligations - commercial		90,158		1,190		9		91,339
Residential mortgage-backed securities		28,449		489		-		28,938
Corporate debt securities		500		-		74		426
Negotiable certificates of deposit		3,173		2		4		3,171
Equity securities		1,010		-		52		958
Total available-for-sale securities	$	245,345	$	4,037	$	154	$	249,228

27

	December 31, 2014
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding
(in thousands)	Cost		Gains		Losses		Fair Value
Available-for-sale:
Obligations of U.S. government agencies	$	29,246	$	77	$	47	$	29,276
Obligations of state and political subdivisions		23,132		1,380		3		24,509
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		26,129		103		1		26,231
Collateralized mortgage obligations - commercial		61,017		492		253		61,256
Residential mortgage-backed securities		73,998		441		341		74,098
Corporate debt securities		500		-		80		420
Negotiable certificates of deposit		2,232		-		-		2,232
Equity securities		1,010		-		43		967
Total available-for-sale securities	$	217,264	$	2,493	$	768	$	218,989

At September 30, 2015 and December 31, 2014, securities with a carrying amount of $247.8 million and $217.6 million, respectively, were pledged as collateral to secure public deposits and for other purposes.

The following table shows the amortized cost and approximate fair value of the Company’s available-for-sale debt securities at September 30, 2015 using contractual maturities.  Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Because collateralized mortgage obligations and residential mortgage-backed securities are not due at a single maturity date, they are not included in the maturity categories in the following maturity summary.

	September 30, 2015
	Amortized		Fair
(in thousands)	Cost		Value
Amounts maturing in:
One year or less	$	-	$	-
After one year through five years		21,743		22,130
After five years through ten years		78,215		79,648
After ten years		2,712		2,671
Collateralized mortgage obligations		113,216		114,883
Residential mortgage-backed securities		28,449		28,938
Total	$	244,335	$	248,270

Gross proceeds from the sale of available-for-sale securities were $5.3 million and $78.8 million, respectively, for the three and nine months ended September 30, 2015, with gross gains of $4 thousand and $2.3 million, respectively, realized upon the sales. There were no gross losses realized upon the sales for the three months ended September 30, 2015. The Company realized gross losses of $4 thousand upon the sales for the nine months ended September 30, 2015.

Gross proceeds from the sale of available-for-sale securities were $40.0 million and $78.6 million, respectively, for the three and nine months ended September 30, 2014. Gross realized gains were $2.9 million and $5.6 million, respectively, for the three and nine months ended September 30, 2014. There were no losses realized upon the sales for the three and nine months ended September 30, 2014.

In the first quarter of 2014, the Company sold its entire held-to-maturity portfolio consisting of four obligations of state and political subdivisions with an aggregate amortized cost of $2.3 million. Gross proceeds received from the sale of the held-to-maturity portfolio were $2.7 million for the nine months ended September 30, 2014, with gross gains of $0.4 million realized upon the sale. The four securities were tax-exempt, zero-coupon bonds of California municipalities. These securities were sold as part of management’s strategy to reduce the amount of potential credit and concentration risk within the investment portfolio, and as part of tax planning strategies aimed at reducing the amount of tax-exempt securities.

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The following tables present the length of time that individual available-for-sale securities have been in a continuous unrealized loss position at September 30, 2015 and December 31, 2014:

	September 30, 2015
	Less than 12 Months						12 Months or Greater						Total
	Number				Gross		Number				Gross		Number				Gross
	of		Fair		Unrealized		of		Fair		Unrealized		of		Fair		Unrealized
(dollars in thousands)	Securities		Value		Losses		Securities		Value		Losses		Securities		Value		Losses
Obligations of U.S. government agencies		-	$	-	$	-		-	$	-	$	-		-	$	-	$	-
Obligations of state and policitical subdivisions		1		1,513		7		1		261		5		2		1,774		12
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		2		812		3		-		-		-		2		812		3
Collateralized mortgage obligations - commercial		2		5,169		9		-		-		-		2		5,169		9
Residential mortgage-backed securities		-		-		-		-		-		-		-		-		-
Corporate debt securities		-		-		-		1		426		74		1		426		74
Negotiable certificates of deposit		6		1,433		4		-		-		-		6		1,433		4
Equity securities		-		-		-		1		948		52		1		948		52
Total		11	$	8,927	$	23		3	$	1,635	$	131		14	$	10,562	$	154

	December 31, 2014
	Less than 12 Months						12 Months or Greater						Total
	Number				Gross		Number				Gross		Number				Gross
	of		Fair		Unrealized		of		Fair		Unrealized		of		Fair		Unrealized
(dollars in thousands)	Securities		Value		Losses		Securities		Value		Losses		Securities		Value		Losses
Obligations of U.S. government agencies		2	$	9,513	$	47		-	$	-	$	-		2	$	9,513	$	47
Obligations of state and political subdivisions		-		-		-		1		254		3		1		254		3
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		1		653		1		-		-		-		1		653		1
Collateralized mortgage obligations - commerical		7		32,513		105		3		8,693		148		10		41,206		253
Residential mortgage-backed securities		3		16,659		56		6		37,619		285		9		54,278		341
Corporate debt securities		-		-		-		1		420		80		1		420		80
Negotiable certificates of deposit		-		-		-		-		-		-		-		-		-
Equity securities		-		-		-		1		957		43		1		957		43
Total		13	$	59,338	$	209		12	$	47,943	$	559		25	$	107,281	$	768

Management evaluates individual securities in an unrealized loss position quarterly for other than temporary impairment (“OTTI”). As part of its evaluation, management considers, among other things, the length of time a security’s fair value is less than amortized cost, the severity of decline, any credit deterioration of the issuer, whether or not management intends to sell the security, and whether it is more likely than not that the Company will be required to sell the security prior to recovery of its amortized cost.

Securities issued by U.S. government or U.S. government-sponsored agencies, including single-maturity bonds, residential mortgage-backed securities, and residential and commercial CMOs, and obligations of state and political subdivisions, comprise the majority of the Company’s securities portfolio. Management performed a review of the fair values of all securities in an unrealized loss position as of September 30, 2015 and determined that movements in the fair values of the securities were consistent with the change in market interest rates. At September 30, 2015, the Company held 14 securities that were in an unrealized loss position, with 3 of those securities in an unrealized loss position for more than 12 months. All but one of the securities in an unrealized loss position at September 30, 2015 were debt securities. Additionally, management considers the severity of each security’s unrealized loss position, placing greater emphasis on any security with an unrealized loss greater than 5.0% of its amortized cost. At September 30, 2015, there were two securities, a corporate debt security and an equity security, with an unrealized loss greater than 5.0% of its amortized cost. The corporate debt security, a floating rate bond of a large money center bank, had an unrealized loss of $74 thousand, or 14.8% of its amortized cost, at September 30, 2015. This bank was considered well capitalized under regulatory capital guidelines at September 30, 2015. The equity security, a mutual fund investment comprised of one- to four-family residential mortgage-backed securities collateralized by properties within the Company’s geographical market, had an unrealized loss of $52 thousand, or 5.2% of its amortized cost, at September 30, 2015. This mutual fund, which provides the Company with credit under the Community Reinvestment Act, has a one- and three-year return of 3.34% and 1.80%, and is rated four stars by Morningstar, an independent investment research company.

29 

The remaining 12 securities in an unrealized loss position at September 30, 2015 included 4 securities issued by a U.S. government or government-sponsored agency, 2 obligations of state and political subdivisions and 6 negotiable certificates of deposit. The obligations of the U.S. government or government-sponsored agencies are securities issued by GNMA and FHLMC that are currently rated Aaa by Moody’s Investor Services or AAA by Standard & Poor’s (“S&P”) and are guaranteed by the U.S. government. The 2 state and political subdivision obligations in an unrealized loss position at September 30, 2015, are general-purpose debt obligations that are secured by the unlimited taxing power of the issuer. Each of the 6 negotiable certificates of deposit have a carrying value below $250 thousand and are fully insured by the Federal Deposit Insurance Corporation.

To date, the Company has received all scheduled principal and interest payments and expects to fully collect all future contractual principal and interest payments on all securities in an unrealized loss position at September 30, 2015. The Company does not intend to sell the securities nor is it more likely than not that the Company will be required to sell the securities prior to recovery of their amortized cost. Based on the result of its review and considering the attributes of these debt and equity securities, management concluded that the individual unrealized losses were temporary and OTTI did not exist at September 30, 2015.

Investments in FHLB and Federal Reserve Bank (“FRB”) stock, which have limited marketability, are carried at cost and totaled $5.6 million and $4.2 million at September 30, 2015 and December 31, 2014, respectively. FRB stock of $1.3 million is included in Other Assets at September 30, 2015 and December 31, 2014. Management noted no indicators of impairment for the FHLB of Pittsburgh and FRB of Philadelphia stock at September 30, 2015.

Note 7. Borrowed Funds

The following table summarizes the components of borrowed funds at September 30, 2015 and December 31, 2014:

	September 30,		December 31,
(in thousands)	2015		2014
Federal Home Loan Bank of Pittsburgh advances - overnight	$	19,500	$	-
Federal Home Loan Bank of Pittsburgh advances - term		73,558		61,194
Subordinated debentures		14,000		25,000
Junior subordinated debentures		10,310		10,310
Total borrowed funds	$	117,368	$	96,504

On September 1, 2009, the Company offered only to accredited investors up to $25.0 million principal amount of unsecured subordinated debentures due September 1, 2019 (the “Notes”). Prior to July 1, 2015, the Notes had a fixed interest rate of 9.00% per annum. Payments of interest are payable to registered holders of the Notes (the “Noteholders”) quarterly on the first of every third month, subject to the right of the Company to defer such payment. On June 30, 2015, pursuant to approval from all of the Noteholders and the Reserve Bank, the Company amended the original terms of the Notes to reduce the interest rate payable on the Notes from 9.00% to 4.50% effective July 1, 2015 and to accelerate a partial repayment of principal amount under the Notes. Pursuant to the approved amendment, on June 30, 2015, the Company repaid 44% of the original principal amount, or $11.0 million, of the Notes outstanding to the holders on June 30, 2015, with the remaining $14.0 million in principal to be repaid as follows: (a) 16% of the original principal amount, or $4.0 million, payable on September 1, 2017; (b) 20% of the original principal amount, or $5.0 million, payable on September 1, 2018; and (c) the final 20% of the original principal amount, or $5.0 million, payable on September 1, 2019, the maturity date of the Notes. As of September 30, 2015 and December 31, 2014, there was $14.0 million and $25.0 million outstanding under the Notes, respectively.

The Company had been under a Written Agreement with the Reserve Bank since November 24, 2010. As previously mentioned, the Company was released from the Written Agreement on September 2, 2015.While the Company was under the Written Agreement, principal and interest payments on the Notes required written non-objection from the Reserve Bank. Pursuant to the Written Agreement, the Company had been deferring the quarterly interest payments on the Notes beginning December 1, 2010 and ending on June 1, 2015.

On July 15, 2015, the Company sent a request to the Reserve Bank to permit payment of the quarterly interest payment on the Notes, which was due and payable on September 1, 2015. The Company subsequently received approval from the Reserve Bank on August 17, 2015 and accordingly paid the quarterly interest payment to the Noteholders on September 1, 2015. It is the intent of the Company to continue the regularly scheduled quarterly interest payments on a go-forward basis. Additionally, the Company is currently developing consolidated capital strategies to pay the $10.8 million in accrued and unpaid interest associated with the Notes, which has been deferred from December 1, 2010 to June 1, 2015.

There have been no material changes in the status or terms of other borrowed funds disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

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Note 8.     Fair Value Measurements

In determining fair value, the Company uses various valuation approaches, including market, income and cost approaches. Accounting standards establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability, which are developed based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s knowledge about the assumptions the market participants would use in pricing an asset or liability, which are developed based on the best information available in the circumstances.

The fair value hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). A financial asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.The fair value hierarchy is broken down into three levels based on the reliability of inputs as follows:

● Level 1 valuation is based upon unadjusted quoted market prices for identical instruments traded in active markets.

● Level 2 valuation is based upon quoted market prices for similar instruments traded in active markets, quoted market prices for identical or similar instruments traded in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by market data; and

● Level 3 valuation is derived from other valuation methodologies including discounted cash flow models and similar techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in determining fair value.

A description of the valuation methodologies used for assets recorded at fair value, and for estimating fair value of financial instruments not recorded at fair value, is set forth below.

Cash, Short-term Investments, Accrued Interest Receivable and Accrued Interest Payable

For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities

The estimated fair values of available-for-sale equity securities are determined by obtaining quoted prices on nationally recognized exchanges (Level 1 inputs). The estimated fair values for the Company’s investments in obligations of U.S. government agencies, obligations of state and political subdivisions, government-sponsored agency CMOs and residential mortgage-backed securities, corporate debt securities, and negotiable certificates of deposit are obtained by the Company from a nationally-recognized pricing service. This pricing service develops estimated fair values by analyzing like securities and applying available market information through processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing (Level 2 inputs), to prepare valuations. Matrix pricing is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things and are based on market data obtained from sources independent from the Company. The Level 2 investments in the Company’s portfolio are priced using those inputs that, based on the analysis prepared by the pricing service, reflect the assumptions that market participants would use to price the assets. The Company has determined that the Level 2 designation is appropriate for these securities because, as with most fixed-income securities, those in the Company’s portfolio are not exchange-traded, and such non-exchange-traded fixed income securities are typically priced by correlation to observed market data. The Company has reviewed the pricing service’s methodology to confirm its understanding that such methodology results in a valuation based on quoted market prices for similar instruments traded in active markets, quoted markets for identical or similar instruments traded in markets that are not active and model-based valuation techniques for which the significant assumptions can be corroborated by market data as appropriate to a Level 2 designation.

For those securities for which the inputs used by an independent pricing service were derived from unobservable market information (Level 3 inputs), the Company evaluates the appropriateness and quality of each price. The Company reviewed the volume and level of activity for all classes of securities and attempted to identify transactions which may not be orderly or reflective of a significant level of activity and volume. For securities meeting these criteria, the quoted prices received from either market participants or an independent pricing service may be adjusted, as necessary, to estimate fair value. If applicable, the adjustment to fair value was derived based on present value cash flow model projections prepared by the Company or obtained from third party providers utilizing assumptions similar to those incorporated by market participants.

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The Company did not own any securities for which fair value was determined using level 3 inputs at September 30, 2015 or December 31, 2014. The Company did own one security issued by a state and political subdivision that was valued using Level 3 inputs during 2014, which was paid off prior to December 31, 2014. This security had a credit rating that was either withdrawn or downgraded by nationally recognized credit rating agencies, and as a result the market for these securities had become inactive. This security was historically priced using Level 2 inputs. The credit ratings withdrawal and downgrade resulted in a decline in the level of significant other observable inputs for this investment security at the measurement dates. Broker pricing and bid/ask spreads were very limited for this security. At September 30, 2014, the Company had obtained a bid indication from a third-party municipal trading desk to determine the fair value of this security.

Loans

Except for collateral dependent impaired loans, fair values of loans are estimated by discounting the projected future cash flows using market discount rates that reflect the credit, liquidity, and interest rate risk inherent in the loan. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. The estimated fair value of collateral dependent impaired loans is based on the appraised loan value or other reasonable offers less estimated costs to sell. The Company does not record loans at fair value on a recurring basis. However from time to time, a loan is considered impaired and an allowance for credit losses is established. The specific reserves for collateral dependent impaired loans are based on the fair value of the collateral less estimated costs to sell. The fair value of the collateral is generally based on appraisals. In some cases, adjustments are made to the appraised values due to various factors including age of the appraisal, age of comparables included in the appraisal, and known changes in the market and in the collateral. When significant adjustments are based on unobservable inputs, the resulting fair value measurement is categorized as a Level 3 measurement.

Loans Held For Sale

Fair values of mortgage loans held for sale are based on commitments on hand from investors or prevailing market prices.

Mortgage Servicing Rights

The fair value of mortgage servicing rights is estimated using a discounted cash flow model that applies current estimated prepayments derived from the mortgage-backed securities market and utilizes a current market discount rate for observable credit spreads. The Bank does not record mortgage servicing rights at fair value on a recurring basis.

Restricted Stock

Ownership in equity securities of FHLB of Pittsburgh and the FRB is restricted and there is no established market for their resale. The carrying amount is a reasonable estimate of fair value.

Deposits

The fair value of demand deposits, savings deposits, and certain money market deposits is the amount payable on demand at the reporting date.  The fair value of fixed-maturity certificates of deposit is estimated based on discounted cash flows using FHLB advance rates currently offered for similar remaining maturities.

Borrowed funds

The Company uses discounted cash flows using rates currently available for debt with similar terms and remaining maturities to estimate fair value.

Commitments to Extend Credit and Standby Letters of Credit

The fair value of commitments to extend credit and standby letters of credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of off-balance sheet commitments is insignificant and therefore not included in the table for non-recurring assets and liabilities.

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Assets Measured at Fair Value on a Recurring Basis

The following tables detail the financial asset amounts that are carried at fair value and measured at fair value on a recurring basis at September 30, 2015 and December 31, 2014, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

	Fair Value Measurements at September 30, 2015
(in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Asset (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Available-for-sale securities:
Obligations of U.S. government agencies	$	44,700	$	-	$	44,700	$	-
Obligations of state and political subdivisions		56,152		-		56,152		-
U.S. government/ government-sponsored agencies:
Collateralized mortgage obligations - residential		23,544		-		23,544		-
Collateralized mortgage obligations - commercial		91,339		-		91,339		-
Residential mortgage-backed securities		28,938		-		28,938		-
Corporate debt securities		426		-		426		-
Negotiable certificates of deposit		3,171		-		3,171		-
Equity securities		958		958		-		-
Total available-for-sale securities	$	249,228	$	958	$	248,270	$	-

	Fair Value Measurements at December 31, 2014
(in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Available-for-sale securities:
Obligations of U.S. government agencies	$	29,276	$	-	$	29,276	$	-
Obligations of state and political subdivisions		24,509		-		24,509		-
U.S. government/ government-sponsored agencies:
Collateralized mortgage obligations - residential		26,231		-		26,231		-
Collateralized mortgage obligations - commerical		61,256		-		61,256		-
Residential mortgage-backed securities		74,098		-		74,098		-
Corporate debt securities		420		-		420		-
Negotiable certificates of deposit		2,232		-		2,232		-
Equity securities		967		967		-		-
Total available-for-sale securities	$	218,989	$	967	$	218,022	$	-

The following tables present a reconciliation and statement of operations classifications of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine month periods ended September 30, 2015 and 2014:

Fair Value Measurements
Using Significant Unobservable Inputs (Level 3)
	State and Political Subdivisions
	Nine Months Ended September 30,
(in thousands)	2015		2014
Balance at January 1,	$	-	$	571
Amortization		-		-
Accretion		-		-
Purchases		-		-
Paydowns		-		(445	)
Total gains or losses (realized/unrealized):		-		-
Included in earnings		-		-
Included in other comprehensive income		-		23
Balance at September 30,	$	-	$	149

There were no transfers between levels within the fair value hierarchy during the nine months ended September 30, 2015 and 2014.

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Assets Measured at Fair Value on a Non-recurring Basis

The following tables present assets measured at fair value on a non-recurring basis:

	Fair Value Measurements at September 30, 2015
					Significant		Significant
			Quoted Prices		Other		Other
			in Active Markets		Observable		Unobservable
			for Identical Assets		Inputs		Inputs
(in thousands)	Fair Value (1)		(Level 1)		(Level 2)		(Level 3)
Collateral-dependent impaired loans	$	7,062	$	-	$	-	$	7,062
Other real estate owned	$	1,582	$	-	$	-	$	1,582

	Fair Value Measurements at December 31, 2014
					Significant		Significant
			Quoted Prices		Other		Other
			in Active Markets		Observable		Unobservable
			for Identical Assets		Inputs		Inputs
(in thousands)	Fair Value (1)		(Level 1)		(Level 2)		(Level 3)
Collateral-dependent impaired loans	$	5,380	$	-	$	-	$	5,380
Other real estate owned	$	2,087	$	-	$	-	$	2,087

(1) Represents carrying value and related write-downs for which adjustments are based on appraised value less estimated selling costs. Management may make adjustments to the appraised values as necessary to consider declines in real estate values since the time of the appraisal. Such adjustments are based on management’s knowledge of the local real estate markets.

Collateral-dependent impaired loans are classified as Level 3 assets and the estimated fair value of the collateral is based on the appraised value or other reasonable offers less estimated costs to sell. When the measure of the impaired loan is less than the recorded investment in the loan, the impairment is recorded through a valuation allowance or is charged off. The amount shown is the balance of impaired loans, net of any charge-offs and the related allowance for loan losses.

OREO properties are recorded at fair value less the estimated cost to sell at the date of the Company’s acquisition of the property. Subsequent to the Company’s acquisition, the balance may be written down further. It is the Company’s policy to obtain certified external appraisals of real estate collateral underlying impaired loans and OREO, and estimate fair value using those appraisals. Other valuation sources may be used, including broker price opinions, letters of intent and executed sale agreements.

The Company discloses fair value information about financial instruments, whether or not recognized in the Statement of Financial Condition, for which it is practicable to estimate that value. The following estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, management judgment is required to interpret data and develop fair value estimates. Accordingly, the estimates below are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The following table summarizes the carrying values and estimated fair values of the Company’s financial instruments at September 30, 2015 and at December 31, 2014:

	Fair Value	September 30, 2015				December 31, 2014
(in thousands)	Measurement	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Cash and short term investments	Level 1	$	31,014	$	31,014	$	35,667	$	35,667
Securities available for sale	See previous table		249,228		249,228		218,989		218,989
FHLB and FRB Stock	Level 2		5,649		5,649		4,154		4,154
Loans held for sale	Level 2		4,634		4,634		603		603
Loans, net	Level 3		713,341		712,602		658,747		659,231
Accrued interest receivable	Level 2		2,618		2,618		2,075		2,075
Mortgage servicing rights	Level 3		207		841		333		898
Financial liabilities:
Deposits	Level 2		852,042		837,071		795,336		779,986
Borrowed funds	Level 2		117,368		117,595		96,504		100,020
Accrued interest payable	Level 2		11,187		11,187		10,262		10,262

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Note 9.  Earnings per Share

For the Company, the numerator of both the basic and diluted earnings per common share is net income available to common shareholders (which is equal to net income less dividends on preferred stock and related discount accretion). The weighted average number of common shares outstanding used in the denominator for basic earnings per common share is increased to determine the denominator used for diluted earnings per common share by the effect of potentially dilutive common share equivalents utilizing the treasury stock method. For the Company, common share equivalents are outstanding stock options to purchase the Company’s common shares and unvested restricted stock.

The following table presents the calculation of both basic and diluted earnings per common share for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except share data)	2015		2014		2015		2014
Net income	$	2,337	$	3,358	$	6,631	$	13,451
Basic weighted-average number of common shares outstanding		16,500,945		16,471,569		16,497,373		16,471,569
Plus: common share equivalents		-		-		-		282
Diluted weighted-average number of common shares outstanding		16,500,945		16,471,569		16,497,373		16,471,851
Income per common share:
Basic	$	0.14	$	0.20	$	0.40	$	0.82
Diluted	$	0.14	$	0.20	$	0.40	$	0.82

There were no common share equivalents related to incremental shares of restricted stock for the three or nine months ended September 30, 2015, as the weighted-average price of the Company’s common stock was below the fair value on the grant date. For the nine months ended September 30, 2014, common share equivalents in the table above are related entirely to the incremental shares of unvested restricted stock.

Common share equivalents, in the table above, exclude stock options of 64,479 for the nine months ended September 30, 2015 and 73,276 stock options for the nine months ended September 30, 2014 with exercise prices that exceed the average market price of the Company’s common shares during the periods presented. Inclusion of these stock options would be anti-dilutive to the diluted earnings per common share calculation.

Note 10. Other Comprehensive Income

The following tables summarize the reclassifications out of accumulated other comprehensive (loss) income for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30, 2015				Nine Months Ended September 30, 2015
	Amount				Amount
	Reclassified from				Reclassified from
	Accumulated				Accumulated
	Other			Affected Line Item	Other			Affected Line Item
	Comprehensive			in the Consolidated	Comprehensive			in the Consolidated
(in thousands)	Income			Statements of Income	Income			Statements of Income
Available-for-sale securities:
Reclassification adjustment for net gains reclassified into net income	$	(4	)	Net gain on sale of securities	$	(2,302	)	Net gain on sale of securities
Taxes		1		Income taxes		782		Income taxes
Net of tax amount	$	(3	)		$	(1,520	)

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	Three Months Ended September 30, 2014				Nine Months Ended September 30, 2014
	Amount				Amount
	Reclassified from				Reclassified from
	Accumulated				Accumulated
	Other			Affected Line Item	Other			Affected Line Item
	Comprehensive			in the Consolidated	Comprehensive			in the Consolidated
(in thousands)	Income			Statements of Income	Income			Statements of Income
Available-for-sale securities:
Reclassification adjustment for net gains reclassified into net income	$	(2,958	)	Net gain on sale of securities	$	(5,638	)	Net gain on sale of securities
Taxes		1,006		Income taxes		1,917		Income taxes
Net of tax amount	$	(1,952	)		$	(3,721	)

The following table summarizes the changes in accumulated other comprehensive income, net of tax for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2015			2014			2015			2014
Beginning balance	$	279		$	2,406		$	1,138		$	(3,092	)
Other comprehensive income (loss) before reclassifications		2,287			(319	)		2,945			6,948
Amounts reclassified from accumulated other comprehensive income (loss)		(3	)		(1,952	)		(1,520	)		(3,721	)
Net other comprehensive income (loss) during the period		2,284			(2,271	)		1,425			3,227
Ending balance	$	2,563		$	135		$	2,563		$	135

Note 11. Related Party Transactions

The Company has engaged in and intends to continue to engage in banking and financial transactions in the conduct of its business with directors and executive officers and their related parties. These transactions are executed on substantially the same terms and at rates prevailing at the time for comparable transactions with unrelated parties.

The Company has granted loans, letters of credit and lines of credit to directors, executive officers and their related parties. The following table summarizes the changes in the total amounts of such outstanding loans and advances under lines of credit, net of participations sold, as well as repayments during the three and nine months ended September 30, 2015 and 2014:

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
(in thousands)	2015			2014			2015			2014
Balance, beginning of period	$	40,486		$	30,303		$	36,783		$	29,301
Additions, new loans and advances		20,881			25,141			52,282			47,998
Repayments		(9,723	)		(13,725	)		(37,421	)		(35,580	)
Other (1)		-			(84	)		-			(84	)
Balance, end of period	$	51,644		$	41,635		$	51,644		$	41,635

(1) Represents loans related to parties that ceased being related parties during period

At September 30, 2015, there were no loan to directors, executive officers and their related parties which were not performing in accordance with the terms of the loan agreements.

Included in related party loans is a commercial line of credit with a company owned by a director with a net balance outstanding of $4.5 million at September 30, 2015. The Company has sold a participation interest in this line to the same director in the amount of $5.2 million, of which $3.0 million is outstanding at September 30, 2015. The Company receives a 25 basis point annual servicing fee from this director on the participation balance.

Deposits from directors, executive officers and their related parties held by the Company at September 30, 2015 and December 31, 2014 amounted to $111.2 million and $77.4 million, respectively. During the second quarter of 2015, the Company attained a significant deposit relationship with a customer that is a related party of a director. The aggregate balance of deposits for this relationship was $92.2 million at June 30, 2015 and $24.7 million at September 30, 2015. In the third quarter of 2015, this customer placed $63.6 million of deposits from this relationship into the reciprocal Insured Cash Sweep program through the Promontory Financial Network in order to receive full FDIC insurance coverage. Interest paid on the deposits amounted to $222 thousand and $69 thousand for the nine months ended September 30, 2015 and 2014, respectively.

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In the course of its operations, the Company acquires goods and services from and transacts business with various companies of related parties. The Company believes these transactions were made on the same terms as those for comparable transactions with unrelated parties. The Company recorded payments for these services of $0.9 million and $1.7 million, respectively, for the three and nine months ended September 30, 2015, and $1.2 million and $2.2 million for the respective periods of 2014.

The Notes held by directors and/or their related parties totaled $8.6 million at September 30, 2015 and $9.0 million at December 31, 2014. On June 12, 2015, the Company solicited consent from all existing Noteholders to amend the Notes by reducing the interest rate payable on the notes from 9.00% to 4.50% effective July 1, 2015, and prepaying 44% of the principal amount outstanding on June 30, 2015. A group of Noteholders holding $14.0 million of the principal balance outstanding on the Notes at June 12, 2015, comprised of both related parties or their interests and non-related parties, offered to purchase the Notes of any Noteholder who did not wish to consent to the amendments. There were seven, non-related party Noteholders, who elected to have their Notes purchased by the group, for a total principal balance of $10.0 million. Of the $10.0 million, $6.4 million was purchased by related parties or their interests. On June 30, 2015, the Company made an $11.0 million principal reduction on the Notes. Total principal payments on Notes held by officers and directors and/or their related parties totaled $6.8 million, of which $6.4 million was used to purchase the Notes referenced above.

On September 1, 2015, the Company made the quarterly interest payment due on the Notes for the period of June 1, 2015 through August 31, 2015, totaling $293 thousand, of which $134 thousand was paid to directors and/or their related interests. There was no interest paid to directors on these Notes for the nine months ended September 30, 2014. Interest expense recorded on the Notes to directors and/or their related interests amounted to $99 thousand and $507 thousand for the three and nine months ended September 30, 2015, respectively, and $223 thousand and $675 thousand for the three and nine months ended September 30, 2014, respectively. Interest accrued and unpaid on the Notes to directors and/or their related interests totaled $3.9 million at September 30, 2015.

The following table summarizes the activity related to the Company’s subordinated debt for the nine months ended September 30, 2015:

	For the Nine Months Ended
	September 30, 2015
(in thousands)	Related Party Subordinated Noteholders			Other Subordinated Noteholders			Total Subordinated Notes Outstanding
Balance, beginning of period	$	9,000		$	16,000		$	25,000
Assignments		6,429			(6,429	)		-
Principal reductions		(6,789	)		(4,211	)		(11,000	)
Balance, end of period	$	8,640		$	5,360		$	14,000

Note 12. Stock Compensation Plans

On August 30, 2000, the Company’s Board adopted the 2000 Employee Stock Incentive Plan (the “Stock Incentive Plan”) in which options could have been granted to key officers and other employees of the Company. The aggregate number of shares which could have been issued upon exercise of the options under the plan could not exceed 1,100,000 shares. Options and rights granted under the Stock Incentive Plan became exercisable six months after the date the options were awarded and expire ten years after the award date. Upon exercise, the shares are issued from the Company’s authorized but unissued stock. The Stock Incentive Plan expired on August 30, 2010, therefore, no further grants will be made under the plan.

The Board also adopted on August 30, 2000, the 2000 Independent Directors Stock Option Plan (the “Directors’ Stock Plan”) for directors who were not officers or employees of the Company. The aggregate number of shares issuable under the Directors’ Stock Plan could not exceed 550,000 shares and became exercisable six months from the date the awards were granted and expired three years after the award date. Upon exercise, the shares are issued from the Company’s authorized but unissued shares. The Directors’ Stock Plan expired on August 30, 2010, therefore, no further grants will be made under the plan.

No compensation expense related to options under either the Stock Incentive Plan or the Directors’ Stock Plan was required to be recorded in the nine months ended September 30, 2015 and 2014.

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The following table summarizes the status of the Company’s stock option plans:

	Nine Months Ended September 30,
	2015				2014
			Weighted					Weighted
			Average					Average
			Exercise					Exercise
	Shares		Price		Shares			Price
Outstanding at January 1.		64,479	$	15.87		82,598		$	15.98
Granted		-		-		-			-
Exercised		-		-		-			-
Forfeited		-		-		(9,322	)		16.05
Outstanding at September 30,		64,479	$	15.87		73,276		$	15.97
Options exercisable at September 30,		64,479				73,276		$	15.97
Weighted average fair value of options granted during the period			$	-				$	-
Stock-based compensation expense			$	-				$	-

At September 30, 2015 and 2014 the exercisable options had no total intrinsic value and there was no unrecognized compensation expense.

The following table presents information pertaining to options outstanding at September 30, 2015:

Options Outstanding

Options Excercisable

Weighted

Average

Weighted

Weighted

Remaining

Average

Average

Number

Contractual

Exercise

Number

Exercise

Range of Exercise Price

Outstanding

Life

Price

Exercisable

Price

$10.81

-

$23.13

64,479

2.1

$

15.87

64,479

$

15.87

On November 27, 2013, the Board of Directors adopted the 2013 Employee Stock Grant Plan (the “2013 Stock Grant Plan”) under which shares of common stock not to exceed 15,000 were authorized to be granted to employees. On December 2, 2013, the Company granted 50 shares of the Company’s common stock to each active full and part time employee. There were 14,400 shares granted under the 2013 Stock Grant Plan at a fair value of $4.26 per share. On October 29, 2014, the Board of Directors adopted the 2014 Employee Stock Grant Plan (the “2014 Stock Grant Plan”) under which shares of stock not to exceed 13,500 were authorized to be granted to employees. On December 1, 2014, the Company granted 50 shares of the Company’s common stock to each active full and part time employee. There were 12,850 shares granted under the 2014 Stock Grant Plan at a fair value of $6.02 per share. The total cost of these grants, which was included in salary expense in the Consolidated Statements of Income, amounted to $77 thousand and $61 thousand for the years ended December 31, 2014 and 2013, respectively. No additional shares were granted under either plan.

The Board of Directors, upon the recommendation of the Compensation Committee, formally adopted a Long-Term Incentive Compensation Plan (“LTIP”) on October 23, 2013. The LTIP was ratified at the 2013 Annual Shareholders Meeting on December 23, 2013. The LTIP is designed to reward executives and key employees for their contributions to the long-term success of the Company, primarily as measured by the increase in the Company’s stock price. The LTIP authorizes up to 1,200,000 shares of common stock for issuance and provides the Board with the authority to offer several different types of long-term incentives, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares. The Board approved initial awards under the terms of the LTIP, which were granted to executives and key employees on March 1, 2014. The initial grant was comprised solely of 45,750 shares of restricted stock. On March 1, 2015, an additional 84,900 shares of restricted stock were awarded under the LTIP. At September 30, 2015, there were 1,069,683 shares of common stock available for award under the LTIP. For the nine months ended September 30, 2015 and 2014, stock-based compensation expense, which is included in salaries and employee benefits expense in the Consolidated Statements of Income, totaled $179 thousand and $65 thousand, respectively. Total unrecognized compensation expense related to unvested restricted stock awards was $522 thousand and $242 thousand at September 30, 2015 and 2014, respectively.

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The following table presents the status of the Company’s unvested restricted stock awards as of, and during the nine months ended, September 30, 2015 and 2014:

	Nine Months Ended September 30,					Nine Months Ended September 30,
	2015					2014
				Weighted-				Weighted-
				Average				Average
	Restricted			Grant Date		Restricted		Grant Date
	Shares			Fair Value		Shares		Fair Value
Unvested at January 1,		45,750		$	6.70		-	$	-
Awards granted		84,900			5.75		45,750		6.70
Forfeitures		(333	)		6.70		-		-
Vestings		(16,526	)		6.70		-		-
Unvested at September 30,		113,791		$	5.99		45,750	$	6.70

Note 13. Income Taxes

The Company evaluates the carrying amount of its deferred tax assets on a quarterly basis, or more frequently if necessary, in accordance with guidance set forth in ASC Topic 740 “Income Taxes,” and applies the criteria in the guidance to determine whether it is more likely than not that some portion, or all, of the deferred tax asset will not be realized within its life cycle, based on the weight of available evidence. If management determines based on available evidence, both positive and negative, that it is more likely than not that some portion or all of the deferred tax asset will not be realized in future periods, a valuation allowance is calculated and recorded. These determinations are inherently subjective and depend upon management’s estimates and judgments used in their evaluation of both positive and negative evidence. The Company’s deferred tax position has been affected by several significant transactions that occurred in prior years. These transactions included the provision for loan losses, the level of non-accrual loans, valuation of other real estate owned and other-than-temporary impairment losses incurred on certain available-for-sale securities, and resulted in the Company being in a cumulative deficit position since 2009. Accordingly, under applicable accounting guidance, the Company has established a full valuation allowance for its net deferred tax assets, excluding deferred tax assets or liabilities related to unrealized holding gains and losses on available-for-sale securities. Valuation allowances, related to net deferred tax assets, established by the Company amounted to $30.3 million at September 30, 2015 and December 31, 2014.

In evaluating available evidence, management considers, among other factors, historical financial performance, expectation of future earnings, the ability to carry back losses to recoup taxes previously paid, length of statutory carry forward periods, experience with operating loss and tax credit carry forwards not expiring unused, tax planning strategies and timing of reversals of temporary differences. In assessing the need for a valuation allowance, management carefully weighed both positive and negative evidence currently available. The weight given to the potential effect of positive and negative evidence must be commensurate with the extent to which it can objectively be verified. In particular, additional scrutiny must be given to deferred tax assets of an entity that has incurred taxable losses during the three most recent years because it is significant negative evidence that is objective and verifiable and therefore difficult to overcome. While the Company generated taxable income for the year ended December 31, 2014, it recorded taxable losses for the years ended December 31, 2013 and 2012.

Recently, the Company implemented certain tax planning initiatives designed to promote the generation of taxable income. These strategies included: 1) the sale of tax-exempt obligations of states and political subdivisions with fair values greater than book values and redeployment of the sales proceeds into taxable investment options; 2) the sale of lower-yielding taxable securities with fair values greater than book values, and the redeployment sales proceeds into higher-yielding taxable investment options; and 3) reducing the annual rate paid on the Company’s Notes from 9.0% to 4.5% and making an $11.0 million, or 44.0%, principal prepayment on the Notes. In addition to these tax planning initiatives, the resolution of costly litigation and release from the Consent Order by the OCC on March 25, 2015 and the Written Agreement by the Reserve Bank on September 2, 2015 has led to an improvement in the Company’s overall risk profile. The Company was also notified by the FDIC that effective February 1, 2015, its risk category for FDIC insurance improved from Risk Category II to Risk Category I, resulting in a decrease in the Company’s initial base assessment rate for deposit insurance from 0.14 basis points to 0.05 basis points, a 64.3% reduction. As a result of these developments, the Company has experienced and anticipates further reductions in its non-interest expense levels, specifically legal expense and regulatory assessments. Furthermore, as a result of the improved risk profile, the Company renewed its professional liability, fidelity bond and errors and omissions insurance policies at lower rates effective July 1, 2015 and accordingly experienced a decrease in insurance expense going forward.

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When determining the need for a valuation allowance, the Company assessed the possible sources of taxable income available under tax law to realize a tax benefit for deductible temporary differences and carryforwards as defined in ASC Topic 740. While the Company has shown substantial book net income in 2013, 2014 and in the first nine months of 2015, these amounts have included significant non-recurring or non-taxable transactions, such as legal settlements, that affected the provision for loan losses and non-interest income levels and gains on the sales of securities. The Company utilizes a three-year rolling measurement of results when assessing whether it is in a cumulative loss position. Adjusting for these non-recurring items, the Company was in a cumulative three-year loss position at September 30, 2015. Based on the analysis of available positive and negative evidence, management determined that the established valuation allowance equal to 100.0% of net deferred tax assets, excluding deferred tax assets or liabilities related to unrealized holding gains and losses on available-for-sale securities, should be maintained at September 30, 2015. Management will reassess the need for a valuation allowance at December 31, 2015 taking into consideration the positive and negative evidence available at that time.

The Company recorded a credit for income tax expense of $40 thousand for the nine months ended September 30, 2015, and a provision for income tax expense of $166 thousand and $326 thousand for the three and nine months ended September 30, 2014, respectively. These amounts were entirely related to alternative minimum tax. There was no provision or credit for income taxes for the three months ended September 30, 2015.

Note 14. Contingencies

On August 8, 2011, the Company announced that it had received document subpoenas from the SEC.  The information requested generally related to disclosure and financial reporting by the Company and the restatement of the Company’s financial statements for the year ended December 31, 2009, and the quarters ended March 31, 2010 and June 30, 2010. On January 28, 2015, the Company and the SEC entered into a settlement agreement resolving these issues related to disclosure and financial reporting and the restatements of the Company’s financial statements for the year ended December 31, 2009 and the quarters ended March 31, 2010 and June 30, 2010. As part of this settlement agreement, on January 30, 2015, the Company paid a civil money penalty of $175 thousand to the SEC. The Company accrued for the $175 thousand civil money penalty in its 2014 Consolidated Statements of Income.

On May 24, 2012, a putative shareholder filed a complaint in the Court of Common Pleas for Lackawanna County (“Shareholder Derivative Suit”) against certain present and former directors and officers of the Company (the “Individual Defendants”) alleging, inter alia, breach of fiduciary duty, abuse of control, corporate waste, and unjust enrichment. The Company was named as a nominal defendant. The parties to the Shareholder Derivative Suit commenced settlement discussions and on December 18, 2013, the Court entered an Order Granting Preliminary Approval of Proposed Settlement subject to notice to shareholders. On February 4, 2014, the Court issued a Final Order and Judgment for the matter granting approval of a Stipulation of Settlement (the “Settlement”) and dismissing all claims against the Company and the Individual Defendants. As part of the Settlement, there was no admission of liability by the Individual Defendants. Pursuant to the Settlement, the Individual Defendants, without admitting any fault, wrongdoing or liability, agreed to settle the derivative litigation for $5.0 million. The $5.0 million Settlement payment was made to the Company on March 28, 2014. The Individual Defendants reserved their rights to indemnification under the Company’s Articles of Incorporation and Bylaws, resolutions adopted by the Board, the Pennsylvania Business Corporation Law and any and all rights they have against the Company’s and the Bank’s insurance carriers. In addition, in conjunction with the Settlement, the Company accrued $2.5 million related to fees and costs of the plaintiff’s attorneys, which was included in non-interest expense in the Consolidated Statements of Income for the year ended December 31, 2013. On April 1, 2014, the Company paid the $2.5 million related to fees and costs of the plaintiff’s attorneys and partial indemnification of the Individual Defendants in the amount of $2.5 million, and as such, as of September 30, 2015, $2.5 million plus accrued interest remains accrued in other liabilities related to the potential indemnification of the Individual Defendants. The Company settled any and all claims it had or may have had against Demetrius & Company, LLC, John Demetrius and Robert L. Rossi & Company in connection with the Shareholder Derivative Suit in 2014.

On September 5, 2012, Fidelity and Deposit Company of Maryland (“F&D”) filed an action against the Company and the Bank, as well as several current and former officers and directors of the Company, in the United States District Court for the Middle District of Pennsylvania. F&D has asserted a claim for the rescission of a directors’ and officers’ insurance policy and a bond that it had issued to the Company. On November 9, 2012, the Company and the Bank answered the claim and asserted counterclaims for the losses and expenses already incurred by the Company and the Bank. The Company and the other defendants are defending the claims and have opposed F&D’s requested relief by way of counterclaims, breaches of contract and bad faith claims against F&D for its failure to fulfill its obligations to the Company and the Bank under the insurance policy. At this time, the matter is in the discovery stage and the Company cannot reasonably determine the outcome or potential range of loss in connection with this matter.

On August 13, 2013, Steven Antonik, individually, as Administrator of the Estate of Linda Kluska, William R. Howells, and Louise A. Howells, on behalf of themselves and others similarly situated, filed a consumer protection class action against the Company and Bank in the Lackawanna County Court of Common Pleas, seeking equitable, injunction and monetary relief to address an alleged pattern and practice of wrong doing by the Bank relating to the repossession and sale of the Plaintiffs’ and class members’ financed motor vehicles.  Discovery in this matter is substantially completed. The parties have agreed to meet and discuss a possible resolution of this matter, however, at this time, the Company cannot reasonably determine the outcome or potential range of loss.

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On September 17, 2013, Charles Saxe, III individually and on behalf of all others similarly situated filed a consumer class action against the Bank in the Lackawanna County Court of Common Pleas alleging violations of the Pennsylvania Uniform Commercial Code in connection with the repossession and resale of financed vehicles.  Discovery in this matter is substantially completed. Plaintiffs’ counsel has filed a petition to certify the class which the Bank is aggressively defending. The parties have agreed to meet and discuss a possible resolution of this matter, however, at this time the Company cannot reasonably determine the outcome or potential range of loss.

On January 22, 2014, the Bank was advised by the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) that FinCEN was investigating the Bank for alleged violations of the Bank Secrecy Act (“BSA”). On May 28, 2014, the Bank was advised by the Office of the Comptroller of the Currency (“OCC”) that the OCC was investigating allegations that the Bank failed to file timely Suspicious Activity Reports. On November 18, 2014, both FinCEN and OCC advised the Bank that they intended on assessing civil money penalties against the Bank. Subsequent to November 18, 2014, the Bank had been in discussions with both regulatory agencies about the alleged BSA violations. On February 27, 2015, the Bank reached a comprehensive settlement with FinCEN and OCC to resolve the BSA allegations. In order to settle the matter, the Bank consented to an aggregate civil money penalty assessment of $1.5 million which was accrued for at December 31, 2014 and included in non-interest expense for the year ended December 31, 2014. The Company paid the $1.5 million civil money penalty on February 27, 2015.

The Company has been subject to tax audits and is also a party to routine litigation involving various aspects of its business, such as employment practice claims, claims to enforce liens, condemnation proceedings on properties in which the Company holds security interests, claims involving the making and servicing of real property loans and other issues incident to its business, none of which has or is expected to have a material adverse impact on the consolidated financial condition, results of operations or liquidity of the Company.

There have been no changes in the status of the other litigation disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

This Quarterly Report should be read in conjunction with the more detailed and comprehensive disclosures included on the Company’s Form 10-K as of and for the year ended December 31, 2014 and Form 10-Q as of and for the quarters ended June 30, 2015 and March 31, 2015. In addition, please read this section in conjunction with our Consolidated Financial Statements and Notes to Consolidated Financial Statements contained herein.

The Company is in the business of providing customary retail and commercial banking services to individuals and businesses within its primary market area located in Northeastern Pennsylvania.

FORWARD-LOOKING STATEMENTS

The Company may from time to time make written or oral “forward-looking statements,” including statements contained in the Company’s filings with the Securities and Exchange Commission (“SEC”), in its reports to shareholders, and in other communications by the Company, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements with respect to the Company’s beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors (some of which are beyond the Company’s control). The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan” and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause the Company’s financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in the Company’s markets; the effects of, and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; the timely development of and acceptance of new products and services; the ability of the Company to compete with other institutions for business; the composition and concentrations of the Company’s lending risk and the adequacy of the Company’s reserves to manage those risks; the valuation of the Company’s investment securities; the ability of the Company to pay dividends or repurchase common shares; the ability of the Company to retain key personnel; the impact of any pending or threatened litigation against the Company; the marketability of shares of the Company and fluctuations in the value of the Company’s share price; the impact of the Company’s ability to comply with its regulatory agreements and orders; the effectiveness of the Company’s system of internal controls; the ability of the Company to attract additional capital investment; the impact of changes in financial services’ laws and regulations (including laws concerning capital adequacy, taxes, banking, securities and insurance); the impact of technological changes and security risks upon the Company’s information technology systems; changes in consumer spending and saving habits; the nature, extent, and timing of governmental actions and reforms, and the success of the Company at managing the risks involved in the foregoing and other risks and uncertainties, including those detailed in the Company’s filings with the SEC.

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The Company cautions that the foregoing list of important factors is not all inclusive. Readers are also cautioned not to place undue reliance on any forward-looking statements, which reflect management’s analysis only as of the date of this report, even if subsequently made available by the Company on its website or otherwise. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company to reflect events or circumstances occurring after the date of this report.

Readers should carefully review the risk factors described in the Annual Report and other documents that the Company periodically files with the Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2014.

CRITICAL ACCOUNTING POLICIES

In preparing the consolidated financial statements, management has made estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statements of condition and results of operations for the periods indicated. Actual results could differ significantly from those estimates.

The Company’s accounting policies are fundamental to understanding management’s discussion and analysis of its financial condition and results of operations. Management has identified the policies on the determination of the allowance for loan and lease losses (“ALLL”), securities valuation and impairment evaluation, and valuation of other real estate owned (“OREO”) and income taxes to be critical, as management is required to make subjective and/or complex judgments about matters that are inherently uncertain and could be most subject to revision as new information becomes available.

The judgments used by management in applying the critical accounting policies discussed below may be affected by a further and prolonged deterioration in the economic environment, which may result in changes to future financial results. Specifically, subsequent evaluations of the loan portfolio, in light of the factors then prevailing, may result in significant changes in the ALLL in future periods, and the inability to collect on outstanding loans could result in increased loan losses. In addition, the valuation of certain securities in the Company’s investment portfolio could be negatively impacted by illiquidity or dislocation in marketplaces resulting in significantly depressed market prices thus leading to impairment losses.

Allowance for Loan and Lease Losses

Management continually evaluates the credit quality of the Company’s loan portfolio, and performs a formal review of the adequacy of the ALLL on a quarterly basis. The ALLL is established through a provision for loan losses charged to earnings and is maintained at a level management considers adequate to absorb estimated probable losses inherent in the loan portfolio as of the evaluation date. Loans, or portions of loans, determined by management to be uncollectible are charged off against the ALLL, while recoveries of amounts previously charged off are credited to the ALLL.

Determining the amount of the ALLL is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, qualitative factors, and consideration of current economic trends and conditions, all of which may be susceptible to significant change. Various banking regulators, as an integral part of their examination of the Company, also review the ALLL. Such regulators may require, based on their judgments about information available to them at the time of their examination, that certain loan balances be charged off or require that adjustments be made to the ALLL. Additionally, the ALLL is determined, in part, by the composition and size of the loan portfolio.

The ALLL consists of three components, a specific component, a general component and an unallocated component. The specific component relates to loans that are classified as impaired. For such loans 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 reserve component of the ALLL covers all other loans and is based on historical loss experience adjusted by qualitative factors. The general reserve component of the ALLL is based on pools of unimpaired loans segregated by loan segment and risk rating categories of “Pass”, “Special Mention” or “Substandard and Accruing.” Historical loss factors and various qualitative factors are applied based on the risk profile in each risk rating category to determine the appropriate reserve related to those loans. Substandard loans on nonaccrual status above the $100 thousand loan relationship threshold and all loans considered troubled debt restructurings (“TDRs”) are classified as impaired. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

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See Note 4 -“Loans” of the notes to consolidated financial statements included in Item 1 hereof for additional information about the ALLL.

Securities Valuation

Management utilizes various inputs to determine the fair value of its investment portfolio. To the extent they exist, unadjusted quoted market prices in active markets (Level 1) or quoted prices for similar assets or models using inputs that are observable, either directly or indirectly (Level 2) are utilized to determine the fair value of each investment in the portfolio. In the absence of observable inputs or if markets are illiquid, valuation techniques are used to determine fair value of any investments that require inputs that are both unobservable and significant to the fair value measurement (Level 3). For Level 3 inputs, valuation techniques are based on various assumptions, including, but not limited to, cash flows, discount rates, adjustments for nonperformance and liquidity, and liquidation values. A significant degree of judgment is involved in valuing investments using Level 3 inputs. The use of different assumptions could have a positive or negative effect on the Consolidated Statements of Financial Condition or results of operations. See Note 6-“Securities” and Note 8-“Fair Value Measurements” of the notes to consolidated financial statements included in Item 1 hereof for additional information about the Company’s securities valuation techniques.

On a quarterly basis, management evaluates individual investment securities having unrealized losses to determine whether or not the security is other-than-temporarily-impaired (“OTTI”). The analysis of OTTI requires the use of various assumptions, including but not limited to, the length of time an investment’s fair value is less than book value, the severity of the investment’s decline, any credit deterioration of the issuer, whether management intends to sell the security, and whether it is more-likely-than-not that the Company will be required to sell the security prior to recovery of its amortized cost basis. Debt investment securities deemed to be OTTI are written down by the impairment related to the estimated credit loss, and the non-credit related impairment loss is recognized in other comprehensive income. The Company did not recognize OTTI charges on investment securities for the three and nine months ended September 30, 2015 and 2014 within the Consolidated Statements of Income.

Other Real Estate Owned

OREO consists of property acquired by foreclosure, abandonment or conveyance of deed in-lieu of foreclosure of a loan, and bank premises that is no longer used for operation or for future expansion. OREO is held for sale and is initially recorded at fair value less costs to sell at the date of acquisition or transfer, which establishes a new cost basis. Upon acquisition of the property through foreclosure or deed-in-lieu of foreclosure, any write-down to fair value less estimated selling costs is charged to the ALLL. The determination is made on an individual asset basis. Bank premises no longer used for operations or future expansion is transferred to OREO at fair value less estimated selling costs with any related write-down included in non-interest expense unless conditions warrant an adjustment to value, as determined by management. Subsequent to acquisition, valuations are periodically performed by management and the assets are carried at the lower of cost or fair value less cost to sell. Fair value is determined through external appraisals, current letters of intent, broker price opinions or executed agreements of sale. Costs relating to the development and improvement of the OREO properties may be capitalized; holding period costs and any subsequent changes to the valuation allowance are charged to expense as incurred.

Income Taxes

The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences could impact our consolidated financial condition or results of operations.

The Company records an income tax provision or benefit based on the amount of tax, including alternative minimum tax, currently payable or receivable and the change in deferred tax assets and liabilities. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial and tax reporting purposes. Management conducts quarterly assessments of all available positive and negative evidence to determine the amount of deferred tax assets that will more likely than not be realized. The Company establishes a valuation allowance for deferred tax assets and records a charge to income if management determines, based on available evidence at the time the determination is made, that it is more likely than not that some portion or all of the deferred tax assets will not be realized. In evaluating the need for a valuation allowance, management considers past operating results, estimates of future taxable income based on approved business plans, future capital requirements and ongoing tax planning strategies. This evaluation process involves significant management judgment about assumptions that are subject to change from period to period depending on the related circumstances. The recognition of deferred tax assets requires management to make significant assumptions and judgments about future earnings, the periods in which items will impact taxable income, future corporate tax rates, and the application of inherently complex tax laws. The use of different estimates can result in changes in the amounts of deferred tax items recognized, which can result in equity and earnings volatility because such changes are reported in current period earnings. On December 31, 2010, the Company established a valuation allowance equal to 100 percent of its net deferred tax assets, excluding deferred tax assets and liabilities related to unrealized holding gains and losses on available-for-sale securities, and have maintained such an allowance through September 30, 2015.

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In connection with determining the income tax provision or benefit, the Company considers maintaining liabilities for uncertain tax positions and tax strategies that management believes contain an element of uncertainty. Periodically, the Company evaluates each of its tax positions and strategies to determine whether a liability for uncertain tax benefits is required. As of September 30, 2015 and December 31, 2014, the Company determined that it did not have any uncertain tax positions or tax strategies and that no liability was required to be recorded.

New Authoritative Accounting Guidance

ASU 2014-04, Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40): “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure,” clarifies that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (a) the creditor obtaining legal title to residential real estate property upon completion of a foreclosure or (b) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The adoption of this guidance on January 1, 2015 did not have a material effect on the operating results or financial position of the Company.

ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” changes the criteria for reporting a discontinued operation. Under the new guidance, a disposal of a component of an entity or group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on the entity’s operations and financial results. This new guidance reduces complexity by removing the complex and extensive implementation guidance and illustrations that are necessary to apply the current definition of a discontinued operation. The new guidance also requires expanded disclosures about discontinued operations that will provide users with more information about the assets, liabilities, revenues and expenses of a discontinued operation and will require pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting, which will provide users with information about the ongoing trends in a reporting organization’s results from continuing operations. The adoption of this guidance on January 1, 2015 did not have a material effect on the operating results or financial position of the Company.

ASU 2014-11, Transfers and Servicing (Topic 860): “Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures,” changes the accounting for repurchase-to-maturity transactions and repurchase financing arrangements by aligning the accounting for these transactions with the accounting for other typical repurchase agreements. Going forward, these transactions would all be accounted for as secured borrowings. The new guidance eliminates sale accounting for repurchase-to-maturity transactions and supersedes the guidance under which a transfer of a financial assets and a contemporaneous repurchase financing could be accounted for on a combined basis as a forward arrangement, which has resulted in outcomes referred to as off-balance sheet accounting. ASU 2014-11 also requires a new disclosure for transactions economically similar to repurchase agreements in which the transferor retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction, and requires expanded disclosure about the nature of the collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The adoption of this guidance on January 1, 2015 did not have a material effect on the operating results or financial position of the Company.

ASU 2014-14, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): “Classification of Certain Government-Guaranteed Mortgage Loans Upon Foreclosure,” requires that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if the following conditions are met: (1) the loan has a government guarantee that is not separable from the loan before foreclosure; (2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim; and (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The adoption of this guidance on January 1, 2015 did not have a material effect on the operating results or financial position of the Company.

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Accounting Guidance to be Adopted in Future Periods

ASU 2014-09, Revenue from Contracts with Customers (Topic 606): Section A, “Summary and Amendments That Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs-Contract with Customers (Subtopic 340-40);” Section B, “Conforming Amendments to Other Topics and Subtopics in the Codification and Status Tables;” and Section C, “Background Information and Basis for Conclusions,” provides a robust framework for addressing revenue recognition issues, upon its effective date, replaces almost all existing revenue recognition guidance, including industry specific guidance, in current GAAP. The core principle of ASU 2014-09 is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 will also result in enhanced interim and annual disclosures, both qualitative and quantitative, about revenue in order to help financial statement users understand the nature, amount, timing and uncertainty of revenue and related cash flows. ASU 2014-09 is effective in annual reporting periods beginning after December 15, 2016 and the interim periods within that year for public business entities, not-for-profit entities that have issued, or are conduit bond obligors for, securities that are traded, listed or quoted on an exchange or over-the-counter market and employee benefit plans that file or furnish financial statements to the SEC. On August 12, 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): “Deferral of the Effective Date,” which defers the adoption of ASU 2014-09 for one year for all entities. Accordingly, the Company will adopt this guidance on January 1, 2018 in accordance with ASU 2015-14, and is currently evaluating the effect this guidance may have on its operating results or financial position.

ASU 2014-12, Compensation – Stock Compensation (Topic 718): “Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period,” requires a performance target that affects vesting and that can be achieved after the requisite service period to be treated as a performance condition. To account for such awards, an entity should apply existing guidance as it relates to awards with performance conditions that affect vesting. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent compensation cost attributable to the period(s) for which the requisite service already has been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service periods. The total amount of compensation cost should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. ASU 2014-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The adoption of this guidance on January 1, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” defines management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and provide guidance for related footnote disclosures. ASU 2014-15 requires an entity’s management to assess the entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically ASU 2014-15: (1) provides a definition of the term substantial doubt; (2) requires an evaluation as to whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable); (3) provides principles for considering the mitigating effect of management’s plans; (4) requires certain disclosures when substantial doubt is alleviated; and (5) require an express statement and other disclosures when substantial doubt is not alleviated. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of this guidance on December 31, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

ASU 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items,” will alleviate uncertainty for preparers, auditors and regulators because auditors and regulators will no longer be required to evaluate whether a preparer presented an unusual and/or infrequent item appropriately. Although ASU 2015-01 eliminates the concept of extraordinary items, the presentation and disclosure guidance for items that are unusual in nature or infrequent in occurrence has been retained and has been expanded to include items that are both unusual in nature or infrequent in occurrence. The nature and financial effects of each event or transaction is required to be presented as a separate component of income from continuing operations or, alternatively, in the notes to the financial statements. ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption of this guidance is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The adoption of this guidance on January 1, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

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ASU 2015-02, Consolidation (Topic 810): “Amendments to the Consolidation Analysis,” improves targeted areas of the consolidation guidance and reduces the number of consolidation models. The new consolidation standard changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable interest entity (“VIE”), and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. It also eliminates the VIE consolidation model based on majority exposure to variability that applied to certain investment companies and similar entities. ASU 2015-02 is effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The adoption of this guidance on January 1, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): “Simplifying the Presentation of Debt Issuance Costs,” more closely aligns the presentation of debt issuance costs under U.S. GAAP with the presentation under comparable IFRS standards. Under ASU 2015-03, debt issuance costs related to a recognized debt liability will no longer be recorded as a separate asset, but will be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. The costs will continue to be amortized to interest expense using the effective interest method. ASU 2015-03 is effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, and requires retrospective application to all prior periods presented in the financial statements. Early adoption of this guidance is permitted. The adoption of this guidance on January 1, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

ASU 2015-05, Intangibles – Goodwill and Other Internal-Use Software (Subtopic 350-40): “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” provides explicit guidance on a customer’s accounting for fees paid in a cloud computing environment. Specifically, the amendments in this ASU provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU 2015-05 is effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption of this guidance is permitted. The adoption of this guidance on January 1, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

Executive Summary

The following overview should be read in conjunction with this MD&A in its entirety.

On September 8, 2015, the Company was notified by the Federal Reserve Bank of Philadelphia (the “Reserve Bank”) that effective September 2, 2015 it was released from the Written Agreement it had been under with the Reserve Bank since November 24, 2010. Previously, on March 25, 2015, the Office of the Comptroller of the Currency (“OCC”) notified First National Community Bank, the Company’s wholly-owned subsidiary (the “Bank”), that it was fully and completely released from the Consent Order it entered into with the OCC in September 2010. These releases signify that the Reserve Bank and OCC have determined that the Company and the Bank have met all of the requirements mandated by the Written Agreement and Consent Order. The Company anticipates a further reduction in its noninterest expense, including FDIC insurance, OCC assessment and general liability and fidelity bond insurance which have been elevated due to operating under the Consent Order. In addition, while operating under the Consent Order, the Company was prohibited from using brokered deposits as a source of liquidity. With the release from the Consent Order, the Company can now utilize brokered deposits as a funding alternative.

On June 30, 2015, pursuant to approval from the Noteholders and the Federal Reserve Bank of Philadelphia, the Company amended the original terms of its unsecured, fixed-rate debentures due September 1, 2019 (“Notes”) to reduce the annual interest rate from 9.00% to 4.50% effective July 1, 2015 and to accelerate a partial prepayment of principal amount. On June 30, 2015, the Company repaid $11.0 million, or 44.0%, of outstanding principal. The remaining $14.0 million of principal is to be repaid, subject to deferral, as follows: 1) 16% of the original principal amount, or $4.0 million, payable September 1, 2017; 2) 20% of the original principal amount, or $5.0 million, payable on September 1, 2018; and 3) the final 20% of the original principal amount, or $5.0 million, payable on September 1, 2019.

Under the Agreement, principal and interest payments on the Notes required written non-objection for the Reserve Bank. Pursuant to the Written Agreement, the Company had been deferring the quarterly interest payments on the Notes beginning December 1, 2010 and ending on June 1, 2015. On July 15, 2015, the Company sent a request to the Reserve Bank to permit payment of the quarterly interest payment on the Notes, which was due and payable on September 1, 2015. The Company subsequently received approval from the Reserve Bank on August 17, 2015 and accordingly paid the quarterly interest payment to the Noteholders on September 1, 2015. It is the intent of the Company to continue the regularly scheduled quarterly interest payments on a go-forward basis. Additionally, the Company is currently developing consolidated capital strategies to pay the $10.8 million in accrued and unpaid interest associated with the Notes, which has been deferred from December 1, 2010 to June 1, 2015.

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The Company recorded net income of $2.3 million, or $0.14 per diluted common share, for the three month period ended September 30, 2015, a decrease of $1.1 million compared to net income of $3.4 million, or $0.20 per diluted common share, for the comparable three months of 2014. Net income for the nine months ended September 30, 2015 was $6.6 million, or $0.40 per diluted common share, a decrease of $6.9 million, compared to net income of $13.5 million, or $0.82 per diluted common share, for the same period of 2014. The annualized return on average equity was 16.38% and 15.96%, respectively, for the three- and nine-month periods ended September 30, 2015, compared to 26.81% and 41.43%, respectively, for the comparable periods in 2014. For the three and nine months ended September 30 2015, the annualized return on average assets was 0.91% and 0.90%, respectively, and 1.38% and 1.85%, respectively, for the comparable periods in 2014. The Company did not pay any dividends during the three or nine months ended September 30, 2015 and 2014.

The reduction in earnings for the three months ended September 30, 2015 was due primarily to a $3.0 million reduction in non-interest income, which resulted from a $3.0 million decrease in net gains on the sale of available-for-sale securities as compared to the same three months of 2014. Partially offsetting the reduction in non-interest income was a $1.4 million decrease in non-interest expense, a $0.4 million increase in net interest income and a $0.1 million increase in the credit for loan and lease losses. The decrease in non-interest expense reflected decreases in expenses on other real estate owned, legal expense, professional fees, insurance, regulatory assessments and other operating expenses. The increase in net interest income was due largely to the 44.0% principal reduction and rate modification on the Company’s Notes completed on June 30, 2015.

Year-to-date net income decreased $6.9 million, or 50.7%, comparing the nine months ended September 30, 2015 and 2014. The reduction in earnings was due largely to nonrecurring income recorded in 2014 related to net gains on the sale of available-for-sale securities and the receipt of a legal settlement in the amount of $5.8 million resulting from judgments filed by the Company pursuant to a large credit relationship.

Total assets increased $85.2 million, or 8.8%, to $1.1 billion at September 30, 2015 as compared to $970.0 million at December 31, 2014. The balance sheet growth largely reflected a $54.6 million, or 8.3%, increase in net loans and a $30.2 million, or 13.8%, increase in available-for-sale securities. Total deposits grew $56.7 million, or 7.1%, while total borrowed funds increased $20.9 million, or 21.6%. The increase in borrowed funds reflected net advances from the Federal Home Loan Bank of Pittsburgh of $31.9 million, partially offset by the $11.0 million, or 44.0%, reduction in the Company’s Notes.

Total shareholders’ equity increased $8.2 million, or 16.0%, to $59.6 million at September 30, 2015 from $51.4 million at December 31, 2014. The capital improvement resulted primarily from net income of $6.6 million, coupled with a $1.4 million increase in accumulated other comprehensive income, which resulted entirely from appreciation in the fair value of available-for-sale securities, net of the tax impact of the appreciation. At September 30, 2015, the Company’s total risk-based capital and Tier I leverage ratios were 11.20% and 6.57%, respectively. The respective ratios for the Bank at September 30, 2015 were 13.29% and 9.11%. The ratios exceeded the 10.00% and 5.00%, respectively, required to be well capitalized under the prompt corrective action provisions of the Basel III capital framework for U.S. banking organizations, which became effective for the Company and the Bank on January 1, 2015.

The Company is planning to convert and upgrade its core operating system during the fourth quarter of 2015. Management anticipates that the conversion to a state-of-the-art, highly-flexible, real-time operating system will greatly enhance the Company’s technology infrastructure and create organization-wide operating efficiencies.

Summary of Performance

Net Interest Income

Net interest income is the difference between (i) interest income (interest and fees on interest-earning assets), and (ii) interest expense (interest paid on the Company’s deposits and borrowed funds). Net interest income represents the largest component of the Company’s operating income and, as such, is the primary determinant of profitability. Net interest income is impacted by variations in the volume, rate and composition of earning assets and interest-bearing liabilities, changes in general market rates and the level of non-performing assets. Interest income is shown on a fully tax-equivalent basis and is calculated by adjusting tax-free interest using a marginal tax rate of 34.0% in order to equate the yield to that of taxable interest rates. Tax-equivalent net interest income for the third quarter of 2015 was largely impacted by the 44.0% partial prepayment and the modification of the interest rate of the Company’s Notes, which had a positive effect on funding costs. In addition, the Company’s cost of funds was also favorably impacted by reinstituting the use of lower-costing brokered deposits, including CDARs, as a source of funding. In comparing the quarter and year-to-date periods ended September 30, 2015, the Company’s net interest income and net interest margin was also significantly impacted by repositioning the investment portfolio from tax-exempt obligations of state and political subdivisions to taxable investments. This repositioning was part of tax planning strategies designed to promote possible future reversal of the deferred tax valuation allowance. Partially mitigating the repositioning was the sale of lower-yielding residential mortgage-backed securities, specifically home equity conversion mortgages, and replacing them with higher-yielding securities.

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Net interest income on a tax-equivalent basis increased $167 thousand to $7.4 million from $7.2 million comparing the three-month periods ending September 30, 2015 and 2014. Interest expense decreased $484 thousand, or 32.2%, to $1.0 million for the three months ended September 30, 2015 from $1.5 million for the same period of 2014. Partially offsetting the reduction in interest expense was a decrease of $317 thousand, or 3.6%, in tax-equivalent interest income. The Company’s tax-equivalent interest margin compressed 11 basis points to 3.07% for the third quarter of 2015 from 3.18% for the same quarter of 2014. Tax-equivalent net interest margin, a key measurement used in the banking industry to measure income from earning assets relative to the cost to fund those assets, is calculated by dividing tax-equivalent net interest income by average interest-earning assets. Rate spread, the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities shown on a fully tax-equivalent basis, was 2.98% for the three months ended September 30, 2015, a decrease of 6 basis points compared to 3.04% for the same period of 2014.

The $484 thousand decrease in interest expense was driven primarily by a 29 basis point decrease in the Company’s cost of funds to 0.51% for the third quarter of 2015 compared to 0.80% for the same quarter of 2014, which resulted in a $404 thousand decrease in interest expense due to change in rates. In addition, despite a $40.6 million, or 5.4%, increase in average interest-bearing liabilities, change in volumes resulted in an $80 thousand decrease in interest expense comparing the third quarters of 2015 and 2014, which was caused by the 44.0% principal repayment of the Notes and the replacement of higher-costing certificates of deposit originated through QwickRate®, a national deposit listing service, and maturing certificates of customers bearing higher interest rates with lower-costing brokered deposits and FHLB of Pittsburgh advances. With regard to changes in rate, the modification of the interest rate on the subordinated debentures from 9.0% to 4.5% was the leading factor contributing to a 134 basis point decrease in the cost of borrowed funds. The decrease in borrowing costs resulted in a $347 thousand reduction in interest expense, which accounted for nearly 86.0% of the decrease in interest expense due to rate and nearly 72.0% of the total decrease in interest expense.

Tax-equivalent interest income decreased $317 thousand, or 3.6%, to $8.4 million for the three months ended September 30, 2015 from $8.7 million for the same three months of 2014, and partially offset the positive effects of the decrease in interest expense. Specifically, the decrease in tax-equivalent interest income resulted primarily from a 25 basis point decline in the tax-equivalent yield on the loan portfolio to 3.91% for the third quarter of 2015 compared to4.16% for the same quarter of 2014, which caused a corresponding decrease in tax-equivalent interest income of $442 thousand. The decrease in loan yields reflected competitive pressures for commercial loans within our market area and current promotions involving short-term residential mortgage products and indirect auto loans. An increase of $27.6 million, or 4.1%, in average loans resulted in a corresponding increase of $280 thousand in tax-equivalent interest income which partially mitigated the decrease due to the decline in yield. In addition, tax-equivalent interest income was also impacted by the repositioning of the investment portfolio. The average balance of tax-exempt investments decreased $34.5 million, or 95.3%, to $1.7 million for the three months ended September 30, 2015 from $36.2 million for the same three months of 2014, which caused a $587 thousand corresponding decrease to tax-equivalent interest income. The average balance of taxable investments increased $63.9 million, or 35.9%, but was only able to mitigate the decrease by $389 thousand.

For the nine months ended September 30, 2015, net interest income on a tax equivalent basis decreased $1.1 million, or 5.0%, to $20.3 million from $21.4 million for the comparable period in 2014. Comparing the year-to-date periods of 2015 and 2014, tax-equivalent interest income decreased $1.9 million, or 7.2%, which was partially offset by a $0.8 million, or 17.6%, reduction in interest expense. The decrease in tax-equivalent interest income was largely related to the repositioning of the investment portfolio, coupled with a 19 basis point decrease in the tax-equivalent loan yields. Changes in average balances and yields of taxable and tax free securities in total caused a $1.6 million reduction in tax-equivalent interest income, which accounted for approximately 83.0% of the total $1.9 million decrease. In addition, the 19 basis point decline in loan yields caused a corresponding decrease in tax-equivalent interest income of $1.0 million, which was only partially mitigated by $677 thousand in additional interest due to a $22.4 million increase in average loans. The reduction in tax-equivalent interest income was partially offset by a $0.8 million reduction in interest expense, which resulted primarily from a 14 basis point decrease in the year-to-date cost of funds to 0.66% in 2015 from 0.80% in 2014. Similar to the quarterly change, the reduction in funding costs reflected the rate modification on the Company’s Notes and the planned maturity and runoff and replacement of certificates of deposit originated through QwickRate® and maturing certificates of customers bearing higher interest rates with lower-costing brokered deposits and advances through the FHLB of Pittsburgh.

Net interest income depends upon the relative amount of interest-earning assets and interest-bearing liabilities and the interest rate earned or paid on them. The following tables present certain information about the Company’s Consolidated Statements of Financial Condition and Consolidated Statements of Income for the three- and nine-month periods ended September 30, 2015 and 2014, and reflect the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods shown. Average balances are derived from average daily balances. The yields include amortization of fees which are considered adjustments to yields.

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	Three Months Ended
	September 30, 2015									September 30, 2014
	Average						Yield/			Average						Yield/
(dollars in thousands)	Balance			Interest			Cost			Balance			Interest			Cost
ASSETS
Earning assets (2)(3)
Loans-taxable (4)	$	660,709		$	6,371			3.86	%	$	635,032		$	6,524			4.11	%
Loans-tax free (4)		41,746			488			4.68	%		39,849			497			4.99	%
Total loans (1)(2)		702,455			6,859			3.91	%		674,881			7,021			4.16	%
Securities-taxable		241,799			1,477			2.44	%		177,863			1,043			2.35	%
Securities-tax free		1,707			29						36,246			620			6.84	%
Total securities (1)(5)		243,506			1,506			2.47	%		214,109			1,663			3.11	%
Interest-bearing deposits in other banks		12,185			10			0.33	%		15,983			8			0.20	%
Total earning assets		958,146			8,375			3.50	%		904,973			8,692			3.84	%
Non-earning assets		72,631									74,828
Allowance for loan and lease losses		(10,568	)								(12,246	)
Total assets	$	1,020,209								$	967,555
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing demand deposits	$	376,656			216			0.23	%	$	301,472			101			0.13	%
Savings deposits		91,164			15			0.07	%		88,821			14			0.06	%
Time deposits over $100,000		90,448			155			0.69	%		120,452			239			0.79	%
Other time deposits		131,771			291			0.88	%		129,649			397			1.22	%
Total interest-bearing deposits		690,039			677			0.39	%		640,394			751			0.47	%
Borrowed funds and other interest-bearing liabilities		105,109			340			1.29	%		114,137			750			2.63	%
Total interest-bearing liabilities		795,148			1,017			0.51	%		754,531			1,501			0.80	%
Demand deposits		143,140									137,992
Other liabilities		25,303									25,337
Shareholders' equity		56,618									49,695
Total liabilities and shareholders' equity	$	1,020,209								$	967,555
Net interest income/interest rate spread (6)					7,358			2.98	%					7,191			3.04	%
Tax equivalent adjustment					(176	)								(380	)
Net interest income as reported				$	7,182								$	6,811
Net interest margin (7)								3.07	%								3.18	%

(1)	Interest income is presented on a tax equivalent basis using a 34% rate.
(2)	Loans are stated net of unearned income.
(3)	Non-accrual loans are included in loans within earning assets.
(4)	Loan fees included in interest income are not significant.
(5)	The yields for securities that are classified as available-for-sale are based on the average historical amortized cost.
(6)	Interest rate spread represents the difference between the average yield on interest-earning assets and the cost of interest-bearing liabilities and is presented on a tax-equivalent basis.
(7)	Net interest income as a percentage of total average interest earning assets.

49

	Nine Months Ended
	September 30, 2015									September 30, 2014
	Average						Yield/			Average						Yield/
(dollars in thousands)	Balance			Interest			Cost			Balance			Interest			Cost
ASSETS
Earning assets (2)(3)
Loans-taxable (4)	$	643,914		$	18,667			3.87	%	$	622,877		$	18,976			4.06	%
Loans-tax free (4)		41,700			1,474			4.71	%		40,334			1,488			4.92	%
Total loans (1)(2)		685,614			20,141			3.92	%		663,211			20,464			4.11	%
Securities-taxable		216,141			3,822			2.36	%		173,883			2,973			2.28	%
Securities-tax free		2,656			138			6.93	%		48,103			2,544			7.05	%
Total securities (1)(5)		218,797			3,960			2.41	%		221,986			5,517			3.31	%
Interest-bearing deposits in other banks		21,877			42			0.26	%		24,188			44			0.24	%
Total earning assets		926,288			24,143			3.48	%		909,385			26,025			3.82	%
Non-earning assets		72,976									74,669
Allowance for loan and lease losses		(11,017	)								(13,446	)
Total assets	$	988,247								$	970,608
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing demand deposits	$	345,921			479			0.18	%	$	312,487			315			0.13	%
Savings deposits		91,548			45			0.07	%		88,372			44			0.07	%
Time deposits over $100,000		103,115			544			0.70	%		142,998			831			0.77	%
Other time deposits		124,495			935			1.00	%		134,607			1,245			1.23	%
Total interest-bearing deposits		665,079			2,003			0.40	%		678,464			2,435			0.48	%
Borrowed funds and other interest-bearing liabilities		104,152			1,807			2.31	%		91,822			2,189			3.18	%
Total interest-bearing liabilities		769,231			3,810			0.66	%		770,286			4,624			0.80	%
Demand deposits		137,750									132,378
Other liabilities		25,722									24,537
Shareholders' equity		55,544									43,407
Total liabilities and shareholders' equity	$	988,247								$	970,608
Net interest income/interest rate spread (6)					20,333			2.82	%					21,401			3.02	%
Tax equivalent adjustment					(548	)								(1,371	)
Net interest income as reported				$	19,785								$	20,030
Net interest margin (7)								2.93	%								3.14	%

(1)	Interest income is presented on a tax equivalent basis using a 34% rate.
(2)	Loans are stated net of unearned income.
(3)	Non-accrual loans are included in loans within earning assets.
(4)	Loan fees included in interest income are not significant.
(5)	The yields for securities that are classified as available-for-sale are based on the average historical amortized cost.
(6)	Interest rate spread represents the difference between the average yield on interest-earning assets and the cost of interest-bearing liabilities and is presented on a tax-equivalent basis.
(7)	Net interest income as a percentage of total average interest earning assets.

50

Rate Volume Analysis

The most significant impact on net income between periods is derived from the interaction of changes in the volume and rates earned or paid on interest-earning assets and interest-bearing liabilities. The volume of earning assets, specifically loans and investments, compared to the volume of interest-bearing liabilities represented by deposits and borrowings, combined with the spread, produces the changes in net interest income between periods. Components of interest income and interest expense are presented on a tax-equivalent basis using the statutory federal income tax rate of 34%.

The following table summarizes the effect that changes in volumes of earning assets and interest-bearing liabilities and the interest rates earned and paid on these assets and liabilities have on net interest income. The net change or mix component attributable to the combined impact of rate and volume changes has been allocated proportionately to the change due to volume and the change due to rate.

	Three Months Ended September 30,									Nine Months Ended September 30,
	2015 vs. 2014									2015 vs. 2014
	Increase (Decrease) due to change in									Increase (Decrease) due to change in
(in thousands)	Volume			Rate			Total			Volume			Rate			Total
Interest income:
Loans - taxable	$	257		$	(410	)	$	(153	)	$	628		$	(937	)	$	(309	)
Loans - tax free		23			(32	)		(9	)		49			(63	)		(14	)
Total loans		280			(442	)		(162	)		677			(1,000	)		(323	)
Securities - taxable		389			45			434			748			101			849
Securities - tax free		(587	)		(4	)		(591	)		(2,360	)		(46	)		(2,406	)
Total securities		(198	)		41			(157	)		(1,612	)		55			(1,557	)
Interest-bearing deposits in other banks		(2	)		4			2			(4	)		2			(2	)
Total interest income		80			(397	)		(317	)		(939	)		(943	)		(1,882	)
Interest expense:
Interest-bearing demand deposits		30			85			115			38			126			164
Savings deposits		-			1			1			1			-			1
Time deposits over $100,000		(54	)		(30	)		(84	)		(236	)		(51	)		(287	)
Other time deposits		7			(113	)		(106	)		(88	)		(222	)		(310	)
Total interest-bearing deposits		(17	)		(57	)		(74	)		(285	)		(147	)		(432	)
Borrowed funds and other interest-bearing liabilities		(63	)		(347	)		(410	)		301			(683	)		(382	)
Total interest expense		(80	)		(404	)		(484	)		16			(830	)		(814	)
Net interest income	$	160		$	7		$	167		$	(955	)	$	(113	)	$	(1,068	)

Provision for Loan and Lease Losses

Management closely monitors the loan portfolio and the adequacy of the ALLL by considering underlying borrower financial performance and collateral values and associated credit risks. Future material adjustments may be necessary to the provision for loan and lease losses and the ALLL if economic conditions or loan performance differ substantially from the assumptions management used in making its evaluation of the ALLL. The provision for loan and lease losses is an expense charged against net interest income

to provide for probable losses attributable to uncollectible loans and is based on management’s analysis of the adequacy of the ALLL. A credit for loan and lease losses reflects the reversal of amounts previously charged to the ALLL.

The Company recorded a credit for loan and lease losses of $0.2 million and $0.3 million for the three and nine months ended September 30, 2015, respectively, compared to credits for loan and lease losses of $0.1 million and $5.6 million, respectively, for the same periods in the prior year. The $5.3 million decrease in the credit for loan and lease losses for the nine months ended September 30, 2015 was primarily attributable to the full recovery of $3.6 million in previously charged-off commercial real estate loans received during the nine months ended September 30, 2014. Management closely monitors the loan portfolio, nonperforming loans and the adequacy of the ALLL considering underlying borrower financial performance and collateral values and increasing credit risks.

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Non-interest Income

Non-interest income totaled $1.4 million for the three months ended September 30, 2015, a decrease of $3.0 million, or 69.0%, from the $4.4 million earned during the comparable period in 2014.  The decrease in non-interest income largely reflected a reduction in net gains on the sale of securities of $3.0 million when comparing the third quarters of 2015 and 2014.

Non-interest income amounted to $6.3 million for the nine months ended September 30, 2015, a decrease of $6.6 million, or 50.7%, from $12.9 million for the nine months ended September 30, 2014. Non-interest income levels were impacted by a reduction in net gains on the sale of securities and non-recurring income in 2014. Year-to-date net gains on the sale of securities totaled $2.3 million in 2015, a decrease of $3.7 million from $6.0 million in 2014. Non-recurring income for the nine months ended September 30, 2014 included monies received from the settlement of judgements filed pursuant to a large commercial credit relationship and a $0.6 million net gain recorded on the divestiture of the Company’s Monroe County branch offices.

Non-interest Expense

For the three months ended September 30, 2015, non-interest expense decreased $1.4 million, or 17.6%, to $6.4 million, from $7.8 million for the same three months of 2014. On a year-to-date basis, non-interest expense decreased $4.8 million, or 19.7%, to $19.9 million in 2015 from $24.7 million in 2014. For both the three-month and year-to-date periods, the decrease resulted primarily from reductions in expenses of other real estate owned, regulatory assessments, legal expenses, professional fees and insurance expense.

Expenses of other real estate owned decreased $0.4 million and $2.2 million, respectively, comparing both the three-month and nine-month periods ended September 30, 2015 and 2014. Year-to-date valuations adjustments to OREO properties totaled $0.2 million in 2015 and $2.2 million in 2014.

During the second quarter of 2015, the Company was notified by the Federal Deposit Insurance Corporation (“FDIC”) that its risk category for FDIC assessments had improved from a risk category II to a risk category I, the lowest risk category, based upon the Company’s most recent regulatory examination. The change in risk categories became effective on February 1, 2015, and as a result the Company’s initial base assessment rate for deposit insurance decreased from 0.14 basis points to 0.05 basis points. The change in assessment rate resulted in decreases in regulatory assessments of $0.1 million and $0.7 million, respectively, comparing the three months and nine months ended September 30, 2015 and 2014.

Legal expense decreased significantly due to the resolution of longstanding regulatory matters and litigation. Legal expense for the third quarter of 2015 was $0.1 million, a decrease of $0.2 million, or 70.1%, from $0.3 million for the same quarter of 2014. For the nine months ended September 30, legal expense decreased $1.1 million, or 76.8%, to $0.3 million in 2015 compared to $1.4 million in 2014. Similarly, professional fees in 2015 decreased $0.1 million, or 36.9%, for the third quarter and $0.5 million, or 37.1%, for the year-to-date period as compared to the same periods of 2014, as the Company continues to monitor and decrease its reliance on third-party consultants.

During the third quarter of 2015, the Company’s professional liability, fidelity bond and errors and omissions insurance policies were renewed at lower rates for the upcoming insurance period. As a result insurance expense for the three months and nine months ended September 30, 2015 decreased $0.1 million, or 34.7%, and $0.2 million, or 30.2%, respectively, compared to the same periods of 2014.

 Provision for Income Taxes

The Company recorded a credit for income tax expense of $40 thousand for the nine months ended September 30, 2015 compared to a provision for income tax expense of $326 thousand for the nine months ended September 30, 2014, which were entirely related to alternative minimum tax.

The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences could impact our consolidated financial condition or results of operations.

52

The Company records an income tax provision or benefit based on the amount of tax, including alternative minimum tax, currently payable or receivable and the change in deferred tax assets and liabilities. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial and tax reporting purposes. Management conducts quarterly assessments of all available positive and negative evidence to determine the amount of deferred tax assets that will more likely than not be realized. The Company establishes a valuation allowance for deferred tax assets and records a charge to income if management determines, based on available evidence at the time the determination is made, that it is more likely than not that some portion or all of the deferred tax assets will not be realized. In evaluating the need for a valuation allowance, management considers past operating results, estimates of future taxable income based on approved business plans, future capital requirements and ongoing tax planning strategies. This evaluation process involves significant management judgment about assumptions that are subject to change from period to period depending on the related circumstances. The recognition of deferred tax assets requires management to make significant assumptions and judgments about future earnings, the periods in which items will impact taxable income, future corporate tax rates, and the application of inherently complex tax laws. The use of different estimates can result in changes in the amounts of deferred tax items recognized, which can result in equity and earnings volatility because such changes are reported in current period earnings. On December 31, 2010, the Company established a valuation allowance equal to 100 percent of its net deferred tax assets, excluding deferred tax assets and liabilities related to unrealized holding gains and losses on available-for-sale securities, and have maintained such an allowance through September 30, 2015.

Recently, the Company implemented certain tax planning initiatives designed to promote the generation of taxable income. These strategies included: 1) the sale of tax-exempt obligations of state and political subdivisions with fair values greater than book values and redeployment of the sales proceeds into taxable investment options; 2) the sale of lower-yielding taxable securities with fair values greater than book values, and the redeployment of sales proceeds into higher-yielding taxable investment options; and 3) reducing the annual rate paid on the Company’s Notes from 9.0% to 4.5% and making an $11.0 million, or 44.0%, principal prepayment on the Notes. In addition to these tax planning initiatives, the resolution of costly litigation and release from the Consent Order by the OCC on March 25, 2015 and the Written Agreement by the Reserve Bank on September 2, 2015 has led to an improvement in the Company’s overall risk profile. The Company was also notified by the FDIC that effective February 1, 2015, its risk category for FDIC insurance improved from Risk Category II to Risk Category I, resulting in a decrease in the Company’s initial base assessment rate for deposit insurance from 0.14 basis points to 0.05 basis points, a 64.3% reduction. As a result of these developments, the Company has experienced and anticipates further reductions in its non-interest expense levels, specifically legal expense and regulatory assessments. Furthermore, as a result of the improved risk profile, the Company renewed its professional liability, fidelity bond and errors and omissions insurance policies at lower rates effective July 1, 2015 and accordingly experienced a decrease in insurance expense going forward.

When determining the need for a valuation allowance, the Company assessed the possible sources of taxable income available under tax law to realize a tax benefit for deductible temporary differences and carryforwards as defined in ASC Topic 740. While the Company has shown substantial book net income in 2013, 2014 and in the first nine months of 2015, these amounts have included significant non-recurring or non-taxable transactions, such as legal settlements, that affected the provision for loan losses and non-interest income levels and gains on the sales of securities. The Company utilizes a three-year rolling measurement of results when assessing whether it is in a cumulative loss position. Adjusting for these non-recurring items, the Company was in a cumulative three-year loss position at September 30, 2015. Based on the analysis of available positive and negative evidence, management determined that the established valuation allowance equal to 100.0% of net deferred tax assets, excluding deferred tax assets or liabilities related to unrealized holding gains and losses on available-for-sale securities, should be maintained at September 30, 2015. Management will reassess the need for a valuation allowance at December 31, 2015 taking into consideration the positive and negative evidence available at that time.

In connection with determining the income tax provision or benefit, the Company considers maintaining liabilities for uncertain tax positions and tax strategies that management believes contain an element of uncertainty. Periodically, the Company evaluates each of its tax positions and strategies to determine whether a liability for uncertain tax benefits is required. As of September 30, 2015 and December 31, 2014, the Company determined that it did not have any uncertain tax positions or tax strategies and that no liability was required to be recorded.

Financial Condition

Assets

Total assets increased $85.2 million, or 8.8%, to $1.1 billion at September 30, 2015 from $970.0 million at December 31, 2014. Loans, net of unearned income and the ALLL, grew $54.6 million, or 8.3%, and available-for-sale securities increased $30.2 million, or 13.8%, comparing September 30, 2015 and December 31, 2014. These increases were primarily funded by an increase in total deposits of $56.7 million, or 7.1%, and an increase in FHLB of Pittsburgh advances of $31.9 million, or 52.1%. On June 30, 2015, the Company repaid $11.0 million, or 44.0%, of the principal amount outstanding on the Notes. On June 30, 2015, the Company also amended the original terms of the Notes to reduce the interest rate payable on the Notes from 9.00% to 4.50% effective July 1, 2015. Pursuant to the approved amendment, the remaining $14.0 million in principal on the Notes is to be repaid as follows: (a) 16% of the original principal amount, or $4.0 million, payable on September 1, 2017; (b) 20% of the original principal amount, or $5.0 million, payable on September 1, 2018; and (c) the final 20% of the original principal amount, or $5.0 million, payable on September 1, 2019, the maturity date of the Notes. As of September 30, 2015 and December 31, 2014, there was $14.0 million and $25.0 million outstanding under the Notes, respectively.

53

Cash and Cash Equivalents

Cash and cash equivalents totaled $31.0 million at September 30, 2015, a decrease of $4.7 million, or 13.1%, from $35.7 million at December 31, 2014. The decrease resulted from loan growth, an increase in available-for-sale securities and the $11.0 million prepayment of the Notes, partially offset by deposit growth and an increase in advances from the FHLB of Pittsburgh. The Company did not pay any dividends during the three and nine months ended September 30, 2015.

Securities

The Company’s investment securities portfolio provides a source of liquidity needed to meet expected loan demand and interest income to increase profitability. Additionally, the Company utilizes the investment securities portfolio to meet pledging requirements to secure public deposits and for other purposes. Investment securities are classified as held-to-maturity and carried at amortized cost when the Company has the positive intent and ability to hold them to maturity. Securities not classified as held-to-maturity are classified as available-for-sale and are carried at fair value, with unrealized holding gains and losses reported as a component of shareholders’ equity in accumulated other comprehensive income (loss), net of tax. The Company determines the appropriate classification of investment securities at the time of purchase. At September 30, 2015 and December 31, 2014, all securities were classified as available-for-sale. The decision to purchase or sell investment securities is based upon the current assessment of long- and short-term economic and financial conditions, including the interest rate environment and asset/liability management strategies. Securities with limited marketability and/or restrictions, such as FHLB of Pittsburgh and FRB stocks, are carried at cost. FHLB stock is classified separately on the consolidated statements of financial condition, while FRB stock is included in other assets.

At September 30, 2015, the Company’s investment portfolio was comprised principally of securities issued by U.S. government or U.S. government-sponsored agencies, which include residential mortgage-backed securities, residential and commercial collateralized mortgage obligations (“CMOs”) and single-maturity bonds, and taxable obligations of state and political subdivisions. Except for U.S. government or U.S. government-sponsored agencies, there were no securities of any individual issuer that exceeded 10.0% of shareholders’ equity as of September 30, 2015.

The following table presents the carrying value of available-for-sale securities, which are carried at fair value, at September 30, 2015 and December 31, 2014:

	September 30,		December 31,
(in thousands)	2015		2014
Available-for-sale securities
Obligations of U.S. government agencies	$	44,700	$	29,276
Obligations of state and political subdivisions		56,152		24,509
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		23,544		26,231
Collateralized mortgage obligations - commercial		91,339		61,256
Residential mortgage-backed securities		28,938		74,098
Corporate debt securities		426		420
Negotiable certificates of deposit		3,171		2,232
Equity securities		958		967
Total available-for-sale securities	$	249,228	$	218,989

As previously mentioned, the Company’s investment portfolio is entirely classified as available-for-sale, which provides management with flexibility to act on market opportunities when they occur. Management monitors the Company’s investment portfolio regularly and adjusts the investment strategy to reflect changes in market conditions, liquidity needs, asset/liability strategy and tax planning requirements.

54

Management actions during the nine months ended September 30, 2015 reflected the Company’s ongoing investment strategy designed to replace tax-free holdings with taxable securities as required under tax planning initiatives, take advantage of changing market conditions and address the Company’s liquidity needs. The Company currently has $52.7 million in net operating loss (“NOL”) carryovers, which it uses to offset any taxable income. In addition, the Company has established a full valuation allowance for its deferred tax assets. Because of this tax position, the Company does not benefit from holding tax-exempt obligations of state and political subdivisions. Accordingly, current tax planning initiatives focus on generating sustained taxable income to be able to reduce NOL carryovers and begin reversing the deferred tax asset valuation allowance.

During the third quarter of 2015, the Company sold two of its residential mortgage-backed securities, specifically home equity conversion mortgages (“HECMs”) with an aggregate amortized cost of $5.3 million, and received gross proceeds totaling $5.3 million. Net gains of $4 thousand were realized upon the sales and included in non-interest income for the three months ended September 30, 2015.

For the nine months ended September 30, 2015, there were a total of 32 securities sold, including 1 U.S. government agency obligation, 18 tax-free and 3 taxable state and political subdivision obligations, 3 commercial CMOs, and 7 HECMs. Gross proceeds received on the sales and the aggregate amortized cost of the securities sold totaled $78.8 million and $76.5 million, respectively. Year-to-date net gains realized upon the sales amounted to $2.3 million and are included in non-interest income for the nine months ended September 30, 2015.

During the nine months ended September 30, 2014, the Company sold its entire holdings of held-to-maturity securities comprised of four zero-coupon obligations of state and political subdivisions with an aggregate amortized cost of $2.3 million. Gross proceeds received from the sale of held-to-maturity securities were $2.7 million, with net gains of $0.4 million realized upon the sale. For the nine months ended September 30, 2014, gross proceeds received from the sale of available-for-sale securities amounted to $78.6 million, with year-to-date net gains totaling $5.6 million included in non-interest income for the nine months ended September 30, 2015.

The Company purchased 21 securities during the third quarter of 2015 with a total aggregate cost of $26.6 million. For the nine months ended September 30, 2015, the Company purchased 55 securities totaling $113.0 million, including $17.3 million in single-maturity bonds of U.S. government-sponsored agencies, $40.7 million in commercial CMOs of U.S. government-sponsored agencies, $1.1 million in residential mortgage-backed securities, $53.0 million in taxable obligations of state and political subdivisions and $0.9 million in negotiable certificates of deposit.

The following table presents the maturities of available-for-sale securities, based on carrying value at September 30, 2015, and the weighted-average yields of such securities calculated on the basis of the amortized cost and effective yields weighted for the scheduled maturity of each security. The yields on tax-exempt obligations of state and political subdivisions are presented on a tax-equivalent basis using an effective interest rate of 34.0%. Because residential and commercial collateralized mortgage obligations and residential mortgage-backed securities are not due at a single maturity date, they are not included in the following summary:

	September 30, 2015
(dollars in thousands)	Within One Year			> 1 – 5 Years			6-10 Years			Over 10 Years			Collateralized Mortgage Obligations and Mortgage-Backed Securities			No Fixed Maturity			Total
Available-for-sale securities
Obligations of U.S. government agencies	$	-		$	17,932		$	26,768		$	-		$	-		$	-		$	44,700
Yield					1.93	%		2.20	%											2.09	%
Obligations of state and political subdivisions		-			1,027			52,880			2,245			-			-			56,152
Yield					2.30	%		2.85	%		6.01	%								2.97	%
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		-			-			-			-			23,544			-			23,544
Yield														2.49	%					2.49	%
Collateralized mortgage obligations - commercial		-			-			-			-			91,339			-			91,339
Yield														2.28	%					2.28	%
Residential mortgage-backed securities		-			-			-			-			28,938			-			28,938
Yield														2.39	%					2.39	%
Corporate debt securities		-			-			-			426			-			-			426
Yield											0.92	%								0.92	%
Negotiable certificates of deposit		-			3,171			-			-						-			3,171
Yield					2.04	%														2.04	%
Equity securities		-			-			-			-			-			958			958
Yield																	3.50	%		3.50	%
Total available-for-sale securities	$	-		$	22,130		$	79,648		$	2,671		$	143,821		$	958		$	249,228
Weighted yield		0.00	%		1.96	%		2.63	%		5.20	%		2.34	%		3.50	%		2.43	%

55

Management evaluates individual securities in an unrealized loss position quarterly for other than temporary impairment (“OTTI”). As part of its evaluation, management considers, among other things, the length of time a security’s fair value is less than amortized cost, the severity of decline, any credit deterioration of the issuer, whether or not management intends to sell the security, and whether it is more likely than not that the Company will be required to sell the security prior to recovery of its amortized cost.

Securities issued by U.S. government or U.S. government-sponsored agencies, including single-maturity bonds, residential mortgage-backed securities, and residential and commercial CMOs, along with obligations of state and political subdivisions, comprise the majority of the Company’s securities portfolio. Management performed a review of the fair values of all securities in an unrealized loss position as of September 30, 2015 and determined that movements in the fair values of the securities were consistent with the change in market interest rates. At September 30, 2015, the Company held 14 securities that were in an unrealized loss position, with 3 of those securities in an unrealized loss position for more than 12 months. All but one of the securities in an unrealized loss position at September 30, 2015 were debt securities. Additionally, management considers the severity of each security’s unrealized loss position, placing greater emphasis on any security with an unrealized loss greater than 5.0% of its amortized cost. At September 30, 2015, there were two securities, a corporate debt security and an equity security, with an unrealized loss greater than 5.0% of its amortized cost. The corporate debt security, a floating-rate bond of a large money center bank, had an unrealized loss of $74 thousand, or 14.8% of its amortized cost, at September 30, 2015. This bank was considered well capitalized under regulatory capital guidelines at September 30, 2015. The equity security, a mutual fund investment comprised of one- to four-family residential mortgage-backed securities collateralized by properties within the Company’s geographical market, had an unrealized loss of $52 thousand, or 5.2% of its amortized cost, at September 30, 2015. This mutual fund, which provides the Company with credit under the Community Reinvestment Act, has a one- and three-year return of 3.34% and 1.80%, and is rated four stars by Morningstar, an independent investment research company.

The remaining 12 securities in an unrealized loss position at September 30, 2015 included 4 securities issued by a U.S. government or government-sponsored agency, 2 obligations of state and political subdivisions and 6 negotiable certificates of deposit. The obligations of the U.S. government or government-sponsored agencies are securities issued by GNMA and FHLMC that are currently rated Aaa by Moody’s Investor Services or AAA by Standard & Poor’s (“S&P”) and are guaranteed by the U.S. government. The 2 state and political subdivision obligations in an unrealized loss position at September 30, 2015, are general-purpose debt obligations that are secured by the unlimited taxing power of the issuer. Each of the 6 negotiable certificates of deposit have a carrying value below $250 thousand and are fully insured by the Federal Deposit Insurance Corporation.

To date, the Company has received all scheduled principal and interest payments and expects to fully collect all future contractual principal and interest payments on all securities in an unrealized loss position at September 30, 2015. The Company does not intend to sell the securities nor is it more likely than not that the Company will be required to sell the securities prior to recovery of their amortized cost. Based on the result of its review and considering the attributes of these debt and equity securities, management concluded that the individual unrealized losses were temporary and OTTI did not exist at September 30, 2015.

Investments in FHLB and Federal Reserve Bank (“FRB”) stock, which have limited marketability, are carried at cost and totaled $5.6 million and $4.2 million at September 30, 2015 and December 31, 2014, respectively. FRB stock of $1.3 million is included in Other Assets at September 30, 2015 and December 31, 2014. Management noted no indicators of impairment for the FHLB of Pittsburgh and FRB of Philadelphia stock at September 30, 2015.

Loans

Despite unanticipated paydowns on several large commercial lending relationships received in the first quarter of 2015, the Company experienced strong demand for its lending products during the nine months ended September 30, 2015. New loan originations exceeded maturities and payoffs for the first nine months of 2015 and resulted in a $52.1 million, or 7.8%, increase in total loans to $721.5 million at September 30, 2015 from $669.5 million at December 31, 2014. Solid increases were exhibited in both the Company’s commercial and retail lending activities.

Historically, commercial lending activities have represented a significant portion of the Company’s loan portfolio. Commercial lending includes commercial and industrial loans, commercial real estate loans and construction, land acquisition and development loans, and represented 57.9% and 57.4% of total loans at September 30, 2015 and December 31, 2014, respectively.

From a collateral standpoint, a majority of the Company’s loan portfolio consists of loans secured by real estate. Real estate secured loans, which include commercial real estate, construction, land acquisition and development, residential real estate loans and home equity lines of credit (“HELOCs”), increased $27.3 million, or 6.7%, to $432.3 million at September 30, 2015 from $405.0 million at December 31, 2014. Real estate secured loans as a percentage of total gross loans decreased slightly to 59.9% at September 30, 2015 from 60.5% at December 31, 2014.

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Commercial and industrial loans increased $10.3 million, or 7.9%, during the year to $142.4 million at September 30, 2015 from $132.1 million at December 31, 2014. Commercial and industrial loans consist primarily of equipment loans, working capital financing, automobile floor plans, revolving lines of credit and loans secured by cash and marketable securities. Commercial real estate loans, which include long-term commercial mortgage financing primarily secured by first or second lien mortgages, increased $16.0 million, or 6.9%, to $249.5 million at September 30, 2015 from $233.5 million at December 31, 2014. Construction, land acquisition and development loans increased $6.7 million, or 35.5%, during the year to $25.5 million at September 30, 2015 from $18.8 million at December 31, 2014. The Company continually monitors its exposure to this higher-risk portfolio segment.

Residential real estate loans totaled $129.4 million at September 30, 2015, an increase of $6.6 million, or 5.4%, from $122.8 million at December 31, 2014. The components of residential real estate loans include fixed-rate and variable-rate mortgage loans. HELOCs are not included in this category but are included in consumer loans. The Company primarily underwrites fixed-rate purchase and refinance of residential mortgage loans for sale in the secondary market to reduce interest rate risk and provide funding for additional loans. However, as part of the Company’s asset/liability management strategy earlier in the 2015, up to $10.0 million of fixed-rate residential mortgage loans eligible for sale on the secondary market were being retained in the portfolio. With the increase in loan demand in the third quarter of 2015 and favorable market conditions, management decided to move $4.6 million of these residential mortgage loans from the portfolio and classified them as held for sale at September 30, 2015. The market value of the loans was above the recorded investment, therefore there were no losses realized on the transfer during the three and nine months ended September 30, 2015. In addition, in January 2015, management began a campaign to promote the Company’s “WOW” residential mortgage product. This product is a non-saleable mortgage with maturity terms of 7.5, 10 and 14.5 years that offers customers an attractive fixed interest rate, low closing cost and quicker close. As a result of this campaign, the balance outstanding of “WOW” mortgages increased $7.1 million, or 26.1%, to $34.3 million at September 30, 2015 from $27.2 million at December 31, 2014.

Consumer loans totaled $132.4 million at September 30, 2015, an increase of $10.3 million, or 8.5%, from $122.1 million at December 31, 2014, reflecting the growth in the Company’s portfolio of indirect automobile loans, which increased $11.8 million, or 12.6%, over the first nine months of 2015.

Loans to state and political subdivisions increased $2.0 million, or 5.0%, to $42.2 million at September 30, 2015 from $40.2 million at December 31, 2014.

The following table summarizes loans receivable, net by category at September 30, 2015 and December 31, 2014:

	September 30,			December 31,
(in thousands)	2015			2014
Residential real estate	$	129,444		$	122,832
Commercial real estate		249,526			233,473
Construction, land acquisition and development		25,516			18,835
Commercial and industrial		142,425			132,057
Consumer		132,418			122,092
State and political subdivisions		42,219			40,205
Total loans, gross		721,548			669,494
Unearned income		(104	)		(98	)
Net deferred loan costs		1,722			871
Allowance for loan and lease losses		(9,825	)		(11,520	)
Loans, net	$	713,341		$	658,747

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The Company considers an industry concentration within the loan portfolio to exist if the aggregate loan balance outstanding for that industry exceeds 25.0% of capital. The following table summarizes the concentrations within the Company’s loan portfolio by industry at September 30, 2015 and December 31, 2014:

	September 30, 2015					December 31, 2014
(in thousands)	Amount		% of Gross Loans			Amount		% of Gross Loans
Retail space/ shopping centers	$	34,134		4.73	%	$	33,140		4.95	%
Automobile dealers		29,635		4.11	%		24,194		3.61	%
1-4 family residential investment properties		18,574		2.57	%		12,764		1.91	%
Colleges and Universities		17,659		2.45	%		16,680		2.49	%
Office complexes/units		15,237		2.11	%		17,249		2.58	%
Land subdivision		12,771		1.77	%		15,220		2.27	%
Physicians		9,848		1.36	%		13,636		2.04	%

Asset Quality

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the amount of unpaid principal, net of unearned interest, deferred loan fees and costs, and reduced by the ALLL. The ALLL is established through a provision for loan and lease losses charged to earnings.

The Company has established and consistently applies loan policies and procedures designed to foster sound underwriting and credit monitoring practices. The Company manages credit risk through the efforts of loan officers, the loan review function, and the Loan Quality and the ALLL management committees, as well as oversight from the Board of Directors. The Company continually evaluates its credit risk management practices to ensure it is reacting to problems in the loan portfolio in a timely manner, although, as is the case with any financial institution, a certain degree of credit risk is dependent in part on local and general economic conditions that are beyond the Company’s control.

Under the Company’s risk rating system, loans that are rated pass/watch, special mention, substandard, doubtful, or loss are reviewed regularly as part of the Company’s risk management practices. The Company’s Loan Quality Committee, which consists of key members of senior management, finance and credit administration, meets monthly or more often as necessary to review individual problem credits and workout strategies and provides monthly reports to the Board of Directors.

A loan is considered impaired when it is probable that the Company will be unable to collect all amounts due (including principal and interest) according to the contractual terms of the note and loan agreement. For purposes of the Company’s analysis, loans that are modified under a troubled debt restructuring (“TDRs”), loan relationships with an aggregate outstanding balance greater than $100 thousand rated substandard and non-accrual, and loans that are identified as doubtful or loss are considered impaired. Impaired loans are analyzed individually to determine the amount of impairment. The Company utilizes the fair value of collateral method for collateral-dependent loans. A loan is considered to be collateral dependent when repayment of the loan is expected to be provided through the liquidation of the collateral held. For impaired loans that are secured by real estate, external appraisals are obtained annually, or more frequently as warranted, to ascertain a fair value so that the impairment analysis can be updated. Should a current appraisal not be available at the time of impairment analysis, other sources of valuation may be used including, current letters of intent, broker price opinions or executed agreements of sale. For non-collateral-dependent loans, the Company measures impairment based on the present value of expected future cash flows, net of any deferred fees and costs, discounted at the loan’s original effective interest rate.

Loans to borrowers that are experiencing financial difficulty that are modified and result in the Company granting concessions to the borrower are classified as TDRs and are considered to be impaired. Such concessions generally involve an extension of a loan’s stated maturity date, a reduction of the stated interest rate, payment modifications, capitalization of property taxes or a combination of these modifications. Non-accrual TDRs are returned to accrual status if principal and interest payments, under the modified terms, are brought current, are performing under the modified terms for six consecutive months, and management believes that collection of the remaining interest and principal is probable.

Non-performing loans are monitored on an ongoing basis as part of the Company’s loan review process. Additionally, work-out efforts continue and are actively monitored for non-performing loans and OREO through the Loan Quality Committee. A potential loss on a non-performing asset is generally determined by comparing the outstanding loan balance to the fair market value of the pledged collateral, less cost to sell.

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Loans are placed on non-accrual when a loan is specifically determined to be impaired or when management believes that the collection of interest or principal is doubtful. This generally occurs when a default of interest or principal has existed for 90 days or more, unless such loan is well secured and in the process of collection, or when management becomes aware of facts or circumstances that the loan would default before 90 days. The Company determines delinquency status based on the number of days since the date of the borrower’s last required contractual loan payment. When the interest accrual is discontinued, all unpaid interest income is reversed and charged back against current earnings. Any subsequent cash payments received are applied, first to the outstanding loan amounts, then to the recovery of any charged-off loan amounts, with any excess treated as a recovery of lost interest. A non-accrual loan is returned to accrual status when the loan is current as to principal and interest payments, is performing according to contractual terms for six consecutive months and future payments are reasonably assured.

Management actively manages impaired loans in an effort to reduce loan balances by working with customers to develop strategies to resolve borrower difficulties, through sale or liquidation of collateral, foreclosure, and other appropriate means. Real estate values in the Company’s market area have appeared to stabilize. In addition, employment conditions within the Company’s market area have shown substantial improvement. However, continued improvement of these metrics cannot be assured. Any weakening of economic and employment conditions could result in real estate devaluations which could negatively impact asset quality and, accordingly, cause an increase in the provision for loan and lease losses.

Under the fair value of collateral method, the impaired amount of the loan is deemed to be the difference between the loan amount and the fair value of the collateral, less the estimated costs to sell. For the Company’s calculations for real estate secured loans, a factor of 10% is generally utilized to estimate costs to sell, which is based on typical cost factors, such as a 6% broker commission, 1% transfer taxes, and 3% various other miscellaneous costs associated with the sales process. If the valuation indicates that the fair value has deteriorated below the carrying value of the loan, the difference between the fair value and the principal balance is charged off. For impaired loans for which the value of the collateral less costs to sell exceeds the loan value, the impairment is considered to be zero.

The following table presents non-performing loans, including non-performing TDRs, OREO and accruing TDRs at September 30, 2015 and December 31, 2014:

	September 30,			December 31,
(in thousands)	2015			2014
Non-accrual loans	$	6,741		$	5,522
Loans past due 90 days or more and still accruing		-			-
Total non-performing loans		6,741			5,522
Other real estate owned		1,618			2,255
Total non-performing loans and OREO	$	8,359		$	7,777
Accruing TDRs	$	5,065		$	5,282
Non-performing loans as a percentage of gross loans		0.93	%		0.82	%

Management continues to manage problem credits through heightened work-out efforts on non-performing loans and aggressively disposing of its holdings of foreclosed properties. Total non-performing loans and OREO increased $0.6 million to $8.4 million at September 30, 2015 from $7.8 million at December 31, 2014. An increase in non-accrual loans was partially offset by a reduction in other real estate owned. The Company’s ratio of non-performing loans to total gross loans was 0.93% at September 30, 2015 compared to 0.82% at December 31, 2014. The $1.2 million, or 22.1%, increase in non-performing loans to $6.7 million at September 30, 2015 from $5.5 million at year-end 2014 was related to three large commercial loan relationships. Specifically, during the third quarter one relationship involving a construction, land acquisition and development loan with a recorded investment of $0.7 million was placed on non-accrual, and based on a current appraisal, written down $0.3 million to $0.4 million. Also in the third quarter of 2015, a commercial relationship involving a commercial real estate loan and commercial and industrial loan with an aggregate recorded investment of $0.8 million was placed on non-accrual. In the second quarter of 2015 one large commercial real estate loan with a recorded investment of $1.7 million was modified as a TDR and placed on non-accrual. As part of its impairment analysis, the Company determined this loan to be collateral-dependent, with the analysis resulting in the loan being partially charged-down in the amount of $0.9 million.

The Company’s ratio of non-performing loans and OREO as a percentage of shareholders’ equity decreased to 14.0% at September 30, 2015 from 15.1% at December 31, 2014. Although non-performing loans as a percentage of shareholders’ equity decreased, the percentage remains elevated. Deterioration in the economic conditions in our market area could lead to additional increases in impaired loans.

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The average balance of impaired loans was $10.5 million and $9.5 million for the nine months ended September 30, 2015 and 2014, respectively. The Company received $61 thousand and $198 thousand of interest income on impaired loans for the three and nine months ended September 30, 2015, respectively and $62 thousand and $173 thousand of interest income on impaired loans for the respective periods in 2014.

The following table presents the changes in non-performing loans for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2015			2014			2015			2014
Balance, beginning of period	$	5,757		$	5,550		$	5,522		$	6,375
Loans newly placed on non-accrual		2,100			584			4,419			1,621
Changes in loans past due 90 days or more and still accruing		-			49			-			30
Loans transferred to OREO		-			-			(149	)		(10	)
Loans returned to performing status		(4	)		-			(135	)		(222	)
Loans charged-off		(947	)		(338	)		(2,395	)		(881	)
Loan payments received		(165	)		(257	)		(521	)		(1,325	)
Balance, end of period	$	6,741		$	5,588		$	6,741		$	5,588

The additional interest income that would have been earned on non-accrual and restructured loans for the three and nine months ended September 30, 2015, had the loans been performing in accordance with their original terms, approximated $112 thousand and $298 thousand, respectively, and $100 thousand and $307 thousand for the respective three and nine month periods of 2014.

The following table presents accruing loan delinquencies and non-accrual loans as a percentage of gross loans at September 30, 2015 and December 31, 2014:

	September 30,			December 31,
	2015			2014
Accruing:
30-59 days		0.27	%		0.30	%
60-89 days		0.09	%		0.09	%
90+ days		0.00	%		0.00	%
Non-accrual		0.93	%		0.82	%
Total delinquencies		1.29	%		1.21	%

Total delinquencies as a percentage of gross loans increased to 1.29% at September 30, 2015 compared to 1.21% at December 31, 2014. The increase primarily reflected the $1.2 million increase non-accrual loans. In its evaluation of the ALLL, management considers a variety of qualitative factors, including changes in the volume and severity of delinquencies.

Allowance for Loan and Lease Losses

The ALLL represents management’s estimate of probable loan losses inherent in the loan portfolio. The ALLL is analyzed in accordance with GAAP and is maintained at a level that is based on management’s evaluation of the adequacy of the ALLL in relation to the risks inherent in the loan portfolio.

As part of its evaluation, management considers qualitative and environmental factors, including, but not limited to:

• changes in national, local, and business economic conditions and developments, including the condition of various market segments;

• changes in the nature and volume of the Company's loan portfolio;

• changes in the Company’s lending policies and procedures, including underwriting standards, collection, charge-off and recovery practices and results;

• changes in the experience, ability and depth of the Company’s lending management and staff;

• changes in the quality of the Company’s loan review system and the degree of oversight by the Company’s Board of Directors;

• changes in the trend of the volume and severity of past due and classified loans, including trends in the volume of non-accrual loans, TDRs and other loan modifications;

• the existence and effect of any concentrations of credit and changes in the level of such concentrations;

• the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the Company’s current loan portfolio; and

• analysis of customers’ credit quality, including knowledge of their operating environment and financial condition.

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Evaluations are intrinsically subjective, as the results are estimated based on management knowledge and experience and are subject to interpretation and modification as information becomes available or as future events occur. Management monitors the loan portfolio on an ongoing basis with emphasis on weakness in both the real estate market and the economy in general and its effect on repayment. Adjustments to the ALLL are made based on management’s assessment of the factors noted above.

For purposes of its analysis, all loan relationships with an aggregate balance greater than $100 thousand that are rated substandard and non-accrual, identified as doubtful or loss, and all TDRs are considered impaired and are analyzed individually to determine the amount of impairment. Circumstances such as construction delays, declining real estate values, and the inability of the borrowers to make scheduled payments have resulted in these loan relationships being classified as impaired. The Company utilizes the fair value of collateral method for collateral-dependent loans and TDRs for which repayment depends on the sale of collateral. For non-collateral-dependent loans and TDRs, the Company measures impairment based on the present value of expected future cash flows discounted at the loan’s original effective interest rate. With regard to collateral-dependent loans, appraisals are received at least annually to ensure that impairment measurements reflect current market conditions. Should a current appraisal not be available at the time of impairment analysis, other valuation sources including current letters of intent, broker price opinions or executed agreements of sale may be used. Only downward adjustments are made based on these supporting values. Included in all impairment calculations is a cost to sell adjustment of approximately 10%, which is based on typical cost factors, including a 6% broker commission, 1% transfer taxes and 3% various other miscellaneous costs associated with the sales process. Sales costs are periodically reviewed and revised based on actual experience. The ALLL analysis is adjusted for subsequent events that may arise after the end of the reporting period but before the financial reports are filed.

The Company’s ALLL consists of both specific and general components. At September 30, 2015, the ALLL that related to impaired loans that are individually evaluated for impairment, the guidance for which is provided by ASC 310 “Impairment of a Loan” (“ASC 310”), was $0.3 million, or 3.2%, of the total ALLL. A general allocation of $9.5 million was calculated for loans analyzed collectively under ASC 450 “Contingencies” (“ASC 450”), which represented 96.8% of the total ALLL of $9.8 million. The ratio of the ALLL to total loans at September 30, 2015 and December 31, 2014 was 1.36% and 1.72%, respectively, based on total loans of $721.5 million and $669.5 million, respectively. The decrease in the ALLL as a percentage of total loans reflects asset quality improvements and lower levels of charge-offs than in the past, coupled with increased loan demand. See “Asset Quality” for further information.

Based on its evaluation of the ALLL, management established an unallocated reserve of $68 thousand at September 30, 2015 and $45 thousand at December 31, 2014. As previously mentioned, as part of its evaluation, management applies loss rates to each loan segment of the loan portfolio for each quarter over the previous three years, which have resulted in overall negative historical loss factors and consequently related negative provisions for the commercial and industrial loan segment at September 30, 2015 and the construction, land acquisition and development loan segment at December 31, 2014. Based on the higher risk characteristics inherent in these segments of the portfolio, management reversed the negative provisions related to the negative historical loss factors and established the unallocated reserves.

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The following table presents an allocation of the ALLL and percent of loans in each category at September 30, 2015 and December 31, 2014:

	September 30, 2015					December 31, 2014
(in thousands)	Allowance Amount		Percentage of Loans in Each Category to Total Loans			Allowance Amount		Percentage of Loans in Each Category to Total Loans
Residential real estate	$	1,309		17.94	%	$	1,772		18.35	%
Commercial real estate		4,235		34.58	%		4,663		34.87	%
Construction, land acquisition and development		969		3.54	%		665		2.81	%
Commercial and industrial		1,259		19.74	%		2,104		19.72	%
Consumer		1,513		18.35	%		1,673		18.24	%
State and political subdivisions		472		5.85	%		598		6.01	%
Unallocated		68		0.00	%		45		0.00	%
Total	$	9,825		100.00	%	$	11,520		100.00	%

The following table presents an analysis of the ALLL for the three and nine months ended September 30, 2015 and 2014:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in thousands)	2015			2014			2015			2014
Balance, beginning of period	$	10,328		$	12,175		$	11,520		$	14,017
Charge-offs:
Residential real estate		66			67			135			152
Commercial real estate		-			-			912			-
Construction, land acquisition and development		683			-			689			-
Commercial and industrial		21			22			163			172
Consumer		198			270			538			637
State and political subdivisions		-			-			-			-
Total charge-offs		968			359			2,437			961
Recoveries of charged-off loans:
Residential real estate		23			9			34			79
Commercial real estate		278			-			296			355
Construction, land acquisition and development		-			-			-			3,539
Commercial and industrial		140			69			307			195
Consumer		215			58			445			303
State and political subdivisions		-			-			-			-
Total recoveries		656			136			1,082			4,471
Net charge-offs (recoveries)		312			223			1,355			(3,510	)
Credit for loan and lease losses		(191	)		(54	)		(340	)		(5,629	)
Balance, end of period	$	9,825		$	11,898		$	9,825		$	11,898
Net charge-offs (recoveries) during the period as a percentage of average loans outstanding during the period		0.04	%		0.03	%		0.20	%		(0.53	)%
Allowance for loan and lease losses as a percentage of gross loans at end of period		1.36	%		1.76	%		1.36	%		1.76	%

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Other Real Estate Owned

The following schedule presents a breakdown of OREO at September 30, 2015 and December 31, 2014:

	September 30,		December 31,
(in thousands)	2015		2014
Land/lots	$	803	$	1,287
Commercial real estate		788		941
Residential real estate		27		27
Total other real estate owned	$	1,618	$	2,255

The following table presents the activity in OREO for the nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2015			2014			2015			2014
Balance, beginning of period	$	1,740		$	3,182		$	2,255		$	4,246
Property foreclosures		-			-			149			13
Bank premises transferred to OREO		-			-			-			1,749
Valuation adjustments		(78	)		(429	)		(208	)		(2,199	)
Carrying value of OREO sold		(44	)		(136	)		(578	)		(1,192	)
Balance, end of period	$	1,618		$	2,617		$	1,618		$	2,617

At September 30, 2015, OREO consisted of 10 properties with an aggregate carrying value of $1.6 million, a decrease of $0.7 million, or 28.2%, from $2.3 million at December 31, 2014.  There were two properties with a carrying value of $149 thousand foreclosed upon during the nine months ended September 30, 2015. Comprising $1.4 million, or 85.0%, of the outstanding balance of OREO at September 30, 2015 were three properties that were originally held in bank premises and equipment and due to a change in strategic purpose were transferred to OREO in 2014.

During the nine months ended September 30, 2015, there were six sales and one partial sale of properties with an aggregate carrying value of $0.6 million. The Company realized net gains on the sale of these properties of $145 thousand, which is included in non-interest income. During the nine months ended September 30, 2014, the Company foreclosed on one property with a carrying value of $13 thousand. There were five sales and two partial sales of properties with an aggregate carrying value of $1.2 million during the nine months ended September 30, 2014. The Company realized net gains on the sale of these properties of $103 thousand for the nine months ended September 30, 2014, which is included in non-interest income.

During the nine months ended September 30, 2014, the Company transferred four properties located in Monroe County, Pennsylvania, including its former Stroudsburg office and three pieces of vacant land from bank premises and equipment to OREO for disposition due to a change in strategic purpose. At the time of transfer, the four properties had an aggregate carrying value of $3.4 million. During the nine months ended September 30, 2014, one of the properties was subsequently sold and two of the other properties, the Stroudsburg property and one of the parcels, were written down in aggregate $1.2 million to their appraised values, less cost to sell.

During the nine months ended September 30, 2015, these three remaining properties were reappraised, and due to continued decline in real estate values in Monroe County, the Company incurred additional valuation adjustments totaling $158 thousand. Valuation adjustments, which are included in non-interest expense, totaled $0.1 million and $0.2 million for the three months and nine months ended September 30, 2015, respectively, and $0.4 million and $2.2 million for the respective periods of 2014.

The Company actively markets all OREO properties for sale through a variety of channels including internal marketing and the use of outside brokers/realtors. The carrying value of OREO is generally calculated at an amount not greater than 90% of the most recent fair market appraised value. A 10% factor is generally used to estimate costs to sell, which is based on typical cost factors, such as 6% broker commission, 1% transfer taxes, and 3% various other miscellaneous costs associated with the sales process. This market value is updated on an annual basis or more frequently if new valuation information is available. Further deterioration in the real estate market could result in additional losses on these properties.

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Liabilities

Total liabilities were $995.6 million at September 30, 2015, an increase of $77.0 million, or 8.4%, from $918.6 million at December 31, 2014. The increase was primarily attributable to growth in total deposits, coupled with an increase in borrowed funds. Total deposits increased $56.7 million, or 7.1%, to $852.0 million at September 30, 2015 as compared to $795.3 million at December 31, 2014. Specifically, non-interest-bearing demand deposits increased $28.0 million, or 22.5%, while interest-bearing deposits grew $28.7 million, or 4.3%. The increase in deposits primarily reflected the attainment of a large deposit relationship totaling $92.3 million at September 30, 2015. Borrowed funds increased by $20.9 million, or 21.6%, to $117.4 million at September 30, 2015 as compared to $96.5 million at December 31, 2014. FHLB of Pittsburgh advances increased $31.9 million, or 52.1%, to $93.1 million at September 30, 2015 from $61.2 million at December 31, 2014. Partially offsetting this increase was the prepayment of $11.0 million of the Company’s outstanding Notes at the end of the second quarter of 2015.

On June 30, 2015, pursuant to approval from the Noteholders and the Federal Reserve Bank of Philadelphia, the Company amended the original terms of the Notes to reduce the interest rate payable on the Notes from 9.00% to 4.50% effective July 1, 2015 and to accelerate a partial repayment of principal amount under the Notes. On June 30, 2015, the Company prepaid 44% of the original principal amount of the Notes, or $11.0 million. As of September 30, 2015 and December 31, 2014, there was $14.0 million and $25.0 million outstanding under the Notes, respectively. For a further discussion related to the Company’s borrowings, see Note 7 - “Borrowed Funds” in the Notes to Consolidated Financial Statements included in Item 1 hereof to this Quarterly Report on Form 10-Q.

Equity

Total shareholders’ equity increased $8.2 million, or 16.0%, to $59.6 million at September 30, 2015 from $51.4 million at December 31, 2014. Net income for the nine months ended September 30, 2015 of $6.6 million, coupled with a $1.4 million increase in accumulated other comprehensive income, was the primary factor leading to the capital improvement. The increase in accumulated other comprehensive income was primarily attributed to appreciation in the fair value of securities held in the available-for-sale portfolio, which was related entirely to changes in market interest rates. Book value per common share improved $0.49, or 15.7% to $3.61 at September 30, 2015 compared to $3.12 at December 31, 2014.

In July 2013, the Federal banking regulators approved the final Basel III capital framework for U.S. banking organizations (the “Regulatory Capital Rules”) which are intended to strengthen the quality and increase the required level of regulatory capital for a more stable and resilient banking system. The Regulatory Capital Rules became effective for the Company and the Bank on January 1, 2015. At September 30, 2015, the Company and the Bank were considered well capitalized under these Regulatory Capital Rules. For more information regarding the new Regulatory Capital Rules and the Company’s and Bank’s capital ratios, see Note 3 – “Regulatory Matters” in the Notes to Consolidated Financial Statements included in Item 1 hereof to this Quarterly Report on Form 10-Q.

Liquidity

The term liquidity refers to the ability of the Company to generate sufficient amounts of cash to meet its cash flow needs.  Liquidity is required to fulfill the borrowing needs of the Company’s credit customers and the withdrawal and maturity requirements of its deposit customers, as well as to meet other financial commitments. The Company’s liquidity position is impacted by several factors, which include, among others, loan origination volumes, loan and investment maturity structure and cash flows, deposit demand and certificate of deposit maturity structure and retention. The Company has liquidity, funding and contingent funding policies in place that are designed with controls in place to provide advanced detection of potentially significant funding shortfalls, establish methods for assessing and monitoring risk levels, and institute prompt responses that may alleviate a potential liquidity crisis. Management monitors the Company’s liquidity position and fluctuations daily so that the Company can adapt accordingly to market influences and balance sheet trends. Management also forecasts liquidity needs and develops strategies to ensure adequate liquidity at all times.

The Company’s statements of cash flows present the change in cash and cash equivalents from operating, investing and financing activities. Cash and cash equivalents, which include cash and due from banks and interest-bearing deposits in other banks, are the Company’s most liquid assets.  Cash and cash equivalents decreased $4.7 million, or 13.1%, to $31.0 million at September 30, 2015 from $35.7 million at December 31, 2014. Cash inflows from operating and financing activities provided net cash of $5.7 million and $77.6 million, respectively, during the nine months ended September 30, 2015. Partially offsetting these inflows was net cash used for investing activities of $87.9 million. The $77.6 million in cash provided by financing activities resulted primarily from a net increase of $56.7 million in deposits coupled with proceeds, net of repayments, from FHLB of Pittsburgh advances of $31.9 million. Partially offsetting these inflows was the $11.0 million principal reduction on the Notes. The $87.9 million in cash used in investing activities resulted primarily from a net increase in loans to customers of $59.0 million, coupled with net cash outflows of $26.9 million related to securities transactions. Proceeds from sales, maturities, calls and paydowns on available-for-sale securities totaled $86.1 million and were more than offset by purchases of available-for-sale securities totaling $113.0 million.

64

Management believes that the Company’s liquidity position is sufficient to meet its cash flow needs as of September 30, 2015. The Company generally utilizes core deposits as its primary source of liquidity. Core deposits include non-interest-bearing and interest-bearing demand deposits, savings deposits and other time deposits, net of brokered deposits and deposits generated through the Promontory Interfinancial Network, which include time deposits issued under Certificate of Deposit Account Registry Service (“CDARs”) and money market and NOW accounts issued through the Insured Cash Sweep (“ICS”) program. Participating in the Promontory Interfinancial Network programs allow the Company to service and attract potential high-balance deposits customers who want the security of full-FDIC insurance but want to maintain a local deposit relationship. Core deposits averaged $686.1 million for the nine months ended September 30, 2015 compared to $663.3 million for the same period of 2014. The $22.8 million, or 3.4%, increase primarily reflected growth in interest-bearing demand, net of deposits issued through the ICS program, of $29.7 million and non-interest-bearing demand deposits of $5.4 million. Partially offsetting these increases was a decrease in other time deposits, net of brokered deposits and CDARs certificates, of $15.5 million. In addition to core deposits, the Company utilizes brokered certificates of deposit, funding through the Promontory Financial Network and advances through the FHLB of Pittsburgh as alternative sources of liquidity. At September 30, 2015, the Company had available borrowing capacity with the FHLB of Pittsburgh of $160.2 million.

Interest Rate Risk

Interest Rate Sensitivity

Market risk is the risk to earnings and/or financial position resulting from adverse changes in market rates or prices, such as interest rates, foreign exchange rates or equity prices. The Company’s exposure to market risk is primarily interest rate risk associated with lending, investing and deposit gathering activities, all of which are other than trading. Changes in interest rates affect earnings by changing net interest income and the level of other interest-sensitive income and operating expenses. In addition, variations in interest rates affect the underlying economic value of our assets, liabilities and off-balance sheet items.

Asset and Liability Management

The Company manages these objectives through its Asset and Liability Management Committee (“ALCO”) and its Rate and Liquidity and Investment Committees, which consist of certain members of senior management and certain members of the finance department. Members of the committees meet regularly to develop balance sheet strategies affecting the future level of net interest income, liquidity and capital.  The major objectives of ALCO are to:

● manage exposure to changes in the interest rate environment by limiting the changes in net interest margin to an acceptable level within a reasonable range of interest rates;

● ensure adequate liquidity and funding;

● maintain a strong capital base; and

● maximize net interest income opportunities.

ALCO monitors the Company’s exposure to changes in net interest income over both a one-year planning horizon and a longer-term strategic horizon. ALCO uses net interest income simulations and economic value of equity (“EVE”) simulations as the primary tools in measuring and managing the Company’s position and considers balance sheet forecasts, the Company’s liquidity position, the economic environment, anticipated direction of interest rates and the Company’s earnings sensitivity to changes in these rates in its modeling. In addition, ALCO has established policy tolerance limits for acceptable negative changes in net interest income. Furthermore, as part of its ongoing monitoring, ALCO has been enhanced to require periodic back testing of modeling results, which involves after-the-fact comparisons of projections with the Company’s actual performance to measure the validity of assumptions used in the modeling techniques.

Earnings at Risk and Economic Value at Risk Simulations

Earnings at Risk

Earnings-at-risk simulation measures the change in net interest income and net income under various interest rate scenarios. Specifically, given the current market rate environment, ALCO looked at “earnings at risk” to determine anticipated changes in net interest income from a base case scenario with interest rate shock scenarios of +200, + 400 and -100 basis points. The simulation takes into consideration that not all assets and liabilities re-price to the same magnitude as market rates (i.e., savings rate). 

65

Economic Value at Risk

While earnings-at-risk simulation measures the short-term risk in the balance sheet, economic value (or portfolio equity) at risk measures the long-term risk by finding the net present value of the future cash flows from the Company’s existing assets and liabilities. ALCO examines this ratio regularly, and given the current rate environment, has utilized rate shocks of +200, +400 and - 100 basis points for simulation purposes. Management recognizes that, in some instances, this ratio may contradict the “earnings at risk” ratio.

While ALCO regularly performs a wide variety of simulations under various strategic balance sheet and treasury yield curve scenarios, the following results reflect the Company’s sensitivity over the subsequent twelve months based on the following assumptions:

● asset and liability levels using September 30, 2015 as a starting point;

● cash flows are based on contractual maturity and amortization schedules with applicable prepayments derived from internal historical data and external sources; and

● cash flows are reinvested into similar instruments so as to keep interest-earning asset and interest-bearing liability levels constant.

The following table illustrates the simulated impact of parallel and instantaneous interest rate shocks of +400 basis points, +200 basis points and -100 basis points on net interest income and the change in economic value over a one-year time horizon from the September 30, 2015 levels.

	Rates + 200						Rates +400						Rates -100
	Simulation			Policy			Simulation			Policy			Simulation			Policy
	Results			Limit			Results			Limit			Results			Limit
Earnings at risk:
Percent change in net interest income		(0.2	)%		(10.0	)%		2.0	%		(20.0	)%		(2.3	)%		(5.0	)%
Economic value at risk:
Percent change in economic value of equity		(8.2	)%		(20.0	)%		(15.7	)%		(35.0	)%		(7.7	)%		(10.0	)%

Under the model, the Company’s net interest income is expected to decrease slightly by 0.2%, while the Company’s economic value of equity (“EVE”) is expected to decrease 8.2%, under an interest rate shock scenario of +200 basis points. In a rate shock scenario of +400 basis points, model results indicate a 2.0% increase in net interest income and a decrease in EVE of 15.7%. In comparison, results for a similar scenario at June 30, 2015 simulated a 1.5% increase in net interest income given an interest rate shock of +200 basis points. The change in net interest income comparing model results at September 30, 2015 and June 30, 2015 reflected the increase in short-term wholesale funding outstanding at September 30, 2015 as compared to the end of the second quarter of 2015.

This analysis does not represent a Company forecast and should not be relied upon as being indicative of expected operating results. These simulations are based on numerous assumptions: the nature and timing of interest rate levels, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacements of asset and liability cash flows, and other factors. While assumptions reflect current economic and local market conditions, the Company cannot make any assurances as to the predictive nature of these assumptions, including changes in interest rates, customer preferences, competition and liquidity needs, or what actions ALCO might take in responding to these changes.

Off-Balance Sheet Arrangements

In the normal course of operations, the Company engages in a variety of financial transactions that, in accordance with U.S. GAAP, are not recorded in our consolidated financial statements, or are recorded in amounts that differ from the notional amounts. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used for general corporate purposes or for customer needs. Corporate purpose transactions are used to help manage credit, interest rate and liquidity risk or to optimize capital. Customer transactions are used to manage customers’ requests for funding.

For the three- and nine-month periods ended September 30, 2015, the Company did not engage in any off-balance sheet transactions that would have or would be reasonably likely to have a material effect on its consolidated financial condition.

66

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in the company’s exposure to market risk during the first nine months of 2015.  For discussion of the Company’s exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosure about Market Risk, contained in the Company’s Form 10-K for the year ended December 31, 2014.

Item 4 - Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded the Company’s disclosure controls and procedures were effective as of September 30, 2015.

There were no changes made to the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II Other Information

Item 1 - Legal Proceedings.

On August 8, 2011, the Company announced that it had received document subpoenas from the SEC.  The information requested generally related to disclosure and financial reporting by the Company and the restatement of the Company’s financial statements for the year ended December 31, 2009, and the quarters ended March 31, 2010 and June 30, 2010. On January 28, 2015, the Company and the SEC entered into a settlement agreement resolving these issues related to disclosure and financial reporting and the restatements of the Company’s financial statements for the year ended December 31, 2009 and the quarters ended March 31, 2010 and June 30, 2010. As part of this settlement agreement, on January 30, 2015, the Company paid a civil money penalty of $175 thousand to the SEC. The Company accrued for the $175 thousand civil money penalty in its 2014 Consolidated Statements of Income.

On May 24, 2012, a putative shareholder filed a complaint in the Court of Common Pleas for Lackawanna County (“Shareholder Derivative Suit”) against certain present and former directors and officers of the Company (the “Individual Defendants”) alleging, inter alia, breach of fiduciary duty, abuse of control, corporate waste, and unjust enrichment. The Company was named as a nominal defendant. The parties to the Shareholder Derivative Suit commenced settlement discussions and on December 18, 2013, the Court entered an Order Granting Preliminary Approval of Proposed Settlement subject to notice to shareholders. On February 4, 2014, the Court issued a Final Order and Judgment for the matter granting approval of a Stipulation of Settlement (the “Settlement”) and dismissing all claims against the Company and the Individual Defendants. As part of the Settlement, there was no admission of liability by the Individual Defendants. Pursuant to the Settlement, the Individual Defendants, without admitting any fault, wrongdoing or liability, agreed to settle the derivative litigation for $5.0 million. The $5.0 million Settlement payment was made to the Company on March 28, 2014. The Individual Defendants reserved their rights to indemnification under the Company’s Articles of Incorporation and Bylaws, resolutions adopted by the Board, the Pennsylvania Business Corporation Law and any and all rights they have against the Company’s and the Bank’s insurance carriers. In addition, in conjunction with the Settlement, the Company accrued $2.5 million related to fees and costs of the plaintiff’s attorneys, which was included in non-interest expense in the Consolidated Statements of Income for the year ended December 31, 2013. On April 1, 2014, the Company paid the $2.5 million related to fees and costs of the plaintiff’s attorneys and partial indemnification of the Individual Defendants in the amount of $2.5 million, and as such, as of September 30, 2015, $2.5 million plus accrued interest remains accrued in other liabilities related to the potential indemnification of the Individual Defendants. The Company settled any and all claims it had or may have had against Demetrius & Company, LLC, John Demetrius and Robert L. Rossi & Company in connection with the Shareholder Derivative Suit in 2014.

On September 5, 2012, Fidelity and Deposit Company of Maryland (“F&D”) filed an action against the Company and the Bank, as well as several current and former officers and directors of the Company, in the United States District Court for the Middle District of Pennsylvania. F&D has asserted a claim for the rescission of a directors’ and officers’ insurance policy and a bond that it had issued to the Company. On November 9, 2012, the Company and the Bank answered the claim and asserted counterclaims for the losses and expenses already incurred by the Company and the Bank. The Company and the other defendants are defending the claims and have opposed F&D’s requested relief by way of counterclaims, breaches of contract and bad faith claims against F&D for its failure to fulfill its obligations to the Company and the Bank under the insurance policy. At this time, the matter is in the discovery stage and the Company cannot reasonably determine the outcome or potential range of loss in connection with this matter.

67

On August 13, 2013, Steven Antonik, individually, as Administrator of the Estate of Linda Kluska, William R. Howells, and Louise A. Howells, on behalf of themselves and others similarly situated, filed a consumer protection class action against the Company and Bank in the Lackawanna County Court of Common Pleas, seeking equitable, injunction and monetary relief to address an alleged pattern and practice of wrong doing by the Bank relating to the repossession and sale of the Plaintiffs’ and class members’ financed motor vehicles.  Discovery in this matter is substantially completed. The parties have agreed to meet and discuss a possible resolution of this matter, however, at this time, the Company cannot reasonably determine the outcome or potential range of loss.

On September 17, 2013, Charles Saxe, III individually and on behalf of all others similarly situated filed a consumer class action against the Bank in the Lackawanna County Court of Common Pleas alleging violations of the Pennsylvania Uniform Commercial Code in connection with the repossession and resale of financed vehicles.  Discovery in this matter is substantially completed. Plaintiffs’ counsel has filed a petition to certify the class which the Bank is aggressively defending. The parties have agreed to meet and discuss a possible resolution of this matter, however, at this time the Company cannot reasonably determine the outcome or potential range of loss.

On January 22, 2014, the Bank was advised by the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) that FinCEN was investigating the Bank for alleged violations of the Bank Secrecy Act (“BSA”). On May 28, 2014, the Bank was advised by the Office of the Comptroller of the Currency (“OCC”) that the OCC was investigating allegations that the Bank failed to file timely Suspicious Activity Reports. On November 18, 2014, both FinCEN and OCC advised the Bank that they intended on assessing civil money penalties against the Bank. Subsequent to November 18, 2014, the Bank had been in discussions with both regulatory agencies about the alleged BSA violations. On February 27, 2015, the Bank reached a comprehensive settlement with FinCEN and OCC to resolve the BSA allegations. In order to settle the matter, the Bank consented to an aggregate civil money penalty assessment of $1.5 million which was accrued for at December 31, 2014 and included in non-interest expense for the year ended December 31, 2014. The Company paid the $1.5 million civil money penalty on February 27, 2015.

The Company has been subject to tax audits and is also a party to routine litigation involving various aspects of its business, such as employment practice claims, claims to enforce liens, condemnation proceedings on properties in which the Company holds security interests, claims involving the making and servicing of real property loans and other issues incident to its business, none of which has or is expected to have a material adverse impact on the consolidated financial condition, results of operations or liquidity of the Company.

Item 1A - Risk Factors.

Management of the Company does not believe there have been any material changes in the risk factors that were previously disclosed in the Company’s Form 10-K for the year ending December 31, 2014.

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

None.

Item 3 - Defaults upon Senior Securities

None.

Item 4 - Mine Safety Disclosures

Not Applicable.

Item 5 - Other Information

None.

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Item 6 - Exhibits

The following exhibits are filed herewith or incorporated by reference.

EXHIBIT 3.1	Amended and Restated Articles of Incorporation dated May 19, 2010 — filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K on May 19, 2010, is hereby incorporated by reference.
EXHIBIT 3.2	Amended and Restated Bylaws — filed as Exhibit 3.2 to the Company’s Form 10-Q for the quarter ended September 30, 2013, as filed on November 12, 2013, is hereby incorporated by reference.
EXHIBIT 4.1	Form of Common Stock Certificate — filed as Exhibit 4.1 to the Company’s Form 10-Q for the quarter ended September 30, 2014, as filed on November 10, 2014, is hereby incorporated by reference.
EXHIBIT 4.2	Form of Amended and Restated Subordinated Note – filed as Exhibit 4.2 to the Company’s Form 10-Q for the quarter ended June 30, 2015, as filed on August 7, 2015, is hereby incorporated for reference.
EXHIBIT 31.1*	Certification of Chief Executive Officer
EXHIBIT 31.2*	Certification of Chief Financial Officer
EXHIBIT 32.1**	Section 1350 Certification — Chief Executive Officer and Chief Financial Officer
EXHIBIT 101.INS*	XBRL INSTANCE DOCUMENT
EXHIBIT 101.SCH*	XBRL TAXONOMY EXTENSION SCHEMA
EXHIBIT 101.CAL*	XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
EXHIBIT 101.DEF*	XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
EXHIBIT 101.LAB*	XBRL TAXONOMY EXTENSION LABEL LINKBASE
EXHIBIT 101.PRE*	XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

_____________________________

* Filed herewith

** Furnished herewith

69

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Registrant:  FIRST NATIONAL COMMUNITY BANCORP, INC.

Date: November 6, 2015	By:	/s/ Steven R. Tokach
	Steven R. Tokach
	President and Chief Executive Officer
Date: November 6, 2015	By:	/s/ James M. Bone, Jr.
	James M. Bone, Jr., CPA
	Executive Vice President and Chief Financial Officer
	Principal Financial Officer
Date: November 6, 2015	By:	/s/ Stephanie A. Westington
	Stephanie A. Westington, CPA
	Senior Vice President and Controller
	Principal Accounting Officer

70

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Steven R. Tokach, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of First National Community Bancorp, Inc.;

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 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 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: November 6, 2015	By:	/s/ Steven R. Tokach
	Steven R. Tokach President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, James M. Bone, Jr., certify that:

1.       I have reviewed this quarterly report on Form 10-Q of First National Community Bancorp, Inc.;

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 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 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: November 6, 2015	By:	/s/ James M. Bone, Jr.
	James M. Bone, Jr., CPA
	Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADDED BY

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of First National Community Bancorp, Inc. (the “Company”) for the quarter ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Steven R. Tokach, President and Chief Executive Officer, and James M. Bone, Jr., Executive Vice President and Chief Financial Officer, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C 78m or 78o(d)); and

2.   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 6, 2015	By:	/s/ Steven R. Tokach
	Steven R. Tokach,
	President and Chief Executive Officer
Date: November 6, 2015	By:	/s/ James M. Bone, Jr.
	James M. Bone, Jr., CPA
	Executive Vice President and Chief Financial Officer

XML

Note 4 - Loans (Details) - Investment in Loans Receivable by Loan Category and Credit Quality Indicator - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 721,548	$ 669,494
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	443,294	399,414
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	15,208	17,978
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	21,884	25,764
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Loss [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Residential Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	129,444	122,832
Residential Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	21,120	19,892
Residential Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	405	451
Residential Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	993	1,077
Residential Portfolio Segment [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Residential Portfolio Segment [Member] | Loss [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	249,526	233,473
Commercial Real Estate Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	224,342	204,252
Commercial Real Estate Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	13,371	13,217
Commercial Real Estate Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	11,813	16,004
Commercial Real Estate Portfolio Segment [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Commercial Real Estate Portfolio Segment [Member] | Loss [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Construction, Land Acquisition and Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	25,516	18,835
Construction, Land Acquisition and Development [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	18,157	10,910
Construction, Land Acquisition and Development [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	362	1,423
Construction, Land Acquisition and Development [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	6,068	5,566
Construction, Land Acquisition and Development [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Construction, Land Acquisition and Development [Member] | Loss [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	142,425	132,057
Commercial Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	134,970	122,261
Commercial Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	935	1,962
Commercial Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	2,399	2,397
Commercial Portfolio Segment [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Commercial Portfolio Segment [Member] | Loss [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	132,418	122,092
Consumer Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	3,101	3,414
Consumer Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	15	0
Consumer Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	116	125
Consumer Portfolio Segment [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Consumer Portfolio Segment [Member] | Loss [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
State and Political Subdivisions [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	42,219	40,205
State and Political Subdivisions [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	41,604	38,685
State and Political Subdivisions [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	120	925
State and Political Subdivisions [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	495	595
State and Political Subdivisions [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
State and Political Subdivisions [Member] | Loss [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Subtotal Commercial Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	480,386	443,156
Subtotal Commercial Loans [Member] | Residential Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	22,518	21,420
Subtotal Commercial Loans [Member] | Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	249,526	233,473
Subtotal Commercial Loans [Member] | Construction, Land Acquisition and Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	24,587	17,899
Subtotal Commercial Loans [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	138,304	126,620
Subtotal Commercial Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	3,232	3,539
Subtotal Commercial Loans [Member] | State and Political Subdivisions [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	42,219	40,205
Accruing Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	240,501	225,326
Accruing Loans [Member] | Residential Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	106,411	100,576
Accruing Loans [Member] | Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Accruing Loans [Member] | Construction, Land Acquisition and Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	929	936
Accruing Loans [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	4,116	5,437
Accruing Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	129,045	118,377
Accruing Loans [Member] | State and Political Subdivisions [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Non-accrual Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	661	1,012
Non-accrual Loans [Member] | Residential Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	515	836
Non-accrual Loans [Member] | Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Non-accrual Loans [Member] | Construction, Land Acquisition and Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Non-accrual Loans [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	5	0
Non-accrual Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	141	176
Non-accrual Loans [Member] | State and Political Subdivisions [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Subtotal Other Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	241,162	226,338
Subtotal Other Loans [Member] | Residential Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	106,926	101,412
Subtotal Other Loans [Member] | Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Subtotal Other Loans [Member] | Construction, Land Acquisition and Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	929	936
Subtotal Other Loans [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	4,121	5,437
Subtotal Other Loans [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	129,186	118,553
Subtotal Other Loans [Member] | State and Political Subdivisions [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 0	$ 0

XML

Note 7 - Borrowed Funds (Details) - Components of Borrowed Funds - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015	Dec. 31, 2014
Components of Borrowed Funds [Abstract]
Federal Home Loan Bank of Pittsburgh advances - overnight	$ 19,500
Federal Home Loan Bank of Pittsburgh advances - term	73,558		$ 61,194
Subordinated debentures	14,000	$ 14,000	25,000
Junior subordinated debentures	10,310		10,310
Total borrowed funds	$ 117,368		$ 96,504

XML

Note 5 - Other Real Estate Owned (Details) - Components of Net Expense of OREO - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Note 5 - Other Real Estate Owned (Details) - Components of Net Expense of OREO [Line Items]
Valuation adjustments	$ 78	$ 429	$ 208	$ 2,199
Total expense	91	514	339	2,545
Income from the operation of foreclosed properties			(1)	(50)
Net expense of OREO	91	514	338	2,495
Insurance Expense [Member]
Note 5 - Other Real Estate Owned (Details) - Components of Net Expense of OREO [Line Items]
OREO expense, gross	19	26	51	66
Legal Fees Expense [Member]
Note 5 - Other Real Estate Owned (Details) - Components of Net Expense of OREO [Line Items]
OREO expense, gross	(6)	14	33	38
Maintenance Expense [Member]
Note 5 - Other Real Estate Owned (Details) - Components of Net Expense of OREO [Line Items]
OREO expense, gross		2	3	17
Professional Fees Expense [Member]
Note 5 - Other Real Estate Owned (Details) - Components of Net Expense of OREO [Line Items]
OREO expense, gross	3	5	4	83
Real Estate Taxes Expense [Member]
Note 5 - Other Real Estate Owned (Details) - Components of Net Expense of OREO [Line Items]
OREO expense, gross	8	28	21	123
Utilities Expense [Member]
Note 5 - Other Real Estate Owned (Details) - Components of Net Expense of OREO [Line Items]
OREO expense, gross	1	4	14	8
Other OREO Expense [Member]
Note 5 - Other Real Estate Owned (Details) - Components of Net Expense of OREO [Line Items]
OREO expense, gross	$ (12)	$ 6	$ 5	$ 11

XML

Note 13 - Income Taxes (Details) - USD ($) $ in Thousands			3 Months Ended	9 Months Ended
	Jun. 30, 2015	Feb. 01, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Jul. 01, 2015	Jun. 12, 2015	Jan. 01, 2015	Dec. 31, 2014
Note 13 - Income Taxes (Details) [Line Items]
Deferred Tax Assets, Valuation Allowance				$ 30,300					$ 30,300
Repayments of Subordinated Debt	$ 11,000
Percent of Principal Amount Outstanding, Pre-payment	44.00%
Initial Base Assessment Rate for Deposit Insurance		0.0005%						0.0014%
Reduction of Assessment Rate for Deposit Insurance		64.30%
Valuation Allowance, Percentage of Net Deferred Tax Assets				100.00%
Income Tax Expense (Benefit)			$ 166	$ (40)	$ 326
Subordinated Debt [Member]
Note 13 - Income Taxes (Details) [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	9.00%					4.50%	9.00%
Percent of Principal Amount Outstanding, Pre-payment	44.00%	44.00%
Principal Only Payment [Member]
Note 13 - Income Taxes (Details) [Line Items]
Repayments of Subordinated Debt		$ 11,000

XML

Note 8 - Fair Value Measurements (Details) - Assets Measured at Fair Value on a Recurring Basis - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Available-for-sale securities:
Available-for-sale securities, fair value	$ 249,228	$ 218,989
US Government Agencies Debt Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	44,700	29,276
US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	56,152	24,509
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Residential Mortgage [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	23,544	26,231
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Commercial Loan [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	91,339	61,256
Residential Mortgage Backed Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	28,938	74,098
Corporate Debt Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	426	420
Negotiable Certificates of Deposit [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	3,171	2,232
Equity Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	958	967
Fair Value, Inputs, Level 1 [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	958	967
Fair Value, Inputs, Level 1 [Member] | US Government Agencies Debt Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	0	0
Fair Value, Inputs, Level 1 [Member] | US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	0	0
Fair Value, Inputs, Level 1 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Residential Mortgage [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	0	0
Fair Value, Inputs, Level 1 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Commercial Loan [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	0	0
Fair Value, Inputs, Level 1 [Member] | Residential Mortgage Backed Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	0	0
Fair Value, Inputs, Level 1 [Member] | Corporate Debt Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	0	0
Fair Value, Inputs, Level 1 [Member] | Negotiable Certificates of Deposit [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	0	0
Fair Value, Inputs, Level 1 [Member] | Equity Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	958	967
Fair Value, Inputs, Level 2 [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	248,270	218,022
Fair Value, Inputs, Level 2 [Member] | US Government Agencies Debt Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	44,700	29,276
Fair Value, Inputs, Level 2 [Member] | US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	56,152	24,509
Fair Value, Inputs, Level 2 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Residential Mortgage [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	23,544	26,231
Fair Value, Inputs, Level 2 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Commercial Loan [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	91,339	61,256
Fair Value, Inputs, Level 2 [Member] | Residential Mortgage Backed Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	28,938	74,098
Fair Value, Inputs, Level 2 [Member] | Corporate Debt Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	426	420
Fair Value, Inputs, Level 2 [Member] | Negotiable Certificates of Deposit [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	3,171	2,232
Fair Value, Inputs, Level 2 [Member] | Equity Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	0	0
Fair Value, Inputs, Level 3 [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	0	0
Fair Value, Inputs, Level 3 [Member] | US Government Agencies Debt Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	0	0
Fair Value, Inputs, Level 3 [Member] | US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	0	0
Fair Value, Inputs, Level 3 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Residential Mortgage [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	0	0
Fair Value, Inputs, Level 3 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Commercial Loan [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	0	0
Fair Value, Inputs, Level 3 [Member] | Residential Mortgage Backed Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	0	0
Fair Value, Inputs, Level 3 [Member] | Corporate Debt Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	0	0
Fair Value, Inputs, Level 3 [Member] | Negotiable Certificates of Deposit [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	0	0
Fair Value, Inputs, Level 3 [Member] | Equity Securities [Member]
Available-for-sale securities:
Available-for-sale securities, fair value	$ 0	$ 0

XML

Note 5 - Other Real Estate Owned (Details) - Composition of OREO - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Dec. 31, 2013
Note 5 - Other Real Estate Owned (Details) - Composition of OREO [Line Items]
Other real estate owned	$ 1,618	$ 1,740	$ 2,255	$ 2,617	$ 3,182	$ 4,246
Land and Lots [Member]
Note 5 - Other Real Estate Owned (Details) - Composition of OREO [Line Items]
Other real estate owned	803		1,287
Other Real Estate Owned, Commercial Real Estate [Member]
Note 5 - Other Real Estate Owned (Details) - Composition of OREO [Line Items]
Other real estate owned	788		941
Other Real Estate Owned, Residential Real Estate [Member]
Note 5 - Other Real Estate Owned (Details) - Composition of OREO [Line Items]
Other real estate owned	$ 27		$ 27

XML

Note 3 - Regulatory Matters (Details)	Sep. 30, 2015	Dec. 31, 2014
Note 3 - Regulatory Matters (Details) [Line Items]
Capital to Risk Weighted Assets	8.00%	10.00%
Tier One Risk Based Capital to Risk Weighted Assets	6.00%	4.00%
Common Equity Tier One Capital to Risk-Weighted Assets	4.50%
Tier One Leverage Capital to Average Assets	4.00%
Tier One Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	8.00%	6.00%
Tier One Leverage Capital Required to be Well Capitalized to Average Assets	5.00%	5.00%
Effective January 2019 [Member]
Note 3 - Regulatory Matters (Details) [Line Items]
Capital to Risk Weighted Assets	10.50%
Tier One Risk Based Capital to Risk Weighted Assets	8.50%
Common Equity Tier One Capital to Risk-Weighted Assets	7.00%
Common Equity Tier One Capital Conservation Buffer	2.50%
Effective January 2016 [Member]
Note 3 - Regulatory Matters (Details) [Line Items]
Common Equity Tier One Capital Conservation Buffer	0.625%

XML

Note 8 - Fair Value Measurements (Details) - Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis - USD ($) $ in Thousands		Sep. 30, 2015	Dec. 31, 2014
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis [Line Items]
Collateral-dependent impaired loans	[1]	$ 7,062	$ 5,380
Other real estate owned	[1]	1,582	2,087
Fair Value, Inputs, Level 1 [Member]
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis [Line Items]
Collateral-dependent impaired loans		0	0
Other real estate owned		0	0
Fair Value, Inputs, Level 2 [Member]
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis [Line Items]
Collateral-dependent impaired loans		0	0
Other real estate owned		0	0
Fair Value, Inputs, Level 3 [Member]
Note 8 - Fair Value Measurements (Details) - Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis [Line Items]
Collateral-dependent impaired loans		7,062	5,380
Other real estate owned		$ 1,582	$ 2,087

[1] Represents carrying value and related write-downs for which adjustments are based on appraised value less estimated selling costs. Management may makeadjustments to the appraised values as necessary to consider declines in real estate values since the time of the appraisal. Such adjustments are based onmanagement's knowledge of the local real estate markets.

XML

Note 14 - Contingencies (Details) - USD ($) $ in Thousands			1 Months Ended		12 Months Ended
	Apr. 01, 2014	Mar. 28, 2014	Feb. 27, 2015	Jan. 30, 2015	Dec. 31, 2014	Sep. 30, 2015	Feb. 04, 2014	Dec. 31, 2013
Note 14 - Contingencies (Details) [Line Items]
Payments of Civil Money Penalty				$ 175
Accrued Civil Money Penalty					$ 175
Derivative Liability							$ 5,000
Litigation Settlement, Amount		$ 5,000
Accrued Liabilities and Other Liabilities						$ 2,500		$ 2,500
Payments for Litigation Settlement Fees and Costs	$ 2,500
Partial Indemnification Individual Defendants Paid	$ 2,500
Subsidiaries [Member]
Note 14 - Contingencies (Details) [Line Items]
Payments of Civil Money Penalty			$ 1,500
Accrued Civil Money Penalty					$ 1,500

XML

Note 5 - Other Real Estate Owned (Tables)

9 Months Ended

Sep. 30, 2015

Disclosure Text Block [Abstract]

Schedule Reflecting Components of OREO [Table Text Block]

	September 30,		December 31,
(in thousands)	2015		2014
Land/lots	$	803	$	1,287
Commercial real estate		788		941
Residential real estate		27		27
Total other real estate owned	$	1,618	$	2,255

Other Real Estate Owned Roll Forward [Table Text Block]

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2015			2014			2015			2014
Balance, beginning of period	$	1,740		$	3,182		$	2,255		$	4,246
Property foreclosures		-			-			149			13
Bank premises transferred to OREO		-			-			-			1,749
Valuation adjustments		(78	)		(429	)		(208	)		(2,199	)
Carrying value of OREO sold		(44	)		(136	)		(578	)		(1,192	)
Balance, end of period	$	1,618		$	2,617		$	1,618		$	2,617

Schedule of Components of Net Expense of Other Real Estate [Table Text Block]

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(in thousands)	2015			2014		2015			2014
Insurance	$	19		$	26	$	51		$	66
Legal fees		(6	)		14		33			38
Maintenance		-			2		3			17
Professional fees		3			5		4			83
Real estate taxes		8			28		21			123
Utilities		1			4		14			8
Other		(12	)		6		5			11
Valuation adjustments		78			429		208			2,199
Total expense		91			514		339			2,545
Income from the operation of foreclosed properties		-			-		(1	)		(50	)
Net expense of OREO	$	91		$	514	$	338		$	2,495

XML

Note 6 - Securities (Details) - Amortized Cost, Gross Unrealized Gains and Losses, and the Fair Value of the Company's Securities - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Available-for-sale:
Available for sale securities, amortized cost	$ 245,345	$ 217,264
Available for sale securities, gross unrealized holding gains	4,037	2,493
Available for sale securities, gross unrealized holding losses	154	768
Available for sale securities, fair value	249,228	218,989
US Government Agencies Debt Securities [Member]
Available-for-sale:
Available for sale securities, amortized cost	43,788	29,246
Available for sale securities, gross unrealized holding gains	912	77
Available for sale securities, gross unrealized holding losses		47
Available for sale securities, fair value	44,700	29,276
US States and Political Subdivisions Debt Securities [Member]
Available-for-sale:
Available for sale securities, amortized cost	55,209	23,132
Available for sale securities, gross unrealized holding gains	955	1,380
Available for sale securities, gross unrealized holding losses	12	3
Available for sale securities, fair value	56,152	24,509
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Residential Mortgage [Member]
Available-for-sale:
Available for sale securities, amortized cost	23,058	26,129
Available for sale securities, gross unrealized holding gains	489	103
Available for sale securities, gross unrealized holding losses	3	1
Available for sale securities, fair value	23,544	26,231
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Commercial Loan [Member]
Available-for-sale:
Available for sale securities, amortized cost	90,158	61,017
Available for sale securities, gross unrealized holding gains	1,190	492
Available for sale securities, gross unrealized holding losses	9	253
Available for sale securities, fair value	91,339	61,256
Residential Mortgage Backed Securities [Member]
Available-for-sale:
Available for sale securities, amortized cost	28,449	73,998
Available for sale securities, gross unrealized holding gains	489	441
Available for sale securities, gross unrealized holding losses	0	341
Available for sale securities, fair value	28,938	74,098
Corporate Debt Securities [Member]
Available-for-sale:
Available for sale securities, amortized cost	500	500
Available for sale securities, gross unrealized holding gains	0	0
Available for sale securities, gross unrealized holding losses	74	80
Available for sale securities, fair value	426	420
Negotiable Certificates of Deposit [Member]
Available-for-sale:
Available for sale securities, amortized cost	3,173	2,232
Available for sale securities, gross unrealized holding gains	2	0
Available for sale securities, gross unrealized holding losses	4	0
Available for sale securities, fair value	3,171	2,232
Equity Securities [Member]
Available-for-sale:
Available for sale securities, amortized cost	1,010	1,010
Available for sale securities, gross unrealized holding gains	0	0
Available for sale securities, gross unrealized holding losses	52	43
Available for sale securities, fair value	$ 958	$ 967

XML

Note 4 - Loans (Details) - Average Balance and Interest Income by Loan Category Recognized on Impaired Loans - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Note 4 - Loans (Details) - Average Balance and Interest Income by Loan Category Recognized on Impaired Loans [Line Items]
Average balance		$ 10,383	$ 9,820	$ 10,507	$ 9,485
Interest income	[1]	61	62	198	173
Real Estate Loan [Member]
Note 4 - Loans (Details) - Average Balance and Interest Income by Loan Category Recognized on Impaired Loans [Line Items]
Average balance		9,889	9,391	10,008	9,050
Interest income	[1]	57	59	188	165
Residential Portfolio Segment [Member] | Real Estate Loan [Member]
Note 4 - Loans (Details) - Average Balance and Interest Income by Loan Category Recognized on Impaired Loans [Line Items]
Average balance		2,413	2,490	2,659	2,144
Interest income	[1]	28	25	92	62
Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Note 4 - Loans (Details) - Average Balance and Interest Income by Loan Category Recognized on Impaired Loans [Line Items]
Average balance		7,017	6,628	6,884	6,613
Interest income	[1]	24	30	82	91
Construction, Land Acquisition and Development [Member] | Real Estate Loan [Member]
Note 4 - Loans (Details) - Average Balance and Interest Income by Loan Category Recognized on Impaired Loans [Line Items]
Average balance		459	273	465	293
Interest income	[1]	5	4	14	12
Commercial Portfolio Segment [Member]
Note 4 - Loans (Details) - Average Balance and Interest Income by Loan Category Recognized on Impaired Loans [Line Items]
Average balance		140	$ 66	142	$ 98
Interest income	[1]	1		1
Consumer Portfolio Segment [Member]
Note 4 - Loans (Details) - Average Balance and Interest Income by Loan Category Recognized on Impaired Loans [Line Items]
Average balance		354	$ 363	357	$ 337
Interest income	[1]	$ 3	$ 3	$ 9	$ 8
State and Political Subdivisions [Member]
Note 4 - Loans (Details) - Average Balance and Interest Income by Loan Category Recognized on Impaired Loans [Line Items]
Interest income	[1]

[1] Interest income represents income recognized on performing TDRs.

XML

Note 4 - Loans (Details) - Loans Receivable, Net, by Category - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014	Sep. 30, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable, gross	$ 721,548	$ 669,494
Unearned income	(104)	(98)
Net deferred loan costs	1,722	871
Allowance for loan and lease losses	(9,825)	(11,520)	$ (11,898)
Loans, net	713,341	658,747
Residential Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable, gross	129,444	122,832
Commercial Real Estate Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable, gross	249,526	233,473
Construction, Land Acquisition and Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable, gross	25,516	18,835
Commercial Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable, gross	142,425	132,057
Allowance for loan and lease losses	(1,259)	(2,104)	(1,805)
Consumer Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable, gross	132,418	122,092
Allowance for loan and lease losses	(1,513)	(1,673)	(1,727)
State and Political Subdivisions [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable, gross	42,219	40,205
Allowance for loan and lease losses	$ (472)	$ (598)	$ (583)

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Note 6 - Securities (Details) - Available-for-sale Securities in a Continuous Unrealized Loss Position $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015 USD ($)	Dec. 31, 2014 USD ($)
Note 6 - Securities (Details) - Available-for-sale Securities in a Continuous Unrealized Loss Position [Line Items]
Number of securities, less than 12 months	11	13
Fair value, less than 12 months	$ 8,927	$ 59,338
Gross unrealized losses, less than 12 months	$ 23	$ 209
Number of securities, 12 months or greater	3	12
Fair value, 12 months or greater	$ 1,635	$ 47,943
Gross unrealized losses, 12 months or greater	$ 131	$ 559
Number of securities	14	25
Fair value	$ 10,562	$ 107,281
Gross unrealized losses	$ 154	$ 768
US Government Agencies Debt Securities [Member]
Note 6 - Securities (Details) - Available-for-sale Securities in a Continuous Unrealized Loss Position [Line Items]
Number of securities, less than 12 months	0	2
Fair value, less than 12 months	$ 0	$ 9,513
Gross unrealized losses, less than 12 months	$ 0	$ 47
Number of securities, 12 months or greater	0	0
Fair value, 12 months or greater	$ 0	$ 0
Gross unrealized losses, 12 months or greater	$ 0	$ 0
Number of securities	0	2
Fair value	$ 0	$ 9,513
Gross unrealized losses	$ 0	$ 47
US States and Political Subdivisions Debt Securities [Member]
Note 6 - Securities (Details) - Available-for-sale Securities in a Continuous Unrealized Loss Position [Line Items]
Number of securities, less than 12 months	1	0
Fair value, less than 12 months	$ 1,513	$ 0
Gross unrealized losses, less than 12 months	$ 7	$ 0
Number of securities, 12 months or greater	1	1
Fair value, 12 months or greater	$ 261	$ 254
Gross unrealized losses, 12 months or greater	$ 5	$ 3
Number of securities	2	1
Fair value	$ 1,774	$ 254
Gross unrealized losses	$ 12	$ 3
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Note 6 - Securities (Details) - Available-for-sale Securities in a Continuous Unrealized Loss Position [Line Items]
Number of securities	4
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Residential Mortgage [Member]
Note 6 - Securities (Details) - Available-for-sale Securities in a Continuous Unrealized Loss Position [Line Items]
Number of securities, less than 12 months	2	1
Fair value, less than 12 months	$ 812	$ 653
Gross unrealized losses, less than 12 months	$ 3	$ 1
Number of securities, 12 months or greater	0	0
Fair value, 12 months or greater	$ 0	$ 0
Gross unrealized losses, 12 months or greater	$ 0	$ 0
Number of securities	2	1
Fair value	$ 812	$ 653
Gross unrealized losses	$ 3	$ 1
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Commercial Loan [Member]
Note 6 - Securities (Details) - Available-for-sale Securities in a Continuous Unrealized Loss Position [Line Items]
Number of securities, less than 12 months	2	7
Fair value, less than 12 months	$ 5,169	$ 32,513
Gross unrealized losses, less than 12 months	$ 9	$ 105
Number of securities, 12 months or greater	0	3
Fair value, 12 months or greater	$ 0	$ 8,693
Gross unrealized losses, 12 months or greater	$ 0	$ 148
Number of securities	2	10
Fair value	$ 5,169	$ 41,206
Gross unrealized losses	$ 9	$ 253
Residential Mortgage Backed Securities [Member]
Note 6 - Securities (Details) - Available-for-sale Securities in a Continuous Unrealized Loss Position [Line Items]
Number of securities, less than 12 months	0	3
Fair value, less than 12 months	$ 0	$ 16,659
Gross unrealized losses, less than 12 months	$ 0	$ 56
Number of securities, 12 months or greater	0	6
Fair value, 12 months or greater	$ 0	$ 37,619
Gross unrealized losses, 12 months or greater	$ 0	$ 285
Number of securities	0	9
Fair value	$ 0	$ 54,278
Gross unrealized losses	$ 0	$ 341
Corporate Debt Securities [Member]
Note 6 - Securities (Details) - Available-for-sale Securities in a Continuous Unrealized Loss Position [Line Items]
Number of securities, less than 12 months	0	0
Fair value, less than 12 months	$ 0	$ 0
Gross unrealized losses, less than 12 months	$ 0	$ 0
Number of securities, 12 months or greater	1	1
Fair value, 12 months or greater	$ 426	$ 420
Gross unrealized losses, 12 months or greater	$ 74	$ 80
Number of securities	1	1
Fair value	$ 426	$ 420
Gross unrealized losses	$ 74	$ 80
Negotiable Certificates of Deposit [Member]
Note 6 - Securities (Details) - Available-for-sale Securities in a Continuous Unrealized Loss Position [Line Items]
Number of securities, less than 12 months	6	0
Fair value, less than 12 months	$ 1,433	$ 0
Gross unrealized losses, less than 12 months	$ 4	$ 0
Number of securities, 12 months or greater	0	0
Fair value, 12 months or greater	$ 0	$ 0
Gross unrealized losses, 12 months or greater	$ 0	$ 0
Number of securities	6	0
Fair value	$ 1,433	$ 0
Gross unrealized losses	$ 4	$ 0
Equity Securities [Member]
Note 6 - Securities (Details) - Available-for-sale Securities in a Continuous Unrealized Loss Position [Line Items]
Number of securities, less than 12 months	0	0
Fair value, less than 12 months	$ 0	$ 0
Gross unrealized losses, less than 12 months	$ 0	$ 0
Number of securities, 12 months or greater	1	1
Fair value, 12 months or greater	$ 948	$ 957
Gross unrealized losses, 12 months or greater	$ 52	$ 43
Number of securities	1	1
Fair value	$ 948	$ 957
Gross unrealized losses	$ 52	$ 43

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Note 12 - Stock Compensation Plans (Details) - Stock Option Plans - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Stock Option Plans [Abstract]
Outstanding at January 1.	64,479	82,598
Outstanding at January 1. (in Dollars per share)	$ 15.87	$ 15.98
Granted	0	0
Granted (in Dollars per share)	$ 0	$ 0
Exercised	0	0
Exercised (in Dollars per share)	$ 0	$ 0
Forfeited	0	(9,322)
Forfeited (in Dollars per share)	$ 0	$ 16.05
Outstanding at September 30,	64,479	73,276
Outstanding at September 30, (in Dollars per share)	$ 15.87	$ 15.97
Options exercisable at September 30,	64,479	73,276
Options exercisable at September 30, (in Dollars per share)		$ 15.97
Stock-based compensation expense (in Dollars)	$ 0	$ 0

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Note 10 - Other Comprehensive Income (Details) - Reclassifications Out of Accumulated Other Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Available-for-sale securities:
Reclassification adjustment for net gains reclassified into net income	$ (4)	$ (2,958)	$ (2,302)	$ (6,006)
Taxes		166	(40)	326
Net of tax amount	3	1,952	1,520	3,721
Reclassification out of Accumulated Other Comprehensive Income [Member]
Available-for-sale securities:
Taxes	1	1,006	782	1,917
Net of tax amount	(3)	(1,952)	(1,520)	(3,721)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Net Investment Gain (Loss) Including Portion Attributable to Noncontrolling Interest [Member]
Available-for-sale securities:
Reclassification adjustment for net gains reclassified into net income	$ (4)	$ (2,958)	$ (2,302)	$ (5,638)

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Note 5 - Other Real Estate Owned (Details) - Activity in OREO - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Activity in OREO [Abstract]
Balance, beginning of period	$ 1,740	$ 3,182	$ 2,255	$ 4,246
Property foreclosures			149	13
Bank premises transferred to OREO				1,749
Valuation adjustments	(78)	(429)	(208)	(2,199)
Carrying value of OREO sold	(44)	(136)	(578)	(1,192)
Balance, end of period	$ 1,618	$ 2,617	$ 1,618	$ 2,617

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Note 1 - Basis of Presentation

9 Months Ended

Sep. 30, 2015

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note 1.     Basis of Presentation

The consolidated financial statements are comprised of the accounts of First National Community Bancorp, Inc., and its wholly owned subsidiary, First National Community Bank (the “Bank”), as well as the Bank’s wholly owned subsidiaries (collectively, the “Company”). The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”) and general practices within the banking industry. In the opinion of management, all adjustments necessary for a fair presentation of the results for the three and nine month periods ended September 30, 2015 have been included in the consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. Prior period amounts have been reclassified when necessary to conform to the current period’s presentation. These reclassifications did not have an impact on the operating results or financial position of the Company. The operating results and financial position of the Company for the three and nine months ended September 30, 2015 may not be indicative of its future results of operations and financial position.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to change in the near term are the allowance for loan and lease losses (“ALLL”), investment security valuations, the evaluation of investment securities and other real estate owned (“OREO”) for impairment, and the evaluation of deferred income taxes.

These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s audited financial statements, included in its Annual Report filed on Form 10-K as of and for the year ended December 31, 2014 (the “2014 Form 10-K”) and the Company’s Quarterly Reports filed on Form 10-Q for the periods ended March 31, 2015 and June 30, 2015.

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Note 10 - Other Comprehensive Income (Details) - Changes in Accumulated Other Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Changes in Accumulated Other Comprehensive Income [Abstract]
Beginning balance	$ 279	$ 2,406	$ 1,138	$ (3,092)
Other comprehensive income (loss) before reclassifications	2,287	(319)	2,945	6,948
Amounts reclassified from accumulated other comprehensive income (loss)	(3)	(1,952)	(1,520)	(3,721)
Net other comprehensive income (loss) during the period	2,284	(2,271)	1,425	3,227
Ending balance	$ 2,563	$ 135	$ 2,563	$ 135

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Note 4 - Loans (Details) - Investment in Loans Modified as TDRs by Loan Category $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)
Troubled debt restructurings:
Number of contracts	1	6	8	18
Pre-modification outstanding recorded investments	$ 79	$ 411	$ 2,639	$ 1,200
Post-modification outstanding recorded investments	$ 79	$ 413	$ 1,744	$ 1,287
Residential Portfolio Segment [Member]
Troubled debt restructurings:
Number of contracts		6	5	12
Pre-modification outstanding recorded investments		$ 411	$ 810	$ 780
Post-modification outstanding recorded investments		$ 413	$ 827	$ 862
Commercial Real Estate Portfolio Segment [Member]
Troubled debt restructurings:
Number of contracts	1		1	4
Pre-modification outstanding recorded investments	$ 1,700		$ 1,654	$ 238
Post-modification outstanding recorded investments			$ 742	$ 238
Construction, Land Acquisition and Development [Member]
Troubled debt restructurings:
Number of contracts			1
Pre-modification outstanding recorded investments			$ 96
Post-modification outstanding recorded investments			$ 96
Commercial Portfolio Segment [Member]
Troubled debt restructurings:
Number of contracts	1		1
Pre-modification outstanding recorded investments	$ 79		$ 79
Post-modification outstanding recorded investments	$ 79		$ 79
Consumer Portfolio Segment [Member]
Troubled debt restructurings:
Number of contracts				2
Pre-modification outstanding recorded investments				$ 182
Post-modification outstanding recorded investments				$ 187

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Note 9 - Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2015

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except share data)	2015		2014		2015		2014
Net income	$	2,337	$	3,358	$	6,631	$	13,451
Basic weighted-average number of common shares outstanding		16,500,945		16,471,569		16,497,373		16,471,569
Plus: common share equivalents		-		-		-		282
Diluted weighted-average number of common shares outstanding		16,500,945		16,471,569		16,497,373		16,471,851
Income per common share:
Basic	$	0.14	$	0.20	$	0.40	$	0.82
Diluted	$	0.14	$	0.20	$	0.40	$	0.82

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Note 8 - Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

	Fair Value Measurements at September 30, 2015
(in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Asset (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Available-for-sale securities:
Obligations of U.S. government agencies	$	44,700	$	-	$	44,700	$	-
Obligations of state and political subdivisions		56,152		-		56,152		-
U.S. government/ government-sponsored agencies:
Collateralized mortgage obligations - residential		23,544		-		23,544		-
Collateralized mortgage obligations - commercial		91,339		-		91,339		-
Residential mortgage-backed securities		28,938		-		28,938		-
Corporate debt securities		426		-		426		-
Negotiable certificates of deposit		3,171		-		3,171		-
Equity securities		958		958		-		-
Total available-for-sale securities	$	249,228	$	958	$	248,270	$	-

	Fair Value Measurements at December 31, 2014
(in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Available-for-sale securities:
Obligations of U.S. government agencies	$	29,276	$	-	$	29,276	$	-
Obligations of state and political subdivisions		24,509		-		24,509		-
U.S. government/ government-sponsored agencies:
Collateralized mortgage obligations - residential		26,231		-		26,231		-
Collateralized mortgage obligations - commerical		61,256		-		61,256		-
Residential mortgage-backed securities		74,098		-		74,098		-
Corporate debt securities		420		-		420		-
Negotiable certificates of deposit		2,232		-		2,232		-
Equity securities		967		967		-		-
Total available-for-sale securities	$	218,989	$	967	$	218,022	$	-

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

Fair Value Measurements
Using Significant Unobservable Inputs (Level 3)
	State and Political Subdivisions
	Nine Months Ended September 30,
(in thousands)	2015		2014
Balance at January 1,	$	-	$	571
Amortization		-		-
Accretion		-		-
Purchases		-		-
Paydowns		-		(445	)
Total gains or losses (realized/unrealized):		-		-
Included in earnings		-		-
Included in other comprehensive income		-		23
Balance at September 30,	$	-	$	149

Fair Value Measurements, Nonrecurring [Table Text Block]

	Fair Value Measurements at September 30, 2015
					Significant		Significant
			Quoted Prices		Other		Other
			in Active Markets		Observable		Unobservable
			for Identical Assets		Inputs		Inputs
(in thousands)	Fair Value (1)		(Level 1)		(Level 2)		(Level 3)
Collateral-dependent impaired loans	$	7,062	$	-	$	-	$	7,062
Other real estate owned	$	1,582	$	-	$	-	$	1,582

	Fair Value Measurements at December 31, 2014
					Significant		Significant
			Quoted Prices		Other		Other
			in Active Markets		Observable		Unobservable
			for Identical Assets		Inputs		Inputs
(in thousands)	Fair Value (1)		(Level 1)		(Level 2)		(Level 3)
Collateral-dependent impaired loans	$	5,380	$	-	$	-	$	5,380
Other real estate owned	$	2,087	$	-	$	-	$	2,087

Fair Value, by Balance Sheet Grouping [Table Text Block]

	Fair Value	September 30, 2015				December 31, 2014
(in thousands)	Measurement	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Cash and short term investments	Level 1	$	31,014	$	31,014	$	35,667	$	35,667
Securities available for sale	See previous table		249,228		249,228		218,989		218,989
FHLB and FRB Stock	Level 2		5,649		5,649		4,154		4,154
Loans held for sale	Level 2		4,634		4,634		603		603
Loans, net	Level 3		713,341		712,602		658,747		659,231
Accrued interest receivable	Level 2		2,618		2,618		2,075		2,075
Mortgage servicing rights	Level 3		207		841		333		898
Financial liabilities:
Deposits	Level 2		852,042		837,071		795,336		779,986
Borrowed funds	Level 2		117,368		117,595		96,504		100,020
Accrued interest payable	Level 2		11,187		11,187		10,262		10,262

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Note 8 - Fair Value Measurements (Details) - Assets Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Assets Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs [Abstract]
Balance at January 1,	$ 0	$ 571
Amortization	0	0
Accretion	0	0
Purchases	0	0
Paydowns	0	(445)
Balance at September 30,	0	149
Included in earnings	0	0
Included in other comprehensive income	$ 0	$ 23

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Note 4 - Loans (Details) - Type of Modifications - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Type of modification:
Financing receivable, modifications	$ 79	$ 413	$ 1,744	$ 1,287
Extended Maturity [Member]
Type of modification:
Financing receivable, modifications		148	805	636
Extended Maturity and Capitalization of Taxes [Member]
Type of modification:
Financing receivable, modifications		40	118	391
Capitalization of Taxes [Member]
Type of modification:
Financing receivable, modifications				35
Principal Forbearance [Member]
Type of modification:
Financing receivable, modifications	79	225	1,733	225
Residential Portfolio Segment [Member]
Type of modification:
Financing receivable, modifications		413	827	862
Residential Portfolio Segment [Member] | Extended Maturity [Member]
Type of modification:
Financing receivable, modifications		148	709	263
Residential Portfolio Segment [Member] | Extended Maturity and Capitalization of Taxes [Member]
Type of modification:
Financing receivable, modifications		40	118	339
Residential Portfolio Segment [Member] | Capitalization of Taxes [Member]
Type of modification:
Financing receivable, modifications				35
Residential Portfolio Segment [Member] | Principal Forbearance [Member]
Type of modification:
Financing receivable, modifications		$ 225		225
Commercial Real Estate Portfolio Segment [Member]
Type of modification:
Financing receivable, modifications			742	238
Commercial Real Estate Portfolio Segment [Member] | Extended Maturity [Member]
Type of modification:
Financing receivable, modifications				238
Commercial Real Estate Portfolio Segment [Member] | Principal Forbearance [Member]
Type of modification:
Financing receivable, modifications			1,654
Construction, Land Acquisition and Development [Member]
Type of modification:
Financing receivable, modifications			96
Construction, Land Acquisition and Development [Member] | Extended Maturity [Member]
Type of modification:
Financing receivable, modifications			96
Commercial and Industrial [Member]
Type of modification:
Financing receivable, modifications	79		79
Commercial and Industrial [Member] | Principal Forbearance [Member]
Type of modification:
Financing receivable, modifications	$ 79		$ 79
Consumer Portfolio Segment [Member]
Type of modification:
Financing receivable, modifications				187
Consumer Portfolio Segment [Member] | Extended Maturity [Member]
Type of modification:
Financing receivable, modifications				135
Consumer Portfolio Segment [Member] | Extended Maturity and Capitalization of Taxes [Member]
Type of modification:
Financing receivable, modifications				$ 52

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Note 10 - Other Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2015

Disclosure Text Block [Abstract]

Reclassification out of Accumulated Other Comprehensive Income [Table Text Block]

	Three Months Ended September 30, 2015				Nine Months Ended September 30, 2015
	Amount				Amount
	Reclassified from				Reclassified from
	Accumulated				Accumulated
	Other			Affected Line Item	Other			Affected Line Item
	Comprehensive			in the Consolidated	Comprehensive			in the Consolidated
(in thousands)	Income			Statements of Income	Income			Statements of Income
Available-for-sale securities:
Reclassification adjustment for net gains reclassified into net income	$	(4	)	Net gain on sale of securities	$	(2,302	)	Net gain on sale of securities
Taxes		1		Income taxes		782		Income taxes
Net of tax amount	$	(3	)		$	(1,520	)

	Three Months Ended September 30, 2014				Nine Months Ended September 30, 2014
	Amount				Amount
	Reclassified from				Reclassified from
	Accumulated				Accumulated
	Other			Affected Line Item	Other			Affected Line Item
	Comprehensive			in the Consolidated	Comprehensive			in the Consolidated
(in thousands)	Income			Statements of Income	Income			Statements of Income
Available-for-sale securities:
Reclassification adjustment for net gains reclassified into net income	$	(2,958	)	Net gain on sale of securities	$	(5,638	)	Net gain on sale of securities
Taxes		1,006		Income taxes		1,917		Income taxes
Net of tax amount	$	(1,952	)		$	(3,721	)

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2015			2014			2015			2014
Beginning balance	$	279		$	2,406		$	1,138		$	(3,092	)
Other comprehensive income (loss) before reclassifications		2,287			(319	)		2,945			6,948
Amounts reclassified from accumulated other comprehensive income (loss)		(3	)		(1,952	)		(1,520	)		(3,721	)
Net other comprehensive income (loss) during the period		2,284			(2,271	)		1,425			3,227
Ending balance	$	2,563		$	135		$	2,563		$	135

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Note 11 - Related Party Transactions (Tables)

9 Months Ended

Sep. 30, 2015

Related Party Transactions [Abstract]

Schedule of Related Party Transactions [Table Text Block]

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
(in thousands)	2015			2014			2015			2014
Balance, beginning of period	$	40,486		$	30,303		$	36,783		$	29,301
Additions, new loans and advances		20,881			25,141			52,282			47,998
Repayments		(9,723	)		(13,725	)		(37,421	)		(35,580	)
Other (1)		-			(84	)		-			(84	)
Balance, end of period	$	51,644		$	41,635		$	51,644		$	41,635

Schedule of Subordinated Borrowing [Table Text Block]

	For the Nine Months Ended
	September 30, 2015
(in thousands)	Related Party Subordinated Noteholders			Other Subordinated Noteholders			Total Subordinated Notes Outstanding
Balance, beginning of period	$	9,000		$	16,000		$	25,000
Assignments		6,429			(6,429	)		-
Principal reductions		(6,789	)		(4,211	)		(11,000	)
Balance, end of period	$	8,640		$	5,360		$	14,000

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Operating activities:
Net income	$ 6,631	$ 13,451
Adjustments to reconcile net income to net cash provided by operating activities:
Investment securities amortization, net	1,173	953
Equity in trust	(5)	(4)
Depreciation and amortization	1,168	1,068
Stock-based compensation	179	65
Credit for loan and lease losses	(340)	(5,629)
Credit for off-balance sheet commitments	(27)	(201)
Gain on the sale of available-for-sale securities	(2,302)	(5,638)
Gain on the sale of held-to-maturity securities		(368)
Gain on the sale of loans held for sale	(69)	(223)
Loss on the sale of education loans		13
Gain on branch divestitures		(607)
Loss on the disposition of bank premises and equipment and other assets		352
Gain on the sale of other real estate owned	(145)	(103)
Valuation adjustment of other real estate owned	208	2,199
Income from bank-owned life insurance	(415)	(496)
Proceeds from the sale of loans held for sale	1,982	6,806
Funds used to originate loans held for sale	(1,352)	(5,934)
(Increase) decrease in accrued interest receivable	(543)	33
Decrease (increase) in other assets	829	(64)
Increase in accrued interest payable	925	1,783
Decrease in other liabilities	(2,221)	(333)
Total adjustments	(955)	(6,328)
Net cash provided by operating activities	5,676	7,123
Cash flows from investing activities:
Maturities, calls and principal payments of available-for-sale securities	7,326	5,965
Proceeds from the sale of available-for-sale securities	78,765	78,582
Proceeds from the sale of held-to-maturity securities		2,686
Purchases of available-for-sale securities	(113,042)	(88,528)
Purchase of Federal Home Loan Bank of Pittsburgh stock	(1,495)	(2,210)
Proceeds from the sale of education loans		2,537
Net increase in loans to customers	(58,975)	(33,095)
Proceeds from the sale of other real estate owned	697	1,268
Proceeds from the sale of bank premises and equipment		2,504
Purchases of property and equipment	(1,175)	(982)
Net cash used in investing activities	(87,899)	(31,273)
Cash flows from financing activities:
Net increase (decrease) in deposits	56,706	(81,076)
Net proceeds from Federal Home Loan Bank of Pittsburgh advances - overnight	19,500
Proceeds from Federal Home Loan Bank of Pittsburgh advances - term	142,947	194,235
Repayment of Federal Home Loan Bank of Pittsburgh advances - term	(130,583)	(152,572)
Principal reduction on subordinated debentures	(11,000)
Net cash provided by (used in) financing activities	77,570	(39,413)
Net decrease in cash and cash equivalents	(4,653)	(63,563)
Cash and cash equivalents at beginning of period	35,667	103,556
Cash and cash equivalents at end of period	31,014	39,993
Cash paid during the period for:
Interest	2,885	2,841
Income taxes	22	238
Other transactions:
Transferred to other real estate owned	149	13
Change in deferred gain on sale of other real estate owned	(26)	27
Principal balance of loans transferred to held for sale	$ 4,592
Bank Premises [Member]
Other transactions:
Transferred to other real estate owned		$ 1,749

XML

Note 12 - Stock Compensation Plans (Tables)

9 Months Ended

Sep. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Stock Options Roll Forward [Table Text Block]

	Nine Months Ended September 30,
	2015				2014
			Weighted					Weighted
			Average					Average
			Exercise					Exercise
	Shares		Price		Shares			Price
Outstanding at January 1.		64,479	$	15.87		82,598		$	15.98
Granted		-		-		-			-
Exercised		-		-		-			-
Forfeited		-		-		(9,322	)		16.05
Outstanding at September 30,		64,479	$	15.87		73,276		$	15.97
Options exercisable at September 30,		64,479				73,276		$	15.97
Weighted average fair value of options granted during the period			$	-				$	-
Stock-based compensation expense			$	-				$	-

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Table Text Block]

Options Outstanding

Options Excercisable

Weighted

Average

Weighted

Weighted

Remaining

Average

Average

Number

Contractual

Exercise

Number

Exercise

Range of Exercise Price

Outstanding

Life

Price

Exercisable

Price

$10.81

-

$23.13

64,479

2.1

$

15.87

64,479

$

15.87

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

	Nine Months Ended September 30,					Nine Months Ended September 30,
	2015					2014
				Weighted-				Weighted-
				Average				Average
	Restricted			Grant Date		Restricted		Grant Date
	Shares			Fair Value		Shares		Fair Value
Unvested at January 1,		45,750		$	6.70		-	$	-
Awards granted		84,900			5.75		45,750		6.70
Forfeitures		(333	)		6.70		-		-
Vestings		(16,526	)		6.70		-		-
Unvested at September 30,		113,791		$	5.99		45,750	$	6.70

XML

Note 4 - Loans (Details) - Performing and Non-Performing Loan Delinquency Status - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	$ 721,548	$ 669,494
Financing Receivables, 1 to 29 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	714,430	662,264
Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	2,369	5,707
Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	784	754
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	3,965	769
Performing Financial Instruments [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	714,807	663,972
Performing Financial Instruments [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	712,244	661,384
Performing Financial Instruments [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	1,904	1,980
Performing Financial Instruments [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	659	608
Performing Financial Instruments [Member] | Real Estate Loan [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	398,064	370,005
Performing Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	397,542	369,354
Performing Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	242	556
Performing Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	280	95
Nonperforming Financial Instruments [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	6,741	5,522
Nonperforming Financial Instruments [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	2,186	880
Nonperforming Financial Instruments [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	465	3,727
Nonperforming Financial Instruments [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	125	146
Nonperforming Financial Instruments [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	3,965	769
Nonperforming Financial Instruments [Member] | Real Estate Loan [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	6,422	5,135
Nonperforming Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	2,040	783
Nonperforming Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	432	3,727
Nonperforming Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	119	36
Nonperforming Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	3,831	589
Residential Portfolio Segment [Member] | Performing Financial Instruments [Member] | Real Estate Loan [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	128,709	121,827
Residential Portfolio Segment [Member] | Performing Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	128,558	121,407
Residential Portfolio Segment [Member] | Performing Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	147	420
Residential Portfolio Segment [Member] | Performing Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	4
Residential Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Real Estate Loan [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	735	1,005
Residential Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	406	495
Residential Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	63	99
Residential Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due		17
Residential Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	266	394
Commercial Real Estate Portfolio Segment [Member] | Performing Financial Instruments [Member] | Real Estate Loan [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	244,208	229,343
Commercial Real Estate Portfolio Segment [Member] | Performing Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	243,837	229,207
Commercial Real Estate Portfolio Segment [Member] | Performing Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	95	136
Commercial Real Estate Portfolio Segment [Member] | Performing Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	276
Commercial Real Estate Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Real Estate Loan [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	5,318	4,130
Commercial Real Estate Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	1,634	288
Commercial Real Estate Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due		3,628
Commercial Real Estate Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	119	19
Commercial Real Estate Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	3,565	195
Construction, Land Acquisition and Development [Member] | Performing Financial Instruments [Member] | Real Estate Loan [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	25,147	18,835
Construction, Land Acquisition and Development [Member] | Performing Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	25,147	18,740
Construction, Land Acquisition and Development [Member] | Performing Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due		95
Construction, Land Acquisition and Development [Member] | Nonperforming Financial Instruments [Member] | Real Estate Loan [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	369
Construction, Land Acquisition and Development [Member] | Nonperforming Financial Instruments [Member] | Real Estate Loan [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	369
Commercial Portfolio Segment [Member] | Performing Financial Instruments [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	142,247	131,846
Commercial Portfolio Segment [Member] | Performing Financial Instruments [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	141,858	131,621
Commercial Portfolio Segment [Member] | Performing Financial Instruments [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	250	90
Commercial Portfolio Segment [Member] | Performing Financial Instruments [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	139	135
Commercial Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	178	211
Commercial Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	110	55
Commercial Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due		52
Commercial Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	68	104
Consumer Portfolio Segment [Member] | Performing Financial Instruments [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	132,277	121,916
Consumer Portfolio Segment [Member] | Performing Financial Instruments [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	130,792	120,204
Consumer Portfolio Segment [Member] | Performing Financial Instruments [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	1,245	1,334
Consumer Portfolio Segment [Member] | Performing Financial Instruments [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	240	378
Consumer Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	141	176
Consumer Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	36	42
Consumer Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	33
Consumer Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	6	58
Consumer Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	66	76
State and Political Subdivisions [Member] | Performing Financial Instruments [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	42,219	40,205
State and Political Subdivisions [Member] | Performing Financial Instruments [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	42,052	$ 40,205
State and Political Subdivisions [Member] | Performing Financial Instruments [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due	$ 167

XML

Note 7 - Borrowed Funds (Details) - USD ($)			9 Months Ended
	Jun. 30, 2015	Sep. 01, 2009	Sep. 30, 2015	Jul. 01, 2015	Jun. 12, 2015	Feb. 01, 2015	Dec. 31, 2014
Note 7 - Borrowed Funds (Details) [Line Items]
Percent of Principal Amount Outstanding, Pre-payment	44.00%
Repayments of Subordinated Debt	$ 11,000,000
Subordinated Debt	$ 14,000,000		$ 14,000,000				$ 25,000,000
Interest Payable			11,187,000				$ 10,262,000
Subordinated Debt [Member]
Note 7 - Borrowed Funds (Details) [Line Items]
Debt Instrument, Face Amount				$ 0.0450
Debt Instrument, Maturity Date		Sep. 01, 2019
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate		9.00%
Debt Instrument, Interest Rate, Stated Percentage	9.00%			4.50%	9.00%
Percent of Principal Amount Outstanding, Pre-payment	44.00%					44.00%
Interest Payable			$ 10,800,000
First Payment [Member] | Subordinated Debt [Member]
Note 7 - Borrowed Funds (Details) [Line Items]
Percent of Principal Amount Outstanding, to Be Repaid			16.00%
Debt Instrument, Principal Amount Payable			$ 4,000,000
Second Payment [Member] | Subordinated Debt [Member]
Note 7 - Borrowed Funds (Details) [Line Items]
Percent of Principal Amount Outstanding, to Be Repaid			20.00%
Debt Instrument, Principal Amount Payable			$ 5,000,000
Final Payment [Member] | Subordinated Debt [Member]
Note 7 - Borrowed Funds (Details) [Line Items]
Percent of Principal Amount Outstanding, to Be Repaid			20.00%
Debt Instrument, Principal Amount Payable			$ 5,000,000
Maximum [Member] | Subordinated Debt [Member]
Note 7 - Borrowed Funds (Details) [Line Items]
Debt Instrument, Face Amount		$ 25,000,000

XML

Consolidated Statements of Financial Condition (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Cash and cash equivalents:
Cash and due from banks	$ 20,631	$ 22,657
Interest-bearing deposits in other banks	10,383	13,010
Total cash and cash equivalents	31,014	35,667
Securities available for sale, at fair value	249,228	218,989
Stock in Federal Home Loan Bank of Pittsburgh, at cost	4,298	2,803
Loans held for sale	4,634	603
Loans, net of allowance for loan and lease losses of $9,825 and $11,520	713,341	658,747
Bank premises and equipment, net	11,258	11,003
Accrued interest receivable	2,618	2,075
Intangible assets	179	302
Bank-owned life insurance	29,232	28,817
Other real estate owned	1,618	2,255
Other assets	7,799	8,768
Total assets	1,055,219	970,029
Deposits:
Demand (non-interest-bearing)	152,038	124,064
Interest-bearing	700,004	671,272
Total deposits	852,042	795,336
Borrowed funds
Federal Home Loan Bank of Pittsburgh advances	93,058	61,194
Subordinated debentures	14,000	25,000
Junior subordinated debentures	10,310	10,310
Total borrowed funds	117,368	96,504
Accrued interest payable	11,187	10,262
Other liabilities	14,989	16,529
Total liabilities	$ 995,586	$ 918,631
Authorized: 20,000,000 shares at September 30, 2015 and December 31, 2014
Issued and outstanding: 0 shares at September 30, 2015 and December 31, 2014
Authorized: 50,000,000 shares at September 30, 2015 and December 31, 2014
Issued and outstanding: 16,500,945 shares, September 30, 2015 and 16,484,419 shares, December 31, 2014	$ 20,626	$ 20,605
Additional paid-in capital	61,939	61,781
Accumulated deficit	(25,495)	(32,126)
Accumulated other comprehensive income	2,563	1,138
Total shareholders' equity	59,633	51,398
Total liabilities and shareholders’ equity	$ 1,055,219	$ 970,029

XML

Note 5 - Other Real Estate Owned (Details) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Dec. 31, 2013 USD ($)
Note 5 - Other Real Estate Owned (Details) [Line Items]
Other Real Estate, Foreclosed Assets, and Repossessed Assets (in Dollars)	$ 1,618	$ 2,617	$ 1,618	$ 2,617	$ 2,255	$ 1,740	$ 3,182	$ 4,246
Other Real Estate Owned, Period Increase (Decrease) (in Dollars)			$ (700)
Other Real Estate Owned, Period Increase (Decrease) Percent			(28.20%)
Real Estate Acquired Through Foreclosure (in Dollars)					$ 2,300
Number of Real Estate Properties Foreclosed			2	1
Other Real Estate Owned, Foreclosed Upon (in Dollars)			$ 149	$ 13
Other Real Estate Owned, Amount Transferred (in Dollars)	$ 1,400		$ 1,400
Other Real Estate Owned, Percentage Transferred	85.00%		85.00%
Number of Real Estate Properties Transferred					3
Number of Real Estate Properties Sold			6	5
Number of Real Estate Properties Partially Sold			1	2
Real Estate Properties Sold (in Dollars)			$ 600	$ 1,200
Gains (Losses) on Sales of Other Real Estate (in Dollars)	$ 129	35	145	$ 103
Number of Properties Written Down				2
Other Real Estate (in Dollars)		1,200		$ 1,200
Other Real Estate, Valuation Adjustments (in Dollars)	$ 78	429	$ 208	2,199
Other Real Estate Owned, Fair Market Appraised Value Percentage	90.00%		90.00%
Other Real Estate Owned, Estimated Costs to Sell Factor	10.00%		10.00%
Other Real Estate Owned, Broker Commission	6.00%		6.00%
Other Real Estate Owned, Transfer Taxes	1.00%		1.00%
Other Real Estate Owned, Miscellaneous Costs	3.00%		3.00%
Consumer Portfolio Segment [Member]
Note 5 - Other Real Estate Owned (Details) [Line Items]
Mortgage Loans in Process of Foreclosure, Amount (in Dollars)	$ 117		$ 117
Residential Portfolio Segment [Member]
Note 5 - Other Real Estate Owned (Details) [Line Items]
Number of Real Estate Properties	2		2		2
Other Real Estate (in Dollars)	$ 27		$ 27		$ 27
Other Real Estate Owned [Member]
Note 5 - Other Real Estate Owned (Details) [Line Items]
Number of Real Estate Properties	10		10
Four Properties Held in OREO [Member]
Note 5 - Other Real Estate Owned (Details) [Line Items]
Other Real Estate Owned, Amount Transferred (in Dollars)		$ 3,400		$ 3,400
Number of Real Estate Properties Transferred				4
Vacant Land [Member]
Note 5 - Other Real Estate Owned (Details) [Line Items]
Number of Real Estate Properties Transferred				3
Number of Properties Written Down				1
Monroe County Properties [Member]
Note 5 - Other Real Estate Owned (Details) [Line Items]
Other Real Estate, Valuation Adjustments (in Dollars)			$ 158
In Process of Foreclosure [Member] | Consumer Portfolio Segment [Member]
Note 5 - Other Real Estate Owned (Details) [Line Items]
Number of Real Estate Properties	4		4
Residential Real Estate, Foreclosed [Member]
Note 5 - Other Real Estate Owned (Details) [Line Items]
Number of Real Estate Properties	2		2
Real Estate Investment Property, Net (in Dollars)	$ 149		$ 149
Four Properties Held in OREO [Member]
Note 5 - Other Real Estate Owned (Details) [Line Items]
Number of Real Estate Properties Sold				1

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Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance, at Dec. 31, 2013	$ 20,589	$ 61,627	$ (45,546)	$ (3,092)	$ 33,578
Balance, (in Shares) at Dec. 31, 2013	16,471,569
Net income for the period			13,451		13,451
Restricted stock awards		65			65
Other comprehensive income, net of tax				3,227	3,227
Balance, at Sep. 30, 2014	$ 20,589	61,692	(32,095)	135	50,321
Balance, (in Shares) at Sep. 30, 2014	16,471,569
Balance, at Dec. 31, 2014	$ 20,605	61,781	(32,126)	1,138	51,398
Balance, (in Shares) at Dec. 31, 2014	16,484,419
Net income for the period			6,631		6,631
Common shares issued under long-term incentive compensation plan	$ 21	(21)
Common shares issued under long-term incentive compensation plan (in Shares)	16,526
Restricted stock awards		179			179
Other comprehensive income, net of tax				1,425	1,425
Balance, at Sep. 30, 2015	$ 20,626	$ 61,939	$ (25,495)	$ 2,563	$ 59,633
Balance, (in Shares) at Sep. 30, 2015	16,500,945

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Note 9 - Earnings Per Share (Details) - shares	3 Months Ended	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2015	Sep. 30, 2014
Restricted Stock [Member]
Note 9 - Earnings Per Share (Details) [Line Items]
Incremental Common Shares Attributable to Dilutive Effect of Share-based Payment Arrangements	0	0
Employee Stock Option [Member]
Note 9 - Earnings Per Share (Details) [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		64,479	73,276

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Note 3 - Regulatory Matters (Details) - Risk-based Capital and Related Ratios - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total capital (to risk-weighted assets)-Ratio	8.00%	10.00%
Total capital (to risk-weighted assets)-Minimun required for capital adequacy purposes	8.00%	8.00%
Total capital (to risk-weighted assets)-to be well capitalized under prompt corrective action regulations	10.00%	10.00%
Tier I capital (to risk-weighted assets)-Ratio	6.00%	4.00%
Tier I capital (to risk-weighted assets)-Minimun required for capital adequacy purposes	6.00%	4.00%
Tier I capital (to risk-weighted assets)-to be well capitalized under prompt corrective action regulations	8.00%	6.00%
Tier I common equity (to risk-weighted assets)	4.50%
Tier I common equity (to risk-weighted assets)	4.50%
Tier I common equity (to risk-weighted assets)	6.50%
Tier I capital (to average assets)-Ratio	4.00%
Tier I capital (to average assets)-Minimun required for capital adequacy purposes	4.00%	4.00%
Tier I capital (to average assets)-to be well capitalized under prompt corrective action regulations	5.00%	5.00%
Parent Company [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total capital (to risk-weighted assets)-Amount (in Dollars)	$ 86,414	$ 93,521
Total capital (to risk-weighted assets)-Ratio	11.20%	13.67%
Tier I capital (to risk-weighted assets)-Amount (in Dollars)	$ 66,964	$ 59,930
Tier I capital (to risk-weighted assets)-Ratio	8.68%	8.76%
Tier I common equity (to risk-weighted assets) (in Dollars)	$ 56,964
Tier I common equity (to risk-weighted assets)	7.38%
Tier I capital (to average assets)-Amount (in Dollars)	$ 66,964	$ 59,930
Tier I capital (to average assets)-Ratio	6.57%	6.05%
Subsidiaries [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total capital (to risk-weighted assets)-Amount (in Dollars)	$ 102,466	$ 105,403
Total capital (to risk-weighted assets)-Ratio	13.29%	15.42%
Tier I capital (to risk-weighted assets)-Amount (in Dollars)	$ 92,821	$ 96,816
Tier I capital (to risk-weighted assets)-Ratio	12.04%	14.16%
Tier I common equity (to risk-weighted assets) (in Dollars)	$ 92,821
Tier I common equity (to risk-weighted assets)	12.04%
Tier I capital (to average assets)-Amount (in Dollars)	$ 92,821	$ 96,816
Tier I capital (to average assets)-Ratio	9.11%	9.78%

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Note 11 - Related Party Transactions (Details) - Subordinated Notes - USD ($) $ in Thousands		9 Months Ended
	Jun. 30, 2015	Sep. 30, 2015
Subordinated Borrowing [Line Items]
Balance, beginning of period		$ 25,000
Principal reductions		(11,000)
Balance, end of period	$ 14,000	14,000
Related Party Noteholders [Member]
Subordinated Borrowing [Line Items]
Balance, beginning of period		9,000
Assignments		6,429
Principal reductions		(6,789)
Balance, end of period		8,640
Other Noteholders [Member]
Subordinated Borrowing [Line Items]
Balance, beginning of period		16,000
Assignments		(6,429)
Principal reductions		(4,211)
Balance, end of period		$ 5,360

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Note 14 - Contingencies

9 Months Ended

Sep. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 14. Contingencies

On August 8, 2011, the Company announced that it had received document subpoenas from the SEC.  The information requested generally related to disclosure and financial reporting by the Company and the restatement of the Company’s financial statements for the year ended December 31, 2009, and the quarters ended March 31, 2010 and June 30, 2010. On January 28, 2015, the Company and the SEC entered into a settlement agreement resolving these issues related to disclosure and financial reporting and the restatements of the Company’s financial statements for the year ended December 31, 2009 and the quarters ended March 31, 2010 and June 30, 2010. As part of this settlement agreement, on January 30, 2015, the Company paid a civil money penalty of $175 thousand to the SEC. The Company accrued for the $175 thousand civil money penalty in its 2014 Consolidated Statements of Income.

On May 24, 2012, a putative shareholder filed a complaint in the Court of Common Pleas for Lackawanna County (“Shareholder Derivative Suit”) against certain present and former directors and officers of the Company (the “Individual Defendants”) alleging, inter alia, breach of fiduciary duty, abuse of control, corporate waste, and unjust enrichment. The Company was named as a nominal defendant. The parties to the Shareholder Derivative Suit commenced settlement discussions and on December 18, 2013, the Court entered an Order Granting Preliminary Approval of Proposed Settlement subject to notice to shareholders. On February 4, 2014, the Court issued a Final Order and Judgment for the matter granting approval of a Stipulation of Settlement (the “Settlement”) and dismissing all claims against the Company and the Individual Defendants. As part of the Settlement, there was no admission of liability by the Individual Defendants. Pursuant to the Settlement, the Individual Defendants, without admitting any fault, wrongdoing or liability, agreed to settle the derivative litigation for $5.0 million. The $5.0 million Settlement payment was made to the Company on March 28, 2014. The Individual Defendants reserved their rights to indemnification under the Company’s Articles of Incorporation and Bylaws, resolutions adopted by the Board, the Pennsylvania Business Corporation Law and any and all rights they have against the Company’s and the Bank’s insurance carriers. In addition, in conjunction with the Settlement, the Company accrued $2.5 million related to fees and costs of the plaintiff’s attorneys, which was included in non-interest expense in the Consolidated Statements of Income for the year ended December 31, 2013. On April 1, 2014, the Company paid the $2.5 million related to fees and costs of the plaintiff’s attorneys and partial indemnification of the Individual Defendants in the amount of $2.5 million, and as such, as of September 30, 2015, $2.5 million plus accrued interest remains accrued in other liabilities related to the potential indemnification of the Individual Defendants. The Company settled any and all claims it had or may have had against Demetrius & Company, LLC, John Demetrius and Robert L. Rossi & Company in connection with the Shareholder Derivative Suit in 2014.

On September 5, 2012, Fidelity and Deposit Company of Maryland (“F&D”) filed an action against the Company and the Bank, as well as several current and former officers and directors of the Company, in the United States District Court for the Middle District of Pennsylvania. F&D has asserted a claim for the rescission of a directors’ and officers’ insurance policy and a bond that it had issued to the Company. On November 9, 2012, the Company and the Bank answered the claim and asserted counterclaims for the losses and expenses already incurred by the Company and the Bank. The Company and the other defendants are defending the claims and have opposed F&D’s requested relief by way of counterclaims, breaches of contract and bad faith claims against F&D for its failure to fulfill its obligations to the Company and the Bank under the insurance policy. At this time, the matter is in the discovery stage and the Company cannot reasonably determine the outcome or potential range of loss in connection with this matter.

On August 13, 2013, Steven Antonik, individually, as Administrator of the Estate of Linda Kluska, William R. Howells, and Louise A. Howells, on behalf of themselves and others similarly situated, filed a consumer protection class action against the Company and Bank in the Lackawanna County Court of Common Pleas, seeking equitable, injunction and monetary relief to address an alleged pattern and practice of wrong doing by the Bank relating to the repossession and sale of the Plaintiffs’ and class members’ financed motor vehicles.  Discovery in this matter is substantially completed. The parties have agreed to meet and discuss a possible resolution of this matter, however, at this time, the Company cannot reasonably determine the outcome or potential range of loss.

On September 17, 2013, Charles Saxe, III individually and on behalf of all others similarly situated filed a consumer class action against the Bank in the Lackawanna County Court of Common Pleas alleging violations of the Pennsylvania Uniform Commercial Code in connection with the repossession and resale of financed vehicles.  Discovery in this matter is substantially completed. Plaintiffs’ counsel has filed a petition to certify the class which the Bank is aggressively defending. The parties have agreed to meet and discuss a possible resolution of this matter, however, at this time the Company cannot reasonably determine the outcome or potential range of loss.

On January 22, 2014, the Bank was advised by the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) that FinCEN was investigating the Bank for alleged violations of the Bank Secrecy Act (“BSA”). On May 28, 2014, the Bank was advised by the Office of the Comptroller of the Currency (“OCC”) that the OCC was investigating allegations that the Bank failed to file timely Suspicious Activity Reports. On November 18, 2014, both FinCEN and OCC advised the Bank that they intended on assessing civil money penalties against the Bank. Subsequent to November 18, 2014, the Bank had been in discussions with both regulatory agencies about the alleged BSA violations. On February 27, 2015, the Bank reached a comprehensive settlement with FinCEN and OCC to resolve the BSA allegations. In order to settle the matter, the Bank consented to an aggregate civil money penalty assessment of $1.5 million which was accrued for at December 31, 2014 and included in non-interest expense for the year ended December 31, 2014. The Company paid the $1.5 million civil money penalty on February 27, 2015.

The Company has been subject to tax audits and is also a party to routine litigation involving various aspects of its business, such as employment practice claims, claims to enforce liens, condemnation proceedings on properties in which the Company holds security interests, claims involving the making and servicing of real property loans and other issues incident to its business, none of which has or is expected to have a material adverse impact on the consolidated financial condition, results of operations or liquidity of the Company.

There have been no changes in the status of the other litigation disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

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Note 4 - Loans (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)
Note 4 - Loans (Details) [Line Items]
Transfer of Portfolio Loans and Leases to Held-for-sale	$ 4,600,000		$ 4,592,000
Education Loans Recorded Investment		$ 2,600,000		$ 2,600,000
Net Loss On Sale of Student Loans	0	0	0	13,000
Impaired Financing Receivable, Minimum Outstanding Balance Threshold			100,000
Loans and Leases Receivable, Allowance	9,825,000	11,898,000	9,825,000	11,898,000	$ 11,520,000
Financing Receivable, Recorded Investment, Nonaccrual Status	6,700,000		$ 6,700,000		5,500,000
Loans Still Classified As Non-accrual Status Period of Past Due			90 days
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing	0		$ 0		0
Financing Receivable, Collectively Evaluated for Impairment	710,428,000		710,428,000		659,698,000
Impaired Financing Receivable, Recorded Investment	11,120,000		11,120,000		9,796,000
Impaired Financing Receivable, Related Allowance	310,000		310,000		384,000
Loans and Leases Receivable, Impaired, Interest Lost on Nonaccrual Loans	112,000	$ 100,000	298,000	$ 307,000
Financing Receivable, Modifications, Recorded Investment	$ 9,400,000		$ 9,400,000		9,000,000
Financing Receivable, Modifications, Number of Contracts	1	6	8	18
Financing Receivable, Modifications, Pre-Modification Recorded Investment	$ 79,000	$ 411,000	$ 2,639,000	$ 1,200,000
Financing Receivable, Modifications, Subsequent Default, Number of Contracts	0	0	1	0
Non-accrual Loans [Member]
Note 4 - Loans (Details) [Line Items]
Financing Receivable, Collectively Evaluated for Impairment	$ 700,000		$ 700,000		1,000,000
Nonperforming Financial Instruments [Member]
Note 4 - Loans (Details) [Line Items]
Financing Receivable, Modifications, Recorded Investment	5,100,000		5,100,000		3,700,000
Performing Financial Instruments [Member]
Note 4 - Loans (Details) [Line Items]
Financing Receivable, Modifications, Recorded Investment	5,300,000		5,300,000		4,300,000
Residential Mortgage [Member]
Note 4 - Loans (Details) [Line Items]
Mortgage Loans on Real Estate	10,000,000		10,000,000
Loans Receivable Held-for-sale, Net, Not Part of Disposal Group, Mortgage	4,600,000		4,600,000		603,000
One-to-Four Family Mortgages [Member]
Note 4 - Loans (Details) [Line Items]
Mortgage Loans on Real Estate, Cost of Mortgages Sold	300,000		1,900,000
Unallocated Financing Receivables [Member]
Note 4 - Loans (Details) [Line Items]
Loans and Leases Receivable, Allowance	$ 68,000		$ 68,000		45,000
Commercial Real Estate Portfolio Segment [Member]
Note 4 - Loans (Details) [Line Items]
Financing Receivable, Modifications, Number of Contracts	1		1	4
Financing Receivable, Modifications, Pre-Modification Recorded Investment	$ 1,700,000		$ 1,654,000	$ 238,000
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down	912,000		912,000
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Note 4 - Loans (Details) [Line Items]
Financing Receivable, Modifications, Recorded Investment	3,500,000		3,500,000
Troubled Debt Restructuring [Member]
Note 4 - Loans (Details) [Line Items]
Loans and Leases Receivable, Allowance	$ 310,000		$ 310,000		$ 346,000

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Note 4 - Loans (Tables)

9 Months Ended

Sep. 30, 2015

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	September 30,			December 31,
(in thousands)	2015			2014
Residential real estate	$	129,444		$	122,832
Commercial real estate		249,526			233,473
Construction, land acquisition and development		25,516			18,835
Commercial and industrial		142,425			132,057
Consumer		132,418			122,092
State and political subdivisions		42,219			40,205
Total loans, gross		721,548			669,494
Unearned income		(104	)		(98	)
Net deferred loan costs		1,722			871
Allowance for loan and lease losses		(9,825	)		(11,520	)
Loans, net	$	713,341		$	658,747

Allowance for Credit Losses on Financing Receivables [Table Text Block]

	Real Estate
(in thousands)	Residential Real Estate			Commercial Real Estate			Construction, Land Acquisition and Development			Commercial and Industrial			Consumer			State and Political Subdivisions			Unallocated		Total
Three months ended September 30, 2015:
Allowance for loan losses:
Beginning balance, July 1, 2015	$	1,484		$	4,041		$	778		$	1,878		$	1,643		$	504		$	-	$	10,328
Charge-offs		(66	)		-			(683	)		(21	)		(198	)		-			-		(968	)
Recoveries		23			278			-			140			215			-			-		656
Provisions (credits)		(132	)		(84	)		874			(738	)		(147	)		(32	)		68		(191	)
Ending balance, September 30, 2015	$	1,309		$	4,235		$	969		$	1,259		$	1,513		$	472		$	68	$	9,825
Three months ended September 30, 2014:
Allowance for loan losses:
Beginning balance, July 1, 2014	$	2,112		$	5,133		$	923		$	1,758		$	1,681		$	568		$	-	$	12,175
Charge-offs		(67	)		-			-			(22	)		(270	)		-			-		(359	)
Recoveries		9			-			-			69			58			-			-		136
Provisions (credits)		(307	)		128			(148	)		-			258			15			-		(54	)
Ending balance, September 30, 2014	$	1,747		$	5,261		$	775		$	1,805		$	1,727		$	583		$	-	$	11,898
Nine months ended September 30, 2015:
Allowance for loan losses:
Beginning balance, January 1, 2015	$	1,772		$	4,663		$	665		$	2,104		$	1,673		$	598		$	45	$	11,520
Charge-offs		(135	)		(912	)		(689	)		(163	)		(538	)		-			-		(2,437	)
Recoveries		34			296			-			307			445			-			-		1,082
Provisions (credits)		(362	)		188			993			(989	)		(67	)		(126	)		23		(340	)
Ending balance, September 30, 2015	$	1,309		$	4,235		$	969		$	1,259		$	1,513		$	472		$	68	$	9,825
Nine months ended September 30, 2014:
Allowance for loan losses:
Beginning balance, January 1, 2014	$	2,287		$	6,017		$	924		$	2,321		$	1,789		$	679		$	-	$	14,017
Charge-offs		(152	)		-			-			(172	)		(637	)		-			-		(961	)
Recoveries		79			355			3,539			195			303			-			-		4,471
Provisions (credits)		(467	)		(1,111	)		(3,688	)		(539	)		272			(96	)		-		(5,629	)
Ending balance, September 30, 2014	$	1,747		$	5,261		$	775		$	1,805		$	1,727		$	583		$	-	$	11,898

	Real Estate
(in thousands)	Residential Real Estate		Commercial Real Estate		Construction, Land Acquisition and Development		Commercial and Industrial		Consumer		State and Political Subdivisions		Unallocated		Total
September 30, 2015
Allowance for loan losses:
Individually evaluated for impairment	$	5	$	303	$	-	$	-	$	2	$	-	$	-	$	310
Collectively evaluated for impairment		1,304		3,932		969		1,259		1,511		472		68		9,515
Total	$	1,309	$	4,235	$	969	$	1,259	$	1,513	$	472	$	68	$	9,825
Loans receivable:
Individually evaluated for impairment	$	2,386	$	7,470	$	704	$	207	$	353	$	-	$	-	$	11,120
Collectively evaluated for impairment		127,058		242,056		24,812		142,218		132,065		42,219		-		710,428
Total	$	129,444	$	249,526	$	25,516	$	142,425	$	132,418	$	42,219	$	-	$	721,548
December 31, 2014
Allowance for loan losses:
Individually evaluated for impairment	$	51	$	331	$	1	$	-	$	1	$	-	$	-	$	384
Collectively evaluated for impairment		1,721		4,332		664		2,104		1,672		598		45		11,136
Total	$	1,772	$	4,663	$	665	$	2,104	$	1,673	$	598	$	45	$	11,520
Loans receivable:
Individually evaluated for impairment	$	2,487	$	6,660	$	256	$	32	$	361	$	-	$	-	$	9,796
Collectively evaluated for impairment		120,345		226,813		18,579		132,025		121,731		40,205		-		659,698
Total	$	122,832	$	233,473	$	18,835	$	132,057	$	122,092	$	40,205	$	-	$	669,494

Financing Receivable Credit Quality Indicators [Table Text Block]

Credit Quality Indicators
September 30, 2015
	Commercial Loans												Other Loans
			Special								Subtotal		Accruing		Non-accrual		Subtotal		Total
	Pass		Mention		Substandard		Doubtful		Loss		Commercial		Loans		Loans		Other		Loans
Residential real estate	$	21,120	$	405	$	993	$	-	$	-	$	22,518	$	106,411	$	515	$	106,926	$	129,444
Commercial real estate		224,342		13,371		11,813		-		-		249,526		-		-		-		249,526
Construction, land acquisition and development		18,157		362		6,068		-		-		24,587		929		-		929		25,516
Commercial and industrial		134,970		935		2,399		-		-		138,304		4,116		5		4,121		142,425
Consumer		3,101		15		116		-		-		3,232		129,045		141		129,186		132,418
State and political subdivisions		41,604		120		495		-		-		42,219		-		-		-		42,219
Total	$	443,294	$	15,208	$	21,884	$	-	$	-	$	480,386	$	240,501	$	661	$	241,162	$	721,548

Credit Quality Indicators
December 31, 2014
	Commercial Loans												Other Loans
			Special								Subtotal		Accruing		Non-accrual		Subtotal		Total
	Pass		Mention		Substandard		Doubtful		Loss		Commercial		Loans		Loans		Other		Loans
Residential real estate	$	19,892	$	451	$	1,077	$	-	$	-	$	21,420	$	100,576	$	836	$	101,412	$	122,832
Commercial real estate		204,252		13,217		16,004		-		-		233,473		-		-		-		233,473
Construction, land acquisition and development		10,910		1,423		5,566		-		-		17,899		936		-		936		18,835
Commercial and industrial		122,261		1,962		2,397		-		-		126,620		5,437		-		5,437		132,057
Consumer		3,414		-		125		-		-		3,539		118,377		176		118,553		122,092
State and political subdivisions		38,685		925		595		-		-		40,205		-		-		-		40,205
Total	$	399,414	$	17,978	$	25,764	$	-	$	-	$	443,156	$	225,326	$	1,012	$	226,338	$	669,494

Past Due Financing Receivables [Table Text Block]

	September 30, 2015
	Delinquency Status
	0-29 Days		30-59 Days		60-89 Days		>/= 90 Days
(in thousands)	Past Due		Past Due		Past Due		Past Due		Total
Performing (accruing) loans:
Real estate:
Residential real estate	$	128,558	$	147	$	4	$	-	$	128,709
Commercial real estate		243,837		95		276		-		244,208
Construction, land acquisition and development		25,147		-		-		-		25,147
Total real estate		397,542		242		280		-		398,064
Commercial and industrial		141,858		250		139		-		142,247
Consumer		130,792		1,245		240		-		132,277
State and political subdivisions		42,052		167		-		-		42,219
Total performing (accruing) loans		712,244		1,904		659		-		714,807
Non-accrual loans:
Real estate:
Residential real estate		406		63		-		266		735
Commercial real estate		1,634		-		119		3,565		5,318
Construction, land acquisition and development		-		369		-		-		369
Total real estate		2,040		432		119		3,831		6,422
Commercial and industrial		110		-		-		68		178
Consumer		36		33		6		66		141
State and political subdivisions		-		-		-		-		-
Total non-accrual loans		2,186		465		125		3,965		6,741
Total loans receivable	$	714,430	$	2,369	$	784	$	3,965	$	721,548

	December 31, 2014
	Delinquency Status
	0-29 Days		30-59 Days		60-89 Days		>/= 90 Days
(in thousands)	Past Due		Past Due		Past Due		Past Due		Total
Performing (accruing) loans:
Real estate:
Residential real estate	$	121,407	$	420	$	-	$	-	$	121,827
Commercial real estate		229,207		136		-		-		229,343
Construction, land acquisition and development		18,740		-		95		-		18,835
Total real estate		369,354		556		95		-		370,005
Commercial and industrial		131,621		90		135		-		131,846
Consumer		120,204		1,334		378		-		121,916
State and political subdivisions		40,205		-		-		-		40,205
Total peforming (accruing) loans		661,384		1,980		608		-		663,972
Non-accrual loans:
Real estate:
Residential real estate		495		99		17		394		1,005
Commercial real estate		288		3,628		19		195		4,130
Construction, land acquisition and development		-		-		-		-		-
Total real estate		783		3,727		36		589		5,135
Commercial and industrial		55		-		52		104		211
Consumer		42		-		58		76		176
State and political subdivisions		-		-		-		-		-
Total non-accrual loans		880		3,727		146		769		5,522
Total loans receivable	$	662,264	$	5,707	$	754	$	769	$	669,494

Impaired Financing Receivables [Table Text Block]

	September 30, 2015
			Unpaid
	Recorded		Principal		Related
(in thousands)	Investment		Balance		Allowance
With no allowance recorded:
Real estate:
Residential real estate	$	819	$	890	$	-
Commercial real estate		5,462		7,089		-
Construction, land acquisition and development		704		1,052		-
Total real estate		6,985		9,031		-
Commercial and industrial		207		236		-
Consumer		-		-		-
State and political subdivisions		-		-		-
Total impaired loans with no related allowance recorded		7,192		9,267		-
With a related allowance recorded:
Real estate:
Residential real estate		1,567		1,567		5
Commercial real estate		2,008		2,008		303
Construction, land acquisition and development		-		-		-
Total real estate		3,575		3,575		308
Commercial and industrial		-		-		-
Consumer		353		353		2
State and political subdivisions		-		-		-
Total impaired loans with a related allowance recorded		3,928		3,928		310
Total impaired loans:
Real estate:
Residential real estate		2,386		2,457		5
Commercial real estate		7,470		9,097		303
Construction, land acquisition and development		704		1,052		-
Total real estate		10,560		12,606		308
Commercial and industrial		207		236		-
Consumer		353		353		2
State and political subdivisions		-		-		-
Total impaired loans	$	11,120	$	13,195	$	310

	December 31, 2014
			Unpaid
	Recorded		Principal		Related
(in thousands)	Investment		Balance		Allowance
With no allowance recorded:
Real estate:
Residential real estate	$	385	$	410	$	-
Commercial real estate		4,401		5,024		-
Construction, land acquisition and development		68		68		-
Total real estate		4,854		5,502		-
Commercial and industrial		32		59		-
Consumer		-		-		-
State and political subdivisions		-		-		-
Total impaired loans with no related allowance recorded		4,886		5,561		-
With a related allowance recorded:
Real estate:
Residential real estate		2,102		2,137		51
Commercial real estate		2,259		2,259		331
Construction, land acquisition and development		188		188		1
Total real estate		4,549		4,584		383
Commercial and industrial		-		-		-
Consumer		361		361		1
State and political subdivisions		-		-		-
Total impaired loans with a related allowance recorded		4,910		4,945		384
Total impaired loans:
Real estate:
Residential real estate		2,487		2,547		51
Commercial real estate		6,660		7,283		331
Construction, land acquisition and development		256		256		1
Total real estate		9,403		10,086		383
Commercial and industrial		32		59		-
Consumer		361		361		1
State and political subdivisions		-		-		-
Total impaired loans	$	9,796	$	10,506	$	384

Schedule of Average Balance and Interest Income On Impaired Loans [Table Text Block]

	Three Months Ended September 30,								Nine Months Ended September 30,
	2015				2014				2015				2014
	Average		Interest		Average		Interest		Average		Interest		Average		Interest
(in thousands)	Balance		Income (1)		Balance		Income (1)		Balance		Income (1)		Balance		Income (1)
Residential real estate	$	2,413	$	28	$	2,490	$	25	$	2,659	$	92	$	2,144	$	62
Commercial real estate		7,017		24		6,628		30		6,884		82		6,613		91
Construction, land acquisition and development		459		5		273		4		465		14		293		12
Total real estate		9,889		57		9,391		59		10,008		188		9,050		165
Commercial and industrial		140		1		66		-		142		1		98		-
Consumer		354		3		363		3		357		9		337		8
State and political subdivisions		-		-		-		-		-		-		-		-
Total impaired loans	$	10,383	$	61	$	9,820	$	62	$	10,507	$	198	$	9,485	$	173

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	Three Months Ended September 30, 2015						Nine Months Ended September 30, 2015
			Pre-Modification		Post-Modification				Pre-Modification		Post-Modification
	Number		Outstanding		Outstanding		Number		Outstanding		Outstanding
	of		Recorded		Recorded		of		Recorded		Recorded
(dollars in thousands)	Contracts		Investments		Investments		Contracts		Investments		Investments
Troubled debt restructurings:
Residential real estate		-	$	-	$	-		5	$	810	$	827
Commercial real estate		-		-		-		1		1,654		742
Construction, land acquisition and development		-		-		-		1		96		96
Commercial and industrial		1		79		79		1		79		79
Consumer		-		-		-		-		-		-
State and political subdivisions		-		-		-		-		-		-
Total new troubled debt restructurings		1	$	79	$	79		8	$	2,639	$	1,744

	Three Months Ended September 30, 2014						Nine Months Ended September 30, 2014
			Pre-Modification		Post-Modification				Pre-Modification		Post-Modification
	Number		Outstanding		Outstanding		Number		Outstanding		Outstanding
	of		Recorded		Recorded		of		Recorded		Recorded
(dollars in thousands)	Contracts		Investments		Investments		Contracts		Investments		Investments
Troubled debt restructurings:
Residential real estate		6	$	411	$	413		12	$	780	$	862
Commercial real estate		-		-		-		4		238		238
Construction, land acquisition and development		-		-		-		-		-		-
Commercial and industrial		-		-		-		-		-		-
Consumer		-		-		-		2		182		187
State and political subdivisions		-		-		-		-		-		-
Total new troubled debt restructurings		6	$	411	$	413		18	$	1,200	$	1,287

Schedule of Types of Modifications of Troubled Debt Restructurings On Financing Receivables [Table Text Block]

	Three Months Ended September 30, 2015										Nine Months Ended September 30, 2015
(in thousands)	Extension of Term		Extension of Term and Capitalization of Taxes		Capitalization of Taxes		Principal Forbearance		Total Modifications		Extension of Term		Extension of Term and Capitalization of Taxes		Capitalization of Taxes		Principal Forbearance		Total Modifications
Type of modification:
Residential real estate	$	-	$	-	$	-	$	-	$	-	$	709	$	118	$	-	$	-	$	827
Commercial real estate		-		-		-		-		-		-		-		-		1,654		1,654
Construction, land acquisition and development		-		-		-		-		-		96		-		-		-		96
Commercial and industrial		-		-		-		79		79		-		-		-		79		79
Consumer		-		-		-		-		-		-		-		-		-		-
State and political subdivisions		-		-		-		-		-		-		-		-		-		-
Total modifications	$	-	$	-	$	-	$	79	$	79	$	805	$	118	$	-	$	1,733	$	2,656

	Three Months Ended September 30, 2014										Nine Months Ended September 30, 2014
(in thousands)	Extension of Term		Extension of Term and Capitalization of Taxes		Capitalization of Taxes		Principal Forbearance		Total Modifications		Extension of Term		Extension of Term and Capitalization of Taxes		Capitalization of Taxes		Principal Forbearance		Total Modifications
Type of modification:
Residential real estate	$	148	$	40	$	-	$	225	$	413	$	263	$	339	$	35	$	225	$	862
Commercial real estate		-		-		-		-		-		238		-		-		-		238
Construction, land acquisition and development		-		-		-		-		-		-		-		-		-		-
Commercial and industrial		-		-		-		-		-		-		-		-		-		-
Consumer		-		-		-		-		-		135		52		-		-		187
State and political subdivisions		-		-		-		-		-		-		-		-		-		-
Total modifications	$	148	$	40	$	-	$	225	$	413	$	636	$	391	$	35	$	225	$	1,287

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Note 12 - Stock Compensation Plans (Details) - Options Outstanding	9 Months Ended
	Sep. 30, 2015 $ / shares shares
Options Outstanding [Abstract]
	$ 10.81
	$ 23.13
(in Shares) | shares	64,479
	2 years 36 days
	$ 15.87
(in Shares) | shares	64,479
	$ 15.87

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Consolidated Statements of Changes in Shareholders' Equity (Unaudited) (Parentheticals) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Other comprehensive income, tax	$ 734	$ 1,663

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Consolidated Statements of Financial Condition (Unaudited) (Parentheticals) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Loans, allowance for loan and lease losses (in Dollars)	$ 9,825	$ 11,520
Preferred shares, par value (in Dollars per share)	$ 1.25	$ 1.25
Preferred shares, authorized	20,000,000	20,000,000
Preferred shares, issued	0	0
Preferred shares, outstanding	0	0
Common shares, par value (in Dollars per share)	$ 1.25	$ 1.25
Common shares, authorized	50,000,000	50,000,000
Common shares, issued	16,500,945	16,484,419
Common shares, outstanding	16,500,945	16,484,419

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Note 9 - Earnings Per Share

9 Months Ended

Sep. 30, 2015

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 9.  Earnings per Share

For the Company, the numerator of both the basic and diluted earnings per common share is net income available to common shareholders (which is equal to net income less dividends on preferred stock and related discount accretion). The weighted average number of common shares outstanding used in the denominator for basic earnings per common share is increased to determine the denominator used for diluted earnings per common share by the effect of potentially dilutive common share equivalents utilizing the treasury stock method. For the Company, common share equivalents are outstanding stock options to purchase the Company’s common shares and unvested restricted stock.

The following table presents the calculation of both basic and diluted earnings per common share for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except share data)	2015		2014		2015		2014
Net income	$	2,337	$	3,358	$	6,631	$	13,451
Basic weighted-average number of common shares outstanding		16,500,945		16,471,569		16,497,373		16,471,569
Plus: common share equivalents		-		-		-		282
Diluted weighted-average number of common shares outstanding		16,500,945		16,471,569		16,497,373		16,471,851
Income per common share:
Basic	$	0.14	$	0.20	$	0.40	$	0.82
Diluted	$	0.14	$	0.20	$	0.40	$	0.82

There were no common share equivalents related to incremental shares of restricted stock for the three or nine months ended September 30, 2015, as the weighted-average price of the Company’s common stock was below the fair value on the grant date. For the nine months ended September 30, 2014, common share equivalents in the table above are related entirely to the incremental shares of unvested restricted stock.

Common share equivalents, in the table above, exclude stock options of 64,479 for the nine months ended September 30, 2015 and 73,276 stock options for the nine months ended September 30, 2014 with exercise prices that exceed the average market price of the Company’s common shares during the periods presented. Inclusion of these stock options would be anti-dilutive to the diluted earnings per common share calculation.

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Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Nov. 06, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	FIRST NATIONAL COMMUNITY BANCORP INC
Trading Symbol	fncb
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		16,500,945
Amendment Flag	false
Entity Central Index Key	0001035976
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Well-known Seasoned Issuer	No
Document Period End Date	Sep. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3

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Note 10 - Other Comprehensive Income

9 Months Ended

Sep. 30, 2015

Disclosure Text Block [Abstract]

Comprehensive Income (Loss) Note [Text Block]

Note 10. Other Comprehensive Income

The following tables summarize the reclassifications out of accumulated other comprehensive (loss) income for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30, 2015				Nine Months Ended September 30, 2015
	Amount				Amount
	Reclassified from				Reclassified from
	Accumulated				Accumulated
	Other			Affected Line Item	Other			Affected Line Item
	Comprehensive			in the Consolidated	Comprehensive			in the Consolidated
(in thousands)	Income			Statements of Income	Income			Statements of Income
Available-for-sale securities:
Reclassification adjustment for net gains reclassified into net income	$	(4	)	Net gain on sale of securities	$	(2,302	)	Net gain on sale of securities
Taxes		1		Income taxes		782		Income taxes
Net of tax amount	$	(3	)		$	(1,520	)

	Three Months Ended September 30, 2014				Nine Months Ended September 30, 2014
	Amount				Amount
	Reclassified from				Reclassified from
	Accumulated				Accumulated
	Other			Affected Line Item	Other			Affected Line Item
	Comprehensive			in the Consolidated	Comprehensive			in the Consolidated
(in thousands)	Income			Statements of Income	Income			Statements of Income
Available-for-sale securities:
Reclassification adjustment for net gains reclassified into net income	$	(2,958	)	Net gain on sale of securities	$	(5,638	)	Net gain on sale of securities
Taxes		1,006		Income taxes		1,917		Income taxes
Net of tax amount	$	(1,952	)		$	(3,721	)

The following table summarizes the changes in accumulated other comprehensive income, net of tax for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2015			2014			2015			2014
Beginning balance	$	279		$	2,406		$	1,138		$	(3,092	)
Other comprehensive income (loss) before reclassifications		2,287			(319	)		2,945			6,948
Amounts reclassified from accumulated other comprehensive income (loss)		(3	)		(1,952	)		(1,520	)		(3,721	)
Net other comprehensive income (loss) during the period		2,284			(2,271	)		1,425			3,227
Ending balance	$	2,563		$	135		$	2,563		$	135

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Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Interest income
Interest and fees on loans	$ 6,693	$ 6,852	$ 19,640	$ 19,958
Interest and dividends on securities:
U.S. government agencies	1,061	893	3,044	2,496
State and political subdivisions, tax-free	19	409	91	1,679
State and political subdivisions, taxable	324	76	447	271
Other securities	92	74	331	206
Total interest and dividends on securities	1,496	1,452	3,913	4,652
Interest on interest-bearing deposits in other banks	10	8	42	44
Total interest income	8,199	8,312	23,595	24,654
Interest expense
Interest on deposits	677	751	2,003	2,435
Interest on borrowed funds:
Interest on Federal Home Loan Bank of Pittsburgh advances	128	125	367	334
Interest on subordinated debentures	162	575	1,290	1,706
Interest on junior subordinated debentures	50	50	150	149
Total interest on borrowed funds	340	750	1,807	2,189
Total interest expense	1,017	1,501	3,810	4,624
Net interest income before credit for loan and lease losses	7,182	6,811	19,785	20,030
Credit for loan and lease losses	(191)	(54)	(340)	(5,629)
Net interest income after credit for loan and lease losses	7,373	6,865	20,125	25,659
Non-interest income
Deposit service charges	799	781	2,218	2,217
Net gain on the sale of securities	4	2,958	2,302	6,006
Net gain on the sale of mortgage loans held for sale	13	57	69	223
Net loss on the sale of education loans	0	0	0	(13)
Net gain on the sale of other real estate owned	129	35	145	103
Gain on branch divestitures	0	0	0	607
Loan-related fees	94	101	290	292
Income from bank-owned life insurance	145	165	415	496
Legal settlements			184	2,127
Other	195	345	720	799
Total non-interest income	1,379	4,442	6,343	12,857
Non-interest expense
Salaries and employee benefits	3,240	3,316	9,582	9,809
Occupancy expense	500	438	1,665	1,554
Equipment expense	408	355	1,234	1,068
Advertising expense	86	109	335	353
Data processing expense	471	508	1,420	1,556
Regulatory assessments	203	266	711	1,389
Bank shares tax	217	21	652	372
Expense of other real estate owned	91	514	338	2,495
Legal expense	80	268	331	1,428
Professional fees	193	306	780	1,240
Insurance expenses	128	196	528	757
Other operating expenses	798	1,486	2,301	2,718
Total non-interest expense	6,415	7,783	19,877	24,739
Income before income taxes	2,337	3,524	6,591	13,777
Provision (credit) for income taxes		166	(40)	326
Net income	$ 2,337	$ 3,358	$ 6,631	$ 13,451
Earnings per share
Basic (in Dollars per share)	$ 0.14	$ 0.20	$ 0.40	$ 0.82
Diluted (in Dollars per share)	0.14	0.20	0.40	0.82
Cash dividends declared per common share (in Dollars per share)	$ 0	$ 0	$ 0	$ 0
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic (in Shares)	16,500,945	16,471,569	16,497,373	16,471,569
Diluted (in Shares)	16,500,945	16,471,569	16,497,373	16,471,851

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Note 4 - Loans

9 Months Ended

Sep. 30, 2015

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 4.     Loans

The following table summarizes loans receivable, net, by category at September 30, 2015 and December 31, 2014:

	September 30,			December 31,
(in thousands)	2015			2014
Residential real estate	$	129,444		$	122,832
Commercial real estate		249,526			233,473
Construction, land acquisition and development		25,516			18,835
Commercial and industrial		142,425			132,057
Consumer		132,418			122,092
State and political subdivisions		42,219			40,205
Total loans, gross		721,548			669,494
Unearned income		(104	)		(98	)
Net deferred loan costs		1,722			871
Allowance for loan and lease losses		(9,825	)		(11,520	)
Loans, net	$	713,341		$	658,747

The Company has granted loans, letters of credit and lines of credit to certain executive officers and directors of the Company as well as to certain related parties of executive officers and directors. These loans, letters of credit and lines of credit were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and, when made, did not involve more than the normal risk of collectability. See Note 11 to these consolidated financial statements for more information about related party transactions.

The Company originates one- to four-family mortgage loans for sale in the secondary market. During the three and nine month periods ended September 30, 2015, the Company sold $0.3 million and $1.9 million, respectively, of one- to four-family mortgages. The Company retains servicing rights on these mortgages. During 2015, as part of its asset/liability management strategy, the Company opted to retain up to $10.0 million in residential mortgages in the loan portfolio. Based on a change in strategy during the third quarter, the Company elected to transfer $4.6 million of loans previously retained in the portfolio to held for sale at September 30, 2015 and to sell, on the secondary market, all eligible residential mortgages originated going forward. The Company had $4.6 million and $603 thousand in residential mortgage loans held-for-sale at September 30, 2015 and December 31, 2014, respectively.

The Company sold substantially all of its education loans, which are categorized as consumer loans, to a third party during the nine months ended September 30, 2014. The education loans had a recorded investment of $2.6 million at the time of sale. The Company recognized a loss of $13 thousand upon the sale of these loans which is included in non-interest income for the nine months ended September 30, 2014.

The Company does not have any lending programs commonly referred to as subprime lending. Subprime lending generally targets borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios.

See Note 2 to the Company’s consolidated financial statements included in the 2014 Form 10-K for information about the risk characteristics related to the Company’s loan segments.

The Company provides for loan losses based on the consistent application of its documented ALLL methodology. Loan losses are charged to the ALLL and recoveries are credited to it. Additions to the ALLL are provided by charges against income based on various factors which, in management’s judgment, deserve current recognition of estimated probable losses. Loan losses are charged-off in the period the loans, or portions thereof, are deemed uncollectible. Generally, the Company will record a loan charge-off (including a partial charge-off) to reduce a loan to the estimated recoverable amount based on its methodology detailed below. The Company regularly reviews the loan portfolio and makes adjustments for loan losses in order to maintain the ALLL in accordance with GAAP. The ALLL consists primarily of the following two components:

(1) Specific allowances are established for impaired loans, which are defined by the Company as all loan relationships with an aggregate outstanding balance greater than $100 thousand that are rated substandard and on non-accrual status, rated doubtful or loss, and all troubled debt restructured loans (“TDRs”). The amount of impairment provided for as an allowance is represented by the deficiency, if any, between the carrying value of the loan and either (a) the present value of expected future cash flows discounted at the loan’s effective interest rate, (b) the loan’s observable market price, or (c) the fair value of the underlying collateral, less estimated costs to sell, for collateral dependent loans. Impaired loans that have no impairment losses are not considered for general valuation allowances described below. If the Company determines that collection of the impairment amount is remote, the Company will record a charge-off.

(2) General allowances are established for loan losses on a portfolio basis for loans that do not meet the definition of impaired. The Company divides its portfolio into loan segments for loans exhibiting similar characteristics. Loans rated special mention or substandard and accruing, which are embedded in these loan segments, are then separated from these loan segments. These loans are then subject to an analysis placing increased emphasis on the credit risk associated with these specific loans. The Company applies an estimated loss rate to each loan segment. The loss rates applied are based on the Company’s own historical loss experience based on the loss rate for each segment of loans with similar risk characteristics in its portfolio. In addition, management evaluates and applies certain qualitative or environmental factors that are likely to cause estimated credit losses associated with the Company’s existing portfolio to differ from historical experience, which are discussed below. This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant revisions based upon changes in economic and real estate market conditions. Actual loan losses may be significantly more than the ALLL that is established, which could have a material negative effect on the Company’s operating results or financial condition.

Management makes adjustments for loan losses based on its evaluation of several qualitative and environmental factors, including but not limited to:

● changes in national, local, and business economic conditions and developments, including the condition of various market segments;

● changes in the nature and volume of the Company’s loan portfolio;

● changes in the Company’s lending policies and procedures, including underwriting standards, collection, charge-off and recovery practices and results;

● changes in the experience, ability and depth of the Company’s lending management and staff;

● changes in the quality of the Company's loan review system and the degree of oversight by the Company’s Board of Directors;

● changes in the trend of the volume and severity of past due and classified loans, including trends in the volume of non-accrual loans, troubled debt restructurings and other loan modifications;

● the existence and effect of any concentrations of credit and changes in the level of such concentrations;

● the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the Company's current loan portfolio; and

● analysis of customers’ credit quality, including knowledge of their operating environment and financial condition.

Each quarter, management evaluates the ALLL and adjusts the ALLL as appropriate through a provision for loan losses. While the Company uses the best information available to make evaluations, future adjustments to the ALLL may be necessary if conditions differ substantially from the information used in making the evaluations. In addition, as an integral part of its examination process, the OCC periodically reviews the Company’s ALLL. The OCC may require the Company to adjust the ALLL based on its analysis of information available to it at the time of its examination.

Based on its evaluation of the ALLL, management established an unallocated reserve of $68 thousand and $45 thousand at September 30, 2015 and December 31, 2014, respectively. As previously mentioned, as part of its evaluation, management applies loss rates to each loan segment of the loan portfolio for each quarter over the previous three years, which have resulted in overall negative historical loss factors and consequently related negative provisions for the commercial and industrial loan segment at September 30, 2015 and the construction, land acquisition and development loan segment at December 31, 2014. Based on the higher risk characteristics inherent in this segment of the portfolio, management reversed the negative provisions related to the negative historical loss factors and established the unallocated reserves.

The following table summarizes activity in the ALLL, by loan category, for the three and nine months ended September 30, 2015 and 2014:

	Real Estate
(in thousands)	Residential Real Estate			Commercial Real Estate			Construction, Land Acquisition and Development			Commercial and Industrial			Consumer			State and Political Subdivisions			Unallocated		Total
Three months ended September 30, 2015:
Allowance for loan losses:
Beginning balance, July 1, 2015	$	1,484		$	4,041		$	778		$	1,878		$	1,643		$	504		$	-	$	10,328
Charge-offs		(66	)		-			(683	)		(21	)		(198	)		-			-		(968	)
Recoveries		23			278			-			140			215			-			-		656
Provisions (credits)		(132	)		(84	)		874			(738	)		(147	)		(32	)		68		(191	)
Ending balance, September 30, 2015	$	1,309		$	4,235		$	969		$	1,259		$	1,513		$	472		$	68	$	9,825
Three months ended September 30, 2014:
Allowance for loan losses:
Beginning balance, July 1, 2014	$	2,112		$	5,133		$	923		$	1,758		$	1,681		$	568		$	-	$	12,175
Charge-offs		(67	)		-			-			(22	)		(270	)		-			-		(359	)
Recoveries		9			-			-			69			58			-			-		136
Provisions (credits)		(307	)		128			(148	)		-			258			15			-		(54	)
Ending balance, September 30, 2014	$	1,747		$	5,261		$	775		$	1,805		$	1,727		$	583		$	-	$	11,898
Nine months ended September 30, 2015:
Allowance for loan losses:
Beginning balance, January 1, 2015	$	1,772		$	4,663		$	665		$	2,104		$	1,673		$	598		$	45	$	11,520
Charge-offs		(135	)		(912	)		(689	)		(163	)		(538	)		-			-		(2,437	)
Recoveries		34			296			-			307			445			-			-		1,082
Provisions (credits)		(362	)		188			993			(989	)		(67	)		(126	)		23		(340	)
Ending balance, September 30, 2015	$	1,309		$	4,235		$	969		$	1,259		$	1,513		$	472		$	68	$	9,825
Nine months ended September 30, 2014:
Allowance for loan losses:
Beginning balance, January 1, 2014	$	2,287		$	6,017		$	924		$	2,321		$	1,789		$	679		$	-	$	14,017
Charge-offs		(152	)		-			-			(172	)		(637	)		-			-		(961	)
Recoveries		79			355			3,539			195			303			-			-		4,471
Provisions (credits)		(467	)		(1,111	)		(3,688	)		(539	)		272			(96	)		-		(5,629	)
Ending balance, September 30, 2014	$	1,747		$	5,261		$	775		$	1,805		$	1,727		$	583		$	-	$	11,898

The following table represents the allocation of the ALLL and the related loan balance, by loan category, disaggregated based on the impairment methodology at September 30, 2015 and December 31, 2014:

	Real Estate
(in thousands)	Residential Real Estate		Commercial Real Estate		Construction, Land Acquisition and Development		Commercial and Industrial		Consumer		State and Political Subdivisions		Unallocated		Total
September 30, 2015
Allowance for loan losses:
Individually evaluated for impairment	$	5	$	303	$	-	$	-	$	2	$	-	$	-	$	310
Collectively evaluated for impairment		1,304		3,932		969		1,259		1,511		472		68		9,515
Total	$	1,309	$	4,235	$	969	$	1,259	$	1,513	$	472	$	68	$	9,825
Loans receivable:
Individually evaluated for impairment	$	2,386	$	7,470	$	704	$	207	$	353	$	-	$	-	$	11,120
Collectively evaluated for impairment		127,058		242,056		24,812		142,218		132,065		42,219		-		710,428
Total	$	129,444	$	249,526	$	25,516	$	142,425	$	132,418	$	42,219	$	-	$	721,548
December 31, 2014
Allowance for loan losses:
Individually evaluated for impairment	$	51	$	331	$	1	$	-	$	1	$	-	$	-	$	384
Collectively evaluated for impairment		1,721		4,332		664		2,104		1,672		598		45		11,136
Total	$	1,772	$	4,663	$	665	$	2,104	$	1,673	$	598	$	45	$	11,520
Loans receivable:
Individually evaluated for impairment	$	2,487	$	6,660	$	256	$	32	$	361	$	-	$	-	$	9,796
Collectively evaluated for impairment		120,345		226,813		18,579		132,025		121,731		40,205		-		659,698
Total	$	122,832	$	233,473	$	18,835	$	132,057	$	122,092	$	40,205	$	-	$	669,494

Credit Quality Indicators – Commercial Loans

Management continuously monitors the credit quality of the Company’s commercial loans by regularly reviewing certain credit quality indicators. Management utilizes credit risk ratings as the key credit quality indicator for evaluating the credit quality of the Company’s loan receivables.

The Company’s commercial loan classification and credit grading processes are part of the lending, underwriting, and credit administration functions to ensure an ongoing assessment of credit quality. Accurate and timely loan classification and credit grading is a critical component of loan portfolio management. Loan officers are required to review their loan portfolio risk ratings regularly for accuracy. The loan review function uses the same risk rating system in the loan review process. Quarterly, the Company engages an independent third party to assess the quality of the loan portfolio and evaluate the accuracy of ratings with the loan officer’s and management’s assessment.

A formal loan classification and credit grading system reflects the risk of default and credit losses. A written description of the risk ratings is maintained that includes a discussion of the factors used to assign appropriate classifications of credit grades to loans. The process identifies groups of loans that warrant the special attention of management. The risk grade groupings provide a mechanism to identify risk within the loan portfolio and provide management and the Board with periodic reports by risk category. The credit risk ratings play an important role in the establishment and evaluation of the provision for loan and lease losses and the ALLL. After determining the historical loss factor which is adjusted for qualitative and environmental factors for each portfolio segment, the portfolio segment balances that have been collectively evaluated for impairment are multiplied by the general reserve loss factor for the respective portfolio segments to determine the general reserve. Loans that have an internal credit rating of special mention or substandard follow the same process; however, the qualitative and environmental factors are further adjusted for the increased risk.

The Company utilizes a loan rating system that assigns a degree of risk to commercial loans based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. Management analyzes these non-homogeneous loans individually by grading the loans as to credit risk and probability of collection for each type of loan. Commercial loans include commercial indirect auto loans which are not individually risk rated, and construction, land acquisition and development loans include residential construction loans which are also not individually risk rated. These loans are monitored on a pool basis due to their homogeneous nature as described in “Credit Quality Indicators – Other Loans” below. The Company risk rates certain residential real estate loans and consumer loans that are part of a larger commercial relationship using its credit grading system as described in “Credit Quality Indicators – Commercial Loans.” The grading system contains the following basic risk categories:

1. Minimal Risk

2. Above Average Credit Quality

3. Average Risk

4. Acceptable Risk

5. Pass - Watch

6. Special Mention

7. Substandard - Accruing

8. Substandard - Non-Accrual

9. Doubtful

10. Loss

This analysis is performed on a quarterly basis using the following definitions for risk ratings:

Pass - Assets rated 1 through 5 are considered pass ratings. These assets show no current or potential problems and are considered fully collectible. All such loans are considered collectively for ALLL calculation purposes. However, accruing TDRs that have been performing for an extended period of time, do not represent a higher risk of loss, and have been upgraded to a pass rating are evaluated individually for impairment.

Special Mention – Assets classified as special mention assets do not currently expose the Company to a sufficient degree of risk to warrant an adverse classification but do possess credit deficiencies or potential weaknesses deserving close attention.  Special Mention assets have a potential weakness or pose an unwarranted financial risk which, if not corrected, could weaken the asset and increase risk in the future.

Substandard - Assets classified as substandard have well defined weaknesses based on objective evidence, and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful - Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable and improbable based on current circumstances.

Loss - Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted.

Credit Quality Indicators – Other Loans

Certain residential real estate loans, consumer loans, and commercial indirect auto loans are monitored on a pool basis due to their homogeneous nature. Loans that are delinquent 90 days or more are placed on non-accrual status unless the collection of the loan is in process and reasonably assured. The Company utilizes accruing versus non-accrual status as the credit quality indicator for these loan pools. The following tables present the recorded investment in loans receivable by loan category and credit quality indicator at September 30, 2015 and December 31, 2014:

Credit Quality Indicators
September 30, 2015
	Commercial Loans												Other Loans
			Special								Subtotal		Accruing		Non-accrual		Subtotal		Total
	Pass		Mention		Substandard		Doubtful		Loss		Commercial		Loans		Loans		Other		Loans
Residential real estate	$	21,120	$	405	$	993	$	-	$	-	$	22,518	$	106,411	$	515	$	106,926	$	129,444
Commercial real estate		224,342		13,371		11,813		-		-		249,526		-		-		-		249,526
Construction, land acquisition and development		18,157		362		6,068		-		-		24,587		929		-		929		25,516
Commercial and industrial		134,970		935		2,399		-		-		138,304		4,116		5		4,121		142,425
Consumer		3,101		15		116		-		-		3,232		129,045		141		129,186		132,418
State and political subdivisions		41,604		120		495		-		-		42,219		-		-		-		42,219
Total	$	443,294	$	15,208	$	21,884	$	-	$	-	$	480,386	$	240,501	$	661	$	241,162	$	721,548

Credit Quality Indicators
December 31, 2014
	Commercial Loans												Other Loans
			Special								Subtotal		Accruing		Non-accrual		Subtotal		Total
	Pass		Mention		Substandard		Doubtful		Loss		Commercial		Loans		Loans		Other		Loans
Residential real estate	$	19,892	$	451	$	1,077	$	-	$	-	$	21,420	$	100,576	$	836	$	101,412	$	122,832
Commercial real estate		204,252		13,217		16,004		-		-		233,473		-		-		-		233,473
Construction, land acquisition and development		10,910		1,423		5,566		-		-		17,899		936		-		936		18,835
Commercial and industrial		122,261		1,962		2,397		-		-		126,620		5,437		-		5,437		132,057
Consumer		3,414		-		125		-		-		3,539		118,377		176		118,553		122,092
State and political subdivisions		38,685		925		595		-		-		40,205		-		-		-		40,205
Total	$	399,414	$	17,978	$	25,764	$	-	$	-	$	443,156	$	225,326	$	1,012	$	226,338	$	669,494

Included in loans receivable are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers. The recorded investment in these non-accrual loans was $6.7 million and $5.5 million at September 30, 2015 and December 31, 2014, respectively. Generally, loans are placed on non-accrual status when they become 90 days or more delinquent, and remain on non-accrual status until they are brought current, have six months of performance under the loan terms, and factors indicating reasonable doubt about the timely collection of payments no longer exist. Therefore, loans may be current in accordance with their loan terms, or may be less than 90 days delinquent and still be on a non-accrual status. There were no loans past due 90 days or more and still accruing at September 30, 2015 and December 31, 2014.

The following tables present the delinquency status of past due and non-accrual loans at September 30, 2015 and December 31, 2014:

	September 30, 2015
	Delinquency Status
	0-29 Days		30-59 Days		60-89 Days		>/= 90 Days
(in thousands)	Past Due		Past Due		Past Due		Past Due		Total
Performing (accruing) loans:
Real estate:
Residential real estate	$	128,558	$	147	$	4	$	-	$	128,709
Commercial real estate		243,837		95		276		-		244,208
Construction, land acquisition and development		25,147		-		-		-		25,147
Total real estate		397,542		242		280		-		398,064
Commercial and industrial		141,858		250		139		-		142,247
Consumer		130,792		1,245		240		-		132,277
State and political subdivisions		42,052		167		-		-		42,219
Total performing (accruing) loans		712,244		1,904		659		-		714,807
Non-accrual loans:
Real estate:
Residential real estate		406		63		-		266		735
Commercial real estate		1,634		-		119		3,565		5,318
Construction, land acquisition and development		-		369		-		-		369
Total real estate		2,040		432		119		3,831		6,422
Commercial and industrial		110		-		-		68		178
Consumer		36		33		6		66		141
State and political subdivisions		-		-		-		-		-
Total non-accrual loans		2,186		465		125		3,965		6,741
Total loans receivable	$	714,430	$	2,369	$	784	$	3,965	$	721,548

	December 31, 2014
	Delinquency Status
	0-29 Days		30-59 Days		60-89 Days		>/= 90 Days
(in thousands)	Past Due		Past Due		Past Due		Past Due		Total
Performing (accruing) loans:
Real estate:
Residential real estate	$	121,407	$	420	$	-	$	-	$	121,827
Commercial real estate		229,207		136		-		-		229,343
Construction, land acquisition and development		18,740		-		95		-		18,835
Total real estate		369,354		556		95		-		370,005
Commercial and industrial		131,621		90		135		-		131,846
Consumer		120,204		1,334		378		-		121,916
State and political subdivisions		40,205		-		-		-		40,205
Total peforming (accruing) loans		661,384		1,980		608		-		663,972
Non-accrual loans:
Real estate:
Residential real estate		495		99		17		394		1,005
Commercial real estate		288		3,628		19		195		4,130
Construction, land acquisition and development		-		-		-		-		-
Total real estate		783		3,727		36		589		5,135
Commercial and industrial		55		-		52		104		211
Consumer		42		-		58		76		176
State and political subdivisions		-		-		-		-		-
Total non-accrual loans		880		3,727		146		769		5,522
Total loans receivable	$	662,264	$	5,707	$	754	$	769	$	669,494

The following tables present a distribution of the recorded investment, unpaid principal balance and the related allowance for the Company’s impaired loans, which have been analyzed for impairment under ASC 310, at September 30, 2015 and December 31, 2014. Non-accrual loans, other than TDRs, with aggregate loan relationship balances less than the $100 thousand loan relationship threshold are not evaluated individually for impairment and are accordingly not included in the following tables. However, these loans are evaluated collectively for impairment as homogenous pools in the general allowance under ASC Topic 450. Total non-accrual loans, other than TDRs, with balances less than the $100 thousand loan relationship threshold, that were evaluated under ASC Topic 450 amounted to $0.7 million and $1.0 million at September 30, 2015 and December 31, 2014, respectively.

	September 30, 2015
			Unpaid
	Recorded		Principal		Related
(in thousands)	Investment		Balance		Allowance
With no allowance recorded:
Real estate:
Residential real estate	$	819	$	890	$	-
Commercial real estate		5,462		7,089		-
Construction, land acquisition and development		704		1,052		-
Total real estate		6,985		9,031		-
Commercial and industrial		207		236		-
Consumer		-		-		-
State and political subdivisions		-		-		-
Total impaired loans with no related allowance recorded		7,192		9,267		-
With a related allowance recorded:
Real estate:
Residential real estate		1,567		1,567		5
Commercial real estate		2,008		2,008		303
Construction, land acquisition and development		-		-		-
Total real estate		3,575		3,575		308
Commercial and industrial		-		-		-
Consumer		353		353		2
State and political subdivisions		-		-		-
Total impaired loans with a related allowance recorded		3,928		3,928		310
Total impaired loans:
Real estate:
Residential real estate		2,386		2,457		5
Commercial real estate		7,470		9,097		303
Construction, land acquisition and development		704		1,052		-
Total real estate		10,560		12,606		308
Commercial and industrial		207		236		-
Consumer		353		353		2
State and political subdivisions		-		-		-
Total impaired loans	$	11,120	$	13,195	$	310

	December 31, 2014
			Unpaid
	Recorded		Principal		Related
(in thousands)	Investment		Balance		Allowance
With no allowance recorded:
Real estate:
Residential real estate	$	385	$	410	$	-
Commercial real estate		4,401		5,024		-
Construction, land acquisition and development		68		68		-
Total real estate		4,854		5,502		-
Commercial and industrial		32		59		-
Consumer		-		-		-
State and political subdivisions		-		-		-
Total impaired loans with no related allowance recorded		4,886		5,561		-
With a related allowance recorded:
Real estate:
Residential real estate		2,102		2,137		51
Commercial real estate		2,259		2,259		331
Construction, land acquisition and development		188		188		1
Total real estate		4,549		4,584		383
Commercial and industrial		-		-		-
Consumer		361		361		1
State and political subdivisions		-		-		-
Total impaired loans with a related allowance recorded		4,910		4,945		384
Total impaired loans:
Real estate:
Residential real estate		2,487		2,547		51
Commercial real estate		6,660		7,283		331
Construction, land acquisition and development		256		256		1
Total real estate		9,403		10,086		383
Commercial and industrial		32		59		-
Consumer		361		361		1
State and political subdivisions		-		-		-
Total impaired loans	$	9,796	$	10,506	$	384

The total recorded investment in impaired loans, which consists of non-accrual loans with an aggregate loan relationship of greater than $100,000 and TDRs, amounted to $11.1 million and $9.8 million at September 30, 2015 and December 31, 2014, respectively. The related allowance recorded for impaired loans was $0.3 million and $0.4 million at September 30, 2015 and December 31, 2014, respectively.

The following table presents the average balance and interest income recognized on impaired loans by loan category for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2015				2014				2015				2014
	Average		Interest		Average		Interest		Average		Interest		Average		Interest
(in thousands)	Balance		Income (1)		Balance		Income (1)		Balance		Income (1)		Balance		Income (1)
Residential real estate	$	2,413	$	28	$	2,490	$	25	$	2,659	$	92	$	2,144	$	62
Commercial real estate		7,017		24		6,628		30		6,884		82		6,613		91
Construction, land acquisition and development		459		5		273		4		465		14		293		12
Total real estate		9,889		57		9,391		59		10,008		188		9,050		165
Commercial and industrial		140		1		66		-		142		1		98		-
Consumer		354		3		363		3		357		9		337		8
State and political subdivisions		-		-		-		-		-		-		-		-
Total impaired loans	$	10,383	$	61	$	9,820	$	62	$	10,507	$	198	$	9,485	$	173

(1) Interest income represents income recognized on performing TDRs. 

The additional interest income that would have been earned on non-accrual and restructured loans in accordance with their original terms approximated $112 thousand and $298 thousand for the three and nine months ended September 30, 2015, respectively, and $100 thousand and $307 thousand for the three and nine months ended September 30, 2014, respectively.

Troubled Debt Restructured Loans

TDRs at September 30, 2015 and December 31, 2014 were $9.4 million and $9.0 million, respectively. Accruing and non-accruing TDRs were $5.1 million and $4.3 million, respectively at September 30, 2015 and $5.3 million and $3.7 million, respectively at December 31, 2014. Approximately $310 thousand and $346 thousand in specific reserves have been established for these loans as of September 30, 2015 and December 31, 2014, respectively.

The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan, an extension of the maturity date, capitalization of real estate taxes, or a permanent reduction of the recorded investment in the loan.

The following tables show the pre- and post-modification recorded investment in loans modified as TDRs by loan category during the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30, 2015						Nine Months Ended September 30, 2015
			Pre-Modification		Post-Modification				Pre-Modification		Post-Modification
	Number		Outstanding		Outstanding		Number		Outstanding		Outstanding
	of		Recorded		Recorded		of		Recorded		Recorded
(dollars in thousands)	Contracts		Investments		Investments		Contracts		Investments		Investments
Troubled debt restructurings:
Residential real estate		-	$	-	$	-		5	$	810	$	827
Commercial real estate		-		-		-		1		1,654		742
Construction, land acquisition and development		-		-		-		1		96		96
Commercial and industrial		1		79		79		1		79		79
Consumer		-		-		-		-		-		-
State and political subdivisions		-		-		-		-		-		-
Total new troubled debt restructurings		1	$	79	$	79		8	$	2,639	$	1,744

	Three Months Ended September 30, 2014						Nine Months Ended September 30, 2014
			Pre-Modification		Post-Modification				Pre-Modification		Post-Modification
	Number		Outstanding		Outstanding		Number		Outstanding		Outstanding
	of		Recorded		Recorded		of		Recorded		Recorded
(dollars in thousands)	Contracts		Investments		Investments		Contracts		Investments		Investments
Troubled debt restructurings:
Residential real estate		6	$	411	$	413		12	$	780	$	862
Commercial real estate		-		-		-		4		238		238
Construction, land acquisition and development		-		-		-		-		-		-
Commercial and industrial		-		-		-		-		-		-
Consumer		-		-		-		2		182		187
State and political subdivisions		-		-		-		-		-		-
Total new troubled debt restructurings		6	$	411	$	413		18	$	1,200	$	1,287

During the nine months ended September 30, 2015, there was one commercial real estate loan that was modified with a recorded investment prior to modification of $1.7 million. Pursuant to the modification, management conducted an analysis and determined that there was impairment on the loan. Accordingly, the Company recorded a $912 thousand partial charge-off related to this TDR.

Although the eight loans modified as TDRs during the nine months ended September 30, 2015 did not result in an increase to the specific reserve in the ALLL at September 30, 2015, charge-offs resulting from the modified TDRs totaled $912 thousand for the nine months ended September 30, 2015.

The following tables present the types of modifications made during the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30, 2015										Nine Months Ended September 30, 2015
(in thousands)	Extension of Term		Extension of Term and Capitalization of Taxes		Capitalization of Taxes		Principal Forbearance		Total Modifications		Extension of Term		Extension of Term and Capitalization of Taxes		Capitalization of Taxes		Principal Forbearance		Total Modifications
Type of modification:
Residential real estate	$	-	$	-	$	-	$	-	$	-	$	709	$	118	$	-	$	-	$	827
Commercial real estate		-		-		-		-		-		-		-		-		1,654		1,654
Construction, land acquisition and development		-		-		-		-		-		96		-		-		-		96
Commercial and industrial		-		-		-		79		79		-		-		-		79		79
Consumer		-		-		-		-		-		-		-		-		-		-
State and political subdivisions		-		-		-		-		-		-		-		-		-		-
Total modifications	$	-	$	-	$	-	$	79	$	79	$	805	$	118	$	-	$	1,733	$	2,656

	Three Months Ended September 30, 2014										Nine Months Ended September 30, 2014
(in thousands)	Extension of Term		Extension of Term and Capitalization of Taxes		Capitalization of Taxes		Principal Forbearance		Total Modifications		Extension of Term		Extension of Term and Capitalization of Taxes		Capitalization of Taxes		Principal Forbearance		Total Modifications
Type of modification:
Residential real estate	$	148	$	40	$	-	$	225	$	413	$	263	$	339	$	35	$	225	$	862
Commercial real estate		-		-		-		-		-		238		-		-		-		238
Construction, land acquisition and development		-		-		-		-		-		-		-		-		-		-
Commercial and industrial		-		-		-		-		-		-		-		-		-		-
Consumer		-		-		-		-		-		135		52		-		-		187
State and political subdivisions		-		-		-		-		-		-		-		-		-		-
Total modifications	$	148	$	40	$	-	$	225	$	413	$	636	$	391	$	35	$	225	$	1,287

There were no TDRs that re-defaulted (defined as past due 90 days) during the three months ended September 30, 2015. There was one TDR with a recorded investment of $3.5 million that re-defaulted during the nine months ended September 30, 2015. The re-default did not occur within one year of the original modification. There were no TDRs which re-defaulted during the three and nine months ended September 30, 2014 and for which the payment re-default occurred within one year of the modification.

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Note 3 - Regulatory Matters

9 Months Ended

Sep. 30, 2015

Disclosure Text Block [Abstract]

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note 3.     Regulatory Matters

The Bank was under a Consent Order (the “Order”) from the Office of the Comptroller of the Currency (“OCC”) dated September 1, 2010. On March 25, 2015, after meeting all of the requirements of the Order, the Bank was fully and completely released from the Order. The Company was subject to a Written Agreement (the “Written Agreement”) with the Federal Reserve Bank of Philadelphia (the “Reserve Bank”) dated November 24, 2010. On September 8, 2015, the Company was notified by the Reserve Bank that effective September 2, 2015 it had been fully and completely released from the Written Agreement.

The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices must be met. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

In July 2013, the Federal Reserve, the OCC and the FDIC approved the final Basel III capital framework for U.S. banking organizations (the “Regulatory Capital Rules”) implementing regulatory capital reforms and changes required by the Dodd-Frank Act.

The Regulatory Capital Rules are effective on January 1, 2014; however, the mandatory compliance date for the Company and the Bank as “standardized approach” banking organizations began on January 1, 2015 and is subject to transitional provisions extending to January 1, 2019. The Regulatory Capital Rules include new risk-based capital and leverage ratios and refine the definition of what constitutes “capital” for purposes of calculating those ratios. The new minimum capital level requirements applicable to the Company and the Bank under the Regulatory Capital Rules are:

● a total risk-based capital ratio of 8.00% (unchanged from current rules);

● a Tier I risk-based capital ratio of 6.00% (increased from 4.00%);

● a new common equity Tier I risk-based capital ratio of 4.50%; and

● a Tier I capital to average assets (“Tier I leverage ratio”) of 4.00% for all institutions.

The Regulatory Capital Rules also establish a “capital conservation buffer” above the new regulatory minimum capital requirements, which must consist entirely of common equity Tier I capital and result in the following minimum ratios effective January 1, 2019:

● a total risk-based capital ratio of 10.50%.

● a Tier I risk-based capital ratio of 8.50%; and

● a common equity Tier I risk-based capital ratio of 7.00%;

The new capital conservation buffer requirement will be phased in beginning in January 2016 at 0.625% of risk-weighted assets and will increase by that amount each year until fully implemented in January 2019 at 2.50%. An institution will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations will establish a maximum percentage of eligible retained income that could be utilized for such actions.

The Regulatory Capital Rules also implement revisions and clarifications consistent with Basel III regarding the various components of Tier I capital, including common equity, unrealized gains and losses, as well as certain instruments that will no longer qualify as Tier I capital, some of which will be phased out over time.

The Regulatory Capital Rules also revise the prompt corrective action framework, which is designed to place restrictions on insured depository institutions, including the Bank, if their capital levels begin to show signs of weakness. These revisions took effect January 1, 2015. Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions are required to meet the following increased capital level requirements in order to qualify as “well capitalized”:

● a total risk-based capital ratio of 10.00% (unchanged from current rules);

● a Tier I risk-based capital ratio of 8.00% (increased from 6.00%);

● a Tier I leverage ratio of 5.00%.

The Regulatory Capital Rules set forth certain changes for the calculation of risk-weighted assets, which are required to be utilized beginning January 1, 2015. The provisions applicable to banking organizations under the “standardized approach” include changes with respect to risk weights for commercial real estate loans, past due exposures and conversion factors for commitments with an original maturity of one year or less.

Current quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total capital, Tier I capital, and Tier I common equity (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined).

The Company’s and the Bank’s actual capital positions at September 30, 2015 and December 31, 2014 are presented in the following table:

Capital Analysis

	September 30,		December 31,
(in thousands)	2015		2014
Company:
Tier I common equity	$	56,964	N/A
Tier I capital		66,964	$	59,930
Tier II capital:
Subordinated notes		9,800		25,000
Allowable portion of allowance for loan and lease losses		9,650		8,591
Total tier II capital		19,450		33,591
Total risk-based capital		86,414		93,521
Total risk-weighted assets	$	771,395	$	683,956
Total average assets (for Tier I leverage ratio)	$	1,019,307	$	990,346
Bank:
Tier I common equity	$	92,821	N/A
Tier I capital		92,821	$	96,816
Tier II capital:
Allowable portion of allowance for loan and lease losses		9,645		8,587
Total tier II capital		9,645		8,587
Total risk-based capital		102,466		105,403
Total risk-weighted assets	$	771,002	$	683,576
Total average assets (for Tier I leverage ratio)	$	1,018,916	$	990,407

The following tables present summary information regarding the Company’s and the Bank’s risk-based capital and related ratios at September 30, 2015 and December 31, 2014:

	Company					Bank					Minimum Required For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Regulations*
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Ratio			Ratio
September 30, 2015
Total capital (to risk-weighted assets)	$	86,414		11.20	%	$	102,466		13.29	%		8.00	%		10.00	%
Tier I capital (to risk-weighted assets)		66,964		8.68	%		92,821		12.04	%		6.00	%		8.00	%
Tier I common equity (to risk-weighted assets)		56,964		7.38	%		92,821		12.04	%		4.50	%		6.50	%
Tier I capital (to average assets)		66,964		6.57	%		92,821		9.11	%		4.00	%		5.00	%

	Company					Bank					Minimum  Required For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Regulations*
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Ratio			Ratio
December 31, 2014
Total capital (to risk-weighted assets)	$	93,521		13.67	%	$	105,403		15.42	%		8.00	%		10.00	%
Tier I capital (to risk-weighted assets)		59,930		8.76	%		96,816		14.16	%		4.00	%		6.00	%
Tier I capital (to average assets)		59,930		6.05	%		96,816		9.78	%		4.00	%		5.00	%

*Applies to the Bank only.

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Note 3 - Regulatory Matters (Tables)

9 Months Ended

Sep. 30, 2015

Disclosure Text Block [Abstract]

Schedule Of Risk Based Capital And Risk Weighted Assets Under Banking Regulations [Table Text Block]

	September 30,		December 31,
(in thousands)	2015		2014
Company:
Tier I common equity	$	56,964	N/A
Tier I capital		66,964	$	59,930
Tier II capital:
Subordinated notes		9,800		25,000
Allowable portion of allowance for loan and lease losses		9,650		8,591
Total tier II capital		19,450		33,591
Total risk-based capital		86,414		93,521
Total risk-weighted assets	$	771,395	$	683,956
Total average assets (for Tier I leverage ratio)	$	1,019,307	$	990,346
Bank:
Tier I common equity	$	92,821	N/A
Tier I capital		92,821	$	96,816
Tier II capital:
Allowable portion of allowance for loan and lease losses		9,645		8,587
Total tier II capital		9,645		8,587
Total risk-based capital		102,466		105,403
Total risk-weighted assets	$	771,002	$	683,576
Total average assets (for Tier I leverage ratio)	$	1,018,916	$	990,407

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations [Table Text Block]

	Company					Bank					Minimum Required For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Regulations*
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Ratio			Ratio
September 30, 2015
Total capital (to risk-weighted assets)	$	86,414		11.20	%	$	102,466		13.29	%		8.00	%		10.00	%
Tier I capital (to risk-weighted assets)		66,964		8.68	%		92,821		12.04	%		6.00	%		8.00	%
Tier I common equity (to risk-weighted assets)		56,964		7.38	%		92,821		12.04	%		4.50	%		6.50	%
Tier I capital (to average assets)		66,964		6.57	%		92,821		9.11	%		4.00	%		5.00	%

	Company					Bank					Minimum  Required For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Regulations*
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Ratio			Ratio
December 31, 2014
Total capital (to risk-weighted assets)	$	93,521		13.67	%	$	105,403		15.42	%		8.00	%		10.00	%
Tier I capital (to risk-weighted assets)		59,930		8.76	%		96,816		14.16	%		4.00	%		6.00	%
Tier I capital (to average assets)		59,930		6.05	%		96,816		9.78	%		4.00	%		5.00	%

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Note 11 - Related Party Transactions

9 Months Ended

Sep. 30, 2015

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

Note 11. Related Party Transactions

The Company has engaged in and intends to continue to engage in banking and financial transactions in the conduct of its business with directors and executive officers and their related parties. These transactions are executed on substantially the same terms and at rates prevailing at the time for comparable transactions with unrelated parties.

The Company has granted loans, letters of credit and lines of credit to directors, executive officers and their related parties. The following table summarizes the changes in the total amounts of such outstanding loans and advances under lines of credit, net of participations sold, as well as repayments during the three and nine months ended September 30, 2015 and 2014:

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
(in thousands)	2015			2014			2015			2014
Balance, beginning of period	$	40,486		$	30,303		$	36,783		$	29,301
Additions, new loans and advances		20,881			25,141			52,282			47,998
Repayments		(9,723	)		(13,725	)		(37,421	)		(35,580	)
Other (1)		-			(84	)		-			(84	)
Balance, end of period	$	51,644		$	41,635		$	51,644		$	41,635

(1) Represents loans related to parties that ceased being related parties during period

At September 30, 2015, there were no loan to directors, executive officers and their related parties which were not performing in accordance with the terms of the loan agreements.

Included in related party loans is a commercial line of credit with a company owned by a director with a net balance outstanding of $4.5 million at September 30, 2015. The Company has sold a participation interest in this line to the same director in the amount of $5.2 million, of which $3.0 million is outstanding at September 30, 2015. The Company receives a 25 basis point annual servicing fee from this director on the participation balance.

Deposits from directors, executive officers and their related parties held by the Company at September 30, 2015 and December 31, 2014 amounted to $111.2 million and $77.4 million, respectively. During the second quarter of 2015, the Company attained a significant deposit relationship with a customer that is a related party of a director. The aggregate balance of deposits for this relationship was $92.2 million at June 30, 2015 and $24.7 million at September 30, 2015. In the third quarter of 2015, this customer placed $63.6 million of deposits from this relationship into the reciprocal Insured Cash Sweep program through the Promontory Financial Network in order to receive full FDIC insurance coverage. Interest paid on the deposits amounted to $222 thousand and $69 thousand for the nine months ended September 30, 2015 and 2014, respectively.

In the course of its operations, the Company acquires goods and services from and transacts business with various companies of related parties. The Company believes these transactions were made on the same terms as those for comparable transactions with unrelated parties. The Company recorded payments for these services of $0.9 million and $1.7 million, respectively, for the three and nine months ended September 30, 2015, and $1.2 million and $2.2 million for the respective periods of 2014.

The Notes held by directors and/or their related parties totaled $8.6 million at September 30, 2015 and $9.0 million at December 31, 2014. On June 12, 2015, the Company solicited consent from all existing Noteholders to amend the Notes by reducing the interest rate payable on the notes from 9.00% to 4.50% effective July 1, 2015, and prepaying 44% of the principal amount outstanding on June 30, 2015. A group of Noteholders holding $14.0 million of the principal balance outstanding on the Notes at June 12, 2015, comprised of both related parties or their interests and non-related parties, offered to purchase the Notes of any Noteholder who did not wish to consent to the amendments. There were seven, non-related party Noteholders, who elected to have their Notes purchased by the group, for a total principal balance of $10.0 million. Of the $10.0 million, $6.4 million was purchased by related parties or their interests. On June 30, 2015, the Company made an $11.0 million principal reduction on the Notes. Total principal payments on Notes held by officers and directors and/or their related parties totaled $6.8 million, of which $6.4 million was used to purchase the Notes referenced above.

On September 1, 2015, the Company made the quarterly interest payment due on the Notes for the period of June 1, 2015 through August 31, 2015, totaling $293 thousand, of which $134 thousand was paid to directors and/or their related interests. There was no interest paid to directors on these Notes for the nine months ended September 30, 2014. Interest expense recorded on the Notes to directors and/or their related interests amounted to $99 thousand and $507 thousand for the three and nine months ended September 30, 2015, respectively, and $223 thousand and $675 thousand for the three and nine months ended September 30, 2014, respectively. Interest accrued and unpaid on the Notes to directors and/or their related interests totaled $3.9 million at September 30, 2015.

The following table summarizes the activity related to the Company’s subordinated debt for the nine months ended September 30, 2015:

	For the Nine Months Ended
	September 30, 2015
(in thousands)	Related Party Subordinated Noteholders			Other Subordinated Noteholders			Total Subordinated Notes Outstanding
Balance, beginning of period	$	9,000		$	16,000		$	25,000
Assignments		6,429			(6,429	)		-
Principal reductions		(6,789	)		(4,211	)		(11,000	)
Balance, end of period	$	8,640		$	5,360		$	14,000

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Note 7 - Borrowed Funds

9 Months Ended

Sep. 30, 2015

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

Note 7. Borrowed Funds

The following table summarizes the components of borrowed funds at September 30, 2015 and December 31, 2014:

	September 30,		December 31,
(in thousands)	2015		2014
Federal Home Loan Bank of Pittsburgh advances - overnight	$	19,500	$	-
Federal Home Loan Bank of Pittsburgh advances - term		73,558		61,194
Subordinated debentures		14,000		25,000
Junior subordinated debentures		10,310		10,310
Total borrowed funds	$	117,368	$	96,504

On September 1, 2009, the Company offered only to accredited investors up to $25.0 million principal amount of unsecured subordinated debentures due September 1, 2019 (the “Notes”). Prior to July 1, 2015, the Notes had a fixed interest rate of 9.00% per annum. Payments of interest are payable to registered holders of the Notes (the “Noteholders”) quarterly on the first of every third month, subject to the right of the Company to defer such payment. On June 30, 2015, pursuant to approval from all of the Noteholders and the Reserve Bank, the Company amended the original terms of the Notes to reduce the interest rate payable on the Notes from 9.00% to 4.50% effective July 1, 2015 and to accelerate a partial repayment of principal amount under the Notes. Pursuant to the approved amendment, on June 30, 2015, the Company repaid 44% of the original principal amount, or $11.0 million, of the Notes outstanding to the holders on June 30, 2015, with the remaining $14.0 million in principal to be repaid as follows: (a) 16% of the original principal amount, or $4.0 million, payable on September 1, 2017; (b) 20% of the original principal amount, or $5.0 million, payable on September 1, 2018; and (c) the final 20% of the original principal amount, or $5.0 million, payable on September 1, 2019, the maturity date of the Notes. As of September 30, 2015 and December 31, 2014, there was $14.0 million and $25.0 million outstanding under the Notes, respectively.

The Company had been under a Written Agreement with the Reserve Bank since November 24, 2010. As previously mentioned, the Company was released from the Written Agreement on September 2, 2015.While the Company was under the Written Agreement, principal and interest payments on the Notes required written non-objection from the Reserve Bank. Pursuant to the Written Agreement, the Company had been deferring the quarterly interest payments on the Notes beginning December 1, 2010 and ending on June 1, 2015.

On July 15, 2015, the Company sent a request to the Reserve Bank to permit payment of the quarterly interest payment on the Notes, which was due and payable on September 1, 2015. The Company subsequently received approval from the Reserve Bank on August 17, 2015 and accordingly paid the quarterly interest payment to the Noteholders on September 1, 2015. It is the intent of the Company to continue the regularly scheduled quarterly interest payments on a go-forward basis. Additionally, the Company is currently developing consolidated capital strategies to pay the $10.8 million in accrued and unpaid interest associated with the Notes, which has been deferred from December 1, 2010 to June 1, 2015.

There have been no material changes in the status or terms of other borrowed funds disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

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Note 9 - Earnings Per Share (Details) - Calculation of Basic and Diluted Earnings Per Common Share - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Calculation of Basic and Diluted Earnings Per Common Share [Abstract]
Net income (in Dollars)	$ 2,337	$ 3,358	$ 6,631	$ 13,451
Basic weighted-average number of common shares outstanding	16,500,945	16,471,569	16,497,373	16,471,569
Plus: common share equivalents	0	0	0	282
Diluted weighted-average number of common shares outstanding	16,500,945	16,471,569	16,497,373	16,471,851
Income per common share:
Basic (in Dollars per share)	$ 0.14	$ 0.20	$ 0.40	$ 0.82
Diluted (in Dollars per share)	$ 0.14	$ 0.20	$ 0.40	$ 0.82

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Note 5 - Other Real Estate Owned

9 Months Ended

Sep. 30, 2015

Disclosure Text Block [Abstract]

Real Estate Owned [Text Block]

Note 5. Other Real Estate Owned

The following table presents the composition of OREO at September 30, 2015 and December 31, 2014:

	September 30,		December 31,
(in thousands)	2015		2014
Land/lots	$	803	$	1,287
Commercial real estate		788		941
Residential real estate		27		27
Total other real estate owned	$	1,618	$	2,255

The following table presents the activity in OREO for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2015			2014			2015			2014
Balance, beginning of period	$	1,740		$	3,182		$	2,255		$	4,246
Property foreclosures		-			-			149			13
Bank premises transferred to OREO		-			-			-			1,749
Valuation adjustments		(78	)		(429	)		(208	)		(2,199	)
Carrying value of OREO sold		(44	)		(136	)		(578	)		(1,192	)
Balance, end of period	$	1,618		$	2,617		$	1,618		$	2,617

At September 30, 2015, OREO consisted of 10 properties with an aggregate carrying value of $1.6 million, a decrease of $0.7 million, or 28.2%, from $2.3 million at December 31, 2014.  There were two properties with a carrying value of $149 thousand foreclosed upon during the nine months ended September 30, 2015. Comprising $1.4 million, or 85.0%, of the outstanding balance of OREO at September 30, 2015 were three properties that were originally held in bank premises and equipment and due to a change in strategic purpose were transferred to OREO in 2014.

During the nine months ended September 30, 2015, there were six sales and one partial sale of properties with an aggregate carrying value of $0.6 million. The Company realized net gains on the sale of these properties of $145 thousand, which is included in non-interest income. During the nine months ended September 30, 2014, the Company foreclosed on one property with a carrying value of $13 thousand. There were five sales and two partial sales of properties with an aggregate carrying value of $1.2 million during the nine months ended September 30, 2014. The Company realized net gains on the sale of these properties of $103 thousand for the nine months ended September 30, 2014, which is included in non-interest income.

During the nine months ended September 30, 2014, the Company transferred four properties located in Monroe County, Pennsylvania, including its former Stroudsburg office and three pieces of vacant land from bank premises and equipment to OREO for disposition due to a change in strategic purpose. At the time of transfer, the four properties had an aggregate carrying value of $3.4 million. During the nine months ended September 30, 2014, one of the properties was subsequently sold and two of the other properties, the Stroudsburg property and one of the parcels, were written down in aggregate $1.2 million to their appraised values, less cost to sell. During the nine months ended September 30, 2015, these three remaining properties were reappraised, and due to continued decline in real estate values in Monroe County, Pennsylvania, the Company incurred additional valuation adjustments totaling $158 thousand. Valuation adjustments, which are included in non-interest expense, totaled $0.1 million and $0.2 million for the three months and nine months ended September 30, 2015, respectively, and $0.4 million and $2.2 million for the respective periods of 2014.

The Company actively markets all OREO properties for sale through a variety of channels including internal marketing and the use of outside brokers/realtors. The carrying value of OREO is generally calculated at an amount not greater than 90% of the most recent fair market appraised value. A 10% factor is generally used to estimate costs to sell, which is based on typical cost factors, such as 6% broker commission, 1% transfer taxes, and 3% various other miscellaneous costs associated with the sales process. This market value is updated on an annual basis or more frequently if new valuation information is available. Further deterioration in the real estate market could result in additional losses on these properties.

The following table presents the components of net expense of OREO for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(in thousands)	2015			2014		2015			2014
Insurance	$	19		$	26	$	51		$	66
Legal fees		(6	)		14		33			38
Maintenance		-			2		3			17
Professional fees		3			5		4			83
Real estate taxes		8			28		21			123
Utilities		1			4		14			8
Other		(12	)		6		5			11
Valuation adjustments		78			429		208			2,199
Total expense		91			514		339			2,545
Income from the operation of foreclosed properties		-			-		(1	)		(50	)
Net expense of OREO	$	91		$	514	$	338		$	2,495

There were four consumer mortgage loans that were in the process of foreclosure at September 30, 2015 with a total carrying value of $117 thousand. There were two residential real estate properties with a carrying value of $149 thousand that were foreclosed upon during the nine months ended September 30, 2015. There were two residential properties with an aggregate carrying value of $27 thousand included in OREO at September 30, 2015 and December 31, 2014.

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Note 6 - Securities

9 Months Ended

Sep. 30, 2015

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 6.  Securities

Securities have been classified as available-for-sale or held-to-maturity in the consolidated financial statements according to management’s intent. The following tables present the amortized cost, gross unrealized gains and losses, and the fair value of the Company’s securities at September 30, 2015 and December 31, 2014:

	September 30, 2015
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding
(in thousands)	Cost		Gains		Losses		Fair Value
Available-for-sale:
Obligations of U.S. government agencies	$	43,788	$	912	$	-	$	44,700
Obligations of state and political subdivisions		55,209		955		12		56,152
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		23,058		489		3		23,544
Collateralized mortgage obligations - commercial		90,158		1,190		9		91,339
Residential mortgage-backed securities		28,449		489		-		28,938
Corporate debt securities		500		-		74		426
Negotiable certificates of deposit		3,173		2		4		3,171
Equity securities		1,010		-		52		958
Total available-for-sale securities	$	245,345	$	4,037	$	154	$	249,228

	December 31, 2014
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding
(in thousands)	Cost		Gains		Losses		Fair Value
Available-for-sale:
Obligations of U.S. government agencies	$	29,246	$	77	$	47	$	29,276
Obligations of state and political subdivisions		23,132		1,380		3		24,509
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		26,129		103		1		26,231
Collateralized mortgage obligations - commercial		61,017		492		253		61,256
Residential mortgage-backed securities		73,998		441		341		74,098
Corporate debt securities		500		-		80		420
Negotiable certificates of deposit		2,232		-		-		2,232
Equity securities		1,010		-		43		967
Total available-for-sale securities	$	217,264	$	2,493	$	768	$	218,989

At September 30, 2015 and December 31, 2014, securities with a carrying amount of $247.8 million and $217.6 million, respectively, were pledged as collateral to secure public deposits and for other purposes.

The following table shows the amortized cost and approximate fair value of the Company’s available-for-sale debt securities at September 30, 2015 using contractual maturities.  Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Because collateralized mortgage obligations and residential mortgage-backed securities are not due at a single maturity date, they are not included in the maturity categories in the following maturity summary.

	September 30, 2015
	Amortized		Fair
(in thousands)	Cost		Value
Amounts maturing in:
One year or less	$	-	$	-
After one year through five years		21,743		22,130
After five years through ten years		78,215		79,648
After ten years		2,712		2,671
Collateralized mortgage obligations		113,216		114,883
Residential mortgage-backed securities		28,449		28,938
Total	$	244,335	$	248,270

Gross proceeds from the sale of available-for-sale securities were $5.3 million and $78.8 million, respectively, for the three and nine months ended September 30, 2015, with gross gains of $4 thousand and $2.3 million, respectively, realized upon the sales. There were no gross losses realized upon the sales for the three months ended September 30, 2015. The Company realized gross losses of $4 thousand upon the sales for the nine months ended September 30, 2015.

Gross proceeds from the sale of available-for-sale securities were $40.0 million and $78.6 million, respectively, for the three and nine months ended September 30, 2014. Gross realized gains were $2.9 million and $5.6 million, respectively, for the three and nine months ended September 30, 2014. There were no losses realized upon the sales for the three and nine months ended September 30, 2014.

In the first quarter of 2014, the Company sold its entire held-to-maturity portfolio consisting of four obligations of state and political subdivisions with an aggregate amortized cost of $2.3 million. Gross proceeds received from the sale of the held-to-maturity portfolio were $2.7 million for the nine months ended September 30, 2014, with gross gains of $0.4 million realized upon the sale. The four securities were tax-exempt, zero-coupon bonds of California municipalities. These securities were sold as part of management’s strategy to reduce the amount of potential credit and concentration risk within the investment portfolio, and as part of tax planning strategies aimed at reducing the amount of tax-exempt securities.

The following tables present the length of time that individual available-for-sale securities have been in a continuous unrealized loss position at September 30, 2015 and December 31, 2014:

	September 30, 2015
	Less than 12 Months						12 Months or Greater						Total
	Number				Gross		Number				Gross		Number				Gross
	of		Fair		Unrealized		of		Fair		Unrealized		of		Fair		Unrealized
(dollars in thousands)	Securities		Value		Losses		Securities		Value		Losses		Securities		Value		Losses
Obligations of U.S. government agencies		-	$	-	$	-		-	$	-	$	-		-	$	-	$	-
Obligations of state and policitical subdivisions		1		1,513		7		1		261		5		2		1,774		12
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		2		812		3		-		-		-		2		812		3
Collateralized mortgage obligations - commercial		2		5,169		9		-		-		-		2		5,169		9
Residential mortgage-backed securities		-		-		-		-		-		-		-		-		-
Corporate debt securities		-		-		-		1		426		74		1		426		74
Negotiable certificates of deposit		6		1,433		4		-		-		-		6		1,433		4
Equity securities		-		-		-		1		948		52		1		948		52
Total		11	$	8,927	$	23		3	$	1,635	$	131		14	$	10,562	$	154

	December 31, 2014
	Less than 12 Months						12 Months or Greater						Total
	Number				Gross		Number				Gross		Number				Gross
	of		Fair		Unrealized		of		Fair		Unrealized		of		Fair		Unrealized
(dollars in thousands)	Securities		Value		Losses		Securities		Value		Losses		Securities		Value		Losses
Obligations of U.S. government agencies		2	$	9,513	$	47		-	$	-	$	-		2	$	9,513	$	47
Obligations of state and political subdivisions		-		-		-		1		254		3		1		254		3
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		1		653		1		-		-		-		1		653		1
Collateralized mortgage obligations - commerical		7		32,513		105		3		8,693		148		10		41,206		253
Residential mortgage-backed securities		3		16,659		56		6		37,619		285		9		54,278		341
Corporate debt securities		-		-		-		1		420		80		1		420		80
Negotiable certificates of deposit		-		-		-		-		-		-		-		-		-
Equity securities		-		-		-		1		957		43		1		957		43
Total		13	$	59,338	$	209		12	$	47,943	$	559		25	$	107,281	$	768

Management evaluates individual securities in an unrealized loss position quarterly for other than temporary impairment (“OTTI”). As part of its evaluation, management considers, among other things, the length of time a security’s fair value is less than amortized cost, the severity of decline, any credit deterioration of the issuer, whether or not management intends to sell the security, and whether it is more likely than not that the Company will be required to sell the security prior to recovery of its amortized cost.

Securities issued by U.S. government or U.S. government-sponsored agencies, including single-maturity bonds, residential mortgage-backed securities, and residential and commercial CMOs, and obligations of state and political subdivisions, comprise the majority of the Company’s securities portfolio. Management performed a review of the fair values of all securities in an unrealized loss position as of September 30, 2015 and determined that movements in the fair values of the securities were consistent with the change in market interest rates. At September 30, 2015, the Company held 14 securities that were in an unrealized loss position, with 3 of those securities in an unrealized loss position for more than 12 months. All but one of the securities in an unrealized loss position at September 30, 2015 were debt securities. Additionally, management considers the severity of each security’s unrealized loss position, placing greater emphasis on any security with an unrealized loss greater than 5.0% of its amortized cost. At September 30, 2015, there were two securities, a corporate debt security and an equity security, with an unrealized loss greater than 5.0% of its amortized cost. The corporate debt security, a floating rate bond of a large money center bank, had an unrealized loss of $74 thousand, or 14.8% of its amortized cost, at September 30, 2015. This bank was considered well capitalized under regulatory capital guidelines at September 30, 2015. The equity security, a mutual fund investment comprised of one- to four-family residential mortgage-backed securities collateralized by properties within the Company’s geographical market, had an unrealized loss of $52 thousand, or 5.2% of its amortized cost, at September 30, 2015. This mutual fund, which provides the Company with credit under the Community Reinvestment Act, has a one- and three-year return of 3.34% and 1.80%, and is rated four stars by Morningstar, an independent investment research company.

The remaining 12 securities in an unrealized loss position at September 30, 2015 included 4 securities issued by a U.S. government or government-sponsored agency, 2 obligations of state and political subdivisions and 6 negotiable certificates of deposit. The obligations of the U.S. government or government-sponsored agencies are securities issued by GNMA and FHLMC that are currently rated Aaa by Moody’s Investor Services or AAA by Standard & Poor’s (“S&P”) and are guaranteed by the U.S. government. The 2 state and political subdivision obligations in an unrealized loss position at September 30, 2015, are general-purpose debt obligations that are secured by the unlimited taxing power of the issuer. Each of the 6 negotiable certificates of deposit have a carrying value below $250 thousand and are fully insured by the Federal Deposit Insurance Corporation.

To date, the Company has received all scheduled principal and interest payments and expects to fully collect all future contractual principal and interest payments on all securities in an unrealized loss position at September 30, 2015. The Company does not intend to sell the securities nor is it more likely than not that the Company will be required to sell the securities prior to recovery of their amortized cost. Based on the result of its review and considering the attributes of these debt and equity securities, management concluded that the individual unrealized losses were temporary and OTTI did not exist at September 30, 2015.

Investments in FHLB and Federal Reserve Bank (“FRB”) stock, which have limited marketability, are carried at cost and totaled $5.6 million and $4.2 million at September 30, 2015 and December 31, 2014, respectively. FRB stock of $1.3 million is included in Other Assets at September 30, 2015 and December 31, 2014. Management noted no indicators of impairment for the FHLB of Pittsburgh and FRB of Philadelphia stock at September 30, 2015.

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Note 8 - Fair Value Measurements

9 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Note 8.     Fair Value Measurements

In determining fair value, the Company uses various valuation approaches, including market, income and cost approaches. Accounting standards establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability, which are developed based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s knowledge about the assumptions the market participants would use in pricing an asset or liability, which are developed based on the best information available in the circumstances.

The fair value hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). A financial asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.The fair value hierarchy is broken down into three levels based on the reliability of inputs as follows:

● Level 1 valuation is based upon unadjusted quoted market prices for identical instruments traded in active markets.

● Level 2 valuation is based upon quoted market prices for similar instruments traded in active markets, quoted market prices for identical or similar instruments traded in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by market data; and

● Level 3 valuation is derived from other valuation methodologies including discounted cash flow models and similar techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in determining fair value.

A description of the valuation methodologies used for assets recorded at fair value, and for estimating fair value of financial instruments not recorded at fair value, is set forth below.

Cash, Short-term Investments, Accrued Interest Receivable and Accrued Interest Payable

For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities

The estimated fair values of available-for-sale equity securities are determined by obtaining quoted prices on nationally recognized exchanges (Level 1 inputs). The estimated fair values for the Company’s investments in obligations of U.S. government agencies, obligations of state and political subdivisions, government-sponsored agency CMOs and residential mortgage-backed securities, corporate debt securities, and negotiable certificates of deposit are obtained by the Company from a nationally-recognized pricing service. This pricing service develops estimated fair values by analyzing like securities and applying available market information through processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing (Level 2 inputs), to prepare valuations. Matrix pricing is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things and are based on market data obtained from sources independent from the Company. The Level 2 investments in the Company’s portfolio are priced using those inputs that, based on the analysis prepared by the pricing service, reflect the assumptions that market participants would use to price the assets. The Company has determined that the Level 2 designation is appropriate for these securities because, as with most fixed-income securities, those in the Company’s portfolio are not exchange-traded, and such non-exchange-traded fixed income securities are typically priced by correlation to observed market data. The Company has reviewed the pricing service’s methodology to confirm its understanding that such methodology results in a valuation based on quoted market prices for similar instruments traded in active markets, quoted markets for identical or similar instruments traded in markets that are not active and model-based valuation techniques for which the significant assumptions can be corroborated by market data as appropriate to a Level 2 designation.

For those securities for which the inputs used by an independent pricing service were derived from unobservable market information (Level 3 inputs), the Company evaluates the appropriateness and quality of each price. The Company reviewed the volume and level of activity for all classes of securities and attempted to identify transactions which may not be orderly or reflective of a significant level of activity and volume. For securities meeting these criteria, the quoted prices received from either market participants or an independent pricing service may be adjusted, as necessary, to estimate fair value. If applicable, the adjustment to fair value was derived based on present value cash flow model projections prepared by the Company or obtained from third party providers utilizing assumptions similar to those incorporated by market participants.

The Company did not own any securities for which fair value was determined using level 3 inputs at September 30, 2015 or December 31, 2014. The Company did own one security issued by a state and political subdivision that was valued using Level 3 inputs during 2014, which was paid off prior to December 31, 2014. This security had a credit rating that was either withdrawn or downgraded by nationally recognized credit rating agencies, and as a result the market for these securities had become inactive. This security was historically priced using Level 2 inputs. The credit ratings withdrawal and downgrade resulted in a decline in the level of significant other observable inputs for this investment security at the measurement dates. Broker pricing and bid/ask spreads were very limited for this security. At September 30, 2014, the Company had obtained a bid indication from a third-party municipal trading desk to determine the fair value of this security.

Loans

Except for collateral dependent impaired loans, fair values of loans are estimated by discounting the projected future cash flows using market discount rates that reflect the credit, liquidity, and interest rate risk inherent in the loan. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. The estimated fair value of collateral dependent impaired loans is based on the appraised loan value or other reasonable offers less estimated costs to sell. The Company does not record loans at fair value on a recurring basis. However from time to time, a loan is considered impaired and an allowance for credit losses is established. The specific reserves for collateral dependent impaired loans are based on the fair value of the collateral less estimated costs to sell. The fair value of the collateral is generally based on appraisals. In some cases, adjustments are made to the appraised values due to various factors including age of the appraisal, age of comparables included in the appraisal, and known changes in the market and in the collateral. When significant adjustments are based on unobservable inputs, the resulting fair value measurement is categorized as a Level 3 measurement.

Loans Held For Sale

Fair values of mortgage loans held for sale are based on commitments on hand from investors or prevailing market prices.

Mortgage Servicing Rights

The fair value of mortgage servicing rights is estimated using a discounted cash flow model that applies current estimated prepayments derived from the mortgage-backed securities market and utilizes a current market discount rate for observable credit spreads. The Bank does not record mortgage servicing rights at fair value on a recurring basis.

Restricted Stock

Ownership in equity securities of FHLB of Pittsburgh and the FRB is restricted and there is no established market for their resale. The carrying amount is a reasonable estimate of fair value.

Deposits

The fair value of demand deposits, savings deposits, and certain money market deposits is the amount payable on demand at the reporting date.  The fair value of fixed-maturity certificates of deposit is estimated based on discounted cash flows using FHLB advance rates currently offered for similar remaining maturities.

Borrowed funds

The Company uses discounted cash flows using rates currently available for debt with similar terms and remaining maturities to estimate fair value.

Commitments to Extend Credit and Standby Letters of Credit

The fair value of commitments to extend credit and standby letters of credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of off-balance sheet commitments is insignificant and therefore not included in the table for non-recurring assets and liabilities.

Assets Measured at Fair Value on a Recurring Basis

The following tables detail the financial asset amounts that are carried at fair value and measured at fair value on a recurring basis at September 30, 2015 and December 31, 2014, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

	Fair Value Measurements at September 30, 2015
(in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Asset (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Available-for-sale securities:
Obligations of U.S. government agencies	$	44,700	$	-	$	44,700	$	-
Obligations of state and political subdivisions		56,152		-		56,152		-
U.S. government/ government-sponsored agencies:
Collateralized mortgage obligations - residential		23,544		-		23,544		-
Collateralized mortgage obligations - commercial		91,339		-		91,339		-
Residential mortgage-backed securities		28,938		-		28,938		-
Corporate debt securities		426		-		426		-
Negotiable certificates of deposit		3,171		-		3,171		-
Equity securities		958		958		-		-
Total available-for-sale securities	$	249,228	$	958	$	248,270	$	-

	Fair Value Measurements at December 31, 2014
(in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Available-for-sale securities:
Obligations of U.S. government agencies	$	29,276	$	-	$	29,276	$	-
Obligations of state and political subdivisions		24,509		-		24,509		-
U.S. government/ government-sponsored agencies:
Collateralized mortgage obligations - residential		26,231		-		26,231		-
Collateralized mortgage obligations - commerical		61,256		-		61,256		-
Residential mortgage-backed securities		74,098		-		74,098		-
Corporate debt securities		420		-		420		-
Negotiable certificates of deposit		2,232		-		2,232		-
Equity securities		967		967		-		-
Total available-for-sale securities	$	218,989	$	967	$	218,022	$	-

The following tables present a reconciliation and statement of operations classifications of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine month periods ended September 30, 2015 and 2014:

Fair Value Measurements
Using Significant Unobservable Inputs (Level 3)
	State and Political Subdivisions
	Nine Months Ended September 30,
(in thousands)	2015		2014
Balance at January 1,	$	-	$	571
Amortization		-		-
Accretion		-		-
Purchases		-		-
Paydowns		-		(445	)
Total gains or losses (realized/unrealized):		-		-
Included in earnings		-		-
Included in other comprehensive income		-		23
Balance at September 30,	$	-	$	149

There were no transfers between levels within the fair value hierarchy during the nine months ended September 30, 2015 and 2014.

Assets Measured at Fair Value on a Non-recurring Basis

The following tables present assets measured at fair value on a non-recurring basis:

	Fair Value Measurements at September 30, 2015
					Significant		Significant
			Quoted Prices		Other		Other
			in Active Markets		Observable		Unobservable
			for Identical Assets		Inputs		Inputs
(in thousands)	Fair Value (1)		(Level 1)		(Level 2)		(Level 3)
Collateral-dependent impaired loans	$	7,062	$	-	$	-	$	7,062
Other real estate owned	$	1,582	$	-	$	-	$	1,582

	Fair Value Measurements at December 31, 2014
					Significant		Significant
			Quoted Prices		Other		Other
			in Active Markets		Observable		Unobservable
			for Identical Assets		Inputs		Inputs
(in thousands)	Fair Value (1)		(Level 1)		(Level 2)		(Level 3)
Collateral-dependent impaired loans	$	5,380	$	-	$	-	$	5,380
Other real estate owned	$	2,087	$	-	$	-	$	2,087

(1) Represents carrying value and related write-downs for which adjustments are based on appraised value less estimated selling costs. Management may make adjustments to the appraised values as necessary to consider declines in real estate values since the time of the appraisal. Such adjustments are based on management’s knowledge of the local real estate markets.

Collateral-dependent impaired loans are classified as Level 3 assets and the estimated fair value of the collateral is based on the appraised value or other reasonable offers less estimated costs to sell. When the measure of the impaired loan is less than the recorded investment in the loan, the impairment is recorded through a valuation allowance or is charged off. The amount shown is the balance of impaired loans, net of any charge-offs and the related allowance for loan losses.

OREO properties are recorded at fair value less the estimated cost to sell at the date of the Company’s acquisition of the property. Subsequent to the Company’s acquisition, the balance may be written down further. It is the Company’s policy to obtain certified external appraisals of real estate collateral underlying impaired loans and OREO, and estimate fair value using those appraisals. Other valuation sources may be used, including broker price opinions, letters of intent and executed sale agreements.

The Company discloses fair value information about financial instruments, whether or not recognized in the Statement of Financial Condition, for which it is practicable to estimate that value. The following estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, management judgment is required to interpret data and develop fair value estimates. Accordingly, the estimates below are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The following table summarizes the carrying values and estimated fair values of the Company’s financial instruments at September 30, 2015 and at December 31, 2014:

	Fair Value	September 30, 2015				December 31, 2014
(in thousands)	Measurement	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Cash and short term investments	Level 1	$	31,014	$	31,014	$	35,667	$	35,667
Securities available for sale	See previous table		249,228		249,228		218,989		218,989
FHLB and FRB Stock	Level 2		5,649		5,649		4,154		4,154
Loans held for sale	Level 2		4,634		4,634		603		603
Loans, net	Level 3		713,341		712,602		658,747		659,231
Accrued interest receivable	Level 2		2,618		2,618		2,075		2,075
Mortgage servicing rights	Level 3		207		841		333		898
Financial liabilities:
Deposits	Level 2		852,042		837,071		795,336		779,986
Borrowed funds	Level 2		117,368		117,595		96,504		100,020
Accrued interest payable	Level 2		11,187		11,187		10,262		10,262

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Note 11 - Related Party Transactions (Details) - Related Party Loans - Directors Executive Officers and Their Related Parties [Member] - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Related Party Transaction [Line Items]
Balance, beginning of period		$ 40,486	$ 30,303	$ 36,783	$ 29,301
Balance, end of period		51,644	41,635	51,644	41,635
Additions, new loans and advances		20,881	25,141	52,282	47,998
Repayments		(9,723)	(13,725)	(37,421)	(35,580)
Other (1)	[1]	$ 0	$ (84)	$ 0	$ (84)

[1] Represents loans related to parties that ceased being related parties during period

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Note 12 - Stock Compensation Plans (Details) - USD ($)					1 Months Ended	9 Months Ended
	Mar. 01, 2015	Dec. 01, 2014	Mar. 01, 2014	Dec. 02, 2013	Aug. 30, 2000	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014	Oct. 29, 2014	Dec. 31, 2013	Nov. 27, 2013
Note 12 - Stock Compensation Plans (Details) [Line Items]
Allocated Share-based Compensation Expense						$ 0	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value						0	0
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized						$ 0	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						0	0
ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsTotalCost						$ 179,000	$ 65,000	$ 77,000		$ 61,000
The 2000 Employee Stock Incentive Plan [Member]
Note 12 - Stock Compensation Plans (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized						0
Share-based Compensation Arrangement by Share-based Payment Award, Exercise Period					6 months
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period					10 years
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Date					Aug. 30, 2010
Allocated Share-based Compensation Expense						$ 0	0
The 2000 Independent Directors Stock Option Plan [Member]
Note 12 - Stock Compensation Plans (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized					550,000	0
Share-based Compensation Arrangement by Share-based Payment Award, Exercise Period					6 months
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period					3 years
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Date					Aug. 30, 2010
Allocated Share-based Compensation Expense						$ 0	0
Long-Term Incentive Compensation Plan [Member]
Note 12 - Stock Compensation Plans (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized										1,200,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant						1,069,683
Employee Stock Option [Member] | The 2000 Employee Stock Incentive Plan [Member]
Note 12 - Stock Compensation Plans (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized					1,100,000
Employee Stock Option [Member] | The 2013 Employee Stock Grant Plan [Member]
Note 12 - Stock Compensation Plans (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized											15,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross, Per Employee				50
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross				14,400
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value				$ 4.26
Employee Stock Option [Member] | The 2014 Employee Stock Grant Plan [Member]
Note 12 - Stock Compensation Plans (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized									13,500
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross, Per Employee		50
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		12,850
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value		$ 6.02
Restricted Stock [Member]
Note 12 - Stock Compensation Plans (Details) [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized						$ 522,000	$ 242,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period						84,900	45,750
Restricted Stock [Member] | Long-Term Incentive Compensation Plan [Member]
Note 12 - Stock Compensation Plans (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	84,900		45,750

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Note 11 - Related Party Transactions (Details) $ in Thousands			3 Months Ended		9 Months Ended
	Sep. 01, 2015 USD ($)	Jun. 30, 2015 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Jul. 01, 2015	Jun. 12, 2015	Feb. 01, 2015	Dec. 31, 2014 USD ($)
Note 11 - Related Party Transactions (Details) [Line Items]
Loans and Leases Receivable, Net Amount			$ 713,341		$ 713,341					$ 658,747
Percent of Principal Amount Outstanding, Pre-payment		44.00%
Subordinated Debt		$ 14,000	$ 14,000		$ 14,000					25,000
Number of Noteholders Electing to Sell Subordinated Notes			7		7
Subordinated Notes of Non-Related Parties Purchased by Group			$ 10,000		$ 10,000
Repayments of Subordinated Debt		$ 11,000
Subordinated Liabilities, Extinguished					11,000
Related Party Transaction, Interest Paid	$ 293
Subordinated Debt [Member]
Note 11 - Related Party Transactions (Details) [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		9.00%					4.50%	9.00%
Percent of Principal Amount Outstanding, Pre-payment		44.00%							44.00%
Director [Member]
Note 11 - Related Party Transactions (Details) [Line Items]
Related Party Transaction Amount of Participation Interest					5,200
Related Party Transaction Amount of Participation Interest Outstanding					3,000
Interest Expense, Related Party			99	$ 223	507	$ 675
Director [Member] | Line of Credit [Member] | Commercial Loan [Member]
Note 11 - Related Party Transactions (Details) [Line Items]
Loans and Leases Receivable, Net Amount			4,500		$ 4,500
Director [Member] | Annual Servicing Fee on Participation Balance [Member]
Note 11 - Related Party Transactions (Details) [Line Items]
Related Party Transaction, Rate					0.25%
Directors Executive Officers and Their Related Parties [Member]
Note 11 - Related Party Transactions (Details) [Line Items]
Related Party Deposit Liabilities			111,200		$ 111,200					77,400
Related Party Transactions, Interest Paid On Deposits					222	69
Related Party Transactions, Subordinated Debt			8,600		8,600					$ 9,000
Subordinated Liabilities, Extinguished		$ 6,800
Related Party Transaction, Interest Paid	$ 134					0
Related Party Transactions, Interest Accrued and Unpaid			3,900		3,900
Not-for-Profit Company, Related Party to Director [Member]
Note 11 - Related Party Transactions (Details) [Line Items]
Related Party Deposit Liabilities		92,200	24,700		24,700
Not-for-Profit Company, Related Party to Director [Member] | Insured Cash Sweep [Member]
Note 11 - Related Party Transactions (Details) [Line Items]
Related Party Deposit Liabilities			63,600		63,600
Various Companies of Related Parties [Member]
Note 11 - Related Party Transactions (Details) [Line Items]
Related Party Transaction, Expenses from Transactions with Related Party			$ 900	$ 1,200	$ 1,700	$ 2,200
Related Party Noteholders [Member]
Note 11 - Related Party Transactions (Details) [Line Items]
Subordinated Liabilities, Additions		6,400
Repayments of Subordinated Debt		$ 11,000

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Note 3 - Regulatory Matters (Details) - Actual Capital Positions and Ratios - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Parent Company [Member]
Note 3 - Regulatory Matters (Details) - Actual Capital Positions and Ratios [Line Items]
Tier I common equity	$ 56,964
Tier I capital	66,964	$ 59,930
Total risk-based capital	86,414	93,521
Total risk-weighted assets	771,395	683,956
Total average assets (for Tier I leverage ratio)	1,019,307	990,346
Subordinated notes	9,800	25,000
Allowable portion of allowance for loan losses	9,650	8,591
Total tier II capital	19,450	$ 33,591
Subsidiaries [Member]
Note 3 - Regulatory Matters (Details) - Actual Capital Positions and Ratios [Line Items]
Tier I common equity	92,821
Tier I capital	92,821	$ 96,816
Total risk-based capital	102,466	105,403
Total risk-weighted assets	771,002	683,576
Total average assets (for Tier I leverage ratio)	1,018,916	990,407
Allowable portion of allowance for loan losses	9,645	8,587
Total tier II capital	$ 9,645	$ 8,587

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Note 6 - Securities (Details) - Available-for-sale Debt Securities by Contractual Maturity $ in Thousands	Sep. 30, 2015 USD ($)
Amounts maturing in:
One year or less	$ 0
One year or less	0
After one year through five years	21,743
After one year through five years	22,130
After five years through ten years	78,215
After five years through ten years	79,648
After ten years	2,712
After ten years	2,671
Total	244,335
Total	248,270
Collateralized Mortgage Obligations [Member]
Amounts maturing in:
Securities without a single maturity, amortized cost	113,216
Securities without a single maturity, fair value	114,883
Residential Mortgage Backed Securities [Member]
Amounts maturing in:
Securities without a single maturity, amortized cost	28,449
Securities without a single maturity, fair value	$ 28,938

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Note 13 - Income Taxes

9 Months Ended

Sep. 30, 2015

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 13. Income Taxes

The Company evaluates the carrying amount of its deferred tax assets on a quarterly basis, or more frequently if necessary, in accordance with guidance set forth in ASC Topic 740 “Income Taxes,” and applies the criteria in the guidance to determine whether it is more likely than not that some portion, or all, of the deferred tax asset will not be realized within its life cycle, based on the weight of available evidence. If management determines based on available evidence, both positive and negative, that it is more likely than not that some portion or all of the deferred tax asset will not be realized in future periods, a valuation allowance is calculated and recorded. These determinations are inherently subjective and depend upon management’s estimates and judgments used in their evaluation of both positive and negative evidence. The Company’s deferred tax position has been affected by several significant transactions that occurred in prior years. These transactions included the provision for loan losses, the level of non-accrual loans, valuation of other real estate owned and other-than-temporary impairment losses incurred on certain available-for-sale securities, and resulted in the Company being in a cumulative deficit position since 2009. Accordingly, under applicable accounting guidance, the Company has established a full valuation allowance for its net deferred tax assets, excluding deferred tax assets or liabilities related to unrealized holding gains and losses on available-for-sale securities. Valuation allowances, related to net deferred tax assets, established by the Company amounted to $30.3 million at September 30, 2015 and December 31, 2014.

In evaluating available evidence, management considers, among other factors, historical financial performance, expectation of future earnings, the ability to carry back losses to recoup taxes previously paid, length of statutory carry forward periods, experience with operating loss and tax credit carry forwards not expiring unused, tax planning strategies and timing of reversals of temporary differences. In assessing the need for a valuation allowance, management carefully weighed both positive and negative evidence currently available. The weight given to the potential effect of positive and negative evidence must be commensurate with the extent to which it can objectively be verified. In particular, additional scrutiny must be given to deferred tax assets of an entity that has incurred taxable losses during the three most recent years because it is significant negative evidence that is objective and verifiable and therefore difficult to overcome. While the Company generated taxable income for the year ended December 31, 2014, it recorded taxable losses for the years ended December 31, 2013 and 2012.

Recently, the Company implemented certain tax planning initiatives designed to promote the generation of taxable income. These strategies included: 1) the sale of tax-exempt obligations of states and political subdivisions with fair values greater than book values and redeployment of the sales proceeds into taxable investment options; 2) the sale of lower-yielding taxable securities with fair values greater than book values, and the redeployment sales proceeds into higher-yielding taxable investment options; and 3) reducing the annual rate paid on the Company’s Notes from 9.0% to 4.5% and making an $11.0 million, or 44.0%, principal prepayment on the Notes. In addition to these tax planning initiatives, the resolution of costly litigation and release from the Consent Order by the OCC on March 25, 2015 and the Written Agreement by the Reserve Bank on September 2, 2015 has led to an improvement in the Company’s overall risk profile. The Company was also notified by the FDIC that effective February 1, 2015, its risk category for FDIC insurance improved from Risk Category II to Risk Category I, resulting in a decrease in the Company’s initial base assessment rate for deposit insurance from 0.14 basis points to 0.05 basis points, a 64.3% reduction. As a result of these developments, the Company has experienced and anticipates further reductions in its non-interest expense levels, specifically legal expense and regulatory assessments. Furthermore, as a result of the improved risk profile, the Company renewed its professional liability, fidelity bond and errors and omissions insurance policies at lower rates effective July 1, 2015 and accordingly experienced a decrease in insurance expense going forward.

When determining the need for a valuation allowance, the Company assessed the possible sources of taxable income available under tax law to realize a tax benefit for deductible temporary differences and carryforwards as defined in ASC Topic 740. While the Company has shown substantial book net income in 2013, 2014 and in the first nine months of 2015, these amounts have included significant non-recurring or non-taxable transactions, such as legal settlements, that affected the provision for loan losses and non-interest income levels and gains on the sales of securities. The Company utilizes a three-year rolling measurement of results when assessing whether it is in a cumulative loss position. Adjusting for these non-recurring items, the Company was in a cumulative three-year loss position at September 30, 2015. Based on the analysis of available positive and negative evidence, management determined that the established valuation allowance equal to 100.0% of net deferred tax assets, excluding deferred tax assets or liabilities related to unrealized holding gains and losses on available-for-sale securities, should be maintained at September 30, 2015. Management will reassess the need for a valuation allowance at December 31, 2015 taking into consideration the positive and negative evidence available at that time.

The Company recorded a credit for income tax expense of $40 thousand for the nine months ended September 30, 2015, and a provision for income tax expense of $166 thousand and $326 thousand for the three and nine months ended September 30, 2014, respectively. These amounts were entirely related to alternative minimum tax. There was no provision or credit for income taxes for the three months ended September 30, 2015.

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Note 6 - Securities (Tables)

9 Months Ended

Sep. 30, 2015

Investments, Debt and Equity Securities [Abstract]

Schedule of Available-for-sale Securities Reconciliation [Table Text Block]

	September 30, 2015
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding
(in thousands)	Cost		Gains		Losses		Fair Value
Available-for-sale:
Obligations of U.S. government agencies	$	43,788	$	912	$	-	$	44,700
Obligations of state and political subdivisions		55,209		955		12		56,152
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		23,058		489		3		23,544
Collateralized mortgage obligations - commercial		90,158		1,190		9		91,339
Residential mortgage-backed securities		28,449		489		-		28,938
Corporate debt securities		500		-		74		426
Negotiable certificates of deposit		3,173		2		4		3,171
Equity securities		1,010		-		52		958
Total available-for-sale securities	$	245,345	$	4,037	$	154	$	249,228

	December 31, 2014
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding
(in thousands)	Cost		Gains		Losses		Fair Value
Available-for-sale:
Obligations of U.S. government agencies	$	29,246	$	77	$	47	$	29,276
Obligations of state and political subdivisions		23,132		1,380		3		24,509
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		26,129		103		1		26,231
Collateralized mortgage obligations - commercial		61,017		492		253		61,256
Residential mortgage-backed securities		73,998		441		341		74,098
Corporate debt securities		500		-		80		420
Negotiable certificates of deposit		2,232		-		-		2,232
Equity securities		1,010		-		43		967
Total available-for-sale securities	$	217,264	$	2,493	$	768	$	218,989

Investments Classified by Contractual Maturity Date [Table Text Block]

	September 30, 2015
	Amortized		Fair
(in thousands)	Cost		Value
Amounts maturing in:
One year or less	$	-	$	-
After one year through five years		21,743		22,130
After five years through ten years		78,215		79,648
After ten years		2,712		2,671
Collateralized mortgage obligations		113,216		114,883
Residential mortgage-backed securities		28,449		28,938
Total	$	244,335	$	248,270

Schedule of Unrealized Loss on Investments [Table Text Block]

	September 30, 2015
	Less than 12 Months						12 Months or Greater						Total
	Number				Gross		Number				Gross		Number				Gross
	of		Fair		Unrealized		of		Fair		Unrealized		of		Fair		Unrealized
(dollars in thousands)	Securities		Value		Losses		Securities		Value		Losses		Securities		Value		Losses
Obligations of U.S. government agencies		-	$	-	$	-		-	$	-	$	-		-	$	-	$	-
Obligations of state and policitical subdivisions		1		1,513		7		1		261		5		2		1,774		12
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		2		812		3		-		-		-		2		812		3
Collateralized mortgage obligations - commercial		2		5,169		9		-		-		-		2		5,169		9
Residential mortgage-backed securities		-		-		-		-		-		-		-		-		-
Corporate debt securities		-		-		-		1		426		74		1		426		74
Negotiable certificates of deposit		6		1,433		4		-		-		-		6		1,433		4
Equity securities		-		-		-		1		948		52		1		948		52
Total		11	$	8,927	$	23		3	$	1,635	$	131		14	$	10,562	$	154

	December 31, 2014
	Less than 12 Months						12 Months or Greater						Total
	Number				Gross		Number				Gross		Number				Gross
	of		Fair		Unrealized		of		Fair		Unrealized		of		Fair		Unrealized
(dollars in thousands)	Securities		Value		Losses		Securities		Value		Losses		Securities		Value		Losses
Obligations of U.S. government agencies		2	$	9,513	$	47		-	$	-	$	-		2	$	9,513	$	47
Obligations of state and political subdivisions		-		-		-		1		254		3		1		254		3
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		1		653		1		-		-		-		1		653		1
Collateralized mortgage obligations - commerical		7		32,513		105		3		8,693		148		10		41,206		253
Residential mortgage-backed securities		3		16,659		56		6		37,619		285		9		54,278		341
Corporate debt securities		-		-		-		1		420		80		1		420		80
Negotiable certificates of deposit		-		-		-		-		-		-		-		-		-
Equity securities		-		-		-		1		957		43		1		957		43
Total		13	$	59,338	$	209		12	$	47,943	$	559		25	$	107,281	$	768

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Note 6 - Securities (Details)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)	Mar. 31, 2014 USD ($)
Note 6 - Securities (Details) [Line Items]
Available-for-sale Securities Pledged as Collateral	$ 247,800,000		$ 247,800,000		$ 217,600,000
Proceeds from Sale of Available-for-sale Securities	5,300,000	$ 40,000,000	78,765,000	$ 78,582,000
Available-for-sale Securities, Gross Realized Gains	$ 4,000	2,900,000	2,300,000	5,600,000
Available-for-sale Securities, Gross Realized Losses		$ 0	$ 4,000	0
Proceeds from Sale of Held-to-maturity Securities				2,686,000
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	14		14		25
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year	3		3		12
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Loss			$ 154,000		$ 768,000
Federal Home Loan Bank Stock and Federal Reserve Bank Stock	$ 5,600,000		5,600,000		4,200,000
Other Assets [Member]
Note 6 - Securities (Details) [Line Items]
Federal Reserve Bank Stock	$ 1,300,000		$ 1,300,000		$ 1,300,000
US States and Political Subdivisions Debt Securities [Member]
Note 6 - Securities (Details) [Line Items]
Held-to-Maturity Securities, Number						4
Held-to-maturity Securities, Sold Security, at Carrying Value						$ 2,300,000
Proceeds from Sale of Held-to-maturity Securities				2,700,000
Held-to-maturity Securities, Sold Security, Realized Gain (Loss)				$ 400,000
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	2		2		1
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year	1		1		1
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Loss			$ 12,000		$ 3,000
Equity Securities [Member]
Note 6 - Securities (Details) [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	1		1		1
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year	1		1		1
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Severity, Percentage of Amortized Cost	5.20%		5.20%
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Loss			$ 52,000		$ 43,000
One-Year Return	3.34%		3.34%
Three-Year Return	1.80%		1.80%
Star Rating by Morningstar	4		4
Corporate Debt and Equity Securities [Member]
Note 6 - Securities (Details) [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	2		2
Corporate Debt Securities [Member]
Note 6 - Securities (Details) [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	1		1		1
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year	1		1		1
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Severity, Percentage of Amortized Cost	14.80%		14.80%
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Loss			$ 74,000		$ 80,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Note 6 - Securities (Details) [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	4		4
Negotiable Certificates of Deposit [Member]
Note 6 - Securities (Details) [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	6		6		0
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year	0		0		0
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Loss			$ 4,000		$ 0
Federal Home Loan Bank of Pittsburgh [Member]
Note 6 - Securities (Details) [Line Items]
Impairment on Federal Home Loan Bank Stock	$ 0		0
Impairment on Federal Reserve Bank of Philadelphia Stock	$ 0		$ 0
Minimum [Member]
Note 6 - Securities (Details) [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Severity, Percentage of Amortized Cost	5.00%		5.00%
Minimum [Member] | Corporate Debt and Equity Securities [Member]
Note 6 - Securities (Details) [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Severity, Percentage of Amortized Cost	5.00%		5.00%

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Note 4 - Loans (Details) - Impaired Loans - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Real estate:
Recorded investment, with no allowance recorded	$ 7,192	$ 4,886
Unpaid principal balance, with no allowance recorded	9,267	5,561
Real estate:
Recorded investment, with a related allowance recorded	3,928	4,910
Unpaid principal balance, with a related allowance recorded	3,928	4,945
Related allowance	310	384
Real estate:
Recorded investment	11,120	9,796
Unpaid principal balance	13,195	10,506
Related allowance	310	384
Real Estate Loan [Member]
Real estate:
Recorded investment, with no allowance recorded	6,985	4,854
Unpaid principal balance, with no allowance recorded	9,031	5,502
Real estate:
Recorded investment, with a related allowance recorded	3,575	4,549
Unpaid principal balance, with a related allowance recorded	3,575	4,584
Related allowance	308	383
Real estate:
Recorded investment	10,560	9,403
Unpaid principal balance	12,606	10,086
Related allowance	308	383
Residential Portfolio Segment [Member] | Real Estate Loan [Member]
Real estate:
Recorded investment, with no allowance recorded	819	385
Unpaid principal balance, with no allowance recorded	890	410
Real estate:
Recorded investment, with a related allowance recorded	1,567	2,102
Unpaid principal balance, with a related allowance recorded	1,567	2,137
Related allowance	5	51
Real estate:
Recorded investment	2,386	2,487
Unpaid principal balance	2,457	2,547
Related allowance	5	51
Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Real estate:
Recorded investment, with no allowance recorded	5,462	4,401
Unpaid principal balance, with no allowance recorded	7,089	5,024
Real estate:
Recorded investment, with a related allowance recorded	2,008	2,259
Unpaid principal balance, with a related allowance recorded	2,008	2,259
Related allowance	303	331
Real estate:
Recorded investment	7,470	6,660
Unpaid principal balance	9,097	7,283
Related allowance	303	331
Construction, Land Acquisition and Development [Member] | Real Estate Loan [Member]
Real estate:
Recorded investment, with no allowance recorded	704	68
Unpaid principal balance, with no allowance recorded	1,052	68
Real estate:
Recorded investment, with a related allowance recorded		188
Unpaid principal balance, with a related allowance recorded		188
Related allowance		1
Real estate:
Recorded investment	704	256
Unpaid principal balance	1,052	256
Related allowance		1
Commercial Portfolio Segment [Member]
Real estate:
Recorded investment, with no allowance recorded	207	32
Unpaid principal balance, with no allowance recorded	236	59
Real estate:
Recorded investment	207	32
Unpaid principal balance	236	59
Consumer Portfolio Segment [Member]
Real estate:
Recorded investment, with a related allowance recorded	353	361
Unpaid principal balance, with a related allowance recorded	353	361
Related allowance	2	1
Real estate:
Recorded investment	353	361
Unpaid principal balance	353	361
Related allowance	$ 2	$ 1

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Consolidated Statements of Comprehensive (Loss) Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Net income	$ 2,337	$ 3,358	$ 6,631	$ 13,451
Other comprehensive income (loss):
Unrealized gains (losses) on securities available for sale	3,465	(482)	4,461	10,528
Taxes	(1,178)	163	(1,516)	(3,580)
Net of tax amount	2,287	(319)	2,945	6,948
Reclassification adjustment for gains included in net income	(4)	(2,958)	(2,302)	(5,638)
Taxes	1	1,006	782	1,917
Net of tax amount	(3)	(1,952)	(1,520)	(3,721)
Total other comprehensive income (loss)	2,284	(2,271)	1,425	3,227
Total comprehensive income	$ 4,621	$ 1,087	$ 8,056	$ 16,678

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Note 2 - New Authoritative Accounting Guidance

9 Months Ended

Sep. 30, 2015

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

Note 2.New Authoritative Accounting Guidance

Accounting Standards Update (“ASU”) 2014-04, Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40): “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure,” clarifies that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (a) the creditor obtaining legal title to residential real estate property upon completion of a foreclosure or (b) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The adoption of this guidance on January 1, 2015 did not have a material effect on the operating results or financial position of the Company.

ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” changes the criteria for reporting a discontinued operation. Under the new guidance, a disposal of a component of an entity or group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on the entity’s operations and financial results. This new guidance reduces complexity by removing the complex and extensive implementation guidance and illustrations that are necessary to apply the current definition of a discontinued operation. The new guidance also requires expanded disclosures about discontinued operations that will provide users with more information about the assets, liabilities, revenues and expenses of a discontinued operation and will require pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting, which will provide users with information about the ongoing trends in a reporting organization’s results from continuing operations. The adoption of this guidance on January 1, 2015 did not have a material effect on the operating results or financial position of the Company.

ASU 2014-11, Transfers and Servicing (Topic 860): “Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures,” changes the accounting for repurchase-to-maturity transactions and repurchase financing arrangements by aligning the accounting for these transactions with the accounting for other typical repurchase agreements. Going forward, these transactions would all be accounted for as secured borrowings. The new guidance eliminates sale accounting for repurchase-to-maturity transactions and supersedes the guidance under which a transfer of a financial assets and a contemporaneous repurchase financing could be accounted for on a combined basis as a forward arrangement, which has resulted in outcomes referred to as off-balance sheet accounting. ASU 2014-11 also requires a new disclosure for transactions economically similar to repurchase agreements in which the transferor retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction, and requires expanded disclosure about the nature of the collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The adoption of this guidance on January 1, 2015 did not have a material effect on the operating results or financial position of the Company.

ASU 2014-14, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): “Classification of Certain Government-Guaranteed Mortgage Loans Upon Foreclosure,” requires that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if the following conditions are met: (1) the loan has a government guarantee that is not separable from the loan before foreclosure; (2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim; and (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The adoption of this guidance on January 1, 2015 did not have a material effect on the operating results or financial position of the Company.

Accounting Guidance to be Adopted in Future Periods

ASU 2014-09, Revenue from Contracts with Customers (Topic 606): Section A, “Summary and Amendments That Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs-Contract with Customers (Subtopic 340-40);” Section B, “Conforming Amendments to Other Topics and Subtopics in the Codification and Status Tables;” and Section C, “Background Information and Basis for Conclusions,” provides a robust framework for addressing revenue recognition issues, upon its effective date, replaces almost all existing revenue recognition guidance, including industry specific guidance, in current GAAP. The core principle of ASU 2014-09 is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 will also result in enhanced interim and annual disclosures, both qualitative and quantitative, about revenue in order to help financial statement users understand the nature, amount, timing and uncertainty of revenue and related cash flows. ASU 2014-09 is effective in annual reporting periods beginning after December 15, 2016 and the interim periods within that year for public business entities, not-for-profit entities that have issued, or are conduit bond obligors for, securities that are traded, listed or quoted on an exchange or over-the-counter market and employee benefit plans that file or furnish financial statements to the SEC. On August 12, 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): “Deferral of the Effective Date,” which defers the adoption of ASU 2014-09 for one year for all entities. Accordingly, the Company will adopt this guidance on January 1, 2018 in accordance with ASU 2015-14, and is currently evaluating the effect this guidance may have on its operating results or financial position.

ASU 2014-12, Compensation – Stock Compensation (Topic 718): “Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period,” requires a performance target that affects vesting and that can be achieved after the requisite service period to be treated as a performance condition. To account for such awards, an entity should apply existing guidance as it relates to awards with performance conditions that affect vesting. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent compensation cost attributable to the period(s) for which the requisite service already has been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service periods. The total amount of compensation cost should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. ASU 2014-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The adoption of this guidance on January 1, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” defines management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and provide guidance for related footnote disclosures. ASU 2014-15 requires an entity’s management to assess the entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically ASU 2014-15: (1) provides a definition of the term substantial doubt; (2) requires an evaluation as to whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable); (3) provides principles for considering the mitigating effect of management’s plans; (4) requires certain disclosures when substantial doubt is alleviated; and (5) require an express statement and other disclosures when substantial doubt is not alleviated. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of this guidance on December 31, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

ASU 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items,” will alleviate uncertainty for preparers, auditors and regulators because auditors and regulators will no longer be required to evaluate whether a preparer presented an unusual and/or infrequent item appropriately. Although ASU 2015-01 eliminates the concept of extraordinary items, the presentation and disclosure guidance for items that are unusual in nature or infrequent in occurrence has been retained and has been expanded to include items that are both unusual in nature or infrequent in occurrence. The nature and financial effects of each event or transaction is required to be presented as a separate component of income from continuing operations or, alternatively, in the notes to the financial statements. ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption of this guidance is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The adoption of this guidance on January 1, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

ASU 2015-02, Consolidation (Topic 810): “Amendments to the Consolidation Analysis,” improves targeted areas of the consolidation guidance and reduces the number of consolidation models. The new consolidation standard changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable interest entity (“VIE”), and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. It also eliminates the VIE consolidation model based on majority exposure to variability that applied to certain investment companies and similar entities. ASU 2015-02 is effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The adoption of this guidance on January 1, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): “Simplifying the Presentation of Debt Issuance Costs,” more closely aligns the presentation of debt issuance costs under U.S. GAAP with the presentation under comparable IFRS standards. Under ASU 2015-03, debt issuance costs related to a recognized debt liability will no longer be recorded as a separate asset, but will be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. The costs will continue to be amortized to interest expense using the effective interest method. ASU 2015-03 is effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, and requires retrospective application to all prior periods presented in the financial statements. Early adoption of this guidance is permitted. The adoption of this guidance on January 1, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

ASU 2015-05, Intangibles – Goodwill and Other Internal-Use Software (Subtopic 350-40): “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” provides explicit guidance on a customer’s accounting for fees paid in a cloud computing environment. Specifically, the amendments in this ASU provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU 2015-05 is effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption of this guidance is permitted. The adoption of this guidance on January 1, 2016 is not expected to have a material effect on the operating results or financial position of the Company.

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Note 8 - Fair Value Measurements (Details) - Estimated Fair Values of the Company's Financial Instruments - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014	Sep. 30, 2014	Dec. 31, 2013
Financial assets:
Cash and short term investments	$ 31,014	$ 35,667	$ 39,993	$ 103,556
Securities available for sale	249,228	218,989
FHLB and FRB Stock	5,600	4,200
Loans held for sale	4,634	603
Accrued interest receivable	2,618	2,075
Financial liabilities:
Deposits	852,042	795,336
Borrowed funds	117,368	96,504
Accrued interest payable	11,187	10,262
Reported Value Measurement [Member]
Financial assets:
Securities available for sale	249,228
Estimate of Fair Value Measurement [Member]
Financial assets:
Securities available for sale	249,228
Fair Value, Inputs, Level 1 [Member]
Financial assets:
Cash and short term investments		35,667
Cash and short term investments		35,667
Securities available for sale	958	967
Fair Value, Inputs, Level 1 [Member] | Reported Value Measurement [Member]
Financial assets:
Cash and short term investments	31,014
Fair Value, Inputs, Level 1 [Member] | Estimate of Fair Value Measurement [Member]
Financial assets:
Cash and short term investments	31,014
Fair Value, Inputs, Level 2 [Member]
Financial assets:
Securities available for sale	248,270	218,022
FHLB and FRB Stock		4,154
Loans held for sale		603
Loans held for sale		603
Accrued interest receivable		2,075
Financial liabilities:
Deposits		795,336
Deposits		779,986
Borrowed funds		96,504
Borrowed funds		100,020
Accrued interest payable		10,262
Fair Value, Inputs, Level 2 [Member] | Reported Value Measurement [Member]
Financial assets:
FHLB and FRB Stock	5,649
Loans held for sale	4,634
Accrued interest receivable	2,618
Financial liabilities:
Deposits	852,042
Borrowed funds	117,368
Accrued interest payable	11,187
Fair Value, Inputs, Level 2 [Member] | Estimate of Fair Value Measurement [Member]
Financial assets:
FHLB and FRB Stock	5,649
Loans held for sale	4,634
Accrued interest receivable	2,618
Financial liabilities:
Deposits	837,071
Borrowed funds	117,595
Accrued interest payable	11,187
Fair Value, Inputs, Level 3 [Member]
Financial assets:
Securities available for sale	0	0
Loans, net		658,747
Loans, net		659,231
Mortgage servicing rights		333
Mortgage servicing rights		$ 898
Fair Value, Inputs, Level 3 [Member] | Reported Value Measurement [Member]
Financial assets:
Loans, net	713,341
Mortgage servicing rights	207
Fair Value, Inputs, Level 3 [Member] | Estimate of Fair Value Measurement [Member]
Financial assets:
Loans, net	712,602
Mortgage servicing rights	$ 841

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Note 12 - Stock Compensation Plans (Details) - Unvested Restricted Stock Awards - Restricted Stock [Member] - $ / shares	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Note 12 - Stock Compensation Plans (Details) - Unvested Restricted Stock Awards [Line Items]
Unvested at January 1,	45,750
Unvested at January 1,	$ 6.70
Awards granted	84,900	45,750
Awards granted	$ 5.75	$ 6.70
Forfeitures	(333)
Forfeitures	$ 6.70
Vestings	(16,526)
Vestings	$ 6.70
Unvested at September 30,	113,791	45,750
Unvested at September 30,	$ 5.99	$ 6.70

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Note 7 - Borrowed Funds (Tables)

9 Months Ended

Sep. 30, 2015

Debt Disclosure [Abstract]

Schedule of Debt [Table Text Block]

	September 30,		December 31,
(in thousands)	2015		2014
Federal Home Loan Bank of Pittsburgh advances - overnight	$	19,500	$	-
Federal Home Loan Bank of Pittsburgh advances - term		73,558		61,194
Subordinated debentures		14,000		25,000
Junior subordinated debentures		10,310		10,310
Total borrowed funds	$	117,368	$	96,504

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Note 4 - Loans (Details) - Activity in the Allowance for Loan Losses, by Loan Category - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Dec. 31, 2014
Allowance for loan losses:
Beginning balance	$ 10,328	$ 12,175	$ 11,520	$ 14,017
Ending balance	9,825	11,898	9,825	11,898
Charge-offs	(968)	(359)	(2,437)	(961)
Recoveries	656	136	1,082	4,471
Provisions (credits)	(191)	(54)	(340)	(5,629)
Allowance for loan losses:
Allowance, individually evaluated for impairment					$ 310	$ 384
Allowance, collectively evaluated for impairment					9,515	11,136
Total allowance	9,825	11,898	9,825	11,898	9,825	11,520
Loans receivable:
Loans, individually evaluated for impairment					11,120	9,796
Loans, collectively evaluated for impairment					710,428	659,698
Total loans					721,548	669,494
Residential Portfolio Segment [Member]
Loans receivable:
Total loans					129,444	122,832
Residential Portfolio Segment [Member] | Real Estate Loan [Member]
Allowance for loan losses:
Beginning balance	1,484	2,112	1,772	2,287
Ending balance	1,309	1,747	1,309	1,747
Charge-offs	(66)	(67)	(135)	(152)
Recoveries	23	9	34	79
Provisions (credits)	(132)	(307)	(362)	(467)
Allowance for loan losses:
Allowance, individually evaluated for impairment					5	51
Allowance, collectively evaluated for impairment					1,304	1,721
Total allowance	1,309	1,747	1,309	1,747	1,309	1,772
Loans receivable:
Loans, individually evaluated for impairment					2,386	2,487
Loans, collectively evaluated for impairment					127,058	120,345
Total loans					129,444	122,832
Commercial Real Estate Portfolio Segment [Member]
Loans receivable:
Total loans					249,526	233,473
Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Allowance for loan losses:
Beginning balance	4,041	5,133	4,663	6,017
Ending balance	4,235	5,261	4,235	5,261
Charge-offs			(912)
Recoveries	278		296	355
Provisions (credits)	(84)	128	188	(1,111)
Allowance for loan losses:
Allowance, individually evaluated for impairment					303	331
Allowance, collectively evaluated for impairment					3,932	4,332
Total allowance	4,235	5,261	4,235	5,261	4,235	4,663
Loans receivable:
Loans, individually evaluated for impairment					7,470	6,660
Loans, collectively evaluated for impairment					242,056	226,813
Total loans					249,526	233,473
Construction, Land Acquisition and Development [Member]
Loans receivable:
Total loans					25,516	18,835
Construction, Land Acquisition and Development [Member] | Real Estate Loan [Member]
Allowance for loan losses:
Beginning balance	778	923	665	924
Ending balance	969	775	969	775
Charge-offs	(683)		(689)
Recoveries				3,539
Provisions (credits)	874	(148)	993	(3,688)
Allowance for loan losses:
Allowance, individually evaluated for impairment						1
Allowance, collectively evaluated for impairment					969	664
Total allowance	969	775	969	775	969	665
Loans receivable:
Loans, individually evaluated for impairment					704	256
Loans, collectively evaluated for impairment					24,812	18,579
Total loans					25,516	18,835
Commercial Portfolio Segment [Member]
Allowance for loan losses:
Beginning balance	1,878	1,758	2,104	2,321
Ending balance	1,259	1,805	1,259	1,805
Charge-offs	(21)	(22)	(163)	(172)
Recoveries	140	69	307	195
Provisions (credits)	(738)		(989)	(539)
Allowance for loan losses:
Allowance, collectively evaluated for impairment					1,259	2,104
Total allowance	1,259	1,805	1,259	1,805	1,259	2,104
Loans receivable:
Loans, individually evaluated for impairment					207	32
Loans, collectively evaluated for impairment					142,218	132,025
Total loans					142,425	132,057
Consumer Portfolio Segment [Member]
Allowance for loan losses:
Beginning balance	1,643	1,681	1,673	1,789
Ending balance	1,513	1,727	1,513	1,727
Charge-offs	(198)	(270)	(538)	(637)
Recoveries	215	58	445	303
Provisions (credits)	(147)	258	(67)	272
Allowance for loan losses:
Allowance, individually evaluated for impairment					2	1
Allowance, collectively evaluated for impairment					1,511	1,672
Total allowance	1,513	1,727	1,513	1,727	1,513	1,673
Loans receivable:
Loans, individually evaluated for impairment					353	361
Loans, collectively evaluated for impairment					132,065	121,731
Total loans					132,418	122,092
State and Political Subdivisions [Member]
Allowance for loan losses:
Beginning balance	504	568	598	679
Ending balance	472	583	472	583
Provisions (credits)	(32)	15	(126)	(96)
Allowance for loan losses:
Allowance, collectively evaluated for impairment					472	598
Total allowance	472	$ 583	472	$ 583	472	598
Loans receivable:
Loans, collectively evaluated for impairment					42,219	40,205
Total loans					42,219	40,205
Unallocated Financing Receivables [Member]
Allowance for loan losses:
Beginning balance			45
Ending balance	68		68
Provisions (credits)	68		23
Allowance for loan losses:
Allowance, collectively evaluated for impairment					68	45
Total allowance	$ 68		$ 68		$ 68	$ 45

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Note 12 - Stock Compensation Plans

9 Months Ended

Sep. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 12. Stock Compensation Plans

On August 30, 2000, the Company’s Board adopted the 2000 Employee Stock Incentive Plan (the “Stock Incentive Plan”) in which options could have been granted to key officers and other employees of the Company. The aggregate number of shares which could have been issued upon exercise of the options under the plan could not exceed 1,100,000 shares. Options and rights granted under the Stock Incentive Plan became exercisable six months after the date the options were awarded and expire ten years after the award date. Upon exercise, the shares are issued from the Company’s authorized but unissued stock. The Stock Incentive Plan expired on August 30, 2010, therefore, no further grants will be made under the plan.

The Board also adopted on August 30, 2000, the 2000 Independent Directors Stock Option Plan (the “Directors’ Stock Plan”) for directors who were not officers or employees of the Company. The aggregate number of shares issuable under the Directors’ Stock Plan could not exceed 550,000 shares and became exercisable six months from the date the awards were granted and expired three years after the award date. Upon exercise, the shares are issued from the Company’s authorized but unissued shares. The Directors’ Stock Plan expired on August 30, 2010, therefore, no further grants will be made under the plan.

No compensation expense related to options under either the Stock Incentive Plan or the Directors’ Stock Plan was required to be recorded in the nine months ended September 30, 2015 and 2014.

The following table summarizes the status of the Company’s stock option plans:

	Nine Months Ended September 30,
	2015				2014
			Weighted					Weighted
			Average					Average
			Exercise					Exercise
	Shares		Price		Shares			Price
Outstanding at January 1.		64,479	$	15.87		82,598		$	15.98
Granted		-		-		-			-
Exercised		-		-		-			-
Forfeited		-		-		(9,322	)		16.05
Outstanding at September 30,		64,479	$	15.87		73,276		$	15.97
Options exercisable at September 30,		64,479				73,276		$	15.97
Weighted average fair value of options granted during the period			$	-				$	-
Stock-based compensation expense			$	-				$	-

At September 30, 2015 and 2014 the exercisable options had no total intrinsic value and there was no unrecognized compensation expense.

The following table presents information pertaining to options outstanding at September 30, 2015:

Options Outstanding

Options Excercisable

Weighted

Average

Weighted

Weighted

Remaining

Average

Average

Number

Contractual

Exercise

Number

Exercise

Range of Exercise Price

Outstanding

Life

Price

Exercisable

Price

$10.81

-

$23.13

64,479

2.1

$

15.87

64,479

$

15.87

On November 27, 2013, the Board of Directors adopted the 2013 Employee Stock Grant Plan (the “2013 Stock Grant Plan”) under which shares of common stock not to exceed 15,000 were authorized to be granted to employees. On December 2, 2013, the Company granted 50 shares of the Company’s common stock to each active full and part time employee. There were 14,400 shares granted under the 2013 Stock Grant Plan at a fair value of $4.26 per share. On October 29, 2014, the Board of Directors adopted the 2014 Employee Stock Grant Plan (the “2014 Stock Grant Plan”) under which shares of stock not to exceed 13,500 were authorized to be granted to employees. On December 1, 2014, the Company granted 50 shares of the Company’s common stock to each active full and part time employee. There were 12,850 shares granted under the 2014 Stock Grant Plan at a fair value of $6.02 per share. The total cost of these grants, which was included in salary expense in the Consolidated Statements of Income, amounted to $77 thousand and $61 thousand for the years ended December 31, 2014 and 2013, respectively. No additional shares were granted under either plan.

The Board of Directors, upon the recommendation of the Compensation Committee, formally adopted a Long-Term Incentive Compensation Plan (“LTIP”) on October 23, 2013. The LTIP was ratified at the 2013 Annual Shareholders Meeting on December 23, 2013. The LTIP is designed to reward executives and key employees for their contributions to the long-term success of the Company, primarily as measured by the increase in the Company’s stock price. The LTIP authorizes up to 1,200,000 shares of common stock for issuance and provides the Board with the authority to offer several different types of long-term incentives, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares. The Board approved initial awards under the terms of the LTIP, which were granted to executives and key employees on March 1, 2014. The initial grant was comprised solely of 45,750 shares of restricted stock. On March 1, 2015, an additional 84,900 shares of restricted stock were awarded under the LTIP. At September 30, 2015, there were 1,069,683 shares of common stock available for award under the LTIP. For the nine months ended September 30, 2015 and 2014, stock-based compensation expense, which is included in salaries and employee benefits expense in the Consolidated Statements of Income, totaled $179 thousand and $65 thousand, respectively. Total unrecognized compensation expense related to unvested restricted stock awards was $522 thousand and $242 thousand at September 30, 2015 and 2014, respectively.

The following table presents the status of the Company’s unvested restricted stock awards as of, and during the nine months ended, September 30, 2015 and 2014:

	Nine Months Ended September 30,					Nine Months Ended September 30,
	2015					2014
				Weighted-				Weighted-
				Average				Average
	Restricted			Grant Date		Restricted		Grant Date
	Shares			Fair Value		Shares		Fair Value
Unvested at January 1,		45,750		$	6.70		-	$	-
Awards granted		84,900			5.75		45,750		6.70
Forfeitures		(333	)		6.70		-		-
Vestings		(16,526	)		6.70		-		-
Unvested at September 30,		113,791		$	5.99		45,750	$	6.70