10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

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

For the quarterly period ended June  30, 2015

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

For the transition period from__________ to___________

Commission file number 0-12126

FRANKLIN FINANCIAL SERVICES CORPORATION

(Exact name of registrant as specified in its charter)

PENNSYLVANIA	25-1440803
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

20 South Main Street, Chambersburg	PA17201-0819
(Address of principal executive offices)	(Zip Code)

(717) 264-6116

(Registrant's telephone number, including area code)

Not Applicable

(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 Act)  Yes☐  No ☒

There were 4,252,508 outstanding shares of the Registrant’s common stock as of July31, 2015.

INDEX

Part I - FINANCIAL INFORMATION
Item 1	Financial Statements
	Consolidated Balance Sheets as of June  30, 2015 and December 31, 2014 (unaudited)	1
	Consolidated Statements of Income for the Three and Six Months ended June  30, 2015	2
	and 2014 (unaudited)
	Consolidated Statements of Comprehensive Income for the Three and Six Months ended	3
	June  30, 2015 and 2014 (unaudited)
	Consolidated Statements of Changes in Shareholders’ Equity for the Six Months	4
	ended June  30, 2015and 2014 (unaudited)
	Consolidated Statements of Cash Flows for the Six Months ended June  30, 2015	5
	and 2014 (unaudited)
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2	Management’s Discussion and Analysis ofResults of Operations and Financial Condition	28
Item 3	Quantitative and Qualitative Disclosures about Market Risk	52
Item 4	Controls and Procedures	52
Part II - OTHER INFORMATION
Item 1	Legal Proceedings	53
Item 1A	Risk Factors	53
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3	Defaults Upon Senior Securities	53
Item 4	Mine Safety Disclosures	53
Item 5	Other Information	53
Item 6	Exhibits	53
SIGNATURE PAGE		54
EXHIBITS

Part I FINANCIAL INFORMATION

Item 1 Financial Statements

Consolidated Balance Sheets

	(unaudited)
(Dollars in thousands, except share and per share data)	June 30		December 31
	2015		2014
Assets
Cash and due from banks	$	17,649	$	14,258
Interest-bearing deposits in other banks		46,754		34,335
Total cash and cash equivalents		64,403		48,593
Investment securities available for sale, at fair value		176,424		171,751
Restricted stock		439		438
Loans held for sale		1,755		389
Loans		733,212		726,531
Allowance for loan losses		(9,450)		(9,111)
Net Loans		723,762		717,420
Premises and equipment, net		14,531		15,046
Bank owned life insurance		22,377		22,098
Goodwill		9,016		9,016
Other intangible assets		-		181
Other real estate owned		4,018		3,666
Deferred tax asset, net		4,690		4,328
Other assets		7,124		8,522
Total assets	$	1,028,539	$	1,001,448
Liabilities
Deposits
Noninterest-bearing checking	$	143,564	$	136,910
Money management, savings and interest checking		680,424		645,672
Time		92,071		98,599
Total Deposits		916,059		881,181
Repurchase Agreements		-		9,079
Other liabilities		5,302		7,667
Total liabilities		921,361		897,927
Shareholders' equity
Common stock, $1 par value per share,15,000,000 shares authorized with
4,625,071 shares issued and 4,241,355 shares outstanding at June 30, 2015 and
4,606,564 shares issued and 4,218,330 shares outstanding at December 31, 2014		4,625		4,607
Capital stock without par value, 5,000,000 shares authorized with no
shares issued and outstanding		-		-
Additional paid-in capital		37,926		37,504
Retained earnings		75,288		71,452
Accumulated other comprehensive loss		(3,800)		(3,100)
Treasury stock, 383,716 shares at June 30, 2015 and 388,234 shares at
December 31, 2014, at cost		(6,861)		(6,942)
Total shareholders' equity		107,178		103,521
Total liabilities and shareholders' equity	$	1,028,539	$	1,001,448
The accompanying notes are an integral part of these financial statements.

1

Consolidated Statements of Income

	For the Three Months Ended				For the Six Months Ended
(Dollars in thousands, except per share data) (unaudited)	June 30				June 30
	2015		2014		2015		2014
Interest income
Loans, including fees	$	7,477	$	7,648	$	14,853	$	15,159
Interest and dividends on investments:
Taxable interest		613		661		1,248		1,302
Tax exempt interest		408		376		817		734
Dividend income		8		31		60		56
Deposits and obligations of other banks		72		45		127		84
Total interest income		8,578		8,761		17,105		17,335
Interest expense
Deposits		619		694		1,260		1,396
Securities sold under agreements to repurchase		-		2		-		9
Long-term debt		-		121		-		242
Total interest expense		619		817		1,260		1,647
Net interest income		7,959		7,944		15,845		15,688
Provision for loan losses		310		266		635		464
Net interest income after provision for loan losses		7,649		7,678		15,210		15,224
Noninterest income
Investment and trust services fees		1,388		1,101		2,651		2,192
Loan service charges		297		250		471		418
Mortgage banking activities		17		19		25		32
Deposit service charges and fees		586		525		1,077		990
Other service charges and fees		311		317		607		584
Debit card income		356		337		675		643
Increase in cash surrender value of life insurance		140		144		279		286
Other real estate owned (losses) gains, net		-		(62)		32		(185)
Other		13		10		237		62
OTTI losses recognized in earnings		-		-		(20)		-
Gain on conversion		-		-		728		-
Securities gains, net		8		221		8		221
Total noninterest income		3,116		2,862		6,770		5,243
Noninterest expense
Salaries and employee benefits		4,203		4,107		8,286		8,357
Net occupancy expense		556		586		1,172		1,262
Furniture and equipment expense		239		237		470		491
Advertising		283		270		471		586
Legal and professional fees		203		353		499		618
Data processing		556		493		1,023		884
Pennsylvania bank shares tax		206		173		402		347
Intangible amortization		90		104		181		207
FDIC insurance		160		222		308		454
ATM/debit card processing		186		178		373		357
Other		977		892		1,965		1,741
Total noninterest expense		7,659		7,615		15,150		15,304
Income before federal income taxes		3,106		2,925		6,830		5,163
Federal income tax expense		632		606		1,472		1,018
Net income	$	2,474	$	2,319	$	5,358	$	4,145
Per share
Basic earnings per share	$	0.58	$	0.55	$	1.27	$	0.99
Diluted earnings per share	$	0.58	$	0.55	$	1.26	$	0.99
Cash dividends declared	$	0.19	$	0.17	$	0.36	$	0.34

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

2

Consolidated Statements of Comprehensive Income

	For the Three Months Ended				For the Six Months Ended
	June 30				June 30
(Dollars in thousands) (unaudited)	2015		2014		2015		2014
Net Income	$	2,474	$	2,319	$	5,358	$	4,145
Securities:
Unrealized (losses) gains arising during the period		(1,239)		774		(536)		2,194
Reclassification adjustment for gains included in net income (1)		(8)		(221)		(716)		(221)
Net unrealized (losses) gains		(1,247)		553		(1,252)		1,973
Tax effect		424		(188)		426		(671)
Net of tax amount		(823)		365		(826)		1,302
Derivatives:
Unrealized gains (losses) arising during the period		32		(4)		31		(12)
Reclassification adjustment for losses included in net income (2)		64		94		160		189
Net unrealized gains		96		90		191		177
Tax effect		(32)		(30)		(65)		(60)
Net of tax amount		64		60		126		117
Total other comprehensive (loss) income		(759)		425		(700)		1,419
Total Comprehensive Income	$	1,715	$	2,744	$	4,658	$	5,564
Reclassification adjustment / Statement line item	Tax  expense (benefit)				Tax  expense (benefit)
(1) Securities / gain on conversion & securities (gains) losses, net	$	3	$	75	$	243	$	75
(2) Derivatives / interest expense on deposits		(22)		(32)		(54)		(64)
The accompanying notes are an integral part of these financial statements.

3

Consolidated Statements of Changes in Shareholders' Equity

For the Sixmonths June30, 2015 and 2014:

							Accumulated
			Additional				Other
	Common		Paid-in		Retained		Comprehensive		Treasury
(Dollars in thousands, except per share data) (unaudited)	Stock		Capital		Earnings		Loss		Stock		Total
Balance at December 31, 2013	$	4,561	$	36,636	$	65,897	$	(4,696)	$	(7,010)	$	95,388
Net income		-		-		4,145		-		-		4,145
Other comprehensive income		-		-		-		1,419		-		1,419
Cash dividends declared, $.34 per share		-		-		(1,419)		-		-		(1,419)
Treasury shares issued under stock option plans, 3,476 shares		-		(10)		-		-		62		52
Common stock issued under dividend reinvestment plan, 20,642 shares		20		354		-		-		-		374
Balance at June 30, 2014	$	4,581	$	36,980	$	68,623	$	(3,277)	$	(6,948)	$	99,959
Balance at December 31, 2014	$	4,607	$	37,504	$	71,452	$	(3,100)	$	(6,942)	$	103,521
Net income		-		-		5,358		-		-		5,358
Other comprehensive loss		-		-		-		(700)		-		(700)
Cash dividends declared, $.36 per share		-		-		(1,522)		-		-		(1,522)
Treasury shares issued under stock option plans, 4,518 shares		-		5		-		-		81		86
Common stock issued under dividend reinvestment plan, 18,507 shares		18		417		-		-		-		435
Balance at June 30, 2015	$	4,625	$	37,926	$	75,288	$	(3,800)	$	(6,861)	$	107,178
The accompanying notes are an integral part of these financial statements.

4

Consolidated Statements of Cash Flows

	Six Months Ended June 30
	2015		2014
(Dollars in thousands) (unaudited)
Cash flows from operating activities
Net income	$	5,358	$	4,145
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		675		732
Net amortization of loans and investment securities		796		893
Amortization and net change in mortgage servicing rights valuation		9		8
Amortization of intangibles		181		207
Provision for loan losses		635		464
Net realized gains on sales of securities		(8)		(221)
Impairment writedown on securities recognized in earnings		20		-
Gain on conversion		(728)		-
Loans originated for sale		(3,812)		(3,554)
Proceeds from sale of loans		2,446		3,303
Writedown on premises and equipment		60		-
Writedown of other real estate owned		-		200
Net gain on sale or disposal of other real estate/other repossessed assets		(32)		(15)
Increase in cash surrender value of life insurance		(279)		(286)
Decrease (increase) in other assets		1,380		(118)
(Decrease) increase in other liabilities		(2,195)		613
Net cash provided by operating activities		4,506		6,371
Cash flows from investing activities
Proceeds from sales and calls of investment securities available for sale		1,381		1,582
Proceeds from maturities and paydowns of securities available for sale		14,132		12,313
Purchase of investment securities available for sale		(21,689)		(28,362)
Net increase in restricted stock		(1)		(32)
Net increase in loans		(7,256)		(10,012)
Capital expenditures		(190)		(321)
Proceeds from sale of other real estate/other repossessed assets		129		493
Net cash used in investing activities		(13,494)		(24,339)
Cash flows from financing activities
Net increase in demand deposits, NOW, and savings accounts		41,406		63,087
Net decrease in time deposits		(6,528)		(8,107)
Net decrease in repurchase agreements		(9,079)		(21,570)
Long-term debt payments		-		(403)
Dividends paid		(1,522)		(1,419)
Treasury stock issued under stock option plans		86		52
Common stock issued under dividend reinvestment plan		435		374
Net cash provided by financing activities		24,798		32,014
Increase in cash and cash equivalents		15,810		14,046
Cash and cash equivalents as of January 1		48,593		40,745
Cash and cash equivalents as of June 30	$	64,403	$	54,791
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest on deposits and other borrowed funds	$	1,304	$	1,670
Income taxes	$	1,513	$	236
Noncash Activities
Loans transferred to Other Real Estate	$	449	$	82
The accompanying notes are an integral part of these financial statements.

5

FRANKLIN FINANCIAL SERVICES CORPORATION and SUBSIDIARIES

UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Basis of Presentation

The consolidated financial statements include the accounts of Franklin Financial Services Corporation (the Corporation), and its wholly-owned subsidiaries, Farmers and Merchants Trust Company of Chambersburg (the Bank) and Franklin Future Fund Inc.  Farmers and Merchants Trust Company of Chambersburg is a commercial bank that has one wholly-owned subsidiary, Franklin Financial Properties Corp. Franklin Financial Properties Corp. holds real estate assets that are leased by the Bank. Franklin Future Fund Inc. is a non-bank investment company. The activities of non-bank entities are not significant to the consolidated totals.  All significant intercompany transactions and account balances have been eliminated.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations, and cash flows as of June  30, 2015, and for all other periods presented have been made.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted.  It is suggested that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s 2014 Annual Report on Form 10-K.  The consolidated results of operations for the period ended June30, 2015 are not necessarily indicative of the operating results for the full year.  Management has evaluated subsequent events for potential recognition and/or disclosure through the date these consolidated financial statements were issued.

The consolidated balance sheet at December 31, 2014 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete consolidated financial statements.

For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, interest-bearing deposits in other banks and federal funds sold.  Generally, federal funds are purchased and sold for one-day periods. 

Earnings per share are computed based on the weighted average number of shares outstanding during each period end.  A reconciliation of the weighted average shares outstanding used to calculate basic earnings per share and diluted earnings per share follows:

	For the Three Months Ended				For the Six Months Ended
	June 30				June 30
(Dollars and shares in thousands, except per share data)	2015		2014		2015		2014
Weighted average shares outstanding (basic)		4,234		4,184		4,228		4,178
Impact of common stock equivalents		11		7		8		6
Weighted average shares outstanding (diluted)		4,245		4,191		4,236		4,184
Anti-dilutive options excluded from calculation		13		34		28		37
Net income	$	2,474	$	2,319	$	5,358	$	4,145
Basic earnings per share	$	0.58	$	0.55	$	1.27	$	0.99
Diluted earnings per share	$	0.58	$	0.55	$	1.26	$	0.99

Note 2. Recent Accounting Pronouncements

Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement . ASU 2015-05 “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, revises the scope of Subtopic 350-40 to include internal-use software accessed through a hosting arrangement (e.g., cloud computing, software as a service, etc.) only if both of the following criteria are met: (1) the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty (there is no significant penalty if the customer has the ability to take delivery of the software without incurring significant cost and the ability to use the software separately without significant loss of utility or value); and (2) it is feasible for the customer to either run the software on its own hardware or contract with another party unrelated to the vendor to host the software.  If both of the criteria are present in a hosting arrangement, then the arrangement contains a software license and the customer should account for that element in accordance with Subtopic 350-40 (i.e., expense fees as incurred).  The ASU is effective for public business entities for fiscal years beginning after

6

December 15, 2015, and interim periods within those fiscal years.  For all other entities, the ASU is effective for fiscal years beginning after December 15, 2015, and interim periods within fiscal year beginning after December 15, 2016.  Early adoption is permitted.  An entity can elect to adopt the amendments either (1) prospectively to all arrangements entered into or materially modified after the effective date, or (2) retrospectively.  The Corporation does not believe ASU 350-40 will have a material effect on its financial statements.

Receivables (Topic 310): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure. ASU 2014-04 “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure” clarifies that a creditor is considered to have physical possession of residential real estate that is collateral for a residential mortgage loan when it obtains legal title to the collateral or a deed in lieu of foreclosure or similar legal agreement is completed.  Consequently, it should reclassify the loan to other real estate owned at that time.  ASU 2014-04 applies to all creditors who obtain physical possession resulting from an in substance repossession or foreclosure of residential real estate property collateralizing a consumer mortgage loan in satisfaction of a receivable.  The ASU does not apply to commercial real estate loans, as the foreclosure process and applicable laws for those assets are significantly different from residential real estate.  The ASU is effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014.  ASU 2014-04 did not have a material effect on the Corporation’s financial statements.

Revenue from Contracts with Customers (Topic 606). The amendments in this Update (ASU 2014-09) establish a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate, construction and software industries. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this objective, the standard requires five basic steps: i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The ASU is effective for public entities for annual periods beginning after December 15, 2016, including interim periods therein. Three basic transition methods are available – full retrospective, retrospective with certain practical expedients, and a cumulative effect approach. Under the third alternative, an entity would apply the new revenue standard only to contracts that are incomplete under legacy U.S. GAAP at the date of initial application (e.g. January 1, 2017) and recognize the cumulative effect of the new standard as an adjustment to the opening balance of retained earnings. That is, prior years would not be restated and additional disclosures would be required to enable users of the financial statements to understand the impact of adopting the new standard in the current year compared to prior years that are presented under legacy U.S. GAAP. Early adoption is prohibited under U.S. GAAP. The Corporation does not believe ASU 2014-09 will have a material effect on its financial statements.

Note 3. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss included in shareholders' equity are as follows:

	June 30		December 31
	2015		2014
(Dollars in thousands)
Net unrealized gains on securities	$	1,100	$	2,352
Tax effect		(374)		(800)
Net of tax amount		726		1,552
Net unrealized losses on derivatives		-		(191)
Tax effect		-		65
Net of tax amount		-		(126)
Accumulated pension adjustment		(6,858)		(6,858)
Tax effect		2,332		2,332
Net of tax amount		(4,526)		(4,526)
Total accumulated other comprehensive loss	$	(3,800)	$	(3,100)

7

Note 4. Guarantees

The Corporation does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit.  Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.  Generally, all letters of credit, when issued, have expiration dates within one year.  The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers. The Bank generally holds collateral and/or personal guarantees supporting these commitments.  The Bank had $26.0 million and $22.7 million of standby letters of credit as of June  30, 2015 and December 31, 2014, respectively. Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payments required under the corresponding guarantees.  The amount of the liability as of June  30, 2015 and December 31, 2014 for guarantees under standby letters of credit issued was not material.

Note 5. Investments

The amortized cost and estimated fair value of investment securities available for sale as of June  30, 2015 and December 31, 2014are as follows:

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
June 30, 2015	cost		gains		losses		value
Equity securities	$	164	$	78	$	-	$	242
U.S. Government agency securities		16,245		168		(29)		16,384
Municipal securities		71,277		1,459		(604)		72,132
Trust preferred securities		5,949		-		(621)		5,328
Agency mortgage-backed securities		80,145		917		(323)		80,739
Private-label mortgage-backed securities		1,502		58		-		1,560
Asset-backed securities		42		-		(3)		39
	$	175,324	$	2,680	$	(1,580)	$	176,424

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
December 31, 2014	cost		gains		losses		value
Equity securities	$	274	$	779	$	-	$	1,053
U.S. Government and Agency securities		15,854		173		(64)		15,963
Municipal securities		66,832		1,826		(292)		68,366
Trust preferred securities		5,940		-		(803)		5,137
Agency mortgage-backed securities		78,779		932		(217)		79,494
Private-label mortgage-backed securities		1,675		35		(15)		1,695
Asset-backed securities		45		-		(2)		43
	$	169,399	$	3,745	$	(1,393)	$	171,751

At June  30, 2015 and December 31, 2014, the fair value of investment securities pledged to secure public funds, trust balances, repurchase agreements, deposit and other obligations totaled $69.3 million and $91.6 million, respectively.

8

The amortized cost and estimated fair value of debt securities at June  30, 2015, by contractual maturity are shown below.Actual maturities may differ from contractual maturities because of prepayment or call options embedded in the securities.

(Dollars in thousands)	Amortized cost		Fair value
Due in one year or less	$	4,570	$	4,609
Due after one year through five years		10,483		10,680
Due after five years through ten years		32,927		33,512
Due after ten years		45,533		45,082
		93,513		93,883
Mortgage-backed securities		81,647		82,299
	$	175,160	$	176,182

The following table provides additional detail about trust preferred securities as of June  30, 2015:

Trust Preferred Securities

(Dollars in thousands)
Deal Name	Maturity	Single Issuer or Pooled	Class	Amortized Cost		Fair Value		Gross Unrealized Gain (Loss)		Lowest Credit Rating Assigned
BankAmerica Cap III	1/15/2027	Single	Preferred Stock	$	964	$	906	$	(58)	BB
Wachovia Cap Trust II	1/15/2027	Single	Preferred Stock		277		261		(16)	BBB
Huntington Cap Trust	2/1/2027	Single	Preferred Stock		941		816		(125)	BB
Corestates Captl Tr II	2/15/2027	Single	Preferred Stock		937		871		(66)	BBB+
Huntington Cap Trust II	6/15/2028	Single	Preferred Stock		892		790		(102)	BB
Chase Cap VI JPM	8/1/2028	Single	Preferred Stock		963		850		(113)	BBB-
Fleet Cap Tr V	12/18/2028	Single	Preferred Stock		975		834		(141)	BB
				$	5,949	$	5,328	$	(621)

The following table provides additional detail about private label mortgage-backed securities as of June  30, 2015:

Private Label Mortgage Backed Securities

(Dollars in thousands)						Gross					Cumulative
	Origination	Amortized		Fair		Unrealized		Collateral	Lowest Credit	Credit	OTTI
Description	Date	Cost		Value		Gain (Loss)		Type	Rating Assigned	Support %	Charges
RALI 2004-QS4 A7	3/1/2004	$	43	$	43	$	-	ALT A	BBB+	11.84	$	-
MALT 2004-6 7A1	6/1/2004		385		393		8	ALT A	CCC	14.11		-
RALI 2005-QS2 A1	2/1/2005		236		251		15	ALT A	CC	5.20		10
RALI 2006-QS4 A2	4/1/2006		502		523		21	ALT A	D	-		313
GSR 2006-5F 2A1	5/1/2006		72		80		8	Prime	D	-		15
RALI 2006-QS8 A1	7/28/2006		264		270		6	ALT A	D	-		217
		$	1,502	$	1,560	$	58				$	555

Impairment:

The investment portfolio contained 91 securities with $59.9 million of temporarily impaired fair value and $1.6 million in unrealized losses at June 30, 2015. The total unrealized loss position has increased slightly from $1.4 million at year-end 2014. 

For securities with an unrealized loss, Management applies a systematic methodology in order to perform an assessment of the potential for other-than-temporary impairment.  In the case of debt securities, investments considered for other-than-temporary impairment: (1) had a specified maturity or repricing date; (2) were generally expected to be redeemed at par, and (3) were expected to achieve a recovery in market value within a reasonable period of time. In

9

addition, the Bank considers whether it intends to sell these securities or whether it will be forced to sell these securities before the earlier of amortized cost recovery or maturity. Equity securities are assessed for other-than-temporary impairment based on the length of time of impairment, dollar amount of the impairment and general market and financial conditions relating to specific issues.  The impairment identified on debt and equity securities and subject to assessment at June30, 2015, was deemed to be temporary and required no further adjustments to the financial statements, unless otherwise noted.

The following table reflects temporary impairment in the investment portfolio (excluding restricted stock), aggregated by investment category, length of time that individual securities have been in a continuous unrealized loss position and the number of securities in each category as of June  30, 2015 and December 31, 2014:

	June 30, 2015
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count
U.S. Government and Agency securities	$	1,498	$	(7)	3	$	4,617	$	(22)	10	$	6,115	$	(29)	13
Municipal securities		20,359		(386)	33		4,775		(218)	7		25,134		(604)	40
Trust preferred securities		-		-	-		5,328		(621)	7		5,328		(621)	7
Agency mortgage-backed securities		18,002		(179)	22		5,346		(144)	8		23,348		(323)	30
Asset-backed securities		-		-	-		4		(3)	1		4		(3)	1
Total temporarily impaired securities	$	39,859	$	(572)	58	$	20,070	$	(1,008)	33	$	59,929	$	(1,580)	91

	December 31, 2014
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count
U.S. Government and Agency securities		4		-	1		7,207		(64)	14		7,211		(64)	15
Municipal securities		5,651		(33)	9		9,441		(259)	14		15,092		(292)	23
Trust preferred securities		-		-	-		5,137		(803)	7		5,137		(803)	7
Agency mortgage-backed securities		9,304		(60)	13		8,199		(157)	10		17,503		(217)	23
Private-label mortgage-backed securities		-		-	-		540		(15)	1		540		(15)	1
Asset-backed securities		-		-	-		5		(2)	1		5		(2)	1
Total temporarily impaired securities	$	14,959	$	(93)	23	$	30,529	$	(1,300)	47	$	45,488	$	(1,393)	70

The municipal bond portfolio has an unrealized loss of $604 thousand at June 30, 2015 compared to $292 thousand at year-end 2014.  This number of securities in this portfolio with an unrealized loss increased from 23 to 40 and the loss in this portfolio is deemed to be non-credit related and no other-than-temporary impairment charges have been recorded.

The trust preferred portfolio contains 7 securities with a fair value of $5.3 million and an unrealized loss of $621 thousand. The trust-preferred securities held by the Bank are single entity issues, not pooled trust preferred securities.  Therefore, the impairment review of these securities is based only on the issuer and the security cannot be impaired by the performance of other issuers as if it was a pooled trust-preferred bond. All of the Bank’s trust preferred securities are single issue, variable rate notes with long maturities (2027 – 2028).  None of these bonds have suspended or missed a dividend payment. At June 30, 2015, the Bank believes it will be able to collect all interest and principal due on these bondsand no other-than-temporary-impairment charges were recorded. 

The PLMBS sector shows a net unrealized gain $58 thousand with all bonds showing an unrealized gain.  Even though there is no unrealized loss, due to the nature of these bonds, they are evaluated closely. These bonds were all rated AAA at time of purchase, but have since experienced rating declines. Some have experienced increased delinquencies and defaults, while others have seen the credit support increase as the bonds paid-down. The Bank monitors the performance of the PLMBS investments on a regular basis and reviews delinquencies, default rates, credit support levels and various cash flow stress test scenarios. In determining the credit related loss, Management considers all principal past due 60 days or more as a loss. If additional principal moves beyond 60 days past due, it will also be considered a loss. As a result of the analysis on PLMBS it was determined that a $20 thousand impairment charge was required at the end of the first

10

quarter; however, no additional impairment charge was required at June 30, 2015.   It is primarily a result of the cumulative OTTI charges that these bonds are showing an unrealized gain at quarter end.  The Bank has recorded $555 thousand of cumulative impairment charges on this portfolio. Management continues to monitor these securities and it is possible that additional write-downs may occur if current loss trends continue. The Bank is currently participating in a class-action lawsuit against one PLMBS servicer that centers on defective warranties and representations made as part of the underwriting process. The following table represents the cumulative credit losses on securities recognized in earnings as of June 30, 2015 and 2014.

(Dollars in thousands)	Six Months Ended
	2015		2014
Balance of cumulative credit-related OTTI at January 1	$	535	$	515
Additions for credit-related OTTI not previously recognized		20		-
Additional increases for credit-related OTTI previously recognized when there is no intent to sell
and no requirement to sell before recovery of amortized cost basis		-		-
Decreases for previously recognized credit-related OTTI because there was an intent to sell		-		-
Reduction for increases in cash flows expected to be collected		-		-
Balance of credit-related OTTI at June 30	$	555	$	515

The Bank held $439 thousand of restricted stock at June 30, 2015.  Except for $30 thousand, this investment represents stock in FHLB Pittsburgh. The Bank is required to hold this stock to be a member of FHLB and it is carried at cost of $100 per share. FHLB stock is evaluated for impairment primarily based on an assessment of the ultimate recoverability of its cost. As a government sponsored entity, FHLB has the ability to raise funding through the U.S. Treasury that can be used to support its operations.  There is not a public market for FHLB stock and the benefits of FHLB membership (e.g., liquidity and low cost funding) add value to the stock beyond purely financial measures. Management intends to remain a member of the FHLB and believes that it will be able to fully recover the cost basis of this investment.

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Note 6. Loans

The Bank reports its loan portfolio based on the primary collateral of the loan. It further classifies these loans by the primary purpose, either consumer or commercial. The Bank’s residential real estate loans include long-term loans to individuals and businesses secured by mortgages on the borrower’s real property and include home equity loans.  Construction loans are made to finance the purchase of land and the construction of residential and commercial buildings thereon, and are secured by mortgages on real estate.  Commercial real estate loans include construction, owner and non-owner occupied properties and farm real estate.  Commercial loans are made to businesses of various sizes for a variety of purposes including property, plant and equipment, working capital and loans to government municipalities.  Commercial lending is concentrated in the Bank’s primary market, but also includes purchased loan participations. Consumer loans are comprised of installment loans and unsecured personal lines of credit. 

A summary of loans outstanding, by primary collateral, at the end of the reporting periods is as follows:

						Change
(Dollars in thousands)	June 30, 2015		December 31, 2014			Amount	%
Residential Real Estate 1-4 Family
Consumer first liens	$	103,852	$	105,014	$	(1,162)	(1.1)
Consumer junior liens and lines of credit		39,915		38,132		1,783	4.7
Total consumer		143,767		143,146		621	0.4
Commercial first lien		60,438		56,300		4,138	7.3
Commercial junior liens and lines of credit		5,637		5,663		(26)	(0.5)
Total commercial		66,075		61,963		4,112	6.6
Total residential real estate 1-4 family		209,842		205,109		4,733	2.3
Residential real estate - construction
Consumer		1,736		1,627		109	6.7
Commercial		6,676		8,088		(1,412)	(17.5)
Total residential real estate construction		8,412		9,715		(1,303)	(13.4)
Commercial real estate		317,329		326,482		(9,153)	(2.8)
Commercial		192,224		179,071		13,153	7.3
Total commercial		509,553		505,553		4,000	0.8
Consumer		5,405		6,154		(749)	(12.2)
		733,212		726,531		6,681	0.9
Less: Allowance for loan losses		(9,450)		(9,111)		(339)	(3.7)
Net Loans	$	723,762	$	717,420	$	6,342	0.9
Included in the loan balances are the following:
Net unamortized deferred loan costs	$	169	$	(76)
Loans pledged as collateral for borrowings and commitments from:
FHLB	$	612,011	$	602,633
Federal Reserve Bank		54,844		56,367
	$	666,855	$	659,000

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Note 7. Loan Quality

The following table presents, by class, the activity in the Allowance for Loan Losses (ALL) for the periods ended:

	Residential Real Estate 1-4 Family
			Junior Liens &				Commercial
(Dollars in thousands)	First Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Total
Allowance at March 31, 2015	$	1,260	$	334	$	263	$	5,600	$	1,628	$	125	$	9,210
Charge-offs		(43)		-		(21)		-		(17)		(26)		(107)
Recoveries		1		-		-		14		8		14		37
Provision		75		25		(22)		72		152		8		310
Allowance at June 30, 2015	$	1,293	$	359	$	220	$	5,686	$	1,771	$	121	$	9,450
Allowance at December 31, 2014	$	1,225	$	334	$	226	$	5,417	$	1,773	$	136	$	9,111
Charge-offs		(43)		-		(21)		-		(218)		(78)		(360)
Recoveries		3		-		-		14		14		33		64
Provision		108		25		15		255		202		30		635
Allowance at June 30, 2015	$	1,293	$	359	$	220	$	5,686	$	1,771	$	121	$	9,450
Allowance at March 31, 2014	$	1,133	$	276	$	374	$	5,509	$	2,309	$	144	$	9,745
Charge-offs		(241)		-		-		(234)		(11)		(37)		(523)
Recoveries		-		-		-		-		13		18		31
Provision		187		(10)		(113)		137		55		10		266
Allowance at June 30, 2014	$	1,079	$	266	$	261	$	5,412	$	2,366	$	135	$	9,519
Allowance at December 31, 2013	$	1,108	$	278	$	291	$	5,571	$	2,306	$	148	$	9,702
Charge-offs		(257)		-		(27)		(348)		(12)		(80)		(724)
Recoveries		3		-		-		-		33		41		77
Provision		225		(12)		(3)		189		39		26		464
Allowance at June 30, 2014	$	1,079	$	266	$	261	$	5,412	$	2,366	$	135	$	9,519

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The following table presents, by class, loans that were evaluated for the ALL under the specific reserve (individually) and those that were evaluated under the general reserve (collectively) and the amount of the ALL established in each class as of June  30, 2015 and December 31, 2014:

	Residential Real Estate 1-4 Family
			Junior Liens &				Commercial
(Dollars in thousands)	First Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Total
June 30, 2015
Loans evaluated for allowance:
Individually	$	1,083	$	51	$	513	$	21,512	$	237	$	-	$	23,396
Collectively		163,207		45,501		7,899		295,817		191,987		5,405		709,816
Total	$	164,290	$	45,552	$	8,412	$	317,329	$	192,224	$	5,405	$	733,212
Allowance established for loans evaluated:
Individually	$	-	$	-	$	-	$	2	$	8	$	-	$	10
Collectively		1,293		359		220		5,684		1,763		121		9,440
Allowance at June 30, 2015	$	1,293	$	359	$	220	$	5,686	$	1,771	$	121	$	9,450
December 31, 2014
Loans evaluated for allowance:
Individually	$	1,171	$	51	$	931	$	22,307	$	1,298	$	-	$	25,758
Collectively		160,143		43,744		8,784		304,175		177,773		6,154		700,773
Total	$	161,314	$	43,795	$	9,715	$	326,482	$	179,071	$	6,154	$	726,531
Allowance established for loans evaluated:
Individually	$	-	$	-	$	-	$	60	$	171	$	-	$	231
Collectively		1,225		334		226		5,357		1,602		136		8,880
Allowance at December 31, 2014	$	1,225	$	334	$	226	$	5,417	$	1,773	$	136	$	9,111

14

The following table shows additional information about those loans considered to be impaired at June  30, 2015 and December 31, 2014:

	Impaired Loans
	With No Allowance				With Allowance
(Dollars in thousands)			Unpaid					Unpaid
	Recorded		Principal		Recorded		Principal		Related
June 30, 2015	Investment		Balance		Investment		Balance		Allowance
Residential Real Estate 1-4 Family
First liens	$	1,601	$	1,778	$	-	$	-	$	-
Junior liens and lines of credit		117		144		-		-		-
Total		1,718		1,922		-		-		-
Residential real estate - construction		513		551		-		-		-
Commercial real estate		21,317		25,297		195		278		2
Commercial		337		397		9		10		8
Total	$	23,885	$	28,167	$	204	$	288	$	10

December 31, 2014
Residential Real Estate 1-4 Family
First liens	$	1,804	$	2,002	$	-	$	-	$	-
Junior liens and lines of credit		169		195		-		-		-
Total		1,973		2,197		-		-		-
Residential real estate - construction		931		977		-		-		-
Commercial real estate		21,487		25,744		862		1,001		60
Commercial		78		80		1,274		1,990		171
Total	$	24,469	$	28,998	$	2,136	$	2,991	$	231

15

The following table shows the average of impaired loans and related interest income for the three and six months ended June  30, 2015 and 2014:

	Three Months Ended				Six Months Ended
	June 30, 2015				June 30, 2015
	Average		Interest		Average		Interest
(Dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Residential Real Estate 1-4 Family
First liens	$	1,618	$	9	$	1,723	$	16
Junior liens and lines of credit		117		-		131		-
Total		1,735		9		1,854		16
Residential real estate - construction		516		-		723		-
Commercial real estate		21,756		174		21,971		327
Commercial		361		-		1,012		-
Total	$	24,368	$	183	$	25,560	$	343
	Three Months Ended				Six Months Ended
	June 30, 2014				June 30, 2014
	Average		Interest		Average		Interest
(Dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Residential Real Estate 1-4 Family
First liens	$	2,289	$	15	$	2,753	$	25
Junior liens and lines of credit		120		-		123		-
Total		2,409		15		2,876		25
Residential real estate - construction		527		-		530		-
Commercial real estate		22,399		81		24,032		174
Commercial		2,056		-		2,074		1
Total	$	27,391	$	96	$	29,512	$	200

16

The following table presents the aging of payments of the loan portfolio:

(Dollars in thousands)			Loans Past Due and Still Accruing										Total
	Current		30-59 Days		60-89 Days		90 Days+		Total		Non-Accrual		Loans
June 30, 2015
Residential Real Estate 1-4 Family
First liens	$	162,515	$	58	$	625	$	153	$	836	$	939	$	164,290
Junior liens and lines of credit		45,171		167		97		-		264		117		45,552
Total		207,686		225		722		153		1,100		1,056		209,842
Residential real estate - construction		7,106		793		-		-		793		513		8,412
Commercial real estate		309,525		367		-		-		367		7,437		317,329
Commercial		191,849		29		-		-		29		346		192,224
Consumer		5,369		15		11		10		36		-		5,405
Total	$	721,535	$	1,429	$	733	$	163	$	2,325	$	9,352	$	733,212

December 31, 2014
Residential Real Estate 1-4 Family
First liens	$	158,197	$	1,531	$	297	$	165	$	1,993	$	1,124	$	161,314
Junior liens and lines of credit		43,424		174		28		-		202		169		43,795
Total		201,621		1,705		325		165		2,195		1,293		205,109
Residential real estate - construction		8,784		-		-		-		-		931		9,715
Commercial real estate		317,576		336		-		140		476		8,430		326,482
Commercial		177,407		12		15		-		27		1,637		179,071
Consumer		6,056		59		22		17		98		-		6,154
Total	$	711,444	$	2,112	$	362	$	322	$	2,796	$	12,291	$	726,531

17

The following table reports the internal credit rating for the loan portfolio.  Consumer purpose loans (mortgage, home equity and installment) are assigned a rating of either pass or substandard.  Substandard consumer loans are comprised of loans 90 days or more past due and still accruing, and nonaccrual loans.  Commercial loans may be assigned any rating in accordance with the Bank’s internal risk rating system.

(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
June 30, 2015
Residential Real Estate 1-4 Family
First liens	$	158,575	$	2,240	$	3,475	$	-	$	164,290
Junior liens and lines of credit		45,273		29		250		-		45,552
Total		203,848		2,269		3,725		-		209,842
Residential real estate - construction		7,899		-		513		-		8,412
Commercial real estate		294,338		10,732		12,259		-		317,329
Commercial		183,559		7,256		1,409		-		192,224
Consumer		5,395		-		10		-		5,405
Total	$	695,039	$	20,257	$	17,916	$	-	$	733,212

December 31, 2014
Residential Real Estate 1-4 Family
First liens	$	155,676	$	1,919	$	3,719	$	-	$	161,314
Junior liens and lines of credit		43,559		29		207		-		43,795
Total		199,235		1,948		3,926		-		205,109
Residential real estate - construction		8,784		-		931		-		9,715
Commercial real estate		301,149		10,578		14,755		-		326,482
Commercial		170,774		5,413		2,884		-		179,071
Consumer		6,137		-		17		-		6,154
Total	$	686,079	$	17,939	$	22,513	$	-	$	726,531

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The following table presents information on the Bank’s Troubled Debt Restructuring (TDR) loans:

								Troubled Debt Restructurings
								That Have Defaulted on
(Dollars in thousands)	Troubled Debt Restructurings							Modified Terms YTD
	Number of	Recorded						Number of	Recorded
	Contracts	Investment		Performing*		Nonperforming*		Contracts	Investment
June 30, 2015
Residential real estate - construction	1	$	513	$	513	$	-	-	$	-
Residential real estate	4		661		661		-	-		-
Commercial real estate	12		15,493		1,493		-	-		-
Total	17	$	16,667	$	2,667	$	0	-	$	-
December 31, 2014
Residential real estate - construction	1	$	521	$	-	$	521	-	$	-
Residential real estate	5		699		673		26	-		-
Commercial real estate	12		15,748		14,283		1,465	-		-
Total	18	$	16,968	$	14,956	$	2,012	-	$	-

*The performing status is determined by the loan’s compliance with the modified terms.

There were no new TDR loans made inthe first six months of 2015 or 2014.

Note 8. Pension

The components of pension expense for the periods presented are as follows:

	Three Months Ended June 30				Six Months Ended June 30
(Dollars in thousands)	2015		2014		2015		2014
Components of net periodic cost:
Service cost	$	92	$	83	$	192	$	169
Interest cost		172		194		350		391
Expected return on plan assets		(296)		(291)		(592)		(581)
Recognized net actuarial loss		123		81		254		163
Net period cost	$	91	$	67	$	204	$	142

The Bank expects its pension expense toincrease to approximately $387 thousand in 2015 compared to $276 thousand in 2014. 

In October, 2014, the Society of Actuaries released new mortality tables for pension plans. The new tables are expected to raise the assumed life of plan participants due to refinements in age and gender distribution of participants. This change is expected to result in higher pension contribution requirements, lower balance sheet funded status, pricier lump-sum payouts, and higher PBGC variable rate premiums. The Bank has not adopted the new mortality tables. If the tables had been adopted at year-end 2014, it is estimated that the new tables would reduce the funded status by $1.6 million and increase the 2015 pension expense by $272 thousand over the current 2015 estimate.  The Bank is still in the process of reviewing the effect of the new tables and is also watching the IRS for its decision on adoption of the new table. Therefore an adoption date for the new tables has not been determined.   

Note 9.  Fair Value Measurements and Fair Values of Financial Instruments

Management uses its best judgment in estimating the fair value of the Corporation’s financial instruments; however, there are inherent weaknesses in any estimation technique.  Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Corporation could have realized in a sales transaction on the dates indicated.  The estimated fair value amounts have been measured as of their respective period-

19

ends and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates.  As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates maybe different than the amounts reported at each year-end.

FASB ASC Topic 820, “Financial Instruments”, requires disclosure of the fair value of financial assets and liabilities, including those financial assets and liabilities that are not measured and reported at fair value on a recurring and nonrecurring basis. The Corporation does not report any nonfinancial assets at fair value. FASB ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy under FASB ASC Topic 820 are as follows:

Level 1: Valuation is based on unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2:  Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.  There may be substantial differences in the assumptions used for securities within the same level.  For example, prices for U.S. Agency securities have fewer assumptions and are closer to level 1 valuations than the private label mortgage backed securities that require more assumptions and are closer to level 3 valuations.

Level 3: Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Corporation’s assumptions regarding what market participants would assume when pricing a financial instrument. 

An asset’s 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 following methods and assumptions were used to estimate the fair values of the Corporation’s financial instruments at June 30, 2015 and December 31, 2014.

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

Investment securities:  The fair value of investment securities is determined in accordance with the methods described under FASB ASC Topic 820 as discussed below.

Restricted stock:  The carrying value of restricted stock approximates its fair value based on redemption provisions for the restricted stock.

Loans held for sale: The fair value of loans held for sale is determined by the price set between the Bank and the purchaser prior to origination. These loans are usually sold at par.

Net loans:  The fair value of fixed-rate loans is estimated for each major type of loan (e.g. real estate, commercial, industrial and agricultural and consumer) by discounting the future cash flows associated with such loans using rates currently offered for loans with similar terms to borrowers of comparable credit quality.  The model considers scheduled principal maturities, repricing characteristics, prepayment assumptions and interest cash flows.  The discount rates used are estimated based upon consideration of a number of factors including the treasury yield curve, expense and service charge factors. For variable rate loans that reprice frequently and have no significant change in credit quality, carrying values approximate the fair value.

Accrued Interest Receivable:  The carrying amount is a reasonable estimate of fair value.

Mortgage servicing rights:  The fair value of mortgage servicing rights is based on observable market prices when available or the present value of expected future cash flows when not available.  Assumptions such as loan default rates, costs to service, and prepayment speeds significantly affect the estimate of future cash flows. Mortgage servicing rights are carried at the lower of cost or fair value.

Deposits, Securities sold under agreements to repurchase and Long-term debt:  The fair value of demand deposits, savings accounts, and money market deposits is the amount payable on demand at the reporting date.  The fair value of fixed-rate certificates of deposit and long-term debt is estimated by discounting the future cash flows using rates approximating those currently offered for certificates of deposit and borrowings with similar remaining maturities.  For securities sold under agreements to repurchase, the carrying value approximates a reasonable estimate of the fair value.

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Accrued interest payable:  The carrying amount is a reasonable estimate of fair value.

Derivatives:  The fair value of the interest rate swaps is based on other similar financial instruments and is classified as Level 2.

The following information regarding the fair value of the Corporation’s financial instruments should not be interpreted as an estimate of the fair value of the entire Corporation since a fair value calculation is only provided for a limited portion of the Corporation’s assets and liabilities.  Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Corporation’s disclosures and those of other companies may not be meaningful. 

The fair value of the Corporation's financial instruments are as follows:

	June 30, 2015
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	64,403	$	64,403	$	64,403	$	-	$	-
Investment securities available for sale		176,424		176,424		242		176,182		-
Restricted stock		439		439		-		439		-
Loans held for sale		1,755		1,755		-		1,755		-
Net loans		723,762		730,507		-		-		730,507
Accrued interest receivable		3,068		3,068		-		3,068		-
Mortgage servicing rights		133		133		-		-		133
Financial liabilities:
Deposits	$	916,059	$	916,110	$	-	$	916,110	$	-
Accrued interest payable		125		125		-		125		-
	December 31, 2014
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	48,593	$	48,593	$	48,593	$	-	$	-
Investment securities available for sale		171,751		171,751		1,053		170,698		-
Restricted stock		438		438		-		438		-
Loans held for sale		389		389		-		389		-
Net loans		717,420		721,680		-		-		721,680
Accrued interest receivable		3,038		3,038		-		3,038		-
Mortgage servicing rights		143		143		-		-		143
Financial liabilities:
Deposits	$	881,181	$	881,289	$	-	$	881,289	$	-
Securities sold under agreements to repurchase		9,079		9,079		-		9,079		-
Accrued interest payable		169		169		-		169		-
Interest rate swaps		191		191		-		191		-

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Recurring Fair Value Measurements

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June  30, 2015 and December 31, 2014 are as follows:

(Dollars in Thousands	Fair Value at June 30, 2015
Asset  Description	Level 1		Level 2		Level 3		Total
Equity securities	$	242	$	-	$	-	$	242
U.S. Government and Agency securities		-		16,384		-		16,384
Municipal securities		-		72,132		-		72,132
Trust Preferred Securities		-		5,328		-		5,328
Agency mortgage-backed securities		-		80,739		-		80,739
Private-label mortgage-backed securities		-		1,560		-		1,560
Asset-backed securities		-		39		-		39
Total assets	$	242	$	176,182	$	-	$	176,424

(Dollars in Thousands)	Fair Value at December 31, 2014
Asset  Description	Level 1		Level 2		Level 3		Total
Equity securities	$	1,053	$	-	$	-	$	1,053
U.S. Government and Agency securities		-		15,963		-		15,963
Municipal securities		-		68,366		-		68,366
Trust Preferred Securities		-		5,137		-		5,137
Agency mortgage-backed securities		-		79,494		-		79,494
Private-label mortgage-backed securities		-		1,695		-		1,695
Asset-backed securities		-		43		-		43
Total assets	$	1,053	$	170,698	$	-	$	171,751
Liability Description
Interest rate swaps	$	-	$	191	$	-	$	191
Total liabilities	$	-	$	191	$	-	$	191

The Corporation used the following methods and significant assumptions to estimate the fair values for financial assets measured at fair value on a recurring basis.

Investment securities:  Level 1 securities represent equity securities that are valued using quoted market prices from nationally recognized markets. Level 2 securities represent debt securities that are valued using a mathematical model based upon the specific characteristics of a security in relationship to quoted prices for similar securities.    

Interest rate swaps: The interest rate swaps are valued using a discounted cash flow model that uses verifiable market environment inputs to calculate the fair value. This method is not dependent on the input of any significant judgments or assumptions by Management.  

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Nonrecurring Fair Value Measurements

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at June  30, 2015 and December 31, 2014 are as follows:

(Dollars in Thousands)
	Fair Value at June 30, 2015
Asset  Description	Level 1		Level 2		Level 3		Total
Impaired loans (1)	$	-	$	-	$	636	$	636
Premises held-for-sale (1)		-		-		358		358
Other real estate owned (1)		-		-		449		449
Mortgage servicing rights		-		-		133		133
Total assets	$	-	$	-	$	1,576	$	1,576

(Dollars in Thousands)	Fair Value at December 31, 2014
Asset  Description	Level 1		Level 2		Level 3		Total
Impaired loans (1)	$	-	$	-	$	3,469	$	3,469
Other real estate owned (1)		-		-		760		760
Mortgage servicing rights		-		-		143		143
Total assets	$	-	$	-	$	4,372	$	4,372

(1) Includes assets directly charged-down to fair value during the year-to-date period.

The Corporation used the following methods and significant assumptions to estimate the fair values for financial assets measured at fair value on a nonrecurring basis.

Impaired loans: Impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral.  Collateral values are estimated using Level 3 inputs based on customized discounting criteria. 

Other real estate: The fair value of other real estate, upon initial recognition, is estimated using Level 2 inputs within the fair value hierarchy based on observable market data and Level 3 inputs based on customized discounting criteria.  In connection with the measurement and initial recognition of the foregoing assets, the Corporation recognizes charge-offs through the allowance for loan losses.  Subsequent charge-offs are recognized as an expense.

Mortgage servicing rights: The fair value of mortgage servicing rights, upon initial recognition, is estimated using a valuation model that calculates the present value of estimated future net servicing income.  The model incorporates Level 3 assumptions such as cost to service, discount rate, prepayment speeds, default rates and losses. 

The Corporation did not record any liabilities at fair value for which measurement of the fair value was made on a nonrecurring basis at June  30, 2015. For financial assets and liabilities measured at fair value on a recurring basis, there were no transfers of financial assets or liabilities between Level 1 and Level 2 during the period ending June  30, 2015.

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The following table presents additional quantitative information about Level 3 assets measured at fair value on a nonrecurring basis:

		Quantitative Information about Level 3 Fair Value Measurements
(Dollars in Thousands)		at June 30, 2015
					Range
Asset  Description		Fair Value	Valuation Technique	Unobservable Input	(Weighted Average)
Impaired loans (1)	$	636	Appraisal	Appraisal Adjustments (2)	0% - 10%(4.39%)
				Cost to sell	0% - 8%(4.49%)
Premises held-for-sale (1)		358	Appraisal	Appraisal Adjustments (2)
Other real estate owned (1)		449	Appraisal	Appraisal Adjustments (2)
				Cost to sell	8%(8%)
Mortgage servicing rights		133	Discounted Cash Flow (3)
		at December 31, 2014
Impaired loans (1)	$	3,469	Appraisal	Appraisal Adjustments (2)	0% - 100%(26%)
				Cost to sell	0% - 10%(5%)
Other real estate owned (1)		760	Appraisal	Appraisal Adjustments (2)
				Cost to sell	8%(8%)
Mortgage servicing rights		143	Discounted Cash Flow (3)
(1) Includes assets directly charged-down to fair value during the year-to-date period.
(2) Qualitative adjustments are discounts specific to each asset and are made as needed.
(3) Valuation and inputs are determined by a third-party pricing service without adjustment.

Note 10.  Financial Derivatives

The Board of Directors has given Management authorization to enter into additional derivative activity including interest rate swaps, caps and floors, forward-rate agreements, options and futures contracts in order to hedge interest rate risk.  The Bank is exposed to credit risk equal to the positive fair value of a derivative instrument, if any, as a positive fair value indicates that the counterparty to the agreement is financially liable to the Bank.  To limit this risk, counterparties must have an investment grade long-term debt rating and individual counterparty credit exposure is limited by Board approved parameters.  Management anticipates continuing to use derivatives, as permitted by its Board-approved policy, to manage interest rate risk.

Fair Value of Derivative Instruments in the Consolidated Balance Sheets were as follows as of June  30, 2015 and December 31, 2014:

Fair Value of Derivative Instruments
(Dollars in thousands)		Balance Sheet
Date	Type	Location	Fair Value
June 30, 2015	Interest rate contracts	Other liabilities	$	-
December 31, 2014	Interest rate contracts	Other liabilities	$	191

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The Effect of Derivative Instruments on the Statement of Income for the Three and Six Months Ended June  30, 2015 and 2014 follows:

Derivatives in ASC Topic 815 Cash Flow Hedging Relationships
(Dollars in thousands)							Amount of Gain
						Location of	or (Loss)
						Gain or (Loss)	Recognized in
						Recognized in	Income on
			Location of	Amount of Gain		Income on	Derivatives
	Amount of Gain		Gain or (Loss)	or (Loss)		Derivative (Ineffective	(Ineffective Portion
	or (Loss)		Reclassified from	Reclassified from		Portion and Amount	and Amount
	Recognized in OCI		Accumulated OCI	Accumulated OCI		Excluded from	Excluded from
	net of tax on Derivative		into Income	into Income		Effectiveness	Effectiveness
Date / Type	(Effective Portion)		(Effective Portion)	(Effective Portion)		Testing)	Testing)
Interest rate contracts
Three months ended:
June 30, 2015	$	64	Interest Expense	$	(64)	Other income (expense)	$	-
June 30, 2014	$	60	Interest Expense	$	(94)	Other income (expense)	$	-
Six months ended:
June 30, 2015	$	126	Interest Expense	$	(160)	Other income (expense)	$	-
June 30, 2014	$	117	Interest Expense	$	(189)	Other income (expense)	$	-

Interest Rate Swap Agreements (“Swap Agreements”)

As of June 30, 2015, the Bank had no swap agreements outstanding. The Bank had entered into interest rate swap agreements as part of its asset/liability management program.  The swap agreements were free-standing derivatives and were recorded at fair value in the Corporation’s consolidated statements of condition.  The Bank was party to master netting arrangements with its financial institution counterparties; however, the Bank did not offset assets and liabilities under these arrangements for financial statement presentation purposes.  The master netting arrangements provided for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract.  Collateral, in the form of marketable securities, was posted by the counterparty with net liability positions in accordance with contract thresholds. 

Securities Sold Under Agreements to Repurchase (“Repurchase Agreements”)

As of June 30, 2015, the Bank had no repurchase agreements outstanding.  The Bank entered into agreements under which it sold securities subject to an obligation to repurchase the same or similar securities.  Under these arrangements, the Bank may have transferred legal control over the assets but still retained effective control through an agreement that both entitled and obligated the Bank to repurchase the agreements.  As a result, these repurchase agreements were accounted for as collateralized financing arrangements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities.  The obligation to repurchase the securities was reflected as a liability in the Corporation’s consolidated statements of condition, while the securities underlying the repurchase agreements remained in the respective investment securities asset accounts.  In other words, there was no offsetting or netting of the investment securities assets with the repurchase agreement liabilities.  In addition, as the Bank did not enter into reverse repurchase agreements, there was no such offsetting to be done with repurchase agreements.

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The following table presents the liabilities subject to an enforceable master netting arrangement or repurchase agreements as of June  30, 2015 and December 31, 2014.  As of these dates, all of the Bank’s swap agreement with an institutional counterparty  was in a liability position.  Therefore, there were no assets to be recognized in the consolidated statements of condition.  The Bank has no swap agreements with our commercial banking customers.

						Net Amounts		Gross Amounts Not Offset in the
		Gross		Gross Amounts		of Liabilities		Statements of Condition
		Amounts of		Offset in the		Presented in the
		Recognized		Statements of		Statements of		Financial		Cash Collateral		Net
(Dollars in thousands)		Liabilities		Condition		Condition		Instruments		Pledged		Amount
Interest Rate Swap Agreements
June 30, 2015	$	-	$	-	$	-	$	-	$	-	$	-
December 31, 2014		191		-		191		191		-		-

Note 11. Capital Ratios

Capital adequacy is currently defined by regulatory agencies through the use of several minimum required ratios.  In July 2013, Federal Banking regulators approved the final rules from the Basel Committee on Banking Supervision for the regulation of capital requirements for U.S. Banks, generally referred to as “Basel III.”  Basel III imposes significantly higher capital requirements and more restrictive leverage and liquidity ratios than those in place at the end of 2014.  The capital ratios to be considered “well capitalized” under Basel III are: common equity tier 1 of 6.5%, Tier 1 leverage of 5%, Tier 1 risk-based capital of 8%, and Total Risk-Based capital of 10%.  The common equity tier 1 ratio is a new capital ratio under Basel III.  Common equity consists of common stock, additional paid-in capital and retained earnings.  The Tier 1 risk-based capital ratio of 8% has been increased from 6%.  The new rule also includes a provision for banks to make a one-time irrevocable choice to exclude accumulated other comprehensive income (AOCI) from its common equity Tier 1 capital.  The Bank elected to exclude AOCI from the capital calculation with its March 31, 2015 regulatory filing.  In addition, a capital conservation buffer will be required to be maintained above the minimum capital ratios to avoid any capital distribution restrictions.  The capital conservation buffer will be phased in from 0% in 2015 to 2.5% in 2019.  The Basel III capital rules took effect for the Corporation and the Bank on January 1, 2015.  At June 30, 2015, the Corporation and the Bank were both well capitalized as defined by the banking regulatory agencies. 

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The following table summarizes regulatory capital information as of June  30, 2015 and December 31, 2014 on a consolidated basis and for the Bank, as defined.  Regulatory capital ratios for June  30, 2015 were calculated in accordance with the Basel III rules, whereas the December 31, 2015 regulatory ratios were calculated in accordance with Basel I rules.  The minimum regulatory ratios shown below define capital levels under Basel III rules.

			Regulatory Ratios
			Adequately	Well
			Capitalized	Capitalized
(Dollars in thousands)	June 30, 2015	December 31, 2014	Minimum	Minimum
Common Equity Tier 1 Risk-based Capital Ratio (1)
Franklin Financial Services Corporation	14.48%	N/A	4.50%	N/A
Farmers & Merchants Trust Company	14.39%	N/A	4.50%	6.50%
Tier 1 Risk-based Capital Ratio (2)
Franklin Financial Services Corporation	14.48%	14.19%	6.00%	N/A
Farmers & Merchants Trust Company	14.39%	13.96%	6.00%	8.00%
Total Risk-based Capital Ratio (3)
Franklin Financial Services Corporation	15.73%	15.49%	8.00%	N/A
Farmers & Merchants Trust Company	15.64%	15.26%	8.00%	10.00%
Tier 1 Leverage Ratio (4)
Franklin Financial Services Corporation	10.17%	9.69%	4.00%	N/A
Farmers & Merchants Trust Company	9.96%	9.55%	4.00%	5.00%
(1) Common equity Tier 1 capital/ total risk-weighted assets (2) Tier 1 capital / total risk-weighted assets
(3) Total risk-based capital / total risk-weighted assets, (4) Tier 1 capital / average quarterly assets

1Note 12. Reclassification

Certain prior period amounts may have been reclassified to conform to the current year presentation.  Such reclassifications did not affect the Corporation’s financial position or results of operations.

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Management’s Discussion and Analysis of Results of Operations and Financial Condition

For the Three and Six Months Ended June  30, 2015and 2014

Forward Looking Statements

Certain statements appearing herein which are not historical in nature are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements refer to a future period or periods, reflecting management’s current views as to likely future developments, and use words such as “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” or similar terms.  Because forward-looking statements involve certain risks, uncertainties and other factors over which the Corporation has no direct control, actual results could differ materially from those contemplated in such statements.  These factors include (but are not limited to) the following: general economic conditions, changes in interest rates, changes in the Corporation’s cost of funds, changes in government monetary policy, changes in government regulation and taxation of financial institutions, changes in the rate of inflation, changes in technology, the intensification of competition within the Corporation’s market area, and other similar factors.

Critical Accounting Policies

Management has identified critical accounting policies for the Corporation to include Allowance for Loan Losses, Mortgage Servicing Rights, Financial Derivatives, Temporary Investment Impairment and Stock-based Compensation.  There were no changes to the critical accounting policies disclosed in the 2014 Annual Report on Form 10-K in regards to application or related judgments and estimates used.  Please refer to Item 7 of the Corporation’s 2014 Annual Report on Form 10-K for a more detailed disclosure of the critical accounting policies.

Results of Operations

Year-to-Date Summary

At June  30, 2015, total assets were $1.029 billion, an increase of $27.1 million from December 31, 2014. Net loans increased to $723.8 million and total deposits increased to $916.1 million.  The Corporation reported net income for the first six months of 2015 of $5.4 million.  This is a 29.3% increase versus net income of $4.1 million for the same period in 2014.  Net income for 2015 was enhanced by two nonrecurring events that increased noninterest income by $899 thousand. These events included a gain of $171 thousand from the liquidation of an off-shore insurance company in which the Bank held an ownership interest and a $728 thousand gain on the conversion of equity securities held by the Bank as the result of an acquisition. Without these events, net income for the first six months would have been $4.8 million, a 15% increase over the prior year.  Total revenue (interest income and noninterest income) increased $1.3 million year-over-year boosted by these nonrecurring items. Interest income decreased $230 thousand,  while interest expense decreasedby  $387 thousand, resulting in a $157 thousand increase in net interest income. The provision for loan losses was $635 thousand for the period, $171 thousand more than in 2014. Noninterest income increased $1.5 million, whilenoninterest expense decreased $154 thousand. Income tax expense increased from $1.0 million in 2014 to $1.5 million in 2015. The effective tax rate increased from 19.7% in 2014 to 21.6% in 2015 due to a lower ratio of tax exempt income to income before federal income taxes.Diluted earnings per share increased to $1.26 in 2015 from $0.99 in 2014.  

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Key performance ratios as of, or for the six months ended June30, 2015 and 2014 and twelve months ended December 31, 2014 are listed below:

	June 30,		December 31,		June 30,
	2015		2014		2014
Performance measurements
Return on average assets*		1.07%		0.83%		0.82%
Return on average equity*		10.28%		8.44%		8.60%
Return on average tangible assets (1)*		1.09%		0.87%		0.85%
Return on average tangible equity (1)*		11.40%		9.72%		9.77%
Efficiency ratio (1)		66.11%		70.83%		70.63%
Net interest margin*		3.60%		3.56%		3.56%
Current dividend yield*		3.10%		3.09%		3.42%
Dividend payout ratio		28.41%		33.88%		34.23%
Shareholders' Value (per common share)
Diluted earnings per share	$	1.26	$	2.00	$	0.99
Basic earnings per share		1.27		2.01		0.99
Regular cash dividends paid		0.36		0.68		0.34
Book value		25.27		24.54		23.85
Tangible book value (1)		23.14		22.36		21.57
Market value		24.55		22.00		19.90
Market value/book value ratio		97.15%		89.65%		83.44%
Price/earnings multiple*		9.74		11.00		10.05
Safety and Soundness
Risk-based capital ratio (Total)		15.73%		15.49%		14.53%
Leverage ratio (Tier 1)		10.17%		9.69%		9.26%
Common equity ratio (Tier 1)		14.48%		-		-
Tangible common equity ratio (1)		9.63%		9.51%		8.93%
Nonperforming loans/gross loans		1.30%		1.74%		2.87%
Nonperforming assets/total assets		1.32%		1.63%		2.46%
Allowance for loan losses as a % of loans		1.29%		1.25%		1.30%
Net charge-offs/average loans*		0.08%		0.19%		0.18%
Trust assets under management (fair value)	$	598,085	$	605,796	$	582,647
* Annualized
(1) See GAAP versus Non-GAAP disclosures that follow

29

GAAP versus Non-GAAP Disclosure – The Corporation supplements its traditional GAAP measurements with Non-GAAP measurements. The Non-GAAP measurements include Return on Average Tangible Assets, Return on Average Tangible Equity, Tangible Book Value and Tangible Common Equity ratio. As a result of merger transactions, intangible assets (primarily goodwill, core deposit intangibles and customer list) were created. The Non-GAAP disclosures are intended to eliminate the effects of the intangible assets and allow for better comparisons to periods when such assets did not exist.  However, not all companies use the same calculation methods for the same non-GAAP measurements and therefore may not be comparable. The following table shows the adjustments made between the GAAP and NON-GAAP measurements:

GAAP Measurement	Calculation
Return on Average Assets	Net Income / Average Assets
Return on Average Equity	Net Income / Average Equity
Book Value	Total Shareholders’ Equity / Shares Outstanding
Non- GAAP Measurement	Calculation
Return on Average Tangible Assets	Net Income plus Intangible Amortization (net of tax) / Average Assets less Average Intangible Assets
Return on Average Tangible Equity	Net Income plus Intangible Amortization (net of tax) / Average Equity less Average Intangible Assets
Tangible Book Value	Total Shareholders’ Equity less Intangible Assets / Shares outstanding
Tangible Common Equity Ratio Efficiency Ratio	Total Shareholders’ Equity less Intangible Assets / Total Assets less Intangible Assets Noninterest expense  / tax equivalent net interest income plus noninterest income less net securities gains or losses

Comparison of the three months ended June 30, 2015 to the three months ended June 30, 2014:

Net Interest Income

The most important source of the Corporation’s earnings is net interest income, which is defined as the difference between income on interest-earning assets and the expense of interest-bearing liabilities supporting those assets.  Principal categories of interest-earning assets are loans and securities, while deposits, securities sold under agreements to repurchase (Repos), short-term borrowings and long-term debt are the principal categories of interest-bearing liabilities.  Demand deposits enhance net interest income because they are noninterest-bearing deposits. For the purpose of this discussion, balance sheet items refer to the average balance for the year and net interest income is adjusted to a fully taxable-equivalent basis.  This tax-equivalent adjustment facilitates performance comparisons between taxable and tax-free assets by increasing the tax-free income by an amount equivalent to the Federal income taxes that would have been paid if this income were taxable at the Corporation’s 34% Federal statutory rate. 

Tax equivalent net interest income for the second quarter of 2015increased $32 thousand quarter over quarter.  Average interest-earning assets increased $5.8 million from 2014,  but the yield on these assets decreased to 3.80% from 3.90% in 2014.  The average balance of investment securities increased $5.4 million while average loans decreased $2.8 million quarter over quarter.  Average commercial loans decreased $3.9 million and average mortgage loans decreased $2.5 million.  These decreases were partially offset with an increase in the average balance of consumer loans, including home equity loans, whichincreased by  $3.6 million.

Interest expense was $619 thousand for the second quarter, a decrease of $198 thousand from the 2014 total of $817 thousand.  Average interest-bearing liabilities decreased $18.7 million to $770.1 million for 2015 from an average balance of $788.8 million in 2014.  The average cost of these liabilities decreased from 0.42% in 2014 to  0.32% in 2015.  Average interest-bearing deposits increased $404 thousand and the cost of these deposits decreased from 0.36% to 0.32%.   The securities sold under agreements to repurchase (Repo) accounts were closed out in 2014 and transferred to other products.  All long-term debt was paid off in 2014.

The changes in the balance sheet and interest rates resulted in anincrease in tax equivalent net interest income of $32 thousand to $8.5 million in 2015 compared to $8.4 million in 2014.  The increase in net interest income was due to a $100 thousand increase from higher volume offset by a $68 thousand decrease due to changes in rates.

30

The following table presents average balances, tax-equivalent (T/E) interest income, and yields earned or rates paid on the assets or liabilities.  All nontaxable interest income has been adjusted to a tax-equivalent basis using a tax rate of 34%.

	For the Three Months Ended June 30,
	2015					2014
	Average		Income or		Average	Average		Income or		Average
(Dollars in thousands)	balance		expense		yield/rate	balance		expense		yield/rate
Interest-earning assets:
Interest-bearing obligations of other
banks and federal funds sold	$	52,114	$	72	0.55%	$	48,903	$	45	0.37%
Investment securities:
Taxable		121,383		621	2.05%		125,219		692	2.22%
Tax Exempt		55,611		613	4.41%		46,397		563	4.86%
Investments		176,994		1,234	2.80%		171,616		1,255	2.93%
Loans:
Commercial, industrial and agricultural		578,985		6,134	4.22%		582,877		6,184	4.20%
Residential mortgage		80,474		829	4.14%		82,954		854	4.13%
Home equity loans and lines		63,650		745	4.69%		58,750		772	5.27%
Consumer		6,490		79	4.88%		7,786		149	7.68%
Loans		729,599		7,787	4.25%		732,367		7,959	4.31%
Total interest-earning assets		958,707		9,093	3.80%		952,886		9,259	3.90%
Other assets		66,770					71,627
Total assets	$	1,025,477				$	1,024,513
Interest-bearing liabilities:
Deposits:
Interest-bearing checking	$	227,943		67	0.12%	$	206,850		60	0.12%
Money Management		382,738		387	0.41%		391,283		424	0.43%
Savings		65,738		12	0.07%		63,704		12	0.08%
Time		93,687		153	0.66%		107,865		198	0.74%
Total interest-bearing deposits		770,106		619	0.32%		769,702		694	0.36%
Securities sold under agreements to repurchase		-		-	-		6,855		2	0.15%
Other borrowings		-		-	-		12,286		121	3.93%
Total interest-bearing liabilities		770,106		619	0.32%		788,843		817	0.42%
Noninterest-bearing deposits		142,621					129,464
Other liabilities		6,751					7,871
Shareholders' equity		105,999					98,335
Total liabilities and shareholders' equity	$	1,025,477				$	1,024,513
T/E net interest income/Net interest margin				8,474	3.55%				8,442	3.55%
Tax equivalent adjustment				(515)					(498)
Net interest income			$	7,959				$	7,944

31

Provision for Loan Losses

For the second quarter of 2015, the Bank recorded net charge-offs of $70 thousand compared to $492 thousand in 2014.  Provision expense for the second quarter was $310 thousand and as a result, the allowance for loan losses (ALL) increased $240 thousand during the quarter.  For more information refer to the Loan Quality and Allowance for Loan Losses discussion in the Financial Condition section.

Noninterest Income

For the second quarter of 2015, noninterest income increased $254 thousand from the same period in 2014.  Investment and trust service fees increased due to higher recurring trust fees and an increase in estate fees. Loan service charges increased primarily due to a large commercial loan prepayment penalty. Deposit service charges increased due to higher fees from the Bank’s overdraft program.  The other real estate owned expense in 2014 was a writedown compared to none in 2015. The securities gains in both years were in the equity portfolio.

The following table presents a comparison of noninterest income for the three months ended June 30, 2015 and 2014.

	For the Three Months Ended
	June 30				Change
(Dollars in thousands)	2015		2014		Amount		%
Noninterest Income
Investment and trust services fees	$	1,388	$	1,101	$	287	26.1
Loan service charges		297		250		47	18.8
Mortgage banking activities		17		19		(2)	(10.5)
Deposit service charges and fees		586		525		61	11.6
Other service charges and fees		311		317		(6)	(1.9)
Debit card income		356		337		19	5.6
Increase in cash surrender value of life insurance		140		144		(4)	(2.8)
Other real estate owned		-		(62)		62	N/A
Other		13		10		3	30.0
Securities gain (losses), net		8		221		(213)	(96.4)
Total noninterest income	$	3,116	$	2,862	$	254	8.9

Noninterest Expense

Noninterest expense for the second quarter of 2015increased $44 thousand compared to the same period in 2014.  The increase in salaries and benefits was primarily due to a $47 thousand increase in salaries, primarily for merit increases, as well as a $24 thousand increase in pension expense and a $23 increase in health insurance expense.  Net occupancy expenses decreased compared to prior year due to less utility and snow removal expense in 2015.  Legal and professional fees decreased as 2014 had higher consulting expenses for the implementation of strategic initiatives.  The increase in data processing was due to higher charges for mobile banking, remote deposit capture, and Franklin Businesslink due to growth in volume, as well as the migration to a new mortgage origination system. The shares tax increase was due to the growth in the Bank’s balance sheet and shareholders’ equity.  FDIC insurance expense decreased over prior year due to a reduction in the assessment rate used to calculate the premium.Other expenses increased due to several one-time expenses the Bank took related to branch assets taken out of service.

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The following table presents a comparison of noninterest expense for the three months ended June  30, 2015 and 2014:

	For the Three Months Ended
(Dollars in thousands)	June 30				Change
Noninterest Expense	2015		2014		Amount		%
Salaries and benefits	$	4,203	$	4,107	$	96	2.3
Net occupancy expense		556		586		(30)	(5.1)
Furniture and equipment expense		239		237		2	0.8
Advertising		283		270		13	4.8
Legal and professional fees		203		353		(150)	(42.5)
Data processing		556		493		63	12.8
Pennsylvania bank shares tax		206		173		33	19.1
Intangible amortization		90		104		(14)	(13.5)
FDIC insurance		160		222		(62)	(27.9)
ATM/debit card processing		186		178		8	4.5
Other		977		892		85	9.5
Total noninterest expense	$	7,659	$	7,615	$	44	0.6

Provision for Income Taxes

For the second quarter of 2015, the Corporation recorded a Federal income tax expense of $632 thousand compared to $606 thousand for the same quarter in 2014. The effective tax rate was 20.3% for the second quarter of 2015 compared to 20.7% for the same period in 2014.  All taxable income for the Corporation is taxed at a rate of 34%.

Comparison of the six months ended June  30, 2015to the six months ended June  30, 2014:

Net Interest Income

Tax equivalent net interest income for the firsthalf of 2015increased $214 thousand from the prior year.  Average interest-earning assets increased $2.5 million from 2014and the yield on these assets decreased from 3.92% in 2014 to 3.87% in 2015.  The average balance of investment securities increased $9.4 million while average loans decreased $2.0 million year over year.  Average commercial loans decreased $3.2 million and average mortgage loans decreased $1.9 million.  These decreases were partially offset by an increase of $3.1 million in the average balance of consumer loans, including home equity loans.

Interest expense was $1.3 million for the first six months, a decrease of $387 thousand from the 2014 total of $1.6 million.  Average interest-bearing liabilities decreased $26.7 million to $759.5 million for 2015 from an average balance of $786.1 million in 2014.  The average cost of these liabilities decreased from 0.42% in 2014 to 0.33% in 2015.  Average interest-bearing deposits decreased $1.8 million and the cost of these deposits decreased from 0.37% to 0.33%.   The securities sold under agreements to repurchase (Repo) accounts were being closed out in 2014 and transferred to other products.  The final Repo account closed in January 2015.  Other borrowings reflect a short-term borrowing in 2015, as all long-term debt was paid off in 2014.

The changes in the balance sheet and interest rates resulted in anincrease in tax equivalent net interest income of $214 thousand to $16.9 million in 2015 compared to $16.6 million in 2014.  The increase in tax equivalentnet interest income was due to a $268 thousand increase from higher volume offset by a $54 thousand decrease due to changes in rates.

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The following table presents average balances, tax-equivalent (T/E) interest income, and yields earned or rates paid on the assets or liabilities.  All nontaxable interest income has been adjusted to a tax-equivalent basis using a tax rate of 34%.

	For the Six Months Ended June 30,
	2015					2014
	Average		Income or		Average	Average		Income or		Average
(Dollars in thousands)	balance		expense		yield/rate	balance		expense		yield/rate
Interest-earning assets:
Interest-bearing obligations of other
banks and federal funds sold	$	42,577	$	127	0.60%	$	47,550	$	84	0.36%
Investment securities:
Taxable		120,988		1,308	2.18%		122,885		1,358	2.23%
Tax Exempt		55,083		1,225	4.45%		43,755		1,101	5.32%
Investments		176,071		2,533	2.90%		166,640		2,459	2.98%
Loans:
Commercial, industrial and agricultural		574,924		12,147	4.22%		578,084		12,179	4.19%
Residential mortgage		80,902		1,653	4.10%		82,841		1,713	4.17%
Home equity loans and lines		63,778		1,496	4.73%		59,061		1,558	5.32%
Consumer		6,478		165	5.14%		8,077		301	7.52%
Loans		726,082		15,461	4.25%		728,063		15,751	4.31%
Total interest-earning assets		944,730		18,121	3.87%		942,253		18,294	3.92%
Other assets		66,786					71,420
Total assets	$	1,011,516				$	1,013,673
Interest-bearing liabilities:
Deposits:
Interest-bearing checking	$	216,313		120	0.11%	$	197,481		109	0.11%
Money Management		383,423		803	0.42%		391,317		845	0.44%
Savings		64,487		24	0.08%		62,325		24	0.08%
Time		95,180		313	0.66%		110,112		418	0.77%
Total interest-bearing deposits		759,403		1,260	0.33%		761,235		1,396	0.37%
Securities sold under agreements to repurchase		50		-	0.15%		12,548		9	0.15%
Other borrowings		12		-	0.30%		12,343		242	3.92%
Total interest-bearing liabilities		759,465		1,260	0.33%		786,126		1,647	0.42%
Noninterest-bearing deposits		139,399					122,807
Other liabilities		7,481					7,573
Shareholders' equity		105,171					97,167
Total liabilities and shareholders' equity	$	1,011,516				$	1,013,673
T/E net interest income/Net interest margin				16,861	3.60%				16,647	3.56%
Tax equivalent adjustment				(1,016)					(959)
Net interest income			$	15,845				$	15,688
All nontaxable interest income has been adjusted to a tax-equivalent basis, using a tax rate of 34%.

34

Provision for Loan Losses

For the first half of 2015, the Bank recorded net charge-offs of $296 thousand compared to $674 thousand in 2014.  Provision expense for the first six months was $635 thousand and as a result, the allowance for loan losses (ALL) increased $339 thousand.  For more information refer to the Loan Quality and Allowance for Loan Losses discussion in the Financial Condition section.

Noninterest Income

For the first six months of 2015, noninterest income increased $1.5 million from the same period in 2014.  Investment and trust service fees increased due to higher recurring trust fees, estate fees and insurance commissions. Loan service charges increased primarily from a large commercial loan prepayment penalty. Mortgage banking fees remained flat, while deposit service charges increased due to the Bank’s overdraft program.  Other service charges and fees increased primarily due to ATM and merchant card fees.   The net gain in other real estate owned was from the gain on a sale, compared to write downs in 2014.  Other income increased from an investment the Corporation owned in an offshore insurance company that liquidated and paid out the investors. Other than temporary impairment charges were recorded on one bond in 2015. The gain on conversion occurred in the equity portfolio and was the result of the Bank receiving shares of S&T Bancorp following its acquisition of Integrity Bancshares.

The following table presents a comparison of noninterest income for the six months ended June 30, 2015 and 2014.

	For the Six Months Ended
	June 30				Change
(Dollars in thousands)	2015		2014		Amount		%
Noninterest Income
Investment and trust services fees	$	2,651	$	2,192	$	459	20.9
Loan service charges		471		418		53	12.7
Mortgage banking activities		25		32		(7)	(21.9)
Deposit service charges and fees		1,077		990		87	8.8
Other service charges and fees		607		584		23	3.9
Debit card income		675		643		32	5.0
Increase in cash surrender value of life insurance		279		286		(7)	(2.4)
Other real estate owned		32		(185)		217	(117.3)
Other		237		62		175	282.3
OTTI losses recognized in income		(20)		-		(20)	N/A
Gain on conversion		728		-		728	N/A
Securities gain (losses), net		8		221		(213)	(96.4)
Total noninterest income	$	6,770	$	5,243	$	1,527	29.1

Noninterest Expense

Noninterest expense for the firstsix months of 2015decreased $154 thousand compared to the same period in 2014.  The decrease in salaries and benefits was primarily due to a decrease in incentive pay expense, as the 2014 expense included a final adjustment for the 2013 payout, and lower commissions expense, but these decreases were partially offset by increases in pension expense and health insurance expenses.  Net occupancy expenses decreased compared to prior year due to less utility and snow removal expense in 2015.  Advertising expenses decreased over prior year, due to the timing of various marketing campaigns.   Legal and professional fees decreased due to a change in internal audit firms.  The increase in data processing expenses was from higher volumes in mobile banking, remote deposit capture, and Franklin Businesslink volumes, as well as the migration to a new mortgage origination system. FDIC insurance expense decreased over prior year due to a reduction in the assessment rate used to calculate the premium.Other expenses increased due to one-time expenses the Bank took to fulfill the funding requirement of a deferred director’s benefit plan established thirty years ago, as well as expenses related to branch assets taken out of service.

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The following table presents a comparison of noninterest expense for the six months ended June  30, 2015 and 2014:

	For the Six Months Ended
(Dollars in thousands)	June 30				Change
Noninterest Expense	2015		2014		Amount		%
Salaries and benefits	$	8,286	$	8,357	$	(71)	(0.8)
Net occupancy expense		1,172		1,262		(90)	(7.1)
Furniture and equipment expense		470		491		(21)	(4.3)
Advertising		471		586		(115)	(19.6)
Legal and professional fees		499		618		(119)	(19.3)
Data processing		1,023		884		139	15.7
Pennsylvania bank shares tax		402		347		55	15.9
Intangible amortization		181		207		(26)	(12.6)
FDIC insurance		308		454		(146)	(32.2)
ATM/debit card processing		373		357		16	4.5
Other		1,965		1,741		224	12.9
Total noninterest expense	$	15,150	$	15,304	$	(154)	(1.0)

Provision for Income Taxes

For the first half of 2015, the Corporation recorded a Federal income tax expense of $1.5 million compared to $1.0 million for the same period in 2014.  The increase was due to a lower ratio of tax exempt income to income before federal income taxes.  As a result, the effective tax rate increased to21.5% for the firstsix months of 2015 compared to 19.7% for 2014.  All taxable income for the Corporation is taxed at a rate of 34%.

Financial Condition

Summary:

At June30, 2015, assets totaled $1.029billion, an increase of $27.1 million from the 2014 year-end balance of $1.001 billion. Investment securities increased $4.7 million, while net loans increased $6.3 million. Deposits were up $34.9 million for the first six months of 2015 due to increases in every deposit category except time deposits and money management accounts. Shareholders’ equity increased $3.7 million during the first six months as retained earnings increased approximately $3.8million, other comprehensive loss decreased  $700 thousand and the Corporation’s Dividend Reinvestment Plan (DRIP) added an additional $435 thousand in new capital.

Cash and Cash Equivalents:

Cash and cash equivalents totaled $64.4 million at June 30, 2015, an increase of $15.8 million from the prior year-end balance of $48.6 million.  Interest-bearing deposits are held primarily at the Federal Reserve and in short-term bank owned certificates of deposit.

Investment Securities:

The investment portfolio has grown approximately $6 million on a cost basis, since year-end 2014. The composition of the portfolio is essentially unchanged with municipal securities and U.S. Agency mortgage-backed securities comprising the greatest portion of the portfolio at approximately 41% and 45% of the portfolio fair value, respectively. The Bank invested $21.7 million during the first six months of 2015 with the purchases spread between, U.S. Agency mortgage-backed securities and municipal securities.  

The investment portfolio had a net unrealized gain of $1.1 million at June 30, 2015 compared to $2.4 million at the prior year-end. The decline in the unrealized gain is primarily the result of a $700 thousand reduction in the unrealized gain in equity securities as Bank should equity securities and recorded the gain from this portfolio. The municipal portfolio also saw its unrealized gains decline during the year, primarily the result of changes in the yield curve.  The portfolio averaged $176.1 million with a yield of 2.90% for the first half of 2015. This compares to an average of $166.6 million and a yield of 2.98% for the same period in 2014. 

The Bank holds only one equity security, a Pennsylvania community bank. The municipal bond portfolio is well diversified geographically (issuers from within 29 states) and is comprised primarily of general obligation bonds (70%).  Most municipal bonds have credit enhancements in the form of private bond insurance or other credit support. The largest

36

geographic municipal bond exposure is to 20 issuers in the state of Texas with a fair value of $10.9 million and 15 issuers in the state of Pennsylvania with a fair value of $9.0 million. The average rating of the municipal portfolio from Moody’s is Aa2. It contains $70.2 million of bonds rated A3 or higher and $1.9 million that are not rated by Moody’s rating agency.  No municipal bonds are rated below investment grade.

The holdings of trust preferred investments and private-label mortgage-backed securities are unchanged since year-end and are detailed in separate tables.

The amortized cost and estimated fair value of investment securities available for sale as of June 30, 2015 and December 31, 2014 is as follows:

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
June 30, 2015	cost		gains		losses		value
Equity securities	$	164	$	78	$	-	$	242
U.S. Government agency securities		16,245		168		(29)		16,384
Municipal securities		71,277		1,459		(604)		72,132
Trust preferred securities		5,949		-		(621)		5,328
Agency mortgage-backed securities		80,145		917		(323)		80,739
Private-label mortgage-backed securities		1,502		58		-		1,560
Asset-backed securities		42		-		(3)		39
	$	175,324	$	2,680	$	(1,580)	$	176,424

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
December 31, 2014	cost		gains		losses		value
Equity securities	$	274	$	779	$	-	$	1,053
U.S. Government and Agency securities		15,854		173		(64)		15,963
Municipal securities		66,832		1,826		(292)		68,366
Trust preferred securities		5,940		-		(803)		5,137
Agency mortgage-backed securities		78,779		932		(217)		79,494
Private-label mortgage-backed securities		1,675		35		(15)		1,695
Asset-backed securities		45		-		(2)		43
	$	169,399	$	3,745	$	(1,393)	$	171,751

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The following table provides additional detail about the Bank’s trust preferred securities as of June 30, 2015:  

(Dollars in thousands)
Deal Name	Maturity	Single Issuer or Pooled	Class	Amortized Cost		Fair Value		Gross Unrealized Gain (Loss)		Lowest Credit Rating Assigned
BankAmerica Cap III	1/15/2027	Single	Preferred Stock	$	964	$	906	$	(58)	BB
Wachovia Cap Trust II	1/15/2027	Single	Preferred Stock		277		261		(16)	BBB
Huntington Cap Trust	2/1/2027	Single	Preferred Stock		941		816		(125)	BB
Corestates Captl Tr II	2/15/2027	Single	Preferred Stock		937		871		(66)	BBB+
Huntington Cap Trust II	6/15/2028	Single	Preferred Stock		892		790		(102)	BB
Chase Cap VI JPM	8/1/2028	Single	Preferred Stock		963		850		(113)	BBB-
Fleet Cap Tr V	12/18/2028	Single	Preferred Stock		975		834		(141)	BB
				$	5,949	$	5,328	$	(621)

The following table provides additional detail about private label mortgage-backed securities as of June30, 2015:

(Dollars in thousands)						Gross					Cumulative
	Origination	Amortized		Fair		Unrealized		Collateral	Lowest Credit	Credit	OTTI
Description	Date	Cost		Value		Gain (Loss)		Type	Rating Assigned	Support %	Charges
RALI 2004-QS4 A7	3/1/2004	$	43	$	43	$	-	ALT A	BBB+	11.84	$	-
MALT 2004-6 7A1	6/1/2004		385		393		8	ALT A	CCC	14.11		-
RALI 2005-QS2 A1	2/1/2005		236		251		15	ALT A	CC	5.20		10
RALI 2006-QS4 A2	4/1/2006		502		523		21	ALT A	D	-		313
GSR 2006-5F 2A1	5/1/2006		72		80		8	Prime	D	-		15
RALI 2006-QS8 A1	7/28/2006		264		270		6	ALT A	D	-		217
		$	1,502	$	1,560	$	58				$	555

The investment portfolio contained 91 securities with $59.9 million of temporarily impaired fair value and $1.6 million in unrealized losses at June 30, 2015. The total unrealized loss position has increased slightly from $1.4 million at year-end 2014. 

For securities with an unrealized loss, Management applies a systematic methodology in order to perform an assessment of the potential for other-than-temporary impairment.  In the case of debt securities, investments considered for other-than-temporary impairment: (1) had a specified maturity or repricing date; (2) were generally expected to be redeemed at par, and (3) were expected to achieve a recovery in market value within a reasonable period of time. In addition, the Bank considers whether it intends to sell these securities or whether it will be forced to sell these securities before the earlier of amortized cost recovery or maturity. Equity securities are assessed for other-than-temporary impairment based on the length of time of impairment, dollar amount of the impairment and general market and financial conditions relating to specific issues.  The impairment identified on debt and equity securities and subject to assessment at June 30, 2015, was deemed to be temporary and required no further adjustments to the financial statements, unless otherwise noted.

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The following table reflects temporary impairment in the investment portfolio (excluding restricted stock), aggregated by investment category, length of time that individual securities have been in a continuous unrealized loss position and the number of securities in each category as of June 30, 2015 and December 31, 2014:

	June 30, 2015
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count
U.S. Government and Agency securities	$	1,498	$	(7)	3	$	4,617	$	(22)	10	$	6,115	$	(29)	13
Municipal securities		20,359		(386)	33		4,775		(218)	7		25,134		(604)	40
Trust preferred securities		-		-	-		5,328		(621)	7		5,328		(621)	7
Agency mortgage-backed securities		18,002		(179)	22		5,346		(144)	8		23,348		(323)	30
Asset-backed securities		-		-	-		4		(3)	1		4		(3)	1
Total temporarily impaired securities	$	39,859	$	(572)	58	$	20,070	$	(1,008)	33	$	59,929	$	(1,580)	91

	December 31, 2014
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count
U.S. Government and Agency securities		4		-	1		7,207		(64)	14		7,211		(64)	15
Municipal securities		5,651		(33)	9		9,441		(259)	14		15,092		(292)	23
Trust preferred securities		-		-	-		5,137		(803)	7		5,137		(803)	7
Agency mortgage-backed securities		9,304		(60)	13		8,199		(157)	10		17,503		(217)	23
Private-label mortgage-backed securities		-		-	-		540		(15)	1		540		(15)	1
Asset-backed securities		-		-	-		5		(2)	1		5		(2)	1
Total temporarily impaired securities	$	14,959	$	(93)	23	$	30,529	$	(1,300)	47	$	45,488	$	(1,393)	70

The municipal bond portfolio has an unrealized loss of $604 thousand at June 30, 2015 compared to $292 thousand at year-end 2014.  This number of securities in this portfolio with an unrealized loss increased from 23 to 40 and the loss in this portfolio is deemed to be non-credit related and no other-than-temporary impairment charges have been recorded.

The trust preferred portfolio contains 7 securities with a fair value of $5.3 million and an unrealized loss of $621 thousand. The trust-preferred securities held by the Bank are single entity issues, not pooled trust preferred securities.  Therefore, the impairment review of these securities is based only on the issuer and the security cannot be impaired by the performance of other issuers as if it was a pooled trust-preferred bond. All of the Bank’s trust preferred securities are single issue, variable rate notes with long maturities (2027 – 2028).  None of these bonds have suspended or missed a dividend payment. At June 30, 2015, the Bank believes it will be able to collect all interest and principal due on these bondsand no other-than-temporary-impairment charges were recorded. 

The PLMBS sector shows a net unrealized gain $58 thousand with all bonds showing an unrealized gain.  Even though there is no unrealized loss, due to the nature of these bonds, they are evaluated closely. These bonds were all rated AAA at time of purchase, but have since experienced rating declines. Some have experienced increased delinquencies and defaults, while others have seen the credit support increase as the bonds paid-down. The Bank monitors the performance of the PLMBS investments on a regular basis and reviews delinquencies, default rates, credit support levels and various cash flow stress test scenarios. In determining the credit related loss, Management considers all principal past due 60 days or more as a loss. If additional principal moves beyond 60 days past due, it will also be considered a loss. As a result of the analysis on PLMBS it was determined that a $20 thousand impairment charge was required at the end of the first quarter; however, no additional impairment charge was required at June 30, 2015.   It is primarily a result of the cumulative OTTI charges that these bonds are showing an unrealized gain at quarter end.  The Bank has recorded $555 thousand of cumulative impairment charges on this portfolio. Management continues to monitor these securities and it is possible that additional write-downs may occur if current loss trends continue. The Bank is currently participating in a class-action lawsuit against one PLMBS servicer that centers on defective warranties and representations made as part of the underwriting process.  

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The Bank held $439 thousand of restricted stock at June 30, 2015.  Except for $30 thousand, this investment represents stock in FHLB Pittsburgh. The Bank is required to hold this stock to be a member of FHLB and it is carried at cost of $100 per share. FHLB stock is evaluated for impairment primarily based on an assessment of the ultimate recoverability of its cost. As a government sponsored entity, FHLB has the ability to raise funding through the U.S. Treasury that can be used to support its operations.  There is not a public market for FHLB stock and the benefits of FHLB membership (e.g., liquidity and low cost funding) add value to the stock beyond purely financial measures. Management intends to remain a member of the FHLB and believes that it will be able to fully recover the cost basis of this investment.

Loans:

Residential real estate:  This category is comprised of consumer purpose loans secured by residential real estate and to a lesser extent, commercial purpose loans secured by residential real estate.  The consumer purpose category represents traditional residential mortgage loans and home equity products (primarily junior liens and lines of credit). Commercial purpose loans in this category represent loans made for various business needs, but are secured with residential real estate. In addition to the real estate collateral, it is possible that additional security is provided by personal guarantees or UCC filings. These loans are underwritten as commercial loans and are not originated to be sold.

Total residential real estate loans increased $4.7 million over 2014, primarily in the commercial first lien and consumer junior liens and lines of credit categories.  For the first six months of 2015, the Bank originated $8.4 million in mortgages, including approximately $3.8 million for a fee through a third party brokerage agreement. The Bank does not originate or hold any loans that would be considered sub-prime or Alt-A, and does not generally originate mortgages outside of its primary market area.

Residential real estate construction:  The largest component of this category represents loans to residential real estate developers ($6.7 million), while loans for individuals to construct personal residences totaled $1.7 million at June  30, 2015.  The Bank’s exposure to residential construction loans is concentrated primarily in south central Pennsylvania.

Real estate construction loans, including residential real estate and land development loans, occasionally provide an interest reserve in order to assist the developer during the development stage when minimal cash flow is generated. All real estate construction loans are underwritten in the same manner, regardless of the use of an interest reserve. Real estate construction loans are monitored on a regular basis by either an independent third party inspector or the assigned loan officer depending on loan amount or complexity of the project. This monitoring process includes at a minimum, the submission of invoices and AIA documents of costs incurred by the borrower, on-site inspections, and a signature by the assigned loan officer for disbursement of funds.  The Bank does not currently have any residential real estate construction loans with an interest reserve.

Commercial loans and commercial real estate: Loans in this category include commercial, industrial, farm, agricultural, land development and municipal government loans. Collateral for these loans may include commercial real estate, farm real estate, equipment or other business assets. Total commercial real estate loans decreased to $317.3 million from $326.5 million at the end of 2014. The largest sectors (by collateral) in the commercial real estate category are: office buildings ($45.9 million), land development ($45.7 million), hotels and motels ($35.5 million), farm land ($33.6 million), and auto dealerships ($17.4 million). Commercial loans increased $13.2 million compared to year end, with increases in commercial and industrial loans ($13.0 million) and municipal loans ($8.8 million), offset by a payoff of $8.5 million from one borrower.  The Bank booked $47.4 million of new commercial loans in the first six months of 2015, but had unexpected pay-offs of $25.7 million from three large commercial loans. Subsequent to quarter end, the Bank booked two large commercial loans totaling $17.4 million.  The largest sectors (by industry) in the commercial loan category are: retail trade ($56.7 million), construction ($54.9 million), manufacturing ($40.9 million), food services ($40.4 million) and agriculture ($39.1 million).  The Bank is very active in its market in pursuing commercial lending opportunities, but supplements in-market growth with purchased loan participations. The Bank purchases commercial loan participations in an effort to increase its commercial lending and diversify its loan mix, both geographically and by industry sector.  Purchased loans are originated primarily within the south central Pennsylvania market and are purchased from only a few select counter parties. These loans usually represent an opportunity to participate in larger credits that are not available in market, with the benefit of lower origination and servicing costs.  For the first six months of 2015, the Bank purchased $765 thousand of loan participations and commitments.  At June 30, 2015, the Bank held $118.6 million in purchased loan participations in its portfolio. 

Consumer loans decreased $749 thousand due primarily to regular payments and maturities.  The Bank believes the consumer portfolio will continue to run-down, as consumers are unwilling to increase their debt and nearly all consumer auto financing has shifted to dealer financing.

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The following table presents a summary of loans outstanding, by primary collateral as of:

						Change
(Dollars in thousands)	June 30, 2015		December 31, 2014			Amount	%
Residential Real Estate 1-4 Family
Consumer first liens	$	103,852	$	105,014	$	(1,162)	(1.1)
Consumer junior liens and lines of credit		39,915		38,132		1,783	4.7
Total consumer		143,767		143,146		621	0.4
Commercial first lien		60,438		56,300		4,138	7.3
Commercial junior liens and lines of credit		5,637		5,663		(26)	(0.5)
Total commercial		66,075		61,963		4,112	6.6
Total residential real estate 1-4 family		209,842		205,109		4,733	2.3
Residential real estate - construction
Consumer		1,736		1,627		109	6.7
Commercial		6,676		8,088		(1,412)	(17.5)
Total residential real estate construction		8,412		9,715		(1,303)	(13.4)
Commercial real estate		317,329		326,482		(9,153)	(2.8)
Commercial		192,224		179,071		13,153	7.3
Total commercial		509,553		505,553		4,000	0.8
Consumer		5,405		6,154		(749)	(12.2)
		733,212		726,531		6,681	0.9
Less: Allowance for loan losses		(9,450)		(9,111)		(339)	(3.7)
Net Loans	$	723,762	$	717,420	$	6,342	0.9
Included in the loan balances are the following:
Net unamortized deferred loan costs	$	169	$	(76)
Loans pledged as collateral for borrowings and commitments from:
FHLB	$	612,011	$	602,633
Federal Reserve Bank		54,844		56,367
	$	666,855	$	659,000

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Loan Quality:

Management utilizes a risk rating scale ranging from 1 (Prime) to 9 (Loss) to evaluate loan quality. This risk rating scale is used primarily for commercial purpose loans. Consumer purpose loans are identified as either a pass or substandard rating. Substandard consumer loans are loans that are 90 days or more past due and still accruing.  Loans rated 1 – 4 are considered pass credits. Loans that are rated 5 are pass credits, but have been identified as credits that are likely to warrant additional attention and monitoring. Loans rated 6 (Special Mention) or worse begin to receive enhanced monitoring and reporting by the Bank. Loans rated 7 (Substandard) or 8 (Doubtful) exhibit the greatest financial weakness and present the greatest possible risk of loss to the Bank. Nonaccrual loans are rated no better than 7.   The following factors represent some of the factors used in determining the risk rating of a borrower: cash flow, debt coverage, liquidity, management, and collateral. Risk ratings, for pass credits, are generally reviewed annually for term debt and at renewal for revolving or renewing debt. The Bank monitors loan quality by reviewing four measurements: (1) loans rated 6 or worse (collectively “watch list”), (2) delinquent loans, (3) other real estate owned (OREO), and (4) net-charge-offs. Management compares trends in these measurements with the Bank’s internally established targets, as well as its national peer group.

Watch list loans exhibit financial weaknesses that increase the potential risk of default or loss to the Bank. However, inclusion on the watch list, does not by itself, mean a loss is certain. The watch list includes both performing and nonperforming loans. Watch list loans totaled $38.2 million at quarter-end, a slight improvement from $40.5 million at the prior year-end. The watch list is comprised of $20.3 million rated 6 and $17.9 million rated 7. The Bank has no loans rated 8-doubtful or 9-loss.  The credit composition of the portfolio, by primary collateral is shown in Note 7 of the accompanying financial statement. Included in the substandard loan total is $9.4 million of nonaccrual loans. The Bank’s Loan Management Committee reviews these loans and risk ratings on a quarterly basis in order to proactively identify and manage problem loans. In addition, a committee meets monthly to discuss possible workout strategies for OREO and all credits rated 7 or worse. Management also tracks other commercial loan risk measurements including high loan to value loans, concentrations, participations and policy exceptions and reports these to the Credit Risk Oversight Committee of the Board of Directors. The Bank  also uses a third-party consultant to assist with internal loan review with a goal of reviewing 60% of commercial loans each year. The FDIC defines certain supervisory loan-to-value lending limits.  The Bank’s internal loan–to-value limits are all equal to, or have a lower loan-to-value limit, than the supervisory limits.  At June 30, 2015, the Bank had loans of $23.6 million that exceeded the supervisory limit.  

Delinquent loans are a result of borrowers’ cash flow and/or alternative sources of cash being insufficient to repay loans.  The Bank’s likelihood of collateral liquidation to repay the loans becomes more probable the further behind a borrower falls, particularly when loans reach 90 days or more past due. Management monitors the performance status of loans by the use of an aging report. The aging report can provide an early indicator of loans that may become severely delinquent and possibly result in a loss to the Bank.  See Note 7 in the accompanying financial statements for a note that presents the aging of payments in the loan portfolio.

Nonaccruing loans generally represent Management’s determination that the borrower will be unable to repay the loan in accordance with its contractual terms and that collateral liquidation may or may not fully repay both interest and principal. It is the Bank’s policy to evaluate the probable collectability of principal and interest due under terms of loan contracts for all loans 90-days or more, nonaccrual loans, or impaired loans. Further, it is the Bank’s policy to discontinue accruing interest on loans that are not adequately secured and in the process of collection.  Upon determination of nonaccrual status, the Bank subtracts any current year accrued and unpaid interest from its income, and any prior year accrued and unpaid interest from the allowance for loan losses.  Management continually monitors the status of nonperforming loans, the value of any collateral and potential of risk of loss.  Nonaccrual loans are rated no better than 7 (Substandard).

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Loan quality, as measured by the balance of nonperforming loans, is improving from year-end and the performance ratios related to nonperforming loans have also improved. The following table presents a summary of nonperforming assets:

(Dollars in thousands)	June 30, 2015		December 31, 2014
Nonaccrual loans
Residential Real Estate 1-4 Family
First liens	$	939	$	1,124
Junior liens and lines of credit		117		169
Total		1,056		1,293
Residential real estate - construction		513		931
Commercial real estate		7,437		8,430
Commercial		346		1,637
Total nonaccrual loans		9,352		12,291
Loans past due 90 days or more and not included above
Residential Real Estate 1-4 Family
First liens		153		165
Junior liens and lines of credit		-		-
Total		153		165
Commercial real estate		-		140
Consumer		10		17
Total loans past due 90 days or more and still accruing		163		322
Total nonperforming loans		9,515		12,613
Other real estate owned		4,018		3,666
Total nonperforming assets	$	13,533	$	16,279
Nonperforming loans to total gross loans		1.30%		1.74%
Nonperforming assets to total assets		1.32%		1.63%
Allowance for loan losses to nonperforming loans		99.31%		72.23%

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The following table identifies the most significant loans in nonaccrual status. These six nonaccrual loans account for 90% of the total nonaccrual balance. The table also indicates those significant nonaccrual loans that are classified as troubled debt restructurings (TDR). A TDR loan is maintained on nonaccrual status until a satisfactory repayment history is established.  All loans on the watch list that are not on nonaccrual or past due 90 days more are considered potential problem loans. Potential problem loans at June 30, 2015 totaled $28.6 million compared to $27.8 million at year-end 2014.

				ALL	Nonaccrual	TDR			Last
(Dollars in thousands)		Balance		Reserve	Date	Status	Collateral	Location	Appraisal(1)
Credit 1 - Commercial real estate	$	3,039	$	-	Dec-10	N	1st lien on 90 acres undeveloped commercial real estate	PA	Nov-14	$	5,855
Credit 2 - Residential real estate and commercial real estate		719		-	Aug-11	N	1st lien on commercial and residential properties and 70 acres of farmland	PA	Nov-14	$	1,140
Credit 3 - Residential real estate		1,932		-	Mar-12	Y	1st and 2nd liens on commercial real estate, residential real estate and business assets	PA	Oct-14	$	3,895
Credit 4 - Residential real estate		1,637		-	Dec-14	N	Hotel and entertainment complex	PA	Feb-15	$	4,000
Credit 5 - Commercial real estate		442		-	Mar-13	N	Liens on land and residential real estate, and investment accounts	PA	Sep-14	$	1,055
Credit 6 - Commercial / commercial real estate		664		-	Mar-14	N	1st lien on commercial real estate	PA	Jun-13	$	1,550
	$	8,433	$	-

(1) Appraisal value, as reported, does not reflect the pay-off of any senior liens or the cost to liquidate the collateral, but does reflect only the Bank’s share of the collateral if it is a participated loan.

Credit 1 has been charged down by $3.5 million since being placed on nonaccrual due to declining appraisal values.  This credit is part of a purchased loan participation and the lead bank has reached a settlement agreement with the borrower.  The Bank expects that it will know if the borrower can satisfy the terms of this agreement in the third quarter of 2015 or if this loan will be moved to other real estate owned.  Credit 2 has sold another piece of real estate and the Bank received a pay down of $158 thousand after June 30, 2015.  The remaining balance is expected to be restructured into a new loan.  Credit 3 is a TDR that is performing in accordance with the modified terms. Credit 4 is a hotel and entertainment complex being operated as part of an estate liquidation. Credit 5 borrower and guarantor have filed bankruptcy and are in the process of selling assets that will result in debt reduction. Subsequent to quarter end, the loan was fully paid off. This credit was written down by $749 thousand, including a $200 thousand write down in the first quarter of 2015.  Credit 6 did not comply with a forbearance agreement and a demand letter was issued in July 2015.

In addition to monitoring nonaccrual loans, the Bank also closely monitors impaired loans and troubled debt restructurings (TDR).  A loan is considered to be impaired when, based on current information and events, it is probable that the Bank will be unable to collect all interest and principal payments due according to the originally contracted terms of the loan agreement.  Nonaccrual loans and TDR loans are always considered impaired. For impaired commercial loans with balances less than $250 thousand and all consumer purpose loans, a specific reserve analysis is not performed and these loans are added to the general allocation pool. In accordance with financial accounting standards, TDR loans are always considered impaired until they are paid off.  However, an impaired TDR loan can be a performing loan. Impaired loans totaled $24.1 million at quarter-end compared to $26.6 million at year-end 2014. Included in the impaired loan total is $14.6 million of accruing TDR loans and $2.1 million of nonaccrual TDR loans. Note 7 of the accompanying financial statements provides additional information on the composition of the impaired loans, including the allowance for loan loss that has been established for impaired loans.

A loan is considered a troubled debt restructuring (TDR) if the creditor (the Bank), for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. These concessions may include lowering the rate, extending the maturity, reamortization of the payment, or a combination of multiple concessions.   The Bank reviews all loans rated 6 or worse when it is providing a loan restructure, modification

44

or new credit facility to determine if the action is a TDR.  If a TDR loan is placed on nonaccrual status, it remains on nonaccrual status for at least six months to ensure performance. All TDR loans are in compliance with their modified terms. See Note 7 in the accompanying financial statements for a note that identifies TDR loans in the portfolio.

The Bank holds $4.0 million of other real estate owned (OREO), comprised of six properties compared to $3.7 million and five properties at December 31, 2014.  The most significant OREO holdings are listed in the table below. The appraised value for Property 2 reflects the commercial and industrial development potential of the property, which is the most likely use for the property. At December 31, 2014, the Bank reported this property with an “as is” valuation. During 2015, the Bank has incurred a net gain of $32 thousand on the sale of OREO and an expense of $19 thousand to hold and maintain OREO.

The following table provides additional information on significant other real estate owned properties:

June 30, 2015
(Dollars in thousands)	Date
	Acquired		Balance	Collateral	Location	Last Appraisal
Property 1	2011	$	488	unimproved real estate for residential development	PA	Jan-15	$	585
Property 2	2012		2,758	1st, 2nd, and 3rd liens residential development land - four tracts with 196 acres	PA	Apr-14	$	6,586
		$	3,246

At June 30, 2015, the Bank had $10 thousand of residential properties in the process of foreclosure compared to $763thousand at the end of 2014.

Allowance for Loan Losses:

Management performs a quarterly evaluation of the adequacy of the allowance for loan losses (ALL). The ALL is determined by segmenting the loan portfolio based on the loan’s collateral. The Bank further classifies the portfolio based on the primary purpose of the loan, either consumer or commercial.  When calculating the ALL, consideration is given to a variety of factors in establishing this estimate including, but not limited to, current economic conditions, diversification of the loan portfolio, delinquency statistics, results of internal loan reviews, historical charge-offs, the adequacy of the underlying collateral (if collateral dependent) and other relevant factors. The Bank begins enhanced monitoring of all loans rated 6 (OAEM) or worse, and obtains a new appraisal or asset valuation for any loan rated 7 (substandard) or worse. Management, at its discretion, may determine that additional adjustments to the appraisal or valuation are required.  Valuation adjustments will be made as necessary based on factors, including, but not limited to: the economy, deferred maintenance, industry, type of property/equipment, age of the appraisal, etc. and the knowledge Management has about a particular situation. In addition, the cost to sell or liquidate the collateral is also estimated and deducted from the valuation in order to determine the net realizable value to the Bank.When determining the allowance for loan losses, certain factors involved in the evaluation are inherently subjective and require material estimates that may be susceptible to significant change, including the amounts and timing of future cash flows expected to be received on impaired loans. Management monitors the adequacy of the allowance for loan losses on an ongoing basis and reports its adequacy quarterly to the Credit Risk Oversight Committee of the Board of Directors. Management believes that the allowance for loan losses at June 30, 2015 is adequate.

The analysis for determining the ALL is consistent with guidance set forth in generally accepted accounting principles (GAAP) and the Interagency Policy Statement on the Allowance for Loan and Lease Losses. The analysis has two components, specific and general allocations. The specific component addresses specific reserves established for impaired loans. A loan is considered to be impaired when, based on current information and events, it is probable that the Bank will be unable to collect all interest and principal payments due according to the originally contracted terms of the loan agreement.  Collateral values discounted for market conditions and selling costs are used to establish specific allocations for impaired loans. It is possible that as a result of the credit analysis, a specific reserve is not required for an impaired loan. For impaired commercial loans with balances less than $250 thousand and all consumer purpose loans, a specific reserve analysis is not performed and these loans are added to the general allocation pool. At June 30, 2015, impaired loans totaled $24.1 million compared to $26.6 million at year-end 2014. Included in the June impaired loan total are loans of $204 thousand with a specific reserve of $10 thousand.  The specific reserve has decreased $221 thousand since year-

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end, primarily as the result of a charge-off of $200 thousand on Credit 5 on the significant nonaccrual table that eliminated the $162 thousand specific reserve on this credit at December 31, 2014. Note 7 in the accompanying financial statements provides additional information about the ALL established for impaired loans.

The general allocation component addresses the reserves established for pools of homogenous loans. The general component includes a quantitative and qualitative analysis. When calculating the general allocation, the Bank segregates its loan portfolio into the following sectors based primarily on the type of supporting collateral:  residential real estate, commercial, industrial or agricultural real estate; commercial and industrial (C&I non-real estate), and consumer.  The residential real estate sector is further segregated by first lien loans, junior liens and home equity products, and residential real estate construction. The quantitative analysis uses the Bank’s twenty quarter rolling historical loan loss experience adjusted for factors derived from current economic and market conditions that have been determined to have an effect on the probability and magnitude of a loss. Prior to March 31, 2015, the Bank was using an eight quarter rolling history for the quantitative analysis. The change to a longer historical period is based upon improving charge-offs and a more stable and slowly improving economy.   The historical loss experience resulted in a general allocation of $9.4 million (1.08% of gross loans) compared to $8.9 million (1.00% of gross loans) at December 31, 2014.  The qualitative analysis utilizes a risk matrix that incorporates qualitative and environmental factors such as: loan volume, management, loan review process, credit concentrations, competition, and legal and regulatory issues. These factors are each risk rated from minimal to high risk and in total can add up to a maximum qualitative factor of 37.5 basis points. At quarter-end, this factor was 21.5 basis points unchanged from year-end 2014.  These factors are determined on the basis of Management’s observation, judgment and experience. 

Real estate appraisals and collateral valuations are an important part of the Bank’s process for determining potential loss on collateral dependent loans and thereby have a direct effect on the determination of loan reserves, charge-offs and the calculation of the allowance for loan losses.  As long as the loan remains a performing loan, no further updates to appraisals are required. If a loan or relationship migrates to risk rating of 7 or worse, an evaluation for impairment status is made based on the current information available at the time of downgrade and a new appraisal or collateral valuation is obtained.

In determining the allowance for loan losses, Management, at its discretion, may determine that additional adjustments to the fair value obtained from an appraisal or collateral valuation are required. Adjustments will be made as necessary based on factors, including, but not limited to the economy, deferred maintenance, industry, type of property or equipment etc., and the knowledge Management has about a particular situation. In addition, the cost to sell or liquidate the collateral is also estimated and deducted from the valuation in order to determine the net realizable value to the Bank. If an appraisal is not available, Management may make its best estimate of the real value of the collateral or use last known market value and apply appropriate discounts.  If an adjustment is made to the collateral valuation, this will be documented with appropriate support and reported to the Loan Management Committee.

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The following table shows the loans that were evaluated for the allowance for loan losses under a specific reserve (individually) and those that were evaluated under a general reserve (collectively), and the amount of the allowance established in each loan class as of June  30, 2015 and December 31, 2014:

	Residential Real Estate 1-4 Family
			Junior Liens &				Commercial
(Dollars in thousands)	First Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Total
June 30, 2015
Loans evaluated for allowance:
Individually	$	1,083	$	51	$	513	$	21,512	$	237	$	-	$	23,396
Collectively		163,207		45,501		7,899		295,817		191,987		5,405		709,816
Total	$	164,290	$	45,552	$	8,412	$	317,329	$	192,224	$	5,405	$	733,212
Allowance established for loans evaluated:
Individually	$	-	$	-	$	-	$	2	$	8	$	-	$	10
Collectively		1,293		359		220		5,684		1,763		121		9,440
Allowance at June 30, 2015	$	1,293	$	359	$	220	$	5,686	$	1,771	$	121	$	9,450
December 31, 2014
Loans evaluated for allowance:
Individually	$	1,171	$	51	$	931	$	22,307	$	1,298	$	-	$	25,758
Collectively		160,143		43,744		8,784		304,175		177,773		6,154		700,773
Total	$	161,314	$	43,795	$	9,715	$	326,482	$	179,071	$	6,154	$	726,531
Allowance established for loans evaluated:
Individually	$	-	$	-	$	-	$	60	$	171	$	-	$	231
Collectively		1,225		334		226		5,357		1,602		136		8,880
Allowance at December 31, 2014	$	1,225	$	334	$	226	$	5,417	$	1,773	$	136	$	9,111

During the first half of 2015, the Bank recorded $635 thousand for the loan loss provision expense, $171 thousand more than the same period in 2014.  For the second quarter of 2015, the provision expense was $310 thousand compared to $266 thousand for the same quarter of 2014.

Charged-off loans usually result from: (1) a borrower being legally relieved of loan repayment responsibility through bankruptcy,(2)insufficient collateral sale proceeds to repay a loan; or (3) the borrower and/or guarantor does not own other assets that, if sold, would generate sufficient sale proceeds to repay a loan. The Bank recorded net loan charge-offs of $296 thousand for the six months of 2015. The largest charge-off during the period was $200 thousand related to Credit 5 on the significant nonaccrual table.

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The following table presents an analysis of the allowance for loan losses for the periods ended:

	Residential Real Estate 1-4 Family
			Junior Liens &				Commercial
(Dollars in thousands)	First Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Total
Allowance at March 31, 2015	$	1,260	$	334	$	263	$	5,600	$	1,628	$	125	$	9,210
Charge-offs		(43)		-		(21)		-		(17)		(26)		(107)
Recoveries		1		-		-		14		8		14		37
Provision		75		25		(22)		72		152		8		310
Allowance at June 30, 2015	$	1,293	$	359	$	220	$	5,686	$	1,771	$	121	$	9,450
Allowance at December 31, 2014	$	1,225	$	334	$	226	$	5,417	$	1,773	$	136	$	9,111
Charge-offs		(43)		-		(21)		-		(218)		(78)		(360)
Recoveries		3		-		-		14		14		33		64
Provision		108		25		15		255		202		30		635
Allowance at June 30, 2015	$	1,293	$	359	$	220	$	5,686	$	1,771	$	121	$	9,450

	June 30, 2015		December 31, 2014		June 30, 2014
Net loans charged-off as a percentage of average gross loans		0.08%		0.19%		0.18%
Net loans charged-off as a percentage of the provision for loan losses		46.61%		177.36%		139.44%
Allowance as a percentage of loans		1.29%		1.25%		1.30%
Net charge-offs	$	296	$	1,355	$	647

48

Deposits: 

Total deposits increased $34.9 million during the first six months of 2015 to $916.1 million. Non-interest bearing deposits increased $6.7 million, while savings and interest-bearing checking increased $34.8 million and time deposits decreased $6.5 million. The increase in non-interest bearing checking accounts occurred primarily inretail checking accounts ($3.1 million) and commercial checking accounts ($2.5 million). Interest bearing checking increased by $34.4 million, primarily from commercial deposits.  The Bank’s Money Management product decreased to $383.2 million from $388.0 million.  Retail money management accounts increased $2.6 million, but were offset by a decrease of $6.3 million in commercial money management accounts.  Retail time deposits decreased since year-end, as customers moved funds to more liquid accounts.  As of June  30, 2015, the Bank had $3.4 million in CDARS reciprocal time deposits included in brokered time deposits.  

						Change
(Dollars in thousands)	June 30, 2015		December 31, 2014			Amount	%
Noninterest-bearing checking	$	143,564	$	136,910	$	6,654	4.9
Interest-bearing checking		229,438		194,992		34,446	17.7
Money management		383,204		388,043		(4,839)	(1.2)
Savings		67,782		62,637		5,145	8.2
Total interest-bearing checking and savings		680,424		645,672		34,752	5.4
Retail time deposits		88,708		92,973		(4,265)	(4.6)
Brokered time deposits		3,363		5,626		(2,263)	(40.2)
Total time deposits		92,071		98,599		(6,528)	(6.6)
Total deposits	$	916,059	$	881,181	$	34,878	4.0
Overdrawn deposit accounts reclassified as loans	$	180	$	138

Borrowings:

The Corporation had no short-term or long-term borrowings at June 30, 2015. 

Shareholders’ Equity:

Total shareholders’ equity increased $3.7 million to $107.2 million at June  30, 2015, compared to $103.5 million at the end of 2014.  The increase in retained earnings from the Corporation’s net income of $5.4 million was partially offset by the cash dividend of $1.5 million. The Corporation’s dividend payout ratio is 28.4% for the first six months of 2015 compared to 34.2% in 2014.  

As part of its quarterly dividend decision, the Corporation considers current and future income projections, dividend yield, payout ratio, and current and future capital ratios. Year-to-date, the Corporation paid dividends of $0.36 per share, compared to $.034 for the same period in 2014, 5.9% increase.  For the second quarter of 2015, the Corporation paid a $.19 per share dividend for the second quarter of 2015, compared to $.17 paid in the second quarter of 2014.  On July 23, 2015 the Board of Directors declared a $0.19 per share regular quarterly dividend for the third quarter of 2015, which will be paid on August 26, 2015.

In addition, the Corporation considers how dividend decisions may affect the Dividend Reinvestment Plan (DRIP), which has raised $435 thousand in new capital this year with 18,507 new shares purchased.  The Corporation continually explores other sources of capital as part of its capital management plan for the Corporation and the Bank.  The Corporation did not repurchase any shares of the Corporation’s common stock during the first six months of 2015.  

49

Capital adequacy is currently defined by regulatory agencies through the use of several minimum required ratios.  In July 2013, Federal Banking regulators approved the final rules from the Basel Committee on Banking Supervision for the regulation of capital requirements for U.S. Banks, generally referred to as “Basel III.”  Basel III imposes significantly higher capital requirements and more restrictive leverage and liquidity ratios than those in place at the end of 2014.  The capital ratios to be considered “well capitalized” under Basel III are: common equity tier 1 of 6.5%, Tier 1 leverage of 5%, Tier 1 risk-based capital of 8%, and Total Risk-Based capital of 10%.  The common equity tier 1 ratio is a new capital ratio under Basel III.  Common equity consists of common stock, additional paid-in capital and retained earnings.  The Tier 1 risk-based capital ratio of 8% has been increased from 6%.  The new rule also includes a provision for banks to make a one-time irrevocable choice to exclude accumulated other comprehensive income (AOCI) from its common equity Tier 1 capital.  The Bank elected to exclude AOCI from the capital calculation with its March 31, 2015 regulatory filing.  In addition, a capital conservation buffer will be required to be maintained above the minimum capital ratios to avoid any capital distribution restrictions.  The capital conservation buffer will be phased in from 0% in 2015 to 2.5% in 2019.  The Basel III capital rules took effect for the Corporation and the Bank on January 1, 2015.  At June  30, 2015, the Corporation and the Bank were both well capitalized as defined by the banking regulatory agencies. 

The following table summarizes regulatory capital information as of June 30, 2015 and December 31, 2014 on a consolidated basis and for the Bank, as defined.  Regulatory capital ratios for June 30, 2015 were calculated in accordance with the Basel III rules, whereas the December 31, 2015 regulatory ratios were calculated in accordance with Basel I rules.  The minimum regulatory ratios shown below define capital levels under Basel III rules.

			Regulatory Ratios
			Adequately	Well
			Capitalized	Capitalized
(Dollars in thousands)	June 30, 2015	December 31, 2014	Minimum	Minimum
Common Equity Tier 1 Risk-based Capital Ratio (1)
Franklin Financial Services Corporation	14.48%	N/A	4.50%	N/A
Farmers & Merchants Trust Company	14.39%	N/A	4.50%	6.50%
Tier 1 Risk-based Capital Ratio (2)
Franklin Financial Services Corporation	14.48%	14.19%	6.00%	N/A
Farmers & Merchants Trust Company	14.39%	13.96%	6.00%	8.00%
Total Risk-based Capital Ratio (3)
Franklin Financial Services Corporation	15.73%	15.49%	8.00%	N/A
Farmers & Merchants Trust Company	15.64%	15.26%	8.00%	10.00%
Tier 1 Leverage Ratio (4)
Franklin Financial Services Corporation	10.17%	9.69%	4.00%	N/A
Farmers & Merchants Trust Company	9.96%	9.55%	4.00%	5.00%
(1) Common equity Tier 1 capital/ total risk-weighted assets (2) Tier 1 capital / total risk-weighted assets
(3) Total risk-based capital / total risk-weighted assets, (4) Tier 1 capital / average quarterly assets

Economy

The Corporation’s primary market area includes Franklin, Fulton, Cumberland and Huntingdon County, PA.  This area is diverse in demographic and economic makeup.  County populations range from a low of approximately 14,000 in Fulton County to over 220,000 in Cumberland County. Unemployment in the Bank’s market area has remained virtually unchanged over the past year and ranges from a low of 3.5% in Cumberland County to high of 5.9% in Huntingdon County.  The market area has a diverse economic base and local industries include, warehousing, truck & rail shipping centers, light and heavy manufacturers, health-care, higher education institutions, farming and agriculture, and a varied service sector.  The Corporation’s primary market area is located in south central Pennsylvania and provides easy access to the major metropolitan markets on the east coast via trucking and rail transportation. Because of this, warehousing and distribution companies continue to find the area attractive. The local economy is not overly dependent on any one industry

50

or business and Management believes that the Bank’s primary market area continues to be well suited for growth as the recession eases.

The following provides selected economic data for the Bank’s primary market:

Economic Data

	June 30, 2015	December 31, 2014
Unemployment Rate (seasonally adjusted)
Market area range (1)	3.5% - 5.9%	3.6% - 5.8%
Pennsylvania	5.4%	5.1%
United States	5.5%	5.8%
Housing Price Index - year over year change
PA, nonmetropolitan statistical area	3.2%	0.5%
United States	5.5%	5.7%
Franklin County Building Permits - year over year change
Residential, estimated	25.9%	32.7%
Multifamily, estimated	-57.9%	157.8%
(1) Franklin, Cumberland, Fulton and Huntingdon Counties

Unlike many companies, the assets and liabilities of the Corporation are financial in nature. As such, interest rates and changes in interest rates may have a more significant effect on the Corporation’s financial results than on other types of industries. Because of this, the Corporation watches the actions of the Federal Reserve Open Market Committee (FOMC) as it makes decisions about interest rate changes. The FOMC continues to hold short-term rates at historic lows.  It continues to monitor employment and inflation data as it considers the timing of an increase in the Fed Funds rate.  Many analysts believe that the FOMC will begin to increase rates in the second half 2015.

Liquidity

The Corporation must meet the financial needs of the customers that it serves, while providing a satisfactory return on the shareholders’ investment.  In order to accomplish this, the Corporation must maintain sufficient liquidity in order to respond quickly to the changing level of funds required for both loan and deposit activity.  The goal of liquidity management is to meet the ongoing cash flow requirements of depositors who want to withdraw funds and of borrowers who request loan disbursements. The Bank regularly reviews it liquidity position by measuring its projected net cash flows (in and out) at a 30 and 90-day interval.  The Bank stresses this measurement by assuming a level of deposit out-flows that have not historically been realized. In addition to this forecast, other funding sources are reviewed as a method to provide emergency funding if necessary.  The objective of this measurement is to identify the amount of cash that could be raised quickly without the need to liquidate assets.  The Bank also stresses its liquidity position utilizing different longer-term scenarios.  The varying degrees of stress create pressure on deposit flows in its local market, reduce access to wholesale funding and limit access of funds available through brokered deposit channels. In addition to stressing cash flow, specific liquidity risk indicators are monitored to help identify risk areas.  This analysis will help identify and quantify the potential cash surplus/deficit over a variety of time horizons to ensure the Bank has adequate funding resources.  Assumptions used for liquidity stress testing are subjective.  Should an evolving liquidity situation or business cycle present new data, potential assumption changes will be considered.  The Bank believes it can meet all anticipated liquidity demands.

Historically, the Corporation has satisfied its liquidity needs from earnings, repayment of loans and amortizing investment securities, maturing investment securities, loan` sales, deposit growth and its ability to access existing lines of credit.  All investment securities are classified as available for sale; therefore, securities that are not pledged as collateral for borrowings are an additional source of readily available liquidity, either by selling the security or, more preferably, to provide collateral for additional borrowing. At June 30, 2015, the Bank had approximately $69.3 million (fair value) in its investment portfolio pledged as collateral for deposits.  Another source of available liquidity for the Bank is a line of credit with the FHLB.  At June  30, 2015, the Bank had approximately $35 million available on this line of credit and $16.0 million of unsecured lines of credit at correspondent banks. At  June  30, 2015, the Bank had an excess borrowing

51

capacity of $240.8 million, which includes the amount available on the line of credit.  The Bank has established credit at the Federal Reserve Discount Window and as of quarter-end had the ability to borrow approximately $28 million. 

Off Balance Sheet Commitments

The Corporation’s financial statements do not reflect various commitments that are made in the normal course of business, which may involve some liquidity risk.  These commitments consist mainly of unfunded loans and letters of credit made under the same standards as on-balance sheet instruments.  Because these instruments have fixed maturity dates, and because many of them will expire without being drawn upon, they do not generally present any significant liquidity risk to the Corporation.  Unused commitments and standby letters of credit totaled $274.1 million and $248.3 million, respectively, at June  30, 2015 and December 31, 2014.

The Corporation has entered into various contractual obligations to make future payments.  These obligations include time deposits, long-term debt, operating leases, deferred compensation and pension payments.  These amounts have not changed materially from those reported in the Corporation’s 2014 Annual Report on Form 10-K.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

There were no material changes in the Corporation’s exposure to market risk during the sixmonths ended June  30, 2015. For more information on market risk refer to the Corporation’s 2014 Annual Report on Form 10-K.

Item 4.  Controls and Procedures

Evaluation of Controls and Procedures

The Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon the evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that as of June  30, 2015, the Corporation’s disclosure controls and procedures are effective. Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in the Corporation’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

The management of the Corporation is responsible for establishing and maintaining adequate internal control over financial reporting. The Corporation’s internal control system is designed 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.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

52

Part II – OTHER INFORMATION

Item 1.Legal Proceedings

The nature of the Corporation’s business generates a certain amount of litigation involving matters arising in the ordinary course of business.  However, in management’s opinion, there are no proceedings pending to which the Corporation is a party or to which our property is subject, which, if determined adversely to the Corporation, would be material in relation to our shareholders’ equity or financial condition.  In addition, no material proceedings are pending or are known to be threatened or contemplated against us by governmental authorities or other parties.

Item 1A. Risk Factors 

There were no material changes in the Corporation’s risk factors during the six months ended June  30, 2015. For more information, refer to the Corporation’s 2014 Annual Report on Form 10-K.

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

None

Item 3.   Defaults by the Company on its Senior Securities

None

Item 4.   Mine Safety Disclosures

Not Applicable

Item 5.   Other Information

None

Item 6. Exhibits

Exhibits

3.1   Articles of Incorporation of the Corporation.  (Filed as Exhibit 3.1 to Annual Report on Form 10-K for the year ended December 31, 2014 and incorporated herein by reference.)

3.2   Bylaws of the Corporation. (Filed as Exhibit 99 to Current Report on Form 8-K filed on December 20, 2014 and incorporated herein by reference.)

31.1 Rule 13a – 14(a)/15d-14(a) Certifications – Principal Executive Officer

31.2 Rule 13a – 14(a)/15d-14(a) Certifications – Principal Financial Officer

32.1 Section 1350 Certifications – Principal Executive Officer

32.2 Section 1350 Certifications – Principal Financial Officer

101 Interactive Data File (XBRL)

53

FRANKLIN FINANCIAL SERVICES CORPORATION

and SUBSIDIARIES

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.

Franklin Financial Services Corporation

August 7, 2015	/s/ William E. Snell, Jr
	William E. Snell, Jr.
	President and Chief Executive Officer
	(Principal Executive Officer)

August7, 2015	/s/ Mark R. Hollar
	Mark R. Hollar
	Treasurer and Chief Financial Officer
	(Principal Financial and Accounting Officer)

54

EX-31.1

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certifications

I, William E. Snell, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Franklin Financial Services Corporation;

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 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:

a)All significant deficiencies and material weaknesses in the design or operation of internal controls 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:  August7, 2015

/s/ William E. Snell, Jr.

William E. Snell, Jr.

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certifications

I, Mark R. Hollar, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Franklin Financial Services Corporation;

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 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:

a)All significant deficiencies and material weaknesses in the design or operation of internal controls 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:  August7, 2015

/s/ Mark R. Hollar

Mark R. Hollar

Treasurer and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes–Oxley Act of 2002

In connection with the Quarterly Report of Franklin Financial Services Corporation (the “Corporation”) on Form 10-Q, for the period ending June  30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William E. Snell, Jr., Chief Executive Officer of the Corporation, 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 and Exchange Act of 1934; and

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

/s/ William E. Snell, Jr.

William E. Snell, Jr.

Chief Executive Officer

August 7, 2015

EX-32.2

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Sections 1350,

As Adopted Pursuant to Section 906 of the Sarbanes–Oxley Act of 2002

In connection with the Quarterly Report of Franklin Financial Services Corporation (the “Corporation”) on Form 10-Q for the period ending June  30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark R. Hollar, Chief Financial Officer of the Corporation, 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 and Exchange Act of 1934; and

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

/s/ Mark R. Hollar

Mark R. Hollar

Chief Financial Officer

August7, 2015

XML

Investments (Other Than Temporary Impairment, Credit Losses Recognized In Earnings) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Investments [Abstract]
Balance of cumulative credit losses on securities, Beginning Balance	$ 535	$ 515
Additions for credit-related OTTI not previously recognized	$ 20
Additions for credit losses recorded which were not previously recognized as components of earnings
Decrease for previously recognized credit-related OTTI because there was an intent to sell
Reduction for increases in cash flows expected to be collected
Balance of cumulative credit losses on securities, Ending Balance	$ 555	$ 515

XML

Financial Derivatives (Schedule Of Fair Value Of Derivative Instruments) (Details) $ in Thousands	Dec. 31, 2014 USD ($)
Interest Rate Swap Maturing [Member] | Other Liabilities [Member]
Derivatives, Fair Value [Line Items]
Fair Value	$ 191

XML

Fair Value Measurements And Fair Values Of Financial Instruments (Narrative) (Details)	Jun. 30, 2015 USD ($)
Fair Value Measurements And Fair Values Of Financial Instruments [Abstract]
Liabilities, nonrecurring basis	$ 0
Assets, Level 1 to Level 2 Transfers	0
Liabilities, Level 1 to Level 2 Transfers	$ 0

XML

Financial Derivatives (Schedule Of Effect Of Derivative Instruments On The Statement Of Income) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in OCI net of tax on (Effective Portion)	$ 64	$ 60	$ 126	$ 117
Interest Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	$ (64)	$ (94)	$ (160)	$ (189)
Other Income (Expense) [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion)

XML

Pension (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Defined Benefit Plan Disclosure [Line Items]
Expected pension expense			$ 387
Pension expense	$ 91	$ 67	204	$ 142	$ 276
If New Mortality Table Was Adopted At Year End 2014 [Member]
Defined Benefit Plan Disclosure [Line Items]
Decrease In Funded Status As Result Of Change In Mortality Age			1,600
Expected Increase In Pension Expense			$ 272

XML

Investments (Narrative) (Details) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2015 USD ($) security $ / shares	Jun. 30, 2014 USD ($)	Dec. 31, 2014 USD ($) security	Dec. 31, 2013 USD ($)
Schedule of Available-for-sale Securities [Line Items]
Impairment writedown on securities recognized in earnings	$ 20
Additional impairment charge on investments	0
Available-for-sale Securities	176,424		$ 171,751
Proceeds from Sale and Maturity of Available-for-sale Securities	1,381	$ 1,582
Securities pledged as collateral	69,300		91,600
Gross Unrealized Losses	1,580		1,393
Cumulative OTTI Charges	$ 555	$ 515	$ 535	$ 515
Number of temporarily impaired securities | security	91		70
Fair value of temporarily impaired securities	$ 59,929		$ 45,488
Restricted stock	439		438
Federal Home Loan Bank of Pittsburgh [Member]
Schedule of Available-for-sale Securities [Line Items]
Restricted stock	$ 30
Restricted stock per share | $ / shares	$ 100
Municipal Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities	$ 72,132		68,366
Gross Unrealized Losses	$ 604		$ 292
Number of temporarily impaired securities | security	40		23
Fair value of temporarily impaired securities	$ 25,134		$ 15,092
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities	242		1,053
Trust Preferred Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities	5,328		5,137
Gross Unrealized Gain (Loss)	(621)
Gross Unrealized Losses	$ 621		$ 803
Number of temporarily impaired securities | security	7		7
Fair value of temporarily impaired securities	$ 5,328		$ 5,137
Private-Label Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities	1,560		1,695
Gross Unrealized Gain (Loss)	58
Gross Unrealized Losses			$ 15
Cumulative OTTI Charges	$ 555
Number of temporarily impaired securities | security			1
Fair value of temporarily impaired securities			$ 540
Period of determining credit related loss, in days	60 days

XML

Capital Ratios (Narrative) (Details)		Jun. 30, 2015		Dec. 31, 2014
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Capital Ratios, Basel III, Capital Conservation Buffer		0.00%
Future Capital Ratios Basel III Capital Conservation Buffer		2.50%
Farmers & Merchants Trust Company [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Common Equity Tier 1 Risk-based Capital Ratio: Well Capitalized Minimum	[1]	6.50%
Tier 1 Risk-based Capital Ratio: Well Capitalized Minimum	[2]	8.00%
Tier 1 Leverage Ratio: Well Capitalized Minimum		5.00%	[3]	6.00%
Total Risk-based Capital Ratio: Well Capitalized Minimum	[4]	10.00%

[1] Common equity Tier 1 capital/ total risk-weighted assets

[2] Tier 1 capital / total risk-weighted assets

[3] Tier 1 capital / average quarterly assets

[4] Total risk-based capital / total risk-weighted assets

XML

Loans (Tables)

6 Months Ended

Jun. 30, 2015

Loans [Abstract]

Schedule Of Loans Outstanding

						Change
(Dollars in thousands)	June 30, 2015		December 31, 2014			Amount	%
Residential Real Estate 1-4 Family
Consumer first liens	$	103,852	$	105,014	$	(1,162)	(1.1)
Consumer junior liens and lines of credit		39,915		38,132		1,783	4.7
Total consumer		143,767		143,146		621	0.4
Commercial first lien		60,438		56,300		4,138	7.3
Commercial junior liens and lines of credit		5,637		5,663		(26)	(0.5)
Total commercial		66,075		61,963		4,112	6.6
Total residential real estate 1-4 family		209,842		205,109		4,733	2.3
Residential real estate - construction
Consumer		1,736		1,627		109	6.7
Commercial		6,676		8,088		(1,412)	(17.5)
Total residential real estate construction		8,412		9,715		(1,303)	(13.4)
Commercial real estate		317,329		326,482		(9,153)	(2.8)
Commercial		192,224		179,071		13,153	7.3
Total commercial		509,553		505,553		4,000	0.8
Consumer		5,405		6,154		(749)	(12.2)
		733,212		726,531		6,681	0.9
Less: Allowance for loan losses		(9,450)		(9,111)		(339)	(3.7)
Net Loans	$	723,762	$	717,420	$	6,342	0.9
Included in the loan balances are the following:
Net unamortized deferred loan costs	$	169	$	(76)
Loans pledged as collateral for borrowings and commitments from:
FHLB	$	612,011	$	602,633
Federal Reserve Bank		54,844		56,367
	$	666,855	$	659,000

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Fair Value Measurements And Fair Values Of Financial Instruments (Schedule Of Fair Value, Assets And Liabilities Measured On Recurring Basis) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	$ 176,424	$ 171,751
Total assets	176,424
Interest rate swaps		191
Total liabilities		191
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	242	1,053
Total assets	242
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	176,182	170,698
Total assets	176,182
Interest rate swaps		191
Total liabilities		191
Equity Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	242	1,053
Equity Securities [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	242	1,053
U.S. Government And Agency Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	16,384	15,963
U.S. Government And Agency Securities [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	16,384	15,963
Municipal Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	72,132	68,366
Municipal Securities [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	72,132	68,366
Trust Preferred Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	5,328	5,137
Trust Preferred Securities [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	5,328	5,137
Agency Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	80,739	79,494
Agency Mortgage-Backed Securities [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	80,739	79,494
Private-Label Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	1,560	1,695
Private-Label Mortgage-Backed Securities [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	1,560	1,695
Asset-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	39	43
Asset-Backed Securities [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale	$ 39	$ 43

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Loan Quality (Impaired Financing Receivables) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Allowance	$ 23,885		$ 23,885		$ 24,469
Unpaid Principal Balance With No Allowance	28,167		28,167		28,998
Recorded Investment With Allowance	204		204		2,136
Unpaid Principal Balance With Allowance	288		288		2,991
Related Allowance	10		10		231
Average Recorded Investment	24,368	$ 27,391	25,560	$ 29,512
Interest Income Recognized	183	96	343	200
First Liens
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Allowance	1,601		1,601		1,804
Unpaid Principal Balance With No Allowance	1,778		1,778		2,002
Average Recorded Investment	1,618	2,289	1,723	2,753
Interest Income Recognized	9	15	16	25
Residential Real Estate Junior Liens & Lines of Credit [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Allowance	117		117		169
Unpaid Principal Balance With No Allowance	144		144		195
Average Recorded Investment	117	$ 120	131	$ 123
Interest Income Recognized
Residential Real Estate 1-4 Family [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Allowance	1,718		1,718		1,973
Unpaid Principal Balance With No Allowance	1,922		1,922		2,197
Average Recorded Investment	1,735	$ 2,409	1,854	$ 2,876
Interest Income Recognized	9	15	16	25
Residential Real Estate - Construction [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Allowance	513		513		931
Unpaid Principal Balance With No Allowance	551		551		977
Average Recorded Investment	516	$ 527	723	$ 530
Interest Income Recognized
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Allowance	21,317		21,317		21,487
Unpaid Principal Balance With No Allowance	25,297		25,297		25,744
Recorded Investment With Allowance	195		195		862
Unpaid Principal Balance With Allowance	278		278		1,001
Related Allowance	2		2		60
Average Recorded Investment	21,756	$ 22,399	21,971	$ 24,032
Interest Income Recognized	174	81	327	174
Commercial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment With No Allowance	337		337		78
Unpaid Principal Balance With No Allowance	397		397		80
Recorded Investment With Allowance	9		9		1,274
Unpaid Principal Balance With Allowance	10		10		1,990
Related Allowance	8		8		$ 171
Average Recorded Investment	$ 361	$ 2,056	$ 1,012	2,074
Interest Income Recognized				$ 1

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Investments (Private Label Mortgage Backed Securities) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	$ 175,324	$ 169,399
Investment securities available for sale, at fair value	176,424	171,751
Cumulative OTTI Charges	555	535	$ 515	$ 515
Private-Label Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	1,502	1,675
Investment securities available for sale, at fair value	1,560	$ 1,695
Gross Unrealized Gain (Loss)	58
Cumulative OTTI Charges	$ 555
Lowest Credit Rating Assigned: Standard & Poor's, BBB+ Rating [Member] | RALI2004-QS4 A7 [Member]
Schedule of Available-for-sale Securities [Line Items]
Origination Date	Mar. 01, 2004
Amortized cost	$ 43
Investment securities available for sale, at fair value	$ 43
Collateral Type	ALT A
Credit Support %	11.84%
Lowest Credit Rating Assigned: Standard & Poor's, CCC Rating [Member] | MALT2004-6 7A1 [Member]
Schedule of Available-for-sale Securities [Line Items]
Origination Date	Jun. 01, 2004
Amortized cost	$ 385
Investment securities available for sale, at fair value	393
Gross Unrealized Gain (Loss)	$ 8
Collateral Type	ALT A
Credit Support %	14.11%
Lowest Credit Rating Assigned: Standard & Poor's, CC Rating [Member] | RALI2005-QS2 A1 [Member]
Schedule of Available-for-sale Securities [Line Items]
Origination Date	Feb. 01, 2005
Amortized cost	$ 236
Investment securities available for sale, at fair value	251
Gross Unrealized Gain (Loss)	$ 15
Collateral Type	ALT A
Credit Support %	5.20%
Cumulative OTTI Charges	$ 10
Lowest Credit Rating Assigned: Standard & Poor's, D Rating [Member] | RALI2006-QS4 A2 [Member]
Schedule of Available-for-sale Securities [Line Items]
Origination Date	Apr. 01, 2006
Amortized cost	$ 502
Investment securities available for sale, at fair value	523
Gross Unrealized Gain (Loss)	$ 21
Collateral Type	ALT A
Cumulative OTTI Charges	$ 313
Lowest Credit Rating Assigned: Standard & Poor's, D Rating [Member] | GSR 2006-5F 2A1 [Member]
Schedule of Available-for-sale Securities [Line Items]
Origination Date	May 01, 2006
Amortized cost	$ 72
Investment securities available for sale, at fair value	80
Gross Unrealized Gain (Loss)	$ 8
Collateral Type	Prime
Cumulative OTTI Charges	$ 15
Lowest Credit Rating Assigned: Standard & Poor's, D Rating [Member] | RALI2006-QS8 A1 [Member]
Schedule of Available-for-sale Securities [Line Items]
Origination Date	Jul. 28, 2006
Amortized cost	$ 264
Investment securities available for sale, at fair value	270
Gross Unrealized Gain (Loss)	$ 6
Collateral Type	ALT A
Cumulative OTTI Charges	$ 217

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Fair Value Measurements And Fair Values Of Financial Instruments (Additional Qualitative Information About Level 3 Assets) (Details) - USD ($) $ in Thousands		6 Months Ended		12 Months Ended
		Jun. 30, 2015		Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		$ 1,576		$ 4,372
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		1,576		4,372
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	[1]	636		3,469
Impaired Loans [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		$ 636	[2]	$ 3,469	[1]
Fair Value Measurements, Valuation Techniques		Appraisal
Impaired Loans [Member] | Significant Unobservable Inputs (Level 3) [Member] | Minimum [Member] | Appraisal Adjustments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	[3]	0.00%		0.00%
Impaired Loans [Member] | Significant Unobservable Inputs (Level 3) [Member] | Minimum [Member] | Cost To Sell [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		0.00%		0.00%
Impaired Loans [Member] | Significant Unobservable Inputs (Level 3) [Member] | Maximum [Member] | Appraisal Adjustments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	[3]	10.00%		100.00%
Impaired Loans [Member] | Significant Unobservable Inputs (Level 3) [Member] | Maximum [Member] | Cost To Sell [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		8.00%		10.00%
Impaired Loans [Member] | Significant Unobservable Inputs (Level 3) [Member] | Weighted Average [Member] | Appraisal Adjustments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate	[3]	4.39%		26.00%
Impaired Loans [Member] | Significant Unobservable Inputs (Level 3) [Member] | Weighted Average [Member] | Cost To Sell [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		4.49%		5.00%
Premises Held-For-Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	[1],[2]	$ 358
Premises Held-For-Sale [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	[2]	$ 358
Fair Value Measurements, Valuation Techniques		Appraisal
Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	[1]	$ 449		$ 760
Other Real Estate Owned [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		$ 449	[2]	$ 760	[1]
Fair Value Measurements, Valuation Techniques		Appraisal
Fair Value Inputs, Discount Rate		8.00%
Other Real Estate Owned [Member] | Significant Unobservable Inputs (Level 3) [Member] | Cost To Sell [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate				8.00%
Other Real Estate Owned [Member] | Significant Unobservable Inputs (Level 3) [Member] | Weighted Average [Member] | Cost To Sell [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Inputs, Discount Rate		8.00%		8.00%
Mortgage Servicing Rights [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		$ 133		$ 143
Mortgage Servicing Rights [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		$ 133		$ 143
Fair Value Measurements, Valuation Techniques	[4]	Discounted Cash Flow (3)

[1] Includes assets directly charged-down to fair value during the year-to-date period.

[2] Includes assets directly charged-down to fair value during the year-to-date period.

[3] Qualitative adjustments are discounts specific to each asset and are made as needed.

[4] Valuation and inputs are determined by a third-party pricing service without adjustment.

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Pension (Schedule Of Net Periodic Pension Costs) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Pension [Abstract]
Service cost	$ 92	$ 83	$ 192	$ 169
Interest cost	172	194	350	391
Expected return on plan assets	(296)	(291)	(592)	(581)
Recognized net actuarial loss	123	81	254	163
Net period cost	$ 91	$ 67	$ 204	$ 142	$ 276

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Basis Of Presentation

6 Months Ended

Jun. 30, 2015

Basis Of Presentation [Abstract]

Basis Of Presentation

Note 1 - Basis of Presentation

The consolidated financial statements include the accounts of Franklin Financial Services Corporation (the Corporation), and its wholly-owned subsidiaries, Farmers and Merchants Trust Company of Chambersburg (the Bank) and Franklin Future Fund Inc.  Farmers and Merchants Trust Company of Chambersburg is a commercial bank that has one wholly-owned subsidiary, Franklin Financial Properties Corp.  Franklin Financial Properties Corp. holds real estate assets that are leased by the Bank. Franklin Future Fund Inc. is a non-bank investment company. The activities of non-bank entities are not significant to the consolidated totals.  All significant intercompany transactions and account balances have been eliminated.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations, and cash flows as of June 30, 2015, and for all other periods presented have been made.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted.  It is suggested that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s 2014 Annual Report on Form 10-K.  The consolidated results of operations for the period ended June 30, 2015 are not necessarily indicative of the operating results for the full year.  Management has evaluated subsequent events for potential recognition and/or disclosure through the date these consolidated financial statements were issued.

The consolidated balance sheet at December 31, 2014 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete consolidated financial statements.

For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, interest-bearing deposits in other banks and federal funds sold.  Generally, federal funds are purchased and sold for one-day periods. 

Earnings per share are computed based on the weighted average number of shares outstanding during each period end.  A reconciliation of the weighted average shares outstanding used to calculate basic earnings per share and diluted earnings per share follows:

	For the Three Months Ended				For the Six Months Ended
	June 30				June 30
(Dollars and shares in thousands, except per share data)	2015		2014		2015		2014
Weighted average shares outstanding (basic)		4,234		4,184		4,228		4,178
Impact of common stock equivalents		11		7		8		6
Weighted average shares outstanding (diluted)		4,245		4,191		4,236		4,184
Anti-dilutive options excluded from calculation		13		34		28		37
Net income	$	2,474	$	2,319	$	5,358	$	4,145
Basic earnings per share	$	0.58	$	0.55	$	1.27	$	0.99
Diluted earnings per share	$	0.58	$	0.55	$	1.26	$	0.99

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Loan Quality (Aging Of Payments Of The Loan Portfolio) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	$ 721,535	$ 711,444
Loans Past Due and Still Accruing	2,325	2,796
Non-accrual loans	9,352	12,291
Total Loans	733,212	726,531
Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	1,429	2,112
Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	733	362
Financing Receivables, 90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	163	322
First Liens
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	162,515	158,197
Loans Past Due and Still Accruing	836	1,993
Non-accrual loans	939	1,124
Total Loans	164,290	161,314
First Liens | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	58	1,531
First Liens | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	625	297
First Liens | Financing Receivables, 90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	153	165
Residential Real Estate Junior Liens & Lines of Credit [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	45,171	43,424
Loans Past Due and Still Accruing	264	202
Non-accrual loans	117	169
Total Loans	45,552	43,795
Residential Real Estate Junior Liens & Lines of Credit [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	167	174
Residential Real Estate Junior Liens & Lines of Credit [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	97	28
Residential Real Estate 1-4 Family [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	207,686	201,621
Loans Past Due and Still Accruing	1,100	2,195
Non-accrual loans	1,056	1,293
Total Loans	209,842	205,109
Residential Real Estate 1-4 Family [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	225	1,705
Residential Real Estate 1-4 Family [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	722	325
Residential Real Estate 1-4 Family [Member] | Financing Receivables, 90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	153	165
Residential Real Estate - Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	7,106	8,784
Loans Past Due and Still Accruing	793
Non-accrual loans	513	931
Total Loans	8,412	9,715
Residential Real Estate - Construction [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	793
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	309,525	317,576
Loans Past Due and Still Accruing	367	476
Non-accrual loans	7,437	8,430
Total Loans	317,329	326,482
Commercial Real Estate [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	367	336
Commercial Real Estate [Member] | Financing Receivables, 90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing		140
Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	191,849	177,407
Loans Past Due and Still Accruing	29	27
Non-accrual loans	346	1,637
Total Loans	192,224	179,071
Commercial [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	29	12
Commercial [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing		15
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	5,369	6,056
Loans Past Due and Still Accruing	36	98
Total Loans	5,405	6,154
Consumer [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	15	59
Consumer [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	11	22
Consumer [Member] | Financing Receivables, 90 Days+ Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Past Due and Still Accruing	$ 10	$ 17

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Financial Derivatives (Tables)

6 Months Ended

Jun. 30, 2015

Financial Derivatives [Abstract]

Schedule Of Fair Value Of Derivative Instruments

Fair Value of Derivative Instruments
(Dollars in thousands)		Balance Sheet
Date	Type	Location	Fair Value
June 30, 2015	Interest rate contracts	Other liabilities	$	-
December 31, 2014	Interest rate contracts	Other liabilities	$	191

Schedule Of Effect Of Derivative Instruments On The Statement Of Income

Derivatives in ASC Topic 815 Cash Flow Hedging Relationships
(Dollars in thousands)							Amount of Gain
						Location of	or (Loss)
						Gain or (Loss)	Recognized in
						Recognized in	Income on
			Location of	Amount of Gain		Income on	Derivatives
	Amount of Gain		Gain or (Loss)	or (Loss)		Derivative (Ineffective	(Ineffective Portion
	or (Loss)		Reclassified from	Reclassified from		Portion and Amount	and Amount
	Recognized in OCI		Accumulated OCI	Accumulated OCI		Excluded from	Excluded from
	net of tax on Derivative		into Income	into Income		Effectiveness	Effectiveness
Date / Type	(Effective Portion)		(Effective Portion)	(Effective Portion)		Testing)	Testing)
Interest rate contracts
Three months ended:
June 30, 2015	$	64	Interest Expense	$	(64)	Other income (expense)	$	-
June 30, 2014	$	60	Interest Expense	$	(94)	Other income (expense)	$	-
Six months ended:
June 30, 2015	$	126	Interest Expense	$	(160)	Other income (expense)	$	-
June 30, 2014	$	117	Interest Expense	$	(189)	Other income (expense)	$	-

Schedule Of Derivative Instruments Subject To Master Netting Arrangement Or Repurchase Agreement

						Net Amounts		Gross Amounts Not Offset in the
		Gross		Gross Amounts		of Liabilities		Statements of Condition
		Amounts of		Offset in the		Presented in the
		Recognized		Statements of		Statements of		Financial		Cash Collateral		Net
(Dollars in thousands)		Liabilities		Condition		Condition		Instruments		Pledged		Amount
Interest Rate Swap Agreements
June 30, 2015	$	-	$	-	$	-	$	-	$	-	$	-
December 31, 2014		191		-		191		191		-		-

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Fair Value Measurements And Fair Values Of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value Measurements And Fair Values Of Financial Instruments [Abstract]

Fair Value, By Balance Sheet Grouping

	June 30, 2015
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	64,403	$	64,403	$	64,403	$	-	$	-
Investment securities available for sale		176,424		176,424		242		176,182		-
Restricted stock		439		439		-		439		-
Loans held for sale		1,755		1,755		-		1,755		-
Net loans		723,762		730,507		-		-		730,507
Accrued interest receivable		3,068		3,068		-		3,068		-
Mortgage servicing rights		133		133		-		-		133
Financial liabilities:
Deposits	$	916,059	$	916,110	$	-	$	916,110	$	-
Accrued interest payable		125		125		-		125		-
	December 31, 2014
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	48,593	$	48,593	$	48,593	$	-	$	-
Investment securities available for sale		171,751		171,751		1,053		170,698		-
Restricted stock		438		438		-		438		-
Loans held for sale		389		389		-		389		-
Net loans		717,420		721,680		-		-		721,680
Accrued interest receivable		3,038		3,038		-		3,038		-
Mortgage servicing rights		143		143		-		-		143
Financial liabilities:
Deposits	$	881,181	$	881,289	$	-	$	881,289	$	-
Securities sold under agreements to repurchase		9,079		9,079		-		9,079		-
Accrued interest payable		169		169		-		169		-
Interest rate swaps		191		191		-		191		-

Schedule Of Fair Value, Assets And Liabilities Measured On Recurring Basis

(Dollars in Thousands	Fair Value at June 30, 2015
Asset  Description	Level 1		Level 2		Level 3		Total
Equity securities	$	242	$	-	$	-	$	242
U.S. Government and Agency securities		-		16,384		-		16,384
Municipal securities		-		72,132		-		72,132
Trust Preferred Securities		-		5,328		-		5,328
Agency mortgage-backed securities		-		80,739		-		80,739
Private-label mortgage-backed securities		-		1,560		-		1,560
Asset-backed securities		-		39		-		39
Total assets	$	242	$	176,182	$	-	$	176,424

(Dollars in Thousands)	Fair Value at December 31, 2014
Asset  Description	Level 1		Level 2		Level 3		Total
Equity securities	$	1,053	$	-	$	-	$	1,053
U.S. Government and Agency securities		-		15,963		-		15,963
Municipal securities		-		68,366		-		68,366
Trust Preferred Securities		-		5,137		-		5,137
Agency mortgage-backed securities		-		79,494		-		79,494
Private-label mortgage-backed securities		-		1,695		-		1,695
Asset-backed securities		-		43		-		43
Total assets	$	1,053	$	170,698	$	-	$	171,751
Liability Description
Interest rate swaps	$	-	$	191	$	-	$	191
Total liabilities	$	-	$	191	$	-	$	191

Fair Value Measurements, Nonrecurring

(Dollars in Thousands)
	Fair Value at June 30, 2015
Asset  Description	Level 1		Level 2		Level 3		Total
Impaired loans (1)	$	-	$	-	$	636	$	636
Premises held-for-sale (1)		-		-		358		358
Other real estate owned (1)		-		-		449		449
Mortgage servicing rights		-		-		133		133
Total assets	$	-	$	-	$	1,576	$	1,576

(Dollars in Thousands)	Fair Value at December 31, 2014
Asset  Description	Level 1		Level 2		Level 3		Total
Impaired loans (1)	$	-	$	-	$	3,469	$	3,469
Other real estate owned (1)		-		-		760		760
Mortgage servicing rights		-		-		143		143
Total assets	$	-	$	-	$	4,372	$	4,372

(1) Includes assets directly charged-down to fair value during the year-to-date period.

Fair Value Inputs, Assets, Quantitative Information

		Quantitative Information about Level 3 Fair Value Measurements
(Dollars in Thousands)		at June 30, 2015
					Range
Asset  Description		Fair Value	Valuation Technique	Unobservable Input	(Weighted Average)
Impaired loans (1)	$	636	Appraisal	Appraisal Adjustments (2)	0% - 10%(4.39%)
				Cost to sell	0% - 8%(4.49%)
Premises held-for-sale (1)		358	Appraisal	Appraisal Adjustments (2)
Other real estate owned (1)		449	Appraisal	Appraisal Adjustments (2)
				Cost to sell	8%(8%)
Mortgage servicing rights		133	Discounted Cash Flow (3)
		at December 31, 2014
Impaired loans (1)	$	3,469	Appraisal	Appraisal Adjustments (2)	0% - 100%(26%)
				Cost to sell	0% - 10%(5%)
Other real estate owned (1)		760	Appraisal	Appraisal Adjustments (2)
				Cost to sell	8%(8%)
Mortgage servicing rights		143	Discounted Cash Flow (3)
(1) Includes assets directly charged-down to fair value during the year-to-date period.
(2) Qualitative adjustments are discounts specific to each asset and are made as needed.
(3) Valuation and inputs are determined by a third-party pricing service without adjustment.

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Financial Derivatives (Schedule Of Derivative Instruments Subject To Master Netting Arrangement Or Repurchase Agreement) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2014	Jun. 30, 2015
Financial Derivatives [Abstract]
Gross Amounts of Recognized Liabilities	$ 191
Gross Amounts Offset in the Statements of Condition
Net Amounts of Liabilities Presented in the Statements of Condition	$ 191
Gross Amounts Not Offset in the Statements of Condition, Financial Instruments	$ 191
Gross Amounts Not Offset in the Statements of Condition, Cash Collateral Pledged
Gross Amounts Not Offset in the Statements of Condition, Net Amount

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Loan Quality (Internal Credit Rating For The Loan Portfolio) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 733,212	$ 726,531
Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	695,039	686,079
Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	20,257	17,939
Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 17,916	$ 22,513
Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount
First Liens
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 164,290	$ 161,314
First Liens | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	158,575	155,676
First Liens | Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	2,240	1,919
First Liens | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 3,475	$ 3,719
First Liens | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount
Residential Real Estate Junior Liens & Lines of Credit [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 45,552	$ 43,795
Residential Real Estate Junior Liens & Lines of Credit [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	45,273	43,559
Residential Real Estate Junior Liens & Lines of Credit [Member] | Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	29	29
Residential Real Estate Junior Liens & Lines of Credit [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 250	$ 207
Residential Real Estate Junior Liens & Lines of Credit [Member] | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount
Residential Real Estate 1-4 Family [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 209,842	$ 205,109
Residential Real Estate 1-4 Family [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	203,848	199,235
Residential Real Estate 1-4 Family [Member] | Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	2,269	1,948
Residential Real Estate 1-4 Family [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 3,725	$ 3,926
Residential Real Estate 1-4 Family [Member] | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount
Residential Real Estate - Construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 8,412	$ 9,715
Residential Real Estate - Construction [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	7,899	8,784
Residential Real Estate - Construction [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 513	$ 931
Residential Real Estate - Construction [Member] | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 317,329	$ 326,482
Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	294,338	301,149
Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	10,732	10,578
Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 12,259	$ 14,755
Commercial Real Estate [Member] | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount
Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 192,224	$ 179,071
Commercial [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	183,559	170,774
Commercial [Member] | Special Mention [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	7,256	5,413
Commercial [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 1,409	$ 2,884
Commercial [Member] | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 5,405	$ 6,154
Consumer [Member] | Pass [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	5,395	6,137
Consumer [Member] | Substandard [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount	$ 10	$ 17
Consumer [Member] | Doubtful [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans and Leases Receivable, Gross, Carrying Amount

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Basis Of Presentation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Basis Of Presentation [Abstract]
Weighted average shares outstanding (basic)	4,234	4,184	4,228	4,178
Impact of common stock equivalents	11	7	8	6
Weighted average shares outstanding (diluted)	4,245	4,191	4,236	4,184
Anti-dilutive options excluded from calculation	13	34	28	37
Net income	$ 2,474	$ 2,319	$ 5,358	$ 4,145
Basic earnings per share	$ 0.58	$ 0.55	$ 1.27	$ 0.99
Diluted earnings per share	$ 0.58	$ 0.55	$ 1.26	$ 0.99

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Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Accumulated Other Comprehensive Loss [Abstract]
Net unrealized gains on securities	$ 1,100	$ 2,352
Tax effect	(374)	(800)
Net of tax amount	726	1,552
Net unrealized losses on derivatives		(191)
Tax effect		65
Net of tax amount		(126)
Accumulated pension adjustment	(6,858)	(6,858)
Tax effect	2,332	2,332
Net of tax amount	(4,526)	(4,526)
Total accumulated other comprehensive loss	$ (3,800)	$ (3,100)

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Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities
Net income	$ 5,358	$ 4,145
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	675	732
Net amortization of loans and investment securities	796	893
Amortization and net change in mortgage servicing rights valuation	9	8
Amortization of intangibles	181	207
Provision for loan losses	635	464
Net realized gains on sales of securities	(8)	(221)
Impairment writedown on securities recognized in earnings	20
Gain on conversion	(728)
Loans originated for sale	(3,812)	(3,554)
Proceeds from sale of loans	2,446	3,303
Writedown of premises and equipment	60
Writedown on other real estate owned		200
Net gain on sale or disposal of other real estate/other repossessed assets	(32)	(15)
Increase in cash surrender value of life insurance	(279)	(286)
Decrease (increase) in other assets	1,380	(118)
(Decrease) increase in other liabilities	(2,195)	613
Net cash provided by operating activities	4,506	6,371
Cash flows from investing activities
Proceeds from sales and calls of investment securities available for sale	1,381	1,582
Proceeds from maturities and paydowns of securities available for sale	14,132	12,313
Purchase of investment securities available for sale	(21,689)	(28,362)
Net decrease in restricted stock	(1)	(32)
Net increase in loans	(7,256)	(10,012)
Capital expenditures	(190)	(321)
Proceeds from sale of other real estate/other repossessed assets	129	493
Net cash used in investing activities	(13,494)	(24,339)
Cash flows from financing activities
Net increase in demand deposits, NOW, and savings accounts	41,406	63,087
Net decrease in time deposits	(6,528)	(8,107)
Net decrease in repurchase agreements	(9,079)	(21,570)
Long-term debt payments		(403)
Dividends paid	(1,522)	(1,419)
Treasury stock issued under stock option plans	86	52
Common stock issued under dividend reinvestment plan	435	374
Net cash provided by financing activities	24,798	32,014
Increase in cash and cash equivalents	15,810	14,046
Cash and cash equivalents as of January 1	48,593	40,745
Cash and cash equivalents as of June 30	64,403	54,791
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for: Interest on deposits and other borrowed funds	1,304	1,670
Cash paid during the year for: Income taxes	1,513	236
Noncash Activities
Loans transferred to Other Real Estate	$ 449	$ 82

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Guarantees (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Guarantees [Abstract]
Standby Letters of Credit Outstanding	$ 26.0	$ 22.7
Letters of credit, Expiration period	1 year

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Loans (Summary Of Loans Outstanding) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 733,212		$ 726,531
Allowance for loan losses	(9,450)	$ (9,210)	(9,111)	$ (9,519)	$ (9,745)	$ (9,702)
Net Loans	723,762		717,420
Change Amount	$ 6,681
Change %	0.90%
Allowance for loan losses, Change Amount	$ (339)
Allowance for loan losses, Change %	(3.70%)
Net Loans, Change Amount	$ 6,342
Net Loans, Change %	0.90%
Net unamortized deferred loan costs	$ 169		(76)
Loans pledged as collateral for borrowings and commitments from: FHLB	612,011		602,633
Loans pledged as collateral for borrowings and commitments from :Federal Reserve Bank	54,844		56,367
Total loans pledged as collateral	666,855		659,000
Residential Real Estate 1-4 Family Consumer First Liens [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	103,852		105,014
Change Amount	$ (1,162)
Change %	(1.10%)
Residential Real Estate 1-4 Family Consumer Junior Liens And Lines Of Credit [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 39,915		38,132
Change Amount	$ 1,783
Change %	4.70%
Residential Real Estate 1-4 Family Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 143,767		143,146
Change Amount	$ 621
Change %	0.40%
Residential Real Estate 1-4 Family Commercial first lien [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 60,438		56,300
Change Amount	$ 4,138
Change %	7.30%
Residential Real Estate 1-4 Family Commercial junior liens and lines of credit [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 5,637		5,663
Change Amount	$ (26)
Change %	(0.50%)
Residential Real Estate 1-4 Family Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 66,075		61,963
Change Amount	$ 4,112
Change %	6.60%
Residential Real Estate 1-4 Family [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 209,842		205,109
Change Amount	$ 4,733
Change %	2.30%
Residential Real Estate- Construction Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 1,736		1,627
Change Amount	$ 109
Change %	6.70%
Residential Real Estate- Construction Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 6,676		8,088
Change Amount	$ (1,412)
Change %	(17.50%)
Residential Real Estate - Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 8,412		9,715
Allowance for loan losses	(220)	(263)	(226)	(261)	(374)	(291)
Change Amount	$ (1,303)
Change %	(13.40%)
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 317,329		326,482
Allowance for loan losses	(5,686)	(5,600)	(5,417)	(5,412)	(5,509)	(5,571)
Change Amount	$ (9,153)
Change %	(2.80%)
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 192,224		179,071
Allowance for loan losses	(1,771)	(1,628)	(1,773)	(2,366)	(2,309)	(2,306)
Change Amount	$ 13,153
Change %	7.30%
Total Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 509,553		505,553
Change Amount	$ 4,000
Change %	0.80%
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 5,405		6,154
Allowance for loan losses	(121)	$ (125)	$ (136)	$ (135)	$ (144)	$ (148)
Change Amount	$ (749)
Change %	(12.20%)

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Financial Derivatives (Narrative) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Derivative [Line Items]
Derivative, net
Securities sold under agreements to repurchase	$ 0
Interest Rate Swap Maturing [Member]
Derivative [Line Items]
Derivative, net	$ 0

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Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Assets
Cash and due from banks	$ 17,649	$ 14,258
Interest-bearing deposits in other banks	46,754	34,335
Total cash and cash equivalents	64,403	48,593
Investment securities available for sale, at fair value	176,424	171,751
Restricted stock	439	438
Loans held for sale	1,755	389
Loans	733,212	726,531
Allowance for loan losses	(9,450)	(9,111)
Net Loans	723,762	717,420
Premises and equipment, net	14,531	15,046
Bank owned life insurance	22,377	22,098
Goodwill	9,016	9,016
Other intangible assets		181
Other real estate owned	4,018	3,666
Deferred tax assets, net	4,690	4,328
Other assets	7,124	8,522
Total assets	1,028,539	1,001,448
Deposits
Noninterest-bearing checking	143,564	136,910
Money management, savings and interest checking	680,424	645,672
Time	92,071	98,599
Total Deposits	916,059	881,181
Repurchase Agreements		9,079
Other liabilities	5,302	7,667
Total liabilities	921,361	897,927
Shareholders' equity
Common stock, $1 par value per share,15,000,000 shares authorized with 4,625,071 shares issued and 4,241,355 shares outstanding at June 30, 2015 and 4,606,564 shares issued and 4,218,330 shares outstanding at December 31, 2014	$ 4,625	$ 4,607
Capital stock without par value, 5,000,000 shares authorized with no shares issued and outstanding
Additional paid-in capital	$ 37,926	$ 37,504
Retained earnings	75,288	71,452
Accumulated other comprehensive loss	(3,800)	(3,100)
Treasury stock, 383,716 shares at June 30, 2015 and 388,234 shares at December 31, 2014, at cost	(6,861)	(6,942)
Total shareholders' equity	107,178	103,521
Total liabilities and shareholders' equity	$ 1,028,539	$ 1,001,448

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Loan Quality (Troubled Debt Restructuring Loans) (Details) $ in Thousands		6 Months Ended
		Jun. 30, 2015 USD ($) contract	Jun. 30, 2014 contract	Dec. 31, 2014 USD ($) contract
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Number of Contracts | contract		17		18
Troubled Debt Restructurings: Recorded Investment		$ 16,667		$ 16,968
Troubled Debt Restructurings That Have Defaulted on Modified Terms YTD: Number of Contracts | contract
Troubled Debt Restructurings That Have Defaulted on Modified Terms YTD: Recorded Investment
Troubled Debt Restructurings, New During Period, Number of Contracts | contract		0	0
Performing [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Recorded Investment	[1]	$ 2,667		$ 14,956
Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Recorded Investment	[1]	$ 0		$ 2,012
Residential Real Estate - Construction [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Number of Contracts | contract		1		1
Troubled Debt Restructurings: Recorded Investment		$ 513		$ 521
Troubled Debt Restructurings That Have Defaulted on Modified Terms YTD: Number of Contracts | contract
Troubled Debt Restructurings That Have Defaulted on Modified Terms YTD: Recorded Investment
Residential Real Estate - Construction [Member] | Performing [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Recorded Investment	[1]	$ 513
Residential Real Estate - Construction [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Recorded Investment	[1]			$ 521
Residential Real Estate 1-4 Family [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Number of Contracts | contract		4		5
Troubled Debt Restructurings: Recorded Investment		$ 661		$ 699
Troubled Debt Restructurings That Have Defaulted on Modified Terms YTD: Number of Contracts | contract
Troubled Debt Restructurings That Have Defaulted on Modified Terms YTD: Recorded Investment
Residential Real Estate 1-4 Family [Member] | Performing [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Recorded Investment	[1]	$ 661		$ 673
Residential Real Estate 1-4 Family [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Recorded Investment	[1]			$ 26
Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Number of Contracts | contract		12		12
Troubled Debt Restructurings: Recorded Investment		$ 15,493		$ 15,748
Troubled Debt Restructurings That Have Defaulted on Modified Terms YTD: Number of Contracts | contract
Troubled Debt Restructurings That Have Defaulted on Modified Terms YTD: Recorded Investment
Commercial Real Estate [Member] | Performing [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Recorded Investment	[1]	$ 1,493		$ 14,283
Commercial Real Estate [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructurings: Recorded Investment	[1]			$ 1,465

[1] The performing status is determined by the loan's compliance with the modified terms.

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Consolidated Statements Of Changes In Shareholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Treasury Stock [Member]	Total
Balance at Dec. 31, 2013	$ 4,561	$ 36,636	$ 65,897	$ (4,696)	$ (7,010)	$ 95,388
Net income			4,145			4,145
Other comprehensive income (loss)				1,419		1,419
Cash dividends declared			(1,419)			(1,419)
Treasury shares issued under stock option plans		(10)			62	52
Common stock issued under dividend reinvestment plan	20	354				374
Balance at Jun. 30, 2014	4,581	36,980	68,623	(3,277)	(6,948)	99,959
Balance at Dec. 31, 2014	4,607	37,504	71,452	(3,100)	(6,942)	103,521
Net income			5,358			5,358
Other comprehensive income (loss)				(700)		(700)
Cash dividends declared			(1,522)			(1,522)
Treasury shares issued under stock option plans		5			81	86
Common stock issued under dividend reinvestment plan	18	417				435
Balance at Jun. 30, 2015	$ 4,625	$ 37,926	$ 75,288	$ (3,800)	$ (6,861)	$ 107,178

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Investments (Amortized Cost And Fair Value Of Debt Securities, By Contractual Maturity) (Details) $ in Thousands	Jun. 30, 2015 USD ($)
Investments [Abstract]
Due in one year or less, Amortized cost	$ 4,570
Due after one year through five years, Amortized cost	10,483
Due after five years through ten years, Amortized cost	32,927
Due after ten years, Amortized cost	45,533
Amortized Cost Contractual Maturities Subtotal	93,513
Mortgage-backed securities, Amortized cost	81,647
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis	175,160
Due in one year or less, Fair value	4,609
Due after one year through five years, Fair value	10,680
Due after five years through ten years, Fair value	33,512
Due after ten years, Fair value	45,082
Fair Value Contractual Maturities Subtotal	93,883
Mortgage-backed securities, Fair value	82,299
Available-for-sale Securities, Debt Securities, Fair Value	$ 176,182

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Basis Of Presentation (Tables)

6 Months Ended

Jun. 30, 2015

Basis Of Presentation [Abstract]

Schedule Of Earnings Per Share, Basic And Diluted

	For the Three Months Ended				For the Six Months Ended
	June 30				June 30
(Dollars and shares in thousands, except per share data)	2015		2014		2015		2014
Weighted average shares outstanding (basic)		4,234		4,184		4,228		4,178
Impact of common stock equivalents		11		7		8		6
Weighted average shares outstanding (diluted)		4,245		4,191		4,236		4,184
Anti-dilutive options excluded from calculation		13		34		28		37
Net income	$	2,474	$	2,319	$	5,358	$	4,145
Basic earnings per share	$	0.58	$	0.55	$	1.27	$	0.99
Diluted earnings per share	$	0.58	$	0.55	$	1.26	$	0.99

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Investments (Schedule Of Trust Preferred Securities) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	$ 175,324	$ 169,399
Fair Value	176,424	171,751
Trust Preferred Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	5,949	5,940
Fair Value	5,328	$ 5,137
Gross Unrealized Gain (Loss)	$ (621)
Lowest Credit Rating Assigned: Standard & Poor's, BB Rating [Member] | Trust Preferred Securities: BankAmerica Cap III [Member]
Schedule of Available-for-sale Securities [Line Items]
Maturity	Jan. 15, 2027
Single issuer or pooled	Single
Class	Preferred Stock
Amortized cost	$ 964
Fair Value	906
Gross Unrealized Gain (Loss)	$ (58)
Lowest Credit Rating Assigned: Standard & Poor's, BB Rating [Member] | Trust Preferred Securities: Huntington Cap Trust [Member]
Schedule of Available-for-sale Securities [Line Items]
Maturity	Feb. 01, 2027
Single issuer or pooled	Single
Class	Preferred Stock
Amortized cost	$ 941
Fair Value	816
Gross Unrealized Gain (Loss)	$ (125)
Lowest Credit Rating Assigned: Standard & Poor's, BB Rating [Member] | Trust Preferred Securities: Huntington Cap Trust II [Member]
Schedule of Available-for-sale Securities [Line Items]
Maturity	Jun. 15, 2028
Single issuer or pooled	Single
Class	Preferred Stock
Amortized cost	$ 892
Fair Value	790
Gross Unrealized Gain (Loss)	$ (102)
Lowest Credit Rating Assigned: Standard & Poor's, BB Rating [Member] | Trust Preferred Securities: Fleet Cap Tr V [Member]
Schedule of Available-for-sale Securities [Line Items]
Maturity	Dec. 18, 2028
Single issuer or pooled	Single
Class	Preferred Stock
Amortized cost	$ 975
Fair Value	834
Gross Unrealized Gain (Loss)	$ (141)
Lowest Credit Rating Assigned: Standard & Poor's, BBB- Rating [Member] | Trust Preferred Securities: Chase Cap VI JPM [Member]
Schedule of Available-for-sale Securities [Line Items]
Maturity	Aug. 01, 2028
Single issuer or pooled	Single
Class	Preferred Stock
Amortized cost	$ 963
Fair Value	850
Gross Unrealized Gain (Loss)	$ (113)
Lowest Credit Rating Assigned: Standard & Poor's, BBB+ Rating [Member] | Trust Preferred Securities: Corestates Captl Tr II [Member]
Schedule of Available-for-sale Securities [Line Items]
Maturity	Feb. 15, 2027
Single issuer or pooled	Single
Class	Preferred Stock
Amortized cost	$ 937
Fair Value	871
Gross Unrealized Gain (Loss)	$ (66)
Lowest Credit Rating Assigned: Standard & Poor's, BBB Rating [Member] | Trust Preferred Securities: Wachovia Cap Trust II [Member]
Schedule of Available-for-sale Securities [Line Items]
Maturity	Jan. 15, 2027
Single issuer or pooled	Single
Class	Preferred Stock
Amortized cost	$ 277
Fair Value	261
Gross Unrealized Gain (Loss)	$ (16)

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Investments (Tables)

6 Months Ended

Jun. 30, 2015

Investments [Abstract]

Unrealized Gain (Loss) On Investments

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
June 30, 2015	cost		gains		losses		value
Equity securities	$	164	$	78	$	-	$	242
U.S. Government agency securities		16,245		168		(29)		16,384
Municipal securities		71,277		1,459		(604)		72,132
Trust preferred securities		5,949		-		(621)		5,328
Agency mortgage-backed securities		80,145		917		(323)		80,739
Private-label mortgage-backed securities		1,502		58		-		1,560
Asset-backed securities		42		-		(3)		39
	$	175,324	$	2,680	$	(1,580)	$	176,424

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
December 31, 2014	cost		gains		losses		value
Equity securities	$	274	$	779	$	-	$	1,053
U.S. Government and Agency securities		15,854		173		(64)		15,963
Municipal securities		66,832		1,826		(292)		68,366
Trust preferred securities		5,940		-		(803)		5,137
Agency mortgage-backed securities		78,779		932		(217)		79,494
Private-label mortgage-backed securities		1,675		35		(15)		1,695
Asset-backed securities		45		-		(2)		43
	$	169,399	$	3,745	$	(1,393)	$	171,751

Amortized Cost And Fair Value Of Debt Securities, By Contractual Maturity

(Dollars in thousands)	Amortized cost		Fair value
Due in one year or less	$	4,570	$	4,609
Due after one year through five years		10,483		10,680
Due after five years through ten years		32,927		33,512
Due after ten years		45,533		45,082
		93,513		93,883
Mortgage-backed securities		81,647		82,299
	$	175,160	$	176,182

Schedule Of Trust Preferred Securities

(Dollars in thousands)
Deal Name	Maturity	Single Issuer or Pooled	Class	Amortized Cost		Fair Value		Gross Unrealized Gain (Loss)		Lowest Credit Rating Assigned
BankAmerica Cap III	1/15/2027	Single	Preferred Stock	$	964	$	906	$	(58)	BB
Wachovia Cap Trust II	1/15/2027	Single	Preferred Stock		277		261		(16)	BBB
Huntington Cap Trust	2/1/2027	Single	Preferred Stock		941		816		(125)	BB
Corestates Captl Tr II	2/15/2027	Single	Preferred Stock		937		871		(66)	BBB+
Huntington Cap Trust II	6/15/2028	Single	Preferred Stock		892		790		(102)	BB
Chase Cap VI JPM	8/1/2028	Single	Preferred Stock		963		850		(113)	BBB-
Fleet Cap Tr V	12/18/2028	Single	Preferred Stock		975		834		(141)	BB
				$	5,949	$	5,328	$	(621)

Private Label Mortgage Backed Securities

(Dollars in thousands)						Gross					Cumulative
	Origination	Amortized		Fair		Unrealized		Collateral	Lowest Credit	Credit	OTTI
Description	Date	Cost		Value		Gain (Loss)		Type	Rating Assigned	Support %	Charges
RALI 2004-QS4 A7	3/1/2004	$	43	$	43	$	-	ALT A	BBB+	11.84	$	-
MALT 2004-6 7A1	6/1/2004		385		393		8	ALT A	CCC	14.11		-
RALI 2005-QS2 A1	2/1/2005		236		251		15	ALT A	CC	5.20		10
RALI 2006-QS4 A2	4/1/2006		502		523		21	ALT A	D	-		313
GSR 2006-5F 2A1	5/1/2006		72		80		8	Prime	D	-		15
RALI 2006-QS8 A1	7/28/2006		264		270		6	ALT A	D	-		217
		$	1,502	$	1,560	$	58				$	555

Schedule Of Unrealized Loss On Investments

	June 30, 2015
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count
U.S. Government and Agency securities	$	1,498	$	(7)	3	$	4,617	$	(22)	10	$	6,115	$	(29)	13
Municipal securities		20,359		(386)	33		4,775		(218)	7		25,134		(604)	40
Trust preferred securities		-		-	-		5,328		(621)	7		5,328		(621)	7
Agency mortgage-backed securities		18,002		(179)	22		5,346		(144)	8		23,348		(323)	30
Asset-backed securities		-		-	-		4		(3)	1		4		(3)	1
Total temporarily impaired securities	$	39,859	$	(572)	58	$	20,070	$	(1,008)	33	$	59,929	$	(1,580)	91

	December 31, 2014
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count
U.S. Government and Agency securities		4		-	1		7,207		(64)	14		7,211		(64)	15
Municipal securities		5,651		(33)	9		9,441		(259)	14		15,092		(292)	23
Trust preferred securities		-		-	-		5,137		(803)	7		5,137		(803)	7
Agency mortgage-backed securities		9,304		(60)	13		8,199		(157)	10		17,503		(217)	23
Private-label mortgage-backed securities		-		-	-		540		(15)	1		540		(15)	1
Asset-backed securities		-		-	-		5		(2)	1		5		(2)	1
Total temporarily impaired securities	$	14,959	$	(93)	23	$	30,529	$	(1,300)	47	$	45,488	$	(1,393)	70

Other Than Temporary Impairment, Credit Losses Recognized In Earnings

(Dollars in thousands)	Six Months Ended
	2015		2014
Balance of cumulative credit-related OTTI at January 1	$	535	$	515
Additions for credit-related OTTI not previously recognized		20		-
Additional increases for credit-related OTTI previously recognized when there is no intent to sell
and no requirement to sell before recovery of amortized cost basis		-		-
Decreases for previously recognized credit-related OTTI because there was an intent to sell		-		-
Reduction for increases in cash flows expected to be collected		-		-
Balance of credit-related OTTI at June 30	$	555	$	515

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Consolidated Statements Of Changes In Shareholders' Equity (Parenthetical) - $ / shares	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Common Stock, Dividends, Per Share, Declared	$ 0.36	$ 0.34
Treasury shares issued under stock option plan, shares	4,518	3,476
Common Stock [Member]
Common stock issued under dividend reinvestment plan, shares	18,507	20,642

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Consolidated Balance Sheets [Abstract]
Common Stock, Par or Stated Value Per Share	$ 1	$ 1
Common Stock, Shares Authorized	15,000,000	15,000,000
Common Stock, Shares, Issued	4,625,071	4,606,564
Common Stock, Shares, Outstanding	4,241,355	4,218,330
Capital Stock, Shares Authorized	5,000,000	5,000,000
Capital Stock, Shares, Issued	0	0
Capital Stock, Shares, Outstanding	0	0
Treasury Stock, Shares	383,716	388,234

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Fair Value Measurements And Fair Values Of Financial Instruments

6 Months Ended

Jun. 30, 2015

Fair Value Measurements And Fair Values Of Financial Instruments [Abstract]

Fair Value Measurements And Fair Values Of Financial Instruments

Note 9.  Fair Value Measurements and Fair Values of Financial Instruments

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

FASB ASC Topic 820, “Financial Instruments”, requires disclosure of the fair value of financial assets and liabilities, including those financial assets and liabilities that are not measured and reported at fair value on a recurring and nonrecurring basis. The Corporation does not report any nonfinancial assets at fair value. FASB ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy under FASB ASC Topic 820 are as follows:

Level 1: Valuation is based on unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2:  Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.  There may be substantial differences in the assumptions used for securities within the same level.  For example, prices for U.S. Agency securities have fewer assumptions and are closer to level 1 valuations than the private label mortgage backed securities that require more assumptions and are closer to level 3 valuations.

Level 3: Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Corporation’s assumptions regarding what market participants would assume when pricing a financial instrument. 

An asset’s 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 following methods and assumptions were used to estimate the fair values of the Corporation’s financial instruments at June 30, 2015 and December 31, 2014.

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

Investment securities:  The fair value of investment securities is determined in accordance with the methods described under FASB ASC Topic 820 as discussed below.

Restricted stock:  The carrying value of restricted stock approximates its fair value based on redemption provisions for the restricted stock.

Loans held for sale: The fair value of loans held for sale is determined by the price set between the Bank and the purchaser prior to origination. These loans are usually sold at par.

Net loans:  The fair value of fixed-rate loans is estimated for each major type of loan (e.g. real estate, commercial, industrial and agricultural and consumer) by discounting the future cash flows associated with such loans using rates currently offered for loans with similar terms to borrowers of comparable credit quality.  The model considers scheduled principal maturities, repricing characteristics, prepayment assumptions and interest cash flows.  The discount rates used are estimated based upon consideration of a number of factors including the treasury yield curve, expense and service charge factors. For variable rate loans that reprice frequently and have no significant change in credit quality, carrying values approximate the fair value.

Accrued Interest Receivable:  The carrying amount is a reasonable estimate of fair value.

Mortgage servicing rights:  The fair value of mortgage servicing rights is based on observable market prices when available or the present value of expected future cash flows when not available.  Assumptions such as loan default rates, costs to service, and prepayment speeds significantly affect the estimate of future cash flows. Mortgage servicing rights are carried at the lower of cost or fair value.

Deposits, Securities sold under agreements to repurchase and Long-term debt:  The fair value of demand deposits, savings accounts, and money market deposits is the amount payable on demand at the reporting date.  The fair value of fixed-rate certificates of deposit and long-term debt is estimated by discounting the future cash flows using rates approximating those currently offered for certificates of deposit and borrowings with similar remaining maturities.  For securities sold under agreements to repurchase, the carrying value approximates a reasonable estimate of the fair value.

Accrued interest payable:  The carrying amount is a reasonable estimate of fair value.

Derivatives:  The fair value of the interest rate swaps is based on other similar financial instruments and is classified as Level 2.

The following information regarding the fair value of the Corporation’s financial instruments should not be interpreted as an estimate of the fair value of the entire Corporation since a fair value calculation is only provided for a limited portion of the Corporation’s assets and liabilities.  Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Corporation’s disclosures and those of other companies may not be meaningful. 

The fair value of the Corporation's financial instruments are as follows:

	June 30, 2015
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	64,403	$	64,403	$	64,403	$	-	$	-
Investment securities available for sale		176,424		176,424		242		176,182		-
Restricted stock		439		439		-		439		-
Loans held for sale		1,755		1,755		-		1,755		-
Net loans		723,762		730,507		-		-		730,507
Accrued interest receivable		3,068		3,068		-		3,068		-
Mortgage servicing rights		133		133		-		-		133
Financial liabilities:
Deposits	$	916,059	$	916,110	$	-	$	916,110	$	-
Accrued interest payable		125		125		-		125		-
	December 31, 2014
	Carrying		Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	48,593	$	48,593	$	48,593	$	-	$	-
Investment securities available for sale		171,751		171,751		1,053		170,698		-
Restricted stock		438		438		-		438		-
Loans held for sale		389		389		-		389		-
Net loans		717,420		721,680		-		-		721,680
Accrued interest receivable		3,038		3,038		-		3,038		-
Mortgage servicing rights		143		143		-		-		143
Financial liabilities:
Deposits	$	881,181	$	881,289	$	-	$	881,289	$	-
Securities sold under agreements to repurchase		9,079		9,079		-		9,079		-
Accrued interest payable		169		169		-		169		-
Interest rate swaps		191		191		-		191		-

Recurring Fair Value Measurements

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2015 and December 31, 2014 are as follows:

(Dollars in Thousands	Fair Value at June 30, 2015
Asset  Description	Level 1		Level 2		Level 3		Total
Equity securities	$	242	$	-	$	-	$	242
U.S. Government and Agency securities		-		16,384		-		16,384
Municipal securities		-		72,132		-		72,132
Trust Preferred Securities		-		5,328		-		5,328
Agency mortgage-backed securities		-		80,739		-		80,739
Private-label mortgage-backed securities		-		1,560		-		1,560
Asset-backed securities		-		39		-		39
Total assets	$	242	$	176,182	$	-	$	176,424

(Dollars in Thousands)	Fair Value at December 31, 2014
Asset  Description	Level 1		Level 2		Level 3		Total
Equity securities	$	1,053	$	-	$	-	$	1,053
U.S. Government and Agency securities		-		15,963		-		15,963
Municipal securities		-		68,366		-		68,366
Trust Preferred Securities		-		5,137		-		5,137
Agency mortgage-backed securities		-		79,494		-		79,494
Private-label mortgage-backed securities		-		1,695		-		1,695
Asset-backed securities		-		43		-		43
Total assets	$	1,053	$	170,698	$	-	$	171,751
Liability Description
Interest rate swaps	$	-	$	191	$	-	$	191
Total liabilities	$	-	$	191	$	-	$	191

The Corporation used the following methods and significant assumptions to estimate the fair values for financial assets measured at fair value on a recurring basis.

Investment securities:  Level 1 securities represent equity securities that are valued using quoted market prices from nationally recognized markets. Level 2 securities represent debt securities that are valued using a mathematical model based upon the specific characteristics of a security in relationship to quoted prices for similar securities.    

Interest rate swaps: The interest rate swaps are valued using a discounted cash flow model that uses verifiable market environment inputs to calculate the fair value. This method is not dependent on the input of any significant judgments or assumptions by Management.  

Nonrecurring Fair Value Measurements

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2015 and December 31, 2014 are as follows:

(Dollars in Thousands)
	Fair Value at June 30, 2015
Asset  Description	Level 1		Level 2		Level 3		Total
Impaired loans (1)	$	-	$	-	$	636	$	636
Premises held-for-sale (1)		-		-		358		358
Other real estate owned (1)		-		-		449		449
Mortgage servicing rights		-		-		133		133
Total assets	$	-	$	-	$	1,576	$	1,576

(Dollars in Thousands)	Fair Value at December 31, 2014
Asset  Description	Level 1		Level 2		Level 3		Total
Impaired loans (1)	$	-	$	-	$	3,469	$	3,469
Other real estate owned (1)		-		-		760		760
Mortgage servicing rights		-		-		143		143
Total assets	$	-	$	-	$	4,372	$	4,372

(1) Includes assets directly charged-down to fair value during the year-to-date period.

The Corporation used the following methods and significant assumptions to estimate the fair values for financial assets measured at fair value on a nonrecurring basis.

Impaired loans: Impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral.  Collateral values are estimated using Level 3 inputs based on customized discounting criteria. 

Other real estate: The fair value of other real estate, upon initial recognition, is estimated using Level 2 inputs within the fair value hierarchy based on observable market data and Level 3 inputs based on customized discounting criteria.  In connection with the measurement and initial recognition of the foregoing assets, the Corporation recognizes charge-offs through the allowance for loan losses.  Subsequent charge-offs are recognized as an expense.

Mortgage servicing rights: The fair value of mortgage servicing rights, upon initial recognition, is estimated using a valuation model that calculates the present value of estimated future net servicing income.  The model incorporates Level 3 assumptions such as cost to service, discount rate, prepayment speeds, default rates and losses. 

The Corporation did not record any liabilities at fair value for which measurement of the fair value was made on a nonrecurring basis at June  30, 2015. For financial assets and liabilities measured at fair value on a recurring basis, there were no transfers of financial assets or liabilities between Level 1 and Level 2 during the period ending June 30, 2015.

The following table presents additional quantitative information about Level 3 assets measured at fair value on a nonrecurring basis:

		Quantitative Information about Level 3 Fair Value Measurements
(Dollars in Thousands)		at June 30, 2015
					Range
Asset  Description		Fair Value	Valuation Technique	Unobservable Input	(Weighted Average)
Impaired loans (1)	$	636	Appraisal	Appraisal Adjustments (2)	0% - 10%(4.39%)
				Cost to sell	0% - 8%(4.49%)
Premises held-for-sale (1)		358	Appraisal	Appraisal Adjustments (2)
Other real estate owned (1)		449	Appraisal	Appraisal Adjustments (2)
				Cost to sell	8%(8%)
Mortgage servicing rights		133	Discounted Cash Flow (3)
		at December 31, 2014
Impaired loans (1)	$	3,469	Appraisal	Appraisal Adjustments (2)	0% - 100%(26%)
				Cost to sell	0% - 10%(5%)
Other real estate owned (1)		760	Appraisal	Appraisal Adjustments (2)
				Cost to sell	8%(8%)
Mortgage servicing rights		143	Discounted Cash Flow (3)
(1) Includes assets directly charged-down to fair value during the year-to-date period.
(2) Qualitative adjustments are discounts specific to each asset and are made as needed.
(3) Valuation and inputs are determined by a third-party pricing service without adjustment.

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Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Jul. 31, 2015
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2015
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2015
Entity Registrant Name	FRANKLIN FINANCIAL SERVICES CORP /PA/
Entity Central Index Key	0000723646
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		4,252,508
Trading Symbol	fraf

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Financial Derivatives

6 Months Ended

Jun. 30, 2015

Financial Derivatives [Abstract]

Financial Derivatives

Note 10.  Financial Derivatives

The Board of Directors has given Management authorization to enter into additional derivative activity including interest rate swaps, caps and floors, forward-rate agreements, options and futures contracts in order to hedge interest rate risk.  The Bank is exposed to credit risk equal to the positive fair value of a derivative instrument, if any, as a positive fair value indicates that the counterparty to the agreement is financially liable to the Bank.  To limit this risk, counterparties must have an investment grade long-term debt rating and individual counterparty credit exposure is limited by Board approved parameters.  Management anticipates continuing to use derivatives, as permitted by its Board-approved policy, to manage interest rate risk.

Fair Value of Derivative Instruments in the Consolidated Balance Sheets were as follows as of June 30, 2015 and December 31, 2014:

Fair Value of Derivative Instruments
(Dollars in thousands)		Balance Sheet
Date	Type	Location	Fair Value
June 30, 2015	Interest rate contracts	Other liabilities	$	-
December 31, 2014	Interest rate contracts	Other liabilities	$	191

The Effect of Derivative Instruments on the Statement of Income for the Three and Six Months Ended June 30, 2015 and 2014 follows:

Derivatives in ASC Topic 815 Cash Flow Hedging Relationships
(Dollars in thousands)							Amount of Gain
						Location of	or (Loss)
						Gain or (Loss)	Recognized in
						Recognized in	Income on
			Location of	Amount of Gain		Income on	Derivatives
	Amount of Gain		Gain or (Loss)	or (Loss)		Derivative (Ineffective	(Ineffective Portion
	or (Loss)		Reclassified from	Reclassified from		Portion and Amount	and Amount
	Recognized in OCI		Accumulated OCI	Accumulated OCI		Excluded from	Excluded from
	net of tax on Derivative		into Income	into Income		Effectiveness	Effectiveness
Date / Type	(Effective Portion)		(Effective Portion)	(Effective Portion)		Testing)	Testing)
Interest rate contracts
Three months ended:
June 30, 2015	$	64	Interest Expense	$	(64)	Other income (expense)	$	-
June 30, 2014	$	60	Interest Expense	$	(94)	Other income (expense)	$	-
Six months ended:
June 30, 2015	$	126	Interest Expense	$	(160)	Other income (expense)	$	-
June 30, 2014	$	117	Interest Expense	$	(189)	Other income (expense)	$	-

Interest Rate Swap Agreements (“Swap Agreements”)

As of June 30, 2015, the Bank had no swap agreements outstanding. The Bank had entered into interest rate swap agreements as part of its asset/liability management program.  The swap agreements were free-standing derivatives and were recorded at fair value in the Corporation’s consolidated statements of condition.  The Bank was party to master netting arrangements with its financial institution counterparties; however, the Bank did not offset assets and liabilities under these arrangements for financial statement presentation purposes.  The master netting arrangements provided for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract.  Collateral, in the form of marketable securities, was posted by the counterparty with net liability positions in accordance with contract thresholds. 

Securities Sold Under Agreements to Repurchase (“Repurchase Agreements”)

As of June 30, 2015, the Bank had no repurchase agreements outstanding.  The Bank entered into agreements under which it sold securities subject to an obligation to repurchase the same or similar securities.  Under these arrangements, the Bank may have transferred legal control over the assets but still retained effective control through an agreement that both entitled and obligated the Bank to repurchase the agreements.  As a result, these repurchase agreements were accounted for as collateralized financing arrangements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities.  The obligation to repurchase the securities was reflected as a liability in the Corporation’s consolidated statements of condition, while the securities underlying the repurchase agreements remained in the respective investment securities asset accounts.  In other words, there was no offsetting or netting of the investment securities assets with the repurchase agreement liabilities.  In addition, as the Bank did not enter into reverse repurchase agreements, there was no such offsetting to be done with repurchase agreements.

The following table presents the liabilities subject to an enforceable master netting arrangement or repurchase agreements as of June 30, 2015 and December 31, 2014.  As of these dates, all of the Bank’s swap agreement with an institutional counterparty was in a liability position.  Therefore, there were no assets to be recognized in the consolidated statements of condition.  The Bank has no swap agreements with our commercial banking customers.

						Net Amounts		Gross Amounts Not Offset in the
		Gross		Gross Amounts		of Liabilities		Statements of Condition
		Amounts of		Offset in the		Presented in the
		Recognized		Statements of		Statements of		Financial		Cash Collateral		Net
(Dollars in thousands)		Liabilities		Condition		Condition		Instruments		Pledged		Amount
Interest Rate Swap Agreements
June 30, 2015	$	-	$	-	$	-	$	-	$	-	$	-
December 31, 2014		191		-		191		191		-		-

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Consolidated Statements Of Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Interest income
Loans, including fees	$ 7,477	$ 7,648	$ 14,853	$ 15,159
Interest and dividends on investments:
Taxable interest	613	661	1,248	1,302
Tax exempt interest	408	376	817	734
Dividend income	8	31	60	56
Deposits and obligations of other banks	72	45	127	84
Total interest income	8,578	8,761	17,105	17,335
Interest expense
Deposits	619	694	1,260	1,396
Securities sold under agreements to repurchase		2		9
Long-term debt		121		242
Total interest expense	619	817	1,260	1,647
Net interest income	7,959	7,944	15,845	15,688
Provision for loan losses	310	266	635	464
Net interest income after provision for loan losses	7,649	7,678	15,210	15,224
Noninterest income
Investment and trust services fees	1,388	1,101	2,651	2,192
Loan service charges	297	250	471	418
Mortgage banking activities	17	19	25	32
Deposit service charges and fees	586	525	1,077	990
Other service charges and fees	311	317	607	584
Debit card income	356	337	675	643
Increase in cash surrender value of life insurance	140	144	279	286
Other real estate owned (losses) gains, net		(62)	32	(185)
Other	13	10	237	62
OTTI losses recognized in earnings			(20)
Gain on conversion			728
Securities gains, net	8	221	8	221
Total noninterest income	3,116	2,862	6,770	5,243
Noninterest expense
Salaries and employee benefits	4,203	4,107	8,286	8,357
Net occupancy expense	556	586	1,172	1,262
Furniture and equipment expense	239	237	470	491
Advertising	283	270	471	586
Legal and professional fees	203	353	499	618
Data processing	556	493	1,023	884
Pennsylvania bank shares tax	206	173	402	347
Intangible amortization	90	104	181	207
FDIC insurance	160	222	308	454
ATM/debit card processing	186	178	373	357
Other	977	892	1,965	1,741
Total noninterest expense	7,659	7,615	15,150	15,304
Income before federal income taxes	3,106	2,925	6,830	5,163
Federal income tax expense	632	606	1,472	1,018
Net income	$ 2,474	$ 2,319	$ 5,358	$ 4,145
Per share
Basic earnings per share	$ 0.58	$ 0.55	$ 1.27	$ 0.99
Diluted earnings per share	0.58	0.55	1.26	0.99
Cash dividends declared	$ 0.19	$ 0.17	$ 0.36	$ 0.34

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Guarantees

6 Months Ended

Jun. 30, 2015

Guarantees [Abstract]

Guarantees

Note 4. Guarantees

The Corporation does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit.  Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.  Generally, all letters of credit, when issued, have expiration dates within one year.  The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers. The Bank generally holds collateral and/or personal guarantees supporting these commitments.  The Bank had $26.0 million and $22.7 million of standby letters of credit as of June 30, 2015 and December 31, 2014, respectively. Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payments required under the corresponding guarantees.  The amount of the liability as of June 30, 2015 and December 31, 2014 for guarantees under standby letters of credit issued was not material.

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Accumulated Other Comprehensive Loss

6 Months Ended

Jun. 30, 2015

Accumulated Other Comprehensive Loss [Abstract]

Accumulated Other Comprehensive Loss

Note 3. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss included in shareholders' equity are as follows:

	June 30		December 31
	2015		2014
(Dollars in thousands)
Net unrealized gains on securities	$	1,100	$	2,352
Tax effect		(374)		(800)
Net of tax amount		726		1,552
Net unrealized losses on derivatives		-		(191)
Tax effect		-		65
Net of tax amount		-		(126)
Accumulated pension adjustment		(6,858)		(6,858)
Tax effect		2,332		2,332
Net of tax amount		(4,526)		(4,526)
Total accumulated other comprehensive loss	$	(3,800)	$	(3,100)

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Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2015

Accumulated Other Comprehensive Loss [Abstract]

Schedule Of Accumulated Other Comprehensive Loss

	June 30		December 31
	2015		2014
(Dollars in thousands)
Net unrealized gains on securities	$	1,100	$	2,352
Tax effect		(374)		(800)
Net of tax amount		726		1,552
Net unrealized losses on derivatives		-		(191)
Tax effect		-		65
Net of tax amount		-		(126)
Accumulated pension adjustment		(6,858)		(6,858)
Tax effect		2,332		2,332
Net of tax amount		(4,526)		(4,526)
Total accumulated other comprehensive loss	$	(3,800)	$	(3,100)

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Capital Ratios

6 Months Ended

Jun. 30, 2015

Capital Ratios [Abstract]

Capital Ratios

Note 11. Capital Ratios

Capital adequacy is currently defined by regulatory agencies through the use of several minimum required ratios.  In July 2013, Federal Banking regulators approved the final rules from the Basel Committee on Banking Supervision for the regulation of capital requirements for U.S. Banks, generally referred to as “Basel III.”  Basel III imposes significantly higher capital requirements and more restrictive leverage and liquidity ratios than those in place at the end of 2014.  The capital ratios to be considered “well capitalized” under Basel III are: common equity tier 1 of 6.5%, Tier 1 leverage of 5%, Tier 1 risk-based capital of 8%, and Total Risk-Based capital of 10%.  The common equity tier 1 ratio is a new capital ratio under Basel III.  Common equity consists of common stock, additional paid-in capital and retained earnings.  The Tier 1 risk-based capital ratio of 8% has been increased from 6%.  The new rule also includes a provision for banks to make a one-time irrevocable choice to exclude accumulated other comprehensive income (AOCI) from its common equity Tier 1 capital.  The Bank elected to exclude AOCI from the capital calculation with its March 31, 2015 regulatory filing.  In addition, a capital conservation buffer will be required to be maintained above the minimum capital ratios to avoid any capital distribution restrictions.  The capital conservation buffer will be phased in from 0% in 2015 to 2.5% in 2019.  The Basel III capital rules took effect for the Corporation and the Bank on January 1, 2015.  At June 30, 2015, the Corporation and the Bank were both well capitalized as defined by the banking regulatory agencies. 

The following table summarizes regulatory capital information as of June 30, 2015 and December 31, 2014 on a consolidated basis and for the Bank, as defined.  Regulatory capital ratios for June 30, 2015 were calculated in accordance with the Basel III rules, whereas the December 31, 2015 regulatory ratios were calculated in accordance with Basel I rules.  The minimum regulatory ratios shown below define capital levels under Basel III rules.

			Regulatory Ratios
			Adequately	Well
			Capitalized	Capitalized
(Dollars in thousands)	June 30, 2015	December 31, 2014	Minimum	Minimum
Common Equity Tier 1 Risk-based Capital Ratio (1)
Franklin Financial Services Corporation	14.48%	N/A	4.50%	N/A
Farmers & Merchants Trust Company	14.39%	N/A	4.50%	6.50%
Tier 1 Risk-based Capital Ratio (2)
Franklin Financial Services Corporation	14.48%	14.19%	6.00%	N/A
Farmers & Merchants Trust Company	14.39%	13.96%	6.00%	8.00%
Total Risk-based Capital Ratio (3)
Franklin Financial Services Corporation	15.73%	15.49%	8.00%	N/A
Farmers & Merchants Trust Company	15.64%	15.26%	8.00%	10.00%
Tier 1 Leverage Ratio (4)
Franklin Financial Services Corporation	10.17%	9.69%	4.00%	N/A
Farmers & Merchants Trust Company	9.96%	9.55%	4.00%	5.00%
(1) Common equity Tier 1 capital/ total risk-weighted assets (2) Tier 1 capital / total risk-weighted assets
(3) Total risk-based capital / total risk-weighted assets, (4) Tier 1 capital / average quarterly assets

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Loan Quality

6 Months Ended

Jun. 30, 2015

Loan Quality [Abstract]

Loan Quality

Note 7. Loan Quality

The following table presents, by class, the activity in the Allowance for Loan Losses (ALL) for the periods ended:

	Residential Real Estate 1-4 Family
			Junior Liens &				Commercial
(Dollars in thousands)	First Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Total
Allowance at March 31, 2015	$	1,260	$	334	$	263	$	5,600	$	1,628	$	125	$	9,210
Charge-offs		(43)		-		(21)		-		(17)		(26)		(107)
Recoveries		1		-		-		14		8		14		37
Provision		75		25		(22)		72		152		8		310
Allowance at June 30, 2015	$	1,293	$	359	$	220	$	5,686	$	1,771	$	121	$	9,450
Allowance at December 31, 2014	$	1,225	$	334	$	226	$	5,417	$	1,773	$	136	$	9,111
Charge-offs		(43)		-		(21)		-		(218)		(78)		(360)
Recoveries		3		-		-		14		14		33		64
Provision		108		25		15		255		202		30		635
Allowance at June 30, 2015	$	1,293	$	359	$	220	$	5,686	$	1,771	$	121	$	9,450
Allowance at March 31, 2014	$	1,133	$	276	$	374	$	5,509	$	2,309	$	144	$	9,745
Charge-offs		(241)		-		-		(234)		(11)		(37)		(523)
Recoveries		-		-		-		-		13		18		31
Provision		187		(10)		(113)		137		55		10		266
Allowance at June 30, 2014	$	1,079	$	266	$	261	$	5,412	$	2,366	$	135	$	9,519
Allowance at December 31, 2013	$	1,108	$	278	$	291	$	5,571	$	2,306	$	148	$	9,702
Charge-offs		(257)		-		(27)		(348)		(12)		(80)		(724)
Recoveries		3		-		-		-		33		41		77
Provision		225		(12)		(3)		189		39		26		464
Allowance at June 30, 2014	$	1,079	$	266	$	261	$	5,412	$	2,366	$	135	$	9,519

The following table presents, by class, loans that were evaluated for the ALL under the specific reserve (individually) and those that were evaluated under the general reserve (collectively) and the amount of the ALL established in each class as of June 30, 2015 and December 31, 2014:

	Residential Real Estate 1-4 Family
			Junior Liens &				Commercial
(Dollars in thousands)	First Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Total
June 30, 2015
Loans evaluated for allowance:
Individually	$	1,083	$	51	$	513	$	21,512	$	237	$	-	$	23,396
Collectively		163,207		45,501		7,899		295,817		191,987		5,405		709,816
Total	$	164,290	$	45,552	$	8,412	$	317,329	$	192,224	$	5,405	$	733,212
Allowance established for loans evaluated:
Individually	$	-	$	-	$	-	$	2	$	8	$	-	$	10
Collectively		1,293		359		220		5,684		1,763		121		9,440
Allowance at June 30, 2015	$	1,293	$	359	$	220	$	5,686	$	1,771	$	121	$	9,450
December 31, 2014
Loans evaluated for allowance:
Individually	$	1,171	$	51	$	931	$	22,307	$	1,298	$	-	$	25,758
Collectively		160,143		43,744		8,784		304,175		177,773		6,154		700,773
Total	$	161,314	$	43,795	$	9,715	$	326,482	$	179,071	$	6,154	$	726,531
Allowance established for loans evaluated:
Individually	$	-	$	-	$	-	$	60	$	171	$	-	$	231
Collectively		1,225		334		226		5,357		1,602		136		8,880
Allowance at December 31, 2014	$	1,225	$	334	$	226	$	5,417	$	1,773	$	136	$	9,111

The following table shows additional information about those loans considered to be impaired at June 30, 2015 and December 31, 2014:

	Impaired Loans
	With No Allowance				With Allowance
(Dollars in thousands)			Unpaid					Unpaid
	Recorded		Principal		Recorded		Principal		Related
June 30, 2015	Investment		Balance		Investment		Balance		Allowance
Residential Real Estate 1-4 Family
First liens	$	1,601	$	1,778	$	-	$	-	$	-
Junior liens and lines of credit		117		144		-		-		-
Total		1,718		1,922		-		-		-
Residential real estate - construction		513		551		-		-		-
Commercial real estate		21,317		25,297		195		278		2
Commercial		337		397		9		10		8
Total	$	23,885	$	28,167	$	204	$	288	$	10

December 31, 2014
Residential Real Estate 1-4 Family
First liens	$	1,804	$	2,002	$	-	$	-	$	-
Junior liens and lines of credit		169		195		-		-		-
Total		1,973		2,197		-		-		-
Residential real estate - construction		931		977		-		-		-
Commercial real estate		21,487		25,744		862		1,001		60
Commercial		78		80		1,274		1,990		171
Total	$	24,469	$	28,998	$	2,136	$	2,991	$	231

The following table shows the average of impaired loans and related interest income for the three and six months ended June 30, 2015 and 2014:

	Three Months Ended				Six Months Ended
	June 30, 2015				June 30, 2015
	Average		Interest		Average		Interest
(Dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Residential Real Estate 1-4 Family
First liens	$	1,618	$	9	$	1,723	$	16
Junior liens and lines of credit		117		-		131		-
Total		1,735		9		1,854		16
Residential real estate - construction		516		-		723		-
Commercial real estate		21,756		174		21,971		327
Commercial		361		-		1,012		-
Total	$	24,368	$	183	$	25,560	$	343
	Three Months Ended				Six Months Ended
	June 30, 2014				June 30, 2014
	Average		Interest		Average		Interest
(Dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Residential Real Estate 1-4 Family
First liens	$	2,289	$	15	$	2,753	$	25
Junior liens and lines of credit		120		-		123		-
Total		2,409		15		2,876		25
Residential real estate - construction		527		-		530		-
Commercial real estate		22,399		81		24,032		174
Commercial		2,056		-		2,074		1
Total	$	27,391	$	96	$	29,512	$	200

The following table presents the aging of payments of the loan portfolio:

(Dollars in thousands)			Loans Past Due and Still Accruing										Total
	Current		30-59 Days		60-89 Days		90 Days+		Total		Non-Accrual		Loans
June 30, 2015
Residential Real Estate 1-4 Family
First liens	$	162,515	$	58	$	625	$	153	$	836	$	939	$	164,290
Junior liens and lines of credit		45,171		167		97		-		264		117		45,552
Total		207,686		225		722		153		1,100		1,056		209,842
Residential real estate - construction		7,106		793		-		-		793		513		8,412
Commercial real estate		309,525		367		-		-		367		7,437		317,329
Commercial		191,849		29		-		-		29		346		192,224
Consumer		5,369		15		11		10		36		-		5,405
Total	$	721,535	$	1,429	$	733	$	163	$	2,325	$	9,352	$	733,212

December 31, 2014
Residential Real Estate 1-4 Family
First liens	$	158,197	$	1,531	$	297	$	165	$	1,993	$	1,124	$	161,314
Junior liens and lines of credit		43,424		174		28		-		202		169		43,795
Total		201,621		1,705		325		165		2,195		1,293		205,109
Residential real estate - construction		8,784		-		-		-		-		931		9,715
Commercial real estate		317,576		336		-		140		476		8,430		326,482
Commercial		177,407		12		15		-		27		1,637		179,071
Consumer		6,056		59		22		17		98		-		6,154
Total	$	711,444	$	2,112	$	362	$	322	$	2,796	$	12,291	$	726,531

The following table reports the internal credit rating for the loan portfolio.  Consumer purpose loans (mortgage, home equity and installment) are assigned a rating of either pass or substandard.  Substandard consumer loans are comprised of loans 90 days or more past due and still accruing, and nonaccrual loans.  Commercial loans may be assigned any rating in accordance with the Bank’s internal risk rating system.

(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
June 30, 2015
Residential Real Estate 1-4 Family
First liens	$	158,575	$	2,240	$	3,475	$	-	$	164,290
Junior liens and lines of credit		45,273		29		250		-		45,552
Total		203,848		2,269		3,725		-		209,842
Residential real estate - construction		7,899		-		513		-		8,412
Commercial real estate		294,338		10,732		12,259		-		317,329
Commercial		183,559		7,256		1,409		-		192,224
Consumer		5,395		-		10		-		5,405
Total	$	695,039	$	20,257	$	17,916	$	-	$	733,212

December 31, 2014
Residential Real Estate 1-4 Family
First liens	$	155,676	$	1,919	$	3,719	$	-	$	161,314
Junior liens and lines of credit		43,559		29		207		-		43,795
Total		199,235		1,948		3,926		-		205,109
Residential real estate - construction		8,784		-		931		-		9,715
Commercial real estate		301,149		10,578		14,755		-		326,482
Commercial		170,774		5,413		2,884		-		179,071
Consumer		6,137		-		17		-		6,154
Total	$	686,079	$	17,939	$	22,513	$	-	$	726,531

The following table presents information on the Bank’s Troubled Debt Restructuring (TDR) loans:

								Troubled Debt Restructurings
								That Have Defaulted on
(Dollars in thousands)	Troubled Debt Restructurings							Modified Terms YTD
	Number of	Recorded						Number of	Recorded
	Contracts	Investment		Performing*		Nonperforming*		Contracts	Investment
June 30, 2015
Residential real estate - construction	1	$	513	$	513	$	-	-	$	-
Residential real estate	4		661		661		-	-		-
Commercial real estate	12		15,493		1,493		-	-		-
Total	17	$	16,667	$	2,667	$	0	-	$	-
December 31, 2014
Residential real estate - construction	1	$	521	$	-	$	521	-	$	-
Residential real estate	5		699		673		26	-		-
Commercial real estate	12		15,748		14,283		1,465	-		-
Total	18	$	16,968	$	14,956	$	2,012	-	$	-

*The performing status is determined by the loan’s compliance with the modified terms.

There were no new TDR loans made inthe first six months of 2015 or 2014.

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Investments

6 Months Ended

Jun. 30, 2015

Investments [Abstract]

Investments

Note 5. Investments

The amortized cost and estimated fair value of investment securities available for sale as of June 30, 2015 and December 31, 2014 are as follows:

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
June 30, 2015	cost		gains		losses		value
Equity securities	$	164	$	78	$	-	$	242
U.S. Government agency securities		16,245		168		(29)		16,384
Municipal securities		71,277		1,459		(604)		72,132
Trust preferred securities		5,949		-		(621)		5,328
Agency mortgage-backed securities		80,145		917		(323)		80,739
Private-label mortgage-backed securities		1,502		58		-		1,560
Asset-backed securities		42		-		(3)		39
	$	175,324	$	2,680	$	(1,580)	$	176,424

(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
December 31, 2014	cost		gains		losses		value
Equity securities	$	274	$	779	$	-	$	1,053
U.S. Government and Agency securities		15,854		173		(64)		15,963
Municipal securities		66,832		1,826		(292)		68,366
Trust preferred securities		5,940		-		(803)		5,137
Agency mortgage-backed securities		78,779		932		(217)		79,494
Private-label mortgage-backed securities		1,675		35		(15)		1,695
Asset-backed securities		45		-		(2)		43
	$	169,399	$	3,745	$	(1,393)	$	171,751

At June 30, 2015 and December 31, 2014, the fair value of investment securities pledged to secure public funds, trust balances, repurchase agreements, deposit and other obligations totaled $69.3 million and $91.6 million, respectively.

The amortized cost and estimated fair value of debt securities at June 30, 2015, by contractual maturity are shown below.Actual maturities may differ from contractual maturities because of prepayment or call options embedded in the securities.

(Dollars in thousands)	Amortized cost		Fair value
Due in one year or less	$	4,570	$	4,609
Due after one year through five years		10,483		10,680
Due after five years through ten years		32,927		33,512
Due after ten years		45,533		45,082
		93,513		93,883
Mortgage-backed securities		81,647		82,299
	$	175,160	$	176,182

The following table provides additional detail about trust preferred securities as of June 30, 2015:

Trust Preferred Securities

(Dollars in thousands)
Deal Name	Maturity	Single Issuer or Pooled	Class	Amortized Cost		Fair Value		Gross Unrealized Gain (Loss)		Lowest Credit Rating Assigned
BankAmerica Cap III	1/15/2027	Single	Preferred Stock	$	964	$	906	$	(58)	BB
Wachovia Cap Trust II	1/15/2027	Single	Preferred Stock		277		261		(16)	BBB
Huntington Cap Trust	2/1/2027	Single	Preferred Stock		941		816		(125)	BB
Corestates Captl Tr II	2/15/2027	Single	Preferred Stock		937		871		(66)	BBB+
Huntington Cap Trust II	6/15/2028	Single	Preferred Stock		892		790		(102)	BB
Chase Cap VI JPM	8/1/2028	Single	Preferred Stock		963		850		(113)	BBB-
Fleet Cap Tr V	12/18/2028	Single	Preferred Stock		975		834		(141)	BB
				$	5,949	$	5,328	$	(621)

The following table provides additional detail about private label mortgage-backed securities as of June 30, 2015:

Private Label Mortgage Backed Securities

(Dollars in thousands)						Gross					Cumulative
	Origination	Amortized		Fair		Unrealized		Collateral	Lowest Credit	Credit	OTTI
Description	Date	Cost		Value		Gain (Loss)		Type	Rating Assigned	Support %	Charges
RALI 2004-QS4 A7	3/1/2004	$	43	$	43	$	-	ALT A	BBB+	11.84	$	-
MALT 2004-6 7A1	6/1/2004		385		393		8	ALT A	CCC	14.11		-
RALI 2005-QS2 A1	2/1/2005		236		251		15	ALT A	CC	5.20		10
RALI 2006-QS4 A2	4/1/2006		502		523		21	ALT A	D	-		313
GSR 2006-5F 2A1	5/1/2006		72		80		8	Prime	D	-		15
RALI 2006-QS8 A1	7/28/2006		264		270		6	ALT A	D	-		217
		$	1,502	$	1,560	$	58				$	555

Impairment:

The investment portfolio contained 91 securities with $59.9 million of temporarily impaired fair value and $1.6 million in unrealized losses at June 30, 2015. The total unrealized loss position has increased slightly from $1.4 million at year-end 2014. 

For securities with an unrealized loss, Management applies a systematic methodology in order to perform an assessment of the potential for other-than-temporary impairment.  In the case of debt securities, investments considered for other-than-temporary impairment: (1) had a specified maturity or repricing date; (2) were generally expected to be redeemed at par, and (3) were expected to achieve a recovery in market value within a reasonable period of time. In addition, the Bank considers whether it intends to sell these securities or whether it will be forced to sell these securities before the earlier of amortized cost recovery or maturity. Equity securities are assessed for other-than-temporary impairment based on the length of time of impairment, dollar amount of the impairment and general market and financial conditions relating to specific issues.  The impairment identified on debt and equity securities and subject to assessment at June 30, 2015, was deemed to be temporary and required no further adjustments to the financial statements, unless otherwise noted.

The following table reflects temporary impairment in the investment portfolio (excluding restricted stock), aggregated by investment category, length of time that individual securities have been in a continuous unrealized loss position and the number of securities in each category as of June 30, 2015 and December 31, 2014:

	June 30, 2015
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count
U.S. Government and Agency securities	$	1,498	$	(7)	3	$	4,617	$	(22)	10	$	6,115	$	(29)	13
Municipal securities		20,359		(386)	33		4,775		(218)	7		25,134		(604)	40
Trust preferred securities		-		-	-		5,328		(621)	7		5,328		(621)	7
Agency mortgage-backed securities		18,002		(179)	22		5,346		(144)	8		23,348		(323)	30
Asset-backed securities		-		-	-		4		(3)	1		4		(3)	1
Total temporarily impaired securities	$	39,859	$	(572)	58	$	20,070	$	(1,008)	33	$	59,929	$	(1,580)	91

	December 31, 2014
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count
U.S. Government and Agency securities		4		-	1		7,207		(64)	14		7,211		(64)	15
Municipal securities		5,651		(33)	9		9,441		(259)	14		15,092		(292)	23
Trust preferred securities		-		-	-		5,137		(803)	7		5,137		(803)	7
Agency mortgage-backed securities		9,304		(60)	13		8,199		(157)	10		17,503		(217)	23
Private-label mortgage-backed securities		-		-	-		540		(15)	1		540		(15)	1
Asset-backed securities		-		-	-		5		(2)	1		5		(2)	1
Total temporarily impaired securities	$	14,959	$	(93)	23	$	30,529	$	(1,300)	47	$	45,488	$	(1,393)	70

The municipal bond portfolio has an unrealized loss of $604 thousand at June 30, 2015 compared to $292 thousand at year-end 2014.  This number of securities in this portfolio with an unrealized loss increased from 23 to 40 and the loss in this portfolio is deemed to be non-credit related and no other-than-temporary impairment charges have been recorded.

The trust preferred portfolio contains 7 securities with a fair value of $5.3 million and an unrealized loss of $621 thousand. The trust-preferred securities held by the Bank are single entity issues, not pooled trust preferred securities.  Therefore, the impairment review of these securities is based only on the issuer and the security cannot be impaired by the performance of other issuers as if it was a pooled trust-preferred bond. All of the Bank’s trust preferred securities are single issue, variable rate notes with long maturities (2027 – 2028).  None of these bonds have suspended or missed a dividend payment. At June 30, 2015, the Bank believes it will be able to collect all interest and principal due on these bondsand no other-than-temporary-impairment charges were recorded. 

The PLMBS sector shows a net unrealized gain $58 thousand with all bonds showing an unrealized gain.  Even though there is no unrealized loss, due to the nature of these bonds, they are evaluated closely. These bonds were all rated AAA at time of purchase, but have since experienced rating declines. Some have experienced increased delinquencies and defaults, while others have seen the credit support increase as the bonds paid-down. The Bank monitors the performance of the PLMBS investments on a regular basis and reviews delinquencies, default rates, credit support levels and various cash flow stress test scenarios. In determining the credit related loss, Management considers all principal past due 60 days or more as a loss. If additional principal moves beyond 60 days past due, it will also be considered a loss. As a result of the analysis on PLMBS it was determined that a $20 thousand impairment charge was required at the end of the first quarter; however, no additional impairment charge was required at June 30, 2015.   It is primarily a result of the cumulative OTTI charges that these bonds are showing an unrealized gain at quarter end.  The Bank has recorded $555 thousand of cumulative impairment charges on this portfolio. Management continues to monitor these securities and it is possible that additional write-downs may occur if current loss trends continue. The Bank is currently participating in a class-action lawsuit against one PLMBS servicer that centers on defective warranties and representations made as part of the underwriting process. The following table represents the cumulative credit losses on securities recognized in earnings as of June 30, 2015 and 2014.

(Dollars in thousands)	Six Months Ended
	2015		2014
Balance of cumulative credit-related OTTI at January 1	$	535	$	515
Additions for credit-related OTTI not previously recognized		20		-
Additional increases for credit-related OTTI previously recognized when there is no intent to sell
and no requirement to sell before recovery of amortized cost basis		-		-
Decreases for previously recognized credit-related OTTI because there was an intent to sell		-		-
Reduction for increases in cash flows expected to be collected		-		-
Balance of credit-related OTTI at June 30	$	555	$	515

The Bank held $439 thousand of restricted stock at June 30, 2015.  Except for $30 thousand, this investment represents stock in FHLB Pittsburgh. The Bank is required to hold this stock to be a member of FHLB and it is carried at cost of $100 per share. FHLB stock is evaluated for impairment primarily based on an assessment of the ultimate recoverability of its cost. As a government sponsored entity, FHLB has the ability to raise funding through the U.S. Treasury that can be used to support its operations.  There is not a public market for FHLB stock and the benefits of FHLB membership (e.g., liquidity and low cost funding) add value to the stock beyond purely financial measures. Management intends to remain a member of the FHLB and believes that it will be able to fully recover the cost basis of this investment.  

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Loans

6 Months Ended

Jun. 30, 2015

Loans [Abstract]

Loans

Note 6. Loans

The Bank reports its loan portfolio based on the primary collateral of the loan. It further classifies these loans by the primary purpose, either consumer or commercial. The Bank’s residential real estate loans include long-term loans to individuals and businesses secured by mortgages on the borrower’s real property and include home equity loans.  Construction loans are made to finance the purchase of land and the construction of residential and commercial buildings thereon, and are secured by mortgages on real estate.  Commercial real estate loans include construction, owner and non-owner occupied properties and farm real estate.  Commercial loans are made to businesses of various sizes for a variety of purposes including property, plant and equipment, working capital and loans to government municipalities.  Commercial lending is concentrated in the Bank’s primary market, but also includes purchased loan participations. Consumer loans are comprised of installment loans and unsecured personal lines of credit. 

A summary of loans outstanding, by primary collateral, at the end of the reporting periods is as follows:

						Change
(Dollars in thousands)	June 30, 2015		December 31, 2014			Amount	%
Residential Real Estate 1-4 Family
Consumer first liens	$	103,852	$	105,014	$	(1,162)	(1.1)
Consumer junior liens and lines of credit		39,915		38,132		1,783	4.7
Total consumer		143,767		143,146		621	0.4
Commercial first lien		60,438		56,300		4,138	7.3
Commercial junior liens and lines of credit		5,637		5,663		(26)	(0.5)
Total commercial		66,075		61,963		4,112	6.6
Total residential real estate 1-4 family		209,842		205,109		4,733	2.3
Residential real estate - construction
Consumer		1,736		1,627		109	6.7
Commercial		6,676		8,088		(1,412)	(17.5)
Total residential real estate construction		8,412		9,715		(1,303)	(13.4)
Commercial real estate		317,329		326,482		(9,153)	(2.8)
Commercial		192,224		179,071		13,153	7.3
Total commercial		509,553		505,553		4,000	0.8
Consumer		5,405		6,154		(749)	(12.2)
		733,212		726,531		6,681	0.9
Less: Allowance for loan losses		(9,450)		(9,111)		(339)	(3.7)
Net Loans	$	723,762	$	717,420	$	6,342	0.9
Included in the loan balances are the following:
Net unamortized deferred loan costs	$	169	$	(76)
Loans pledged as collateral for borrowings and commitments from:
FHLB	$	612,011	$	602,633
Federal Reserve Bank		54,844		56,367
	$	666,855	$	659,000

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Pension

6 Months Ended

Jun. 30, 2015

Pension [Abstract]

Pension

Note 8. Pension

The components of pension expense for the periods presented are as follows:

	Three Months Ended June 30				Six Months Ended June 30
(Dollars in thousands)	2015		2014		2015		2014
Components of net periodic cost:
Service cost	$	92	$	83	$	192	$	169
Interest cost		172		194		350		391
Expected return on plan assets		(296)		(291)		(592)		(581)
Recognized net actuarial loss		123		81		254		163
Net period cost	$	91	$	67	$	204	$	142

The Bank expects its pension expense to increase to approximately $387 thousand in 2015 compared to $276 thousand in 2014. 

In October, 2014, the Society of Actuaries released new mortality tables for pension plans. The new tables are expected to raise the assumed life of plan participants due to refinements in age and gender distribution of participants. This change is expected to result in higher pension contribution requirements, lower balance sheet funded status, pricier lump-sum payouts, and higher PBGC variable rate premiums. The Bank has not adopted the new mortality tables. If the tables had been adopted at year-end 2014, it is estimated that the new tables would reduce the funded status by $1.6 million and increase the 2015 pension expense by $272 thousand over the current 2015 estimate.  The Bank is still in the process of reviewing the effect of the new tables and is also watching the IRS for its decision on adoption of the new table. Therefore an adoption date for the new tables has not been determined.   

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Investments (Unrealized Gain (loss) On Investments) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 175,324	$ 169,399
Gross Unrealized Gains	2,680	3,745
Gross Unrealized Losses	(1,580)	(1,393)
Available for sale	176,424	171,751
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	164	274
Gross Unrealized Gains	78	779
Available for sale	242	1,053
U.S. Government And Agency Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	16,245	15,854
Gross Unrealized Gains	168	173
Gross Unrealized Losses	(29)	(64)
Available for sale	16,384	15,963
Municipal Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	71,277	66,832
Gross Unrealized Gains	1,459	1,826
Gross Unrealized Losses	(604)	(292)
Available for sale	72,132	68,366
Trust Preferred Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	5,949	5,940
Gross Unrealized Losses	(621)	(803)
Available for sale	5,328	5,137
Agency Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	80,145	78,779
Gross Unrealized Gains	917	932
Gross Unrealized Losses	(323)	(217)
Available for sale	80,739	79,494
Private-Label Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,502	1,675
Gross Unrealized Gains	58	35
Gross Unrealized Losses		(15)
Available for sale	1,560	1,695
Asset-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	42	45
Gross Unrealized Losses	(3)	(2)
Available for sale	$ 39	$ 43

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Fair Value Measurements And Fair Values Of Financial Instruments (Schedule Of Fair Value An A Nonrecurring Basis) (Details) - USD ($) $ in Thousands		Jun. 30, 2015		Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		$ 1,576		$ 4,372
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		1,576		4,372
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	[1]	636		3,469
Impaired Loans [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		636	[2]	3,469	[1]
Premises Held-For-Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	[1],[2]	358
Premises Held-For-Sale [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	[2]	358
Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	[1]	449		760
Other Real Estate Owned [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		449	[2]	760	[1]
Mortgage Servicing Rights [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		133		143
Mortgage Servicing Rights [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring		$ 133		$ 143

[1] Includes assets directly charged-down to fair value during the year-to-date period.

[2] Includes assets directly charged-down to fair value during the year-to-date period.

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Basis Of Presentation (Policy)

6 Months Ended

Jun. 30, 2015

Basis Of Presentation [Abstract]

Consolidation

The consolidated financial statements include the accounts of Franklin Financial Services Corporation (the Corporation), and its wholly-owned subsidiaries, Farmers and Merchants Trust Company of Chambersburg (the Bank) and Franklin Future Fund Inc.  Farmers and Merchants Trust Company of Chambersburg is a commercial bank that has one wholly-owned subsidiary, Franklin Financial Properties Corp.  Franklin Financial Properties Corp. holds real estate assets that are leased by the Bank. Franklin Future Fund Inc. is a non-bank investment company. The activities of non-bank entities are not significant to the consolidated totals.  All significant intercompany transactions and account balances have been eliminated.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations, and cash flows as of June 30, 2015, and for all other periods presented have been made.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted.  It is suggested that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s 2014 Annual Report on Form 10-K.  The consolidated results of operations for the period ended June 30, 2015 are not necessarily indicative of the operating results for the full year.  Management has evaluated subsequent events for potential recognition and/or disclosure through the date these consolidated financial statements were issued.

The consolidated balance sheet at December 31, 2014 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete consolidated financial statements.

For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, interest-bearing deposits in other banks and federal funds sold.  Generally, federal funds are purchased and sold for one-day periods. 

Earnings Per Share

Earnings per share are computed based on the weighted average number of shares outstanding during each period end.  A reconciliation of the weighted average shares outstanding used to calculate basic earnings per share and diluted earnings per share follows:

	For the Three Months Ended				For the Six Months Ended
	June 30				June 30
(Dollars and shares in thousands, except per share data)	2015		2014		2015		2014
Weighted average shares outstanding (basic)		4,234		4,184		4,228		4,178
Impact of common stock equivalents		11		7		8		6
Weighted average shares outstanding (diluted)		4,245		4,191		4,236		4,184
Anti-dilutive options excluded from calculation		13		34		28		37
Net income	$	2,474	$	2,319	$	5,358	$	4,145
Basic earnings per share	$	0.58	$	0.55	$	1.27	$	0.99
Diluted earnings per share	$	0.58	$	0.55	$	1.26	$	0.99

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Loan Quality (Tables)

6 Months Ended

Jun. 30, 2015

Loan Quality [Abstract]

Allowance For Loan Losses, By Loan Segment

The following table presents, by class, the activity in the Allowance for Loan Losses (ALL) for the periods ended:

	Residential Real Estate 1-4 Family
			Junior Liens &				Commercial
(Dollars in thousands)	First Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Total
Allowance at March 31, 2015	$	1,260	$	334	$	263	$	5,600	$	1,628	$	125	$	9,210
Charge-offs		(43)		-		(21)		-		(17)		(26)		(107)
Recoveries		1		-		-		14		8		14		37
Provision		75		25		(22)		72		152		8		310
Allowance at June 30, 2015	$	1,293	$	359	$	220	$	5,686	$	1,771	$	121	$	9,450
Allowance at December 31, 2014	$	1,225	$	334	$	226	$	5,417	$	1,773	$	136	$	9,111
Charge-offs		(43)		-		(21)		-		(218)		(78)		(360)
Recoveries		3		-		-		14		14		33		64
Provision		108		25		15		255		202		30		635
Allowance at June 30, 2015	$	1,293	$	359	$	220	$	5,686	$	1,771	$	121	$	9,450
Allowance at March 31, 2014	$	1,133	$	276	$	374	$	5,509	$	2,309	$	144	$	9,745
Charge-offs		(241)		-		-		(234)		(11)		(37)		(523)
Recoveries		-		-		-		-		13		18		31
Provision		187		(10)		(113)		137		55		10		266
Allowance at June 30, 2014	$	1,079	$	266	$	261	$	5,412	$	2,366	$	135	$	9,519
Allowance at December 31, 2013	$	1,108	$	278	$	291	$	5,571	$	2,306	$	148	$	9,702
Charge-offs		(257)		-		(27)		(348)		(12)		(80)		(724)
Recoveries		3		-		-		-		33		41		77
Provision		225		(12)		(3)		189		39		26		464
Allowance at June 30, 2014	$	1,079	$	266	$	261	$	5,412	$	2,366	$	135	$	9,519

The following table presents, by class, loans that were evaluated for the ALL under the specific reserve (individually) and those that were evaluated under the general reserve (collectively) and the amount of the ALL established in each class as of June 30, 2015 and December 31, 2014:

	Residential Real Estate 1-4 Family
			Junior Liens &				Commercial
(Dollars in thousands)	First Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Total
June 30, 2015
Loans evaluated for allowance:
Individually	$	1,083	$	51	$	513	$	21,512	$	237	$	-	$	23,396
Collectively		163,207		45,501		7,899		295,817		191,987		5,405		709,816
Total	$	164,290	$	45,552	$	8,412	$	317,329	$	192,224	$	5,405	$	733,212
Allowance established for loans evaluated:
Individually	$	-	$	-	$	-	$	2	$	8	$	-	$	10
Collectively		1,293		359		220		5,684		1,763		121		9,440
Allowance at June 30, 2015	$	1,293	$	359	$	220	$	5,686	$	1,771	$	121	$	9,450
December 31, 2014
Loans evaluated for allowance:
Individually	$	1,171	$	51	$	931	$	22,307	$	1,298	$	-	$	25,758
Collectively		160,143		43,744		8,784		304,175		177,773		6,154		700,773
Total	$	161,314	$	43,795	$	9,715	$	326,482	$	179,071	$	6,154	$	726,531
Allowance established for loans evaluated:
Individually	$	-	$	-	$	-	$	60	$	171	$	-	$	231
Collectively		1,225		334		226		5,357		1,602		136		8,880
Allowance at December 31, 2014	$	1,225	$	334	$	226	$	5,417	$	1,773	$	136	$	9,111

Impaired Financing Receivables

The following table shows additional information about those loans considered to be impaired at June 30, 2015 and December 31, 2014:

	Impaired Loans
	With No Allowance				With Allowance
(Dollars in thousands)			Unpaid					Unpaid
	Recorded		Principal		Recorded		Principal		Related
June 30, 2015	Investment		Balance		Investment		Balance		Allowance
Residential Real Estate 1-4 Family
First liens	$	1,601	$	1,778	$	-	$	-	$	-
Junior liens and lines of credit		117		144		-		-		-
Total		1,718		1,922		-		-		-
Residential real estate - construction		513		551		-		-		-
Commercial real estate		21,317		25,297		195		278		2
Commercial		337		397		9		10		8
Total	$	23,885	$	28,167	$	204	$	288	$	10

December 31, 2014
Residential Real Estate 1-4 Family
First liens	$	1,804	$	2,002	$	-	$	-	$	-
Junior liens and lines of credit		169		195		-		-		-
Total		1,973		2,197		-		-		-
Residential real estate - construction		931		977		-		-		-
Commercial real estate		21,487		25,744		862		1,001		60
Commercial		78		80		1,274		1,990		171
Total	$	24,469	$	28,998	$	2,136	$	2,991	$	231

The following table shows the average of impaired loans and related interest income for the three and six months ended June 30, 2015 and 2014:

	Three Months Ended				Six Months Ended
	June 30, 2015				June 30, 2015
	Average		Interest		Average		Interest
(Dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Residential Real Estate 1-4 Family
First liens	$	1,618	$	9	$	1,723	$	16
Junior liens and lines of credit		117		-		131		-
Total		1,735		9		1,854		16
Residential real estate - construction		516		-		723		-
Commercial real estate		21,756		174		21,971		327
Commercial		361		-		1,012		-
Total	$	24,368	$	183	$	25,560	$	343
	Three Months Ended				Six Months Ended
	June 30, 2014				June 30, 2014
	Average		Interest		Average		Interest
(Dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Residential Real Estate 1-4 Family
First liens	$	2,289	$	15	$	2,753	$	25
Junior liens and lines of credit		120		-		123		-
Total		2,409		15		2,876		25
Residential real estate - construction		527		-		530		-
Commercial real estate		22,399		81		24,032		174
Commercial		2,056		-		2,074		1
Total	$	27,391	$	96	$	29,512	$	200

Aging Of Payments Of The Loan Portfolio

(Dollars in thousands)			Loans Past Due and Still Accruing										Total
	Current		30-59 Days		60-89 Days		90 Days+		Total		Non-Accrual		Loans
June 30, 2015
Residential Real Estate 1-4 Family
First liens	$	162,515	$	58	$	625	$	153	$	836	$	939	$	164,290
Junior liens and lines of credit		45,171		167		97		-		264		117		45,552
Total		207,686		225		722		153		1,100		1,056		209,842
Residential real estate - construction		7,106		793		-		-		793		513		8,412
Commercial real estate		309,525		367		-		-		367		7,437		317,329
Commercial		191,849		29		-		-		29		346		192,224
Consumer		5,369		15		11		10		36		-		5,405
Total	$	721,535	$	1,429	$	733	$	163	$	2,325	$	9,352	$	733,212

December 31, 2014
Residential Real Estate 1-4 Family
First liens	$	158,197	$	1,531	$	297	$	165	$	1,993	$	1,124	$	161,314
Junior liens and lines of credit		43,424		174		28		-		202		169		43,795
Total		201,621		1,705		325		165		2,195		1,293		205,109
Residential real estate - construction		8,784		-		-		-		-		931		9,715
Commercial real estate		317,576		336		-		140		476		8,430		326,482
Commercial		177,407		12		15		-		27		1,637		179,071
Consumer		6,056		59		22		17		98		-		6,154
Total	$	711,444	$	2,112	$	362	$	322	$	2,796	$	12,291	$	726,531

Internal Credit Rating For The Loan Portfolio

(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
June 30, 2015
Residential Real Estate 1-4 Family
First liens	$	158,575	$	2,240	$	3,475	$	-	$	164,290
Junior liens and lines of credit		45,273		29		250		-		45,552
Total		203,848		2,269		3,725		-		209,842
Residential real estate - construction		7,899		-		513		-		8,412
Commercial real estate		294,338		10,732		12,259		-		317,329
Commercial		183,559		7,256		1,409		-		192,224
Consumer		5,395		-		10		-		5,405
Total	$	695,039	$	20,257	$	17,916	$	-	$	733,212

December 31, 2014
Residential Real Estate 1-4 Family
First liens	$	155,676	$	1,919	$	3,719	$	-	$	161,314
Junior liens and lines of credit		43,559		29		207		-		43,795
Total		199,235		1,948		3,926		-		205,109
Residential real estate - construction		8,784		-		931		-		9,715
Commercial real estate		301,149		10,578		14,755		-		326,482
Commercial		170,774		5,413		2,884		-		179,071
Consumer		6,137		-		17		-		6,154
Total	$	686,079	$	17,939	$	22,513	$	-	$	726,531

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Fair Value Measurements And Fair Values Of Financial Instruments (Fair Value, By Balance Sheet Grouping) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities available for sale, at fair value	$ 176,424	$ 171,751
Interest rate swaps		191
Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	64,403	48,593
Investment securities available for sale, at fair value	176,424	171,751
Restricted stock	439	438
Loans held for sale	1,755	389
Net loans	723,762	717,420
Accrued interest receivable	3,068	3,038
Mortgage servicing rights	133	143
Deposits	916,059	881,181
Securities sold under agreements to repurchase		9,079
Accrued interest payable	125	169
Interest rate swaps		191
Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	64,403	48,593
Investment securities available for sale, at fair value	176,424	171,751
Restricted stock	439	438
Loans held for sale	1,755	389
Net loans	730,507	721,680
Accrued interest receivable	3,068	3,038
Mortgage servicing rights	133	143
Deposits	916,110	881,289
Securities sold under agreements to repurchase		9,079
Accrued interest payable	125	169
Interest rate swaps		191
Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	64,403	48,593
Investment securities available for sale, at fair value	242	1,053
Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment securities available for sale, at fair value	176,182	170,698
Restricted stock	439	438
Loans held for sale	1,755	389
Accrued interest receivable	3,068	3,038
Deposits	916,110	881,289
Securities sold under agreements to repurchase		9,079
Accrued interest payable	125	169
Interest rate swaps		191
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Net loans	730,507	721,680
Mortgage servicing rights	$ 133	$ 143

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Loan Quality (Allowance For Loan Losses, By Loan Segment) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Dec. 31, 2014
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	$ 9,210	$ 9,745	$ 9,111	$ 9,702
Charge-offs	(107)	(523)	(360)	(724)
Recoveries	37	31	64	77
Provision	310	266	635	464
Allowance, Ending Balance	9,450	9,519	9,450	9,519
Loans evaluated for allowance individually					$ 23,396	$ 25,758
Loans evaluated for allowance collectively					709,816	700,773
Total Loans					733,212	726,531
Allowance established for loans evaluated individually					10	231
Allowance established for loan evaluated collectively					9,440	8,880
Total Allowance	9,210	9,745	9,111	9,702	9,450	9,111
First Liens
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	1,260	1,133	1,225	1,108
Charge-offs	(43)	(241)	(43)	(257)
Recoveries	1		3	3
Provision	75	187	108	225
Allowance, Ending Balance	1,293	1,079	1,293	1,079
Loans evaluated for allowance individually					1,083	1,171
Loans evaluated for allowance collectively					163,207	160,143
Total Loans					164,290	161,314
Allowance established for loan evaluated collectively					1,293	1,225
Total Allowance	1,260	1,133	1,225	1,108	1,293	1,225
Residential Real Estate Junior Liens & Lines of Credit [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	334	276	334	278
Provision	25	(10)	25	(12)
Allowance, Ending Balance	359	266	359	266
Loans evaluated for allowance individually					51	51
Loans evaluated for allowance collectively					45,501	43,744
Total Loans					45,552	43,795
Allowance established for loan evaluated collectively					359	334
Total Allowance	334	276	334	278	359	334
Residential Real Estate - Construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	263	374	226	291
Charge-offs	(21)		(21)	(27)
Provision	(22)	(113)	15	(3)
Allowance, Ending Balance	220	261	220	261
Loans evaluated for allowance individually					513	931
Loans evaluated for allowance collectively					7,899	8,784
Total Loans					8,412	9,715
Allowance established for loan evaluated collectively					220	226
Total Allowance	263	374	226	291	220	226
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	5,600	5,509	5,417	5,571
Charge-offs		(234)		(348)
Recoveries	14		14
Provision	72	137	255	189
Allowance, Ending Balance	5,686	5,412	5,686	5,412
Loans evaluated for allowance individually					21,512	22,307
Loans evaluated for allowance collectively					295,817	304,175
Total Loans					317,329	326,482
Allowance established for loans evaluated individually					2	60
Allowance established for loan evaluated collectively					5,684	5,357
Total Allowance	5,600	5,509	5,417	5,571	5,686	5,417
Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	1,628	2,309	1,773	2,306
Charge-offs	(17)	(11)	(218)	(12)
Recoveries	8	13	14	33
Provision	152	55	202	39
Allowance, Ending Balance	1,771	2,366	1,771	2,366
Loans evaluated for allowance individually					237	1,298
Loans evaluated for allowance collectively					191,987	177,773
Total Loans					192,224	179,071
Allowance established for loans evaluated individually					8	171
Allowance established for loan evaluated collectively					1,763	1,602
Total Allowance	1,628	2,309	1,773	2,306	1,771	1,773
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance, Beginning Balance	125	144	136	148
Charge-offs	(26)	(37)	(78)	(80)
Recoveries	14	18	33	41
Provision	8	10	30	26
Allowance, Ending Balance	121	135	121	135
Loans evaluated for allowance collectively					5,405	6,154
Total Loans					5,405	6,154
Allowance established for loan evaluated collectively					121	136
Total Allowance	$ 125	$ 144	$ 136	$ 148	$ 121	$ 136

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Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Consolidated Statements Of Comprehensive Income [Abstract]
Net income		$ 2,474	$ 2,319	$ 5,358	$ 4,145
Securities:
Unrealized (losses) gains arising during the period		(1,239)	774	(536)	2,194
Reclassification adjustment for gains included in net income	[1]	(8)	(221)	(716)	(221)
Net unrealized (losses) gains		(1,247)	553	(1,252)	1,973
Tax effect		424	(188)	426	(671)
Net of tax amount		(823)	365	(826)	1,302
Derivatives:
Unrealized gains (losses) arising during the period		32	(4)	31	(12)
Reclassification adjustment for losses included in net income	[2]	64	94	160	189
Net unrealized gains		96	90	191	177
Tax effect		(32)	(30)	(65)	(60)
Net of tax amount		64	60	126	117
Total other comprehensive (loss) income		(759)	425	(700)	1,419
Total Comprehensive Income		1,715	2,744	4,658	5,564
Reclassification adjsutment / Statement line item
Securities / gain on conversion & securities (gains) losses, net		3	75	243	75
Derivative/interest expense on deposits		$ (22)	$ (32)	$ (54)	$ (64)

[1] Securities / gain on conversion & securities (gains) losses, net

[2] Derivatives / interest expense on deposits

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2015

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note 2. Recent Accounting Pronouncements

Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement . ASU 2015-05 “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, revises the scope of Subtopic 350-40 to include internal-use software accessed through a hosting arrangement (e.g., cloud computing, software as a service, etc.) only if both of the following criteria are met: (1) the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty (there is no significant penalty if the customer has the ability to take delivery of the software without incurring significant cost and the ability to use the software separately without significant loss of utility or value); and (2) it is feasible for the customer to either run the software on its own hardware or contract with another party unrelated to the vendor to host the software.  If both of the criteria are present in a hosting arrangement, then the arrangement contains a software license and the customer should account for that element in accordance with Subtopic 350-40 (i.e., expense fees as incurred).  The ASU is effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years.  For all other entities, the ASU is effective for fiscal years beginning after December 15, 2015, and interim periods within fiscal year beginning after December 15, 2016.  Early adoption is permitted.  An entity can elect to adopt the amendments either (1) prospectively to all arrangements entered into or materially modified after the effective date, or (2) retrospectively.  The Corporation does not believe ASU 350-40 will have a material effect on its financial statements.

Receivables (Topic 310): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure. ASU 2014-04 “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure” clarifies that a creditor is considered to have physical possession of residential real estate that is collateral for a residential mortgage loan when it obtains legal title to the collateral or a deed in lieu of foreclosure or similar legal agreement is completed.  Consequently, it should reclassify the loan to other real estate owned at that time.  ASU 2014-04 applies to all creditors who obtain physical possession resulting from an in substance repossession or foreclosure of residential real estate property collateralizing a consumer mortgage loan in satisfaction of a receivable.  The ASU does not apply to commercial real estate loans, as the foreclosure process and applicable laws for those assets are significantly different from residential real estate.  The ASU is effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014.  ASU 2014-04 did not have a material effect on the Corporation’s financial statements.

Revenue from Contracts with Customers (Topic 606). The amendments in this Update (ASU 2014-09) establish a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate, construction and software industries. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this objective, the standard requires five basic steps: i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The ASU is effective for public entities for annual periods beginning after December 15, 2016, including interim periods therein. Three basic transition methods are available – full retrospective, retrospective with certain practical expedients, and a cumulative effect approach. Under the third alternative, an entity would apply the new revenue standard only to contracts that are incomplete under legacy U.S. GAAP at the date of initial application (e.g. January 1, 2017) and recognize the cumulative effect of the new standard as an adjustment to the opening balance of retained earnings. That is, prior years would not be restated and additional disclosures would be required to enable users of the financial statements to understand the impact of adopting the new standard in the current year compared to prior years that are presented under legacy U.S. GAAP. Early adoption is prohibited under U.S. GAAP. The Corporation does not believe ASU 2014-09 will have a material effect on its financial statements.

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Capital Ratios (Schedule Of The Total Risk-based, Tier 1 Risk-based And Tier 1 Leverage Requirements) (Details)		Jun. 30, 2015		Dec. 31, 2014
Franklin Financial Service Corporation [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Common Equity Tier 1 Risk-based Capital Ratio: Ratio	[1]	14.48%
Common Equity Tier 1 Risk-based Capital Ratio: Adequately Capitalized Minimum	[1]	4.50%
Tier 1 Risk-based Capital Ratio: Ratio	[2]	14.48%		14.19%
Tier 1 Risk-based Capital Ratio: Adequately Capitalized Minimum	[2]	6.00%
Total Risk-based Capital Ratio: Ratio	[3]	15.73%		15.49%
Total Risk-based Capital Ratio: Adequately Capitalized Minimum	[3]	8.00%
Tier 1 Leverage Ratio: Ratio	[4]	10.17%		9.69%
Tier 1 Leverage Ratio: Adequately Capitalized Minimum	[4]	4.00%
Farmers & Merchants Trust Company [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Common Equity Tier 1 Risk-based Capital Ratio: Ratio	[1]	14.39%
Common Equity Tier 1 Risk-based Capital Ratio: Adequately Capitalized Minimum	[1]	4.50%
Common Equity Tier 1 Risk-based Capital Ratio: Well Capitalized Minimum	[1]	6.50%
Tier 1 Risk-based Capital Ratio: Ratio	[2]	14.39%		13.96%
Tier 1 Risk-based Capital Ratio: Adequately Capitalized Minimum	[2]	6.00%
Tier 1 Risk-based Capital Ratio: Well Capitalized Minimum	[2]	8.00%
Total Risk-based Capital Ratio: Ratio	[3]	15.64%		15.26%
Total Risk-based Capital Ratio: Adequately Capitalized Minimum	[3]	8.00%
Total Risk-based Capital Ratio: Well Capitalized Minimum	[3]	10.00%
Tier 1 Leverage Ratio: Ratio	[4]	9.96%		9.55%
Tier 1 Leverage Ratio: Adequately Capitalized Minimum	[4]	4.00%
Tier 1 Leverage Ratio: Well Capitalized Minimum		5.00%	[4]	6.00%

[1] Common equity Tier 1 capital/ total risk-weighted assets

[2] Tier 1 capital / total risk-weighted assets

[3] Total risk-based capital / total risk-weighted assets

[4] Tier 1 capital / average quarterly assets

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Pension (Tables)

6 Months Ended

Jun. 30, 2015

Pension [Abstract]

Schedule Of Net Periodic Pension Costs

	Three Months Ended June 30				Six Months Ended June 30
(Dollars in thousands)	2015		2014		2015		2014
Components of net periodic cost:
Service cost	$	92	$	83	$	192	$	169
Interest cost		172		194		350		391
Expected return on plan assets		(296)		(291)		(592)		(581)
Recognized net actuarial loss		123		81		254		163
Net period cost	$	91	$	67	$	204	$	142

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Investments (Schedule Of Unrealized Loss On Investments) (Details) $ in Thousands	Jun. 30, 2015 USD ($) security	Dec. 31, 2014 USD ($) security
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months: Fair Value	$ 39,859	$ 14,959
Less than 12 months: Unrealized Losses	$ (572)	$ (93)
Less than 12 months: Count | security	58	23
12 months or more: Fair Value	$ 20,070	$ 30,529
12 months or more: Unrealized Losses	$ (1,008)	$ (1,300)
12 months or more: Count | security	33	47
Fair Value	$ 59,929	$ 45,488
Unrealized Losses	$ (1,580)	$ (1,393)
Count | security	91	70
U.S. Government And Agency Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months: Fair Value	$ 1,498	$ 4
Less than 12 months: Unrealized Losses	$ (7)
Less than 12 months: Count | security	3	1
12 months or more: Fair Value	$ 4,617	$ 7,207
12 months or more: Unrealized Losses	$ (22)	$ (64)
12 months or more: Count | security	10	14
Fair Value	$ 6,115	$ 7,211
Unrealized Losses	$ (29)	$ (64)
Count | security	13	15
Municipal Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months: Fair Value	$ 20,359	$ 5,651
Less than 12 months: Unrealized Losses	$ (386)	$ (33)
Less than 12 months: Count | security	33	9
12 months or more: Fair Value	$ 4,775	$ 9,441
12 months or more: Unrealized Losses	$ (218)	$ (259)
12 months or more: Count | security	7	14
Fair Value	$ 25,134	$ 15,092
Unrealized Losses	$ (604)	$ (292)
Count | security	40	23
Trust Preferred Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
12 months or more: Fair Value	$ 5,328	$ 5,137
12 months or more: Unrealized Losses	$ (621)	$ (803)
12 months or more: Count | security	7	7
Fair Value	$ 5,328	$ 5,137
Unrealized Losses	$ (621)	$ (803)
Count | security	7	7
Agency Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months: Fair Value	$ 18,002	$ 9,304
Less than 12 months: Unrealized Losses	$ (179)	$ (60)
Less than 12 months: Count | security	22	13
12 months or more: Fair Value	$ 5,346	$ 8,199
12 months or more: Unrealized Losses	$ (144)	$ (157)
12 months or more: Count | security	8	10
Fair Value	$ 23,348	$ 17,503
Unrealized Losses	$ (323)	$ (217)
Count | security	30	23
Private-Label Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
12 months or more: Fair Value		$ 540
12 months or more: Unrealized Losses		$ (15)
12 months or more: Count | security		1
Fair Value		$ 540
Unrealized Losses		$ (15)
Count | security		1
Asset-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
12 months or more: Fair Value	$ 4	$ 5
12 months or more: Unrealized Losses	$ (3)	$ (2)
12 months or more: Count | security	1	1
Fair Value	$ 4	$ 5
Unrealized Losses	$ (3)	$ (2)
Count | security	1	1

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Reclassifications

6 Months Ended

Jun. 30, 2015

Reclassifications [Abstract]

Reclassifications

1Note 12. Reclassification

Certain prior period amounts may have been reclassified to conform to the current year presentation.  Such reclassifications did not affect the Corporation’s financial position or results of operations.